ANNUAL REPORT 2012 TURKCELL ANNUAL REPORT Financial Statements. Summary Consolidated Financial Statements

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1 Financial Statements Summary Consolidated Financial Statements Profit & Loss Statement (million TRY) % Change Turkcell İletişim Hizmetleri A.Ş. Turkcell Plaza Meşrutiyet Cad. No: 71 Tepebaşı, İstanbul Tel: +90 (212) Fax: +90 (212) Trade Registry Number Total Revenue 9, , % Direct cost of revenues 1 (5,954.3) (6,487.3) 9.0% Depreciation and amortization (1,592.9) (1,411.7) (11.4%) Gross Margin 36.5% 38.3% 1.8pp TURKCELL ANNUAL REPORT 2012 Administrative expenses (410.9) (484.2) 17.8% Selling and marketing expenses (1,684.9) (1,705.7) 1.2% EBITDA 2 2, , % EBITDA Margin 31.1% 30.9% (0.2pp) Net finance income / (expense) ,602.3% Finance expense (528.3) (224.2) (57.6%) Finance income % Share of profit of associates (3.8%) Other income / (expense) (218.5) (105.2) (51.9%) Monetary gains / (losses) (37.9%) Non-controlling interests (51.5%) Income tax expense (485.0) (522.5) 7.7% Net Income 1, , % (1) including depreciation and amortization expenses. (2) EBITDA is a non-gaap financial measure. Consolidated Balance Sheet Data (year-end) Turkcell Group has subsidiaries in Turkey, Germany, Belarus, Moldova, Ukraine, Georgia, Kazakhstan, Azerbaijan and KKTC. ANNUAL REPORT 2012 (million TRY) % Change Cash and Cash Equivalents 4, , % Total Assets 17, , % Long-term Debt 1, ,103.8 (44.7%) Total Debt 3, ,039.6 (13.9%) Total Liabilities 6, ,923.7 (6.9%) Total Shareholders Equity 10, , % *All financial results in this annual report are prepared in accordance with International Financial Reporting Standards (IFRS) and expressed in Turkish Liras (TRY) unless otherwise stated.

2 TURKCELL GROUP: As the leading communication and technology company, we are the market leader in five of the nine countries in which we operate, giving us a total of 69.2 million customers KKTC - KKTCell Subscriber Base(mn) 0.4 Market Share (%) 71 Revenue (million $) 70 Forward-Looking Statements Turkey - TURKCELL Subscriber Base (mn) 35.1 Market Share (%) 52 Revenue (million TRY) 8,724 Ukraine - life :) Subscriber Base (mn) 11.1 Market Share (%)* 17 Revenue (million $) Kazakhstan - Kcell* Subscriber Base (mn) 13.5 Revenue (million $) 1,221 Azerbaijan - Azercell* Subscriber Base (mn) 4.4 Revenue (million $) 579 This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of All statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forwardlooking statements generally can be identified by the use of forward-looking terminology such as, among others, will, expect, intend, estimate, believe or continue. Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2011 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Belarus - life :) Subscriber Base (mn) 1.1 Market Share (%)* 8 Revenue (million $) 62.2 Georgia - Geocell* Subscriber Base (mn) 2.1 Revenue (million $) 148 Germany - TURKCELL Europe Subscriber Base (mn) 0.3 Started its Operations in 1Q 2011 Moldova - Moldcell* Subscriber Base (mn) 1.3 Revenue (million $) 79 * data of Q * Owned indirectly through our subsidiary Fintur, in which we hold a % stake.

3 TABLE OF CONTENTS 02 Our Vision / Our Values / Our Strategic Priorities 50 Major Subsidiaries 04 Letter from the Chairman 54 Human Resources 08 Letter from the CEO 58 Mobile Telecommunication Sector 16 Leader in Technology 64 Investor and International Media Relations Leader in Advantages Leader in Services Leader in Social Responsibility Corporate Governance Compliance Report Consolidated Financial Statement and Independent Audit Report 225 Summary of Audit Report 01

4 OUR VISION To ease and enrich the lives of our customers with communication and technology solutions OUR VALUES 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 OUR STRATEGIC PRIORITIES As a Leading Communication and Technology Company To: Deliver superior customer experience Grow voice revenues Grow mobile internet business Drive adoption of mobile services Drive operational excellence & productivity Invest in future growth businesses 02 TURKCELL ANNUAL REPORT 2012

5 TURKCELL GROUP STRATEGY We continue to create value for our stakeholders thanks to our attention to customer experience and operational excellence OPERATIONAL EXCELLENCE & PRODUCTIVITY SUPERIOR AND DIFFERENTIATING CUSTOMER EXPERIENCE Focus on the customer Align the company Deliver the best customer experience SUSTAINABLE & PROFITABLE GROWTH INNOVATION 03

