turkcell

Transcription

turkcell

TURKCELL
ANNUAL REPORT 2010
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Out Of
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Turkcell
CONTENTS
2
PAGE
Our Vision / Our Values / Our Strategic Priorities
4
Turkcell Group in Numbers
6
Turkcell: Leading Communication and Technology Company
8
Letter From the Chairman
10
Board Members
12
Letter From the CEO
14
Executive Officers
16
Superior Technologies
22
More Advantages
32
Best Quality Service
40
More Social Responsibility
46
Awards
53
Managers of Turkcell Affiliates
54
Subsidiaries
56
Human Resources
62
Mobile Telecommunication Sector
66
International Ratings
72
Investor Relations
74
Corporate Governance
78
Turkcell Offices 95
Consolidated Financial Statement and Independent Audit Report
96
Dematerialization Of The Share Certificates Of The Companies That Are Traded
On The Stock Exchange
204
The Board’s Dividend Distribution Proposal
205
3
OUR VISION
OUR STRATEGIC PRIORITIES
To ease and enrich the lives of our customers with communication and
technology solutions.
As a Leading Communication and Technology Company,
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
4
Turkcell Annual Report 2010
• to grow in our core mobile communication business through increased use
of voice and data,
• to grow our existing international subsidiaries with a focus on profitability,
• to grow in the fixed broadband business by creating synergy among
Turkcell Group companies through our fiber optic infrastructure,
• to grow in the area of mobility, internet and convergence through new
business opportunities,
• to grow in domestic and international markets through communications,
technology and new business opportunities,
• to develop new service platforms that will enrich our relationship with our
customers through our technical capabilities.
5
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Turkcell Group IN Numbers
2010
TRY
9.0
billion
Revenue
33%
EBITDA*
EBITDA Margin
60.4
million
TRY
2.9
billion
TRY
1.8
billion
Net Income
Group subscribers
Group revenue slightly improved to
TRY9.0 billion mainly due to increasing
mobile internet revenues and the higher
contribution of Group companies,
despite the negative impact of regulatory
decisions in Turkey.
Turkcell Turkey’s revenue was TRY8.0
billion, which included higher mobile
internet revenues, up 74% to TRY454
million and a higher postpaid subscriber
base, despite the negative impact of
significant regulatory changes. The share
of mobile internet and service revenues
in Turkcell Turkey’s revenues increased
by 4 percentage points to 20%.
Topline contribution of subsidiaries
increased to 11% in 2010, mainly due
to strong revenue growth of 33% to
TRY335.1 million at Superonline.
EBITDA contribution of subsidiaries
improved to 9% in 2010 from 5% in
2009, mainly due to the significantly
improved operational performance of
Superonline and Astelit.
Despite challenging market conditions
and regulatory changes, Group EBITDA
margin was maintained at 33%, while
Group EBITDA was at TRY2.9 billion.
Group net income increased by 4% to
TRY1.8 billion.
Turkcell’s capital expenditures totaled
TRY18 billion since inception and TRY1.7
billion in 2010.
*EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at http://www.turkcell.com.tr/c/docs/announcements/
announcements_2011_0223_Q4_2010_press_release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, however, that
following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account
for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior
periods, including the Q4 2010 reconciliation.
6
7
Turkcell: LEADING COMMUNICATION
AND TECHNOLOGY COMPANY
1
Turkey - TURKCELL
Subscribers (mn)
Market Share
Revenues (million TRY)
2
6
8.9
50%
1,013
4.0
55%
504
2.0
44%
152
8
Moldova - Moldcell
Subscribers (mn)
Market Share
Revenues (million $)
3rd in
Europe
6
5
14 in the
World
th
Operating
in
9 countries
8
Georgia - Geocell
Subscribers (mn)
Market Share
7
1.5
14%
49
60.4
million
subscribers
1
Azerbaijan - Azercell
Subscribers (mn)
Market Share
4
2
7
9.1
18%
339
Kazakhstan - Kcell
Subscribers (mn)
Market Share
5
9
Belarus - life :)
Subscribers (mn)
Market Share
4
3
Ukraine - life :)
Subscribers (mn)
Market Share
3
33.5
54%
7,991
TRNC - KKTCell
Subscribers (mn)
Market Share
0.9
32%
67
9
0.4
69%
81
Turkcell is a leading
regional player, with
market leadership
in five of the nine
countries in which
it operates with its
approximately 60.4
million subscribers as
of 2010. Turkcell has
been listed on the NYSE
and the ISE since July
2000 and is the only
NYSE-listed company in
Turkey.
TURKCELL Europe- Germany
MVNO operations commenced in Q1 2011
8
9
Letter from the ChaIrman
COLIN J. WILLIAMS
In 2010, the Turkcell Group has once again executed well, which
is mainly attributable to growing contribution from its subsidiaries, mobile internet and services revenues, despite the challenging
competitive and regulatory environment. In 2010, we recorded
TRY9.0 billion in revenues, an EBITDA margin of 33% and TRY1.8
billion in net income.
The Turkish mobile market, had gone through a difficult period in
2009 and its ripple effects prevailed in the market during 2010 in
terms of competition and regulation. Turkish mobile market witnessed some radical changes during the year, with interconnection
rates and maximum prices decreasing significantly, which had a
material impact on our financials. In the face of these developments, we responded and adapted rapidly to these critical changes
and maintained our market leadership in the sector.
During this difficult period, we continued our investments, which
totaled TRY 1.7 billion in 2010, in order to maintain our technological leadership. We established a strong 3G network and fiber
infrastructure while further strengthening our existing 2G network.
We built up our business model on mobile broadband and total telecom solutions, and prepared for the future. Through this strategic
focus, in the first year of 3G in Turkey we established one of the
world’s leading 3G networks and I am proud to say that we are providing mobile internet speed, which is faster than average speeds
of many European mobile operators.
Looking ahead, we are moving into a new era, in which we will
continue to grow our business model through our mobile data and
services as well as applications tailored for our customers’ needs.
In this new period, the market is characterized by increasing smartphones and expanding 3G network. We strongly believe that Turkcell is well-positioned to push the technological boundaries. For
this purpose, we benefit from the increasing synergies with our fixed broadband business Superonline and also Turkcell Technology,
which contributes remarkably to the Group on research and development activities. Going forward, we remain determined to capita-
All along, Turkcell’s long-term success
has been built on three core values:
responsibility, sensitivity, and service.
Turkcell’s board of directors is determined
to conduct all our business by ensuring the
high standards of corporate governance.
10
lize on the considerable growth potential of mobile data which we
perceive as the growth engine of our business, while building up on
our strong voice revenues.
During the year, Turkcell Group’s success was also attributable to
significant improvement in international subsidiaries, in which the
management team focused on profitability. Gradual improvement in
macroeconomic environment of our international subsidiaries also
contributed to this outcome. In 2010, our subsidiaries’ contribution to
consolidated revenues increased to 11% from 10% a year ago and expected to improve further. Meanwhile, our fixed broadband business
Superonline improved its contribution to Turkcell Group as a result of
its increased synergy with the Group. Additionally, outside of Turkey
we continue to look for opportunities to expand our business into new
markets. In this context, we made a wholesale traffic purchase agreement in Germany in 2010, which allows us to introduce the Turkcell
brand, know-how and benefits to a Western European market.
All along, Turkcell’s long-term success has been built on three core
values: responsibility, sensitivity, and service. Our objective has
been to enrich the country’s social and cultural life in different fields, ranging from education to sports, from culture to employment
through our corporate social responsibility projects.
Based on our dividend policy, we have consistently distributed
dividends for the last seven years. Based on our dividend policy,
our Board of Directors proposed cash dividends of approximately
TRY1.3 billion (about $0.9 billion) of Turkcell’s 2010 distributable
net income to the approval of General Assembly.
Managing the only Turkish company with a dual listing on the New
York and Istanbul Stock Exchanges, Turkcell’s board of directors is
determined to conduct all our business by ensuring the high standards of corporate governance. Our aim is to enhance our corporate
governance practices and to generate long-term economic value for
the company’s shareholders.
In conclusion, I would like to emphasize that Turkcell faces the future with confidence, supported by our strong, agile and dedicated
team across the Group and our growing fixed and mobile broadband
business. On behalf of the Board, I take this opportunity to convey
my gratitude to Turkcell’s management team, employees, retailers,
suppliers, and associates and, most of all, to our loyal customers for
their continued support which has made our success possible.
11
Board Members*
1
Colin J. Williams
Chairman
Colin J. Williams, age 69, was appointed as the Chairman of the
Board of Directors on February 25, 2010 and re-appointed on April
29, 2010. 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
2004. 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.
2
12
Karin Eliasson
2
3
3
Member
Karin Eliasson, age 49, was appointed as a member of the Board
of Directors on April 29, 2010. Ms. Eliasson has been Senior Vice
President and Head of Group Human Resources at TeliaSonera since 2008. 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
Sween University.
Tero Erkki Kivisaari
5
Tero Erkki Kivisaari, age 39, was appointed to the Board of Directors on May 14, 2007 and was re-appointed on April 29, 2010.
Mr. Kivisaari has been the President of TeliaSonera in Eurasia
since May 1, 2007 and the Chairman of the Board of Directors of
Fintur Holdings B.V. Previously, Mr. Kivisaari has 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 BV board. He served as CFO of Fintur
Holding B.V from 2003. Mr. Kivisaari has been the CFO of SmartTrust AB, a mobile software company owned by Carlyle Group, GE
Capital, Eqvitec and Sonera Group. Before that, Mr. Kivisaari 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.
4
1
4
Member
Oleg Malis, age 37, was appointed to the Board of Directors on
May 22, 2006 and re-appointed on April 29, 2010. He is also Senior Vice President of Altimo. Mr. Malis began working for Altimo
as Chief of the Current Project Management Unit in 2005. Between 2003 and 2005 Mr. Malis was Senior Vice President and M&A
Director at Golden Telecom. Before joining Golden Telecom, Mr.
Malis founded Investelectrosvyaz and Corbina Telecom. Mr. Malis
holds a degree in Systems Engineering from Moscow State Aviation
Technological University.
6
Member
Oleg Malis
Gulsun Nazli Karamehmet
Williams
Gulsun Nazli Karamehmet Williams, age 33, was appointed to our
Board of Directors on April 29, 2010. Since 2004, she has worked
in different positions at Digiturk (Digital Platform İletisim Hizmetleri A.S), where she currently holds the positon of Chief Content
Officer and Executive Member of the Board. Prior to Digiturk, she
worked at BSkyB England. She studied at Sarah Lawrence College
(USA) and Richmond University (UK) and has a B.A in Communications.
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6
Member
Mehmet Bulent Ergin, age 63, was first appointed as a member of the
Turkcell Board of Directors on April 29, 2005 and was re-appointed on
April 29, 2010. After having taken 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. and was a
managing director at Maysan A.S. and Baytur Trading S.A. Currently, Mr.
Ergin is the Chairman of the Board of Directors of Genel Denizcilik Nakliyati A.S., Show TV, Aksam Gazetesi and Genel Enerji A.S., and he also
holds the position of Board membership in Cukurova Holding. Mr. Ergin
majored in Civil Engineering at Robert College, Turkey.
7
Member
Mehmet Bulent Ergin
Alexey Khudyakov
Member
Alexey Khudyakov, age 40, was appointed to the Board of Directors
on May 22, 2006 and re-appointed on April 29, 2010. 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 a 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 named
to the Audit Committee in reliance on Rule 10A-3(b)(1)(iv)(D) under
the Securities Exchange Act of 1934.
7
* The term of office of Board of Directors is three years upon selection.
13
Letter from the CEO
I am pleased to note that we achieved solid execution in 2010, even
though regulatory environment remained a challenge.
During the year the sector was characterized mainly by non-profit oriented and market share focused competition. As Turkcell, we essentially
attribute our strong execution and commitment to long-term growth to
two items, which will remain our core focus areas:
1. Notable contribution from mobile internet and services revenues,
2. Significant increase in profitability of our subsidiaries.
These two main focus areas will decrease the share of voice revenues
in our consolidated revenues going forward, and diversify our portfolio,
which will make us stronger in such a competitive environment.
Without doubt, a new era of mobility is emerging with its key pillars
being mobility, internet and convergence. Global trends point to mobile
internet revenue as the key growth driver. Indeed, going forward, we
anticipate a rise in mobile internet user number through wider internet usage in the remotest corners of the world. For this reason, we
are very excited by the industry we operate in, and remain committed
to our smart investments. In line with this technological revolution, as
Turkey’s technology leader, we continued with investments whereby
our 3G technology available in Turkey has been certified as one of the
fastest in the world. As such, within a year we have reached population
coverage of 82% in Turkey.
In 2010, time and results thoroughly justified our actions and investments in 3G, and we have every reason to be proud of this outcome.
Our mobile internet revenues have climbed 86% on average over the
past two years. Today, the number of smartphones in our network has
reached 2 million, thus 6% of total subscribers from 3% a year ago,
confirming further significant growth potential. Meanwhile, we clearly
identify fixed and mobile communications convergence as the next platform to substantially impact our lives. Our continued fiber-optic backbone
investment through fixed broadband subsidiary, Superonline reflects this
belief. Meanwhile, with Superonline’s recently-signed Regional Cable
Network project, Istanbul will become the East’s internet gateway to Europe, and the world’s new internet hub due to its geostrategic position.
As Turkcell, we are both aware of our pioneering role in this new era
with our new strategic responsibilities. Turkcell is well-positioned for
this new era, deriving strength from its strategy, entitled “Turkcell 2.0”.
Our strategy may be summarized as sharpening our customer focus,
offering superior solutions, delivering the best value propositions and
increasing user experience in data usage. While our story over the past
17 years has been about “voice”, the next chapter is definitely about
“data”. Accordingly, we have introduced our “Mobile Constitution” geared to ensuring customer satisfaction and trust through operational
excellence, transparency, and cultural change.
SUREYYA CILIV
and 2G and 3G networks. Our capital expenditures since inception have
totaled TRY18 billion. We differentiate ourselves from the competition
through completed core investments in our 3G and fiber-optic infrastructure.
While mobile internet will be a key focus going forward, we will retain
attention on the core mobile business and rising contribution of our
subsidiaries. In 2010, we were delighted to observe that our investments in domestic and international subsidiaries begin to yield desired
results. In Ukraine, our turnaround strategy led to improved operational
profitability to 19% from 5.7% a year ago. Meanwhile, our fixed broadband subsidiary, Superonline, increased its full-year EBITDA margin
to 9.8% from 1.4% a year ago. Looking ahead we remain confident of
our subsidiaries’ continued solid performance. We also expanded our
operations into nine countries by initiating MVNO services in Germany
through the wholesale traffic purchase agreement signed in 2010.
During the year in the Turkish market, mobile line penetration decreased by 2 pp to 85%, mainly due to the continuing decline in multiple
SIM card usage, while we maintained our leadership with a 54% subscriber market share. Throughout 2010, we offered our customers even
more affordable prices, thereby increasing both usage and customer
satisfaction.
As the only Turkish Company with a dual listing on the NYSE and ISE,
over the past 17 years we have continuously provided service to Turkish
people with the same passion we felt on our very first day. We are operating in line with the best-practice international standards and regulations of the capital markets, adhering to professional ethical values,
realizing projects of social responsibility, protecting investor interests
and building strong investor relations through enhanced transparency.
In 2010, we continued to extend scholarship to school-age girls who
cannot continue their education due to financial reasons. We provided
educational grants to 10,000 girls in a year with the “Snowdrops” project, which has grown from a drop into an avalanche. We have touched
the lives of 130,000 children within three years via our “Bridge of Hearts project” carried out in conjunction with the Ministry of National
Education. At the same time, Turkcell has continued to provide employment opportunities for young people through its Erzurum and Diyarbakır Call Centers in the east and south east region on Turkey since 2006.
All in all, we are pleased to observe the tangible benefits of the business
model that we have successfully implemented. I feel confident that we
will continue to lead the way through further investment in cutting edge
technology, and by increasing the quality and range of our services. I
trust that you share the excitement we feel at our role in this new era –
both in our industry and the world. I would like to express my gratitude
to all of our customers, employees, business partners, and shareholders for their continued support.
During the year, in line with our long-term strategy of providing superlative services, we have continued to invest in our fiber-optic backbone
14
15
Executive Officers
9
10
5
12
13
6
2
16
11
15
7
3
1
1
Sureyya Ciliv
CEO
2
Burak Sevilengul
Chief Consumer
Business Officer
3
Koray Ozturkler
Chief Corporate
Affairs Officer
4
Ilter Terzioglu
Chief Network
Operations Officer
9
5
Emre Sayin
Chief Consumer
Strategic Projects Officer
6
Lale Saral Develioglu
Chief Group Marketing
Services Officer
7
Selen Kocabas
Chief Corporate
Business Officer
8
Serkan Okandan
Chief Financial Officer
13
14
8
4
Emre Sehsuvaroglu
Division Head Corporate
Risk Management
Ilker Kuruoz
Chief Information
and Communication
Technologies Officer
10 Umit Akin
11
Hulusi Acar
Chief Consumer Sales
Officer
12
14 Cenk Bayrakdar
15
Ekrem Yener
Chief International
Expansion Officer
16 Meltem Kalender Ozturk
Chief Legal Affairs
Officer
Chief Products and
Services Management
Tayfun Cataltepe
Chief Corporate Strategy
& Regulations Officer
Chief Human Resources
Officer*
* As of March 14, 2011
17
Executive Officers
1
Sureyya Ciliv
Chief Executive Officer
5
Sureyya Ciliv, age 53, was appointed the Chief Executive Officer of Turkcell on January 9, 2007. Having previously worked as Microsoft Turkey
country manager between 1997-2000, he served in various management positions in Microsoft Global Sales, Marketing and Service Group
in the USA between 2000 and 2007. 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 1981.
2
Chief Consumer Business Officer
6
7
Ilter Terzioglu
Chief Group Marketing Services Officer
11
8
Serkan Okandan
Chief Financial Officer
Serkan Okandan, age 41, joined Turkcell in 2000. Since January 1, 2006,
he has been the Chief Financial Officer of Turkcell. Prior to this appointment, he was the Financial Control and Reporting Division Head of Turkcell. Mr. Okandan started his professional career at PricewaterhouseCoopers in 1992. He then worked for DHL and Frito Lay as a Financial
Controller. Serkan Okandan is a graduate in Economics from Bosphorus
University.
13
Umit Akin
14
Chief Consumer Sales Officer
12
Chief Information and Communication Technologies Officer
Cenk Bayrakdar
Chief Products and Services Management Officer
Cenk Bayrakdar, age 43, joined Turkcell in 2000 and was appointed Chief
Product and Services Management Officer on September 1, 2009. 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 2001-2002 and served as the Partnership
Development Division Head of Turkcell between 2002 and 2004. Prior to his
current position at Turkcell as the Chief Product and Services Management Officer, Mr. Bayrakdar acted as the Chief Information and Communication Technologies Officer.
Chief Legal Affairs Officer
Hulusi Acar
Ilker Kuruoz
Ilker Kuruoz, age 42, is Turkcell’s Chief Information and Communication Technologies Officer as of September 2009. He joined Turkcell in 2006. Kuruöz has
started his professional career in 1994 in ABT. He then worked in NCR as a
System Consultant, in Garanti Teknoloji as a Business Unit Manager and in
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 Bilkent University Computer Engineering in 1992 and holds a Master’s
degree from the same department.
15
Ekrem Yener
Chief International Expansion Officer
Hulusi Acar, age 40, joined Turkcell in 2000 and was appointed Chief Consumer Sales Officer on December 10, 2009. He graduated from Istanbul University’s Business Administration department in 1995. Mr. Acar worked in
sales positions in THY and Koctas A.S. At Turkcell he worked as Area Sales
Manager, Marmara Region Coordinator and Turkey Sales Manager between
2000-2004. Between March 2004 and November 2006 he was Sales and
Customer Relationship Chief Executive Officer of Astelit. Prior to his current
position as Chief Consumer Sales Officer, he worked as the Sales Management
and Wholesale and Distribution Management Division Head.
Selen Kocabas
Selen Kocabas, age 43, joined Turkcell in 2003 and she 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, Mrs. Kocabas 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.
Division Head of Corporate Risk Management
Umit Akin, age 41, joined Turkcell in 2002 and was appointed Chief Legal
Affairs Officer on February 1, 2010. Prior to his current position, he was the
Division Head of Turkcell’s Regulatory Legal Affairs department. Mr. Akin began his professional life in 1996 at Ankara University’s Faculty of Law as a
Research Assistant. He then worked as a Lawyer at Ericsson. Umit Akin graduated from Ankara University, Faculty of Law in 1995 and holds a master’s
degree in Public Law.
Chief Corporate Business Officer
Chief Network Operations Officer
18
Lale Saral Develioglu
Lale Saral Develioglu, age 43, joined Turkcell in 2003 and since August
2010 has been Chief Turkcell Group Marketing Services Officer. Prior to
this position, she was the Chief Marketing Officer from 2006 to 2010 and
the Individual Marketing Division Head of Turkcell between December
2003 and June 2006. Starting her career at Unilever, Lale Saral Develioglu
served as Brand Manager for 5 years and Marketing Manager for 7 years
in various product categories and markets between 1992 and 2003. She
is a graduate from the department of Industrial Engineering of Bogazici
University. She also holds a Master’s degree in Management Engineering
from Rensselaer Polytechnic Institute, New York.
Emre Sehsuvaroglu
Emre Sehsuvaroglu, age 40, joined Turkcell in 2006 and has served as the
Division Head in charge of Corporate Risk Management since November 13,
2006, working on such issues as compliance with the Sarbanes-Oxley Act, internal audit, corporate risk management, business continuity program management and data security. Mr. Sehsuvaroglu started his professional career
at Deloitte Independent Audit in 1993 and then served as Audit Group Director
at Arkas Holding between 2003 - 2006. Mr. Sehsuvaroglu is a graduate of
Marmara University Department of Management, a Certified Accountant and
a Certified Internal Auditor.
10
Chief Corporate Affairs Officer
Ilter Terzioglu, age 45, joined Turkcell in 2003 and since April 1, 2006
he has been the Chief Network Operations Officer. 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. Prior to his current position in Turkcell as the Chief Network
Operations Officer, he was performing as the Head of Business Strategies, Regulation and Risk Consolidation in Turkcell.
9
Emre Sayin, age 44, is the Chief Consumer Strategic Projects Officer of Turkcell. Prior to his current position, he was performing as 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 in 2005-2006 and for Kodak A.S. as the General Manager in
2002-2005. Prior to that Emre Sayin was the Chief Marketing Officer for
Microsoft Turkey between 1999-2002. Sayin worked as the Marketing and
Category Manager of Unilever Turkey between 1992-1999. Emre Sayin is
a graduate of Bosphorus University’s Department of Industrial Engineering
and holds a Master’s degree in Systems and Industrial Engineering from
Rutgers University.
Koray Ozturkler
Koray Ozturkler, age 48, joined Turkcell in 1998 and since April 9, 2008
he has been the Chief Corporate Affairs Officer in charge of corporate
communications, investor relations and Corporate Citizenship. Prior to
this appointment he was the Investor Relations division head at Turkcell
since 2002 and before that he 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 Marketing Division and he received his MBA majoring in MIS from Mercer University.
4
Chief Consumer Strategic Projects Officer
Burak Sevilengul
Burak Sevilengul, age 38, joined Turkcell in 2001 and has been Chief
Consumer Business Officer since August 2010. Prior to this appointment, he was the Division Head for the Consumer Business group and
had various other managerial responsibilities within the Marketing
Department. Burak Sevilengül is a graduate of Middle East Technical University’s Department of Business Administration and holds an
MBA degree University Of Georgia, Terry College of Business.
3
Emre Sayin
Ekrem Yener, age 50, 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 1991-1998.
Yener worked as the Ankara Regional Manager of Microsoft Turkey in 1998.
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 2004-2007. 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 Berkley in 1986 and in High Level Marketing Management from Kellogg
University.
Tayfun Cataltepe
Chief Corporate Strategy & Regulations Office
Tayfun Cataltepe, age 50, is the Chief Corporate Strategy & Regulations Officer. After graduating from the Electronic Engineering Department of Bosphorus 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 in
the Bell Laboratories. In 1998 he moved on to AT&T as the IP Network and
Service Planning projects manager, where he worked until 2003. 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 2006. In 2007, Mr. Cataltepe served
as the Europe Telecom Sector Expert in the Transaction Integration Services
Department of Ernst & Young. Since 2007, he has been working at Turkcell
as a Chief Officer.
16
Meltem Kalender Ozturk
Chief Human Resources Officer
* Meltem Kalender Ozturk, age 37, joined Turkcell in 1998. She was
assigned as Division Head of Employee Relations Management between
2001 and 2011 in charge of training, performance and talent management,
remuneration, employee relations, organizational development and
quality management. Mrs. Ozturk, the Chief Human Resources Officer since
March 14, 2011, worked also in Human Resources areas in Logo Business
Solutions and Işıklar Holding. Meltem Kalender Ozturk is a graduate of
Business Administration from Marmara University.
19
Get More Out Of
Life With Turkcell
Technology evolves and improves every day. Technologies that we
couldn’t have dreamed of just five years ago are today essential elements of our existence. We now carry our daily lives and our business in our pockets. We all want to be accessible anytime, anywhere,
and we want effortless access to our loved ones, and to information.
With its technology, innovation, services, and corporate social responsibility projects, Turkcell strives to provide more – to its subscribers and to Turkey.
In the 17 years since its inception,
Turkcell has developed customized
communication solutions, changed
lifestyles with its innovations, supported
young athletes and national teams and
held the hands of the Snowdrops who
want an education; Turkcell has become
Turkey’s Turkcell. And now, from the
East to the West, it is time to bring more
life across Turkey. Because there is life
in this nation and we all have dreams
for the better.
Turkcell is making a difference with its technological infrastructure,
with the advantages and services it offers, and with its investments
in Turkey. In the 17 years since its inception, Turkcell has developed
customized communication solutions, changed lifestyles with its innovations, supported young athletes and national teams and held
the hands of the Snowdrops who want an education; Turkcell has
become Turkey’s Turkcell.
And now, from the East to the West, it is time to bring more life right
across Turkey. Because there is life in this nation, and we all have
dreams for the better.
For that reason, we need more well-being, more success, more
simplicity, more communication, more returns, more abundance,
more support, more hope, more options, more freedom, and more
education.
Get More
Out Of
LIfe WIth
Turkcell
Now, get more out of life with Turkcell.
20
21
SuperIor
TechnologIes
Get More
Out Of LIFE
22
We have made greater investments into more advanced technologies towards
broader, higher-quality and faster communication
Turkcell Group made a TRY1.7 billion investment
in 2010.
Broadest Coverage
We continued to deliver the highest quality services to Turkey’s largest mobile subscriber base, with population coverage of 99.07 percent, geographic coverage of 86.97 percent and EDGE coverage of
100 percent in our network, in 2G technology, as of December 31,
2010. We maintained our leadership of 3G in Turkey with population coverage of around 82 percent.
As a first among global 2G/3G operators, we used the iDirect VSAT
systems under “3G service via satellite communication” technology,
linking the 3G base station to the network via satellite. Consequently, we were able to offer 3G speeds usually only available in
urban areas anywhere within the borders of our country (in rural
areas to which the infrastructure companies cannot bring service,
and where microwave communication is impossible under severe
weather conditions, during disasters and festivals, etc.).
We doubled our speed in 2G technology
We have ranked among the firsts to successfully test the EEDGE
(Evolved EDGE) technology, one of the latest technological advances in mobile communications, on our network. EEDGE technology
provides the best user experience in mobile internet applications
and data services, and doubles the speed for customers in GSM/2G
services.
The Fastest Mobile Internet
In 2010, as well as 2009, we were again certified as the leader in
terms of 3G Internet speeds among mobile operators in Turkey by P3
Communications, an independent international ranking and audit
company, following field tests conducted in Istanbul, Ankara, and
Izmir.
The Latest Technology
We ranked first in the“Average Mobile Internet Speed” among fifteen European mobile operators in field tests conducted to compare 3G mobile Internet speeds of mobile operators in Turkey and
Europe. The tests were conducted in Paris, Berlin, and London;
and in Istanbul, Diyarbakir, and Trabzon, and are certified by IRIS
Telekom, an independent testing and evaluation organization. In
addition, two of Turkcell’s six Radio Network Controllers (“RNC”)
ranked first and second in data speed among 657 RNCs to be evaluated in the Global 3G Performance Comparison Report issued by
Ericsson in 2010. Our remaining four RNCs also ranked among the
ten fastest.
As always, we have strived to continue to make our network available
with the latest technology, and to maintain our technological leadership.
We gained strength through the fiber optic infrastructure
We reinforced our network infrastructure with Superonline’s fiber-
Broad International Coverage
We provide an international roaming service via 662 operators in
208 countries as of December 31, 2010. We cover 95 percent of the
world and 100 percent of Europe in terms of number of countries.
We also continue to enable our customers to experience 3G speed
abroad via 204 operators in 108 countries.
24
We reached a speed of 42 mbps with our 3G technology
We have achieved a speed of 42.2 Mbps in 3G through dual carrier
technology to become one of the first ten operators worldwide to
implement this technology.
optic infrastructure of more than 22,000 km in 73 provinces. Superonline now carries 69
percent of our network traffic.
We executed, together with Superonline, one of the world’s longest marine crossover
projects in radio link connection of 95 km, to provide an alternative transmission method
to Northern Cyprus-Turkey fiber optic line.
In December 2009, Superonline won the public tender for the fifteen-year lease of
BOTAS’s fiber optic infrastructure of 11,280 km, with a bid of EUR20.9 million. Thanks
to this tender, Superonline was able to use these BOTAS routes to access all geographical regions of Turkey. Along with the route provided by the tender, Superonline added
new international exit points to the two existing ones, increasing their number to seven
by the end of 2010; its fiber optic infrastructure exceeded 22,000 km. Superonline is
set to continue with selective investments in this infrastructure in 2011. It signed the
Regional Cable Network (“RCN”) project, involving seven operators from five countries,
in December 2010. The project involves the establishment of the longest uninterrupted
land Internet infrastructure in the region, through the placement of a 7,750-km fiber
optic cable line from the city of Fujairah, in the United Arab Emirates, to Istanbul. The
project is scheduled to commence operations in the second half of 2011, and to become
the internet gateway for 2 billion people. Consequently, Istanbul will become the East’s
internet gateway to Europe, and the world’s new Internet base, due to its geostrategic
position.
Superonline came together with Turkey’s six leading Internet service providers (Borusan
Telekom, Dogan Telekom, Global Iletisim, Grid Telekom, Koç.net, and TurkNet) to establish
the Turkish Network Infrastructure Platform (“TNAP”), contributing to the Turkish component of international investment into positioning Istanbul as the world’s new internet base.
We continued to increase mobile internet usage with devices and applications that deliver the best Internet experience
We have continued to make a difference in the lives of our customers in 2010 with our
innovative 3G products and services. In March, for the first time in Turkey, we introduced
the Turkcell 3G MultiVINN, allowing five individuals to feel the freedom of enjoying wireless Internet with 3G speed - anytime and anywhere.
42.2 Mbps
speed with
3G
82%
3G
coverage
22,000+ km
fiber-optic
backbone
Two of Turkcell’s
six Radio Network
Controllers ranked first
and second in data
speed among 657 RNCs
to be evaluated in the
Global 3G Performance
Comparison Report
issued by Ericsson in
2010.
25
At Turkcell, we provide even more of the best mobile Internet
experience to our customers, enabling them to connect to life anytime and anywhere. The Turkcell 3G VINN modem, with 43.2
Mbps, is compatible with dual carrier technology; by using it our
customers have doubled their Internet speed to an unparalleled
level.
In March, for the first time in Turkey, we introduced the Turkcell 3G
MultiVINN, allowing five individuals to enjoy the freedom of wireless
Internet with 3G speed - anytime and anywhere.
In October, we introduced the three-month VINN campaign, the
shortest contract campaign in the market, which won much attention from our customers.
We increased the penetration of Internet usage from handsets with
applications we developed, and by facilitating easier mobile access
to social networking sites. With two campaigns launched in January
and May, Facebook Free and Facebook Zero, we provided all Turkcell
subscribers with free access to Facebook on their handsets. Our campaigns particularly attracted the interest of the youth segment; each
day, an average of 1.2 million subscribers accessed Facebook on their
handset.
In 2010 we continued to increase mobile internet usage through
our smartphone device bundled offers. And as of year-end 2010,
the number of smartphones on our network had reached 2 million,
representing 6% of total subscribers.
In the first year of 3G technology, we designed and executed the “3G
Enabled Mobile Devices” campaign. Including for the first time seven
producers and more than 70 models, we enabled more users to fully
enjoy life with Turkcell, introducing the campaign with broad-based
communication efforts. We provided our customers with the liberty
As of year-end 2010, the number of
smartphones on our network had
reached 2 million, representing 6%
of total subscribers.
26
We increased the penetration of
internet usage from handsets with
applications we developed, and by
facilitating easier mobile access to
social networking sites.
to use the 3G enabled device of their choice, with a very advantageous Turkcell offer.
On September 24, we also introduced Apple’s iPhone 4, which has
generated huge interest worldwide, with special Turkcell offers. We
designed different Internet and voice packages for two models of the
iPhone 4 - the 16 GB and 32 GB memory capacity models.
Nokia’s global music platform, Comes With Music (“CWM”), was offered
to the Turkish market for the first time, by Turkcell and on the Turkcell
channels, with the launch of two new Nokia products, the X6 and 5235.
We provided free local and international music downloads to purchasers
of those Nokia phones for a period of one year with the CWM concept.
Turkcell also introduced to the Turkish market Samsung’s 2010
flagship product: the Galaxy S.
We additionally offered our customers the Nokia E72, with affordable payment options to enable users to enjoy the Internet with 3G
speed and make video calls.
We offered Turkcell customers, for the first time, the HTC Touch2,
with a computer-like Internet experience and touch screen; and the
HTC HD2, with the largest screen (4.3’’) and the fastest processor (1
GHz) on the market. Both phones were introduced to Turkcell consumers with extremely advantageous campaign offers.
We also brought the Samsung Galaxy Tab to the Turkish market for
the first time, with Turkcell 3G differentiation and advantages. In addition to the features found on a regular tablet, the Samsung Galaxy
Tab includes features like voice and short messaging, and video call
capability. Turkcell subscribers can have this tablet with advantageous call, messaging, and Internet offers.
Wireless
internet for
5 individuals
with 3G
MultiVINN
Turkcell
3G VINN
with 43.2
Mbps
1.2 million
daily
Facebook
users
The Turkcell 3G VINN
modem, with 43.2
Mbps, is compatible
with dual carrier
technology; by using
it our customers
have doubled their
internet speed to an
unparalleled level.
27
We introduced the first Turkcell-branded mobile device: Turkcell T10
We introduced the Turkcell T10, the first Turkcell-branded device,
with the slogan, “A Smartphone for Everyone”, with the objective of
providing equal opportunity in mobile Internet usage.
A standout, with its easy-to-use menu and attractive design, the
Turkcell T10 ensures seamless connection to life through an advanced mobile Internet experience. The stylishly-designed Turkcell T10
won kudos, providing mobile Internet service with 3G speed, mobile
TV service, a touch screen, Turkcell applications and access to the
most popular Internet sites with one click – at an affordable price.
With the T10, we continued to empower our subscribers’ internet
habits, increasing their mobile Internet use by 10 times, compared
with usage prior to purchasing the T10.
We continue to provide new products and services
to further ease the lives of our customers
We closely follow global trends, both to meet local market needs
and to continue to provide creative and pioneering solutions in cooperation with our business partners. In 2010, our mobile internet
and service revenues represented 20% of the total Turkcell Turkey
revenues. Our value-added services, with the exception of data and
messaging, were used by more than 20 million customers in 2010.
Turkcell Enablers & Platforms
Turkcell invests in platforms that enrich user experience and increase the distinctiveness of its products and services. The Turkcell Application Store enables users to download more than 3,000 free or paid
applications, with more than 1,000 compatible mobile devices. With
a download rate of one application per second, the Application Store
had more than 4 million distinct users who downloaded 19 million
applications in 2010. The download numbers for 22 Turkcell applications - including Compass, Travel, Goals on Your Mobile, Mobile
TV, Gezenzi, Footbo, and Click to Win - exceeded 3.8 million.
We closely follow global trends, both
to meet local market needs and to
continue to provide creative and
pioneering solutions in cooperation
with our business partners.
28
Music Services
GncPlay’s vision is to be the go-to place for unlimited online music
streaming. Although the platform can be used by everyone, the user
interface is particularly designed for the young segment. Users can
create their own play lists and share them with friends. Users can
listen to limitless music, follow specific radio stations, create song
lists and share them with their friends. The “Ring Back Tone” Turkcell service enables users to play music for their callers.
TV & Video Services
With Turkcell MobileTV service providing data flow with 3G speed, subscribers may
watch TV channels and recorded content on their mobile phones. Turkcell also provides
recorded video services via turkcell-im and Expert TV WAP pages. The Turkcell-im WAP
page offers popular videos collected from various web sources that are open to public
access.
Social Community and Entertainment Services
Turkcell provides a variety of sports services focusing on football given the size of the
fan base and popularity of this sport within Turkey. Partnering with a major national TV
provider, Turkcell provides a social football platform Footbo.com in Turkish to consumers
to create fan pages, forums and discussions. Also, Turkcell launched an online social
game Footbocity in 2010, widely appreciated by football fans, which enable users to play
interactive games and build their own virtual cities.
Launched in 2010 as a location-based social micro-blog service, Gezenzi enables our
users to share their status information, photos and comments, and follow comments and
messages in their areas of interest.
Information Services
Turkcell developed the IBB Mobile Traffic application in cooperation with the Istanbul
Metropolitan Municipality to ease the lives of its users with updated, reliable information
on Istanbul traffic. This application has been downloaded one million times since its
launch in 2008.
With the location-based Turkcell Compass application, users can determine the nearest
police stations, pharmacies, hospitals, etc. within a specific area around their own location.
Turkcell Seyahat is a travel companion service, enabling users to buy tickets or make
reservations with major airline companies and view live flight information as well as
weather conditions at their destinations.
“Who Called Me” is an information service that notifies users of any calls received – and
those numbers - while their mobile device was shut off and/or outside coverage area.
“Who Called Me” retrieves callers and numbers when the user’s device is again in service. With the common address book feature, the calling numbers are matched with the
contact in address book, to ensure a fuller experience.
Education Services
School (Okul.com.tr) is an online educational platform developed for teachers, parents
and students. It combines rich educational materials with socialized content to reinforce
communication. School is also intended to be a platform where adults can receive lifelong education.
3,000+
applications
19 million
download
2 million
smartphone
in network
Introduced
Samsung
Galaxy Tab in
Turkey
22 Turkcell
branded
applications
T10: First
Turkcell
branded
smartphone
We introduced the
Turkcell T10, the first
Turkcell-branded
device, with the slogan,
“A Smartphone for
Everyone”.
29
Mobile Financial Services
With Turkcell Mobile Payment service, users can use their Turkcell
invoice or TRY accounts for expenses of up to TRY 35 in participating
stores. The Turkcell Mobile Payment service can be used in more
than 470 locations. Turkcell launched the first contactless payment
solution for iPhone in Europe in 2010 in cooperation with Visa Europe and Yapı Kredi Bank.
Other Services
With the “Click to Call” service, we offer our subscribers the opportunity to make calls without using their mobile phone numbers.
When the “Click to Call” button is pressed on contracted websites,
the call between two subscribers begins without dialing numbers.
If, for any reason, Turkcell customers do not wish to share their mobile phone numbers, they may acquire a Rumara number to call other Turkcell subscribers. Rumara users can receive calls from other
Rumara users, and also from all Turkcell subscribers.
Machine-to-Machine Communication (M2M)
Since 2009, Turkcell has been focused on its M2M business, the
principal markets of which in Turkey are car telematics, team tracking, fleet management, POS terminals, security alarms, smart metering and sales force automation applications.
Location and Authentication
A first in its area, the location-based survey application enables researchers to display the location-based distribution of votes on a
map, adding a new dimension to their decision-making.
The Turkcell Application Store
enables users to download more than
3,000 free or paid applications, with
more than 1,000 compatible mobile
devices.
30
In just one year, we added 26
more patented applications to
our existing 31, while increasing
the number of our international
applications to 18.
Mobile Signature enables customers to sign electronic documents
and transactions with a legally-accepted digital signature using GSM
SIM cards. There are currently 50 application providers in the market, representing industries as diverse as banking, e-government,
insurance, healthcare and e-commerce.
We made our mark on the world of R&D with TURKCELL TEKNOLOJİ
We conducted different projects with more than 200 leading technology companies and research centers from Europe. In just one
year, we added a further 26 patented applications to our existing 31,
while increasing the number of our international applications to 18.
Already last year’s leader in patent applications in our sector, this
year we further overtook other applicants.
We developed unique products:
With our expertise in SIM card technology, we developed an infrastructure that can manage the SIM cards of Turkcell subscribers,
along with the vast majority of applications run on the cards, from
a single point. We also introduced the Mobile Signature Platform in
the second quarter of 2010 to reduce licensing and additional development costs, as well as to provide more consistent service.
In the last months of 2010, we accelerated and completed the
development studies, which has begun in 2008 on NFC (Near Field Communication) technology. With this technology, Turkcell
acquired the necessary infrastructure for the secure transmission
of applications used in the banking sector, such as credit cards
to the SIM card, and for the development of the “mobile wallet”
concept.
Compass
MobileTV
Goals
on Your
Mobile
Click to
Win
Travel
Gezenzi
IBB
Mobile
Traffic
With a download rate
of one application per
second, the Application
Store had more than 4
million distinct users
who downloaded 19
million applications in
2010.
31
MORE
ADVANTAGES
Get More
Out Of LIFE
32
More Advantages
More Advantages
We presented more varied offers, in more ranges, at affordable prices
and with higher quality
We continued to present more advantageous offers
for various needs and differentiated solutions for
our consumer and corporate customers
As the market leader, our aim in 2010 was to enable not only our
own subscribers, but everybody, to easily experience Turkcell quality;
thus we launched the “My Turkcell is Your Turkcell” campaign. In just
about one week, more than 1.5 million people had enjoyed Turkcell
quality and difference. With our “Thanks” campaign, we offered free
minutes for up to three days, from 6:00 a.m. to 6:00 p.m., to our longterm post-paid subscribers in the consumer segment as a “thank you”
for the years they have spent with us. We let them know how much we
have valued their loyalty to us over the years as Turkcell customers,
and cemented that loyalty by providing them with a satisfying present.
We continued to offer advantageous offers to meet the needs of our
customers with special tariffs and community offers such as for farmers and public employees. The Turkcell Farmer Package, designed
to aid Turkey’s farmers in increasing their production, attracted widespread interest. We provided not only useful and informative communication offers, but also mobile training programs to raise productivity, location-based daily weather forecasts, local and global news,
product-based information, and discounts through co-branded offers.
With local campaigns, we offered several advantages to our customers
in rural regions and priority provinces, further expanding our market
share in these regions.
In the world of HazırKart (prepaid service), we provided our customers
with monthly “Pomegranate Packages”, which offer five free units for
each unit purchased that included both voice and SMS services.
We made a difference in the transition from units to Turkish lira
We, together with Turkcell Technology, successfully completed the
unit-to-TRY transition period, an important IT transformation project.
Turkcell conducted the most transparent and seamless transition from
34
units to Turkish lira. One week before the transition date, we announced the Turkish lira fees of our tariffs to all of our HazırKart customers,
through SMS, as well as our websites, voice response system, dealers,
and call centers. We converted the units remaining on our customers’
lines at a higher unit price than the one they had paid to load them,
acting on the principle of customer satisfaction. The transition was
completely smooth and entirely flawless for 26 million customers.
As of April 1, our subscribers were able to view on their screens the
amount used, the total, and the remaining amount after each use. We
provided assistance for the Turkish lira transition through a dedicated
service line and answered all related questions.
We continued to offer more freedom to young subscribers
We introduced an advantageous postpaid tariff to the youth segment
and created an alternative to HazırKart, also leading the sector in this
area. We diversified our SMS packages, a very important communication tool for youth.
With gnçtrkcll club, we supported and encouraged youth
throughout the year, providing young people with platforms
where they could demonstrate their power
In 2010 Turkcell’s youth club, gnçtrkcll, provided total savings of
TRY20 million to millions of gnçtrkcll members, through 35 campaigns. We offered free meals at McDonald’s and Burger King in different periods, and a free ticket with each ticket purchased at movie theaters, throughout the year. We also supported our young customers
with special offers and prices on online shopping. In addition to brand
partnerships and price advantages, we reached 440,000 people with
14 activities/sponsorships.
We provided more benefits to our customers with continuing brand
partnerships
We continued our brand partnerships in 2010, offering numerous advantages to our customers through 65 campaigns that included 35
brands. Two million Turkcell customers gained a total value of approximately TRY53 million in shopping benefits. Customers took ad-
vantage of special offers ranging from fuel to food, textiles to transport, and tourism to
technology, by using the passwords we sent them. With 2.5 million hits, our “Turkcell Users
Win” campaign saved each customer an average of TRY21.
