Annual Report 2011
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ANNUAL REPORT 2011 TABLE OF CONTENTS PAGE Our Vision / Our Values / Our Strategic Priorities 04 Turkcell Group in Numbers 05 Turkcell Group: A Leading Communication and Technology Company 06 Letter from the Chairman 08 Board Members 10 Letter from the CEO 12 Executive Officers 14 Introduction: It’s sharing that makes life beautiful... 18 Leader in Technology 20 Leader in Advantages 30 03 Leader in Services 40 Leader in Social Responsibility 50 Awards 58 Subsidiaries 60 Human Resources 66 Mobile Communication Industry 70 Investor Relations 76 2011 Corporate Governance Compliance Report 80 Turkcell Offices 91 Consolidated Financial Statement and Independent Audit Report 92 Independent Auditor’s Report Summary 220 TURKCELL ANNUAL REPORT 2011 To ease and enrich the lives of our customers with communication and technology solutions We believe that customers come first We are an agile team We promote open communication We are passionate about making a difference We value people As a leading communication and technology company: Our strategic priorities are to grow in our core mobile communication business through increased use of voice and 04 data and to continue sustainable and profitable growth to provide our customers with a unique customer and user experience that will enhance brand loyalty to grow mobile Internet usage by promoting smart devices to offer relevant products and services to our customers by increasing our knowledge of their needs and leveraging our technological innovations to create value for our customers, country and company with continuous innovative practices to grow profitably in the fixed broadband business by creating synergy among Turkcell Group companies through our fiber optic infrastructure to grow our existing international subsidiaries with a focus on profitability to grow in domestic and international markets through communications, technology and new business opportunities. TURKCELL GROUP IN NUMBERS TRY 9.4 billion Revenue TRY 2.9 billion * EBITDA 05 31.1% EBITDA Margin 64.8 million Group subscribers * EBITDA is a non-GAAP financial measurement TURKCELL ANNUAL REPORT 2011 TURKCELL GROUP: LEADING COMMUNICATION AND TECHNOLOGY COMPANY Belarus - life :) Subscriber Base (mn) 1.8 Market Share (%) 16 Revenues (million $) 48 Germany Turkcell Europe Subscriber Base (mn) 0.2 Started its operations in 1Q 2011 Ukraine - life :) 06 Subscriber Base (mn) 9.7 Market Share (%) 18 Revenues (million $) 369 Moldova - Moldcell Subscriber Base (mn) 1.1 Market Share (%) 35 Revenues (million $) 79 Turkey - TURKCELL Subscriber Base (mn) 34.5 Market Share (%) 53 Revenues (million TRY) 8,030 Georgia - Geocell Kazakhstan - Kcell Subscriber Base (mn) 2.1 Subscriber Base (mn) 10.8 Market Share (%) 42 Market Share (%) 48 Revenues (million $) 142 Revenues (million $) 1,211 07 07 Azerbaijan - Azercell Subscriber Base (mn) 4.2 Market Share (%) 54 Revenues (million $) 526 KKTC - KKTCell Subscriber Base (mn) 0.4 Market Share (%) 69 Revenues (million $) 70 TURKCELL ANNUAL REPORT 2011 LETTER FROM THE CHAIRMAN “With our 2G, 3G and fiber investments which are aimed at creating value for our customers, we will continue to be one of the largest investors contributing to the development of the country, while providing the best quality service to our customers.” 08 In an environment where the global economy is taken to boost smartphone penetration, enabling top-5 most transparent companies for the past slowing down and the European Union is facing our Turkish market customers to conveniently two years underlines the importance we attach financial difficulties, Turkey achieved stability as share information, we have increased the number to our strict corporate governance principles and a result of its consecutive growth over the past 10 of smartphones in our network by 100% to 3.8 respecting the recently introduced Corporate Go- quarters, strengthening our faith in our ongoing million in 2011. vernance Principles of the Capital Markets Board, investments and in Turkey. we will continue to safeguard the rights of our We have made investments of around TRY 20 shareholders. As Turkcell Turkey, we have preserved our billion since our foundation. Throughout the year, leadership in innovation and technology, enabling in accordance with our long term strategy focu- It is also our duty to create value for Turkcell’s us to achieve a strong growth momentum in 2011 sed on providing the best quality service, we pur- shareholders, and although we were unable to along with our widespread network, strong sales sued our investments in fiber optic infrastructure, distribute the recommended 75% dividend for channels and new mobile services. In consequen- as well as 2G and 3G networks. Having built up 2010, we will continue to support the Company’s ce, we increased our subscriber base by 1.1 milli- our business model on mobile internet and total long term profit goals through strategic plans and on, despite intense competition in the market. As telecom solutions, we continued to lead Turkey’s investments. Turkcell