6 LETTER FROM THE CHAIRMAN Our sector is changing rapidly and Turkcell is a driving force behind the technological developments that support industries in general Slowing economic growth became one of the major topics among the developed nations in Nevertheless, Turkey continued to attract international investor attention with its robust growth potential and economic infrastructure. Reflecting its robust dynamics, Turkey s credit rating was upgraded to Investment Grade, while the Istanbul Stock Exchange became the 2nd fastest growing bourse of the year, confirming Turkey s strength. Turkcell believes in Turkey s potential and has therefore continued its investments, despite global economic fragility. Our sector is changing rapidly and Turkcell is a driving force behind the technological developments that support industries in general. The cutting-edge services that have entered our lives such as machine to machine, cloud computing, mobilization of daily activities and rapid mobile data will generate the trends for 2013 and beyond. Turkcell s vision, with its superior network operated by the highly skilled Turkcell family, already provides its customers with a privileged service that enables them to maximize the added value to their businesses and lives. Our rational and customer-oriented growth strategies continue to enlarge the Turkcell family. The Turkcell Group s wide geographical coverage that accomodates 9 countries in Asia and Europe, supported the further increase in our consolidated subscriber base, by 4.4 million to 69.2 million by the year-end. Based on these strategies, group revenues in 2012 grew by 12% to TRY 10.5 billion and EBITDA by 11% to TRY 3.2 billion. The growth was driven by 6% growth in voice, 44% in mobile data, and 33% in domestic and international subsidiaries. I am also pleased to note that the share of our subsidiaries in total group revenues increased to 17%, while EBITDA contribution rose to 16%. Turkcell is highly ranked worldwide by independent institutions and opinion leaders for its outstanding network quality, fast mobile broadband that facilitates access to information, and its wide network coverage. Investing in future trends, our unique dual carrier network of 43.2 mbps mobile broadband speed and a fiber infrastructure with an internet speed of 1,000 mbps make us a key player in the global mobile industry. This recognition reflects the position of the company and the efforts of its employees. We at Turkcell, are excited about the future. Having positioned ourselves strongly with our superior network and pioneering R&D team, we confidently provide the best user experience and a wider range of services today and in the future. 04 TURKCELL ANNUAL REPORT 2012

7 In fulfilling our social responsibilities, we continue to focus our efforts on the following areas: education, sports, arts & culture, economic development and women s empowerment. For the latter, Turkcell initiated the Women Power to the Economy project enabling low-income women to set up or expand their businesses and also importantly this year, we launched the Money-Box for Van project to ease the suffering of citizens, who endured the devastating Van earthquake of These projects have by extension contributed to the economy itself. Another outstanding contribution has been Turkcell s investment in call center operations in the Eastern provinces of Turkey; showing how private sector investment can contribute to local economic development. As one of Turkey s biggest success stories, Turkcell has a duty to turn its operational strengths into shareholder value and as the Chairman of Turkcell, I therefore wish for a swift resolution of the ongoing compliance process in accordance with the Principles of Corporate Governance. I believe that this challenging process will be resolved, with Turkcell emerging even stronger on the basis of its successful business model. I thank all our loyal customers, investors, dedicated employees, distributors, suppliers, business and solution provider partners for being the source underlying the great success of COLIN J. WILLIAMS 05

8 BOARD MEMBERS Colin J. Williams, Chairman Colin J. Williams was appointed as the Chairman of the Board of Directors on February 25, 2010 and re-appointed on April 29, He also serves as a Voting Member and Chairman of the Audit Committee of Turkcell s Board of Directors. He is Chairman of Clondalkin and Chair of the Audit and Remuneration Committees of Clondalkin, a consumer and industrial packaging company. From January 2001 to December 2004, Mr. Williams served as President of SCA, North America, which is active in the packaging sector, personal care and paper tissue products. He was a long-term board member and Vice Chairman of ICCA, the International Corrugated Packaging Institution, the European Federation of Packaging and the Federation of Paper Producers (CEPI). Mr. Williams is the founding President of Propak Europe and was a board member of the Greater Philadelphia Chamber of Commerce between 2002 and From 1988 to 2001, Mr. Williams was the President of SCA Packaging, prior to which he served as the Managing Director of Bowater, a corrugated packaging company, for four years. From 1978 to 1984, he was first the Sales Director and then the General Manager of Chicopee in the Netherlands, a non-woven fabrics company of Johnson & Johnson. Mr. Williams holds an MBA degree in finance from New York University, an M.Sc. degree in physical chemistry and an honorary doctorate from Lund University in Sweden. Alexey Khudyakov, Member Alexey Khudyakov was appointed to the Board of Directors on May 22, 2006 and re-appointed on April 29, He is Vice President of Altimo, a leading investor in telecoms, and also serves as non-executive Chairman and Chair of the Audit Committees of High River Gold Mines, a gold mining company. Prior to his appointment to Altimo, Mr. Khudyakov held a Vice President position with Alfa Bank, managing the bank s direct investments in the telecom sector. Before that, he was a management consultant with McKinsey & Co. Mr. Khudyakov holds a Master of Business Administration degree from INSEAD and a Master s degree in Applied Mathematics and Physics from the Moscow Institute of Physics and Technology. He is non-executive board member of Turkcell. He is also an Observer Member of the Audit Committee of Turkcell s Board of Directors. Mr. Khudyakov was nominated to the Audit Committee in reliance on Rule 10A-3(b)(1)(iv)(D) under the Securities Exchange Act of Gulsun Nazli Karamehmet Williams, Member Gulsun Nazli Karamehmet Williams was appointed as a member of the Board of Directors on April 29, In November 2011, she was appointed to Board of Genel Energy plc, an independent oil exploration and production company. Since 2004, she has worked in different positions at Digiturk (Digital Platform Iletisim Hizmetleri A.S), where she currently holds the position of Chief Content Officer and Executive Member of the Board. Prior to Digiturk, she worked at BSKYB UK. She studied at Sarah Lawrence College (USA) and Richmond University (UK) and has a B.A. in Communications. 06 TURKCELL ANNUAL REPORT 2012