Turkcell Platinum continued to expand privileges
Turkcell Platinum subscribers continued to benefit from various exclusive advantages and
privileges in 2010. Platinum subscribers received dedicated support regarding their Turkcell lines and mobile phones from a Special Service Team, who were dispatched to the
customer – wherever they were – with related services and products; and with the 24/7
Special Customer Services, which provided a timely free-of-charge response.
Platinum subscribers also benefited from special discounts on their mobile phone bills,
VINN 3G modem, and mobile devices; and from home delivery services for any device they
desired.
Over the summer, Turkcell Platinum subscribers were given the opportunity to attend Turkcell Kuruçeşme Arena concerts with a guest; they could also attend - again with a guest
- special film previews and parties. In addition, Platinum subscribers could participate in
Flugtag, the Yeşilçam Awards Ceremony and IF Festival.
Turkcell Platinum subscribers were periodically presented with special discounts and gifts,
across more than 10 brands.
We continued to offer advantageous tariffs and packages to our corporate customers
We revamped our corporate tariff structure in January 2010, offering more advantageous
packages to our customers and simplifying the options, making it easier to choose the
optimal package for employees. We introduced Plus Packages in 2010; these allow our
corporate customers to meet all their local voice, data, and SMS needs with a single, pricepredictive tariff package.
In July 2010, we launched Easy Packages to enable our corporate customers to easily allocate lines to employees and business partners. Also launched in 2010, the Italy campaign,
Russia-Ukraine campaign, U.S.–Canada package, Saudi Arabia package, and the Great Britain–Germany–France Daily Voice package met the international communication needs of
our corporate customers at more advantageous prices. We gradated our international data
tariffs to provide our heavy users with data service at more advantageous prices.
Counter to
TRY
transition of
26 million
customers
2 million
subscribers
TRY53
million
benefits
65 campaigns
TRY20 million
benefits with
gnçtrkcll
As the market leader,
our aim in 2010 was
to enable not only
our own subscribers,
but everybody, to
easily experience
Turkcell quality; thus
we launched the
“My Turkcell is Your
Turkcell” campaign.
35
More Advantages
We provided special advantages to different professional groups
With the objective of meeting the communication needs of craftsmen
within a single package, we introduced the İşTcell Craftsman Package, treating them as corporate customers and offering them corporate
advantages.
Following the 2009 launch of its first packages for self-employed individuals like physicians, lawyers, and pharmacists, İşTcell focused on
real estate agents in 2010. We addressed the needs of these leading
groups in the self-employment sector and accordingly enhanced offers
for these clubs. Family doctors who are affiliated with the İşTcell Doctors Club benefit from discounts, with a mobile application specifically
designed for them, while all member doctors have free access to the
WAP portal that contains customized information and applications.
Real estate agents affiliated with the İşTcell Real Estate Agents Club can
post discounted ads on the website at sahibinden.com, while attorneys
affiliated with the İşTcell Lawyers Club have discounted access to UYAP
(National Judicial Network Project) using their mobile signature.
We provided total benefits of TRY18 Million to 30,000 corporate
customers with the İŞTEKAZAN program
We launched our corporate loyalty program, İŞTEKAZAN, on March
1, 2010. The program provided our corporate customers with savings
of up to 50 percent on expenditures including food, fuel, cargo, office
materials, insurance, finance, security, transport, software, hardware,
meetings, hotel accommodation, training, advertising, Internet, and
technology.
30,000 companies gained total savings of TRY18 million through
discount contracts signed with more than 30 different brands across
different sectors; contracted brands recorded a total turnover of approximately TRY219 million as of year-end 2010.
With the objective of meeting the
communication needs of craftsmen
within a single package, we
introduced the İşTcell Craftsman
Package, treating them as corporate
customers and offering them
corporate advantages.
36
On November 23, 2010, we organized the first İŞTCELL Technology
Summit, with the theme of “Opportunities to Make a Difference in
your Business with Mobile Technologies.” Notable speakers included
world-renowned technology gurus Geoffrey Moore and Don Tapscott,
as well as Turkey’s top brand managers, who met with our corporate
customers.
We provided more advantages to our customers through our corporate loyalty program, İŞTECEP
The corporate loyalty program with contracts, İŞTECEP, produced a
catalog with 26 alternatives in total, including 29 offers and 12 de-
İşTcell
Doctors
Club
İşTcell
Craftsman
Package
TRY18
million
benefit for
30K corporate
customers
We provided total
benefits of TRY18
million to 30,000
corporate customers
with the İŞTEKAZAN
program. Contracted
brands recorded
a total turnover of
approximately TRY219
million as of year-end
2010.
37
More Advantages
vice options from all manufacturers, with the launch of 11 new offers
introduced in September and November 2010. İŞTECEP provided more
advantages to our corporate customers with an increased number of
gifts.
We made a difference to the special needs of our customers through
corporate solutions and increased their efficiency
As the leading communication and technology company in Turkey,
we endeavor to fully understand the needs of our corporate customers, and maximize their efficiency in terms of business-team, assets and customer management, with tailor-made mobile solutions.
Accordingly, in 2010, we introduced approximately 5,000 initiatives
to meet the needs of small, medium and large companies. We helped our corporate customers to reduce their operating costs, increase
their efficiency, and make a difference among the competition.
In 2010,
• We enabled our corporate customers to communicate with their clients and employees through approximately three billion messages,
• The Turkcell Vehicle Tracking Service, used in 150,000 vehicles across Turkey, ensured fuel savings of up to 30 percent for companies,
and reduced their maintenance costs by 10 percent,
• With our “Remote Meter Tracking” solution, we prevented electricity
and water losses and theft by up to 80 percent. We reduced incorrect
meter reading rates by 7 percent,
• With the VINN 3G MultiModem solution, implemented in cooperation with the Istanbul Public Transport authority, we provided 18,000
passengers with Internet access at 3G speed in public buses, daily,
• With the 3G Backup solution, we shortened the supermarket chains’
new store opening time by three days,
• With our field automation solutions, we reduced companies’ field
operating expenditures.
As a Total Telecom Solutions Provider we continued our
investments in more advantageous services for our customers
We embarked on our goal of becoming a Total Telecom Solutions
We made a difference to the special
needs of our customers through
corporate solutions and increased
their efficiency.
38
Within the Total Telecom Solutions
Provider, we designed a first joint
offer by Turkcell and Superonline.
Provider (“TTSP”), and will provide our total solutions from a single
source. Our product and service catalogue, expanded with our transition project, will provide our customers with faster and more global
solutions, with more advantageous total costs and higher service quality. After this transition, we will provide the business world with total
solutions through our voice (mobile, fixed), internet (mobile, fixed),
end-to-end communication, network, and data center services and
corporate applications within our revised product and service catalogue.
We position a variety of office products and offers to comply with all
office needs, most notably voice and Internet services
Accordingly, on the office mobile voice service side, we enhanced the
FCT voice (Ekomini) package contents for both local and international
calls and created Ekomini offers with free devices in 2010. With these
voice packages, we helped our customers to reduce their fixed phone
expenses by at least 65 percent.
Within the TTSP, we designed a first joint offer by Turkcell and Superonline and provided ADSL and 3G together for SOHOs (small offices/
home offices) through the Corporate Solution Centers. We introduced
an automatic 3G backup service with a VINN device attachable to the
ADSL modem and provided companies with uninterrupted communication. We drew up a Service Level Agreement (SLA) for the infrastructure of the “Corporate Package Data Access” and added value for our
corporate customers, thus increasing their satisfaction. In addition,
with an unlimited 3G Backup package, we meet their need to back up
land lines and switch to 3G technology. We delivered data traffic at its
second level through L2TP tunneling to those of our customers who
requested it, thus taking the first steps into the “Buy and Sell” model
of mobile Internet; this will begin entering our lives through Virtual
Mobile Operators in the near future.
In the world of mobile Internet, we broke new ground throughout 2010. We provided VINN owners with cost control options,
with packages that discontinued when the first limit was reac-
hed, and offered unlimited Internet packages with a fair use policy. With our bulk
purchase advantages, we gave special discounts to users who immediately made further
commitments with us.
We continued to deliver technological advances and innovations to our customers via
our digital platforms
We continued to employ a number of new technologies and launched micro-sites and demos, including micro-websites with video productions, demos on our services, and applications utilizing social media tools as well as through the use of interactive media. In 2010,
we introduced many new micro-sites and demos.
The Facebook “100 Things To Do While You Are Young” page created within the context
of “100 Things To Do While You Are Young” campaign became a video sharing platform
during the campaign period. This page then became an interactive communication platform for the sharing of the movie, music and entertainment content of gnctrkcll, and the
communication of gnctrkcll campaigns. This page has the highest subscriber number of
350,000 among Turkish brands.
With www.turkcellliningucu.com website, we created a platform for our subscribers to
enable them to create their own videos interpreting our coverage theme song. We then
broadcast our selected submissions on TV as an advertisement.
Gnctrkcll club designed an engaging micro-site, www.iliskininadinikoy.com, for Valentine’s
Day, using Facebook Connect. A micro-site directed towards the gnçtrkcll audience, www.
gnctrkccsessizsinema.com, which is an entertaining micro-site with a video-based online
charades game, was launched in March 2010.
1,600
mobile
marketing
project
Sponsored
free
packages for
4.4 million
people
We also completed the design of the home and sub-page for Gezenzi, Turkcell’s locationbased mobile micro-blogging service, and launched www.gezenzi.com in 2010.
We offered Turkcell subscribers who wished to participate in the “Turkey’s Got Talent”
television show an opportunity to post their videos online. A jury evaluated videos posted
on the www.turkcellleyeteneksizsiniz.com website that met predetermined criteria; those
selected by the jury showcased their talent on the television show.
We provided more advantages with Mobile Marketing
In 2010, we developed 1,600 projects with 353 different companies across 50 assorted
sectors within our mobile marketing service, which always provides more advantages. In
Europe’s largest permission-based database, 11.4 million people received various benefits.
With 700 million advertisement impressions realized in the year, sponsored free packages
benefited 4.4 million people. Mobile Marketing team qualified to the finals in six categories
of the Global Mobile Marketing Awards; and published the first Mobile Marketing book in
Turkey in cooperation with McGraw Hill.
Mobile Marketing
team qualified to the
finals in six categories
of the Global Mobile
Marketing Awards;
and published the first
Mobile Marketing book
in Turkey in cooperation
with McGraw Hill.
39
best qualıty
Servıce
Get More
Out Of LIFE
40
With our expanded, widespread and trained Service Team, we produce more
innovative and practical solutions to better meet your needs.
More service with the most widespread sales
network
Turkcell Communication Centers
We have around 1,000 exclusive Turkcell Communication Centers,
providing expertise in communication technologies; these centers
offer customers a warm, reassuring atmosphere at the most frequented and accessible locations (81 cities, 222 districts), and provide
standard and solution-oriented services. At the Turkcell Communication Centers, our widest exclusive face-to-face service channel, we
continue our efforts to win the hearts and minds of our customers.
We continued to lead the market by reflecting our leadership approach back to entire retailing sector with our Turkcell Communication
Centers which act on the motto, “Technology is a way for us to make
your life easier” and the vision of, “Specialist retailing in communication technologies.” Our stores are visited by 22 million people on
average each month, and our customers are served by a competent
team composed of 6,500 trained, well-natured people with expertise in communication technologies.
Technology Experts, who have been providing service in our stores
since 2008, present our customers with a variety of devices equipped with the latest technology and applications to make life easier.
They also focus on the development of store employees to ensure the
satisfaction of customer needs at first contact. We continue to invest
in consistent training for store employees towards ongoing improvement of our service quality. Accordingly, we provided 200,000
hours of training in 2010. We have engaged independent research
companies to measure the quality of our services, and to track the
advances in our performance. Our stores are routinely audited to
ensure sustainable, standardized, and high-quality service.
We provide our customers with more comprehensive service through the distinctive applications in our stores, two of which draw the
greatest attention; fast battery charger and telephone backup:
• Fast Battery Charger: a feature unique to Turkcell among global
operators, these devices quickly complete charging in 15 minutes.
In 2010, the device was used 1.1 million times.
• Telephone Backup Device: a feature unique to Turkcell in Turkey,
this device is used both for telephone backup and the downloading
of various applications, to make life easier. In 2010, approximately 1
million applications were downloaded.
We provide our customers with efficient product
supply, and fast and efficient information at
17,000 Turkcell Sales Points and 50 Turkcell
Distribution Centers
Turkcell Sales Points
There are approximately 17,000 Turkcell Sales Points, offering the
products of all operators in Turkey and providing service even in
the most outlying locations. With this figure, Turkcell is one of the
most prominent examples of a telecom supply chain in Europe. It is
essential for us that our customers can easily access Turkcell products and services and get the best service possible at these stores.
Accordingly, we established 50 Turkcell Distribution Centers to make
weekly visits to these sales points, thus ensuring efficient product
supply, as well as providing correct, fast and efficient information on
our products and services.
In 2010, we introduced another distinctive service for Turkcell Sales
Points: Turkcell Ambassadors Club. With this club, Turkcell Sales Points win points for their performance and use them in shopping. This
system ensures the creation of a one-to-one communication platform with Turkcell Sales Points, thus improving their performance
and motivation. Our customers are also able to purchase their units
on digital environments via digital POS use generalized in 2010.
They can thus meet their unit needs anytime and anywhere, either
by cash or credit card payment.
Other Channels
We have been providing service to our customers through Electronic Chain Stores since
2008; we can offer the Turkcell advantages at any point where our customers come
together with technology. Our customers can meet both their subscription and device
needs through the partnerships with eight brands and in approximately 100 stores. We
also provide our customers with other channels for their routine needs, including bank
ATMs and online branches, call centers, kiosks, post office (“PTT”) and the Turkcell
website.
We maintained our focus on customer satisfaction in our Call
Center and remained the acknowledged leader; our success was
recognized with awards
Turkcell Global Bilgi formed special service teams in 2010 as part of the service segmentation efforts carried out in Turkcell Consumer Operations; thus enabling those users
with different service needs to obtain these services from trained expert customer representatives. Designed under the leadership of Turkcell Global Bilgi Customer Relationship
Management, and with the efforts of the IT department, the system differentiates itself
from other practices in the sector with its technological features and process for the
maintenance of satisfied customers. Protected by “Tasdix”, the first digital time stamp
introduced to the end-user in Turkey, this program was entered into TÜBİTAK registers,
and its usage rights are under proprietary protection.
In 2010, Turkcell Global Bilgi ranked first in the world and the EMEA region in the
“2010 Top Ranking Performers” assessment by ContactCenterWorld.com; for the
“Gaining New Customers - SOHO*” project, designed for professional groups in Turkcell Corporate Operations. The SOHO project is a club, covering professional groups
including doctors, lawyers, pharmacists, public accountants and real estate agents. It
operates under the membership system to provide members with exclusive services
related to their own professional groups.
With the aim of facilitating its members’ businesses, the project enriches customer
experience with benefits that include customer services through a free, dedicated
number; educated customer representatives who have a command of the terminology
17,000
Turkcell
Sales
Points
50 Turkcell
Distribution
Centers
Fast
Battery
Charger
Telephone
Backup
Device
At around 1,000
Turkcell Communication
Centers, our widest
exclusive face-to-face
service channel, we
continue our efforts
to win the hearts and
minds of our customers.
*Small office home office
42
43
of the related professional group; bulk SMS packages; web assistant service; mobile knowledge banks; and special discounts from
brand partnerships. The SOHO project speeds up campaigns and
club membership sales compared with traditional sales methods,
as well as providing cost efficiency.
With the achievement of many firsts since its establishment, and
15,000
video
calls
with an investment of TRY 125 million over 10 years, Turkcell Global Bilgi contacted 230 million customers in 2010. It responded to
15,000 video calls through mobile internet technology with 3G speed, and provided for the first time a video call center for the hearingimpaired. Turkcell Global Bilgi has won 25 national and international awards over the past five years as a result of its differentiating
service approach.
We both increased customer satisfaction and
reduced costs, by implementing voice recognition
for our customers
We introduced voice signature on February 9, implementing voice
Voice
signature
25 awards
in 5 years to
Global Bilgi
recognition so that our customers are no longer obliged to answer
security questions before speaking to a service representative.
We eased the lives of company executives with
refinements to Corporate Online Transaction
New features were added to Corporate Online Transaction, which
enables company executives to manage corporate lines through
approximately 200 transaction options; companies were provided
with 24/7 online transaction capability. With the addition of new
reports, customers can produce any report they need from this chan-
With the achievement of many firsts
since its establishment, and with an
investment of TRY 125 million over 10
years, Turkcell Global Bilgi contacted
230 million customers in 2010.
44
nel.
We provide corporate customer services customized to company
employee profiles
With “İşTcell Business Class Customer Services” for company executives and decision makers; “Technical Support Service” for IT
executives; and “İşTcell Corporate Customer Services” for company
employees, we provide exclusive services with tailor-made solutions
for the varying requirements of different profiles.
New features were
added to Corporate
Online Transaction,
which enables company
executives to manage
corporate lines through
approximately 200
transaction options;
companies were
provided with 24/7
online transaction
capability.
45
MORE SOCIAL
RESPONSIBILITY
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Out Of LIFE
46
Turkcell Annul Report 2010
As Turkey’s Turkcell, we continue to support not only technology, but also
economic, environmental, and social development.
We invest in the future of future generations in the areas of education, sports, and employment, by developing or supporting sustainable, long-lasting and measurable projects that promote youth
development.
Snowdrops
We provide educational grants to 10,000 girls every year with the
Snowdrops project, which has grown from a drop into an avalanche
The Snowdrops project was initiated in 2000 in cooperation with the
Society for Supporting Modern Life and provided grants to 5,000 girls
who are decisive and determined to study. Turkcell extended the project
in 2007 to increase the number of grants given every year to 10,000.
The Snowdrops project strives to provide equal educational opportunities to girls unable to continue their education due to the economic
disadvantages of their families; and subsequently to develop them
into open-minded individuals with a profession.
Concluding its first decade in 2010, Snowdrops is Turkey’s pioneering education project, also marking Turkcell’s first comprehensive
social responsibility initiative. Snowdrops has grown into an avalanche over the years with public support to become one of Turkey’s
most important social responsibility projects, providing educational
opportunities to tens of thousands of girls.
A Mentorship Program was initiated in 2004 as a supporting process
for the Snowdrops project, to further contribute to the development
of real-life skill sets for the “Snowdrops” continuing their education at university level. Volunteers were chosen from among Turkcell
executives, leading female journalists and columnists in the media
world, as well as successful businesswomen to assume a “guiding”
role; they then joined the program as informed mentors, following
long and meticulous study and training. The Mentorship Program
48
began with 46 mentors and grew yearly, with 160 mentors in total
mentoring their Snowdrops to date.
The project recently opened up at different levels, gaining international recognition. In 2008, the Snowdrops project was filmed by National Geographic. Prior to the documentary, an 11-person National
Geographic team conducted interviews with Snowdrop girls and their families, in Istanbul, Kars, Erzurum, and Mardin, from September
2008 to April 2009. As a result, for the first time in Turkey, a social
responsibility project was filmed as a documentary on the National
Geographic Channel. A Snowdrops photo exhibition, displaying images taken during the shoots, toured cities across Turkey.
16 national
and
international
awards to
Snowdrops
976
college
graduates
Scholarships
to 20,000
girls
In March 2010, the Snowdrops project was selected by the United
Nations as an exemplary project and introduced to the world through a series of activities.
With this project growing from a drop into an avalanche, we now
provide educational grants to 10,000 girls every year. Since 2000,
20,000 girls have received scholarships; 9,634 students have graduated from high school; 3,437 of them have entered college; and 976
are college graduates. Thus far, the Snowdrops project has garnered
16 national and international awards.
Bridge of Hearts
Initiated in 2008 in partnership with the Ministry of Education, the
“Bridge of Hearts” project enables ten thousands of children from
around Turkey to visit different provinces and establish new and
long-lasting friendships with other children, while also discovering
the natural and cultural beauties of our country.
Five-day tours are arranged as part of the Bridge of Hearts project,
to support students’ personal and social development, as well as to
We invest in the future
of future generations
in the areas of
education, sports,
and employment,
by developing or
supporting sustainable,
long-lasting and
measurable projects
that promote youth
development.
49
increase their awareness of social issues, diversity, and voluntary
activity. Students visit historical and touristic sites, plant trees, and
participate in environmental activities during the first three days of
the tour, according to the plan of the Provincial Directorate of Education. The remaining two days are scheduled by the family hosting
each student.
Having reached 130,000 students in three years, the Bridge of Hearts project continues to grow each year. In 2010, special day activities were included in the project. Students were taken to the Anıtkabir Mausoleum on April 23 and to Samsun on May 19, to experience
the enthusiasm of national holidays. International tours were also
included to expand students’ horizons.
Within the Bridge of Hearts project;
• In 3 years, 130,000 students from 81 provinces visited provinces
they had never seen, and experienced new cultures,
• More than 5 million kilometers were covered,
• 3,250 administrators and 6,500 teachers were appointed to accompany the students.
• Bridge of Hearts teams were formed in 81 provinces,
• Thousands of students for the first time experienced: planes, the
sea, the metro and trains,
• Hundreds of thousands of friendship were established.
Runners to the Future
Developed in cooperation with the General Directorate of Youth and
Sports, the “Runners to the Future” project aims to support the training of athletes aged 12-18 who can achieve success in individual
sports.
At Turkcell, we also prioritize
investing in employment. Turkcell
Group employs approximately 11,000
people.
50
Included in the national plan of the United Nations’ project, Alliance of Civilizations, the project selects young athletes based on
their talent, and coaches them in sports, including weightlifting,
skiing, swimming, tennis, and athletics, along with cycling for the
visually-impaired, across Turkey; they are trained to become national athletes who will successfully represent Turkey in the international arena.
Within this project, Turkcell also sponsors Marsel İlhan, the number
one-ranking tennis player in Turkey and 90th in the world; as well as
Cagla Buyukakcay, another national tennis player.
Turkcell is the main sponsor of the National Football and
Basketball Teams
From its start as the Official Communication Sponsor in 2002, Turkcell has continued its
support for the National Football Team since 2005, as the main sponsor. Turkcell intends
to continue its support of the national team, recognizing the importance of the team’s achievements in enhancing national morale, as well as our nation’s international prestige.
Turkcell also supports the National Basketball Team, encouraging and inspiring upcoming generations. Starting off as the Official Communication Sponsor in 2002, we became the main sponsor in 2006. Turkcell was also the main sponsor of the World Basketball
Championship 2010, where our national team achieved great success by picking up a
silver medal.
Contribution to employment
At Turkcell, we also prioritize investing in employment. Turkcell Group employs approximately 11,000 people. We have established an eco-system of 50,000 people, including
our dealers and business partners.
In line with the importance we place on employment, we have initiated an important project in partnership with İŞKUR (Turkish Employment Agency). In 2010, we provided 1,600
unemployed young people with comprehensive training opportunities in the retailing
and call center sectors. More than 1,000 of them were employed in our eco-system. We
will continue this partnership with İŞKUR in 2011, and provide training and job opportunities to more than 2,000 people.
We also focus on employing physically challenged individuals. Accordingly, Turkcell Group employs 285 physically challenged individuals, while Turkcell Global Bilgi has 180
physically challenged employees. A project developed with the Ministry of Transportation
employs 7 such individuals, who are able to provide call center service from their homes.
With our Turkcell Global Bilgi call center, we employ 7,500 people in 12 locations in total,
including nine in Turkey (Istanbul, Izmir, Erzurum, Eskişehir, Diyarbakir, Ankara, and
Karaman), two in Ukraine, and one in Belarus.
We Offer Job Opportunities to Thousands of Young People
through the Turkcell Academy - İŞKUR Cooperation
As retail and call center sectors prosper in Turkey, the need for human resources trained
in technology and communication, and in marketing, sales, and customer-centric services constantly increases. Acting on the ideas of “People Are Our Priority, People Are Our
Pioneers” and “Investing in People”, the Turkcell Academy established cooperation with
Support
the training
of athletes
aged 12-18
The main
sponsor of the
National Football
and Basketball
Teams
An
eco-system
of 50,000
people
Employs
approximately
11,000 people
Turkcell was also
the main sponsor of
the World Basketball
Championship 2010,
where our national
team achieved great
success by picking up a
silver medal.
51
İŞKUR, the employment agency affiliated with the Turkish Ministry of
Labor and Social Security, to both introduce qualified labor to these
sectors and offer employment opportunities to this qualified labor.
The primary function of the Turkish employment agency is defined
in its articles of incorporation: to meet the personnel needs of employers with qualified labor.
In this cooperative effort, we brought together the nationwide human resources of İŞKUR, the academic knowledge of the universities
and the Turkcell Group’s corporate knowledge and experience under
the expertise of the Turkcell Academy; we designed two programs:
the “Turkcell Retail Sales Development Program” and the “Customer Relations Development Program.” From the young people registered with İŞKUR, those with qualifications defined according to
business criteria passed through a three-stage selection procedure,
including a telephone interview, general examination, and face-toface interview, for an opportunity to attend these programs.
In these programs, instructors from Ege University, Erzurum Atatürk University, and Turkcell Academy offered theoretical lessons in
classrooms and then practical instruction that covered in-store and
web-based call center sessions.
In 2010, 1,600 young people were trained; and 110 of them were
employed in Turkcell call centers and with dealers. We will continue this cooperation in 2011 and will hold new, augmented training
programs designed for the call center and retail sectors; offering job
opportunities for 2,000 unemployed young and talented individuals
in twelve cities.
Turkcell Volunteers
The Turkcell Volunteers group, composed of Turkcell employees,
identifies people in need and related projects in cooperation with
Turkcell Volunteers were granted
the “The Best Social Responsibility
Project Created by Employees”, by the
United States-based E2E, in 2010.
non-governmental organizations, and ensures the individual support of Turkcell employees through in-house organizations.
Turkcell Volunteers projects to date have included “Would You Share
Your Toy?”; “Let’s Heat the Yukarı Tandır Village”; “My First Holiday”; “A Book for Every Child”; “We Regenerate the Fatih Elementary School in Şırnak”; “Recreational Area Arrangement for the Kapıkaya Elementary School in Siverek”; and “Curiosity Room.”
Turkcell Volunteers were granted the “Excellence in Public Relations – Golden World Award” by the International Public Relations
Association (IPRA) in 2007; an honorary award from the PR News
Nonprofit PR Awards in the United States in 2009; and “The Best
Social Responsibility Project Created by Employees” award, by the
United States-based E2E, in 2010.
• Turkcell was presented with an “Alliance Excellence
Awards” in 2009, in the “Growth Company: AllianceManagement Excellence” category, for our Turkcell
Partner Program. The Turkcell Partner Program is the major pillar
of all our Business Partnership Management Programs. We have
been implementing the Turkcell Partner Program at Turkcell since
2004 and at our Group Companies since 2010.
• The Corporate University Xchange is considered one of the most
respected organizations in the world in terms of designing inhouse workshops. It presented the Turkcell Academy with the
CorpU Award for Excellence and Innovation in the
“Learning Technologies” category for the 11th time this
year.
We opened our network infrastructure to the “Earthquake Information System” project
We signed a cooperation protocol with Bogazici University, Kandilli
Observatory, and the Earthquake Research Institute to conduct joint
studies on the Earthquake Information System Project. We opened
our base stations and network infrastructure to these scientific projects.
We saved energy
A new generation feature recently integrated into our network enabled us to reduce the power consumption of network equipment that
experiences less use during low-traffic hours. We achieved energy
savings of 4-5 percent and reduced CO2 emissions by 8,800 tons.
We produced alternative energy solutions
We increased the number of our base stations powered by hybrid
energy systems to 17. We used wind power at 217 base stations,
under the Greencell Project, supporting the production of green
energy.
honorary awards in seven different categories.
•Kariyer.net recognized Turkcell with its “Company
Receiving the Highest Job Applications” award; and
the Turkcell Global Bilgi with its “Company Generating
the Highest Employment” at the Respect for
Humanity Award Ceremony.
Turkcell’s CEO Süreyya Ciliv was presented with an honorary
award in the “Executive of the Year in Europe” category, while
the Snowdrops and Bridge of Hearts projects each received
honorary awards in the “Social Responsibility Projects of the
Year” category. The Turkcell Management Team was recognized
in the “Management Team of the Year” category; the Turkcell
Corporate Communications Team was recognized in the
“Communication Team of the Year” category; Turkcell VINN in
the “Marketing Campaign of the Year” category; TıklaKonuş and
Turkcell Konuşanİlan in the “New Services of the Year” category;
and Turkcell Mobile Learning and Turkcell-NTV News Package in
the “New Telecommunication Services of the Year” category.
• In the Best-Managed Companies in Central and Eastern Europe
2010 Survey, conducted by Euromoney magazine, Turkcell
ranked first in the “Most Satisfactory and Consistent
Company Strategy in the Mobile Sector” category,
and third in the “Best Managed Company” category.
Turkcell Academy received an Excellence Award in
the “Leadership Development” category from ASTD
(American Society for Training and Development).
International Public
Relations Association (IPRA) in the “Best Service
Launch” category for the 3G launch.
•
Global Bilgi ranked first in the “Call
Centers” list in the Bilisim 500.
• We won the grand award in the Bilisim 500 competition for
our “Mobile Application”.
Global Bilgi won the Grand Prize in the “Best
Telemarketing” category for the EMEA (Europe, Middle-
• Turkcell
Digital Age Awards:
Most Creative Viral Campaign: Certificate of Achievement:
• We won the Grand Prize from the
• Turkcell
We ranked high in thirteen categories in the
International Business Awards; in three of these, we
ranked the highest. Accordingly, we garnered First Place in
the “Marketing Website” category with www.turkcell3g.com;
First Place in the “Financial Services” category, with Garanti
e-trader; and “Production Development Team of the Year” with
AdinAction Development Team. Turkcell also won ten
Amsterdam.
East and Africa Region).
52
•
Financial
Disclosure Procedures in Europe” at the 2010
Investor Relations Global Rankings Awards in
•
Turkcell won the Trade Financing Solution of
the Year award. Turkcell and Astelit, a Turkcell Group
company in Ukraine, signed a facility agreement in the amount
of approximately $360 million to be used for the 2009 financing
of infrastructure investments originating from Ericsson. The
facility was arranged by Credit Agricole CIB and Nordea Bank
AB with the guarantee of the Swedish Export Credits Guarantee
Board, and was assigned to the Swedish Export Credit
Corporation. This financing transaction was awarded as the
Trade Financing Solution of the Year by Euromoney.
• We were honored with an award for “Best
Responsible Technology
We enabled location information for 112 emergency calls
We managed, through improvements to our network, to send call
location information to emergency institutions for the calls made to
the 112 Emergency Center in Ankara, Antalya, and Isparta; a first for
Turkey. At Turkcell, we are prepared to provide this service to other
cities and continue the effort with the Ministry of Health.
•
Awards
Turkcell Continued To Win Awards in 2010
Gezenzi Lost
Most Creative Digital Centered, Integrated
Campaigns
First: 100
Digital
Things To Do When You Are Young
Most Creative Video: First Award: Gezenzi
Internet Video
• We won the Grand Prize at the Golden Drum in the “Best
Event” category with the First Year Event of 3G.
•
PR
We were awarded Capital Magazine’s Most
Admired Company in 2010 Award.
53
Managers of Turkcell Affiliates
54
Astelit – Alexander Barinov
Superonline - Murat Erkan
Alexander Barinov was appointed General Manager of Astelit on December 1st 2010. Mr. Barinov has
extensive experience in the telecommunications industry both in Ukraine and at the international level.
Before joining Astelit he worked as Vice President of the Supervisory Board of StarLightMedia. From
June 2008 till April 2010 Mr. Barinov worked for Vympelcom Group, where he held the positions of Vice
President for Sales of Vympelcom (Beeline) Russia and General Director of Ukrainian Radio Systems
(Beeline) Ukraine. Before that, Mr. Barinov had held a number of top-managerial positions, including
Vice President for Product, Marketing and Strategic Development of IBS Group (Russia), General Manager of Aegis Media (Russia), General Director of DEPO Computers (Russia) and Marketing Director of
Philips CE Russia. Mr. Barinov graduated from Moscow State Academy of Chemical Engineering, where
he completed his PhD, and also carried out his research in Dortmund University (Germany).
Murat Erkan joined the Turkcell family as the General Manager of Tellcom in June 2008. After launching
his career at Toshiba, Mr. Erkan became Turkey’s first Systems Engineer at Cisco. Prior to joining Tellcom, he worked as the Business Unit Manager at Aneltech, responsible for providing solutions to the
telecom, mobile communication, information and communications technology, defense and industrial
production sectors. He also managed the merger of Tellcom and Superonline in 2008. Mr. Erkan graduated from the Department of Electronics and Communications Engineering at Yıldız Technical University
in 1992.
BeST – Ozcan Ermis
Turkcell Teknoloji – Kadir Semih Incedayi
Ozcan Ermis has been serving as the General Manager of BeST in Belarus since October 2008. Mr. Ermis
was the Sales and Marketing Director at Astelit Ukraine in his previous post, and served as the Sales and
Marketing Director of Vodafone Turkey until 2006. Prior to that, he served as the Marketing Director of
Telsim until 2003. He started his career in the automotive sector in the marketing department in 1992.
Ozcan Ermis is a graduate of the Department of Mechanical Engineering of Bosphorus University and
holds an MBA degree from the same university.
Kadir Semih Incedayi joined Turkcell Teknoloji Arastirma ve Gelistirme A.S. in April 2007. Before becoming the General Manager of Turkcell Teknoloji, he joined Turkcell in December 2006 as the Division
Head of Research and Development. After ten years with the Koc Group, Mr. Incedayı served as manager
for four years at Telsim and two years at Borusan Telekom. Kadir Semih Incedayi graduated from the
Department of Computer Engineering at Middle East Technical University after attending Istanbul Erkek
High School.
Global Bilgi - Bahadir Pekkan
Inteltek - Ahmet Sezer
Bahadir Pekkan started working for Global Bilgi A.Ş., Turkey’s leading call center, in 2005, after holding
managerial positions in various companies. At Global Bilgi, Mr. Pekkan served as the Chief Financial
Officer for approximately eighteen months and then, from June 1, 2006 on, as the General Manager.
Bahadir Pekkan is also the president of the Association of Call Centers, established in 2008. Born in
Istanbul in 1967, Mr. Pekkan is a graduate of the Department of Business Administration of Marmara
University. He also holds masters degrees in Capital Markets & Stock Exchanges from Marmara University and in Finance-Accounting from Yeditepe University.
Ahmet Sezer has served as the General Manager of Inteltek since 2004. After graduating from the Department of Electronics and Communications Engineering at Istanbul Technical University in 1982, he
began his career as an engineer at Aselsan, and continued at IBM Turk Ltd. between 1988 and1994.
During his career as a professional manager, he has been the Assistant General Manager of Intertech
A.Ş., 1994-1997, the Group Vice President of the Vestel Group of Companies, 1997-1998, the General
Manager of Vestel Consultancy and Professional Services, 1998-2001, and the General Manager of
Probil A.Ş., 2001-2004.
KKTCell - Daghan Fellahoglu
Global Tower - Ismet Yazici
Daghan Fellahoglu joined the Turkcell family on August 1, 2008 and since then has been serving as the
General Manager of KKTCell. His expertise, developed from holding senior positions in local and foreign
telecommunications and IT markets, rests in marketing, sales, product management and network design. Between 1996 and 2007, Mr. Fellahoglu served in various senior management positions at Ericsson in Turkey and Sweden; between 2007 and 2008, he worked in Singapore as the Sales Development
Director for South East Asia. Born in Baf in 1971, he is a graduate of the Department of Electric and
Electronic Engineering of Eastern Mediterranean University and Turkish Maarif College.
Ismet Yazici joined Global Tower on February 2, 2009 as Assistant General Manager for Business Development & Sales and became Deputy General Manager on February 18, 2010. He became General Manager
at Global Tower on November 8, 2010. He joined Nortel Netas in 1993 as an R&D engineer. He received
a master’s degree in Political Science at Marmara University (1998) and an MBA degree at the University
of Texas (2000). Mr. Yazici worked in the International Sales & Marketing Department at Nortel Netas between1995 and1999 and served the same company as the Manager of the Romanian office between 1997
and1999. Mr. Yazici was CDMA Product Marketing Manager at Nortel Networks Richardson, Texas, USA,
between1999 and 2003, and became the Nortel Networks EMEA Product Marketing & Business Development
Director in 2003. He was honored with the “Exceptional Contribution” and “Leadership Recognition” awards
for his contribution to the introduction of CDMA technology to the region and to the expansion of Nortel
Networks to new markers. Mr. Yazici served in the Turkey unit of Nortel in 2006 and held the position of Marketing, Business Development, and Corporate Sales Leadership until the end of January 2009. Born in May
1968 in Duzce, Ismet Yazici graduated from the Department of Electronic Engineering at Hacettepe University.
55
Subsidiaries
Subsidiaries
In 2010 Turkcell, continued its operations in a wide geography spanning from
Germany to Kazakhstan
International Subsidiaries
In 2010, Astelit’s EBITDA tripled compared to 2009 within the context of the turnaround strategy and effective cost control initiatives.
Its EBITDA margin increased to 19.0% in 2010 from 5.7% a year
before. The main drivers of this increase were the tariff redesigns
resulting in a decrease in interconnection costs, together with cost
cutting measures.
Ukraine: Astelit
By the beginning of February 2005, Turkcell’s 55% indirect subsidiary Astelit had launched its GSM operations in Ukraine under the
“life:)” brand name. Of the company’s shares, 45% belong to the
System Capital Management Group. Astelit covers 96% of Ukraine’s
population and 88% of the country’s territory.
Summary Data for Astelit
2009
2010
y/y % chg
(25.4%)
(21.8%)
8.3%
Average Revenue per User (ARPU) in US$
Total
2.5
Active (3 months)
3.7
Revenue (UAH million)
2,740
Revenue (US$ million)
351.1
EBITDA2 (US$ million)
20.2
EBITDA margin
5.7%
Net Loss (US$ million)
(111.8)
Capex (US$ million)
216.0
4.0%
5.4%
(1.8%)
(3.4%)
219.3%
13.3pp
(9.7%)
(69.2%)
1
Active subscribers are those who in the past three months made a transaction which brought
revenue to the Company.
2
The 3-month active ARPU rose by 5.4% in 2010, mainly due to a
decline in the number of active subscribers, along with the change
in active subscriber definition. MoU increased by 8.3% in 2010 yearon-year.
FINTUR
Turkcell holds a 41.45% stake in Fintur Holdings BV. Fintur has focused
on GSM investments in growing markets of relatively low penetration
rates, such as Azerbaijan, Kazakhstan, Moldova and Georgia.
EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at
Belarus: BeST
Turkcell purchased 80% of Belarusian Telecommunications Network
(BeST) for US$500 million from the State Assets Committee of the Republic of Belarus in July 2008 as part of the Company’s strategy to
capitalize on the emerging investment potential in neighboring countries. The purchased amount is scheduled to be paid in three installments: The initial payment of US$300 million was made on August
26, 2008, and the second installment of US$100 million was made
on December 31, 2009. The remaining installment of US$100 million
was made on December 31, 2010. An additional payment of US$100
million falls due when BeST first announces a net annual profit.
http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_
release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note,
however, that following the publication of the reconciliation in our Q4 2010 results on February
23, 2011, we have made changes to the manner in which we account for the impact of changes
in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise
our presentation of prior periods, including the Q4 2010 reconciliation.
56
Deriving its strength mainly from its wide coverage area, strong network structure, high quality service, extensive product range, highly
professional staff and support of shareholders, Azercell allows its
subscribers to make calls using the networks of 406 operators in
152 countries around the world. As of the end of 2010, Azercell had
approximately 4 million subscribers, and held the leading position
in the telecommunication sector.
Additionally, the Company holds the majority stake in Azeronline,
the internet service provider established as a limited liability company in December 1999.
FINTUR
Number of subscribers (million)
Total
12.2
9.1
Active (3 months) 1
7.8
6.1
MoU (minutes)
158.7
171.9
2.6
3.9
2,691
339.3
64.5
19.0%
(101.0)
66.5
In 2010, Astelit’s number of registered and three-month active subscribers stood at 9.1 million and 6.1 millon, respectively.
BeST was able to achieve 76.2% geographical coverage and 96.3%
population coverage in just two years, while increasing its subscriber
market share to 14% in a market with a penetration rate of 110%
as of 2010. BeST’s subscriber base rose by 25% year-on-year to 1.5
million. As the first mobile operator in Belarus to launch 3G services
in November 2009, BeST continued its investments, with a TRY185.4
million capital expenditure in 2010, which rendered the Company the
leader in the Belarusian market in 3G rollout, increasing its brand
awareness to 88% with its own brand, namely life:).
The acquisition of BeST gives Turkcell the opportunity to enter a market of growth potential. Belarus’ growing economy and young and
well-educated population, make it an attractive market in a region
where Turkcell is keen to grow.
Fintur’s subscriber base continued to grow in 2010. The overall subscriber number rose by 16.9% to 15.9 million, mainly as a result of strong
growth in Kazakhstan. Fintur’s consolidated revenue increased by 8.2%
to US$1,737 million in 2010, mainly driven by a 17.4% increase in the
revenues of our Kazakhstan operation, along with strong subscriber acquisitions and an improved macroeconomic environment. We account
for our investment in Fintur using the equity method. Fintur’s contribution to income was US$153.0 million in 2010.
Azerbaijan: Azercell
Established in 1996, Azercell was a joint venture between Azertel
and the Azerbaijani Ministry of Communications. Currently, Fintur
owns approximately 51% of Azercell through direct and indirect
holdings. Despite incessant and intensifying price competition, the
Company has managed to maintain its market leadership since its
first year of operation.
2009
2010
Subscriber (million)
Kazakhstan
7.2
8.9
Azerbaijan
3.8
4.0
Moldova
0.7
0.9
Georgia
1.9
2.0
TOTAL 13.6
15.9
Revenue (US$ million)
Kazakhstan
863
1,013
Azerbaijan
501
504
Moldova
63
67
Georgia
175
152
Other*
3
1
TOTAL 1,605
1,737
y/y % chg
23.6%
5.3%
28.6%
5.3%
16.9%
17.4%
0.6%
6.3%
(13.1%)
(66.7%)
8.2%
(*) Includes intersegment eliminations
(US$ million)
2009
2010
y/y % chg
Fintur’s contribution to
Turkcell Group’s net income
119.6
153.0
27.9%
57
Subsidiaries
ranking among the largest cellular operators in Central Asia, Kcell
had 8.9 million subscriptions as of the end of 2010.
Moldova: Moldcell
Moldcell was granted its GSM 900 license in November 1999 and
commenced operations in Moldova in April 2000. The Company is
fully-owned by Fintur Holdings B.V.
Moldcell was the first operator in Moldova to provide services ranging
from SMS to roaming for prepaid subscribers, WAP/Internet Access,
GPRS/EDGE, 3.5G and BlackBerry Enterprise Solution.Moldcell’s subscriber number had increased to 0.9 million by the end of 2010.
Georgia: Geocell
Geocell was founded in 1996 as a joint venture between the Georgian Ministry of Telecommunications and Turkish company Gürtel
Telekomunikasyon Yatırım ve Dış Ticaret Anonim Şirketi (Gürtel) as
the first GSM operator in Georgia.
Geocell began commercial operations in March 1997 and was granted a GSM 900 MHz operating license in April 1997. In 2006, the
Company acquired its UMTS license (2100 MHz frequency), resulting
in improved network coverage, added capacity and the possibility
for prepaid subscribers to use 3G technology. As of December 2010,
Geocell had 2 million subscribers.
On December 1, 2010, Kcell launched 3G services in Astana and Almaty, based on temporary permission. On December 25, 2010, the
competent authority signed an addendum to the existing GSM license, which provides Kcell with the rights to operate a 3G network. The
addendum requires Kcell to provide all locations with a population
exceeding 10,000 people with mobile services using UMTS/WCDMA
standards until January 1, 2015.
Turkish Republic of Northern Cyprus: KKTCell
Established in 1999, KKTCell is a subsidiary of Turkcell that operated
under a revenue-sharing agreement with the government of the Turkish Republic of Northern Cyprus (TRNC) until the end of July 2007. In
2007, KKTCell signed an 18-year license agreement for the installation
and operation of a digital, cellular, mobile telecommunication system
with the TRNC Ministry of Communications & Works. This agreement
replaced the GSM-Mobile Telephone System Agreement that was based
on revenue-sharing. By the end of 2010, KKTCell had 386,000 subscribers and a 69% market share. KKTCell covers 100% of the population,
and its coverage reaches beyond the geographical borders of the TRNC.
In an exciting development in 2008, KKTCell introduced 3G technology to Northern Cyprus and began offering 3G services and products to the people of Northern Cyprus on October 14, 2008. In 2010,
through its radio link project, KKTCell had the only international gateway other than that of the TRNC Telecommunication Board.