Group, we increased our subscriber base telecommunications market. We are proud to by 4.4 million to 64.8 million, despite the macroe- note that our outstanding network quality and The fact that Turkcell has ranked among “The conomic challenges in certain markets where our coverage have placed Turkey among the world’s Companies of the Decade” and been selected foreign subsidiaries operate. leading networks. “Turkey’s Most Admired Brand” for the past 5 consecutive years, clearly indicates that we are We are delighted to observe the successful As Turkcell, our long term success also rests on on the right track. And thus I feel particularly pro- 09 results of the investments and profit-oriented our awareness of social responsibility, and in light ud to be the Chairman of Turkcell, a formidable strategies implemented within our domestic and of this approach we continue to contribute to company contributing to society and economy foreign subsidiaries. Indeed, as a result of their Turkey’s development with the social responsibi- alike. I warmly thank all our hard working, inno- successful operations in 2011, the contribution lity projects that we lead. Our “Snowdrops” pro- vative and dedicated employees, who ensure that of our subsidiaries to Group revenues rose from ject, having completed its 10th year, was selected our service quality sets a global example, as well 10.2% to14.3%. In particular, our subsidiary in the best project in the world in the Contribution as our distributors, suppliers, investors, other bu- Ukraine improved its EBITDA margin from 19.0% to Society category at the “World Communicati- siness partners and our loyal customers who have to 25.5%, increasing its revenues by 9% in US$ on Awards 2011”. made Turkcell Turkey a leading mobile operator. terms. Meanwhile, our fixed broadband subsidi- ary Turkcell Superonline, with its widening fiber In 2011, through our social responsibility projects, network, improved its synergy within Turkcell we continued to enrich the social and cultural life Group, increasing its revenue by 37% and EBIT- of the country in the areas of education, sport, COLIN J. WILLIAMS DA margin to 17.7% on a year-on-year basis from culture and employment. More recently, in the 9.8%. aftermath of the earthquakes in Van, we took ra- pid action and dedicated ourselves to our “Turkey In the new communication era where the incre- Money-Bank for Van” project, primarily meeting asing number of smartphones together with 3G the needs of our teachers and students. and fiber optic networks stand out, we continued to create value both for our customers and for As the Board of Directors of the sole Turkish Turkey itself, strengthening our leadership in the company trading on both the New York and market. As a result of our mobile internet techno- Istanbul stock exchanges, our primary duty is to logy, setting a global example, together with the conduct our operations in accordance with the determined actions that we take, I am confident internationally accepted corporate governance that we will continue to increase our momentum principles that underpin long term success and in mobile internet technology in the coming peri- stability, and improve our corporate governance ods. In this respect, with the actions that we have practices. Indeed, our ranking among Europe’s TURKCELL ANNUAL REPORT 2011 BOARD MEMBERS 1 Colin J. Williams 2 Karin Eliasson Chairman Member Colin J. Williams was appointed as the Chairman of the Board of Directors Karin Eliasson was appointed as a member of the Board of Directors on on February 25, 2010 and re-appointed on April 29, 2010. He also serves April 29, 2010. Ms. Eliasson has been Senior Vice President, Head of Group as a Voting Member and Chairman of the Audit Committee of Turkcell’s Human Resources at TeliaSonera since 2008. Prior to joining TeliaSonera, Board of Directors. He is Chairman of Clondalkin and Chair of the Audit Ms. Eliasson was Senior Vice President of Human Resources at Svenska and Remuneration Committees of Clondalkin, a consumer and industrial Cellulosa Aktiebolaget, SCA. From 2000 until 2003 she served as the packaging company. From January 2001 to December 2004, Mr. Williams CEO of Novare Human Capital AB. Ms. Eliasson is a member of the Board served as President of SCA, North America, which is active in the packaging of Directors of Proffice AB and Insurance company PRI Pensionsgaranti sector, personal care and paper tissue products. He was a long term board mutual. She holds a Bachelor of Science in Human Resources from Mid member and Vice Chairman of ICCA, the International Corrugated Packaging Sweden University. Institution, the European Federation of Packaging and the Federation of Paper Producers (CEPI). Mr. Williams is the founding President of Propak 3 Oleg Malis Europe and was a board member of the Greater Philadelphia Chamber of Member Commerce between 2002 and 2004. From 1988 to 2001, Mr. Williams was Oleg Malis was appointed to the Board of Directors on May 22, 2006 and re- the President of SCA Packaging, prior to which he served as the Managing appointed on April 29, 2010.