9 Karin Eliasson, Member Karin Eliasson was appointed as a member of the Board of Directors on April 29, Ms. Eliasson has been Senior Vice President, Head of Group Human Resources at TeliaSonera since Prior to joining TeliaSonera, Ms. Eliasson was Senior Vice President of Human Resources at Svenska Cellulosa Aktiebolaget, SCA. From 2000 until 2003, she served as the CEO of Novare Human Capital AB. Ms. Eliasson is a member of the Board of Directors of Proffice AB and Insurance company PRI Pensionsgaranti mutual. She holds a Bachelor of Science in Human Resources from Mid Sweden University. Mehmet Bulent Ergin, Member Mehmet Bulent Ergin was first appointed as a member of the Turkcell Board of Directors on April 29, 2005 and was re-appointed on April 29, After taking responsibility in Hochtief AG s First Bosphorus project and Tekfen A.S. s Iraq-Turkey pipeline project, Mr. Ergin worked in various positions at Cukurova Group companies. He held a managerial position at Cukurova Ithalat ve Ihracat T.A.S. Currently, Mr. Ergin is the Chairman of the Board of Directors of Genel Denizcilik Nakliyati A.S., Show TV, Aksam Gazetesi, Maysan Mando A.S. and Baytur Trading S.A. and he also holds the position of Board membership in Digiturk, West of England P&I Club and Cukurova Holding. Mr. Ergin majored in Civil Engineering at Robert College, Turkey. Oleg Malis, Member Oleg Malis was appointed to the Board of Directors on May 22, 2006 and re-appointed on April 29, He began working for Altimo in 2005 and he was senior Vice President of Altimo until January Between 2003 and 2005, he was Senior Vice President and M&A Director at Golden Telecom. Prior to that, Mr. Malis founded Investelectrosvyaz and Corbina Telecom. Mr. Malis holds a degree in Systems Engineering from Moscow State Aviation Technological University. Tero Erkki Kivisaari, Member Tero Erkki Kivisaari was appointed to the Board of Directors on May 14, 2007 and was re-appointed on April 29, Mr. Kivisaari is the President of TeliaSonera Mobility Services (since 2012) and TeliaSonera Eurasia (since 2007). Previously, Mr. Kivisaari served as the Chief Financial Officer and Vice President of TeliaSonera in Eurasia. Mr. Kivisaari is a member of the Board of Directors of Azercell, Moldcell, A.S OJSC Megafon and Nurminen Logistics Plc; and the Chairman of Fintur Holdings B.V. board. He served as CFO of Fintur Holding B.V from Mr. Kivisaari has been the CFO of SmartTrust AB, a mobile software company owned by Carlyle Group, GE Capital, Eqvitec and Sonera Group. Prior to that, he had held the position of Vice President of Sonera Group s International Operations. Mr. Kivisaari served as an associate professor of Finance at the Helsinki School of Economics and holds an MBA in Finance. 07

10 Letter from the CEO As a whole team, we concentrated on our operations and continued to contribute more value to both the economy and our customers Revenue (TRY million) 10,507 9, EBITDA* (TRY million) 3,242 2,913 12% 11% Net Income (TRY million) 2,079 1,178 77% * EBITDA is a non-gaap financial measurement Subscribers (million) million TURKCELL FAALİYET RAPORU 2011

11 Turkey s economy has continued to strengthen in the year 2012 despite the global economic uncertainty. Moreover, the country s status as a solid investment destination was confirmed by its new investment grade rating. We firmly believe that these developments will further encourage investments, and expect Turkey s dynamic growth to continue throughout 2013 and beyond. At the Turkcell Group level, we achieved consolidated revenue of TRY 10.5 billion on 12% growth and an EBITDA margin of 31%. This growth was notably driven by 6% rise in voice, 44% in mobile broadband, and 33% in subsidiaries. As a result of this performance, our net income reached TRY 2.1 billion for 2012, while our free cash flow climbed by 18% to TRY 1.5 billion compared to the previous year. Today, the Turkcell Group is serving 69.2 million customers in total from East to West, with 4.4 million new users added in Specifically in the Turkish market, despite continued competition, we remained the clear market leader. Our domestic and international subsidiaries have been improving their top line, and more significantly increasing profitability, seeing a total rise of 33% in both revenues and EBITDA in And I am pleased to see their contribution to total group revenues rise to 17% from 14% and in EBITDA to 16% from 14% year on year. Our strategic investment in the fiber optic network, Turkcell Superonline, saw revenue growth of 49% to TRY 684 million and an EBITDA margin rise to 21% from 18% year on year. Notably, it has achieved a positive net income for the first time in Meanwhile, our Ukraine subsidiary Astelit continued to increase its revenues by 10% in USD-terms, while the EBITDA margin rose to 28% from 26%. While registering this business success, Turkcell has also been reinventing itself since 2007 in the changing telecommunications world, where the new era is all about mobility, Internet, smart devices, and applications. Indeed, Turkcell took further steps this year in its transformation from a GSM operator to a communications and technology company. With our nationwide mobile broadband speed of 43.2 mbps, and fiber broadband speed of 1,000 mbps, we eased access to information and served as a global example on several fronts. In addition, as a leading innovator, Turkcell s R&D team of more than 500 engineers, sets an example among leading countries in the number of patents and innovative services it has introduced to Turkey. As a result our network investments and cutting edge telecommunication and technology solutions such as Turkcell Smart Cloud, Turkcell Wallet, Turkcell TV and Turkcell Smart Health, have contributed more value to both the economy and our customers. Day by day we continue to increase this value, which combines superior customer experience through innovative solutions and affordable Turkcell branded smartphones and tablets. Meanwhile, Turkcell continued its broad contribution to the social development of Turkey, in such areas as technology, entrepreneurship, education, employment, the arts and culture and sports. In 2012, our social responsibility projects have again confirmed that life is more beautiful when shared. The Women Power to the Economy project has enabled us to support lowincome women, by providing funds to start their businesses on Turkcell s mobile platforms. Additionally this year, Turkcell initiated The Money-box for Van campaign after last year s devastating earthquake left many citizens of Van suffering substantial damage. As a result, a modern teacher campus and dormitory were built, while education scholarships were provided to selected students. This world-acclaimed campaign received the EU Special Award from the United Nations at the IPRA Awards Ceremony. I hope that the ongoing compliance process in accordance with the principles of corporate governance will be resolved in the short term and our performance will continue to excel. We continue to provide the highest level of support for the swift resolution. In 2012, we are once again proud of our many accomplishments not only for Turkcell itself, but for the greater good of Turkey, and our other countries of operation. I hereby congratulate and thank all our employees, customers, business partners and shareholders for their much appreciated efforts and commitment to achieving our goals. Looking forward, it is pleasing to note that the Turkcell team remains excited about the future and keen to add strategic value to the nation with its technological edge and software development capabilities. SUREYYA CILIV 09