Following its establishment, Superonline obtained the license for
long distance telephone services (LDTS), which allows it to provide long-distance call origination and termination for individual and
corporate customers, as well as wholesale voice-carrying services.
The Company received its Internet service provider license in February 2005, and was granted a landline data transmission license
in June 2005 and an infrastructure operating license in April 2006.
Superonline won a major infrastructure tender initiated by the Turkish Electricity Transmission Corporation (TEIAS) in January 2007,
and has been granted the 10-year operational rights for a fiber-optic
cable between Istanbul and Ankara. In 2007, Superonline became
the first alternative operator in Turkey to carry domestic traffic. Superonline provides its customers with affordable packages for fiber
Internet, the most advanced Internet-access technology in the world.
With its fiber-optic-infrastructure investments completed within a
relatively short timeframe, Superonline introduced its customers to
100 mbps Internet connections in 2007.
On December 2009, Superonline won the public tender for the 15-year
lease of BOTAS’s fiber optic infrastructure, with a bid of EUR20.9 million, and has been granted the right to use BOTAS’s 11,280 km of routes.
These routes enable Superonline to access all of Turkey’s regions.
In 2010, Superonline’s fiber-optic network reached 580,000 home
passes. In 2010, its contribution to Turkcell’s financials continued
to improve with a 32.8% revenue growth and an EBITDA margin of
9.8%. Throughout the year, the focus on the higher-margin residential segment increased, resulting in year-on-year segment revenue
growth of 70%. Corporate segment revenues grew by 30%, leveraging the strengths of the Turkcell Group, while wholesale revenues
grew by 26%, in line with increasing Group synergies.
Domestic Subsidiaries
Kazakhstan: Kcell
Kcell commenced its activities in 1999 as a joint venture between
Fintur Holdings B.V. and Kazakhstan’s national telecommunications
operator Kazakhtelecom. The Company operates on a renewable 15year licensing agreement that provides the right to run a standard
GSM 900 cellular network.
As the undisputed market leader in Kazakhstan, based on subscriptions, growth rate, investment volume and variety of services, and
58
Superonline
Tellcom İletişim Hizmetleri A.Ş., founded in 2004, merged its strength
and brands with those of Turkey’s leading Internet provider, Superonline Uluslararası Elektronik Bilgilendirme, Telekomünikasyon ve
Haberleşme Hizmetleri A.Ş. in May 2009, to operate under the brand
name “Superonline”. Turkey’s innovative telecom operator Superonline is continuing its investments in order to become a complete solution and service provider for its corporate and individual customers.
Summary data for Superonline
2009
2010
y/y % chg
Revenue (TRY million)
EBITDA1 (TRY million)
EBITDA margin
Capex (TRY million)
252.4
3.6
1.4%
259.5
335.1
32.9
9.8%
480.3
32.8%
813.9%
8.4pp
85.1%
Global Tower
Global Tower, which was established in 2006 with the vision of
“spreading communication everywhere”, and with its new business
model implemented in Turkey for the first time, provides operators,
TV and radio broadcasters, as well as civil and military communication/monitoring corporations in wireless communication with installation, leasing, and maintenance services at international standards
for tower, roof and on-premises infrastructural facilities.
Serving its customers in more than 5,500 tower fields across Turkey,
Global Tower stands out as one of Europe’s leading infrastructure
operators, with its tower field portfolio.
The services provided by Global Tower enable its customers to focus
their investments on the efficient use of their human resources and
energies in their main business areas, rather than on dealing with
exhaustive field operations, the high costs of tower and energy infrastructure, ever-increasing leasing expenditures and its procedures.
Turkey’s first and only tower service provider, Global Tower aims to extend its rapid growth in Turkey to international markets. Accordingly,
in 2009 it began operations in Ukraine under the name of UKRTOWER.
Inteltek
Inteltek was established in 2001 and owned by Turktell, a Turkcell
affiliate, Intralot and Intralot Iberia Holding, with respective shares
of 55%, 20% and 25%. Established with the aim of exploring and
utilizing available business opportunities within the gaming sector,
the Company is the sole operator of sports betting games in Turkey.
1
Inteltek is successfully carrying out, on behalf of the Directorate of
the Spor Toto Organization under the General Directorate of Youth
and Sports (GSGM), work and related services regarding the establishment and operation of the central betting system for sports ga-
59
Subsidiaries
mes based fixed-odds and paramutual betting. It has also established and operates the risk-management system and services of the
main dealership, using Intralot’s technology and know-how, and the
strong GSM infrastructure of Turkcell.
Inteltek is now one of the world’s largest operators in the statecontrolled betting-games sector, and has become an exemplary and
leading organization with its contributions to the public and Turkish
sports, thanks to its operations and “iddaa” trademark. As a result, it
has almost created a sector providing income for thousands of people.
Inteltek won the tender held in August 2008 by the Directorate of
Spor Toto Organization under the GSGM to acquire the rights to
operate fixed-odds and paramutual betting games based on sports
events for a period of 10 years until August 2018.
The sales activities of Inteltek in Turkey are managed through a
network of over 5,500 agents (incl. 1,000 mobile agents) across 81
provinces, five electronic agents over the Internet, GSM, a call center
and a digital TV broadcasting platforms.
An agreement to protect the ethical values of football has been signed with the Turkish Football Federation and Spor Toto Organization, and a guaranteeing position has been undertaken in Turkish
football. Furthermore, a similar agreement has been signed with
UEFA and FIFA via a collective platform, constituted by official European betting companies.
Inteltek has become a member of the World Lottery Association (WLA)
and the European Lottery Union (EL) in a bid to participate in the industry at an international level and follow relevant developments.
Inteltek, through the iddaa brand managed on behalf of Spor Toto
Organization, continued to create added value for the Turkish economy with tax income generated for the state amounting to TRY1
billion, as well as contributions to Turkish Sports of TRY496 million
in 2010. As part of Inteltek’s strategy of capitalizing on the emerging investment potential in neighboring countries, it received the
authorization to organize, operate, manage and develop the fixedodds and paramutual sports betting business in Azerbaijan from
Azerbaycan Azeridmanservis Limited Company in January 2010. Inteltek owns 51% of Azerinteltek, domiciled in Azerbaijan, for a period
of 10 years. Azerinteltek commenced operations on January 18, 2011.
60
Turkcell Global Bilgi
Turkcell Global Bilgi was established in 1999 as a call center. In
response to developments in the sector, as well as evolving and
increasing customer expectations, investments were made to transform Global Bilgi into a “Customer Relations Management Center.”
It now has the best technology system in its sector in Turkey, as well
as in Europe.
Operating within Turkcell Group, one of Turkey’s most valuable companies, and with a firm position on the world’s prestigious technology lists, Turkcell Global Bilgi maintains its leadership with a 45%
market share.
Turkcell Global Bilgi provides services with a desk capacity of
5,500, distributed among 12 locations – nine in Turkey (in Istanbul, Izmir, Erzurum, Eskisehir, Diyarbakir, Ankara, and Karaman)
and three abroad (two in Ukraine, one in Belarus). Turkcell Global
Bilgi, which has a young employee profile, solely serves Turkcell
customers, from the Erzurum and Diyarbakir locations. The Erzurum Call Center, established in 2006, employs 880 people, 45%
of whom are female and 55% are male. The average age of employees is 26. Of the employees, 0.14% of those at the Erzurum
Call Center hold a doctoral degree, 0.71% hold a master’s degree, 34.61% hold a bachelor’s degree, 36.31% hold an associate’s
degree, 28.09% are high school graduates, and 0.14% are secondary school graduates.
Turkcell Teknoloji
Established to develop competitive services and products in information and communication technology, Turkcell Teknoloji stands out as
one of Turkey’s leading R&D and innovation companies. In 2007, the
decision was made to establish a techno-park company and enable
R&D staff specialized in information and communication technologies within Turkcell since 1994, to continue their R&D and innovative
activities in an optimal setting. Accordingly, in 2008, a building was
constructed for Turkcell Teknoloji in the Technology Free Zone; designed with a 500-person capacity, the goal was to establish the most
favorable living and working environment for those engineers responsible for software research and development. This building ranked first
in the Architectural Design Awards held in Turkey in 2010.
Following the success and increase in business volume achieved in Erzurum, the Company established the Diyarbakir Call Center in 2008. There
are 650 employees in Diyarbakir, of whom 56% are female, and 44%
are male. With an average age of 26, 0.49% of the Diyarbakir Call Center
holds a master’s degree, 16.37% a bachelor’s degree, and 41.57% an
associate’s degree, while 41.57% are high school graduates.
Developing services and products in areas including customer relations and channel management, mobile marketing, business intelligence solutions, SIM assets and services management, roaming solutions, value-added services, operational and business support systems,
Turkcell Teknoloji employs 360 highly qualified engineers as of 2010.
As the first and the sole company from Turkey to become a member
of CISQ (Consortium for IT Software Quality), which is setting global
standards of software quality, Turkcell Teknoloji focuses on changing, transforming and simplifying people’s lives through its innovative and customer-oriented approach. Products under development
on in-house platforms incorporate the creative ideas of our employees. The value given to innovative and creative ideas is demonstrated
by the increasing number of patents that Turkcell Teknoloji obtains
each year. Turkcell Teknoloji establishes partnerships with national
and international R&D companies, universities and research centers
within its eco-system to develop new ideas, and to transform them
into value-added products. Playing an active role in international
R&D programs, Turkcell Teknoloji is also working with leading R&D
technology companies and universities abroad.
Turkcell Global Bilgi is a major employer, creating employment for
7,500 people and providing value-added services to more than 50
million people in Turkey and 10 million in Ukraine. Given that the
call center sector is undergoing rapid expansion both locally and
globally, Turkcell Global Bilgi aims to grow in new locations.
Ensuring the international expansion of differentiating products and
solutions of Turkcell and its Group companies, and thus creating value
for other operators as well, Turkcell Teknoloji carries out successful
technology and software export operations to the CIS, Middle East, Africa, and Europe, and aims to become a world brand in its area.
61
Human Resources
Human Resources
There is More for Me in Turkcell
Our Values
We continue to actively sustain the values that guide our actions and
conduct, and to extend our sphere of influence through our motto,
“Get More out of Life with Turkcell.” We see our values as distinctive
behavior, defining the current success of the Turkcell Group: 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.
Today, employees at all levels, from senior management on down,
participate in this process by declaring “There Is More for Me in
Turkcell”, and thus supporting our people-based culture.
Our Employees: Our Most Valuable Asset
Acting on our philosophy, “People First in a Pioneering Turkcell”, we
consistently prioritize motivating and satisfying our employees. We
track technologies that will shape our industry, not only in Turkey,
but globally; we work to lead exemplary worldwide practices.
By creating a flexible, sensitive, and democratic work environment
where change is supported, we constantly review the investments
that add value to our company in order to motivate our team. Our
business setting is characterized beyond a “work environment” as
a “living environment”, and we proceed within this understanding.
We demonstrate our motto - More Joy – with the shopping advantages offered to Turkcell employees through contracted corporations
in our TClub service, in order to make shopping more fun. Through
Turkcell Social Activity Group (TSAG) we offer enjoyable programs
for our employees by organizing social and entertainment activities.
Separately, in addition to regular vacation, all employees receive
one additional day off for their birthdays.
More Opportunities
We recruited 343 employees in 2010, in line with our new projects
62
and corporate growth. In accordance with the career opportunities
we offered, the internal promotion rate was 87%; 312 people were
transferred to, or rotated within different divisions in Turkcell to take
on new roles and responsibilities, supporting their career development. In 2010, employee turnover rate in our company was 4.66%.
More Sharing
We offer “More Sharing” opportunities to our team through social
channels like Habercell and Paylas Turkcell’li / Turkcell Blog. We
distribute news related to developments in the Company through
Habercell (News-cell); we offer our services to customers through
our employees with the Paylas Turkcell’li application, a practice
used by all Group companies.
More Convenience
We offer More of Convenience to our team with additional benefits that enhance their professional and private lives; including Flex
Menu, Turkcell Assist, and the Individual Pension Plan.
Through Flex Menu, our flexible additional benefits program, our
employees may select each year the package that best suits their needs among available options including shopping vouchers, holiday
packages, as well as interim payments for individual pension plans
and healthy living packages.
Turkcell Assist, the employee support line launched on September
1, 2010, is available to employees and their families free of charge.
With Turkcell Assist, they find easier and faster solutions to issues
in their private lives; general information and guidance services are
provided 24/7 by experts on medical, financial, legal, psychological,
and everyday issues.
The Individual Pension Plan covers all Turkcell employees and offers
them the opportunity to invest in their future through a mutual contribution model. Female employees with child(ren) aged 2-5 years
are offered a monthly child care allowance.
The demographics of Turkcell employees are provided in the
following table:
Employee
2007
Male
1,854
Female 1,021
Average Age
32
Education Level
Post-graduate Degree
484
University Degre 2,066
High School Graduate
316
Secondary School Graduate 9
At Least One Foreign Language2,064
Two or More Foreign Language 799
2008
1,798
1,011
33
500
2,025
277
7
1,910
855
2009 2010
1,728 1,778
981 1,011
33
33
535
569
1,918 1,986
248
226
8
8
1,819 2,046
789
743
This chart does not include part-time employees and interns.
More Appreciation
We Promote Innovation
At Turkcell, we continue to use the process called “I Have a Great
Idea!” that works via the Innovation Office, enabling our employees
to pass on original ideas that add value to the Company. We continue to reward ideas generated through the “I Have a Great Idea!”
program, and to date Turkcell has recognized 612 employees under
this scheme. Their total contribution to the company has amounted
to US$236 million.
Turkcell is Turkey’s Most Admired Company
Our priority is to recruit and retain the best talent. Our distinctive
human resources practices continue “to create dedicated people who
yield successful results”. Our employees, in turn, say “There Is More
for Me at Turkcell” and reward Turkcell with the highest rates in both
the industry and in Turkey, in employee retention studies conducted
by independent research companies.
More Development: Turkcell Academy
We Develop Our Leaders, Our Employees, Our Business Partners and
Our Entire Eco-system, with our Development Solutions
As a leading technology company, Turkcell endeavors to communicate to our team the latest content and the most current issues
in development programs, through the most effective technological
solutions and infrastructures, due to its evolving working conditions
and Turkcell’s own dynamic structure. We systematically follow the
performance and potential of all individuals within our eco-system,
in particular the Turkcell Group and field teams, and develop them in
line with a dynamic business environment and our corporate strategy
of being “Ready” for the competition.
With these perspectives in mind, the Turkcell Academy offers different development solutions for topics that include “Customer”,
“Technology” and “Leadership”. In 2010, Turkcell Academy provided 1,026,579 hours of training to 48,685 people in the Turkcell Group eco-system. Our distinctive development solutions in
2010:
• “Turkcell Group Sales Program”: covering all Turkcell Group employees - including dealers, business partners and corporate solution
centers - who have contact with Turkcell customers; the program was
offered to more than 30,000 people, and featured a broad range of
development solutions through training programs. These included
common service issues and sales culture, products and services, and
specialization. We regularly measured the technical knowledge level
of program participants and offered proactive distant learning solutions for areas of development.
• The Turkcell Academy Offered Real Customer Experience through
“Customer 2.0”: We offered five different development solutions for
improving the awareness and knowledge levels of Turkcell Group
executives and employees as Turkcell Ambassadors, through “Customer 2.0”, a customer-focused conversion program.
63
Human Resources
• We offered specialized training opportunities in “Mobile Communication and Knowledge Technologies”, with 300 different training
programs in the Technological Development Program. We supported
corporate progress with development programs specifically designed for 45 different technical profiles, as well as 500 different classroom training programs.
• Within the Leadership Development programs, we implemented
a specific management preparation program for high-performance
individuals who were candidates for managerial positions.
• With the Turkcell Academy Marketing Conferences, we continued
to bring together Turkcell Group and top management of the other
leading companies with globally known authorities in their fields.
Last year, Turkcell Academy hosted conferences with well-known figures such as Malcolm Gladwell and David Plouffe, and brought Dan
Ariely to Turkey in January 2011.
New Graduates are at Turkcell Group with Turkcell Academy PAF
(First Step to Professionalism) Training Program…
In 2010, Turkcell Academy continued its First Step to Professionalism (PAF) Program, which it initiated to enable successful young
talents to begin their professional life one step ahead and in the
right direction. The PAF Program encompasses the internship–parttime employment–new graduate recruitment phases, and aims to
improve the awareness of these young people of professional life,
business fields, companies, and jobs, while widening their perspective. We seek to offer them part-time and then full-time job opportunities within the Group, according to their individual and project
performance during their traineeship. In 2010, the Company offered
internships to 195 students under this program.
We Add Value to Our Business through University-Industry
Cooperation
We support many local and international academic studies and
Turkcell Academy visited universities
in 2010 under the “Life with Turkcell”
and “If You Are Young, You Are the
Future” projects, at 75 universities in
25 cities.
64
implement joint programs and events with universities under the
“University-Industry Cooperation” program, conducted with Turkcell
Academy, the corporate university of the Turkcell Group.
innovative ideas in Turkcell’s focus areas into sustainable business
models that will add value to our society and support entrepreneurship and innovation.
In the knowledge that the upcoming younger generation will shape
both our nation and our technology, we have designed three programs, the “Turkcell Mobile Communication and Technology Development Program”, the “Turkcell Customer Relations Development
Program,” and the “Turkcell Mobile Marketing Development Program” to, share our knowledge and experience with university students, and to introduce a qualified labor force to the rapidly evolving
information sector.
Turkcell Academy is Also a Leader in Training Technologies
In parallel with our leading position in technology, in our training
programs, as alternatives to classical classroom training, we endeavor to use the most suitable methods for individual development
with the platforms we have designed. As one of the first Turkish
companies to provide its employees with e-learning solutions,
we continue to offer development opportunities to approximately
25,000 people through our Turkcell Academy e-learning platform.
In 2010, we implemented 71% of our educational development solutions through distant learning methods, using education technology. We thus saved US$10 million.
Turkcell Academy visited universities in 2010 under the “Life with
Turkcell” and “If You Are Young, You Are the Future” projects, coming into contact with more than 22,000 university students at 75
universities in 25 cities, with seminars on “Mobile Innovation”,
“New Technologies”, “Entrepreneurship”, and “Careers”.
Turkcell Academy supports, in addition to many of Turkey’s most
prestigious universities, selected academic research and projects on
technology, innovation, entrepreneurship, and leadership at worldrenowned universities such as Harvard Business School and the
Massachusetts Institute of Technology (MIT), facilitating their coordination with its businesses units. Ranked among the business partners of Bahçeşehir CO-OP (Cooperative Education) and Sabancı CAP
(Company Action Project) programs, the Turkcell Academy continues
to carry out joint projects and programs with these universities.
We Support Technologically Promising Young Talent!
We have maintained the “Turkcell Academy Postgraduate Scholarship Program”, supporting the development of technologically promising young talent and introducing a qualified labor force to the
sector, since 2007. Designed with the valuable contributions of the
Turkish Information Association, this program supports postgraduate and doctoral students with whom we will conduct joint projects in
focus areas of the Turkcell Group, and we facilitate their collaboration with our business units.
The M.I.T. Enterprise Forum, established under the leadership of
the Massachusetts Institute of Technology, one of the world’s most
prestigious universities, was held for the second time in a European
country – Turkey - with the cooperation of Turkcell. A significant
part of our social responsibility vision is the investment in qualified
human resources and good ideas, and support of value-added projects in Turkey. With this collaboration, our aim is to transform the
TSAG organized approximately 500
activities in 2010 alone, in which
more than 30,000 employees and
their families participated.
Mobile Training
The Turkcell Academy Mobile Training platform brings training and
technology together to make life easier and ensure easy access to
information. This platform can be used with any mobile device that
has a mobile network (EDGE, WiFi, 3G, etc.) and WAP/web access,
and stands out as a pioneering practice, in line with Turkcell’s leading vision in technology.
Academy won the honorary award in the “Best New Corporate University” category of the Cubic Awards (Corporate University Best in Class)
and was presented the “Excellence” award in the “Learning Technologies” category of the “Annual Corporate University Xchange Awards for
Excellence and Innovation”, held by the Corporate University Xchange,
for most effective use of learning technologies.Following this global
success, this Turkcell Academy-specific project was published in 2010
as a case study by the Corporate University Xchange, a leading and
highly respected international organization in the development sector,
with members among corporate universities of leading international
companies in the U.S. Again, the mobile learning practices of Turkcell
Academy were cited as a case study in a book on mobile learning, The
Mobile Edge, by Gary Woodill, an analyst at Brandon Hall; one of the
most prestigious research organizations in the distance learning field.
Virtual Classroom
The Turkcell Academy Virtual Classroom enables people from different locations to attend web-based training activities or conferences (webinars) independent of their locations. The virtual classroom
platform, accessible to large audiences through interactive presentations, makes information sharing highly effective.
Turkcell Academy was also honored with “Leadership Development
Program” and “Excellence in Practice” awards in 2010 by the American Society for Training & Development (ASTD), the world’s largest
organization engaged in learning and performance at work. In parallel with these achievements, Turkcell Academy was invited to enter
the Corporate University Xchange/Global Leadership Advisory Board.
Web-Based Development Platforms
With the growth of the Internet and social media, web-based selflearning tools gain increasing importance, allowing our employees
to access best practices, reports, videos, and other resources in any
areas they require. Within the Academy, the use of various platforms
by our employees is increasing; including the virtual library (Getabstract), virtual dictionary (Information Dictionary), video learning
(Academy Instructor TV), electronic database IEEE; “Harvard Manage
Mentor” offered to our executives (created by Harvard Business Publishing and acknowledged as the world’s most effective leadership
development portal), and the Harvard Business Publishing Portal.
Turkcell Social Activity Group
The Turkcell Social Activity Group (TSAG) continues to design distinctive activities for our employees with the motto, “The Fun Part of
Work”. Every week, TSAG organizes tours, tournaments, kids’ club
activities, training courses, competitions, parties, daytime events
and dozens of special activities. TSAG organized approximately 500
activities in 2010 alone, in which more than 30,000 employees and
their families participated.
Turkcell Academy Differentiated among International Platforms
Turkcell Academy, the strategic development center of the Turkcell Group, has been recognized with many awards in recent years. Turkcell
Our Corporate Sports Clubs
We continue to support approximately 150 athletes from Turkcell,
with corporate sports teams for basketball, cycling, bowling, football, carting, table tennis, volleyball, sailing, and swimming. We
take unique pride in the achievements of our corporate sports teams, representing Turkcell in various leagues.
65
With its young and dynamic population and the current penetration levels
Turkish market still has a growth potential in the mid-term.
Penetration
The increased importance of operational profitability is in part due
to the change in partnership structures in the Turkish telecommu-
Mobile Line Penetration
Source: BofA Merrill Lynch, the ICTA
nications sector. This change came about with the sale of Telsim,
the privatization of Türk Telekom, the sale of Telecom Italia Mobile’s
shares in Avea to Türk Telekom, and the purchase of Telsim by Vodafone. Mobile number portability (MNP), which was introduced to
127%
101%
the Turkish market on November 9, 2008, led to aggressive flat rate
85%
offers that negatively impacted the previously rational approach to
competition between operators in the Turkish market. Unlimited flat
rates for calls resulted in a change in traffic composition from on-net
Europe
to off-net and a decline in multiple SIM card usage. Together these
factors had a negative effect on operational profitability as well as a
decrease in mobile line penetration.
Developing
Countries
Mobile Subscriber Number
(millions)
65.8
Mobile line penetration, which is approaching 130% in European
62.8
Turkey
Source: the ICTA
3G
2G
61.8
countries, fell 2 percentage points in Turkey to 85% in 2010 due to
a decline in multiple SIM card usage.
On the other hand, with its young and dynamic population and the
65.8
55.7
42.4
current penetration levels, Turkish market still has a growth potential in the mid-term. In 2011, we expect the number of mobile lines to
grow in parallel to population growth, and mobile line penetration
to remain in-line with the year-end 2010 level.
66
2008
7.1
2009
19.4
2010
67
Competitive offers in the market
have remained aggressive. Turkcell
maintained its leading position with a
54% subscriber market share.
Competition
Competitive offers in the market have remained aggressive. All operators focused on increasing their postpaid subscriber base by providing high minute incentive port-in offers, launching lower priced
voice packages and continuing to offer flat rate minute packages for
all directions. The focus on segmented offers continued throughout the
year, while 3G and terminal bundled offers gained pace towards the
year-end.
Turkcell maintained its leading position with a 54% subscriber market share.
Regulation
The Turkish mobile market witnessed some radical changes in 2010.
Financial Review (Consolidated)
Profit & Loss Statement
(million TRY)
2009
2010
Total Revenue
8,936.4
9,003.6
Direct cost of revenues1
(4,769.3) (5,039.2)
Depreciation and amortization (908.7) (1,139.7)
Gross Margin
46.6%
44.0%
Administrative expenses
(421.2)
(521.9)
Selling and marketing expenses(1,676.2) (1,633.9)
EBITDA2
2,978.4
2,948.3
EBITDA Margin
33.3%
32.7%
Net finance income / (expense) 223.8
264.0
Finance expense
(287.1)
(153.4)
Finance income
510.9
417.4
Share of profit of associates
118.8
184.7
Income tax expense
(529.1)
(483.5)
Net Income
1,701.6
1,764.3
y/y % chg
0.8%
5.7%
25.4%
(2.6pp)
23.9%
(2.5%)
(1.0%)
(0.6pp)
18.0%
(46.6%)
(18.3%)
55.5%
(8.6%)
3.7%
1 including depreciation and amortization expenses.
2 EBITDA 2 EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at
ximum prices by 38% negatively impacted the market and further
tion of active subscribers lengthening the duration of prepaid churn
pressured per minute revenue and profitability. Additionally, we
to nine months from seven months.
upper limit for calls of up to 60 seconds; transition to TRY from unitbased pricing for prepaid subscribers, and the
change in the defini19%
19%
Subscriber Market Share
19%
27%
27%
27%
to 56.0% at 2010, mainly due to increases in depreciation and
amortization (up 2.5 pp), network-related expenses (up 0.4 pp), and
Share of profit of equity accounted investees: Our share in the net
other items (up 0.7 pp); which were partially offset by the decrease
income of unconsolidated investees, consisting of the net income/(ex-
in interconnect costs (down 1.0 pp).
pense) impact of Fintur and A-Tel, increased by 55.5% to TRY184.7
million for the full year, mainly due to the higher net income contri-
Administrative expenses: General and administrative expenses as
bution from Fintur (particularly from the operations in Kazakhstan).
a percentage of revenue increased by 1.1 pp to 5.8% in 2010. This
was mainly due to higher bad debt expenses arising from the inc-
Income tax expense: For 2010, the total taxation charge decreased by
rease in the postpaid subscriber base together with higher wages
8.6% to TRY483.5 million as a result of a decrease in profit before tax.
and salaries.
Of the total tax charge for FY 2010, TRY508.1 million is related to current tax charges while the deferred tax income totaled TRY24.6 million.
Selling and marketing expenses: For the full year, selling and marketing expenses as a percentage of revenue decreased by 0.7 pp to
Net Income: Net income increased by 3.7% to TRY1,764.3 million.
18.1% mainly due to lower selling expenses and frequency usage
fees paid for prepaid subscribers as a result of the decline in the
prepaid subscriber base, which were partially offset by the higher
wages and salaries.
the EBITDA margin was at 32.7%. 1.1 pp higher general and administrative expenses together with 0.2 pp higher direct cost of revenues were partially compensated by the 0.7 pp lower selling and
Consolidated Balance Sheet Data (million TRY)
(at period end)
2009 2010 Cash and cash equivalents 4,660.9 5,105.1 Total assets 14,034.3 15,142.4 Long term debt 1,236.4 2,175.7 Total debt 2,276.6 2,840.8 Total liabilities 5,156.4 5,505.3 Total shareholders’
equity / Net Assets
8,877.9 9,637.1 y/y % chg
9.5%
7.9%
76.0%
24.8%
6.8%
8.6%
The following discussion focuses principally on the developments
Our Company has a significantly high net working capital and a
and trends in our business in 2010. All financial results in this an-
finance income of TRY264.0 million mainly due to an increase in in-
strong balance sheet. Turkcell has a net cash position of TRY2.3 bil-
nual report are prepared in accordance with International Financial
terest income in 2010 arising from the absence of legal provisions in
lion as at year-end 2010. We manage the exchange rate - interest
Revenue: For the year 2010, consolidated revenue slightly improved
million, as well as the 11.1% higher contribution from subsidiaries
year-on-year (particularly, through Superonline, which increased
revenues by 32.8% to TRY335.1 million from TRY252.4 million),
despite the adverse effects of MTR and price cap cuts.
se on loans as a result of the increase in outstanding debt balance.
Net finance income/(expense): For the full year, we recorded net
le internet and services revenues of Turkcell Turkey to TRY1,619.1
68
posits due to lower interest rates and the increase in interest expen-
lion. As a percentage of revenue, direct costs increased from 53.4%
TURKCELL GROUP: FINANCIAL AND OPERATIONAL PERFORMANCE
IN 2010
to TRY9,003.6 million, mainly due to the 26.4% increase in mobi-
Source: the ICTA
depreciation and amortization increased by 5.7% to TRY5,039.2 mil-
marketing expenses.
Turkcell
54% Reporting Standards (“IFRS”) and expressed in Turkish liras and/or
Vadafone
Dollars unless otherwise stated. .
54%
Avea
54%
2009, partially netted off by the decrease in interest income on de-
EBITDA: In 2010, nominal EBITDA was at TRY2,948.3 million, while
The significant decrease in interconnection rates by 52% and ma-
have seen some regulatory changes, such as the introduction of an
Direct cost of revenues: In 2010, direct cost of revenues including
Total Debt – Cash Position:
risks of the balance sheet by using financial tools and keeping our
Our Company has a significantly high
net working capital and a strong
balance sheet. Turkcell has a net cash
position of TRY2.3 billion as at yearend 2010.
foreign-exchange denominated assets at optimum levels. We plan to
use vendor financing that spread the payables to the vendors related
to our infrastructure investments over the long-term.
Consolidated debt amounted to TRY2.8 billion as of December 31,
2010. TRY941 million of this was related to Turkcell’s Ukrainian
operations. TRY1,878 million of our consolidated debt is at a floating rate and TRY665 million will mature in less than a year. During
2010, our debt/annual EBITDA ratio increased to 96.4%.
69
In 2010 we registered 734,000
net new postpaid subscribers. Our
postpaid subscriber base increased
by 7.4% in to 10.1 million, from 9.4
million a year earlier.
In 2010, major cash outflows were the capital expenditures and divi-
varied capital market tools in order to maintain capital diversity. All
Consolidated Cash Flow
(million TRY)
EBITDA1
LESS:
Capex and License
Turkcell
Ukraine2
Investment & Marketable Securities
Net Interest Income/Expense
Other
Net Change in Debt
Dividends paid
Cash Generated
Cash Balance
2009
2,978.4
(2,664.0)
(1,823.1)
(325.2)
(232.1)
223.5
(595.7)
1,119.0
(1,098.0)
(268.9)
4,660.9
2010
2,948.3
(1,667.5)
(782.4)
(102.7)
(64.3)
283.8
(662.6)
465.9
(859.3)
444.3
5,105.1
dend payment. In 2010, our capital expenditures totaled TRY1,667.5
million, of which TRY782.4 million was related to Turkcell Turkey,
TRY102.7 million to our Ukrainian operations, TRY185.4 million to
our Belarusian operations, and TRY480.3 million to Superonline. In
2010, we also paid a cash dividend of TRY859.3 million to our shareholders.
Until the end of the 3rd quarter of 2007, Turkcell Turkey benefited
from investment incentives, and we did not use any in 2010. Group
subsidiary Turkcell Technology, received support for 60% of its expenditures accepted under the “Industry R&D Projects Supporting
Program”, which is conducted in association with TUBITAK and the
Undersecretaries of Foreign Trade. In 2010, TRY1.1 million is deducted from the direct cost of revenues item.
Group capex for 2011 is expected to be in line with 2010 (TRY1.7
billion).
Turkcell Turkey had TRY713 million in loans as of year-end 2010.
Also, at the Group level, there are some loans obtained from banks.
Currently, our company has no financial instrument in circulation in
the capital markets.
All Group companies meet their cash needs covered in their business plans and approved by their Board of Directors through credit or capital increases in alignment with central management. The
Company may undertake long and short-term debt in accordance
with Group financing needs and market forecasts. Debt tools used
range from bank loans to Export Credit Agency loans, and include
70
1
23, 2011, we have made changes to the manner in which we account for the impact of changes in
foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our
presentation of prior periods, including the Q4 2010 reconciliation.
2
The appreciation of reporting currency (TRY) against US$ is included in this line.
Profitability and Solvency Ratios
Gross Profit Margin
EBITDA Margin
Net Profit Margin
Total Liability/Equity Ratio
Total Debt/EBITDA Ratio
2009
2010
y/y % chg
46.6%
33.3%
19.0%
58.1%
76.4%
44.0%
32.7%
19.6%
57.1%
96.4%
(2.6pp)
(0.6pp)
0.6pp
(1.0pp)
20.0pp
2010
33.5
10.1
23.3
y/y % chg
(5.4%)
7.4%
(10.4%)
13.0
26.6
7.6
19.5
40.0
11.4
33.9%
8.3%
1.3%
Operational Summary (Turkcell Turkey)
Turkcell Turkey
2009
Number of total subscribers (mn) 35.4
Number of postpaid subscribers (mn) 9.4
Number of prepaid subscribers (mn) 26.0
ARPU (Average Monthly
Revenue per User), blended (US$) 12.0
ARPU, postpaid (US$)
26.6
ARPU, prepaid (US$)
7.5
ARPU, blended (TRY)
18.5
ARPU, postpaid (TRY)
41.0
ARPU, prepaid (TRY)
11.6
Churn (%)
32.6%
MOU (Average Monthly Minutes
of usage per subscriber), blended 134.3
179.1
5.4%
(2.4%)
(1.7%)
1.3 pp
33.4%
debt activities are managed so as to ensure not to negatively impact
ratings, while also taking into account fundamental debt ratios.
Subsidiaries included in the consolidation have no stake in shareholders’ equity.
Donations Made in 2010:
A total of TRY8,556,709 in cash donations was made in 2010 consisting of TRY8,469,952 cash donations to various associations, foundations and institutions; and TRY86,757 donations in kind to schools
and projects approved by the Ministry of Culture and Tourism.
Operational Review (Turkcell Turkey)
Subscribers: Our subscriber base in Turkey totaled 33.5 million as
of December 31, 2010, down by 5.4% year-on-year. In 2010, we
maintained our focus on the postpaid segment with newly launched
campaigns and offers, increased data lines and promoted switches
from the prepaid to the postpaid segment. This resulted in a 7.4%
increase in our postpaid subscriber base to 10.1 million, from 9.4
million a year earlier. Demonstrating the success of our value focused subscriber acquisition approach in 2010 we registered 734,000
net new postpaid subscribers. Accordingly, the postpaid subscriber
base made up 30.1% of our overall subscriber base, up from 26.6%
in the same period of the previous year. At the same time, we saw a
slowdown in the contraction of the prepaid subscriber base, which
declined by 10.4% to 23.3 million, from 26.0 million a year earlier.
interconnection rates. The rise was mainly attributable to rising mobile internet revenues and postpaid subscriber base.
Postpaid ARPU in TRY terms fell by 2.4% to TRY40.0, while prepaid ARPU decreased slightly by 1.7% to TRY11.4. This was mainly
due to the negative impact of declining MTRs and the reduction of
the maximum price cap, as well as the dilutive impact of prepaid to
postpaid switches.
Forward Looking Expectations
Going forward, we view mobile internet in Turkey and our subsidiaries’ contribution as an important growth driver. We will continue
to invest in our network quality. We will keep our value focus, maximizing customer experience to ensure loyalty, while building on our
strong brand name.
In 2011, we expect our revenues to grow which will mainly be driven
by increasing mobile internet revenues, as well as growing contributions from our subsidiaries.
Churn Rate: Churn refers to voluntarily and involuntarily disconnected subscribers. Our annual churn rate rose by 1.3 pp to 33.9%,
mainly due to declining multiple SIM card usage. The majority of
churners comprised low ARPU generating prepaid subscribers.
MoU: MoU increased by 33.4% to 179.1 minutes in 2010, up from
134.3 minutes in 2009, driven by attractive tariffs and campaign offers.
In 2011, we expect healthy growth in usage as our successful incentives and loyalty programs continue.
ARPU: In 2010, blended average revenue per user (“ARPU”) in TRY
terms increased by 5.4 to TRY19.5, respectively, despite decreasing
We will continue to invest in our
network quality. We will keep our
value focus, maximizing customer
experience to ensure loyalty, while
building on our strong brand name.
71
International Ratings
Other Information About Our Operations
International Ratings For Turkcell As of March 2011
Public Announcements from December 31, 2010 to April 4, 2011
Moody’s
Local currency rating
Foreign currency rating
Outlook
Ba2
Ba2
Positive
On January 8, 2010, Moody’s affirmed Turkcell’s Ba2 foreign
and local currency ratings and upgraded the Company’s
outlook from “stable” to “positive.” Moody’s attributed this
revision to the Company’s robust operational and financial
performance, as well to as its profitability, sustainable cashflow generation capacity, and the positive momentum in its
Ukraine business.
Fitch Ratings
Outlook
February 22, 2011
Standard & Poor’s
BBBBBBStable
On March 18, 2010, Fitch Ratings affirmed Turkcell’s longterm foreign and local currency Issuer Default Ratings
(IDR) at “BBB-”, respectively. The outlook on both IDRs is
“Stable”.
Fitch Ratings claim that the ratings reflect Turkcell’s leading
market share in Turkey’s mobile telecom sector, despite
increased competition, as well as strong credit metrics
compared with peers in the neighboring region.
Outlook BB+
BB+
Positive
On January 26, 2011, S&P upgraded the outlook on
Turkcell’s long-term foreign currency rating from “stable”
to “positive” and affirmed both Turkcell’s long-term foreign
currency and local currency ratings as “BB+”. With this
rating evaluation, Turkcell remains S&P’s highest rated
company in Turkey.
The revision primarily reflects Turkcell’s improving
profitability and the increasing profitability of Turkcell
subsidiaries, particularly Superonline in Turkey and Astelit
in Ukraine, as well as the Company’s improving cash
generation ability.
On November 5, 2010, we have announced that on September 22,
20101, Turkey’s Information and Communication Technologies Authority (“ICTA”) has decided Turkcell to reimburse its subscribers in
regards to a change in one of its tariff options (namely, BizBize Her
Yöne Kamu 1500) following the ICTA’s decision of March 25, 20092
and fined Turkcell an amount equal to 0.33% of Turkcell’s 2009
stand-alone revenues. Our company filed a lawsuit for the suspension of execution, then annulment of the mentioned decision and that
Regional Ankara Administrative Court suspended the execution of
the Authority’s decision.
(1) reference number 2010/DK-10/543
(2) reference number 2009/DK-07/149
March 1, 2011
On June 27, 2008 Turkcell has announced that the Information and
Communication Technologies Authority (“ICTA”) has issued a fine for
the amount of TRY32 million with regards to certain Turkcell campaigns relating to some of its subscription packages that offered free
minutes to its customers under certain conditions. Turkcell also added that the Company would take the necessary legal steps to dispute this claim. Turkcell filed a lawsuit requesting the annulment of
this decision immediately after the payment of TRY24 million with a
25% discount on August 1, 2008. The Court has rejected our claim,
and Turkcell is to appeal against this Court’s decision accordingly.
March 9, 2011
In line with our strategic priorities, we have made changes to our
management team to be effective from March 14, 2011. Selen Kocabas becomes Chief Corporate Business Officer. Emre Sayin, who was
the Chief Corporate Business Officer, has been assigned to manage
Consumer Strategic Projects reporting to the Chief Executive Officer.
Our Business Support Function is being restructured and renamed
as the Human Resources Function and Meltem Kalender Ozturk becomes the Chief Human Resources Officer.
March 11, 2011
sale process of 51% of Serbia Telecom’s shares. Following the evaluation process, we have decided not to bid in the tender for the 51%
of Serbia Telecom’s shares. In the event of any material development
which needs to be publically disclosed, our Company will make the
necessary announcements according to the Circular VIII, No: 54 of
Turkey’s Capital Markets Board.
March 23, 2011
Announcement regarding Turkcell ‘s Board of Directors’ decision on
the Ordinary General Assembly. (Detailed information is on page 84)
March 23, 2011
Announcement regarding Turkcell ‘s Board of Directors’ proposal on
dividend distribution. (Detailed information is on page 179)
March 24, 2011
Some of the media reported today that our shareholder TeliaSonera
planned to take legal action against the Chairman of Turkcell, Mr.
Colin J. Williams. Since Turkcell has received no information regarding this issue, we cannot share any development at this stage.
March 31, 2011
As per the announcement on November 30, 2010, Turkcell stated
that the Company had prequalified to receive the specifications and
tender documents for the third mobile license tender to be held by
the Syrian Arab Republic. Following evaluation of the current tender
conditions, Turkcell has decided not to bid for the third mobile license tender held by the Syrian Arab Republic.
March 31, 2011
Today; Capital Markets Board has requested an explanation from
our Company, after Sonera Holding BV’s announcement to the Istanbul Stock Exchange in regards to the lawsuit initiated against our
Company’s Chairman of Board; Colin J. Williams. As per our announcement following media reports on March 24, 2011, since Turkcell
has received no information regarding this issue, we cannot share
any developments at this stage.
As per the announcement on December 17, 2010, we had stated that
our Company was conducting research and analysis regarding the
72
73
Investor Relations
Investor Relations
Turkcell had the fourth highest market capitalization among all those listed on the
İMKB as of December 31, 2010, with a market capitalization of US$15.01 billion.
Investor Information
Five-year share performance and market capitalization
Turkcell shares were simultaneously listed on the Istanbul Stock
Shareholder Structure
Turkcell’s free float was initially 10.5 percent, and over time it rose
to 34.7 percent as of year-end 2010, as a result of the stake sales of
shareholders.
1
2
3
4
5
6
As of December 31, 2010, Turkcell’s shareholder structure is as follows:
Exchange (İMKB) and in the U.S., on the New York Stock Exchange (NYSE) on July 11, 2000. The shares are traded with the TCELL
symbol at the IMKB, and the TKC symbol on the NYSE, in the form of
American Depositary Shares (ADS). Currently, two ADSs represent
five tradable shares. The nominal value of Turkcell’s issued share
capital is TRY2,200,000,000, consisting of 2,200,000,000 shares
with a nominal value of TRY1 each.
Shareholder
Turkcell Holding A.Ş.
1,122,000,000.238
51.00%
287,632,179.557
13.07%
26,021,712.590
1.18%
Çukurova Holding A.Ş.
995,509.429
0.05%
Müflis Bilka Bilgi Kaynak
ve Iletisim San. Ve Tic. A.Ş.
137,199.575
0.01%
763,213,398.611
34.69%*
2,200,000,000.000
100.00%
Sonera Holding B.V.
MV Holding A.Ş.
Free Float
TOTAL
1
Pınar Oz Varas
[email protected]
2
Ozge Aydemir
[email protected]
3
Nihat Narin
[email protected]
4
Yesim Tohma
[email protected]
5
Esra Agca
[email protected]
6
Banu Uzgur
[email protected]
Contact Information for Investor and International Media Relations
Phone: +90 (212) 313 18 88
Fax: +90 (212) 292 93 22
E-mail: [email protected]
URL: http://www.turkcell.com.tr/en/investorRelations
74
Value of Stake (TRY) Share Capital (%)
(*) Although our company’s free float is 34.69%, according to the “Active Circulation
Share Report” announced by the Central Registry Agency, pursuant to Capital Markets Board’s (CMB) decision no. 21/655 of 23.07.2010, modified with its decision no.
24/729 of 18.08.2010, our company has 557,614,008.03 shares in active circulation
as of 31.12.2010, its ratio being 25.34%. The difference results from the exclusion of
“shares that i. are owned by public corporate entities, ii. are owned by corporations
associated with the company’s founders (companies subject to consolidation), iii. are
owned by real and legal partners who own 5% or more of the company’s capital, iv.
are owned by a) members of the Company’s Boards of Directors and of Supervisors,
b) the Director-General or his/her equivalents or superiors in terms of authorities and
roles, and c) top managers who report directly to the Director-General or his/her equivalents in terms of authorities and roles, v. are owned by funds and foundations of the
company, vi. are granted as equity capital pursuant to the capital markets legislation,
collateralized after having been purchased by transaction on credit or granted as collateral, in addition to collateralized shares for clearing bank markets, vii. are legally restricted and cannot be traded, viii. are prohibited, and ix. are seized” from the definition
of “ratio of shares in active circulation,” as specified by the SPK in its decisions. Since
the difference may be caused by one or more of the issues specified in the decision, it
is not possible for our company to know it.
As the only Turkish company listed on both the İMKB and NYSE,
Turkcell had the fourth highest market capitalization among all those listed on the İMKB as of December 31, 2010, with a market capitalization of US$15.01 billion.
15.00
24.49
10.00
13.21
22.28
17.27
5.00
0.00
23.21
30.00
20.00
10.00
2006
*Based on closing prices
2007
2008
Market Cap
(billion TRY)
0.00
2009
2010
Share Price*
Source: Bloomberg
(TRY)
TCELL (TRY)
Lowest Highest
2006
4.46
6.95
2007 2008
5.59 6.19
12.09 11.30
2009 2010
6.86 7.80
10.32 11.18
TKC (US$)
Lowest Highest
2006
8.21
13.17
2007 2008
10.73 8.74
25.97 24.99
2009 2010
10.04 12.34
17.91 19.59
Source: Bloomberg
75
Kaynak: Bloomberg
1.40
1.30
1.10
1.20
1.10
1.00
1.00
0.90
0.90
0.80
0.80
0.70
0.70
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
Foreign ownership (%)
We strive to provide both our company
and our shareholders with maximum
value, without compromising
our corporate policy based on
timely and fair disclosure and our
principles of transparency, reliability,
accountability, and integrity since the
public offering date.
76
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Jan-10
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
0.60
Feb-10
Jan-10
0.60
100
90
80
70
60
50
Kaynak: Bloomberg
1.20
Feb-10
Investor Relations
Relative share performance in 2010 (TKC)
Relative share performance in 2010 (TCELL)
In 2010, we won the “Best Corporate
Governance in Turkey” award at first
global corporate Governance Awards
ceremony in London. Separately,
Turkcell as selected as the “company
of the Decade” in Turkey by World
Finance Magazine in 2011.
Trading volume and foreign ownership
Compared with 2009, Turkcell’s trading volume declined by 20 percent to 9.4 billion in 2010. 2 percent of the total trading volume
of İMKB-100 index was realized with Turkcell shares. The foreign
ownership in Turkcell’s free float had reached 93 percent as of the
end of 2010.
and on rules and regulations to which we are bound to investors
and analysts through regular meetings, local and international conferences, analyst days, and teleconferences. Accordingly, we met
approximately 550 investors in 2010, by attending 15 local and international conferences, visiting their premises in the U.S., Europe,
and Canada. Moreover, we conducted an Investor & Analyst Day on
January 17, 2011 in London, attended by approximately 80 people.
Investor Relations
We have endeavored to continue providing both our company and
our shareholders with maximum value in 2010.
We reinforced the difference we created in
Investor Relations with awards in 2010
The Turkcell Investor Relations Department strives to ensure Company shares remain a favored investment tool for domestic and overseas institutional investors and shareholders in order to create value
for the Company and all its stakeholders. The Department also seeks
to translate the Company’s operational performance into market value and to promote the company in the most effective way possible.
investors, analysts, and other related parties. The Investor Relations
website received the “Excellence” award in both the “Telecommunication” and “Investor Relations” categories, from Interactive Media
Awards (IMA), recognized as one of the world’s most prominent Internet organizations.
Contact Information for Investor and International media Relations
Turkcell’s financial information and Company news is available on
its website, or may alternatively be obtained from the Investor Relations Department.
In February 2010, with World Finance Magazine’s combined 175 years of business journalism and research, our Company
won the “Best Corporate Governance in Turkey” award
at World Finance Magazine’s first global Corporate Governance
Awards ceremony in London.
Since its shares are traded on both the U.S. and Turkish stock exchanges, Turkcell has shaped its corporate governance model in accordance with the requirements of both markets.
On March 23, 2010, Turkcell was ranked among the top
5 companies in Europe by its Financial Disclosure
Procedures and received an award at the 2010 Investor Relations Global Rankings (“IRGR”) Awards ceremony. A
In line with these requirements, the Turkcell Investor Relations department strives to provide both our company and our shareholders
with maximum value, without compromising our corporate policy based on timely and fair disclosure, and our principles of transparency,
reliability, accountability, and integrity since the public offering date.
total of 503 companies participated in 2010 IRGR awards, including
a number of the world’s leading corporate names such as Microsoft, IBM and Procter & Gamble. All companies were categorized in
5 regions. Turkcell was evaluated in the Europe region along with
other leading European corporate names such as Deutsche Telekom,
Credit Suisse, Bayer and BP.
Therefore, in 2010, we continued to disclose information on our
strategy and activities, on sectors and markets where we operate,
In addition, the Investor Relations Department continued to maximize our Investor Relations website to communicate with shareholders,
77
Framework of Turkcell Corporate Governance
The Company has adopted the following guiding
principles:
Responsibilities of the Turkcell Board of Directors
The business affairs of our Company are managed under the direction of the Board, which represents and is accountable to our
shareholders. The responsibilities and authority of the Board consist
of, but are not restricted to, the following:
•Building the vision of the Company, approving of local and international business strategies and determining short- and longterm goals;
• Approving the Company’s annual budget and business plans
and its revisions;
•Monitoring the strategic and financial performance of the Company and ensuring that corrective measures are carried out as
necessary;
• Controlling important expenditures not included in the annual
operating plan of the Company;
• Consistent with applicable regulations, overseeing the preparation of the annual report and finalizing this report for presentation at the General Assembly of shareholders;
• Consistent with applicable regulations, approving quarterly financial results, the audit report and amendments to the accounting
policies previously adopted by the Company or any material change in the method or timing of reporting of the financial results.
Structure of the Board of Directors
The Board of Directors consists of at least seven members chosen
for a maximum three-year term. As per Turkcell’s Corporate Gover-
78
nance Guidelines, the Board, taking into consideration the suggestions of the Corporate Governance Committee, is to review its own
size and determine the most effective number for future activities.
Together, the Corporate Governance Committee and the Board of
Directors are, within the scope of the current structure of the Board
of Directors, to reassess the skills and qualification needed for Board
membership. Each Board Member should have time to devote to the
activities of the Board, enhance their knowledge about the global telecommunications industry and related industries, and attend annually at least 75% of Board meetings. Each Board Member is encouraged to limit the number of other public company boards on which
he or she serves and to be mindful of his or her other existing and
planned future commitments, so that such other directorships and
commitments do not materially interfere with his or her service as
an effective and active member of the Company’s Board. In addition,
the Corporate Governance Committee is to develop and supervise an
orientation program for new elected Board Members.
On our Ordinary General Assembly dated April 29, 2010, Colin J.
Williams, Nazli Karamehmet Williams, Mehmet Bülent Ergin, Karin
Eliasson, Tero Kivisaari, Oleg Malis, Alexey Khudyakov were selected
as Turkcell Board of Directors for a period of three years.
Operations of the Board of Directors
As per Turkcell’s Corporate Governance Guidelines, the Board of Directors should generally have at least 11 regular meetings per year
at appropriate intervals to carry out their responsibilities. Additional
meetings may always be convened, upon reasonable notice, to address specific needs of the Company. The first Board meeting of the year
should convene within one month of the Annual General Assembly.
79
The Chief Executive Officer should take the utmost care to ensure an
equal flow of information to all Board members prior to Board of Directors meetings. It is the Chief Executive Officer’s responsibility to
establish a system through which the Board of Directors access to the
work of the management and other employees of the company in order to provide an effective flow of information to the Board of Directors
and to ensure a reasonable access to the management.
Committees of the Board of Directors
The Board of Directors has two committees, each consisting of at
least two members: the Audit Committee and the Corporate Governance Committee. If necessary, experts outside the Board may be
eligible to be commissioned on a committee. The Board of Directors can also establish additional committees as required or deemed
appropriate. Board of Directors’ members should not serve on more
than two committees. Each committee serves as advisory bodies to
the Board of Directors and makes recommendations to it.
At the Board of Directors meeting on May 27, 2010, within the context of Turkcell’s Corporate Governance Principles and applicable
regulations, it was decided that Mr. Colin J. Williams and Mr. Alexey
Khudyakov will continue their Audit Committee memberships and
that Mr. Colin J. Williams will continue as Chairman of the Audit
Committee. At the same meeting, it was decided that Mr. Colin J
Williams, Ms. Karin B. Eliasson, Mr. Mehmet Bülent Ergin and Mr.
Oleg A. Malis are appointed as Corporate Governance Committee
members of the Company and that Mr. Colin J. Williams will serve as
Chairman of the Corporate Governance Committee.
Corporate Governance Committee
As per Turkcell’s Corporate Governance Guidelines, the fundamental
role of the Corporate Governance Committee is to assist the Board
with the development and implementation of the Company’s corporate governance principles, and presents to the Board remedi-
Turkcell Code of Ethichs reflects the
values and principles of Turkcell and
applies to all employess, officers and
Board Members.
80
al proposals to that end. As per Turkcell’s Corporate Governance
Guidelines, the committee is to establish a transparent system for
the determination, evaluation and training of board member candidates. The Committee also makes recommendations to the Board,
where appropriate, regarding the Company’s compensation strategy
both for the Board Members and the Chief Executive Officer and Chief Financial Officer and the Chief Executive Officer and Chief Financial Officer succession plan.
Furthermore, in the relations between the Company and its shareholders, the Committee assists the Board. To that end, it oversees the
investor relations activities.
Audit Committee
In compliance with laws and regulations applying to Audit Committees, the chief duties of the Committee are:
• To assist in determining the quality and integrity of the
Company’s financial statements and related disclosure;
• To oversee the implementation and efficiency of the Company’s
accounting system;
• To pre-approve the appointment of and services to be provided
by the independent audit company;
• To approve and monitor the agreement between the independent auditor and the Company;
• To oversee performance and efficiency of the independent auditing system;
• To oversee performance and efficiency of the internal auditing
mechanism.
The Board of Directors is to assess the independence and qualifications of every member of the Audit Committee to ensure that he or
she is qualified to be a Committee Member, and, if necessary utilize
outside consultants or advisors.
Remuneration of the Board of Directors
The remuneration of the Members of the Board of Directors is to
be determined by shareholders at the General Assembly. Currently
plans regarding profit sharing, retirement and other similar subjects
are not in effect.
As per Turkcell’s Corporate Governance Guidelines, the Board, upon
the recommendation of the Corporate Governance Committee together with its own determinations, is to decide on a proposal to the
General Assembly of Shareholders whether Board Members will be
remunerated and if such is the case, the form and amount of compensation to be paid to the Board members.
Evaluation of the Board of Directors and Management, and Management Succession and Development
As per Turkcell’s Corporate Governance Guidelines, the Board should conduct a self-evaluation on an annual basis. The Board of Directors must determine performance targets for the Company, and
therefore, the Chief Executive Officer and Chief Financial Officer each
year. In line with the financial and other targets specified, the Board of Directors, with the assistance of the Corporate Governance
Committee, must evaluate the performance of the Chief Executive
Officer and of the Chief Financial Officer at the end of each year and,
determine their remuneration. The Board of Directors, taking into
consideration the recommendations of the Corporate Governance
Committee and with the assistance of the Chief Executive Officer,
will review and approve the plan for successions to the posts of Chief
Executive Officer and the Chief Financial Officer.
Dividend Distribution Policy
Turkcell has adopted a dividend policy, which is set out in its Corporate Governance Guidelines.
As adopted, our general dividend policy is to pay dividends to shareholders with due regard to trends in our operating performance,
financial condition and other factors. Since 2004, the Board of Directors has endeavored to distribute cash dividends of at least 50% of
our distributable net profits per fiscal year, although the payment of
dividends remains subject to our cash flow requirements, applicable
Turkish laws and the approval of, or amendment by, the Board of
Directors and the General Assembly of Shareholders.
(TRY)
Cash Dividend
Bonus Share
Cash Dividend
per Share
2004
250,127,565 380,247,980 0.16962
2005
509,075,181 345,112,659 0.27445
2006
567,039,784 -
0.25775
2007
648,713,951 -
0.29487
2008
1,098,193,226
-
0.49918
2009
859,259,101
-
0.39057
On March 23, 2011, our Board of Directors decided to propose an
aggregate gross cash dividend of TRY1,328,696,972 , which correspond to 75% of Turkcell’s distributable income to be paid in cash to
our shareholders.
Changes in the Articles of Association
At the Ordinary General Assembly held on April 29, 2010, Article 3
entitled Purpose and Subject Matter of Turkcell’s Articles of Association was amended in line with Turkey’s Capital Markets Board’s arrangement dated September 9, 2009 and numbered 28/780, which
rules that public companies can provide guarantees, pledges and
mortgages, to third parties for them to carry out their ordinary business operationsonly if such third parties are fully consolidated in the
company’s financial statements.
Capital Markets and Corporate Governance Compliance Unit
At Turkcell, in compliance with Article 8 of Series: IV, No. 41
“Communiqué Regarding the Principles that apply to Public Companies” issued by the Capital Markets Board, a Capital Markets and
Corporate Governance Compliance Officer was appointed in February 2009 pursuant to a Board of Directors decision and Capital Market Corporate Governance Compliance Unit was established in May
2009, for the purposes of:
•Ensuring company compliance with capital market regulations
and
• Coordinating corporate governance practices of the Company.
Within the framework of ensuring compliance with capital market
regulations, rules and regulations pertaining inside information
were provided to management and employees on regular basis.
Pursuant to CMB regulations, a list of those having access to inside information is maintained. Furthermore, information regarding
rules and regulations pertaining inside information is published on
Turkcell’s internal intranet pages and provided to every new Turkcell
employee through the Orientation Program and reminded via regular e-mails and mobile training programs.
Code of Ethics
The following is a summary of “Turkcell Common Values and Code of
Ethics” (the “Code”) confirmed by the management and employees
of Turkcell are as below.
81
The Code reflects the values and principles of Turkcell and applies to
all employees, officers and Board Members of Turkcell.
Conflicts of Interest
Employees, officers and directors are prohibited from (a) taking for
themselves personally opportunities that are properly within the
scope of Turkcell’s activities, (b) using corporate property, information or position for personal gain, and (c) competing with Turkcell.
A “conflict of interest” exists when a person’s private interest interferes in any way, or even appears to interfere, with the interests of
Turkcell. A conflict situation can arise when an employee, officer or
director takes actions or has interests that may make it difficult to
perform his or her work for Turkcell objectively and effectively. Conflicts of interest also arise when an employee, officer or director, or a
member of his or her family, receives improper personal benefits as
result of his or her position in Turkcell.
Conflicts of interest are prohibited as a matter of Turkcell policy.
Each employee, officer or director is expected to avoid any outside
activity, financial interest or relationship that may present a possible
conflict of interest or appearance of a conflict.
Turkcell employees, officers and directors may give presents to or
receive presents from, persons, institutions and corporations with
whom they have business relations only in compliance within the
internally defined rules.
Protection and Proper Use of the Company Assets
Turkcell’s employees should protect the Company’s assets and ensure their proper use. All Turkcell assets should be used only for
legitimate business purposes. Information is one of the most critical
asset categories. Employees, officers and directors should maintain
the confidentiality of information entrusted to them by Turkcell or
All communications with investors,
financial analysts, press and
similar bodies shall be performed
in accordance with the” Turkcell
Disclosure Policy”
82
customers of Turkcell. All employees are required to comply with
“Turkcell Information Security and Disclosure” policies and procedures, which is published in Turkcell’s internal intranet pages.
Principles for Public Disclosure
All communications with investors, financial analysts, press and similar bodies shall be performed in accordance with the “Turkcell
Disclosure Policy” which is published on Turkcell’s website.
No employee other than those specifically authorized to perform this
duty can make oral or written announcements on behalf of Turkcell.
Compliance with Laws, Rules and Regulations
Turkcell actively promotes compliance with all applicable laws, rules
and regulations.
Working Principles
Turkcell is committed to providing a safe, secure and efficient working
environment to its employees. Therefore Turkcell expects all of its employees to conduct themselves in accordance with the following principles:
• Turkcell employees must conduct themselves at all times in a
professional manner. Turkcell employees may not engage in an
abusive, threatening or violent manner, or otherwise behave in
an aggressive or harassing manner towards customers, suppliers or fellow employees. Turkcell employees are prohibited from
promoting religious or political views in the workplace.
• All Turkcell employees must not fraudulently alter official documents they issue for the performance of their duties. The employees are responsible timely and accurate preparation and delivery
of reports to regulatory authorities and other similar bodies.
The full text of the Code is published in Turkcell’s internal intranet
pages. The Code is explained to each new Turkcell employee via the
orientation program and the new employee is made to sign a contract proving that these rules shall constitute an inseparable part of
the employee’s condition of employment.
Oxley”), and the rules issued by the US Securities and Exchange
Commission (“SEC”) there under, require an SEC reporting company
to disclose whether or not it has adopted a written code of ethics
applicable to the Company’s senior financial officers, including the
Company’s principal executive officer. The following rules have been
adopted by Turkcell in accordance with these provisions and are
applicable to Turkcell’s senior executive and financial officers.
The Chief Executive Officer, Chief Financial Officer and other executive officers and financial officers hold important roles in corporate
governance. Turkcell, according to the laws and regulations applicable to the Company, has adopted the following code of ethics.
This code of ethics is designed to deter wrongdoing and to provide
principles to which these officers are expected to adhere and which
they are expected to advocate. It complements any other appropriate
Turkcell policies or guidelines in force from time to time.
Any change to this code of ethics and any explicit or implicit waiver
from it for these officers will be disclosed on this web page in accordance with applicable law and regulations. A waiver is defined
as a material departure from a provision of this code and an implicit
waiver means failure to take action within a reasonable period of
time regarding a material departure from a provision of this code
that has been made known to an executive officer of the Company.
The Board of Directors of Turkcell declares that the Chief Executive
Officer, Chief Financial Officer and other executive officers and financial officers:
1. Will act with honesty and integrity, including ethically handling
actual or apparent conflicts of interest between their personal relationships or financial or commercial interests and their responsibilities to Turkcell;
2. Make full, fair, accurate, timely and understandable disclosure in
all reports and documents that the Turkcell files with, or submits to,
the Turkcell’s capital markets regulators or otherwise makes public;
The Code of Conduct rules are defined, updated and published by
the Ethics Committee.
3. Comply with all governmental laws, rules and regulations applicable to Turkcell and to its relationship with its shareholders;
Declaration of Code of Ethics Made in Compliance with the SarbanesOxley Act
Section 406 of the US Sarbanes-Oxley Act of 2002 (“Sarbanes-
4. Ensure that their actions comply not only with the letter but the
spirit of this code and foster a culture in which compliance with the
law and Turkcell’s policies is at the core of Turkcell’s activities.
Turkcell has been involved in
alternative capital markets to fund
and support changing financial
structures during the process of
operational growth.
The Audit Committee of the Board of Directors will apply this code to
specific situations. The Chief Executive Officer, Chief Financial Officer
and other executive officers and financial officers will report known
or suspected violations to the Audit Committee. The Audit Committee
will take all appropriate action to investigate any violations reported
to it. In a case where a violation has occurred, the Board of Directors will take (or authorize) any disciplinary action that it considers
appropriate. This action may, in cases of severe breaches, include
dismissal or the initiation of judicial proceedings.
TURKCELL CORPORATE RISK MANAGEMENT
Since its establishment in 1993, Turkcell Iletisim Hizmetleri A.S.
has been involved in alternative capital markets to fund and support changing financial structures during the process of operational
growth. In the performance of its corporate obligations, Turkcell has
complied with various regulations, laws and rules since 1994. The
obligations are liable to change, not only according to the financial
regimes of the area in which the Company is active, but according to
the requests and obligations of the markets from which it is funded.
Being listed on the New York Stock Exchange, Turkcell management is
responsible for ensuring the compliance with the provisions of Article
404 of the Sarbanes Oxley Act, as promulgated by the United States
Securities and Exchange Commission (the “SEC”) as well as Corporate
Governance Principles since it is also listed on Istanbul Stock Exchange. Accordingly, Turkcell has formulated an internal control mechanism for itself and for the consolidated group companies which, in
audit scope, are in line with Corporate Governance Principles. Turkcell
Corporate Risk Management Department coordinates Risk Management, Internal Audit, Business Continuity Management, Information
Security Management, and Internal Fraud Management processes.
By developing and applying a risk management methodology, the
83
Company strengthens its focus on corporate risk management practices.
Turkcell Corporate Risk Management Department, in compliance with
the “principle of independence” directly reports to the Audit Committee, the Chief Executive Officer and the Chief Financial Officer.
Independent Auditor
In accordance with the Audit Committee’s recommendations, our
Company’s Board of Directors resolved on December 18, 2009, that
DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.
shall be appointed as Turkcell’s Independent Auditor (as referred to
in Article 16 of our Company’s Articles of Association) for a period of
two years regarding the audit of our Company’s consolidated financial statements and that this appointment was approved at the Ordinary General Assembly Meeting of our Company on April 29, 2010.
DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.
Sun Plaza, Maslak Mahallesi, Bilim Sokak No.: 5, Şişli, 34398 Istanbul, Turkey
Tel: +90 (212) 366 60 00
Fax: +90 (212) 366 61 65
www.deloitte.com.tr
Ordinary General Assembly
Turkcell’s Board of Directors has decided that the Ordinary General
Assembly for the year 2010 is to be held at Turkcell Plaza, Conference Room, Mesrutiyet Cad. No:71 Tepebasi, Istanbul on April 21,
2011, at 3.00 pm to resolve the following agenda.
TURKCELL İLETİŞİM HİZMETLERİ A.Ş.
AGENDA OF THE ORDINARY GENERAL ASSEMBLY
MEETING Dated 21 April 2011
1. Opening and election of the Presidency Board;
2. Authorizing the Presidency Board to sign the minutes of the meeting;
3. Reading the Annual Reports of the Board of Directors relating to
fiscal year 2010;
4. Reading the Annual Reports of the Auditors relating to fiscal year
2010;
5. Reading the summary of the Independent Audit Firm’s report relating to fiscal year 2010;
84
6. Review, discussion and approval of the Balance Sheet and profits/
loss statements relating to fiscal year 2010;
7. Release of the Board members from activities and operations of
the Company in year 2010;
8. Release of the auditors from activities and operations of the Company in year 2010;
9. Election of auditors for a period of one year and determination of
their remuneration;
10. Discussion of and decision on the Board of Directors’ proposal
concerning the distribution of profit for year 2010;
11. Informing the General Assembly regarding the donations made
in year 2010;
12. Informing the General Assembly regarding the guarantees,
pledges and mortgages provided by the Company to third parties
or the derived income thereof, in accordance with the Decision of
the Capital Markets Board dated 09/09/2009 and numbered 28/780;
13. Wishes and hopes;
14. Closing.
2010 COMPLIANCE WITH CORPORATE
GOVERNANCE PRINCIPLES REPORT:
Turkcell believes that high standards of corporate governance are important for perpetuating successful business practices and generating
long-term economic value for the Company’s shareholders. Accordingly, we have paid full attention to applying the principles laid out
in the Corporate Governance Principles published by the CMB. Taking
into consideration relevant CMB regulations and best practices and
with the aim of meeting the obligations of our Company brought by
the capital market regulations and to ensure coordination in corporate
governance practices, pursuant to CMB Communiqué Serial: IV, No.:
41, in 2009, we have formed a Capital Markets & Corporate Governance Compliance unit. Accordingly, the Board of Directors within the
responsibilities enumerated in Turkcell’s Corporate Governance Guidelines, has provided the necessary oversight for preparation of this
Annual Report which contains the Compliance Report.
SECTION 1
SHAREHOLDERS
1.1 Shareholders Relations Department
Representatives of the Investor and International Media Relations Department within the Turkcell organization, pursuant to existing regu-
lations, hold regular meetings with analysts and investors to share
developments in Company strategy and operations, and the market,
industry and legal environment in which it operates. In addition, Turkcell management regularly holds meetings with media representatives to share publicly available information and to answer questions.
nouncements are distributed by e-mail to addresses registered in
the Company’s database. Inquiries, verbal or written, made to the
Investor and International Media Relations Department are replied
to as quickly as possible within the scope of publicly disclosed information.
An Investor Relations Department has existed since Turkcell’s initial public offering. The Investor and International Media Relations
Department functions under the Executive Officer in charge of Corporate Affairs. It monitors all disclosures to the public in accordance
with Turkcell’s Disclosure Policy that seeks to provide information to
the public in a timely, accurate, complete, understandable and equal
manner. Detailed contact information of the Investor and International Media Relations Department can be found on our Company’s
website (www.turkcell.com.tr) and under the Investor Relations heading in the Annual Report.
Provisions for appointment of a special auditor have not been included in the Company’s Articles of Association. During this reporting
period, no requests for appointment of a special auditor were submitted.
Verbal and written questions submitted to this department are answered within the context of publicly disclosed information as quickly
as possible.
The Company, in accordance with best practices, has a Disclosure
Committee responsible for the Company’s disclosures in accordance
with applicable regulations, and a Disclosure Team charged with
ensuring that material information is shared within the Company.
In compliance with Article 8 of Series: IV, No. 41 “Communiqué Regarding the Principles that apply to Public Companies” issued by the
Capital Markets Board, at Turkcell a Capital Markets and Corporate Governance Compliance Officer was appointed in February 2009
pursuant to a Board of Directors decision and Capital Market Corporate Governance Compliance Unit was established in May 2009, for
the purposes of:
•Ensuring company compliance with capital market regulations and
• Coordinating corporate governance practices of the Company.
1.2 Use of Right of Gaining Information of the Shareholders
In order for shareholders to obtain information concerning the
Company easily and without discrimination, all publicly disclosed
information is available on our website (www.turkcell.com.tr) in
Turkish and English in the Investor Relations section for the use by
Turkish and foreign shareholders equally. In addition, all public an-
1.3 Information on the General Assembly of Shareholders
The Company makes disclosures when the Board of Directors take
a decision regarding the General Assembly Meeting and its agenda
and in addition regarding the resolutions of the General Assembly
following the General Assembly meeting. The Ordinary General Assembly met on April 29, 2010 with a quorum of 74.18%. The participants of the General Assembly included shareholders and their representatives submitting blockage letters within the legal period, the
Board of Directors, statutory auditors, chief executive officer, deputy
executive officers, and the staff organizing the General Assembly.
The invitation to attend the meeting was published in the Turkish
Trade Registry Gazette and national newspapers. At the same time,
invitations were issued to shareholders in foreign countries. For owners of registered shares, invitations were extended by registered
letter with return receipt, as the law requires.
In accordance with the Turkish Commercial Code, applications were
received from shareholders of publicly traded shares up to one week
before the meeting. During the General Assembly, shareholders
exercised their right to ask questions and these were answered by
the executive officers. All matters advised by shareholders were duly
recorded in the minutes and these minutes were registered and announced in the Bulletin of Turkish Trade Registry. In addition, the
Extraordinary General Meeting planned to be held on October 20,
2010 could not convene due to the provisions of related legislations
since the Government Commissioners failed to show up.
1.4 Voting Rights and Minority Rights
Pursuant to the Articles of Association of the Company, there are
no privileged shares in terms of decision-making and voting rights.
Apart from the independent member currently on the Board of
Directors, shareholders possessing shares greater than 5% are
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represented, while minority shareholders are not. With regard to
the Company’s capital, there is no mutual participation. The CMB
Communiqué concerning the right to exercise cumulative voting is
optional for the Publicly Traded Companies and this voting method
has not been used as yet.
1.5 Dividend Distribution Policy and Time of Dividend Distribution
We have adopted a dividend policy, which is included in our Corporate Governance Guidelines. As adopted, our general dividend policy
is to pay dividends to shareholders with due regard to trends in our
operating performance, financial condition and other factors. Since 2004, the Board of Directors has endeavored to distribute cash
dividends of at least 50% of our distributable net profits per fiscal
year, although the payment of dividends remains subject to our cash
flow requirements, applicable Turkish laws and the approval of, or
amendment by, the Board of Directors and the General Assembly of
Shareholders.
The Dividend Distribution Policy adopted by the Board of Directors
is published in the annual report of the company as well as on its
website (www.turkcell.com.tr) under Corporate Governance in the
Investor Relations Section.
In accordance with our Articles of Association, there are no privileged shares and no privileges for dividend distribution. Dividend distributions are made within the periods and in line with the principles
stipulated by CMB regulations.
1.6 Transfer of Shares
While there is no limitations in the Articles of Association of our
Company with respect to the transfer of shares, Provisional Article
4, paragraph c, sentence 4 of the authorizing regulations relating
to the Electronic Communication Sector, to which Turkcell is subject, makes states that the written approval of the Information and
Communication Technologies Authority is required for “actions of
gaining or transferring or movement of shares which shall result in
change of control.”
SECTION 2
PUBLIC DISCLOSURE AND TRANSPARENCY
2.1 Company Disclosure Policy
The Disclosure Policy Framework Document, regarding public an-
86
nouncements in accordance with the domestic and international capital markets regulations to which Turkcell is subject was prepared
and presented to shareholders at the Ordinary General Assembly
held in 2005. Following the General Assembly, the Disclosure Policy
Framework Document was published in the Investor Relations section of the Company’s website, www.turkcell.com.tr, under Corporate Governance heading. Turkcell’s Disclosure Policy was revised in
2009 and published on the website.
Turkcell makes public disclosures in compliance with the CMB, ISE,
SEC and NYSE regulations to which it is subject. The purpose of
Turkcell’s Disclosure Policy is to ensure an active and transparent
communication which is complete, fair, correct, timely, clear, and
cost effectively and equally accessible for all stakeholders including
shareholders, investors, employees and customers in accordance with the regulations to which the Company is subject. Turkcell
follows-up news and rumors about the Company and in accordance
with the Company’s Procedure on Follow-up of News and Rumors
public disclosures may be made if deemed appropriate or necessary.
The responsibility to maintain and monitor this Disclosure Policy is
incumbent on the Company’s Investor and International Media Relations Division.
2.2 Public Disclosures
In 2010, Turkcell made a total of 45 public disclosures to the domestic and foreign capital markets to which it is subject. Since Turkcell
shares are quoted on the New York Stock Exchange, these disclosures were made both in English and Turkish. Public Disclosures
are available on the Turkcell website (www.turkcell.com.tr) in the
Investor Relations section.
Information provided by our Disclosure Team and/or Disclosure
Committee is evaluated under the coordination of the Investor and
International Media Relations Division and with the compliance advice of the Capital Markets and Corporate Governance Compliance
Unit in accordance with the local and the international capital market regulations to which our Company is subject. In cases in which
public disclosure is required, such disclosure is to be made by the
Investor and International Media Relations Division.
Furthermore, in 2009, Turkcell created a mechanism for the postponement of the public disclosure of inside information, within the framework of Article 15 of the Capital Markets Board Communiqué on
Disclosure (Series: VIII, No. 54), which regulates the postponement
of public disclosure of inside information.
2.3 Corporate Website and its Contents
Turkcell’s website is www.turkcell.com.tr. Information for shareholders is provided under the following headings in the Investment
Relations section:
a.Market Information
b. Shareholder Structure
c.
i.
Corporate Governance Guidelines
ii.Board of Directors
iii.Board Committees
iv.
Dividend Policy
v.
Code of Ethics
vi.
Articles of Association
vii.
Disclosure Policy
viii.
General Assembly Information
ix.
Compliance Report
d.
Announcements
Presentations
e.
Financial and Operational Information
i.Key Financial Data
ii.Key Financial Data TRY
iii.
Historical US GAAP Key Financial Data
iv.Key Operational Data
v.
Debt and Credit Rating
vi.
International Operations
vii.
Investor Kit
viii.Outlook & Strategy
ix.
Annual Report
f.
Financial Calendar
g.Share Information
i. Interactive Share Charts
ii. Investment Calculator
iii. Ticker Symbols
iv.
Analyst Coverage
h
FAQ
i.
Contact Us
2.4 Announcement of Real Person Final Dominant Shareholder /
Shareholders
The shareholder structure of our Company is as follows:
Shareholder
Turkcell Holding A.Ş.
Sonera Holding B.V.
MV Holding A.Ş.
Çukurova Holding A.Ş.
Müflis Bilka Bilgi Kaynak ve İletişim San. Ve Tic. A.Ş.
Public Share*
TOTAL
Value of Stake (TRY)
1,122,000,000.238
287,632,179.557
26,021,712.590
995,509.429
% of Share
51.00%
13.07%
1.18%
0.05%
137,199.575
763,213,398.611
2,200,000,000.000
0.01%
34.69%*
100.00%
(*) While 34.69% of our company is listed in the stock exchange, the number of our
Company’s free floating shares on 31.12.2010 was 557,614,008.03 according to a
“Report on Free Float Ratios” released by the Central Registry Agency in accordance
with Capital Markets Board’s decision 21/655 of 23.07.2010 as amended by its decision 24/729 of 18.08.2010 and its free float ratio is 25.34%. The difference between
those rates results from the exclusion of shares which are “ i. held by a public entity,
ii. Held by the company’s incorporators and its affiliates (companies subject to consolidation), iii. Held by shareholders who may be a natural person or a corporate
body and control at least 5% of the Company’s capital, iv. Held by a) the members of
the Company’s Board of Directors and the Board of Auditors, b) General Manager or
executives who are equal to or superior to a general manager in terms of their powers
and functions, c) senior executives who report to General Manager or executives who
are equal to or superior to a general manager in terms of their powers and functions,
v. owned by the savings funds or foundations of companies, vi. Provided as equity
capital pursuant to regulations applicable to the capital markets legislation or as a
collateral in respect of a margin trading or as a collateral except the ones which are
given as a collateral only for Central Depository Bank markets, vii. Which are legally
restricted and cannot be subject to purchase and sale, viii) prohibited , ix. Seized “ in
the definition of free float ratio. The difference may result from one or more situations
described in the decision and it is not possible for our Company to know.
2.5 Disclosure on Insider Traders
Turkcell’s Disclosure Policy contains guidelines concerning the Blackout Period Practice relating to insider trading issues. In accordance with these guidelines, employees are prohibited from selling or
purchasing Turkcell securities during the blackout period. Turkcell
employees with access to inside information that can affect the price
of capital market instruments are restricted from selling or purchasing Turkcell securities regardless of blackout periods.
Pursuant to CMB regulations, a list of those having access to inside
information is maintained, rules and regulations pertaining inside
information were provided to management and employees, and
regular reminders were made through e-mail and mobile training
programs. Furthermore, this information is provided to every new
Turkcell employee through the Orientation Program. Employees are
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required to sign an affirmation stating that these regulations are an
indispensible part of their employment contracts.
vironment not as “a place to work”, but as a “living space”; and we
carry out our practices based on this approach.
SECTION 3
STAKEHOLDERS
To work with and retain the best talent is our priority. With our distinctive human resources practices, we continue “to develop dedicated employees who yield successful results”. Our employees also
say, “There Is More for Me in Turkcell”, and evaluate Turkcell with
the highest ratings, both in the industry and across Turkey, in employee loyalty surveys by independent research companies.
3.1 Informing Stakeholders
In addition to the legislation that is currently in effect, company policies and procedures have been created to inform Company employees and stakeholders.
3.2 Participation of Stakeholders in Management
While there is no special provision concerning the participation of
stakeholders in management, relevant information is shared with
Turkcell’s business partners, staff and other stakeholders through
defined and regular meetings, such as staff communication meetings, platforms where the staff can communicate their ideas and
suggestions, Supplier Day for the supply chain, Business Partner
Day for the firms Turkcell works with on value-added services, and
dealer meetings.
Detailed information is available in the Human Resources section of
the Turkcell Annual Report 2010.
Acting on our tenet of “People First in a Pioneering Turkcell”, we
always prioritize our employees’ satisfaction and motivation. We
follow the technologies that impact our industry both locally and
globally, and strive to take the lead with exemplary applications.
3.4 Information about Relationships with Customers and Suppliers
Turkcell uses an approach in line with global quality standards wherever the Company has contact with and/or provides services to its customers. The Company has a holistic view over all products and services
to understand the experience from a customer’s perspective in order
to improve the system, the processes, and human resources; and, if
necessary, to make timely corrective adjustments to systems or processes related to that specific experience. Turkcell also regularly assesses
its services and its approach in all business channels to identify areas
of improvement and to make adjustments that simplify the lives of our
customers and ensure their satisfaction. We aim to achieve operational
perfection at every point where we provide service to our customers
and to improve customer satisfaction through consistent evaluation
and dynamic actions. We design processes and service structure with
the customer in mind and craft strategies based not only on operational
goals, but also on the results of our analyses on customer satisfaction
and the related emotional consequences. We assess the performance
of our suppliers with mystery shoppers and satisfaction surveys; and
also encourage them to take corrective actions where necessary.
We continue to invest, adding value to the Company and creating a
flexible, sensitive, and democratic work environment, which supports changes that motivate our employees. We define our work en-
In parallel with ever-changing and improving global conditions,
Turkcell does not content itself only with providing superior highquality service, but also plans and implements activities in line with
3.3 Human Resources Policy
We continue to maintain the values that guide our decisions and conduct, and to extend our sphere of influence, based on our motto of
“Get More Out of Life With Turkcell”. Our values manifest themselves
in our conduct, which will differentiate the current success of Turkcell
Group: Our customers come first. We are an agile team. We believe in
open communication. We make a difference. We value people.
Today all our employees from each level and every team, along with
the entire top management, support our human-focused culture,
based on our slogan of “There Is More for Me in Turkcell”.
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To continue to be “a winning team”, we will carry on shaping and
implementing our human resource strategies, based on our belief
in the substance of our corporate culture and the employees and
leaders who keep this culture alive.
social responsibility, environmental awareness, and respect for the
rights of its customers, suppliers and employees. As a matter of joint
responsibility, suppliers are also expected to act in accord with these
principles, and improve their environment correspondingly.
a. Success in Accord
• Turkcell suppliers have a crucial role in providing our costumers
with our products and services.
• We aim to establish with our suppliers a flexible and valueadded business partnership based on transparency, incorporating the principles of integrity, cooperation, and achievement.
• Turkcell believes that long-term success is possible only with
dedicated suppliers. Correspondingly, the quality of our relationship with our suppliers is of ultimate importance.
b. Legal Obligations
• While fulfilling their obligations, suppliers must follow and respect the applicable laws and regulations and guarantee their
compliance with the Labor Law in their conduct. Accordingly,
suppliers are expected to observe the following matters and adhere to them in its working principles.
Forced Labor: Suppliers must not force their employees to work in
any way, shape, or form. This obligation covers forced labor in prison, debt bondage with high interest rates, or other forms of compulsory labor.
Child Labor: Suppliers must not employ child labor. Unless a higher
age limit is not specified in the local laws, children who are under
15 years old and have not completed their compulsory education
(in the content of International Labor Organization Convention 138)
cannot be employed. Employees who are under 18 years old should
not work in risky jobs or in night jobs even if they want to work to
meet their educational needs.
Harassment: The suppliers’ employees must not be exposed to corporal punishment or physical, sexual, psychological, or verbal harassment or abuse.
Bribery: Suppliers must not offer bribes to any Turkcell employee
under any circumstances or for any reason whatsoever.
Compensation: The wages and profits of the supplier’s employees,
including overtime pay, must be equal to or higher than the minimum limit specified in the applicable laws and regulations.
Nondiscrimination: Suppliers must treat all employees based on
their talents and qualifications, without any discrimination of race,
ethnicity, language, religion, sexual choice, gender, and political or
ideological views in all its employment decisions, including but not
limited to recruitment, promotion, compensation, benefits, education, forced dismissal, and completion of work.
Health, Safety and Environment: Suppliers must ensure a healthy
and safe work environment for its employees, to prevent accidents
and injuries, and also ensure healthy and safe residential facilities pursuant to local laws, where applicable. For this purpose, the
suppliers must take systematic actions to reduce any risks that threaten employee safety and to guarantee the health and safety of its
employees pursuant to the related standards and laws. The suppliers must also be able to prove full compliance with all the legal
regulations on environmental protection in all their activities.
c. Our Expectations from Suppliers
Turkcell requires all its suppliers to comply with general legal rules
and with the Turkcell Common Values and Code of Conduct. Turkcell
selects its suppliers based on the principle of trust. Turkcell will take
into consideration those suppliers that have quality management and
information security management certificates, are sensitive to the ecological balance, and conduct social responsibility projects and assess
them accordingly, in addition to other supplier selection criteria.
• Quality and Information Security Management
• Environmental and Ecological Compliance
• Social Responsibility
3.5 Social Responsibility
As Turkey’s Turkcell, we continue to support not only technology, but
also economic, environmental, and social development.
We invest in the future of the next generations in the areas of education, sports, and employment, by developing or supporting sustainable, long-lasting and measurable projects that promote youth
development.
89
Snowdrops
We provide educational grants to 10,000 girls every year with the
Snowdrops project, which has grown from a drop into an avalanche.
The “Snowdrops” project was initiated in 2000 in cooperation with
Society for Supporting Modern Life and provided grants to 5000 girls
who are decisive and determined to study. Turkcell extended the
project in 2007 to increase the number of grants given every year
to 10,000.
The Snowdrops project strives to provide equal educational opportunities to girls who could not continue their education due to the economic disadvantages of their families; and subsequently to develop
them into open-minded individuals with a profession.
Finishing its first decade in 2010, Snowdrops is Turkey’s pioneering
education project and Turkcell’s first comprehensive social responsibility initiative. Snowdrops grew into an avalanche over years with
public support and became one of Turkey’s most important social
responsibility projects, providing educational opportunities to tens
of thousands girls.
A Mentorship Program was initiated in 2004 as a supporting process
for the Snowdrops project, to further contribute to the development
of real-life skill sets for the “Snowdrops” continuing their education
at the university level. Volunteers were chosen from among Turkcell
executives, leading female journalists and columnists in the media
world, and successful businesswomen to assume a “guiding” role;
they then joined the program as informed mentors, following long
and meticulous study and training. The Mentorship Program began
with 46 mentors and grew each year, with 160 mentors in total
mentoring their Snowdrops until now.
The project recently opened up with different levels and gained international recognition. In 2008, the Snowdrops project was filmed
by National Geographic. Prior to the documentary, a 11-person National Geographic team conducted interviews with Snowdrop girls
and their families, in Istanbul, Kars, Erzurum, and Mardin, from
September 2008 to April 2009. As a result, for the first time in Turkey, a social responsibility project was filmed as a documentary on
the National Geographic Channel. A Snowdrops photo exhibition,
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displaying photographs taken during the shoots, toured cities across
Turkey.
In March 2010, the Snowdrops project was selected by the United
Nations as an exemplary project and introduced to the world through a series of activities.
With this project growing from a drop into an avalanche, we now
provide educational grants to 10,000 girls every year. Since 2000,
20,000 girls have received scholarships; 9,634 students graduated
from high school; 3,437 of them entered college; and 976 are college graduates. Until now, the Snowdrops project has garnered 16
national and international awards.
Bridge of Hearts
Initiated in 2008 in partnership with the Ministry of Education, the
“Bridge of Hearts” project enables ten thousands of children from
around Turkey to visit different provinces and to establish new longlasting friendships with other children, while also discovering the
natural and cultural beauties of our country.
Five-day tours are arranged as part of the Bridge of Hearts project,
to support students’ personal and social development, as well as
to increase their awareness of social issues, diversity, and volunteering. Students visit historical and touristic sites, plant trees, and
participate in environmental activities during the first three days of
the tour, according to the plan of the Provincial Directorate of Education. The remaining two days are scheduled by the family hosting
each student.
Having reached 130,000 students in three years, the Bridge of Hearts project continues to grow every year. In 2010, special day activities were included in the project. Students were taken to Anıtkabir
on April 23 and to Samsun on May 19, to experience the enthusiasm
of national holidays. International tours were also included to expand students’ horizons.
Within the Bridge of Hearts project;
• in 3 years, 130,000 students from 81 provinces visited provinces
they had never seen, and experienced new cultures,
• more than 5 million kilometers were covered,
• 3,250 administrators and 6,500 teachers were appointed to accompany the students.
•Bridge of Hearts teams were formed in 81 provinces,
• thousands of students saw for the first time: planes, sea, metro,
and train,
• hundreds of thousands of friendship were established.
Runners to the Future
Developed in cooperation with the General Directorate of Youth and
Sports, the “Runners to the Future” project aims to support the training of athletes aged 12-18 who can achieve success in individual
sports.
Included in the national plan of the United Nations’ project, Alliance of Civilizations, the project selects young athletes based on their
talent, and coaches them in sports, including weightlifting, skiing,
swimming, tennis, athletics, along with cycling of the visuallyimpaired, across Turkey; they are trained to become national athletes who will represent Turkey abroad successfully.
Within this project, Turkcell also sponsors Marsel İlhan, the firstranking tennis player in Turkey and 90th in the world ; as well as
Çağla Büyükakçay, another national tennis player.
Turkcell is the main sponsor of the National Football and Basketball
Teams
From its start as the Official Communication Sponsor in 2002, Turkcell has continued its support for the National Football Team since
2005, as the main sponsor.
Turkcell intends to continue its support to the national team, recognizing the importance of the achievements of the team for enhancing
national morale as well as our nation’s international reputation.
Contribution to employment
At Turkcell, we also prioritize investing in employment. Turkcell
Group employs approximately 11,000 people. We established an
eco-system of 50,000 people, including our dealers and business
partners.
In line with the importance we place on employment, we initiated
an important project in partnership with İŞKUR (Turkish Employment
Agency). In 2010, we provided 1,600 unemployed young people with
comprehensive training opportunities in retailing and call center sectors. More than 1,000 of them were employed in our eco-system. We
will continue this partnership with İŞKUR in 2011 and will provide
training and job opportunities to more than 2,000 people.