12 EXECUTIVE OFFICERS Sureyya Ciliv Chief Executive Officer Ilker Kuruoz Chief Information & Communication Technologies Officer Tayfun Cataltepe Chief Regulation Strategies & Wholesale Business Officer Lale Saral Develioglu Chief International Business Officer 2 Bulent Elonu Chief Network Operations Officer 4 Murat D. Erden Acting Chief Financial Officer 6 Ilter Terzioglu Chief Strategic Projects Officer 8 Koray Ozturkler Chief Corporate Affairs Officer 10 TURKCELL ANNUAL REPORT 2012

13 Hulusi Acar Chief Consumer Sales Officer Emre Sayin Chief Consumer Business Officer Cenk Bayrakdar Chief New Technology Business Officer Selen Kocabas Chief Corporate Business Officer Burak Sevilengul Chief Consumer Marketing Officer Meltem Kalender Ozturk Chief Group Human Resources Officer 14 Ekrem Yener Chief International Expansion Officer 11

14 EXECUTIVE OFFICERS Sureyya Ciliv Chief Executive Officer Sureyya Ciliv was appointed as the Chief Executive Officer of Turkcell on January 9, Having previously worked as Microsoft Turkey country manager between 1997 and 2000, he served in various management positions in Microsoft Global Sales, Marketing and Service Group in the USA between 2000 and Prior to 1997, Mr. Ciliv was the General Manager and Chairman of Novasoft Systems Inc., a company he established in Boston, USA. Sureyya Ciliv received his MBA degree from Harvard University in 1983 after successfully graduating with honors in Industry & Operations Engineering and Computer Engineering from the University of Michigan in Bulent Elonu Chief Network Operations Officer Bulent Elonu started his professional life in 1997 at Siemens and joined Turkcell in He undertook various managerial roles in Network Operations Function and served as Transport Network Divison Head between Prior to his current position in Turkcell as the Chief Network Operations Officer, Elonu was Regional Operations Marmara Divison Head. Bulent Elonu graduated from the Istanbul Technical University Electrical Engineering Department. Ilker Kuruoz Chief Information & Communication Technologies Officer Ilker Kuruoz became Turkcell s Chief Information and Communication Technologies Officer as of September He joined Turkcell in Kuruoz began his professional career in 1994 at ABT. He then worked at NCR as a System Consultant, at Garanti Teknoloji as a Business Unit Manager and at Accenture as a Senior Manager. Prior to his current position at Turkcell, he was the Capability Management Division Head of Turkcell. Ilker Kuruoz graduated from the Bilkent University Computer Engineering department in 1992 and holds a Master s degree from the same department. Murat D. Erden Acting Chief Financial Officer Murat D. Erden joined Turkcell in 2001 as Division Head of Treasury and is responsible for the Treasury and Risk Management activities. He is currently Acting Chief Financial Officer and also represents Turkcell as a Board Member at a number of selected group companies since Mr. Erden started his career at the Treasury and Capital Markets Department of Bankers Trust Turkey. Following the Deutsche Bank-Bankers Trust merger, he continued to work for the Global Markets Department as Assistant Treasurer. Murat D. Erden is a graduate of the Department of Economics at Bogazici University and received his MBA degree from San Diego State University in Finance in Tayfun Cataltepe Chief Regulation Strategies & Wholesale Business Officer Tayfun Cataltepe joined Turkcell in Cataltepe is the Chief Regulation Strategies & Wholesale Business Officer. After graduating from the Electric Engineering Department of Bogazici University, Cataltepe received his MSc degree from Michigan Technology University and doctorate degree from the University of California, Los Angeles. From 1990 to 1998, he worked as a Research and Development Engineer at Bell Laboratories. In 1998 he moved on to AT&T as the IP Network and Service Planning projects manager, where he worked until Following AT&T, he started to work at Aycell as the Deputy General Manager in charge of Technical Operations. He was then Deputy General Manager in charge of Network Operations at AVEA from 2004 to Between Mr. Cataltepe served as the Europe Telecom Sector Expert in the Transaction Integration Services Department of Ernst & Young. Ilter Terzioglu Chief Strategic Projects Officer Ilter Terzioglu joined Turkcell in Mr. Terzioglu has worked in the communications sector since 1993 and served as Assistant General Manager at Ericsson, Superonline and Show TV. Mr. Terzioglu is a graduate of the Department of Econometrics at Istanbul University. Between April 1, 2006 and September 30, 2012 Mr. Terzioglu was Chief Network Operations Officer. Prior to that appointment, he was Turkcell s Head of Business Strategies, Regulation and Risk Consolidation. He is currently Chief Strategic Projects Officer at Turkcell since October Lale Saral Develioglu Chief International Business Officer Lale Saral Develioglu joined Turkcell in 2003 and has been Chief International Business Officer since May Prior to this position, she was Turkcell Group Marketing Services Officer and Chief Marketing Officer. Starting her career at Unilever in 1992, Lale Saral Develioglu had served as Brand Manager for 5 years and Marketing Manager for 7 years in various product categories and markets until She is a graduate of the Department of Industrial Engineering of Bogazici University. She also holds a Master s degree in Operations Research and Engineering Management from Rensselaer Polytechnic Institute, New York. Koray Ozturkler Chief Corporate Affairs Officer Koray Ozturkler joined Turkcell in 1998, and since April 9, 2008 has been the Chief Corporate Affairs Officer in charge of corporate communications, investor relations and Corporate Citizenship. Prior to this appointment he had been the Investor Relations division head at Turkcell since 2002, and before that was the division head of International Business Development. Mr. Ozturkler started his career in the USA at Accenture Consulting. He continued his career at Yapi Kredi Bank. Mr. Ozturkler is a graduate of Johnson C. Smith University with a degree in Marketing, and received his MBA concentrating on MIS from Mercer University. 12 TURKCELL ANNUAL REPORT 2012