We also focus on employing physically challenged individuals. Turkcell Group employs 285 physically challenged individuals, while
Turkcell Global Bilgi has 180 physically challenged employees. A
project developed with the Ministry of Transportation employs 7
physically challenged individuals, who are able to provide call center service from their homes.
With our Turkcell Global Bilgi call center, we employ 7,500 people in
12 locations in total, including nine in Turkey (Istanbul, Izmir, Erzurum, Eskişehir, Diyarbakir, Ankara, and Karaman), two in Ukraine,
and one in Belarus.
Turkcell establishes base stations to provide mobile communication
services which is Turkcell’s area of business. Safety tests are conducted by the manufacturer and Turkcell on the base stations built. Nevertheless, 168 lawsuits were opened between January 1, 2010 and
December 31, 2010, claiming that base stations had adverse effects
on the environment and health, and violated neighborhood laws. A
verdict was reached in 38 of the lawsuits in 2010 claiming violation
of environmental and human health and neighborhood laws. Of these, 14 were decided for and 24 against the Company.
Turkcell also supports the National Basketball Team, encouraging
and inspiring upcoming generations. Starting off as the Official Communication Sponsor in 2002, we became the main sponsor in 2006.
Turkcell was also the main sponsor of the World Basketball Championship 2010, where our national team achieved great success with
a silver medal.
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SECTION 4
BOARD OF DIRECTORS
4.1 Structure and Creation of the Board of Directors and Independent Members
Information on the Board of Directors is provided in the Investor
Relations section of Turkcell’s website (www.turkcell.com.tr).
On our Ordinary General Assembly dated April 29, 2010, the following members were selected as Turkcell Board of Directors for a
period of three years:
Colin J. Williams Chairman (Independent Member)
Nazli Karamehmet WilliamsMember
Mehmet Bulent Ergin
Member
Karin EliassonMember
Tero KivisaariMember
Oleg MalisMember
Alexey KhudyakovMember
All the members of the Board of Directors are non-executives. Colin
J. Williams, as the independent member of the Board of Directors,
fulfills the criteria of the CMB Corporate Governance Principles as
well as the SEC’s independence criteria.
4.2 Qualifications of the Members of the Board of Directors
The qualifications of the members of the Board of Directors are specified in the Corporate Governance Guidelines as adopted by the
Company’s Board of Directors. According to this, every year, the Corporate Governance Committee, together with the Board of Directors,
within the current structure of the Board, reviews the skills and specialties required for its members. Each Board Member is required
to devote time to Board activities, to enhance his/her knowledge of
the global telecommunications industry and related industries and
to annually attend at least 75% of scheduled Board meetings. Each
Board Member is encouraged to limit the number of other public
company boards on which he or she serves. This will ensure that
such other directorships and commitments do not materially interfere with his or her service as an effective and active member of the
Company’s Board. In addition, the Corporate Governance Committee
develops and supervises an orientation program for newly elected
members of the Board of Directors.
92
4.3 Vision and Strategic Objectives of the Company
The vision and strategic targets of Turkcell are on the Company’s
website (www.turkcell.com.tr) under “About Turkcell” and in the
Annual Report.
4.4 Risk Management and Internal Control Mechanisms
Corporate Risk Management Department coordinates Risk Management, Internal Audit, Business Continuity Management, Information
Security Management, and Internal Fraud Management processes. By
developing and applying a risk management methodology, the Company strengthens its focus on corporate risk management practices.
Turkcell Corporate Risk Management Department, in compliance with the “principle of independence” and in line with CMB’s
Communiqué Series: X No.19 directly reports to the Chief Executive
Officer, the Chief Financial Officer, and the Audit Committee formed
by independent members of the Board of Directors.
Internal Control / Internal Audit Activities: Turkcell management is
responsible for ensuring the compliance with the provisions of Article 404 of the Sarbanes Oxley Act, as promulgated by the United
States Securities and Exchange Commission (the “SEC”). Thus, management is responsible for establishing and maintaining effective
internal control structure in Turkcell and for the consolidated group
companies that are in audit scope.
Within this framework Turkcell Corporate Risk Management Department is responsible to provide support for the establishment of internal control system both in Turkcell and consolidated group companies in audit scope and to evaluate and report on the effectiveness
of the internal control system for ensuring the compliance with the
provisions of Article 404 of the Sarbanes Oxley Act. The deficiencies
and corrective actions taken by process owners that are taken or
planned to be taken are reported to Audit Committee and management on a regular basis.
Risk Management is responsible for the following tasks: defining the
risks that affect Turkcell’s performance towards its goals, coordinating risk analysis tasks, sharing results with Corporate Executive
Team and the Risk Management Board, and reporting and following
up on these results.
The motive behind determining risks is not to suspend business activities that create these risks but to decrease the likelihood of the
risks occuring or to decrease their possible impacts. Here, the goal is
to minimize unpleasent surprises, to enable Turkcell to run seamless
operations, and to provide a reasonable level of assurance to the
management for Turkcell to achieve its goals.
Every department in Turkcell defines the risks it faces on a regular
basis and classifies them on the basis of priority. Also, the Company
prepares detailed action plans for critical risks and applies these
plans. These processes are coordinated by Risk Management and
are reported on a regular basis.
With this mechanism, Turkcell Corporate Risk Management Department
ensures the reliability and accuracy of the financial statements of Turkcell
and its consolidated group companies that are in audit scope. In addition, it monitors that Company’s operations are in compliance with relevant regulations and in order to increase the efficiency of the Company’s
operations reviews processes, determines current and potential risks and
coordinates actions either to mitigate or prevent these risks.
Turkcell formulated its business continuity plans in 2000, involving
its technical operations. In 2004, the scope of the business continuity plan has been broadened and positioned as business continuity
management. The business continuity plan covers several subjects,
including natural disasters, terrorist attacks, loss of critical staff or
information, and its effects to our dealers and suppliers.
The Business Continuity Plan aims to mitigate risks against disasters
by means of geographical dispersion. By courtesy of our geographically widespread technical infrastructure, our plans to manage a
disaster from a remote center have been structured. We have the
ability to keep additional capacity on main switchboards or support
them with mobile switchboards.
Base station maintenance teams are positioned on a regional basis
throughout the country. In case of emergency, teams have action
plans to back up each other. In cases when a damaged base station
cannot be operational within a certain time, a mobile base station is
sent to maintain urgent coverage.
In addition, Regulations Strategy Department monitors regulatory
developments in the market as well as the developments in the competitive environment to mitigate potential risks that may be faced in
these areas.
4.5 Authority and Responsibilities of the Members of the Board of
Directors and Executives
The pertinent section of the Company’s Articles of Association is as
follows: “The Board is fully authorized to carry out the affairs of the
Company and management of Company assets and the activities relating to the Company purpose and subject matter other than those
that have to be solely carried out by the General Assembly”.
In addition, within the context of enhancing the Company’s corporate governance practices, the responsibilities and duties of the Board
of Directors are examined in the Corporate Governance Guidelines
adopted by the Board, and published on the Company’s website
(www.turkcell.com.tr) in the Investor Relations section under Corporate Governance.
4.6 Activities of the Board of Directors
The Board of Directors held 11 ordinary meetings in 2010. It also
met off calendar. The primary activities of the Board of Directors are
contained in the Corporate Governance Guidelines adopted by the
Board of Directors. An outline of them is published under “Corporate Governance Principles” on the Company’s website. In addition,
a Corporate Governance Secretariat has been created to coordinate
information flow between the members of the Board. No Board of
Director member has weighted voting rights or the power of veto.
4.7 Prohibition on Carrying out Transactions with the Company and
Prohibition on Competition
Permission contained in articles 334 and 335 of the Turkish Commercial Code pertaining to the prohibition on having dealings with
the Company and on competing with it have been given to the Board
of Director members at the Ordinary General Assembly dated April
29, 2010.
4.8 Code of Ethics
The Turkcell Common Values are defined as common concepts and
values, which Turkcell employees are expected to observe in the-
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Each new Turkcell employee is introduced to these codes in the orientation program and signs a commitment letter stating his/her understanding that they will be considered an integral part of his/her
employment contract. The signature date of the commitment letter
is specified on the letter. Any subsequent revisions in the Turkcell
Common Values and Code of Ethics are published in the Turkcell
intranet. Employees are responsible for following these revisions.
All related adjustments are determined by the Ethics Committee, assigned by the Audit Committee operating within the Turkcell Board
of Directors. The Ethics Committee revises, updates, and improves
the Codes, checks them for inconsistencies and submits the final
version to the Audit Committee. The defined adjustments enter into
force after approval by the Audit Committee.
Each Turkcell employee is responsible for reporting, through existing reporting channels, all cases and rumors which may be contrary
to the codes and regulations specified in the Manual for Turkcell
Common Values and Code of Ethics or which may cause reasonable
doubt or concern that such a contrariness may arise.
While investigating such complaints/reports, the Audit and Ethics
Committees may receive guidance from managers, employees, or
from external sources with expertise on the related issue, provided
that the principle of confidentiality is observed. The Audit and Ethics Committees are free to include the management team, internal audit team, independent auditors, consultants, or experts into
the investigation phase or analysis of the results, provided that new
participants comply with the principle of confidentiality. After the
investigation phase has been completed, the Audit and Ethics Committees independently work to make decisions and settle the issue.
If the complaint/report investigated by the Ethics Committee is a not
critical case, action may be taken upon a decision by the chairman
of the Ethics Committee. For critical cases, the majority of the Ethics
Committee must agree on the decision.
The committee imposes sanctions on the employee(s) involved in the
case, taking into consideration the ramifications and consequences
of the case.
94
Training programs and notifications are provided to employees through various channels during the year to increase their awareness
and acknowledgement of the Common Values and Code of Ethics.
Our Code of Ethics is outlined on the company’s website, in the Investor Relations section under the Corporate Governance link. These
codes of ethics are complementary to other related policies, codes
of conducts, and guides that are published or will be published by
the Company.
4.9 Number, Structure and Independence of the Committees Established on the Board of Directors
Within the Board of Directors, there is an Audit Committee and a
Corporate Governance Committee. Each committee advises and
makes recommendations to the Board of Directors. Each committee also has charters specifying working principles. Both the Audit
Committee’s and the Corporate Governance Committee’s members
consist of the non-executive members of the Board of Directors. Information about the committees formed on the Board of Directors is
published on the Company’s website (www.turkcell.com.tr) in the
Investors Relations section under Corporate Governance.
At the Board of Directors meeting on May 27, 2010, within the context of Turkcell’s Corporate Governance Principles and applicable
regulations, it was decided that Mr. Colin J. Williams and Mr. Alexey
Khudyakov will continue their Audit Committee memberships and
that Mr. Colin J. Williams will continue as Chairman of the Audit
Committee. At the same meeting, it was decided that Mr. Colin J
Williams, Ms. Karin B. Eliasson, Mr. Mehmet Bulent Ergin and Mr.
Oleg A. Malis are appointed as Corporate Governance Committee
members of the Company and that Mr. Colin J. Williams will serve as
Chairman of the Corporate Governance Committee.
4.10 Financial Rights Provided to the Board of Directors
Attendance fees are paid to the members of the Board of Directors.
No loans have been granted to any Members of the Company’s Board of Directors or managers nor have any other guaranties such as
sureties been given.
Turkcell offices
Office Name Address
Tepebaşı Plaza
Asmalı Mescit Mh. Meşrutiyet Caddesi No: 71 Asmalı Mescit Beyoğlu - İstanbul
Turkcell Office
ir work lives, to internalize and to integrate into their conduct. All
Turkcell employees and management are responsible for compliance with these codes and regulations.
Maltepe Plaza
Yeni Mh. Pamukkale Sk. No: 3, 34880 Soğanlık Mevkii - Kartal - İstanbul
Davutpaşa PlazaSerçe Kale Sk. No: 2, Topkapı - İstanbul
Kartal Plaza Topselvi Dipçik Sk. No: 31,
Kartal - İstanbul
Şişli Plaza
19 Mayıs Cad. Dr. İsmet Öztürk Sokak Şişli Plaza
Ofis blokları E Blok B2 Şişli-İstanbul
Adana Plaza
Turhan Cemal Berikel Bulv. No: 212,
Seyhan - Adana
Ankara PlazaEskişehir Yolu 9. Km No: 264,
Söğütözü - Ankara
Antalya PlazaKızıltoprak Mah. 915 Sk. No: 3, Antalya
Bursa PlazaOrganize San. Bölgesi Kırmızı Cad. No: 4,
Nilüfer - Bursa
Diyarbakır PlazaUrfa Yolu 6. Km Diyarbakır
İzmir Plaza
Ankara Asfaltı No: 64, Bornova - İzmir
Samsun PlazaMimar Sinan Mah. 60. Sokak No: 18, PK 55200
Atakum - Samsun
Erzurum Plaza
1. Organize sanayi bölgesi 1. cadde 4. sokak
NO:10 Aziziye-Erzurum
Trabzon PlazaMısırlı Mahallesi Hasan Turfanda Yolu No: 1,
Çukurçayır – Trabzon
95
CONTENTS
TURKCELL İLETİŞİM HİZMETLERİ A.Ş.
AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENT
AND INDEPENDENT AUDIT REPORT
96
PAGE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
101
CONSOLIDATED INCOME STATEMENTS
102
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
103
CONSOLIDATED STATEMENTS OF CHANGES AND EQUITY
104
CONSOLIDATED STATEMENT OF CASH FLOWS
105
Notes To The Consolidated Financial Statements
106-203
NOTE 1. Reporting entity
NOTE 2. Basis of preparation
NOTE 3. Significant accounting policies
NOTE 4. Determination of fair values
NOTE 5. Financial risk management
NOTE 6. Operating segments
NOTE 7. Revenue
NOTE 8. Other Expenses
NOTE 9. Personnel expenses
NOTE 10. Finance income and costs NOTE 11. Income tax expense
NOTE 12. Property, plant and equipment NOTE 13. Intangible assets
NOTE 14. Equity accounted investees
NOTE 15. Other investments
NOTE 16. Other non-current assets
NOTE 17. Deferred tax assets and liabilities
NOTE 18. Trade receivables and accrued income
NOTE 19. Other current assets
NOTE 20. Cash and cash equivalents
NOTE 21. Capital and reserves
NOTE 22. Earnings per share
NOTE 23. Other non-current liabilities
NOTE 24. Loans and borrowings
NOTE 25. Employee benefits
NOTE 26. Deferred income
NOTE 27. Provisions NOTE 28. Trade and other payables
NOTE 29. Financial instruments NOTE 30. Operating leases
NOTE 31. Guarantees and purchase obligations NOTE 32. Commitments and Contingencies NOTE 33. Related parties
NOTE 34. Group entities
NOTE 35. Subsequent events
106
107
111
130
132
134
139
139
140
140
141
143
145
150
151
152
153
155
155
156
156
158
159
159
162
162
162
164
165
173
173
174
198
203
97
DRT Bağımsız Denetim ve
DRT Bağımsız Denetim ve
Serbest Muhasebeci
Serbest Muhasebeci
Mali Müşavirlik A.Ş.
Mali Müşavirlik A.Ş.
Sun Plaza, Bilim Sok. No:5
Sun Plaza, Bilim Sok. No:5
Maslak, Şişli 34398, İstanbul,
Maslak, Şişli 34398, İstanbul,
Türkiye
Türkiye
Tel : (212) 336 60 00
Tel : (212) 336 60 00
Fax : (212) 336 60 10
Fax : (212) 336 60 10
web : www.deloitte.com.tr
web : www.deloitte.com.tr
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Turkcell İletişim Hizmetleri A.Ş.
To the Board of Directors and Shareholders of
We have audited the accompanying consolidated statement of financial position of Turkcell İletişim Hizmetleri A.Ş (“the Company”) and its
subsidiaries (together “the Group”) as of December 31, 2010 and the related consolidated statement of income, consolidated statement of
comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year ended December
31, 2010. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Fintur Holdings B.V. (“Fintur”);
a 41.45 percent owned equity accounted investee of the Group. The Group’s investment in Fintur as of December 31, 2010 was $304 million
and its share in profit of Fintur was $153 million, for the year 2010. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included for Fintur, is based solely on the report of the other auditors.
We have audited the internal control over financial reporting of Turkcell İletişim Hizmetleri A.Ş. and its subsidiaries (together “the Group”) as of
December 31, 2010 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. The Group’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report. Our responsibility
is to express an opinion on the Group’s internal control over financial reporting based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material
respects, the financial position of the Group as of December 31, 2010 and the results of their operations and their cash flows for the year
ended December 31, 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as of December 31, 2010 based on the criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 18, 2011 expressed an unqualified opinion on the effectiveness of Group’s internal control over financial reporting.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and
principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Istanbul, Turkey
April 18, 2011
Member of DELOITTE TOUCHE TOHMATSU LIMITED
98
99
Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries
Consolidated Statement Of Financial Position As at 31 December 2010
(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation
of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, based on our audit, the Group maintained, in all material respects, effective internal control over financial reporting as of December
31, 2010, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Group and our report dated April 18, 2011 expressed an unqualified opinion
on those financial statements based on our audit and the report of the other auditors.
Istanbul, Turkey
April 18, 2011
Member of DELOITTE TOUCHE TOHMATSU LIMITED
Assets
Property, plant and equipment
Intangible assets
GSM and other telecommunication operating licenses
Computer software
Other intangible assets
Investments in equity accounted investees
Other investments
Due from related parties
Other non-current assets
Trade receivables
Deferred tax assets
Total non-current assets
Inventories
Other investments
Due from related parties
Trade receivables and accrued income
Other current assets
Cash and cash equivalents
Total current assets
Note
2010
2009
12
13
3,068,021
1,709,311
955,703
547,607
206,001
399,622
33,849
1,044
107,277
35,024
2,876
5,357,024
2,652,222
1,897,981
1,058,098
595,218
244,665
383,490
34,755
21,039
75,120
2,058
5,066,665
24,386
8,201
88,897
816,151
197,740
3,302,163
4,437,538
9,794,562
28,205
62,398
108,843
783,752
175,417
3,095,486
4,254,101
9,320,766
14
15
33
16
18
17
15
33
18
19
20
Total assets
Equity
Share capital
Share premium
Capital contributions
Reserves
Retained earnings
Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS
21
21
21
21
21
1,636,204
434
22,772
(660,121)
5,258,327
6,257,616
1,636,204
434
22,772
(512,095)
4,712,254
5,859,569
Non-controlling interests
21
(24,019)
36,632
6,233,597
5,896,201
24
25
27
23
17
1,407,316
29,742
57,055
160,832
93,105
1,748,050
821,179
27,776
5,676
154,991
118,432
1,128,054
20
24
11
28
33
26
27
5,896
430,205
96,080
951,976
10,760
164,186
153,812
1,812,915
5,244
690,780
93,260
1,038,762
14,780
248,518
205,167
2,296,511
Total liabilities
3,560,965
Total equity and liabilities
9,794,562
3,424,565
9,320,766
Total equity
Liabilities
Loans and borrowings
Employee benefits
Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Bank overdraft
Loans and borrowings
Income taxes payable
Trade and other payables
Due to related parties
Deferred income
Provisions
Total current liabilities
100
101
Consolidated Statement Of Income For the year ended 31 December 2010
Consolidated Statement Of Comprehensive Income For the year ended 31 December 2010
Revenue
Direct costs of revenue
Gross profit
Other income
Selling and marketing expenses
Administrative expenses
Other expenses
Results from operating activities
Note
2010
2009
2008
7
5,982,093
(3,349,035)
2,633,058
5,789,972
(3,097,097)
2,692,875
6,970,408
(3,409,013)
3,561,395
14,668
(1,085,750)
(347,290)
(64,233)
1,150,453
978
(1,085,081)
(273,139)
(111,220)
1,224,413
14,136
(1,351,692)
(309,349)
(17,990)
1,896,500
277,130
(102,662)
174,468
329,550
(187,514)
142,036
442,099
(136,769)
305,330
Total comprehensive income for the year
Owners of Turkcell Iletisim Hizmetleri AS
Non-controlling interest
Total comprehensive income for the year
8
Finance income
Finance costs
Net finance income
10
10
Share of profit of equity accounted investees
Profit before income tax
14
122,839
1,447,760
78,448
1,444,897
102,990
2,304,820
Income tax expense
Profit for the year
11
(320,799)
1,126,961
(340,093)
1,104,804
(549,758)
1,755,062
1,170,176
(43,215)
1,126,961
1,093,992
10,812
1,104,804
1,836,824
(81,762)
1,755,062
0.53
0.50
0.83
Profit attributable to:
Owners of Turkcell Iletisim Hizmetleri AS
Non-controlling interest
Profit for the year
Basic and diluted earnings per share (in full USD)
22
2010
2009
2008
Profit for the year
1,126,961
1,104,804
1,755,062
Other comprehensive income/(expense):
Foreign currency translation differences
Net change in fair value of available-for-sale securities
Income tax on other comprehensive (expense)/income
Other comprehensive income/(expense) for the year, net of income tax
(184,352)
(1,318)
(754)
(186,424)
53,046
1,197
(1,091)
53,152
(1,458,709)
(6,385)
1,368
(1,463,726)
940,537
1,157,956
291,336
984,187
(43,650)
940,537
1,146,681
11,275
1,157,956
363,504
(72,168)
291,336
Total comprehensive income/(expense)
attributable to:
102
103
6,233,597
(12,689)
(12,689)
6,257,616
(12,689)
(263,984)
-
-
534,943
-
22,772
-
Balance at 31 December 2010
1,636,204
434
-
(931,080)
5,258,327
(24,019)
89
-
Change in non-controlling interest
Change in reserve for non-controlling interest put
option
-
-
-
-
-
89
-
(590,541)
(573,451)
(573,451)
Dividends paid
-
-
-
-
-
(17,090)
940,537
(50,652)
-
984,187
1,170,176
-
(1,318)
-
50,652
-
-
-
-
-
-
Increase in legal reserves
-
(461)
(184,210)
(43,650)
(186,424)
(1,318)
-
(435)
(1,318)
(185,989)
-
(184,210)
-
(461)
-
-
-
-
Total other comprehensive income/(expense)
-
-
(1,318)
(184,671)
(184,210)
(461)
-
Foreign currency translation differences, net of tax
Net change in fair value of available-for-sale securities,
net of tax
-
-
(1,318)
(185,106)
1,170,176
1,170,176
Other comprehensive income/(expense)
Profit for the year
-
484,291
22,772
Total comprehensive income
Balance at 1 January 2010
1,636,204
434
1,318
-
(250,834)
-
-
(435)
1,126,961
(43,215)
5,896,201
5,859,569
4,712,254
(746,870)
36,632
4,570
5,896,201
5,859,569
4,712,254
484,291
22,772
1,636,204
434
1,318
(250,834)
(746,870)
36,632
36,088
4,570
-
36,088
-
36,088
-
-
-
-
4,570
Capital contribution granted
-
-
-
-
-
-
(1,676)
-
option
-
-
-
-
-
(1,676)
-
(744,380)
(713,297)
(713,297)
Dividends paid
-
-
-
-
-
(31,083)
1,157,956
(105,512)
-
1,146,681
1,093,992
-
-
105,512
-
-
-
-
-
1,197
-
51,492
11,275
53,152
1,197
-
-
463
1,197
52,689
-
51,492
-
-
-
1,197
-
-
-
-
-
-
1,197
51,955
51,492
-
net of tax
-
-
-
-
51,492
463
1,104,804
1,093,992
1,093,992
Profit for the year
-
378,779
18,202
1,636,204
434
-
121
(286,922)
-
-
10,812
5,443,643
5,385,527
4,437,071
(798,362)
58,116
18,202
5,443,643
5,385,527
4,437,071
378,779
18,202
1,636,204
434
121
(286,922)
(798,362)
58,116
(286,922)
18,202
-
(286,922)
-
(286,922)
-
-
-
18,202
Capital contribution granted
-
-
-
-
-
-
46,795
-
option
-
-
-
-
-
46,795
-
(556,973)
(502,334)
(502,334)
Dividends paid
-
-
-
-
-
(54,639)
291,336
(121,945)
-
363,504
1,836,824
-
(5,360)
-
121,945
-
-
-
-
-
-
(1,467,960)
(72,168)
(5,360)
-
-
9,594
(5,360)
(1,473,320)
-
(1,467,960)
-
-
-
-
-
-
-
(5,360)
9,594
(1,467,960)
(1,467,960)
-
net of tax
-
-
(5,360)
1,755,062
(81,762)
1,836,824
1,836,824
Profit for the year
-
-
-
-
-
138,128
5,793,077
3,224,526
669,598
256,834
1,636,204
434
5,481
Total
NonControlling
Interest
Retained
Earnings
Translation
Reserve
Reserve for NonControlling Interest
Put Option
Fair Value
Reserve
Legal
Reserves
Share
Premium
Capital
Contribution
Share
Capital
Attributable to equity holders of the Company
104
(1,463,726)
(1,458,366)
5,931,205
Consolidated Statement Of Cash Flows For the year ended 31 December 2010
Total
Equity
Consolidated Statement Of Changes In Equity For the year ended 31 December 2010
Note
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation and impairment of fixed assets
Amortization of intangible assets
Net finance (income)
Income tax expense
(Gain)/loss on sale of property, plant and equipment
Gain on sale of subsidiary
Unrealized foreign exchange gain and loss on operating assets
Impairment losses on goodwill
Provision for impairment of trade receivables
Deferred income
Change in trade receivables
Change in due from related parties
Change in inventories
Change in other current assets
Change in other non-current assets
Change in due to related parties
Change in trade and other payables
Change in other current liabilities
Change in other non-current liabilities
Change in employee benefits
Change in provisions
Interest paid
Income tax paid
Dividends received
Net cash generated by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from currency option contracts
Payment of currency option contracts premium
Acquisition of available-for-sale securities
Proceeds from sale of available-for-sale securities
Acquisition of subsidiary, net of cash acquired
Interest received
Net cash used in investing activities
12
13
10
11
18
26
18
33
19
16
33
23
25
27
12
13
Cash flows from financing activities
Proceeds from issuance of loans and borrowings
Loan transaction costs
Repayment of borrowings
Proceeds from capital contribution
Dividends paid
Net cash used in financing activities
Net decrease/(increase) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effects of foreign exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at 31 December
20
2010
2009
2008
1,126,961
1,104,804
1,755,062
515,515
241,839
(237,628)
320,799
(154,457)
101
(5,847)
23,499
126,257
(77,854)
1,879,185
384,257
206,421
(254,582)
340,093
(115,240)
25,150
88,572
61,835
75,379
(2,966)
1,913,723
433,942
245,985
(393,671)
549,758
(151,629)
(6,931)
(4,727)
(228,033)
68,550
(3,293)
2,265,013
(204,403)
28,752
3,083
(29,389)
(29,011)
(3,775)
32,541
(96,118)
(14,051)
2,690
(45,102)
1,524,402
(269,360)
(20,312)
(8,662)
(37,099)
(21,272)
(6,290)
180,469
(115,306)
(82,893)
942
123,644
1,657,584
(214,220)
2,124
(267)
(27,208)
(10,704)
(6,541)
66,690
206,537
52,452
5,773
29,704
2,369,353
(38,829)
(322,754)
99,759
1,262,578
(29,497)
(395,024)
83,543
1,316,606
(25,050)
(687,292)
89,235
1,746,246
(912,097)
(132,827)
8,506
12,147
(4,988)
(16,762)
70,528
270,602
(704,891)
(1,044,165)
(723,507)
4,471
10,549
(1,150)
(83,951)
32,015
320,697
(1,485,041)
(603,568)
(193,219)
16,693
14,655
(4,970)
(47,549)
78,542
(309,967)
354,211
(695,172)
1,071,777
(12,100)
(772,892)
89
(590,541)
(303,667)
1,692,866
(14,357)
(944,133)
4,570
(744,380)
(5,434)
601,000
(487,999)
72,199
18,202
(556,973)
(353,571)
254,020
(173,869)
697,503
3,090,242
(47,995)
3,255,420
8,691
3,093,175
(535,258)
3,296,267
3,090,242
3,255,420
105
Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010
1. Reporting entity
Turkcell Iletisim Hizmetleri Anonim Sirketi (the “Company”) was incorporated in Turkey on 5 October 1993 and commenced its operations in
1994. The address of the Company’s registered office is Turkcell Plaza, Mesrutiyet Caddesi No: 71, 34430 Tepebasi/Istanbul. It is engaged in
establishing and operating a Global System for Mobile Communications (“GSM”) network in Turkey and regional states.
2. Basis of preparation
In April 1998, the Company signed a license agreement (the “2G License”) with the Ministry of Transportation and Communications of Turkey
(the “Turkish Ministry”), under which it was granted a 25 year GSM license in exchange for a license fee of $500,000. The License permits the
Company to operate as a stand-alone GSM operator and releases it from some of the operating constraints in the Revenue Sharing Agreement,
which was in effect prior to the 2G License. Under the 2G License, the Company collects all of the revenue generated from the operations of
its GSM network and pays the Undersecretariat of Treasury (the “Turkish Treasury”) a treasury share equal to 15% of its gross revenue from
Turkish GSM operations. The Company continues to build and operate its GSM network and is authorized to, among other things, set its own
tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscribers, collect payments and deal directly with subscribers. Following the 3G tender held by the Information Technologies and Communications
Authority (“ICTA”) regarding the authorization for providing IMT-2000/UMTS services and infrastructure, the Company has been granted
the A-Type license (the “3G License”) providing the widest frequency band, at a consideration of EUR 358,000 (excluding Value Added Tax
(“VAT”)). Payment of the 3G license was made in cash, following the necessary approvals, on 30 April 2009.
On 25 June 2005, the Turkish Government declared that GSM operators are required to pay 10% of their existing monthly treasury share to
the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting from 30 June 2005, the
Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund.
In July 2000, the Company completed an initial public offering with the listing of its ordinary shares on the Istanbul Stock Exchange and American Depositary Shares, or ADSs, on the New York Stock Exchange.
As at 31 December 2010, two significant founding shareholders, Sonera Holding BV and Cukurova Group, directly and indirectly, own approximately 37.1% and 13.8%, respectively of the Company’s share capital and are ultimate counterparties to a number of transactions that are
discussed in the related parties footnote. On the basis of publicly available information, Alfa Group, which previously held, indirectly through
Cukurova Telecom Holdings Limited and Turkcell Holding AS, 13.2% of the Company’s shares, has reduced its stake to 4.99% following
litigation with Telenor ASA (“Telenor Group”). On the basis of publicly available information, it is understood that Alfa Group sold 62.2% of
its holdings in Alfa Telecom Turkey Limited (“ATTL”) to Visor Group affiliate Nadash International Holdings Inc. (“Nadash”) and Alexander
Mamut’s Henri Services Limited (“HSL”) and in July 2010, redeemed these shares.
The consolidated financial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in one associate and one joint venture. Subsidiaries of the Company,
their locations and their business are given in Note 34. The Company’s and each of its subsidiaries’, associate’s and joint venture’s financial
statements are prepared as at and for the year ended 31 December 2010.
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued
by the International Accounting Standards Board (“IASB”).
The Company selected the presentation form of “function of expense” for the statement of income in accordance with IAS 1 “Presentation of
Financial Statements”.
The Company reports cash flows from operating activities by using the indirect method in accordance with IAS 7 “Statement of Cash Flows”,
whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash
receipts or payments, and items of income or expense associated with investing or financing cash flows.
The consolidated financial statements as of and for the year ended 31 December 2010 were authorized for issue on 23 February 2011 by the
Board of Directors and updated by the management for any subsequent events up until 18 April 2011.
Authority for restatement and approval of consolidated financial statements belongs to the same Board. Consolidated financial statements are
approved by the Board of Directors by the recommendation of Audit Committee of the Company.
(b) Basis of measurement
The accompanying consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpose of fair presentation in accordance with IFRSs as issued by the IASB. They are prepared on the historical cost basis adjusted for the effects
of inflation during the hyperinflationary period lasted by 31 December 2005, except that the following assets and liabilities are stated at their
fair value: put option liability, derivative financial instruments and financial instruments classified as available-for-sale. The methods used to
measure fair value are further discussed in Note 4.
(c) Functional and presentation currency
The consolidated financial statements are presented in US Dollars (“USD” or “$”), rounded to the nearest thousand. Moreover, all financial
information expressed in Turkish Lira (“TL”), Euro (“EUR”), Ukranian Hryvnia (“HRV”) and Swedish Krona (“SEK”) has been rounded to the
nearest thousand. The functional currency of the Company and its consolidated subsidiaries located in Turkey and Turkish Republic of Northern Cyprus is TL. The functional currency of Euroasia Telecommunications Holding BV (“Euroasia”) and Financell BV (“Financell”) is USD.
The functional currency of East Asian Consortium BV (“Eastasia”), Beltur BV, Surtur BV and Turkcell Europe is EUR. The functional currency of
LLC Astelit (“Astelit”), LLC Global Bilgi (“Global LLC”) and UkrTower LLC (“UkrTower”) is HRV. The functional currency of Belarusian Telecommunications Network (“Belarusian Telecom”) and FLLC Global Bilgi (“Global FLLC”) is Belarusian Roubles (“BYR”). The functional currency of
Azerinteltek QSC (“AzerInteltek”) is Azerbaijan Manat.
(d) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimates are revised and in any future periods affected.
106
107
2. Basis of preparation (continued)
(d) Use of estimates and judgments (continued)
Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are described in Notes 4 and 32 and detailed analysis with
respect to accounting estimates and critical judgments of allowance for doubtful receivables, useful lives or expected patterns of consumption
of the future economic benefits embodied in depreciable assets, commission fees, revenue recognition and income taxes are provided below:
Key sources of estimation uncertainty
In Note 29, detailed analysis is provided for the foreign exchange exposure of the Group and risks in relation to foreign exchange movements.
Critical accounting judgments in applying the Group’s accounting policies
Certain critical accounting judgments in applying the Group’s accounting policies are described below:
Allowance for doubtful receivables
During the current year, the Group has changed its accounting estimates regarding the determination of allowance for doubtful receivables.
Formerly, the allowance for doubtful receivables was based on management’s evaluation of the volume of the receivables outstanding, historical collection trends and general economic conditions. With the new accounting estimate, the Group maintains an allowance for doubtful
receivables for estimated losses resulting from the inability of the Group’s subscribers and customers to make required payments. The Group
bases the allowance on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection
trends and general economic conditions. The allowance is periodically reviewed. The allowance charged to expenses is determined in respect
of receivable balances, calculated as a specified percentage of the outstanding balance in each aging group, with the percentage of the allowance increasing as the aging of the receivable becomes longer.
This change is accounted as a change in accounting estimates in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates
and Errors”. Based on the evaluation performed, the change in the estimates regarding the determination of allowance for doubtful receivables caused the following impact on bad debt provision expense:
Bad debt expense for the year ended 31 December 2010
Previous
accounting
estimate
Current
accounting
estimate
Impact
127,921
126,257
1,664
Due to the impracticability, the Group has not disclosed the effect of the change for the future periods.
Useful lives of assets
The economic useful lives of the Group’s assets are determined by management at the time the asset is acquired and regularly reviewed for
appropriateness. The Group defines useful life of its assets in terms of the assets’ expected utility to the Group. This judgment is based on the
experience of the Group with similar assets. In determining the useful life of an asset, the Group also follows technical and/or commercial
obsolescence arising on changes or improvements from a change in the market. The useful lives of the licenses are based on the duration of
the license agreements.
108
Critical accounting judgments in applying the Group’s accounting policies (continued)
Useful lives of assets (continued)
In accordance with IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”, the residual value and the useful life of an asset
shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for
as a change in an accounting estimate in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. As part
of yearly review of useful lives of assets, the Group made necessary evaluation by considering current technologic and economic conditions
and recent business plans. Based on the evaluation performed, changes in the useful lives caused the following prospective impacts on depreciation and amortization charges;
Depreciation and amortization charge for the year ended 31
December 2010
Previous
accounting
estimate
Current
accounting
estimate
Impact
765,280
757,354
7,926
Due to the impracticability, the Group has not disclosed the effect of the change for the future periods.
Commission fees
Commission fees relate to services performed in relation to betting games where the Group acts as an agent in the transaction rather than as a
principal. In April 2009, the IASB issued amendments to the illustrative guidance in the appendix to IAS 18 “Revenue” in respect of identifying
an agent versus a principal in a revenue-generating transaction. Based on this guidance; management considered the following factors in
distinguishing between an agent and a principal:
• The Group does not take the responsibility for fulfilment of the games.
• The Group does not collect the proceeds from the final customer and it does not bear the credit risk.
• The Group earns a pre-determined percentage of the total turnover.
Revenue recognition
In arrangements which include multiple elements, the Group considers the elements to be separate units of accounting in the arrangement.
Total arrangement consideration relating to the bundled contracts is allocated among the different units according the following criteria:
• the component has standalone value to the customer and
• the fair value of the component can be measured reliably. The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. If a delivered
element of a transaction is not a separately identifiable component, then it is accounted for as an integrated part of the remaining components
of the transaction.
109
Critical accounting judgments in applying the Group’s accounting policies (continued)
Comparative information and revision of prior period financial statements (continued)
Income taxes
The calculation of income taxes involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot be finally
determined until resolution has been reached with the relevant tax authority or, as appropriate, through formal legal process.
The Company has for 2010 revised the manner in which it accounts for the impact of changes in foreign exchange rates in its statement of
cash flows and has revised its presentation of prior periods, resulting in a change in the allocation of the impact of foreign exchange rate
changes among “Operating activities”, “Effects of foreign exchange on statement of financial position items” and “Effect of foreign exchange
rate changes on cash” in the statement of cash flows. The change relates to the impact of re-translation of the underlying functional currency
cash flows into the presentation currency, the US Dollar. The Company believes that changes to prior periods are immaterial. The change
in the statement of cash flows will not impact the Company’s previously reported statement of income, statement of comprehensive income,
statement of financial positions or “Cash and cash equivalents” at the end of any period. The effect of the change on the statement of cash
flows is as follows:
As part of the process of preparing the consolidated financial statements, the Group is required to estimate the income taxes in each of the
jurisdictions and countries in which they operate. This process involves estimating the actual current tax exposure together with assessing
temporary differences resulting from differing treatment of items, such as deferred revenue and reserves for tax and accounting purposes.
The Group management assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent
the recovery is not considered probable the deferred asset is adjusted accordingly.
The recognition of deferred tax assets is based upon whether it is probable that future taxable profits will be available, against which the
temporary differences can be utilized. Recognition, therefore, involves judgment regarding the future financial performance of the particular
legal entity in which the deferred tax asset has been recognized.
Changes in accounting policies
Changes to the accounting policies are applied retrospectively and the prior period’s financial statements are restated accordingly. The Group
did not make any major changes to accounting policies during the current year.
Changes in accounting estimates
If the application of changes in the accounting estimates affects the financial results of a specific period, the changes in the accounting estimates are applied in that specific period, if they affect the financial results of current and following periods; the accounting estimate is applied
prospectively in the period in which such change is made. A change in the measurement basis applied is a change in an accounting policy, and
is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting
estimate, the change is treated as a change in an accounting estimate.
The Group did not have any major changes in the accounting estimates during the current year except for the allowance for doubtful receivables and the useful lives of property, plant and equipment and intangible assets.
Comparative information and revision of prior period financial statements
The consolidated financial statements of the Group have been prepared with the prior periods on a comparable basis in order to give consistent information about the financial position and performance. If the presentation or classification of the financial statements is changed, in
order to maintain consistency, the financial statements of the prior periods are also reclassified in line with the related changes.
For the year ended 31 December 2009
As previously reported
Revisions
Net cash from operating activities
Effects of foreign exchange on statement of financial position items
Effects of foreign exchange rate changes on cash
1,294,935
30,938
(576)
3,090,242
21,671
(30,938)
9,267
-
For the year ended 31 December 2008
As previously reported
Revisions
Net cash from operating activities
Effects of foreign exchange on statement of financial position items
Effects of foreign exchange rate changes on cash
1,674,385
(418,945)
(44,452)
3,255,420
71,861
418,945
(490,806)
-
As Revised
1,316,606
8,691
3,090,242
As Revised
1,746,246
(535,258)
3,255,420
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and
have been applied consistently by the Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable or convertible
are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases. The accounting policies of subsidiaries are changed as necessary to align them with the policies
adopted by the Group.
(ii) Acquisition from entities under common control
Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are
excluded from the scope of IFRS 3 “Business Combinations”. In business combinations under common control, assets and liabilities subject to
business combination are accounted for at their carrying value in consolidated financial statements. Statements of income are consolidated
starting from the beginning of the financial year in which the business combination is realized. Financial statements of previous financial
years are restated in the same manner in order to maintain consistency and comparability. Any positive or negative goodwill arising from
110
111
such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment
in subsidiary and the share acquired in subsidiary’s equity accounted for as equity transactions (i.e. transactions with owners in their capacity
as owners).
3. Significant accounting policies (continued)
(iii) Associates and jointly controlled entities (equity accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating decisions. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Joint ventures are
those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for
strategic financial and operating decisions.
(ii) oreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD
from the functional currency of the foreign operation at foreign exchange rates ruling at the reporting date. The income and expenses of
foreign operations are translated to USD at monthly average exchange rates.
Associates and jointly controlled entities (equity accounted investees) are accounted for using the equity method and are initially recognized at
cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments
to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that
significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying
amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the
extent that the Group has an obligation or has made payments on behalf of the investee. The Group’s equity accounted investees as at 31
December 2010 are Fintur Holdings BV (“Fintur”) and A-Tel Pazarlama ve Servis Hizmetleri AS (“A-Tel”).
(iv) Transactions eliminated on consolidation
Intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against
the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but
only to the extent that there is no evidence of impairment.
(v) Non-controlling interests
Where a put option is granted by the Group to the non-controlling interests shareholders in existing subsidiaries that provides for settlement
in cash or in another financial asset, the Group recognizes a liability for the present value of the estimated exercise price of the option. The
interests of the non-controlling shareholders that hold such put options are derecognized when the financial liability is recognized. The corresponding interests attributable to the holder of the puttable non-controlling interests are presented as attributable to the equity holders of
the parent and not as attributable to those non-controlling interests’ shareholders. The difference between the put option liability recognized
and the amount of non-controlling interests’ shareholders derecognized is recorded under equity. Subsequent changes in the fair value of the
put options granted to the non-controlling shareholders in existing subsidiaries are also recognized in equity, except the imputed interest on
the liability is recognized in the consolidated statement of income.
(b) Foreign currency (continued)
Foreign currency differences arising on retranslation are recognized directly in the foreign currency translation reserve, as a separate component of equity. Since 1 January 2005, the Group’s date of transition to IFRSs, such differences have been recognized in the foreign currency
translation reserve. When a foreign operation is disposed of, partially or fully, the relevant amount in the foreign currency translation reserve
is transferred to the statement of income.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized
directly in equity in the foreign currency translation reserve.
(iii) Translation from functional to presentation currency
Items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the
entities operate, normally under their local currencies.
The consolidated financial statements are presented in USD, which is the presentation currency of the Group. The Group uses USD as the
presentation currency for the convenience of investor and analyst community.
Assets and liabilities for each statement of financial position presented (including comparatives) are translated to USD at exchange rates at
the statement of financial position date. Income and expenses for each statement of income (including comparatives) are translated to USD at
monthly average exchange rates.
Foreign currency differences arising on retranslation are recognized directly in a separate component of equity.
(iv) Net investment in foreign operations
Foreign currency differences arising from the translation of the net investment in foreign operations are recognized in the foreign currency
translation reserve. They are transferred to the statement of income upon disposal of the foreign operations.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of
the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional
currency at the exchange rate at that date. Foreign currency differences arising on translation of foreign currency transactions are recognized
in the statement of income. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional
currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign
currency translated at the exchange rate at the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized
in the statement of income, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized
directly in equity.
112
113
(c) Financial instruments
(c) Financial instruments (continued)
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
(i) Non-derivative financial instruments (continued)
Non-derivative financial instruments which are not recognized or designated as financial instruments at fair value through profit or loss are
recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial
instruments are measured as described below:
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group
has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Accounting for finance income and costs is discussed in Note 3(m).
• Financial assets at fair value through profit or loss
An instrument is classified as financial asset at fair value through profit or loss if it is held for trading or is designated as such upon initial
recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes
purchase and sale decisions based on their fair value in accordance with the Group’s risk management or investment strategy. Upon initial
recognition, attributable transaction costs are recognized in the statement of income when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in the statement of income.
• Held-to-maturity financial assets
If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity
financial assets are recognized initially at fair value plus any directly attributable transaction costs. Held-to-maturity financial assets are heldto-maturity investments that are measured at amortized cost using the effective interest method, less any impairment losses.
Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in
the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment securities as
held-to-maturity for the current and the following two financial years.
• Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in
any of the previous categories.
The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to
initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(h)(i)), and foreign exchange
gains and losses on available-for-sale monetary items (see note 3(b)(i)), are recognized directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to the statement of income.
• Estimated exercise price of put options
Under the terms of certain agreements, the Group is committed to acquire the interests owned by non-controlling shareholders in consolidated subsidiaries, if these non-controlling interests wish to sell their share of interests.
As the Group has unconditional obligations to fulfil its liabilities under these agreements, IAS 32 “Financial instruments: Disclosure and Presentation”, requires the value of such put option to be presented as a financial liability on the statement of financial position for the present
value of the estimated option redemption amount. The Group accounts for such transactions under the anticipated acquisition method and
the interests of non-controlling shareholders that hold such put option are derecognized when the financial liability is recognized. The Group
accounts for the difference between the amount recognized for the exercise price of the put option and the carrying amount of non-controlling
interests in equity.
• Other
Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.
(ii) Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency risk exposures arising from operational, financing and investing
activities. In accordance with its treasury policy, the Group engages in forward and option contracts. However, these derivatives do not qualify
for hedge accounting and are accounted for as trading derivatives.
Embedded derivatives are separated from the host contract and accounted for separately if a) the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, b) a separate instrument with the same terms as the embedded derivative would
meet the definition of a derivative, and c) the combined instrument is not measured at fair value through profit or loss.
Derivatives are recognized initially at fair value; attributable transaction costs are recognized in the statement of income when incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognized in the statement of income.
114
115
(d) Property, plant and equipment
(d) Property, plant and equipment (continued)
(i) Recognition and measurement
Items of property, plant and equipment are stated at cost adjusted for the effects of inflation during the hyperinflationary period lasted by 31
December 2005 less accumulated depreciation (see below) and accumulated impairment losses (see note 3(h)(ii)).
(iii) Depreciation (continued)
Depreciation methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.
(e) Intangible assets
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of
materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs
of dismantling and removing the items and restoring the site on which they are located, if any. Borrowing costs related to the acquisition or
constructions of qualifying assets are capitalized as part of the cost of that asset.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant
and equipment.
(i) GSM and other telecommunication operating licenses
GSM and other telecommunication operating licenses that are acquired by the Group are measured at cost adjusted for the effects of inflation
during the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below).
Amortization
Amortization is recognized in the statement of income on a straight line basis primarily by reference to the unexpired license period. The
useful lives for the GSM and other telecommunication operating licenses are as follows:
GSM and other telecommunications licenses
Gains/losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the
carrying amount of property, plant and equipment and are recognized net within other income or other expenses in the statement of income.
Changes in the obligation to dismantle, remove assets on sites and to restore sites on which they are located, other than changes deriving
from the passing of time, are added or deducted from the cost of the assets in the period in which they occur. The amount deducted from the
cost of the asset shall not exceed the balance of the carrying amount on the date of change, and any excess balance is recognized immediately
in the statement of income.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that
the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of
the replaced item is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of
income as incurred.
(iii) Depreciation
Depreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in
the asset. Leased assets are depreciated over the shorter of the lease term or their useful lives unless it is reasonably certain that the Group
will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Buildings
Mobile network infrastructure
Fixed network infrastructure
Call center equipment
Equipment, fixtures and fittings
Motor vehicles
Central betting terminals
Leasehold improvements
116
21 – 50 years
6 – 8 years
3 – 25 years
5 – 8 years
4 – 5 years
4 – 5 years
10 years
5 years
3 – 25 years
In accordance with the new legislation issued by ICTA, the infrastructure operator authorization right of the Company’s subsidiary, Superonline Iletisim Hizmetleri AS (“Superonline”), has become infinite. As a result, Superonline revised the expected useful lives of its operating
license and related fixed network equipment from 15 years to 25 years.
(ii) Computer Software
Costs associated with maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated
with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Costs include the software development employee costs and an
appropriate portion of relevant overheads.
Amortization
Amortization is recognized in the statement of income on a straight-line basis over the estimated useful lives from the date the software is
available for use. The useful lives for computer software are as follows:
Computer software
3 – 8 years
(iii) Other intangible assets
Intangible assets that are acquired by the Group which have finite useful lives are measured at cost adjusted for the effects of inflation during
the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below) and accumulated impairment losses (see
note 3(h)(ii)).
Indefeasible Rights of Use (“IRU”) correspond to the right to use a portion of the capacity of an asset granted for a fixed period of time. IRUs
are recognized as an intangible asset when the Group has specific indefeasible right to use an identified portion of the underlying asset and
the duration of the right is the major part of the underlying asset’s economic life. IRUs are amortized over the shorter of the expected period
of use and the life of the contract.
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(e) Intangible assets (continued)
(e) Intangible assets (continued)
(iii) Other intangible assets (continued)
(iv) Internally generated intangible assets – research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset (that is purchased
from independent third parties) to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands,
is recognized in the statement of income as incurred. Capitalized costs generally relate to the application of development stage; any other costs
incurred during the pre and post-implementation stages, such as repair, maintenance or training, are expensed as incurred.
Amortization
Amortization is recognized in the statement of income on a straight line basis over the estimated useful lives of intangible assets unless such
useful lives are indefinite from the date that they are available for use. The estimated useful lives for the current and comparative periods are
as follows:
Transmission lines Central betting system operating right Customer base
Brand name
Customs duty and VAT exemption right
10 years
10 years
2 – 8 years
10 years
4.4 years
Amortization methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.
Goodwill
From 1 January 2010 the Group has applied IFRS 3 (2008) “Business Combinations” in accounting for business combinations. The change in
accounting policy has been applied prospectively and had no effect as there is no business combination in the current period.
For acquisitions on or after 1 January 2010, the Group measures goodwill as the fair value of the consideration transferred (including the fair
value of any previously-held equity interest in the acquiree) and the recognized amount of any non-controlling interests in the acquiree, less
the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition
date.
An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and
only if, all of the following have been demonstrated:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale;
• The intention to complete the intangible asset and use or sell it;
• The ability to use or sell the intangible asset;
• How the intangible asset will generate probable future economic benefits;
• The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• The ability to measure reliably the expenditure attributable to the intangible asset during its development.
• The amount initially recognized for internally generated intangible assets is the sum of expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, de
velopment expenditure is charged to the statement of income in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated
impairment losses, on the same basis as intangible assets acquired separately.
(f) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial
recognition, the leased asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not recognized on the Group’s statement of financial position.
(g) Inventories
Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course
of business, less selling expenses. The cost of inventory is determined using the weighted average method and includes expenditure incurred
in acquiring the inventories and bringing them to their existing location and condition. As at 31 December 2010, inventories mainly consist of
simcards, scratch cards, handsets and modems.
When the excess is negative, a bargain purchase gain is recognized immediately in the statement of income.
(h) Impairment
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill
is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset including
goodwill, that forms part of the carrying amount of the equity accounted investees.
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(i) Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
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(h) Impairment (continued)
(h) Impairment (continued)
(i) Financial assets (continued)
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount
and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an
available-for-sale financial asset is calculated by reference to its fair value.
(ii) Non-financial assets (continued)
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had been recognized.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognized in the statement of income. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in equity is transferred to the statement of income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For
financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the
statement of income. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehensive income.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories, and deferred tax assets are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For goodwill, the recoverable amount is estimated each year at the same time.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets (the “cash-generating unit”). The recoverable
amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a post-tax discount rate adjusted for the effects of tax cash outflows
that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of
the combination.
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the
recoverable amount is determined from the cash-generating unit to which corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount.
Impairment losses are recognized in the statement of income. Impairment losses recognized in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the
unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount.
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Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, therefore, is not tested for
impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is
objective evidence that the investment in an associate may be impaired.
(i) Employee benefits
(i) Retirement pay liability
In accordance with existing labor law in Turkey, the Company and its subsidiaries in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military
service or die. Such payments are calculated on the basis of 30 days’ pay maximum full TL 2,623 as at 31 December 2010 (equivalent to full
$1,697 as at 31 December 2010), which is effective from 1 January 2011, per year of employment at the rate of pay applicable at the date of
retirement or termination. Reserve for retirement pay is computed and reflected in the consolidated financial statements on a current basis.
The reserve has been calculated by estimating the present value of future probable obligation of the Company and its subsidiaries in Turkey
arising from the retirement of the employees.
(ii) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will
have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as
an employee benefit expense in the statement of income when they are due.
The assets of the plan are held separately from the consolidated financial statements of the Group. The Company and other consolidated companies that initiated defined contribution retirement plan are required to contribute a specified percentage of payroll costs to the retirement
benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement plan is to make the specified contributions.
(j) Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the
risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as a provision. An onerous contract is considered to exist
where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits
expected to be received under it. The Group did not recognize any provision for onerous contracts as at 31 December 2010 (31 December
2009: nil).
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(j) Provisions (continued)
(k) Revenue (continued)
Commission fees mainly comprised of net takings earned to a maximum of 1.4% of gross takings, as a head agent of fixed odds betting games
starting from 1 March 2009 (between 15 March 2007 and 1 March 2009, commission rate was 7% of gross takings and 4.3% commission
was recognized based on the para-mutual and fixed odds betting games operated on Central Betting System).
Dismantling, removal and restoring sites obligation
The Group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets
were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Bonus
Provision for bonus is provided when the bonus is a legal obligation, or past practice would make the bonus a constructive obligation and the
Group makes a reliable estimate of the obligation.
(k) Revenue
Revenues are recognized as the fair value of the consideration received or receivable, net of returns, trade discounts and rebates. Communication fees include postpaid revenues from incoming and outgoing calls, additional services, prepaid revenues, interconnect revenues and
roaming revenues. Communication fees are recognized at the time the services are rendered.
With respect to prepaid revenues, the Group generally collects cash in advance by selling scratch cards to distributors. In such cases, the
Group does not recognize revenue until the subscribers use the telecommunications services. Deferred income is recorded under current
liabilitiesThe Group offers free right of use to its subscribers, and recognizes any unused portion of these free granted right of use as at the
balance sheet date as deferred revenue. The Group does not have any other customer loyalty program in the scope of IFRIC 13 “Customer
Loyalty Programmes”.
In connection with campaigns, both postpaid and prepaid services may be bundled with handset or other goods/services and these bundled
services and products involve consideration in the form of fixed fee or a fixed fee coupled with continuing payment stream. Loyalty programs
for both postpaid and prepaid services may be bundled with other services. Total arrangement considerations relating to the bundled contract
are allocated among the different units according the following criteria:
• the component has standalone value to the customer and
• the fair value of the component can be measured reliably. The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables.
If a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integral part of the remaining
components of the transactions.
Revenues allocated to handsets given in connection with campaigns, which is included in other revenue, is recognized when the significant
risks and rewards of ownership have been transferred to the buyer, collection is probable, the associated costs and possible return of goods
can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured
reliably.
Monthly fixed fees represent a fixed amount charged to postpaid subscribers on a monthly basis without regard to the level of usage. Fixed
fees are recognized on a monthly basis when billed.
Commission revenues are recognized at the time all the services related with the games are fully rendered. Under the agreement signed with
Spor Toto Teskilat Mudurlugu AS (“Spor Toto”), Inteltek Internet Teknoloji Yatirim ve Danismanlik AS (“Inteltek”) is obliged to undertake any
excess payout, which is presented on net basis with the commission fees.
Simcard sales are recognized upfront upon delivery to distributors, net of returns, discounts and rebates. Simcard costs are also recognized
upfront upon sale of the simcard to the distributors.
Call center revenues are recognized at the time services are rendered.
The revenue recognition policy for other revenues is to recognize revenue as services are provided.
Volume rebates or discounts and other contractual changes in the prices of roaming and other services are anticipated, as both the payer
and the recipient, if it is probable that they have been earned or will take effect. Thus, contractual rebates and discounts are anticipated, but
discretionary rebates and discounts are not anticipated because the definitions of asset and liability would not be met.
(l) Lease payments
Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease. Lease
incentives received are recognized as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability.
The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance
of the liability.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a
lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the
arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement,
the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements
on the basis of their relative fair values.
(m) Finance income and costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets), late payment interest income,
interest income on contracted receivables, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial
assets at fair value through profit or loss and gains on derivative instruments that are recognized in the statement of income. Interest income
is recognized as it accrues, using the effective interest method.
Finance costs comprise interest expense on borrowings, litigation late payment interest expense, unwinding of the discount on provisions,
changes in the fair value of financial assets at fair value through profit or option premium expense.
Foreign currency gains and losses are reported on a net basis.
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(m) Finance income and costs (continued)
(p) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or
loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is equal to basic EPS because the Group does not have any convertible notes or share options granted to employees.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned by the temporary investment of the part of the borrowing not yet used is
deducted against the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of income in the period in which they are incurred.
(n) Transactions with related parties
A related party is essentially any party that controls or can significantly influence the financial or operating decisions of the Group to the extent
that the Group may be prevented from fully pursuing its own interests. For reporting purposes, investee companies and their shareholders,
non-controlling shareholders at subsidiaries, key management personnel, shareholders of the Group and the companies that the shareholders have a relationship with are considered to be related parties.
(o) Income taxes
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of income except to the extent that
it relates to items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial
recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit,
and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate
to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized.
(q) Operating segment
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses
including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating
results are regularly reviewed by the Group management to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.
The Group identified Turkcell, Euroasia and Belarusian Telecom as operating segments.
(r) Subscriber acquisition costs
The Group capitalizes directly attributable subscriber acquisition costs when the following conditions are met:
• the capitalized costs can be measured reliably;
• there is a contract binding the customer for a specific period of time; and
• it is probable that the amount of the capitalized costs will be recovered through the revenues generated by the service contract, or, where
the customer withdraws from the contract in advance, through the collection of the penalty.
Capitalized subscriber acquisition costs are amortized on a straight-line basis over the minimum period of the underlying contract. In all other
cases, subscriber acquisition costs are expensed when incurred.
(s) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the
Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized in the statement of income over the period necessary to match them with the
costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are
credited to the statement of income on a straight-line basis over the expected useful lives of the related assets.
(t) New standards and interpretations The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported
and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that
have had no material impact on the financial statements are set out in this section.
Interest and penalties assessed on income tax deficiencies are presented based on their nature.
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(t) New standards and interpretations (continued)
a) New and Revised IFRSs do not affect presentation and disclosures
Amendments to IFRS 5, Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2009)
The amendments to IFRS 5 clarify that the disclosure requirements in IFRSs other than IFRS 5 do not apply to non-current assets (or disposal
groups) classified as held for sale or discontinued operations unless those IFRSs require
IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements (continued)
The application of IAS 27 (2008) has resulted in changes in the Group’s accounting policies for changes in ownership interests in subsidiaries.
Specifically, the revised Standard has brought clarification to the Group’s accounting policies regarding changes in ownership interests in its
subsidiaries that do not result in loss of control. Under IAS 27 (2008), all such increases or decreases are dealt with in equity, with no impact
on goodwill or profit or loss.
(i) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations, or
(ii) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and the disclosures are not already provided in the consolidated financial statements.
Since the Group does not have any assets in this context, disclosures in these consolidated financial statements have not been modified to
reflect the above clarification.
Amendments to IAS 7, Statement of Cash Flows (as part of Improvements to IFRSs issued in 2009)
The amendments to IAS 7 specify that only expenditures that result in a recognized asset in the statement of financial position can be classified
as investing activities in the statement of cash flows. The application of the amendments to IAS 7 has resulted in a change in the presentation
of cash outflows in respect of development costs that do not meet the criteria in IAS 38, “Intangible Assets” for capitalization as part of an
internally generated intangible asset. This change has been applied retrospectively.
Since, the development costs, which do not meet the criteria for capitalization, were included in cash flows from operating activities in the
consolidated statement of cash flows of the previous periods, this amendment does not affect the consolidated financial statements.
New and Revised IFRSs affecting the reported financial performance and / or financial position
IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements
IFRS 3 (revised), “Business Combinations” and consequential amendments to IAS 27, “Consolidated and Separate Financial Statements”, IAS
28, “Investments in Associates” and IAS 31, “Interests in Joint Ventures” are effective prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The main impact of the
adoption is as follows:
(a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as “minority interests”) either at fair value or at the non-controlling interests’ share of the fair value of the identifiable net assets of the acquiree,
(b) to change the recognition and subsequent accounting requirements for contingent consideration,
(c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs
being recognized as an expense in the statement of income as incurred,
(d) in step acquisitions, previously held interests are to be remeasured to fair value at the date of the subsequent acquisition with the
value included in goodwill calculation. Gain or loss arising from the re-measurement shall be recognized as part of statement of income.
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(b) New and Revised IFRSs affecting the reported financial performance and / or financial position (continued)
When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to
derecognize all assets, liabilities and non-controlling interests at their carrying amount and to recognize the fair value of the consideration
received. Any retained interest in the former subsidiary is recognized at its fair value at the date control is lost. The resulting difference is
recognized as a gain or loss in profit or loss.
These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions.
Since the non-controlling interests have a deficit balance, net loss amounting to $46,705 is accounted in non-controlling interests in accordance with IAS 27 (revised) in the current period. There have been no transactions whereby an interest in an entity is retained after the loss
of control of that entity; there have been no transactions with non-controlling interests.
IAS 28 (revised in 2008), “Investments in Associates”
The principle adopted under IAS 27 (2008) that a loss of control is recognized as a disposal and re-acquisition of any retained interest at fair
value is extended by consequential amendments to IAS 28. Therefore, when significant influence over an associate is lost, the investor measures any investment retained in the former associate at fair value, with any consequential gain or loss recognized in profit or loss.
As part of Improvements to IFRSs issued in 2010, IAS 28 (2008) has been amended to clarify that the amendments to IAS 28 regarding transactions where the investor loses significant influence over an associate should be applied prospectively. The Group has applied the amendments
to IAS 28 (2008) as part of Improvements to IFRSs issued in 2010 in advance of their effective dates (annual periods beginning on or after 1
July 2010).
There have been no transactions whereby an interest in an entity is retained after the loss of significant influence in that entity; there have
been no transactions to acquire or dispose of shares in associates.
IFRIC 18, “Transfers of Assets from Customers”, is effective for transfer of assets received on or after 1 July 2009. This interpretation is applied
by the Group for the revenue recognition of assets transferred to its customers.
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(c) New and Revised IFRSs applied with no material effect on the consolidated financial statements
The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and
revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future
transactions or arrangements.
(d) New and Revised IFRSs in issue but not yet effective (continued)
IFRIC 17, “Distributions of non-cash assets to owners”, is effective for annual periods beginning on or after 1 July 2009. This is not currently
applicable to the Group, as it has not made any non-cash distributions.
“Additional exemptions for first-time adopters” (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied
for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.
IFRS 2, “Share-based Payments - Group Cash-settled Share Payment Arrangements” is effective for annual periods beginning on or after 1
January 2010. This is not currently applicable to the Group, as the Group does not have share-based payment plans.
Amendments to IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations” (as part of Improvements to IFRSs issued in 2008)
clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale.
Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The improvements cover 12 main standards/
interpretations as follows: IFRS 2, “Share-based Payments”, IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations”, IFRS
8, “Operating Segments”, IAS 1, “Presentation of Financial Statements”, IAS 7, “Statement of Cash Flows”, IAS 17, “Leases”, IAS 18, “Revenue”, IAS 36, “Impairment of Assets”, IAS 38, “Intangible Assets”, IAS 39, “Financial Instruments: Recognition and Measurement”, IFRIC 9,
“Reassessment of Embedded
Derivatives”, IFRIC 16, “Hedges of Net Investment in a Foreign Operation”. The effective dates vary standard by standard but most are effective
1 January 2010.
(d) New and Revised IFRSs in issue but not yet effective
IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions”
Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to
present comparative IFRS 7 fair value disclosures.
IFRS 7, “Financial Instruments: Disclosures”
In October 2010, IFRS 7, “Financial Instruments: Disclosures” is amended by IASB as part of its comprehensive review of off balance sheet
activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets
(for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the
assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the
end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The Group has not yet had
an opportunity to consider the potential impact of the adoption of this revised standard.
IFRS 9, “Financial Instruments: Classification and Measurement”
In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately
replace IAS 39, “Financial Instruments: Recognition and Measurement”. The standard requires an entity to classify its financial assets on the
basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and
subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods
beginning on or after 1 January 2013. The Group has not had an opportunity to consider the potential impact of the adoption of this standard.
IAS 24 (Revised 2009), “Related Party Disclosures”
In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government related entities with a
partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1
January 2011. The Group does not expect any impact of the adoption of this amendment on the financial statements.
IAS 32 (Amendments), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements”
The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February 2010. The amendments address the
accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer.
Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions
are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The Group has not
yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.
IFRIC 14 (Amendments), “Pre-payment of a Minimum Funding Requirement”
Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment
requires an asset to be recognized for any surplus arising from voluntary pre-payments made. The Group does not expect any impact of the
adoption of this amendment on the financial statements.
On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred
before their date of transition to IFRSs and to provide guidance for entities emerging from severe hyperinflation either to resume presenting
IFRS financial statements or to present IFRS financial statements for the first time.
These amendments are not relevant to the Group, as it is an existing IFRS preparer.
128
129
4. Determination of fair values (continued)
(ii) Intangible assets
(d) New and Revised IFRSs in issue but not yet effective (continued)
The fair value of the brand acquired in the Superonline Uluslararası Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri AS
business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned.
The fair value of customer base acquired in the Superonline business combination are valued using the multi-period excess earnings method,
whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.
IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”
IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entity that issues
equity instruments in order to settle, in full or part, a financial liability. The Group has not yet had an opportunity to consider the potential
impact of the adoption of this amendment to the standard.
IAS 12, “Income Taxes”
In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the
entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery
will be through use or through sale when the asset is measured using the fair value model in IAS 40, “Investment Property”. The amendment
provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through
sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The Group has not yet had an opportunity to
consider the potential impact of the adoption of this revised standard.
Annual Improvements, May 2010
Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main
standards/interpretations as follow: IFRS 1, “First-time Adoption of International Financial Reporting Standards”, IFRS 3, “Business Combinations,” IFRS 7, “Financial Instruments: Disclosures”, IAS 1, “Presentation of Financial Statements”, IAS 27, “Consolidated and Separate
Financial Statements”, IAS 34, “Interim Financial Reporting” and IFRIC 13, “Customer Loyalty Programmes”. With the exception of amendments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011. Early
adoption of these amendments is allowed. The Group has not yet had an opportunity to consider the potential impact of the adoption of these
amendments to the standards.
4. Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial
assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When
applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(i) Property, plant and equipment
The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value
of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing
seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, willingly. The market value
of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.
The fair value of the custom duty and VAT exemption agreement in the Belarusian Telecom business combination is based on the incremental
cash flows method (cost saving approach) and this was used for the valuation analysis.
The fair value of mobile telephony licenses (GSM&UMTS) in the Belarusian Telecom business combination is based on the Greenfield (buildout) method, which is estimated to be appropriate and commonly used for the valuation of licenses, and this was used for the valuation
analysis.
The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the
assets.
(iii) Investments in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is
determined by reference to their quoted bid price or over the counter market price at the reporting date. The fair value of held-to-maturity
investments is determined for disclosure purposes only.
(iv) Trade and other receivables / due from related parties
The fair values of trade and other receivables and due from related parties are estimated as the present value of future cash flows, discounted
at the market rate of interest at the reporting date.
(v) Derivatives
The fair value of forward exchange contracts and option contracts are based on their listed market price, if available. If a listed market price is
not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price
for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models.
(vi) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to
similar lease agreements.
(vii) Exercise price of financial liability related to non-controlling share put option
The Group measures the estimated exercise price of the financial liability originating from put options granted to non-controlling interests as
the present value of estimated option redemption amount. Present value of the estimated option redemption amount is based on the fair value
of estimation for the company subject to the put option.
The Group has estimated a value based on multiple approaches in grant to share purchase agreement including income approach (discounted
cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 August 2013, which is the
exercise date of the put option, is then discounted back to 31 December 2010.
130
131
5. Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
5. Financial risk management (continued)
• Credit risk
• Liquidity risk
• Market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for
measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.
Transactions involving derivatives are with counterparties with whom the Group has signed agreements and which have sound credit ratings.
At the reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group establishes an allowance for doubtful receivables that represents its estimate of incurred losses in respect of trade and other
receivables. This allowance includes the specific loss component that relates to individual subscribers exposures, and adjusted for a general
provision which is determined based on the age of the balances and historical collection trends.
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and the Group’s activities.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures,
and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in
its oversight role by Internal Audit.
The exchange rates were very volatile in 2009 but with a generally positive trend due to developments in the global markets as well as Turkish
politics. The improved perception of global risk helped emerging market currencies appreciate in the second half of 2009. TL appreciated against USD by 0.4% and depreciated against EUR by 0.9%, HRV depreciated against USD by 3.7% and BYR depreciated against USD by 30.1% as
at 31 December 2009 when compared to the exchange rates as at 31 December 2008. As at 31 December 2010, TL depreciated against USD by
2.7% and appreciated against EUR by 5.1%, HRV appreciated against USD by 0.3% and BYR depreciated against USD by 4.8% when compared to the exchange rates as at 31 December 2009. Please refer to Note 29 for additional information on the Group’s exposure to this turmoil.
Credit risk
Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group may require collateral
in respect of financial assets. Also, the Group may demand letters of guarantee from third parties related to certain projects or contracts. The
Group may also demand certain pledges from counterparties if necessary in return for the credit support it gives related to certain financings.
In monitoring customer credit risk, customers are grouped according to whether they are an individual or legal entity, aging profile, maturity
and existence of previous financial difficulties. Trade receivables and accrued service income are mainly related to the Group’s subscribers.
The Group’s exposure to credit risk on trade receivables is influenced mainly by the individual payment characteristics of postpaid subscribers.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables.
132
Credit risk (continued)
Investments are preferred to be in liquid securities and mostly with counterparties that have a credit rating equal or better than the Group.
Some of the collection banks have credit ratings that are lower than the Group’s, or they may not be rated at all, however, policies are in place
to review the paid-in capital and rating of counterparties periodically to ensure credit worthiness.
The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. At 31 December 2010, $1,324,604 guarantees were
outstanding (31 December 2009: $1,102,672).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to manage
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it
has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return on risk.
The Group buys and sells derivatives in order to manage market risks. All such transactions are carried at within the guidelines set by the
Group treasury management.
Currency risk
The Group is exposed to currency risk on certain revenues such as roaming revenues, purchases and certain operating costs such as roaming
expenses and network related costs and resulting receivables and payables, borrowings, deferred payments related to the acquisition of Belarusian Telecom and financial liability in relation to put option for the acquisition of non-controlling shares of Belarusian Telecom that are
denominated in a currency other than the respective functional currencies of Group entities, primarily TL for operations conducted in Turkey.
The currencies in which these transactions are primarily denominated are EUR, USD and SEK.
133
134
61,835
-
1,388,590
102,990
78,448
1,834,880
277,251
102,990
(681,258)
(596,802)
(42,885)
755,185
(440,883)
(263,348)
(76,006)
2,592,114
1,946,071
383,608
81,423
181,671
336,226
6,970,408
5,789,972
328,011
292,303
362,893
2008
61,835
Other material non-cash items:
Impairment on goodwill
78,448
291,020
550,926
-
87,938
155,762
-
216,445
404,651
-
1,239,477
Capital expenditure
(67,920)
(8,922)
(52,749)
(100,986)
(79,874)
(528,465)
(396,259)
Depreciation and amortization
Share of profit of equity
accounted investees
(32,975)
(1,250)
(12,513)
(262,917)
(54,921)
(100,710)
(162,939)
Finance cost
144,989
75,783
100
(5,827)
(38,318)
1,411
6,344
32,330
20,150
2,093
667,318
2,383,940
1,819,250
304,321
Finance income
Reportable segment adjusted
EBITDA
246,466
304,118
2
380
17,356
76
1,977
436,716
350,045
1,033
41,944
2008
6,170,419
5,176,105
2009
Euroasia
Turkcell
2009
22,784
Intersegment revenue
Total external revenues
2008
2009
2008
2009
Other
Belarusian Telecom
61,835
23,499
Other material non-cash items:
Impairment on goodwill
122,839
386,119
87,938
-
120,061
216,445
-
66,727
1,239,477
-
538,776
Capital expenditure
(92,034)
(52,749)
(80,826)
(79,874)
(120,407)
(396,259)
(474,703)
Share of profit of equity
accounted investees
(66,143)
(12,513)
(28,527)
(54,921)
(43,974)
(162,939)
(34,569)
Finance costs
2008
23,499
-
1,111,683
122,839
78,448
291,020
(767,970)
(67,920)
(173,213)
(32,975)
317,146
1,996,640
144,989
75,783
60,213
213,655
(38,318)
1,411
753
(32,564)
20,150
2,093
763
64,455
1,819,250
304,321
255,417
1,751,094
Finance income
Reportable segment adjusted
EBITDA
2009
Total
61,835
78,448
1,834,880
(596,802)
383,608
(263,348)
1,946,071
328,011
406,401
386,404
305,065
17,356
76
63
48,918
350,045
1,033
5,252
334,006
5,176,105
22,784
14,682
Operating segments (continued)
2010
Turkcell
The accounting policies of operating segments are the same as those described in the summary of significant accounting policies.
5,294,104
2009
2010
Information regarding the operations of each reportable segment is included below. Adjusted EBITDA is used to measure performance as
management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that
operate within these industries. Adjusted EBITDA definition includes revenue, direct cost of revenues excluding depreciation and amortization,
selling and marketing expenses and administrative expenses. Adjusted EBITDA is not a financial measure defined by IFRS as a measurement
of financial performance and may not be comparable to other similarly-titled indicators used by other companies.
Total external revenues
Euroasia
2009
Other operations mainly include companies operating in telecommunication and betting businesses and companies provide internet and
broadband services, call center and value added services.
Intersegment revenue
The Group comprises the following main operating segments: Turkcell, Euroasia and Belarusian Telecom, all of which are GSM operators in
their countries.
2010
Belarusian Telecom
6. Operating segments
The Group has three reportable segments, as described below, which are based on the dominant source and nature of the Group’s risk and
returns as well as the Group’s internal reporting structure. These strategic segments offer the same types of services, however they are managed separately because they operate in different geographical locations and are affected by different economical conditions.
2009
2010
Other
Interest rate risk
The Group’s exposure to interest rate risk is related to its financial assets and liabilities. The Group’s financial liabilities mostly consist of floating interest rate borrowings. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which
provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. In this respect, the Group
has not entered into any type of derivative instrument in order to hedge interest rate risk as at 31 December 2010.
246,466
2009
The Group’s investments in its equity accounted investee Fintur and its subsidiaries in Ukraine, Republic of Belarus, Azerbaijan and Germany
are not hedged with respect to the currency risk arising from the net assets as those net investments are considered to be long-term in nature.
304,118
2010
Currency risk (continued)
Derivative financial instruments such as forward contracts and options are used to hedge exposure to fluctuations in foreign exchange rates.
The Group uses forward exchange contracts to hedge its currency risk.
5,982,093
Total
Market risk (continued)
5,789,972
2009
5. Financial risk management (continued)
135
Total
1,695,670
383,490
5,724,088
2009
1,528,364
399,622
6,039,395
2010
Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:
2010
2009
2008
5,697,025
5,567,399
6,651,438
691,469
550,584
655,196
Elimination of inter-segment revenue
(406,401)
(328,011)
(336,226)
Consolidated revenue
5,982,093
5,789,972
6,970,408
2010
2009
2008
1,782,985
213,655
(39,268)
1,957,372
277,130
(102,662)
14,668
(64,233)
122,839
(757,354)
1,447,760
1,801,082
144,989
(20,738)
1,925,333
329,550
(187,514)
978
(111,220)
78,448
(590,678)
1,444,897
2,410,443
181,671
(11,833)
2,580,281
442,099
(136,769)
14,136
(17,990)
102,990
(679,927)
2,304,820
Revenues
Total revenue for reportable segments
136
143,607
198,780
83,161
Adjusted EBITDA
Total adjusted EBITDA for reportable segments
Other adjusted EBITDA
Elimination of inter-segment adjusted EBITDA
Consolidated adjusted EBITDA
Finance income
Finance costs
Other income
Other expense
Consolidated profit before income tax
Finance income
Total finance income for reportable segments
Other finance income
Elimination of inter-segment finance income
Consolidated finance income
2010
2009
2008
256,933
60,213
(40,016)
277,130
307,825
75,783
(54,058)
329,550
673,762
81,423
(313,086)
442,099
Reportable segment liabilities
1,092,496
1,305,206
153,927
189,875
56,982
383,490
399,622
Investment in associates
-
-
-
-
-
773,103
1,045,535
517,718
517,312
3,860,173
3,730,420
616,375
702,847
2009
2010
Reportable segment assets
6. Operating segments (continued)
2010
Turkcell
2009
2010
2009
Belarusian Telecom
Euroasia
As at 31 December 2010 and 2009
2010
Other
2009
Other revenue
137
6. Operating Segments (continued)
Finance costs
Total finance costs for reportable segments
Other finance costs
Elimination of inter-segment finance costs
Consolidated finance costs
Total depreciation and amortization for
reportable segments
Other depreciation and amortization
Elimination of inter-segment depreciation and amortization
Consolidated depreciation and amortization
Capital expenditure
Total capital expenditure for reportable segments
Other capital expenditure
Elimination of inter-segment capital expenditure
Consolidated capital expenditure
Assets
Total assets for reportable segments
Other assets
Investments in equity accounted investees
Other unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Other liabilities
Other unallocated liabilities
Consolidated total liabilities
138
2010
2009
2008
107,070
66,143
(70,551)
102,662
230,373
32,975
(75,834)
187,514
364,877
76,006
(304,114)
136,769
2010
2009
2008
675,936
92,034
(10,616)
757,354
528,882
67,920
(6,124)
590,678
638,373
42,885
(1,331)
679,927
2010
2009
2008
725,564
386,119
(33,101)
1,078,582
1,543,860
291,020
(65,606)
1,769,274
1,111,339
277,251
(24,012)
1,364,578
2010
2009
4,993,860
1,045,535
399,622
3,355,545
9,794,562
4,950,985
773,103
383,490
3,213,188
9,320,766
2010
2009
1,329,584
198,780
2,032,601
3,560,965
1,552,063
143,607
1,728,895
3,424,565
Geographical information
In presenting the information on the basis of geographical segments, segment revenue is based on the geographical location of operations
and segment assets are based on the geographical location of the assets.
Revenues
Turkey
Ukraine
Belarus
Turkish Republic of Northern Cyprus
2010
2009
2008
5,522,387
334,006
48,918
76,782
5,982,093
5,348,500
350,045
17,356
74,071
5,789,972
6,456,165
436,716
380
77,147
6,970,408
2010
2009
3,746,557
607,704
497,798
65,222
439,743
5,357,024
3,437,909
634,068
507,729
66,656
420,303
5,066,665
Non-current assets
Turkey
Ukraine
Belarus
Turkish Republic of Northern Cyprus
Unallocated non-current assets
7. Revenue
Communication fees
Monthly fixed fees
Commission fees on betting business
Call center revenues
Simcard sales
Other revenues
2010
5,670,215
75,420
31,195
25,199
22,900
157,164
5,982,093
2009
5,557,335
42,493
42,652
17,426
22,855
107,211
5,789,972
2008
6,576,857
65,081
176,237
16,604
28,189
107,440
6,970,408
8. Other Expenses
Other expenses amount to $64,233, $111,220 and $17,990 for the years ended 31 December 2010, 2009 and 2008, respectively.
Other expenses comprises impairment change recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to
$23,499, penalty imposed as a result of investigation of ICTA on tariff plans, VAS service subscriptions and charging applications of the Company amounting to $13,987, $4,957 and $2,090, respectively, Special Communication Tax (“SCT”) and VAT calculated on roaming services that
had to be collected from subscribers as a result of tax settlement amounting to $12,900 and provision set for SCT on the discounts applied to
distributors for prepaid scratch card sales between January 2005 and January 2007 amounting to $5,825 based on the previous settlement
gains. Besides, provision set for the SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $14,539
as of 31 December 2009. However, it has been settled at $2,765 and the difference is reflected to “other expense” as income.
139
9. Personnel expenses
11. Income tax expense
2010
2009
2008
485,214
400,880
501,327
10,879
7,884
8,083
5,243
3,694
4,182
501,336
(*) Wages and salaries include compulsory social security contributions and bonuses.
412,458
513,592
Wages and salaries (*)
Increase in employee benefits
Contributions to defined contribution plans
Current tax expense
Current period
Deferred tax benefit
Origination and reversal of temporary differences
Benefit of investment incentives recognized
Utilization of previously unrecognized tax losses
10. Finance income and costs Total income tax expense
2010
2009
2008
(336,914)
(336,914)
(353,389)
(353,389)
(567,169)
(567,169)
13,321
1,187
1,607
16,115
(320,799)
9,574
1,892
1,830
13,296
(340,093)
14,893
2,518
17,411
(549,758)
Recognized in the statement of income:
Interest income on bank deposits
Late payment interest income
Interest income on contracted receivables
Premium income on option contracts
Interest income on available-for-sale financial assets
Net gain on disposal of available-for-sale financial assets transferred
from equity
Discount interest income
Other interest income
Finance income
Litigation late payment interest expense
Interest expense on financial liabilities measured at amortized cost
Option premium expense
Net foreign exchange loss
Other
Finance cost
Net finance income
2010
196,418
42,064
12,345
12,147
1,121
1,318
2009
224,160
49,037
31,178
10,549
6,308
2,084
2008
359,408
43,479
14,655
8,328
6,494
886
10,831
277,130
1,052
5,182
329,550
5,053
4,682
442,099
(258)
(97,016)
(30,501)
(66,086)
(4,988)
(13,778)
(17,552)
(102,662)
174,468
(76,763)
(1,150)
(576)
(12,009)
(187,514)
142,036
(51,448)
(4,970)
(44,452)
(5,398)
(136,769)
305,330
Income tax recognized directly in equity
2010
Before tax
(184,352)
Tax (expense)/
benefit
(754)
Net of tax
(185,106)
(1,318)
-
(1,318)
(185,670)
(754)
(186,424)
53,046
(1,091)
51,955
1,197
-
1,197
54,243
(1,091)
53,152
(1,458,709)
343
(1,458,366)
(6,385)
1,025
(5,360)
(1,465,094)
1,368
(1,463,726)
2009
2008
Late payment interest income is interest received from subscribers who pay monthly invoices after the due date specified on the invoices.
Interest income on contracted receivables is recognized over the amount related to the handset campaigns throughout the contract period.
Litigation late payment interest expense is recognized in relation to legal disputes. Litigation late payment interest expense comprises accrued interest amounting to $10,235 calculated over SCT and VAT from roaming services that had to be collected from subscribers as a result
of tax settlement and accrued interest amounting to $8,428 calculated over SCT on the discounts applied to distributors for prepaid scratch
card sales between January 2005 and January 2007 which is calculated based on the previous settlement gains. Besides, accrued interests
calculated over SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $28,400 as of 31 December
2009. However, after settlement, it has been calculated as $5,671 and the difference is reflected to “litigation late payment interest expense”
as income. Detailed explanations are given in Note 32.
Borrowings costs capitalized on fixed assets are $11,127, $1,602 and $11,375 for the year ended 31 December 2010, 2009 and 2008, respectively. Interest capitalization ratio is 17.6%, 5.6% and 26.1% for the year ended 31 December 2010, 2009 and 2008 respectively.
140
141
Balance at
1 January
2009
4,636,948
269,094
280,986
14,737
132,628
436,107
5,770,500
Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible
expenses, and by deducting tax exempt income.
142
Accumulated depreciation
Cost or deemed cost
Network infrastructure (All Operational)
Land and buildings
Motor vehicles
Construction in progress
Total
12. Property, plant and equipment
In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit
distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007
sets details about implementation.
If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in
accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing.
Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.
(76,116)
38,013
587
(724)
8
507
38,391
Additions
219,664
8,227
7,831
1,569
4,232
804,244
1,045,767
11. Income tax expense (continued)
The income taxes payable of $96,080 and $93,260 as at 31 December 2010 and 2009, respectively, represents the amount of income taxes payable in respect of related taxable profit for the years ended 31 December 2010 and 2009, respectively netted off with advance tax payments.
The Turkish entities within the Group are subject to corporate tax at the rate of 20%. In Turkey, there is no procedure for a final and definitive
agreement on tax assessments. Companies file their tax returns at the end of April following the close of the accounting year to which they
relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five
years. Advance tax returns are filed on a quarterly basis.
(39,298)
(12,289)
(549,758)
-
1%
(29,242)
(5,113)
(340,093)
700,808
-
2,096,070
(3,054)
(320,799)
Total property, plant and equipment equipment
-
39,298
39,298
(460,964)
17,909
6,178
(42,206)
2,518
(83,841)
22,937
-
20%
(1)%
2%
4%
(1)%
(316,821)
(9,031)
(1,029)
(3,047)
(329,928)
(288,979)
10,041
1,041
(29,444)
1,892
1,830
(48,963)
17,602
310,051
16,518
15,243
956
2,191
344,959
20%
(1)%
2%
3%
(1)%
Impairment
-
(289,552)
12,367
676
(19,300)
1,187
1,607
(47,623)
22,893
Transfers
704,608
1,765
31,637
1,138
(739,148)
-
20%
(1)%
1%
3%
(2)%
3,202,862
82,300
260,872
12,092
116,304
3,674,430
2008
1,755,062
549,758
2,304,820
Disposals
(344,581)
(9,777)
(1,067)
(3,745)
(359,170)
Income tax using the Company’s domestic tax rate
Effect of tax rates in foreign jurisdictions
Tax exempt income
Non-deductible expenses
Tax incentives
Utilization of previously unrecognized tax losses
Unrecognized deferred tax assets
Difference in effective tax rate of equity accounted
investees
Other
Total income tax expense
2009
1,104,804
340,093
1,444,897
Effect of
movements in
exchange rates
17,901
(6,342)
713
(334)
490
(50,153)
(37,725)
2010
1,126,961
320,799
1,447,760
Profit for the year
Total income tax expense
Profit before income tax
Network infrastructure (All Operational)
Land and buildings
Motor vehicles
Total
Reconciliation of effective tax rate
The reported income tax expense for the years ended 31 December 2010, 2009 and 2008 are different than the amounts computed by applying the statutory tax rate to profit before income tax of the Company, as shown in the following reconciliation:
3,273,403
99,405
266,360
12,027
115,955
3,767,150
Balance at
31 December
2009
5,234,540
272,744
311,390
14,905
134,743
451,050
6,419,372
11. Income tax expense (continued)
2,652,222
143
144
The impairment losses on property, plant and equipment for the years ended 31 December 2010, 2009 and 2008 are $64,847, $39,298 and $7,688, respectively and recognized
in depreciation expense.
Depreciation expenses for the years ended 31 December 2010, 2009 and 2008 are $515,515, $384,257 and $433,942, respectively including impairment losses and recognized
in direct cost of revenues.
3,068,021
(64,847)
12,710
(8,607)
523,029
Total property, plant and equipment equipment
2,652,222
(46,486)
115,072
3,485,694
(3,068)
(102,938)
-
63,673
-
1,308
(721)
(694,167)
2,906
450,668
115,955
3,767,150
Total
11,827
(355)
(1,686)
1,841
Motor vehicles
12,027
106,750
252,184
(10,742)
(16,921)
(1,709)
15,196
266,360
2,999,861
10,124
(2,779)
63,673
18,229
(690,051)
420,601
99,405
Land and buildings
Network infrastructure (All operational)
Accumulated depreciation
3,273,403
(85,994)
202,400
6,553,715
(10,083)
(1,174)
14,018
(149,424)
(1,174)
(936,992)
(3,592)
(702,774)
703,191
973,697
451,050
6,419,372
Total
136,506
16,341
(426)
(3,436)
-
-
-
(968)
-
(1,901)
3,763
6,167
14,905
134,743
Motor vehicles
281,610
278,709
(6,755)
(35,347)
(2,205)
11,626
311,390
15,711
272,744
5,638,149
-
-
986,357
(694,108)
233,239
5,234,540
Land and buildings
Network infrastructure (All operational) Operational)
Impairment
Transfers
Disposals
Cost or deemed cost
12. Property, plant and equipment (continued)
Balance at
1 January 2010
Additions
(6,845)
(121,879)
Balance at
31 December 2010
Effect of movements in
exchange rates
12. Property, plant and equipment (continued)
Leased assets
The Group leases equipment under a number of finance lease agreements. At the end of each of the lease period, the Group has the option
to purchase the equipment at a beneficial price. As at 31 December 2010, net carrying amount of fixed assets acquired under finance leases
amounted to $82,944 (31 December 2009: $65,844).
Property, plant and equipment under construction
Construction in progress mainly consisted of capital expenditures in GSM network of the Company, Astelit, Kibris Mobile Telekomunikasyon
Limited Sirketi (“Kibris Telekom”) and Belarusian Telecom and non-operational items as at 31 December 2010 and 2009.