15 Hulusi Acar Chief Consumer Sales Officer Hulusi Acar joined Turkcell in 2000 and was appointed Chief Consumer Sales Officer on December 10, He graduated from Istanbul University s Business Administration department in Mr. Acar worked in sales positions at THY and Koctas A.S. before joining Turkcell. He held various other managerial responsibilities within the Sales Department including Turkey Sales Manager between 2000 and He was Sales and Customer Relationship Chief Executive Officer of Astelit/Ukraine between March 2004 and November He also worked as Sales Management and Wholesale and Distribution Management Division Head from 2007 to 2009, prior to his current position. Burak Sevilengul Chief Consumer Marketing Officer Burak Sevilengul joined Turkcell in 2001 and has been Chief Consumer Marketing Officer since August Prior to this appointment, he was the Division Head of the Consumer Business Group and held various other managerial responsibilities within the Marketing Department. Burak Sevilengul is a graduate of The Middle East Technical University s Department of Business Administration and holds an MBA degree from the University of Georgia, Terry College of Business. Emre Sayin Chief Consumer Business Officer Emre Sayin is the Chief Consumer Business Officer of Turkcell. Prior to his current position, he was the Chief Corporate Business Officer and Chief Consumer Sales Officer of Turkcell. Sayin worked for Evyap Pazarlama ve Tic. A.S. as the Deputy General Manager in charge of Marketing from 2005 to 2006, and for Kodak A.S. as the General Manager from 2002 to Prior to that Emre Sayin was the Chief Marketing Officer for Microsoft Turkey between Sayin worked as the Marketing and Category Manager of Unilever Turkey between 1992 and He is a graduate of Bogazici University s Department of Industrial Engineering and holds a Master s degree in Systems and Industrial Engineering from Rutgers University. Meltem Kalender Ozturk Chief Group Human Resources Officer Meltem Kalender Ozturk joined Turkcell in 1998 and is our Chief Group Human Resources Officer. Between 2001 and 2011, she was the Division Head of Employee Relations Management in charge of training & development, talent management, remuneration, employee relations, recruitment, organizational development and quality management. Mrs. Ozturk also worked in various human resources functions at Logo Business Solutions and Isiklar Holding. Meltem Kalender Ozturk is a graduate in Business Administration from Marmara University Cenk Bayrakdar* Chief New Technology Business Officer Cenk Bayrakdar joined Turkcell in 2000 and was appointed Chief New Technology Business Officer on July 27, Cenk Bayrakdar graduated from Istanbul Technical University, Department of Electronics & Communication Engineering and holds Master s degrees in Industrial Engineering and Finance from Texas A&M University. Having started his professional career at Arcelik, he held several managerial positions on the IT and Production Teams. He then worked at Corbuss as the Business Development Coordinator between and served as the Partnership Development and Content Business Area Division Head of Turkcell between 2002 and Mr. Bayrakdar acted as the Chief Information and Communication Technologies Officer during Prior to his current position at Turkcell, he was responsible for product and services management as Chief Product and Services Management Officer between 2009 and * Mr Bayrakdar, who served as Chief New Technology Business Officer at Turkcell, resigned on January 31st, Ekrem Yener Chief International Expansion Officer Ekrem Yener joined Turkcell in 2007 and has held positions as Chief Corporate Business Officer and Chief Special Projects Officer. Currently, he is acting as Turkcell s Chief International Expansion Officer. He worked for Aysu Dis Tic. A.S. and Digital Equipment A.S. as a Sales Manager from Yener worked as the Ankara Regional Manager of Microsoft Turkey in He was appointed Microsoft s Deputy General Manager in Charge of Marketing in 2002 and was the Deputy General Manager in charge of Business and Strategy Development between 2004 and He graduated from the Istanbul Technical University s Department of Metallurgical Engineering in 1982 and received a Master s Degree in Material Sciences from the University of California at Berkeley in 1986 and in High Level Marketing Management from Kellogg University. Selen Kocabas Chief Corporate Business Officer Selen Kocabas joined Turkcell in 2003 and is the Chief Corporate Business Officer. Prior to this appointment, she was the Chief Business Support Officer in charge of human resources, corporate information systems, procurement and contract management and administrative issues. Mrs. Kocabas started her professional career as a Management Trainee at Koc Holding, and later worked as Human Resources Expert at Arcelik, then as a Human Resources Coordinator at Marshall, followed by Groupe Danone SA, where she worked as Human Resources Director. Selen Kocabas is a graduate of Economics from Istanbul University. She also obtained a Master s degree in Human Resources Management from Marmara University. Umit Akin Chief Legal Affairs Officer Mr. Akin, who served as Chief Legal Affairs Officer at Turkcell, resigned on August, Yigit Kulabas Chief Corporate Marketing Officer Yigit Kulabas has been appointed Chief Corporate Marketing Officer effective March 11,