As at 31 December 2010, a mortgage is placed on Izmir building in favour of Yapı ve Kredi Bankası A.S., Interbank A.S. and Pamukbank T.A.S
founded at 25 August 1992 amounting to $970 (31 December 2009: $996) and also on Davutpasa building in favour of Pamukbank T.A.S founded at 11 December 1997 amounting to $323 (31 December 2009: $332) due to previous debts of BMC Sanayi ve Ticaret A.S. Those buildings
were sold to the Company with their mortgages. Since the debts of BMC Sanayi ve Ticaret A.S. were paid and the Company has no liability to
Savings Deposit Insurance Fund (“SDIF”) related to Interbank A.S. and Pamukbank T.A.S., the Company asked for the release of mortgage on
Izmir building on 13 March 2006. However, the mortgage is still valid due to the outstanding debts of Cukurova Group to SDIF.
13. Intangible assets
In April 1998, the Company signed the License with the Turkish Ministry, under which it was granted a GSM license, which is amortized over
25 years with a carrying amount of $364,349 as at 31 December 2010 (31 December 2009: $404,636). The amortization period of the license
will end in 2023.
On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and
infrastructure. The Company acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding
VAT). The license is effective for duration of 20 years starting from 30 April 2009. The carrying amount is $456,221 as at 31 December 2010
(31 December 2009: $493,982).
Impairment testing for long-lived assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Long-lived assets are tested for impairment as
at 31 December 2010. As the recoverable amounts of the assets or cash-generating unit are greater than the value in use, no impairment is
recognized. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of
assets, cash generating units. As at 31 December 2010, impairment test for long-lived assets of Astelit and A-Tel, is made on the assumption
that Astelit and A-Tel are the cash generating unit. As the recoverable amounts based on the value in use of cash generating units is higher
than the carrying amount of cash-generating units of Astelit and A-Tel, no impairment is recognized. The assumptions used in value in use
calculation of Astelit and A-Tel as at 31 December 2010 are:
Astelit: A 15.7% post-tax WACC rate and a 2.5% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based
on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for Astelit. The pre-tax rate for
disclosure purposes is 18.9%
A-Tel: A 14.2% post-tax WACC rate and a 4.0% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based
on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for A-Tel. The pre-tax rate for
disclosure purposes is 14.2%.
145
146
244,642
Goodwill
Balance at
1 January 2010
(86,481)
241,839
74
10,595
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Disposals
517,086
206,421
84
11,416
639
458
170
2,301
140,964
50,389
723,507
680,510
1,062
-
-
-
-
28
1,350
23,530
17,027
Additions
(12,710)
(1,307)
-
-
-
-
-
-
-
(1,307)
-
(14,017)
(96,449)
-
-
-
-
-
-
-
-
79,617
2,815
Transfers
(379)
(21,711)
-
-
-
-
-
-
(1,940)
(19,771)
(22,090)
-
-
-
-
-
-
-
-
(2,319)
(19,771)
Disposals
(23,499)
-
-
-
-
-
-
-
-
-
-
(23,499)
-
-
(23,499)
-
-
-
-
-
-
-
-
Impairment
-
-
-
-
-
-
-
-
-
-
-
(693,312)
-
-
-
-
-
-
-
185,000
508,312
Transfers
(65,980)
(52,695)
20
(686)
(69)
(28)
-
(110)
(767)
(38,140)
(12,915)
(118,675)
(928)
(48)
(19,600)
(1,338)
(167)
(122)
-
(144)
(858)
(47,792)
(47,678)
Effects of movements in
exchange rates
(61,835)
-
-
-
-
-
-
-
-
-
(61,835)
-
-
(61,835)
-
-
-
-
-
-
-
Impairment
(9,786)
(17,117)
33
266
20
10
20
154
3,875
(21,495)
(26,903)
(4,142)
(482)
1,549
224
28
21
23
408
1,585
(26,117)
Effects of movements
in exchange rates
1,709,311
2,000,145
571
25,462
2,581
1,024
1,543
4,116
27,007
1,472,109
465,732
3,709,456
2,626
2,782
141,257
49,987
6,231
4,554
22,531
5,722
32,615
2,019,716
1,421,435
Balance at
31 December 2010
1,897,981
1,812,308
477
15,553
1,996
584
4,016
26,040
1,355,842
407,800
3,710,289
5,562
2,298
184,356
51,325
6,398
4,676
5,527
33,189
1,951,060
1,465,898
Balance at
31 December
2009
Computer software includes internally generated capitalized software development costs that meet the definition of an intangible asset. The amount of internally generated capitalized
costs is $29,142 for the year ended 31 December 2010 (31 December 2009: $24,987).
Amortization expenses on intangible assets other than goodwill for the years ended 31 December 2010, 2009 and 2008 are $241,839, $206,421 and $245,985 respectively including
impairment losses and recognized in direct cost of revenues. The impairment losses on goodwill for the year ended 31 December 2010, 2009 and 2008 are $23,499, $61,835 and nil
respectively recognized in other expenses in the consolidated statement of income.
Total intangible assets
1,897,981
1,812,308
Total
477
15,553
Other
468
584
1,996
Brand name
Customer base
654
1,543
-
Indefeasible right of usage
4,016
210
1,734
26,040
Transmission lines
Central betting system operating right
70,847
155,358
155,714
407,800
3,710,289
1,355,842
Computer software
GSM and other telecommunication operating
licenses
Accumulated amortization
Total
532
94,441
2,298
5,562
Other
-
51,325
184,356
Goodwill
-
4,676
6,398
Brand name
Customer base
-
22,531
-
Indefeasible right of usage
284
5,527
339
33,189
Transmission lines
400
36,831
1,465,898
1,951,060
Computer software
Additions
1,452,895
GSM and other telecommunication operating
licenses
Cost
13. Intangible assets (continued)
Total intangible assets
1,644,715
Total
3,871
360
1,337
Customer base
Other
116
Brand name
3,826
23,585
Transmission lines
1,212,943
398,677
3,097,610
Computer software
Accumulated amortization
Total
22,506
51,101
6,370
Customer base
1,718
4,655
Brand name
Other
5,476
31,431
Transmission lines
1,743,264
986,447
Balance at
1 January
2009
Computer software
Cost
147
Superonline, a wholly owned subsidiary of the Group, won the tender of BOTAS for indefeasible right to use the capacity of the fiber optic
cables already installed by BOTAS for 15 years, including the right to install additional fiber optic cables and the right to use the capacity of
these fiber optic cables for the same period. Superonline will pay EUR 20,900 to BOTAS for the right and this transaction has been considered
as a finance lease as the lease term is for the major part of the remaining useful life of the fiber optic cables already installed by BOTAS and
Superonline will make significant investment during the initial period of the lease agreement which is an indicator that the transaction is a
finance lease. The Group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to
be made to BOTAS till the year 2024.
Impairment testing for cash-generating unit containing goodwill
Goodwill allocated to cash generating units and carrying values of all cash generating units are annually tested for impairment. The recoverable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying
discounted cash flow calculation. Independent appraisals were obtained for fair values to determine recoverable amounts for Belarusian
Telecom and Superonline as at 31 December 2010.
In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain
matters including management’s expectations of growth in EBITDA, calculated as results from operating activities before depreciation and
amortization and other income/(expenses), timing and quantum of future capital expenditure, long term growth rates, and the selection of
discount rates to reflect the risks involved.
Belarusian Telecom
As at 31 December 2010, the aggregate carrying amount of goodwill allocated to Belarusian Telecom is $120,112 and goodwill arising from
the acquisition of Belarusian Telecom was impaired by $23,499 following the adverse movements in the discount and growth rates and adverse performance against previous plans. The impairment loss was allocated fully to goodwill and is included in other expense. Value in use
was determined by discounting the future cash flows generated from the continuing use of the unit. The calculation of the value in use was
based on the following key assumptions:
Impairment testing for cash-generating unit containing goodwill (continued)
Superonline
As at 31 December 2010, the aggregate carrying amount of goodwill allocated to Superonline is $21,145. As the recoverable values based on
the value in use of the cash generating units is estimated to be higher than carrying amount, no impairment was required for goodwill arising
from the acquisition of Superonline as at 31 December 2010. The calculation of the value in use was based on the following key assumptions:
Values assigned to EBITDA for the periods forecasted include the expected synergies to be achieved from operating as a part of the Group.
Values assigned to this key assumption reflect past experience except for efficiency improvements and synergies. Management believes that
any reasonably possible change in the key assumptions on which Superonline recoverable amount is based would not cause Superonline’s
carrying amount to exceed its recoverable amount.
The projection period for the purposes of goodwill impairment testing is taken as 8 years between 1 January 2011 and 31 December 2018.
Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 2.5%. This growth rate does not exceed the
long-term average growth rate for the market in which Superonline operates.
A post-tax discount rate WACC of 15.8% was applied in determining the recoverable amount of the unit. Discounting post-tax cash flows at
a post-tax discount rate and discounting pre tax cash flows at pre-tax discount rate give same results, since the pre-tax discount rate is the
post-tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows. For disclosure purposes pre-tax discount
rate is 18.3%.
After the acquisition of Superonline Uluslararasi Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri AS (“Superonline
Uluslararasi”) in 2008, management merged Superonline Uluslararasi’s operations with its wholly owned subsidiary, Tellcom Iletisim Hizmetleri AS (“Tellcom”) in May 2009. With the merger, Superonline Uluslararasi and Tellcom seized to be separate cash generating units and
merged as one cash generating unit under the brand name of Superonline. Therefore, the business plans used for the purpose of the impairment testing represents the merged entities operations. The registered name of the entity was changed from Tellcom Iletisim Hizmetleri AS
to Superonline Iletisim Hizmetleri AS with General Assembly Meeting note dated 20 December 2010.
The projection period for the purposes of goodwill impairment testing is taken as 7 years between 1 January 2011 and 31 December 2017.
Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 3.0% which does not exceed the estimated
average growth rate for the country.
A post-tax discount rate WACC of 14.4% was applied in determining the recoverable amount of the unit. The post-tax rate was adjusted
considering the tax cash outflows and other future tax cash flows and discrepancies between the cost of the assets and their tax bases. The
pre-tax rate for disclosure purposes is 17.2%.
148
149
150
During 2009, Fintur distributed a total dividend of $200,000. The Group received its share of dividend in December 2009 at the amount of
$82,900 and decreased its investment in Fintur by $82,900.
In 2010, Fintur has decided to distribute two dividends amounting to $70,000 and $190,000. The Company reduced the carrying value of its
investments in Fintur by the cash collected dividend of $29,015 and $78,755 on 5 May 2010 and 7 December 2010, respectively.
(822,538)
(83,128)
(739,410)
(743,374)
1,921,224
1,823,095
98,129
A-Tel
Fintur
2008
1,678,919
* Figures mentioned in the above table includes fair value adjustments that arose during acquisition of A-Tel.
1,888
366,433
364,545
(8,529)
302,416
310,945
1,605,022
73,897
A-Tel
Fintur
2009
1,799,811
1,736,576
63,235
A-Tel
Fintur
2010
Revenues
41.45%
50.00%
31 December 2009
Fintur (associate)
A-Tel (joint venture)*
(77,625)
(665,749)
(749,440)
(56,683)
(692,757)
2,923
372,439
Profit/Loss
369,516
In April 2008, the privatization of the Republic of Azerbaijan’s 35.7% ownership in Azercell Telecom B.M. (“Azercell”), a 51% owned consolidated subsidiary of Fintur, was completed. The non-controlling shareholders in Azercell acquired the 35.7% shares of Republic of Azerbaijan
increasing their effective ownership in Azercell to 49%. One of the non-controlling shareholders was also granted a put option, giving the
shareholder the right to sell its 42.2% stake to Fintur at fair value in certain deadlock situations regarding significant decisions at the General
Assembly. Fintur has initially accounted for the present value of the estimated option redemption amount as a provision and derecognized
the non-controlling interest. The difference between the present value of the estimated option redemption amount and the derecognized noncontrolling interest amounting to $715,126 is accounted under equity, in accordance with the Group’s accounting policy.
423,754
46,069
469,823
1,491,371
196,524
1,687,895
14. Equity accounted investees (continued)
The Company’s investment in Fintur and A-Tel amounts to $303,618 and $96,004 respectively as at 31 December 2010 (31 December 2009:
$285,597 and $97,893). Direct cost
of revenues
1,915,125
242,593
2,157,718
454,875
196,578
651,453
405,846
405,846
804,271
39,476
843,747
1,915,125
242,593
2,157,718
250,133
6,539
256,672
2,030,267
230,302
2,260,569
489,238
192,008
681,246
439,495
439,495
811,749
37,216
848,965
289,785
1,078
290,863
2,030,267
230,302
2,260,569
31 December 2010
Fintur (associate)
A-Tel (joint venture)*
41.45%
50.00%
Ownership
Current
assets
451,598
48,888
500,486
Non-current
assets
1,578,669
181,414
1,760,083
Non-current
liabilities
Current
liabilities
Total
assets
Total
liabilities
and equity
Equity
attributable
to parent
Noncontrolling
interest
14. Equity accounted investees
The Group’s share of profit in its equity accounted investees for the years ended 31 December 2010, 2009 and 2008 are $122,839, $78,448 and $102,990, respectively. Summary
financial information for equity accounted investees adjusted for the accounting policy differences for the same events under similar circumstances and not adjusted for the
percentage ownership held by the Group is as follows:
During April 2010 and December 2009 at the General Assembly meeting of A-Tel, it has been decided to distribute dividends and accordingly
the Company reduced the carrying value of its investments in A-Tel by the dividends declared of TL 1,241 (equivalent to $803 as at 31 December 2010) and TL 7,248 (equivalent to $4,688 as at 31 December 2010) as at 31 December 2010 and 2009, respectively.
15. Other investments
Non-current investments:
2010
Aks Televizyon Reklamcilik ve Filmcilik
Sanayi ve Ticaret AS
(“Aks TV”)
T Medya Yatirim Sanayi ve Ticaret AS
(“T-Medya”)
2009
Country of
incorporation
Turkey
Ownership
(%)
6.24
Carrying
Amount
21,905
Ownership
(%)
6.24
Carrying
Amount
22,492
Turkey
4.52
11,944
10.03
12,263
33,849
34,755
On 2 February 2010, SDIF notified that lien was laid on “priority right to purchase back” regarding the shares of Aks TV of which 6.24% were
held by Turktell Bilişim Hizmetleri AS. In case that, those shares are sold to third parties other than Cukurova Group, SDIF has the right to
exercise its priority right to purchase back and the purchase price will be determined within the context of the past agreements signed between previous owners and Cukurova Group.
On 19 July 2010, at T-Medya’s General Assembly Meeting, it has been decided to increase the share capital of T-Medya. However, the Group
did not participate in the capital contribution, accordingly the ownership of the Group in T-Medya decreased to 4.52%.
There is no active market available for investments Aks TV and T Medya. The Company measured these investments at cost. Based on the
impairment analysis performed by considering the lower end limits of fair value calculations performed by an independent valuation firm, no
impairment has been identified.
151
15. Other investments (continued)
Current investments:
17. Deferred tax assets and liabilities (continued)
Unrecognized deferred tax assets (continued)
2010
2009
Available-for-sale financial assets
Government bonds, treasury bills
Time deposits
Deposits maturing after 3 months or more
-
62,398
8,201
-
8,201
62,398
There are no government bonds as at 31 December 2010 (31 December 2009: $62,398).
As at 31 December 2010, BYR denominated time deposits maturing after 3 months or more amounting to $201 have stated interest rate of
10.5% and USD denominated time deposits maturing after 3 months or more amounting to $8,000 have stated interest rate of 7.0%
The Group’s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 29.
2009
37,628
22,406
9,597
2,867
2,622
75,120
minimum
17. Deferred tax assets and liabilities
Unrecognized deferred tax liabilities
At 31 December 2010, a deferred tax liability of $15,687 (31 December 2009: $18,669) for temporary differences of $78,433 (31 December
2009: $93,345) related to investments in subsidiaries was not recognized because the Company controls whether the liability will be incurred
and it is satisfied that it will not be incurred in the foreseeable future.
Unrecognized deferred tax assets
Deferred tax assets have not been recognized in respect of the following items:
2010
2009
67,086
39,186
Tax losses
152,776
140,493
Total unrecognized deferred tax assets
219,862
179,679
Deductible temporary differences
Amount
3,207
10,785
78,819
35,784
48,197
176,792
Expiration Date
2011
2012
2013
2014
2015 thereafter
As at 31 December 2010, tax losses which will be carried indefinitely are as follows:
Year Originated
2004
16. Other non-current assets
2010
VAT receivable
62,167
Prepaid expenses
29,717
Deposits and guarantees given
9,560
Advances given for fixed assets
4,654
Prepayment for subscriber acquisition cost
Others
1,179
107,277
Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a
consideration.
As at 31 December 2010, expiration of tax losses is as follows:
Year Originated
2006
2007
2008
2009
2010
Amount
15,910
38,621
63,408
55,382
239,575
44,625
12,150
2005
2006
2007
2008
2009
2010
Recognized deferred tax assets and liabilities
Deferred tax assets and liabilities as at 31 December 2010 and 2009 are attributable to the following:
Assets
Liabilities
2010
2009
2010
2009
Property, plant
& equipment
and intangible
assets
347
84
(152,193)
(170,397)
Investment
(15,096)
(13,833)
Provisions
28,423
27,474
Trade and other
payables
23,460
39,271
(16)
(38)
Other items
25,940
2,104
(1,094)
(1,039)
Tax assets /
(liabilities)
78,170
68,933
(168,399)
(185,307)
Net off of tax
(75,294)
(66,875)
75,294
66,875
Net tax assets /
(liabilities)
2,876
2,058
(93,105)
(118,432)
Net
2010
2009
(151,846)
(15,096)
28,423
(170,313)
(13,833)
27,474
23,444
24,846
39,233
1,065
(90,229)
-
(116,374)
-
(90,229)
(116,374)
The deductible temporary differences do not expire under current tax legislation. Turkish tax legislation does not allow companies to file
tax returns on a consolidated basis. Therefore, deferred tax assets have not been recognized in respect of these items resulting from certain
consolidated subsidiaries because it is not probable that future taxable profit will be available against which the Group can utilize the benefits
therefrom.
152
153
Balance at
31 December 2010
(151,846)
(15,096)
28,423
23,444
24,846
(90,229)
12,336
373
(740)
(805)
(380)
10,784
(754)
(754)
Receivables from subscribers
Accrued service income
Accounts and checks receivable
Receivables from Turk Telekomunikasyon AS (“Turk Telekom”)
2010
414,606
348,135
52,111
1,299
816,151
2009
392,328
318,526
57,867
15,031
783,752
Trade receivables are shown net of allowance for doubtful debts amounting to $367,913 as at 31 December 2010 (31 December 2009:
$268,157). The impairment loss recognized for the years ended 31 December 2010, 2009 and 2008 are $117,362, $75,379 and $65,678,
respectively.
6,131
(882)
1,689
(14,984)
24,161
16,115
Letters of guarantee received with respect to the accounts and checks receivable are amounted to $181,366 and $164,958 as at 31 December
2010 and 2009, respectively.
The accrued service income represents revenues accrued for subscriber calls (air-time) and contracted receivables related to handset campaigns, which have not been billed and will be billed within one year. Due to the volume of subscribers, there are different billing cycles; accordingly, an accrual is made at each period end to accrue revenues for rendered but not yet billed. Contracted receivables related to handset
campaigns, which will be invoiced after one year is presented under non-current trade receivables amounting to $35,024.
Receivables from Turk Telekom represent net amounts that are due from Turk Telekom under the Interconnection Agreement. The Interconnection Agreement provides that Turk Telekom will pay to the Company for Turk Telekom’s fixed-line subscribers’ calls to GSM subscribers.
The Group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 29.
(170,313)
(13,833)
27,474
39,233
1,065
(116,374)
19. Other current assets
Property, plant & equipment and intangible assets
Investment
Provisions
Other items
Total
Balance at
1 January 2010
Effect of
movements
in exchange
rates
Recognized in Recognized in other
the statement
comprehensive
of income
income
(170,313)
(13,833)
27,474
39,233
1,065
(116,374)
(770)
(122)
602
27
1,031
768
(1,091)
(1,091)
Property, plant & equipment and intangible assets
Investment
Provisions
Other items
Tax credit carry forwards
Total
(168,636)
(10,267)
10,070
44,239
(4,759)
6
(129,347)
(907)
(2,353)
16,802
(5,033)
4,793
(6)
13,296
Balance at
31 December 2009
Effect of
movements
in exchange
rates
Recognized in Recognized in other
the statement
comprehensive
of income
income
Balance at
1 January 2009
17. Deferred tax assets and liabilities (continued)
Movement in temporary differences as at 31 December 2010 and 2009
18. Trade receivables and accrued income
Prepaid expenses
Receivables from ICTA
VAT receivable
Receivables from Tax Office
2010
83,680
25,938
25,702
15,736
2009
69,559
48,760
-
Advances to suppliers
12,131
12,351
8,311
17,727
6,150
3,262
1,777
15,053
197,740
2,767
12,527
11,726
175,417
Interest income accruals
Restricted cash
Receivables from personnel
Prepayment for subscriber acquisition cost
Other
Receivables from ICTA is related to the fine applied on tariffs above upper limits as a result of Court suspension of the execution decision.
ICTA paid the related amount on 27 January 2011. In Note 32, under legal proceedings section, detailed explanations are given with respect
to the receivable.
As at 31 December 2010, restricted cash represents amounts deposited at banks as guarantees in connection with the loan utilized by Azerinteltek and mature in 12 months.
Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum
consideration.
154
155
20. Cash and cash equivalents
21. Capital and reserves (continued)
Cash in hand
Cheques received
Banks
-Demand deposits
-Time deposits
Bonds and bills
Bank overdrafts
Cash and cash equivalents in the statement of cash flows
2010
7,957
172
3,293,257
193,358
3,099,899
777
3,302,163
(5,896)
3,296,267
2009
157
1,154
3,093,889
199,764
2,894,125
286
3,095,486
(5,244)
3,090,242
As at 31 December 2010, cash and cash equivalents deposited in banks that are owned and/or controlled by Cukurova Group, a significant
shareholder of the Company is amounting to $90,000 (31 December 2009: nil).
As at 31 December 2010, average maturity of time deposits is 60 days (31 December 2009: 69 days)
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 29.
21. Capital and reserves
Share capital
As at 31 December 2010, common stock represented 2,200,000,000 (31 December 2009: 2,200,000,000) authorized, issued and fully paid
shares with a par value of TL 1 each. In accordance with the Law No. 5083 with respect to TL, on 9 May 2005, par value of each share is
registered to be one TL.
In connection with the redenomination of the TL and as per the related amendments of Turkish Commercial Code, in order to increase the
nominal value of the shares to TL 1, 1,000 units of shares, each having a nominal value of TL 0.001 shall be merged and each unit of share
having a nominal value of TL 1 shall be issued to represent such shares. The Company is still in the process of merging 1,000 existing ordinary
shares, each having a nominal value of TL 0.001 to one ordinary share having a nominal value of TL 1 each. After the share merger which
appears as a provisional article in the Articles of Association to convert the value of each share with a nominal value of TL 0.001 to TL 1, all
shares will have a value of TL 1. Although the merger process has not been finalized, the practical application is to state each share having
a nominal value of TL 1 which is consented by Capital Markets Board of Turkey (“CMB”). Accordingly, number of shares data is adjusted for
the effect of this merger.
The holders of shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company.
As at 31 December 2010, total number of pledged shares hold by various institutions is 137,200 (31 December 2009: 137,200).
156
Capital contribution
Capital contribution comprises the contributed assets and certain liabilities that the government settled on behalf of the Group that do not
meet the definition of a government grant which the government is acting in its capacity as a shareholder.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign and domestic operations from their functional currencies to presentation currency of USD.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are
derecognized or the asset is impaired.
Legal reserve
Under the Turkish Commercial Code, Turkish companies are required to set aside first and second level legal reserves out of their profits.
First level legal reserves are set aside 5% of the distributable income per statutory accounts each year. The ceiling on the first legal reserves
is 20% of the paid-up capital. The reserve requirement ends when the 20% of paid-up capital level has been reached. Second legal reserves
correspond to 10% of profits actually distributed after the deduction of the first legal reserves and the minimum obligatory dividend pay-out
(5% of the paid-up capital). There is no ceiling for second legal reserves and they are accumulated every year.
Reserve for non-controlling interest put option liability
The reserve for non-controlling interest put option liability includes the difference between the put option liability granted to the noncontrolling shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. Subsequent changes in
the fair value of the put option liability are also recognized in this reserve.
Dividends
The Company has adopted a dividend policy, which is set out in its corporate governance guidance. As adopted, the Company’s general dividend policy is to pay dividends to shareholders with due regard to trends in the Company’s operating performance, financial condition and
other factors.
The Board of Directors intends to distribute cash dividends in an amount of not less than 50% of the Company’s lower of distributable profit
based on the financial statements prepared in accordance with the accounting principles accepted by the CMB or statutory records, for each
fiscal year starting with profits for fiscal year 2004. However, the payment of dividends will still be subject to cash flow requirements of the
Company, compliance with Turkish law and the approval of and amendment by the Board of Directors and the General Assembly of Shareholders.
157
21. Capital and reserves (continued)
23. Other non-current liabilities
Dividends (continued)
On 10 March 2010, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2009 amounting
to TL 859,259 (equivalent to $555,795 and $573,451 as at 31 December 2010 and 29 April 2010, respectively), which represented 50% of
distributable income. This represents a net cash dividend of full TL 0.3905723 (equivalent to full $0.2526341 and $0.2606596 as at 31 December 2010 and 29 April 2010, respectively) per share. This dividend proposal was discussed and approved at the Ordinary General Assembly of
Shareholders held on 29 April 2010. Dividend distribution started on 17 May 2010 and completed as at 31 December 20
2010
Cash dividends
2009
TL
USD*
859,259
573,451
TL
1,098,193
2008
USD*
TL
713,297
648,714
USD*
502,334
* USD equivalents of dividends are computed by using the Central Bank of the Republic of Turkey’s TL/USD exchange rate on 29 April 2010, 8
May 2009 and 25 April 2008 which are the dates that the General Assembly of Shareholders approved the dividend distribution.
In the Ordinary General Assembly of Shareholders Meeting of Inteltek held on 15 April 2010, it has been decided to distribute dividends amounting to TL 55,980 (equivalent to $36,210 as at 31 December 2010). The dividend was paid on 29 April 2010.
22. Earnings per share
The calculations of basic and diluted earnings per share as at 31 December 2010 were based on the profit attributable to ordinary shareholders for the years ended 31 December 2010, 2009 and 2008 of $1,170,176, $1,093,992 and $1,836,824 respectively and a weighted average
number of shares outstanding during the years ended 31 December 2010, 2009 and 2008 of 2,200,000,000 calculated as follows:
2010
2009
2008
1,170,176
1,093,992
1,836,824
Weighted average number of shares
2,200,000,000
Basic and diluted earnings per share
0.53
2,200,000,000
0.50
2,200,000,000
0.83
Numerator:
Net profit for the period attributed to owners
Denominator:
158
Consideration payable in relation to acquisition of BeST
Financial liability in relation to put option
Deposits and guarantees taken from agents
Payables to other suppliers
Other
2010
78,402
53,435
16,310
7,391
5,294
160,832
2009
75,319
63,152
13,951
2,569
154,991
Consideration payable in relation to acquisition of Belarusian Telecom represents the present value of long-term deferred payment to the
seller. Payment of $100,000 is contingent on financial performance of Belarusian Telecom, and based on management’s estimations, expected
to be paid during the first quarter of 2016. The present value of the contingent consideration is $78,402 as at 31 December 2010 (31 December
2009: $75,319).
Non-controlling shareholders in Belarusian Telecom were granted a put option, giving the shareholders the right to sell their entire stake
to Beltel Telekomunikasyon Hizmetleri AS (“Beltel”) at fair value during a specified period. The Group accounted for the present value of
the estimated option redemption amount as a provision and derecognized the non-controlling interest. The Company has estimated a value
based on multiple approaches including income approach (discounted cash flows) and market approach (comparable market multiples). The
average of the values determined as at 31 August 2013, which is the exercise date of the put option, is then discounted to 31 December 2010.
The difference between the present value of the estimated option redemption and derecognized non-controlling interests amounting to
$32,382 has been presented as reserve for non-controlling interest put option under equity.
24. Loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at
amortized cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk and payment schedule
for interest bearing loans, see Note 29.
2010
2009
Non-current liabilities
Unsecured bank loans
1,366,207
793,210
Secured bank loans
21,850
25,253
Finance lease liabilities
19,259
2,716
1,407,316
821,179
Current liabilities
Current portion of unsecured bank loans
357,637
226,463
Current portion of secured bank loans
4,378
Unsecured bank facility
57,355
461,788
Secured bank facility
6,399
Current portion of finance lease liabilities
4,436
2,529
430,205
690,780
159
160
2011
2011
USD
USD
AZN
AZN
USD
USD
BYR
EUR
USD
Secured bank loans
Fixed
Fixed
Floating
Fixed
Floating
Fixed
Fixed
-
Fixed
Fixed
Floating
Fixed
Floating
Floating
Floating
Fixed
Fixed
Fixed
Fixed
Floating
Fixed
Floating
* Refinancing rate of the National Bank of the Republic of Belarus.
** Secured by Rebuplic of Belarus Government.
2010-2011
2011-2024
2010
2010
2010
2011
2011
2011-2013
2013
2010-2012
2020
2009-2014
Secured bank loans
USD
2011
2010-2016
USD
USD
USD
2011
2013
EUR
USD
USD
2013
2009-2014
BYR
USD
USD
USD
2011-2015
USD
2015
Secured bank loans**
USD
Floating
4.64%
3.35%
-
-
Libor+2.0%-3.5%
18.00%
18.00%
-
5.00%
2.97%
Libor+3.465%
2.97%
RR*+2%
Libor+%1.35
Libor+1.75%
2.81%
%2.25-2.80%
4.10%-8%
2.24%
Libor+2.24%-2.45%
2.37%
Libor+2.9%-3.0%
Libor+2.1%
Libor+2.25%-3.75%
2,733
1,837,521
1,849,330
20,962
-
-
-
189
316
744
6,210
9,985
13,627
17,754
26,228
48,672
24,602
57,581
96,998
86,464
144,078
159,406
178,603
188,730
264,674
488,965
2,819
26,487
-
-
-
150
250
744
6,150
9,811
13,280
17,505
21,389
50,236
24,500
59,654
95,193
86,442
148,726
159,200
184,044
188,500
263,250
491,000
Some of the Group’s borrowings are subject to covenant clauses, whereby the Group is required to meet certain key performance indicators.
As of 31 December 2010, the Group is in compliance with all borrowing covenants.
Floating
Superonline, a wholly owned subsidiary of the Group, acquired indefeasible right of use with BOTAS and will pay EUR 20,900 to BOTAS for
the right. The Group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to be
made to BOTAS till the year 2024. As of 31 December 2010, the carrying amount of lease liability related to BOTAS agreement is $20,962.
2012
2,529
2,716
5,245
-
5.7%
1,525,550
5,583
-
1,971
-
113,387
1/2
RR*
476,000
-
-
2.80%
Libor+2.0%-3.5%
-
-
-
-
-
-
-
25,958
22,487
-
-
2.97%
RR*+2%
64,589
-
Libor+%1.35
69,856
2.81%
63,500
2.80%
191,219
-
2.24%
-
-
-
-
-
491,000
Libor+2.3%-3.75%
Face value
2009
239
99
338
Nominal interest rate
2,768
2,815
5,583
2011-2012
4,436
19,259
23,695
USD
763
4,848
5,611
USD
5,199
24,107
29,306
Interest
Present value of
minimum lease
payments
Interest
Future minimum
lease payments
Carrying amount
31 December 2009
Face value
2010
Less than one year
More than one year
Future minimum
lease payments
Present value of
minimum lease
payments
Nominal interest rate
31 December 2010
Interest rate type
1,511,959
5,245
-
2,085
113,395
476,754
-
-
-
-
-
-
26,236
25,253
62,162
-
66,051
63,505
-
183,710
-
-
-
-
487,563
Carrying amount
Finance lease liabilities are payable as follows:
Year of maturity
24. Loans and borrowings (continued)
Currency
24. Loans and borrowings (continued)
Terms and conditions of outstanding loans are as follows:
161
25. Employee benefits
International Accounting Standard No. 19 (“IAS 19”) “Employee Benefits” requires actuarial valuation methods to be developed to estimate
the enterprise’s obligation under defined benefit plans. The liability for this retirement pay obligation is recorded in the accompanying consolidated financial statements at its present value using a discount rate of 4.7%.
27. Provisions (continued)
Non-current provisions: (continued)
Movement in the reserve for employee termination benefits as at 31 December 2010 and 2009 are as follows:
2010
27,776
9,990
(8,114)
889
(799)
29,742
Opening balance
Provision set/reversed during the period
Payments made during the period
Unwind of discount
Effect of change in foreign exchange rate
Closing balance
2009
26,717
6,350
(5,410)
1,534
(1,415)
27,776
Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of income as incurred.
The Group incurred $5,243, $3,694 and $4,182 in relation to defined contribution retirement plan for the years ended 31 December 2010,
2009 and 2008 respectively.
Total charge for the employee termination benefits is included in the statement of income.
Legal
95
627
722
Other
467
223
690
Total
5,676
51,323
266
(210)
57,055
Legal provisions are set for the probable cash outflows related to legal disputes.
The Group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets
were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the liability.
The above mentioned additions to obligations for dismantling, removing and site restoration during the period are non-cash transactions
recorded against property, plant and equipment.
Current provisions:
The liability is not funded, as there is no funding requirement.
26. Deferred income
Deferred income primarily consists of right of use sold but not used by prepaid subscribers and it is classified as current as at 31 December
2010. The amount of deferred income is $164,186 and $248,518 as at 31 December 2010 and 2009, respectively.
27. Provisions
Non-current provisions:
Provision made/used during the year
Unwind of discount
Provision made/used during the year
Unwind of discount
Obligations for
dismantling, removing
and site restoration
5,114
50,473
266
(210)
55,643
Legal
95
95
Obligations for
dismantling, removing
and site restoration
4,490
590
34
5,114
Other
467
467
Total
4,490
1,152
34
5,676
Provision made during the year
Provisions used during the year
Unwind of discount
Provision made/(reversed) during the year
Provisions used during the year
Unwind of discount
Legal
44,258
158,580
(40,018)
5,098
167,918
Bonus
38,091
36,784
(37,996)
235
135
37,249
Total
82,349
195,364
(78,014)
235
5,233
205,167
Legal
167,918
59,303
(115,004)
1,885
(2,949)
111,153
Bonus
37,249
45,617
(39,056)
(53)
(1,098)
42,659
Total
205,167
104,920
(154,060)
1,832
(4,047)
153,812
Legal provisions are set for the probable cash outflows related to legal disputes. In Note 32, under legal proceedings section, detailed explanations are given with respect to legal provisions.
The bonus provision totalling to $42,659 comprises mainly the provision for the year ended 31 December 2010 and is planned to be paid in
March 2011.
162
163
28. Trade and other payables
The breakdown of trade and other payables as at 31 December 2010 and 2009 is as follows:
28. Trade and other payables (continued)
Selling and marketing expense accrual is mainly resulted from services received from third parties related to marketing activities of the Group
which are not yet invoiced.
2010
2009
Payables to other suppliers
414,911
354,057
Taxes and withholdings payable
221,872
215,375
Payables to Ericsson companies
98,415
115,980
Selling and marketing expense accrual
61,209
62,783
License fee accrual
53,474
38,289
Roaming expense accrual
21,032
61,783
ICTA share accrual
17,319
18,543
Interconnection payables
11,992
31,957
4,415
5,343
789
1,046
Interconnection accrual
Payables to KKTC Tax Office
Consideration payable in relation to acquisition of Belarusian Telecom
Other
-
97,605
46,548
36,001
951,976
1,038,762
Balances due to other suppliers are arising in the ordinary course of business.
Taxes and withholdings include VAT payable, special communications tax, frequency usage fees payable to ICTA and personnel income taxes.
Payables to Ericsson companies comprise due to Ericsson Turkey, Ericsson Sweden and Ericsson AB arising from fixed asset purchases, site
preparation and other services.
Turkcell is one of parties of two different signed agreements with Ericsson Turkey, namely Supply and Maintenance and Support Service Agreements. In fact, hardware and software responsibility within the scope of Supply Agreement belongs to Ericsson AB. Since, Turkcell signed the
agreement with Ericsson Turkey, Ericsson Turkey transfer its supply responsibility to Ericsson AB with the signed protocol between Ericsson
Turkey, Turkcell and Ericsson AB. Based on the Supply Agreement, Ericsson Turkey committed Turkcell to provide GSM network in operating
condition, spare part, installation, training and documentation. Besides, this agreement provides Turkcell to non-exclusive, untransferable
and perpetual software license for GSM software. According to Maintenance and Support Service Agreement, Ericsson Turkey provides Turkcell problem report processing service, consultancy service and emergency state service. Based on these two agreements, Ericsson AB is the
guarantor for commitments of Ericsson Turkey to Turkcell. For agreements signed between Turkcell and Ericsson Turkey, of which Ericsson
Sweden is the guarantor, parties signed a supplementary agreement on 1 January 2010 and extended the period of GSM service agreement
until 31 December 2010. Tender process for the agreement of year 2011 has not been finalized yet.
In accordance with the license agreement, Turkcell pays 90% of the treasury share, which equals 15% of its gross revenue, to the Turkish
Treasury and 10% as universal service fund to the Turkish Ministry.
Payables to interconnection suppliers arise from voice and SMS termination services rendered by other GSM operators.
Interconnection accrual represents net balance of uninvoiced call termination services received from other operators and interconnection
services rendered to other operators.
Consideration payable in relation to acquisition of Belarusian Telecom represents present value of short-term deferred payments to the seller.
Deferred payment amounting to $100,000 was paid as of 31 December 2010. The remaining consideration is classified under other noncurrent liabilities section (Note 23).
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 29.
29. Financial instruments
Credit risk
Exposure to credit risk:
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was
Due from related parties-non current
Other non-current assets*
Available-for-sale financial assets
Due from related parties-current
Other current assets*
Cash and cash equivalents**
Time deposits maturing in 3 months or more
2010
1,044
15,258
88,897
851,175
56,170
3,294,206
8,201
4,314,951
2009
21,039
11,996
62,398
108,843
783,752
29,284
3,095,329
4,112,641
* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current
assets.
** Cash on hand is excluded from cash and cash equivalents.
The maximum exposure to credit risk for trade receivables arising from sales transactions including those classified as due from related parties at the reporting date by type of customer is:
Receivable from subscribers
Receivables from distributors and other operators
Other
164
Note
33
16
15
33
18
19
20
15
2010
798,404
71,044
3,199
872,647
2009
710,747
85,949
1,312
798,008
165
166
(145,143)
(787,629)
(175,196)
(533,636)
(1,017,989)
(2,659,593)
* Advances taken, taxes and withholding payable are excluded from trade and other payables.
2,491,281
(144,664)
(1,038,629)
(530,085)
(229,158)
(912,194)
(2,854,730)
2,662,201
TOTAL
(75,155)
(75,155)
63,152
(58,541)
53,435
Financial liability in
relation to put option
(58,541)
(100,000)
(100,000)
(200,000)
172,924
(100,000)
(100,000)
78,402
Consideration
payable in relation
to acquisition of
Belarusian Telecom
-
-
-
-
(5,244)
(14,884)
(14,884)
(5,244)
5,244
14,780
-
-
-
-
(10,787)
(5,896)
(5,896)
(10,787)
5,896
10,760
Bank overdraft
(728,795)
(728,795)
723,222
(681,669)
676,187
(681,669)
(26)
(2,789)
(1,385)
(1,383)
(5,583)
5,245
(16,622)
(5,576)
(1,909)
(1,993)
(24,472)
(16,767)
(695,681)
(166,987)
(5,420)
-
(432,251)
(267,683)
(46,659)
(1,583,273)
1,481,461
25,253
(17,887)
(10,155)
(960,660)
(13,852)
(5,150)
(523,026)
or less
cash flows
(9,165)
(218,000)
years
months
6-12
Carrying
Amount
years
years
(2,273)
(3,206)
Trade and other
payables*
135%
(29,306)
182%
Current cash debt coverage ratio
23,695
2,296,511
Finance lease
liabilities
1,812,915
(208,363)
Current liabilities
(48,327)
3,095,486
(1,920,204)
3,302,163
32,627
1,781,199
2009
Secured bank loans
2010
Liquidity risk
Current cash debt coverage ratio as at 31 December 2010 and 2009 is as follows:
Liabilities
The allowance accounts in respect of trade receivables and due from related parties is used to record impairment losses unless the Group is
satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable and is written off against the
trade receivables and due from related parties directly.
years
The impairment loss recognized of $126,257 for the period ended 31 December 2010 relates to its estimate of incurred losses in respect of
trade receivables and due from related parties.
months
4,119
268,157
or less
(7,630)
376,808
cash flows
Closing balance
Amount
More
than 5
(7,978)
2-5
75,379
(9,976)
1-2
126,257
Write-off
6-12
Impairment loss recognized
31 December 2010
196,637
6 months
2009
268,157
29. Financial instruments (continued)
Liquidity risk (continued)
The following are the contractual maturities of financial liabilities, including estimated interest payments:
2010
Opening balance
Contractual
Impairment losses
The movement in the allowance for impairment in respect of trade receivables and due from related parties as at 31 December 2010 and
2009 is as follows:
6 months
31 December 2009
1-2
2009
746,545
38,406
47,031
81,310
342
913,634
Contractual
2010
738,697
74,665
56,004
71,750
941,116
Carrying
Not past due
1-30 days past due
1-3 months past due
3-12 months past due
1-5 years past due
Non-derivative
financial
Credit risk (continued)
Exposure to credit risk: (continued)
The aging of trade receivables and due from related parties as at 31 December 2010 and 2009:
years
2-5
-
(20,671)
Years
More than 5
167
Exposure to currency risk
Exposure to currency risk (continued)
The Group’s exposure to foreign currency risk based on notional amounts is as follows:
The following significant exchange rates are applied during the period:
Average Rate
31 December
31 December
2010
2009
USD
Foreign currency denominated assets
Other investments
Foreign currency denominated liabilities
Loans and borrowings-non current
Loans and borrowings-current
Net exposure
Foreign currency denominated liabilities
Loans and borrowings-non current
Loans and borrowings-current
Net exposure
168
SEK
20,605
1
22,295
31,121
2,372
1,324,795
1,401,189
201
825
18,605
71
99,734
119,436
10
1
11
(830,434)
(189,105)
(514,439)
(366,279)
(4,199)
(1,904,456)
(503,267)
(65,562)
(1,194)
(66,756)
52,680
(722)
(722)
(711)
31 December 2010
EUR
SEK
USD
Foreign currency denominated assets
Other investments
31 December 2009
EUR
1
8,000
17,969
33,566
4,579
1,494,743
1,558,858
148
20,482
1,086
52,842
74,558
10
1
11
(1,405,907)
(179,865)
(350,172)
(161,901)
(754)
(2,098,599)
(539,741)
(28,132)
(1,872)
(42,849)
(808)
(73,661)
897
11
TL/USD
TL/EUR
TL/SEK
BYR/USD
HRV/USD
1.5050
1.9931
0.2074
2,978.8
7.9325
1.5495
2.1527
0.2016
2,780.9
7.7975
Reporting Date
31 December
2010
Closing Rate
31 December
2009
1.5460
2.0491
0.2262
3,000.0
7.9617
1.5057
2.1603
0.2082
2,863.0
7.9850
Sensitivity analysis
The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate foreign exchange exposure is composed of all assets and liabilities denominated in foreign currencies. The analysis excludes net foreign currency
investments.
10% strengthening of the TL, HRV, BYR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant.
Profit or loss
2010
2009
USD
EUR
SEK
53,974
(119)
-
50,327
(7,558)
10
10% weakening of the TL, HRV, BYR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased)
profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant.
Profit or loss
2010
2009
USD
EUR
SEK
(53,974)
119
-
(50,327)
7,558
(10)
169
Interest rate risk
Interest rate risk (continued)
Sensitivity analysis (continued)
Cash flow sensitivity analysis for variable rate instruments:
A change of 100 basis points in interest rates as at 31 December 2010 would have increased/(decreased) equity and profit or loss by the
amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is
performed on the same basis as at 31 December 2010 and 2009.
As at 31 December 2010 and 2009 the interest rate profile of the Group’s interest-bearing financial instruments was:
31 December 2010
Note
Fixed rate instruments
Time deposits
USD
EUR
TL
Other
Available-for-sale securities
TL
Time deposits maturing after 3 months
or more
USD
BYR
Finance lease obligations
USD
EUR
USD fixed rate loans
Secured bank loans
USD fixed rate loans
AZN fixed rate loans
Variable rate instruments
Available-for-sale securities
EUR
Secured bank loans
BYR floating rate loans
USD floating rate loans
EUR floating rate loans
BYR floating rate loans
AZN fixed rate loans
Effective
Interest
Rate
Carrying
Amount
31 December 2009
Effective
interest
Carrying
rate
Amount
20
3.5%
3.9%
9.1%
8.7%
1,469,797
68,640
1,561,282
180
3.6%
2.3%
10.1%
17.6%
1,425,695
146,183
1,318,614
3,633
15
-
-
14.8%
62,109
7.0%
10.5%
8,000
201
-
-
15
24
4.6%
3.4%
(2,733)
(20,962)
5.7%
-
(5,245)
-
4.2%
(591,463)
3.7%
(452,897)
5.2%
22.5%
(6,210)
(189)
-
-
-
-
5.1%
289
10.9%
(26,228)
12.3%
(25,253)
3.6%
7.8%
22.5%
(1,175,049)
(13,627)
(316)
3.8%
2.1%
-
(1,026,479)
(2,085)
-
24
24
15
24
24
A change of 1% in interest rates for time deposits maturing after 3 months or more would have increased/(decreased) profit or loss by $65
(31 December 2009: nil).