16 LIFE IS BEAUTIFUL WHEN SHARING WITH TURKCELL... As by far the number one mobile operator in Turkey, we surpassed ourselves for yet another year with our communication solutions that bring added value to life, our social responsibility projects and above all, our 35 million mobile subscribers. We are well aware of the true attributes that make Turkcell the leader in Turkey. Our profession is people, and wherever they are, we are also there. Our profession is sharing. We provide technologies that make life more beautiful through sharing. We provide tailored solutions based on changing needs by closely observing life itself in all its aspects. Our profession is technology. Our technology makes us a crucial envoy of Turkey. This is why, as Turkcell, we are one of the nation s key resources when it comes to representing Turkey globally. This year, we again eased and enriched the life of our customers with the innovations we shared. We always say that you never know where you will hear or receive a life-changing Hello. Our undisputed leadership in signal strength was maintained last year as well. Our customers met their loved ones whenever, and wherever they wanted to share the special moments in their lives. Having compared our mobile Internet and voice quality with that of the world s giants, research has shown that we have long since ceased to envy the leading edge technologies of other countries. As we have since surpassed those same world leaders with our 3G mobile Internet speed and network coverage, thereby raising Turkey to the highest rank. We were proud for each citizen in our country. We launched the Smartphone Campaign in Turkey. We support everyone s dream of owning a smartphone. In doing so we have ended the perception that smartphones necessarily mean high prices. We have become the example and set the pace for others to follow. We have provided special packages for our subscribers to enable them to share their lives easily. We have offered our customers transparent, controllable and flexible packages with plenty of minutes, SMS and MB. We have also put state-of-the-art technologies into service that enable our corporate customers to grow and swiftly achieve their targets. Our slogan has been Let technology grow your business, and Let Turkcell take care of the technology. As a result we have increased both operating profitability and productivity. We have maintained our leadership in customer satisfaction. We have carried on developing particular solutions based on the needs of our customers; we have expanded these solutions to every field from Communication Centers to Call Centers. Another busy year has passed. But we are aware that we have a lot more work to do. And since we believe that life is meaningful when shared, it is even more beautiful when shared with all it has to offer. Because it is sharing that makes life beautiful. 14 TURKCELL ANNUAL REPORT 2012

17 Turkcell exists to empower its customers to carry the world in their pockets, access information anytime and share their lives with their loved ones, no matter how far away they may be 15

18 LEADER IN TECHNOLOGY

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20 LEADER IN TECHNOLOGY TURKCELL CUSTOMERS CONTINUE TO SHARE THE BEAUTY OF LIFE THANKS TO TURKCELL S CUTTING-EDGE TECHNOLOGY As Turkcell we have always worked to provide the best available technology to our customers. In 2012, we continued to provide top-quality service to the widest subscriber population throughout Turkey s geography by differentiating ourselves from our competitors with an additional 6,000 access points in 2G and 3G technology. And thanks to our superior signal strength, we enable our customers to share their experiences, emotions and brief moments of their lives, anytime and anywhere. Some pleasant words, a song, a film, excitement, or even the joy of a new born baby can be shared with our loved ones. Within the scope of our vision to provide the best available technology, we have continued to increase our investments and have been among the first operators in the world to use HSPA+ technology. Furthermore, thanks to dual carrier technology, while providing a 43.2 Mbps speed to our customers, we also continue working to offer them the cutting-edge technologies which enable 84 Mbps speed. As of December 31, 2012, we have reached 84.02% of Turkey s population with our 3G network and 99.17% with our 2G network. The speed of our 3G network, supporting dual carrier internet technology across Turkey, has been acknowledged on numerous occasions. We have been the sole operator to popularize the technology that doubles mobile internet speed on smartphones supporting dual carrier, such as the new ipad and iphone5, across 99% of Turkey. In tests performed across 11 cities at 140 different fixed points in Turkey, the UK and USA by independent company Metrico Wireless Ltd., we have offered a better data download performance compared to all other 3G operators. We are working even harder to keep pace with rapidly emerging technology, and to provide efficient and innovative solutions for changing needs As Turkcell, with the aim of providing service continuity and preventing our customers from being affected by the IPv4 bottleneck, we have actualized Carrier Grade NAT technology on our network. We thereby, accomplished one more step in the Ipv6 shift. We have made the move to an infrastructure that is more flexible in data pricing, which in return enables instant real time pricing. This way, postpaid subscribers will also benefit from the same campaigns as their prepaid counterparts. 2 times faster We have enabled our prepaid customers who travel abroad without having activated their roaming option to receive service both in an easy and quick manner through activation of the Roaming option via USSD (Unstructured Supplementary Services Data) (by dialing *111#). We were the first operator in the world to provide this roaming activation service using this method. In metropolitan cities, we have constructed radio link with the capacity of fiber optic transmission among our base stations. By this means, we have added the speed of wire communication along with flexibility. 18 TURKCELL ANNUAL REPORT 2012

21 Turkcell Technology 99.17% population coverage with the 2G network 84.02% population coverage with the 3G network Extra 6,000 base stations for the 2G and 3G networks As Turkey s Turkcell, we ve continued to lend support to domestic production, thus contributing to the development of the country. We have continued to lend support to domestic production by investing TRY 2.5 million in the Domestic RadioLink Project, which was designed and produced in Turkey. As the first operator to use domestic production radio link devices, operating in the 7 GHz band within its network, we have integrated them into Turkcell networks at 180 locations nationwide. Again, with SME-Turkcell cooperation, we have started to use Domestic 3G Antennae, which began to operate on our network at the beginning of Responsible Technology Besides our innovative communication solutions, our responsible technology projects that create value for Turkey and serve as a model for the world ensure that, in our 18th year, we remain Turkey s Turkcell. By carrying out studies on Business Continuity Management since 1998, we ve actualized the Istanbul Earthquake Drill with the active participation of equipped 1,718 personnel ready to respond in case of an earthquake. We successfully executed the drill that tested personnel evacuation, and continuity of the network and critical services that we provide to our customers. We believe that receiving emergency health and security services in the shortest possible time is a civil right for everyone without any exceptions. After the earthquake in Van, within the scope of Integration of the 112 Command and Control Centers in 81 Cities Project developed by the Ministry of Health, we enabled access to data location for individuals calling the emergency lines. As Turkcell we also utilize our technology leadership to produce eco-friendly solutions. The United Nations Industrial Development Organization (UNIDO) has chosen Turkcell as its partner for its tests that are to be conducted in Turkey for the seamless power plant working with hydrogen within the scope of the European Union projects. Accordingly, we launched these tests at the communication units located in Bursa for use of water based hydrogen energy better known as Future Energy Source. Total Base Stations 2G 3G 6,787 17,206 10,314 18,908 12,760 20,

22 LEADER IN TECHNOLOGY In 2012, as Turkcell Group we made TRY 1.7 billion in investments; we shared our leading technology, which enables uninterrupted and high speed communication, keeping our customers connected to life. And once again, our Turkcell Group customers shared every moment of their lives using superior Turkcell technology. Our mobile broadband revenues increased to TRY 1,040 million thanks to our high quality network, smartphone focus and innovative product services. As the leading communication and technology company of Turkey, our activities are executed in accordance with our mission to provide equality of opportunity in information access through mobile broadband usage, and by increasing smart device penetration in Turkey. This has enabled our mobile broadband business to grow further. As of 2012, as a result of our superior value propositions and investments, our mobile broadband business constituted 12% of Turkcell Turkey s total revenue, and with an increase of 44% it has reached a total of TRY 1,040 million. In 2012, as Turkcell we continued to add new devices to our own T brand series which provides the best customer experience at a reasonable price. With the competitive difference we ve created, we doubled mobile internet usage. By the end of 2012, smartphone penetration on our network had reached 19%. In 2012 Turkcell customers have also enjoyed the best user experience with brand new devices Many smartphones that rank first in the portfolio of the world s leader mobile phone brands, and that boast outstanding hardware and software features, have debuted on the market in 2012, exclusively at Turkcell stores. Hundreds of thousands of Turkcell customers have started to further enjoy unrivaled Turkcell network coverage and mobile internet speed by choosing these products, which will add convenience, speed and fun to their lives anytime, anywhere in a manner that best suits their needs. Turkcell brand smartphones are always popular In 2012, we have added T11, Turkcell MaxiPLUS5 and MaxiPRO5 to our T-brand devices that we had placed on the market in November The newly added T11 which was launched on January 2012 has won much recognition with its all-inclusive smartphone concept available at affordable prices. In July 2012, we expanded the Turkcell family by launching Turkcell MaxiPLUS5 and MaxiPRO5. Turkcell MaxiPRO5, both hard-working and social, blazed a trail in Turkey with its My Job/My Private application. This enables Turkcell corporate users to completely separate their business and private information on a single platform by creating two distinct personal and corporate profiles. Turkey s Smartphone Campaign Another first for Turkey by Turkcell: Smartphone Campaign As Turkcell, we have started the biggest campaign of recent years to introduce brand new smartphones to people throughout Turkey with the message that Life is beautiful when shared. Within the scope of the Smartphone Campaign we ve presented 9 different models of 7 different brands for sale at 20 TURKCELL ANNUAL REPORT 2012

23 The number of smartphones ON our network has reached 6.2 million by the end of 2012 Smartphone figures within our Network (million) Smartphone penetration (%) % 6% % % OUR MOBILE BROADBAND REVENUES MORE THAN DOUBLED SINCE 2010 Mobile Broadband Revenue (TRY million) 724 1, %

24 LEADER IN TECHNOLOGY up to 36% discounts. As Turkcell, we have always wanted everyone to share their experiences with their loved ones, and to make these innovations a part of their life through the advantages of the mobile world. Thanks to the Smartphone Campaign our customers purchased these devices at extremely attractive terms, and further, enjoyed a complimentary internet service on us, enabling them to use their smartphones right away. Best tablets and ultrabooks were again introduced by Turkcell As a first in the market, we, through our distribution network, offered our customers ultrabooks in a package where Turkcell VINN and internet were included, thus displaying excellent performance. We have enabled our customers to use their ultrabooks with 3G connectivity by choosing among attractive data proposals. We have offered our customers the new ipad with attractive data plans at a Dual carrier speed.through faster and more elegantly designed products of technological superiority within the mobile broadband category, we have strengthened our leadership in this field. We have introduced tablet projects that enable our corporate customers to access information anytime and manage their work remotely. Accordingly, we ve enabled mobile users to work more efficiently by providing access to corporate applications everywhere. In so doing, we have helped them to stay ahead of their competitors. With the aim of supporting peer-to-peer IT infrastructures suitable for our customers needs and expectations, we also added Windows 8 devices to tablets with Android operating systems. Turkcell Superonline ranked Turkey among the top-five countries in the world to offer 1,000 Mbps Internet service to households Thanks to Superonline, Turkey ranked among Europe s top 3 countries with the highest growth in fiber internet Turkcell Superonline initiated the fiber internet era in Turkey simultaneously with the rest of the world, and is the first and only telecom operator in Turkey to provide 1,000 Mbps Internet speed to its customers. Turkcell Superonline continues its ever-growing investments to further extend its infrastructure. As an innovative telecom operator it provides communication solutions to national and international telecom operators, corporations and households in the areas of data, voice and video (triple play). Ranking Turkey among the top-five countries in the world to offer 1,000 Mbps internet speed service to households, Turkcell Superonline was appraised by the international FTTH Council (Fiber to the Home Council) for its achievements. Fiber Internet in Turkey = Turkcell Superonline 22 TURKCELL ANNUAL REPORT 2012

25 In FIber Internet we are among the top 3 countries with the highest growth In Europe with countries of more than 1 million access, Turkey is the 3rd fastest growing country along with Ukraine and Holland. Sweden Slovenia Japan Portugal USA TURKEY Hong Kong Countries where 1,000 Mbps FTTP service to more than 100 thousand households are provided Turkcell Superonline Revenue (TRY million) %

26 LEADER IN TECHNOLOGY In 2012, the contribution of Turkcell Superonline to Turkcell Group s financials continued to increase thanks to 49% revenue growth and a 20.8% EBITDA margin. And as the focus on the household segment increased throughout the year, segment income rose by 92%. And with the synergy of Turkcell Group, corporate segment income climbed 64.7%, while wholesale segment revenues (Turkcell and carrier) rose 20.7%. Having invested approximately TRY 1.8 billion since its foundation, Turkcell Superonline provides fiber internet services at the speed of light to households in 12 cities across Turkey, namely Istanbul, Ankara, Izmir, Bursa, Kocaeli, Adana, Gaziantep, Antalya, Mersin, Samsun, Trabzon and Kayseri, via its own fiber optic infrastructure. Turkcell Superonline increased the number of households that receive fiber internet services to more than 425 thousand (total closing subscribes) and maintains its leadership in number portability. In Turkey, 8 out of 10 customers who ported their number until the end of 2012 have preferred Turkcell Superonline. With its international collaborations, Turkcell Superonline plays a major role in transforming Istanbul into the regional internet hub. Collaborating with the world s leading Tier-1 telecom operators such as Tata Communications, Deutsche Telekom, and Inteliquent, Turkcell Superonline enables Turkey to bridge Europe, Asia and the Far East in terms of internet connection. Turkcell Superonline will continue to develop its portfolio consisting of valueadded services that let its corporate customers share information, technology and life, all with the convenience of its fiber internet, cloud information solutions and new generation voice services, by utilizing the technological superiority of its new generation infrastructure and the synergy of Turkcell Group. Thanks to Turkcell s Smart Cloud services, our customers can access technology both from a single point and at the speed of light Turkcell Smart Cloud With our Cloud information investments, we have introduced Turkcell s data center competencies to our customers. With the accomplished Turkcell Smart Cloud platform, corporations have started to pay based on their software, hardware and service usage according to their requirements without any pre-investment costs. This experience which began with our customers most essential requirements such as corporate , data storage, data backup, and website hosting, extended to virtual server services of diverse business software used by corporations and emergency backup services. Today, Cloud services are not only a platform preferred by our corporate customers for their own internal requirements, but also to meet the total requirements of the ecosystems in which they grow. On March, 2012, we enabled M2M customers to manage their devices more efficiently by launching Turkey s first M2M Platform. Turkcell Smart Cloud We ve also introduced the Turkcell Smart Health Solution, geared towards the remote management of chronic diseases. Accordingly, we were the first operator in Turkey to provide an infrastructure that allows remote monitoring by their doctors of chronically ill patients with sicknesses such as diabetes, hypertension, arrhythmia, asthma, and COPD. By introducing the Turkcell Smart Fleet product specific to the logistics sector, we ve supported its productivity growth. And by transforming over 350 thousand vehicles into Smart Vehicles through Turkcell M2M infrastructure, by the end of 2012, we ve provided nearly a TRY 750 million fuel saving annually in Turkey. 24 TURKCELL ANNUAL REPORT 2012