Equity
100 bp decrease
(9,262)
9,262
Cash flow sensitivity (net)
(9,262)
9,262
100 bp increase
100 bp decrease
31 December 2010
Sensitivity analysis
Fair value sensitivity analysis for fixed rate instruments:
A change of 1% in interest rates for available for sale financial assets would have increased/(decreased) equity by nil (31 December 2009: $186).
170
Profit or loss
100 bp increase
31 December 2009
(4,912)
4,912
-
-
Cash flow sensitivity (net)
(4,912)
4,912
-
-
Fair values
The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows:
Note
31 December 2010
Carrying
Fair
Amount
Value
31 December 2009
Carrying
Fair
Amount
Value
Assets carried at fair value
Available for sale securities
15
-
-
62,398
62,398
62,398
62,398
Assets carried at amortized cost
Due from related parties-long term
Other non-current assets*
Due from related parties-short term
Trade receivables and accrued income***
Other current assets*
Time deposits maturing after 3 months or more
33
16
33
18
19
20
15
1,044
15,258
88,897
851,175
56,170
3,302,163
8,201
4,322,908
1,044
15,258
88,897
851,175
56,170
3,302,163
8,201
4,322,908
21,039
11,996
108,843
783,752
29,284
3,095,486
4,050,400
21,039
11,996
108,843
783,752
29,284
3,095,486
4,050,400
Liabilities carried at fair value
Put option for Best acquisition
23
(53,435)
(53,435)
(53,435)
(53,435)
(63,152)
(63,152)
(63,152)
(63,152)
Liabilities carried at amortized cost
Loans and borrowings-long term
Bank overdrafts
Loans and borrowings-short term
Trade and other payables**
24
20
24
28
33
(1,407,316)
(5,896)
(430,205)
(676,187)
(10,760)
(1,407,316)
(5,896)
(430,205)
(676,187)
(10,760)
(821,179)
(5,244)
(690,780)
(723,222)
(14,780)
(821,179)
(5,244)
(690,780)
(723,222)
(14,780)
23-28
(78,402)
(2,608,766)
(78,402)
(2,608,766)
(172,924)
(2,428,129)
(172,924)
(2,428,129)
Deferred payments
* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.
** Advances taken, taxes and withholdings payable are excluded from trade and other payables.
*** Includes non-current trade receivables amounting to $35,024.
The methods used in determining the fair values of financial instruments are discussed in Note 4.
171
Fair values (continued)
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method:
Fair values (continued)
Fair value hierarchy (continued)
Total gains or losses included in profit or loss for the period in the following table are presented in the statement of comprehensive income
as follows:
The different levels have been identified as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets and liability, either directly or indirectly.
Level 3: inputs for the asset or liability that are not based on observable market.
31 December 2010
31 December 2009
Available-for sale financial assets
Balance as at 1 January 2010
Total gains or losses:
in profit or loss
in other comprehensive income
Total recognition in equity
Balance as at 31 December 2010
Available-for
sale financial
assets
Financial liability
in relation to put
option
Total
-
(5,447)
(5,447)
-
(5,447)
(5,447)
Total gains or losses included in profit or loss for the period:
Net financing costs
Total gains or losses for the period included in profit or loss for asset
and liabilities held at the end of the reporting period:
Level 1
Level 2
Level 3
Total
-
-
53,435
53,435
53,435
53,435
Level 1
Level 2
Level 3
Total
62,109
62,109
-
289
289
62,398
62,398
-
-
63,152
63,152
63,152
63,152
Available-for sale
financial assets
289
Financial liability in relation
to put option
(63,152)
Total
(62,863)
(289)
-
(5,447)
15,164
(53,435)
(5,447)
(289)
15,164
(53,435)
Net financing costs
30. Operating leases
The Company entered into various operating lease agreements. For the years ended 31 December 2010 2009 and 2008, total rent expenses
for operating leases were $301,309, $287,259 and $263,805 respectively.
The future minimum lease payments under non-cancellable leases are as follows:
Less than one year
Between one and five years
More than five years
2010
18,024
16,107
7,221
41,352
2009
5,804
19,167
8,453
33,424
31. Guarantees and purchase obligations
As at 31 December 2010, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and
purchase of sponsorship and advertisement services amount to $594,910 (31 December 2009: $245,088).
As at 31 December 2010, the Group is contingently liable in respect of bank letters of guarantee obtained from banks given to customs authorities, private companies and other public organizations and provided financial guarantees to subsidiaries totalling to TL 2,413,062 (equivalent
to $1,560,842 as at 31 December 2010) (31 December 2009: TL 1,986,052 equivalent to $1,319,023 as at 31 December 2009).
The table above shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair
value hierarchy.
172
173
32. Commitments and Contingencies
32. Commitments and Contingencies (continued)
License Agreements
License Agreements (continued)
Turkcell:
On 27 April 1998, the Company signed the License Agreement with the Turkish Ministry. In accordance with the License Agreement, the Company was granted a 25 year GSM license for a license fee of $500,000. The License Agreement permits the Company to operate as a standalone GSM operator. Under the License, the Company collects all of the revenue generated from the operations of its GSM network and pays
the Turkish Treasury and Turkish Ministry an treasury share and universal service fund, respectively, equal to 15% of its gross revenues from
Turkish GSM operations. On 25 June 2005, the Turkish government declared that GSM operators are required to pay 10% of their existing
monthly treasury share to the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting
from 30 June 2005, the Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service
fund. Moreover, the Company is obliged to pay 0.35% of its yearly gross revenue once a year as ICTA Fee. The Company is authorized to,
among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages,
issue invoices directly to subscribers, collect payments and deal directly with subscribers.
Turkcell (continued):
In February 2002, the Company renewed its License with the ICTA, and became subject to a number of new requirements, including those
regarding the build-out, operation, quality and coverage of the Company’s GSM network, prohibitions on anti-competitive behaviour and
compliance with national and international GSM standards. Failure to meet any requirement in the renewed License, or the occurrence of
extraordinary unforeseen circumstances, can also result in revocation of the renewed License, including the surrender of the GSM network
without compensation, or limitation of the Company’s rights thereunder, or could otherwise adversely affect the Company’s regulatory status.
Certain conditions of the renewed License Agreement include the following:
Coverage: The Company had to attain geographical coverage of 50% and 90% of the population of Turkey with certain exceptions within three
years and five years, respectively, of the License’s effective date.
Service offerings: The Company must provide certain services in addition to general GSM services, including free emergency calls and technical assistance for subscribers, free call forwarding to police and other public emergency services, receiver-optional short messages, video
text access, fax capability, calling and connected number identification and restrictions, call forwarding, call waiting, call hold, multi-party
and third-party conference calls, billing information and barring of a range of outgoing and incoming calls.
Service quality: In general, the Company must meet all the technical standards determined and updated by the European Telecommunications
Standards Institute and Secretariat of the GSM MoU. Service quality requirements include that call blockage cannot exceed 5% and unsuccessful calls cannot exceed 2%.
Tariffs: ICTA sets the initial maximum tariffs in TL and USD. Thereafter, the revised License provides that the ICTA will adjust the maximum
tariffs at most every nine months or, if necessary, more frequently. The Company is free to set its own tariffs up to the maximum tariffs.
Rights of the ICTA, Suspension and Termination:
The revised License is not transferable without the approval of the ICTA. In addition, the License Agreement gives the ICTA certain monitoring
rights and access to the Company’s technical and financial information and allows for inspection rights, and gives certain rights to suspend
operations under certain circumstances. Also, the Company is obliged to submit financial statements, contracts and investment plans to the
ICTA.
The Company is entitled to any revenues collected during such period and the Licensee’s term will be extended by the period of any suspension. The revised License may also be terminated upon a bankruptcy ruling against the Company or for other license violations, such as
operating outside of its allocated frequency ranges, and the penalties for such violations can include fines, loss of frequency rights, revocation
of the license and confiscation of the network management centre, the gateway exchanges and central subscription system, including related
technical equipment, immovables and installations essential for the operation of the network.
Based on the enacted law on 3 July 2005 with respect to the regulation of privatization, gross revenue description based for the calculation
of treasury share and universal service fund has been changed. According to this new regulation, interest charges for late collections, and
indirect taxes such as VAT, and other expenses are excluded from the description of gross revenue. Calculation of gross revenue for treasury
share and universal service fund according to the new regulation is effective after Council of State’s approval on 10 March 2006.
3G License
On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and
infrastructure. Turkcell acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding VAT).
The license is effective for duration of 20 years starting from 30 April 2009. According to the agreement, operators have provided IMT 2000/
UMTS services starting from 30 July 2009.
In accordance with the 3G License Agreement, the Company had to cover 100% of the population within the borders of all metropolitan
municipalities and borders of all cities and municipalities in three and six years, respectively. Moreover, the Company had to cover 100% of
the population in all settlement areas with a population higher than 5,000 and 1,000 within eight and ten years, respectively following the
effective date of the agreement.
Belarusian Telecom:
Belarusian Telecom owns a license issued on 28 August 2008 for a period of 10 years and is valid till 28 August 2018. According to the Sale
and Purchase Agreement signed, the State Property Committee of the Republic of Belarus committed to grant the license from the acquisition
date of 26 August 2008 for a period of 10 years and such license shall be extended for an additional 10 years for an insignificant consideration. State Property Committee of the Republic of Belarus has fulfilled its obligations stated in Sale and Purchase Agreement and submitted
the related official documents in December 2009. According to the current legislation of the Republic of Belarus, the license extension will be
made upon the expiration of its validity period. Therefore, Belarusian Telecom shall apply for extension in August 2018. In the consolidated
financial statements, amortization charge is recorded on the assumption that the license will be extended.
Under its license, Belarusian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the
date of the license until 2018. However, Belarusian Telecom’s period of execution in relation to coverage requirements are extended for three
years starting from the acquisition date.
The ICTA may suspend the Company’s operations for a limited or an unlimited period if necessary for the purpose of public security and national defence. During period of suspension, the ICTA may operate the Company’s GSM network.
174
175
Astelit:
Astelit owns two GSM activity licenses, one is for GSM–900, the other is for DCS–1800. As at 31 December 2010, Astelit owns twenty four
GSM–900, DCS 1800, D-AMPS and microwave Radiorelay frequency licenses which are regional or national. In addition to the above GSM
licenses, Astelit owns three licenses for local fixed line phone connection with wireless access using D-AMPS standard, one license for international and long distance calls and eight PSTN licenses for seven regions of Ukraine. Also, Astelit holds number range – two NDC codes for
mobile network and local ranges for PSTN and D-AMPS licenses.
Kibris Telekom:
On 27 April 2007, Kibris Telekom signed the License Agreement for Installation and Operation of a Digital, Cellular, Mobile Telecommunication
System (“Mobile Communication License Agreement”) with the Ministry of Communications and Works of the Turkish Republic of Northern
Cyprus which is effective from 1 August 2007, replacing the existing GSM-Mobile Telephony System Agreement dated 25 March 1999. In
accordance with the Mobile Communication License Agreement, Kibris Telekom was granted an 18 year GSM 900, GSM 1800 and IMT 2000/
UMTS license for GSM 900, GSM 1800 frequencies while the usage of IMT 2000/UMTS frequency bands is subject to the fulfilment of certain
conditions.
According to licenses, Astelit should adhere to state sanitary regulations to ensure that equipment used does not injure the population by
means of harmful electro-magnetic emissions. Licenses require Astelit to inform authorities about start/end of operations in three months;
about changes in incorporation address in 30 days. Also, Astelit must present all the required documents for inspection by Ukrainian Telecommunications Authority at their request. The Ukrainian Telecommunications Authority may suspend the operations of Astelit for a limited or an
unlimited period if necessary because of the expiration of licenses, upon mutual consent, or in case of violation of terms of radio frequencies
use. If such a violation is determined, Ukrainian Telecommunications Authority notifies Astelit of provisions violated and sets deadline for
recovery. If the deadline is not met, licenses may be terminated.
Inteltek:
Inteltek signed a contract on 30 July 2002 which provides for the installation, support and operation of an on-line central betting system as
well as maintenance and support for the provision of sport betting games. The Central Betting System Contract was scheduled to expire on
30 March 2008.
Inteltek signed another contract with General Directorate of Youth and Sports (“GDYS”) on 2 October 2003 which authorized Inteltek to establish and operate a risk management center and become head agent for fixed odds betting. The Fixed Odds Betting Contract was scheduled
to expire in October 2011. However, in relation to the lawsuits related to the operations of Inteltek, GDYS ceased the implementation of the
Fixed Odds Betting Contract starting from March 2007. Following this annulment decision, Spor Toto and Inteltek signed a new Fixed Odds
Betting Contract on 15 March 2007, with less-advantageous conditions compared to previous contract signed in 2003, which expired on 1
March 2008.
Inteltek signed a new Fixed Odds Betting Contract with Spor Toto, which took effect on 1 March 2008. At the same time, Inteltek signed a new
Central Betting System Contract with Spor Toto, which took effect on 31 March 2008 as having the same conditions with the current contract
and both contracts were to be valid for one year atmost until the operation started as a result of the new tender.
On 12 August 2008, Spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting in sports
games. Inteltek gave the best offer for the tender. On 29 August 2008, Inteltek signed a contract with Spor Toto, receiving the rights to run the
sport betting business for the next ten years. New commission rate, which is 1.4% of gross takings (until 1 March 2009, commission rate was
7% of gross takings), is applicable starting from March 2009. Under the terms of this contract, Inteltek guaranteed TRY 1,500,000 (equivalent
to $970,246 as of 31 December 2010) turnover for the first year of the contract, and has given similar guarantees for future years.
At 31 December 2010, the total amount of guarantee obtained from banks and provided to Spor Toto amounted to TRY 161,298 (equivalent to
$63,353 as at 31 December 2010) (31 December 2009: TRY 159,752 equivalent to $106,098 as at 31 December 2009). The targeted payout is
50% of the turnover balance. The fact that the Company is obliged to pay the difference between the realized and the targeted payout balances, whenever the pool balance falls negative, creates an excess payment risk.
176
On 14 March 2008, Kibris Telekom was awarded a 3G infrastructure license at a cost of $10,000 including VAT, which was paid at the end of
March 2008. Under the terms of the license, the system had to be operational by mid-October 2008. In 2010, Kibris Telekom has completed
the radio transmision (airlink) project providing direct international voice and data connection with mainland and started using it from the
third quarter of 2010. The Project is the only direct connection in Turkish Republic of Northern Cyprus besides Telecommunication Authority.
Under the Mobile Communication License Agreement, Kibris Telekom also pays the tax authorities of Turkish Republic of Northern Cyprus a
treasury share on monthly basis equal to 15% of gross revenues excluding accrued interest charges for the late payments, indirect taxes and
accrued revenues for reporting purposes, payments made to third parties for value added services, interconnection revenues, roaming income
from own subscribers after the related payment made to other operators.
Superonline:
Superonline was authorized to Fixed Telephony, Satellite Communication Service, Infrastructure, Wired and Wireless Internet Service Provider
and Mobile Virtual Network Operator.
Authorization By-Law for Telecommunication Services and Infrastructure published in Official Gazette on dated 26 August 2004 has been
abrogated By-Law on Authorization for Electronic Communications Sector dated 28 May 2009. According to this abrogation, Superonline’s
“License” on Fixed Authority Services, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Service has been
changed to “Authority” on Fixed Authority Services, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Service, Cable Broadcast Service and Superonline’s “License” on Long Distance Traffic Carrying Services License has been changed to “Authority”
relevant to the Fixed Telephony Services.
In accordance with the new legislation issued by ICTA, the infrastructure operator authorization right of Superonline has become infinite. As
a result, Superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years.
Azerinteltek:
Azerinteltek, in which Inteltek’s shareholding is 51%, was established on 19 January 2010, and authorized to organize, operate, manage and
develop the fixed-odds and para-mutual sports betting games by the Ministry of Youth and Sports of Azerbaijan for a period of 10 years. The
agreement signed with Azeridmanservis which is founded by the Ministry of Youth and Sports of Azerbaijan is renewed with the same terms
and conditions in accordance with the new legislation enforced in Azerbaijan regarding the betting games based on sports on 30 September
2010.
Azerinteltek officially commenced to conduct sports betting games on 18 January 2011.
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Interconnection Agreements (continued)
Interconnection Agreements
The Company has entered into interconnection agreements with a number of operators in Turkey and overseas including Turk Telekom, Telsim Mobil Telekomunikasyon Hizmetleri AS (“Telsim”), Vodafone Telekomunikasyon AS (“Vodafone”), Avea Iletisim Hizmetleri AS (“Avea”),
Milleni.com GMbH and Globalstar Avrasya Uydu Ses ve Data Iletisim AS (“Globalstar”).
There are no minimum payment obligations under the interconnection agreements; however, failure to carry the counterparty’s traffic may
expose the Company to financial and other penalties or loss of interconnection privileges for its own traffic. On 10 February 2010, ICTA decreased “Standard Interconnection Tariffs” for the Company from full TL 0.0655 (equivalent to $0.0424 as at 31 December 2010) to full TL 0.0313
(equivalent to $0.0202 as at 31 December 2010) for voice calls and left the tariff unchanged at full TL 0.0775 (equivalent to full $0.0501 as
at 31 December 2010) for video calls, effective from 1 April 2010. The Company started to recognize interconnection revenues and cost in
accordance with “Standard Interconnection Reference Tariffs” starting from 1 April 2010.
The Access and Interconnection Regulation (the “Regulation”) became effective when it was issued by the ICTA on 23 May 2003.
The Regulation is driven largely by a goal to improve the competitive environment. Under the Regulation, the ICTA may compel all
telecommunications operators to accept another operator’s request for use of and access to its network. All telecommunications operators in
Turkey may be required to provide access to other operators on the same terms and qualifications provided to their shareholders, subsidiaries
and affiliates.
In accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) were obliged to renew their interconnection agreements within two months following the issuance of the Regulation. As a result of intervention by the ICTA, the Company entered into supplemental agreements with Turk Telekom on 10 November 2003, Telsim on 21 November 2003, and Globalstar on 11 December
2003, with amended tariffs and tariff adoption procedures. The interconnection agreement with Avea (formerly TT&TIM) was last renewed on
20 January 2006. On 24 May 2006, shares of Telsim were transferred to Vodafone and a new interconnection agreement was signed between
the Company and Vodafone at the end of July 2006.
On 21 February 2005, Superonline and Milleni.com GMbH have signed an agreement to provide telecommunications services to each other
whereby Milleni.com GMbH may convey calls to the Company’s switch and the Company may convey calls to Milleni.com GMbH’s switch, in
both cases, for onward transmission to their destinations.
In addition, the ICTA has required operators holding significant market power, as well as Turk Telekom, to share certain facilities with other
operators under certain conditions and to provide co-location on their premises for the equipment of other operators at a reasonable price.
The ICTA has also required telecommunications operators to provide number portability, which means allowing users to keep the same phone
numbers even after they switch from one network to another starting from 9 November 2008.
Under a typical interconnection agreement, each party agrees, among other things to permit the interconnection of its network with the
Company’s network to enable calls to be transmitted to, and received from, the GSM system operated by each party in accordance with technical specifications set out in the interconnection agreement. Typical interconnection agreements also establish understandings between the
parties relating to a number of key operational areas, including call traffic management, quality and performance standards, interconnection
interfaces and other technical, operational and procedural aspects of interconnection.
As at 31 December 2010, the management believes that the Group is in compliance with the above mentioned license and interconnection
agreements’ conditions and requirements in all material respects.
Legal Proceedings
The Group is involved in various claims and legal actions arising in the ordinary course of business described below.
Dispute with Turk Telekom with respect to call termination fees
Upon application of Turk Telekom, the ICTA has set temporary (and after final) call termination fees for calls to be applied between Turk Telekom and the Company starting from 10 August 2005. However, Turk Telekom did not apply these termination fees for the international calls.
Therefore, on 22 December 2005, the Company filed a lawsuit against Turk Telekom to cease this practice and requested collection of its damages totalling to TL 11,970 (equivalent to $7,743 as at 31 December 2010) including principal, interest and penalty on late payment covering
the period from August 2005 until October 2005. Expert reports and supplementary expert reports which are obtained for the lawsuit, affirm
justification of the Company. The lawsuit is still pending.
On 19 December 2006, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by ICTA for the period between November 2005 and October 2006 amounting to TL 23,726 (equivalent
to $15,347 as at 31 December 2010) including principal, interest and penalty on late payment. The Court decided to consolidate this lawsuit
with the first lawsuit dated 22 December 2005.
On 2 November 2007, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by ICTA for the period between November 2006 and 1 March 2007 amounting to TL 6,836 (equivalent to
$4,422 as at 31 December 2010) including principal, interest and penalty on late payment. The Court also decided to consolidate this lawsuit
with the first lawsuit dated 22 December 2005.
Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated
financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
The Company’s interconnection agreements usually provide that each party will assume responsibility for the safe operation of its own network. Each party is also typically responsible for ensuring that its network does not endanger the safety or health of employees, contractors,
agents or customers of the other party or damage interfere with or cause any deterioration in the operation of the other party’s network.
Interconnection agreements also specify the amount of the payments that each party will make to the other for traffic originated on one
network but switched to the other. These payments vary by contract, and in some cases, may require the Company to pay the counterparty
less, the same amount, or a greater amount per minute, for traffic originating on the Company’s network but switching to the counterparty’s
network, than it receives for a similar call originating on another network and switched to the Company’s network.
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Dispute on Turk Telekom Transmission Lines Leases
Effective from 1 July 2000, Turk Telekom annulled the discount of 60% that it provided to the Company based on its regular ratio, which had
been provided for several years, and, at the same time, Turk Telekom started to provide a discount of 25% being subject to certain conditions.
The Company filed a lawsuit against Turk Telekom for the application of the agreed 60% discount. However, on 30 July 2001, the Company
had been notified that the court of appeal upheld the decision made by the commercial court allowing Turk Telekom to terminate the 60%
discount. Accordingly, the Company paid and continues to pay transmission fees to Turk Telekom based on the 25% discount. Although Turk
Telekom did not charge any interest on late payments at the time of such payments, the Company recorded an accrual amounting to a nominal
amount of TL 3,023 (equivalent to $1,955 as at 31 December 2010) for possible interest charges as at 31 December 2000. On 9 May 2002, Turk
Telekom requested an interest amounting to a nominal amount of TL 30,068 (equivalent to $19,449 as at 31 December 2010).
Legal Proceedings (continued)
The Company did not agree with Turk Telekom’s interest calculation and, accordingly, obtained an injunction from the commercial court to
prevent Turk Telekom from collecting any amounts relating to this interest charge. Also, the Company initiated a lawsuit against Turk Telekom
on the legality of such interest. On 25 December 2008, the Court rejected the case. The Company appealed the decision. The Supreme Court
rejected the appeal. The Company applied for the correction of the decision. The Supreme Court rejected the correction of the decision request
and the decision is finalised.
Based on the management opinion, the Company accrued provision of TL 91,864 (equivalent to $59,420 as at 31 December 2010) and the
Company netted off the whole amount from the receivables from Turk Telekom as at 31 December 2010.
Additionally, a lawsuit is commenced against Turk Telekom on 28 October 2010 to collect the receivable amounting to principal of TL 23,378
(equivalent to $15,122 as at 31 December 2010), overdue interest of TL 3,092 (equivalent to $2,000 as at 31 December 2010) and delay fee of
TL 1,925 (equivalent to $1,245 as at 31 December 2010), with the contractual default interest until payment date on the ground that the above
mentioned exercise is contrary to the term of the contract which is effective for the year 2000, Turk Telekom has already collected the whole
amount which is subjected to the related court decision as of 31 October 2009 and Turk Telekom collected additional receivable.
Dispute regarding the Fine Applied by the Competition Board
The Competition Board commenced an investigation of business dealings between the Company and the mobile phone distributors in October
1999. The Competition Board decided that the Company disrupted the competitive environment through an abuse of a dominant position in
the Turkish mobile market and infringements of certain provisions of the Law on the Protection of Competition. As a result, the Company was
fined a nominal amount of approximately TL 6,973 (equivalent to $4,510 as at 31 December 2010) and was enjoined to cease these infringements. The Company initiated a lawsuit before Council of State for the injunction and cancellation of the decision. On 15 November 2005, the
Court cancelled the Competition Board’s decision.
After the cancellation of the Competition Board’s decision, the Competition Board has given the same decision again on 29 December 2005.
On 10 March 2006, the Company initiated a lawsuit before Council of State for the injunction and cancellation of the Competition Board’s
decision dated 29 December 2005. On 13 May 2008, Council of State dismissed the lawsuit. The Company appealed the decision. Appeal
process is still pending.
Based on the decision of Competition Board, Ankara Tax Office requested the Company to pay TL 6,973 (equivalent to $4,510 as at 31 December
2010) through the payment order dated 4 August 2006. On 25 September 2006, the Company made the related payment and initiated a lawsuit for
the cancellation of this payment order. The court dismissed the lawsuit, and the Company appealed this decision. On 17 March 2009, Council of State
reversed the judgement of the Local Court. Local Court decided in line with the decision of Council of State. On 18 December 2009, the Court rejected
the case and the Company also appealed this decision. Council of State reversed the judgement of the Instance Court. The lawsuit is still pending.
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Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing Activities
The Competition Board decided to initiate an investigation in order to identify whether the Company maintains exclusive activities on mobile
marketing and their appropriateness with respect to competition rules. On 23 December 2009, Competition Board decided that the Company
violates competition rules in GSM and mobile marketing services and fined the Company amounting to TL 36,072 (equivalent to $23,332 as
at 31 December 2010). The payment was made within 1 month following the notification of the decision of the Competition Board. Therefore,
25% discount was applied and TL 27,054 (equivalent to $17,499 as at 31 December 2010) is paid as the monetary fine on 25 May 2010. The
Company filed a legal case on 25 June 2010 for the suspension of execution and cancellation of the aforementioned decision. The Court rejected the Company’s suspension of execution request. The Company objected to the decision. The lawsuit is still pending.
Avea, depending on the Competition Board decision, initiated a lawsuit against the Company claiming a compensation from the Company for
its damages amounting to TL 1,000 (equivalent to $647 as at 31 December 2010), with reservation of further claims, on the ground that the
Company violated the competition. The lawsuit is still pending.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognised in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December
2009: None).
Dispute on National Roaming Agreement
The Company conducted roaming negotiations in 2001 with İs-Tim Telekomunikasyon Hizmetleri A.S. (“İs-Tim”) which is a GSM operator,
performing since March 2001. On 19 October 2001, upon unsuccessful negotiations, ICTA granted time for the Company until 15 November
2005 to sign the roaming agreement with the determined conditions and requested parties to come to an agreement until 15 November 2001.
The Company initiated a lawsuit on the ground that ICTA has no power of intervention; its proposals are impossible from technical aspects and
unacceptable from economic reasons. Council of State gave a decision on nonneccessity of a new decision on the ground that action which is
subjected to the lawsuit is cancelled by another state council decision. This decision appealed by ICTA. Council of State, Plenary Session of the
Chamber for Administrative Divisions decided to uphold the court decision.
In a letter dated 14 March 2002, the ICTA subjected Is-Tim’s request for national roaming to the condition that it is reasonable, economically
proportional and technically possible. Nevertheless, the ICTA declared that the Company is under an obligation to enter a national roaming
agreement with Is-Tim within a 30 day period. The Company initiated a lawsuit against ICTA. On 14 March 2006, Council of State decided to
cancel the process dated 14 March 2002 but rejected the Company’s request for cancellation of the regulation on procedures and policies with
respect to national roaming. ICTA appealed the decision. Plenary Session of Administrative Law Divisions of the Council of State has decided
to approve the decision of the Council of State.
The ICTA decided that the Company has not complied with its responsibility under Turkish regulations to provide national roaming and fined
the Company by nominal amount of approximately TL 21,822 (equivalent to $14,115 as at 31 December 2010). On 7 April 2004, the Company
made the related payment with its accrued interest. On 27 May 2004, the Company filed a lawsuit. On 3 January 2005, with respect to the
Council of State’s injunction, ICTA paid back nominal amount of TL 21,822 (equivalent to $14,115 as at 31 December 2010).
On 13 December 2005, Council of State decided the cancellation of the administrative fine but rejected the Company’s request for cancellation
of the regulation on procedures and policies with respect to national roaming. ICTA appealed the decision. The appeal process is still pending.
Plenary Session of Administrative Law Divisions of the Council of State has decided to approve the decision of the Council of State. On 22 July
2010, the Company initiated a lawsuit against ICTA for the compensation of TL 7,111 (equivalent to $4,600 as at 31 December 2010), the total
amount of the damage of the Company accrued interest between the period when the Company made the payment and ICTA returned the
same to the Company as the result of the stay of order decision.
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Dispute on National Roaming Agreement (continued)
Dispute on Deposits at Banks
The Company has disputes in connection with some accounts at two banks which are deemed to be raised as a result of irregularities in such
banks and parties initiated lawsuits to each other regarding such disputes. It has been informed that a nominal of 3,814 TL (equivalent to
$2,467 as at 31 December 2010) was blocked as of 31 December 2001. The Company has recorded that amount as expense to its consolidated
financial statements. The bank claims a nominal amount of 3,785 TL (equivalent to $2,448 as at 31 December 2010), excluding interest, in
addition to the aforementioned amount. The Company initiated a lawsuit in the total of the above mentioned amounts against the other bank.
In the end of the jurisdiction, the Court, on 27 April 2004, decided the Company to pay $2,629 as principal and 40% of such amount as rejection of the execution compensation. Such decision became final on 11 October 2004. The Company made a payment of 7,615 TL (equivalent
to $4,926 as at 31 December 2010) on 10 December 2004 to 14th Execution Office of Istanbul.
On 27 October 2006, Telecom Italia SPA and TIM International N.V. initiated a lawsuit against the Company claiming that the Company violated
competition law since demand of roaming has not been met. Telecom Italia SPA and TIM International N.V. requested $2,000 with respect to
this claim. The Court rejected the case. Such decision has been appealed by Telecom Italia SPA and TIM International N.V. The appeal process
is still pending.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December
2009: None).
Dispute regarding of the Fine Applied by ICTA on pricing applications of the Company
On 7 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 4,008 (equivalent to $2,592 as at 31 December 2010) for misinforming the Authority and TL 374 (equivalent to $242 as at 31 December 2010) for making some subscribers suffer. The
payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL 3,287
(equivalent to $2,126 as at 31 December 2010) is paid in total as the administrative fine on 9 June 2010. The Company filed two lawsuits on
9 July 2010 for the suspension of execution and cancellation of the aforementioned decision. The Court rejected the Company’s suspension of
execution requests and the Company objected to the decisions but the objections are rejected. The lawsuits are still pending.
Since it is not virtually certain that an inflow of economic benefits will arise, no contingent asset is recognized in the consolidated financial
statements as at and for the year ended 31 December 2010.
Dispute regarding the Fine applied by ICTA on tariffs above upper limits
On 15 October 2009, ICTA decided to initiate an investigation stating that the Company applied tariffs above upper limits announced by ICTA.
On 21 December 2009, the Company initiated a lawsuit for the cancellation of ICTA’s decision. The case is still pending.
On 21 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 53,467 (equivalent to $34,584 as at 31 December 2010) by claiming that the Company applied tariffs above the upper limits of GSM-GSM in GSM Upper Limits Table approved by ICTA.
The payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL
40,100 (equivalent to $25,938 as at 31 December 2010) is paid as the administrative fine on 3 June 2010. The Company filed a lawsuit on 28
June 2010, for the cancellation of the aforementioned decision. The Court overruled the suspension of execution claim, the Company objected
to the decision and the Court accepted this objection and decided for the suspension of the execution. Accordingly, ICTA paid back TL 40,100
(equivalent to $25,938 as at 31 December 2010) on 27 January 2011. An income accrual of the same amount has been recognized in the
consolidated financial statements as of 31 December 2010 (31 December 2009: None).
Amount to be reimbursed to the subscribers is calculated as TL 46,228 (equivalent to $29,902 as at 31 December 2010) and deducted from
revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made
in January 2010.
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In the lawsuit initiated against the other bank, the Court decided in favour of the Company on 1 March 2005. The bank appealed the decision
and the Company replied the same. On 3 April 2006, Supreme Court of Appeals decided the reversal of the Court’s decision in favour of the
defendant. The Court abided by the decision of the Supreme Court of Appeals. The lawsuit is pending. The Company has not reflected any
amount in connection with this matter in its consolidated financial statements prepared as at and for the year ended 31 December 2010.
Dispute on Special Communication Taxation Regarding Prepaid Card Sales
Tax Office imposed tax penalty in the total amount of TL 47,130 (equivalent to $30,485 as at 31 December 2010) and TL 89,694 (equivalent to
$58,017 as at 31 December 2010) based on the ground that the Company had to pay special communication tax over the discounts applied
to the distributors for the wholesales for the years 2003 and 2004, respectively. On 31 December 2008 and 18 December 2009, the Company
initiated lawsuits before the court. The Company requested to await until the completion of settlement procedure in the lawsuit initiated on 31
December 2008. Since the Company and the Ministry of Finance Settlement Commission have settled on the amounts subjected to the lawsuits
as explained in the following paragraph, the Company has withdrawn from the lawsuits.
According to the settlement made with the Ministry of Finance Settlement Commission on 1 June 2010, special communication tax and penalty
was settled at TL 1,489 (equivalent to $963 as at 31 December 2010) and TL 2,834 (equivalent to $1,833 as at 31 December 2010) for the
years 2003 and 2004, respectively. In addition, late payment interest was settled at TL 3,570 (equivalent to $2,309 as at 31 December 2010)
and TL 5,295 (equivalent to $3,425 as at 31 December 2010) for the years 2003 and 2004, respectively. The aforementioned amounts were
paid on 27 July 2010.
Provision set for the above mentioned special communication taxes, penalty and late payment interest was TL 64,653 (equivalent to $41,820
as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2009 and the difference between
the provision amount and settled amount was recognized as income in the consolidated financial statements as at and for the year ended 31
December 2010.
Tax Office imposed tax penalty, including actual tax and penalty for loss of tax, in the total amount of TL 133,617 (equivalent to $86,428 as at
31 December 2010) and TL 139,101 (equivalent to $89,975 as at 31 December 2010) based on the ground that the Company had to pay special
communication tax over the discounts applied to the distributors for the wholesales for the years 2005 and 2006, respectively. The Company
initiated lawsuits for the cancellation of assessments and penalties mentioned above. Lawsuits are still pending.
Company management decided to set provision for the special communication tax for the discounts applied to distributors for the wholesales
between January 2005 and January 2007 amounting to TL 9,087 (equivalent to $5,878 as at 31 December 2010) and accrued interest amounting to TL 12,655 (equivalent to $8,186 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31
December 2010 in line with the settlement gains with respect to same issue in June 2010.
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Dispute on Special Communication Taxation Regarding Prepaid Card Sales (continued)
Dispute with Spor Toto
On 9 November 2005, Spor Toto sent a notification letter to Inteltek claiming that Inteltek is obliged to pay nominal amount of TL 3,292 (equivalent to $2,129 as at 31 December 2010) due to the difference in the reconciliation methods. Spor Toto claims that the reconciliation periods
should be six-month independent periods whereas Inteltek management believes that those periods should be cumulative as stated in the
agreement. Inteltek did not pay the requested amount.
On 28 February 2011, Tax Amnesty Law has been approved by the President of Republic of Turkey and; if applied until 2 May 2011, Turkish
companies gained an alternative method for the settlement of previous disputes with the Tax Authorities related to the years prior to 2009.
On 23 March 2011, Board of Directors of the Company convened and decided to authorize the management to apply to the Turkish Ministry of
Finance in order to restructure the special communication tax imposition pertaining years 2005-2006 and to pursue related negotiations. As
of the date of this report, the Company has not applied to the Tax Authorities related to the Tax Amnesty Law.
Carrying International Voice Traffic
In May 2003, the Company was informed that the ICTA had initiated an investigation against the Company claiming that the Company has
violated Turkish laws by carrying some of its international voice traffic through an operator other than Turk Telekom. The Company is disputing
whether Turk Telekom should be the sole carrier of international voice traffic. On 5 March 2004, ICTA fined the Company a nominal amount
of approximately TL 31,731 (equivalent to $20,525 as at 31 December 2010).
The Company has initiated a lawsuit with the claim of annulment of the related processes and decisions of ICTA, however, paid the administrative fine on 9 April 2004. On 5 November 2004, Council of State gave a decision, which is served to the Company, for stay of execution. With
respect to that decision, ICTA paid back TL 18,000 (equivalent to $11,643 as at 31 December 2010) on 26 January 2005 and deduct a sum of
TL 13,731 (equivalent to $8,882 as at 31 December 2010) from the December frequency usage fee payment. On 26 December 2006, Council of
State decided to accept the Company’s claim and annul the decision of and the fine imposed by the ICTA. ICTA appealed the decision. Appeal
Turk Telekom initiated a lawsuit against the Company with respect to the same issue requesting an amount of TL 450,931 (equivalent to
$291,676 as at 31 December 2010) of which TL 219,149 (equivalent to $141,752 as at 31 December 2010) is principal and TL 231,782 (equivalent to $149,924 as at 31 December 2010) is interest charged until 30 June 2005 and requesting a temporary injunction.
Considering the progresses at the court case, provision is set for the principal amounting to TL 51,942 (equivalent to $33,598 as at 31 December 2010) and accrued interest amounting to a nominal amount of TL 84,567 (equivalent to $54,701 as at 31 December 2010) in the
consolidated financial statements as at and for the year ended 31 December 2010.
In deciding upon the amount of the provision taking, the Company has taken the Turkish law into consideration, not the amounts requested by
Turk Telekom and reflected in the expert report. Specifically, under Turkish Law, a person who is alleging that he has suffered a loss cannot
claim the whole of his possible revenues but only the damages may only be sought in respect of lost profit. For this reason, the provision set
by the Company is calculated by taking Turk Telekom’s estimated loss of profit into consideration rather than the amounts requested by Turk
Telekom and amounts reflected in the expert report. Moreover, the Company obtained an independent opinion dated 23 October 2007 which
supports the management opinion from an expert who is not designated by the Court.
Spor Toto, on behalf of GDYS, initiated a declaratory lawsuit against Inteltek. On 22 February 2007, the Court rejected the case and decided
that the collection risk is with GDYS and Inteltek is not responsible for the uncollected amount of TL 1,527 (equivalent to $988 as at 31 December 2010) and also rejected the demand that the reconciliation period should be six-month independent periods. GDYS appealed the Court’s
decision. Supreme Court rejected the appeal request of GDYS. Following the Supreme Court’s decision, GDYS applied for the correction of the
decision. GDYS’s correction of decision request was rejected by the Court and the decision was finalized.
Based on the decision of Supreme Court, Inteltek reversed the previously accrued principal amount of TL 3,292 (equivalent to $2,129 as at 31
December 2010) and its overdue interest accrual amount of TL 1,894 (equivalent to $1,225 as at 31 December 2010). Furthermore, Inteltek
reclaimed TL 2,345 (equivalent to $1,517 as at 31 December 2010) principal and TL 977 (equivalent to $632 as at 31 December 2010) accrued
interest which was paid in the 1st and 3rd reconciliation periods. Inteltek has initiated a lawsuit on 21 February 2008 to collect this amount.
On 19 March 2009, the court decided in favour of Inteltek. Spor Toto appealed the decision. The Supreme Court ruled to reverse the judgement
of the local court. Inteltek applied for the correction of the decision. The correction of the decision process is still pending.
Dispute on over assessment following the settlement on VAT fine pertaining to International Roaming Agreements
On 9 February 2009, the Company initiated a lawsuit claiming cancellation of interest charges amounting TL 6,609 (equivalent to $4,275 as
at 31 December 2010) which are erroneously calculated after settlement with the Tax Office regarding the VAT and tax penalties accrued due
to roaming agreement for years 2000, 2001 and 2002. The Court rejected the Company’s injunction request. The Company objected to the
decision. The Court rejected the objection of the Company. The lawsuit is pending.
On 5 November 2009, the Court rejected the Turk Telekom’s request amounting to TL 171,704 (equivalent to $111,063 as at 31 December
2010) and accepted the request amounting to TL 279,227 (equivalent to $180,613 as at 31 December 2010). The Company appealed the decision. Also Turk Telekom appealed the decision. Appeal process is still pending.
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Dispute on Iranian GSM tender process
The Company has initiated an arbitration case against Islamic Republic of Iran for not abiding by the provisions of the Agreement on Reciprocal Promotion and Protection of Investments and demanded its sustained loss, on 11 January 2008 at the arbitration court which is established
pursuant to the UNCITRAL arbitration rules. The arbitration process is still pending.
Dispute on Mobile Number Portability
On 29 March 2007, the Company initiated a lawsuit against the ICTA claiming stay of order for and the annulment of the Regulation on Mobile Number Portability issued by the ICTA on 1 February 2007 on the ground that vested rights of the Company arising out the concession
agreement were violated by the said regulation. On 1 June 2009, the Court rejected the case. The Company appealed the decision. The appeal
Besides, related with GSM tender process, Eastasia one of the partners of the consortium established to participate the tender and a wholly
owned subsidiary of the Company, initiated an arbitration process against IEDC, another partner of the consortium, on 29 April 2008 claiming
that IEDC violated the shareholder’s agreement and seeking compensation for damages for the aforementioned breach. The arbitration process is still pending.
Dispute on Turk Telekom Transmission Tariffs
On 19 January 2007, the Company initiated a lawsuit against Turk Telekom claiming that Turk Telekom charged transmission on erroneous
tariffs between 1 June 2004 and 1 July 2005. The Company requested a nominal amount of TL 8,136 (equivalent to $5,263 as at 31 December
2010) including interest. The expert report given to Court is in favor of the Company. The court ruled to obtain supplementary expert report.
The case is still pending.
Dispute on the decision of CMB regarding Audit Committee Member
On 21 July 2006, Alexey Khudyakov was appointed to the audit committee as an observer member. On 26 January 2007 the CMB informed
the Company that Alexey Khudyakov’s current status, as an observer member on the audit committee does not satisfy the requirements under
Article 25 “Committees Responsible for Auditing” of the CMB. The CMB has stated that steps must be taken urgently in order to comply with
Article 25. On 21 March 2007, the Company commenced a lawsuit to suspend the execution and to annul the decision of the CMB.
On 18 January 2008, Ankara 14th Administrative Court rejected the case. The Company appealed the decision with an injunction request.
However Council of State rejected the appeal request. The Company applied for the correction of the decision. The correction of the decision
On 15 October 2008, the CMB decided on an administrative fine amounting to TL 12 (equivalent to $8 as at 31 December 2010) since the
Company did not fulfill the decision of CMB dated 26 January 2007 and required the Company to inform its shareholders at the next General
Assembly Meeting. The Company commenced a lawsuit before the Administrative Court. The Court rejected the Company’s suspension request
and the Company’s objection to this decision has been rejected. The case is still pending.
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Dispute on Turk Telekom Interconnection Costs
On 8 April 2009, Turk Telekom initiated a lawsuit for damages against the company claiming that the company is violating the legislation by
applying higher call termination fees to operators than the fees applied to the Company’s subscribers for on-net calls and requesting for the
time being TL 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from 2001 and TL 10 (equivalent to $6 as at 31
December 2010) with its accrued interest starting from the lawsuit date for the sustained loss as a result of decreasing traffic volume of Turk
Telekom and subscriber lost derived from this action. The case is still pending.
2009: None).
Dispute on Avea Interconnection Costs
On 4 November 2010, Avea initiated a lawsuit on the ground that on-net tariffs of the Company are under the interconnection fees notwithstanding ICTA’s decision regarding, on-net tariffs of the Company cannot be under the interconnection fees which are applied by the Company
to other operators and demanded TL 1,000 (equivalent to $647 as at 31 December 2010) material compensation by reserving its right for
surpluses. The lawsuit is pending.
The Company has accrued provision amounting to TL 1,000 (equivalent to $647 as at 31 December 2010) which is the total amount of the
legal case.
Dispute on Campaigns
On 21 May 2008, ICTA decided that the Company damaged the subscribers’ financial interests related to the campaigns in which free minutes
or counters are given and requested TL 32,088 (equivalent to $20,755 as at 31 December 2010). On 10 July 2008, the Company filed a lawsuit
for the injunction and cancellation of the ICTA’s decision. The lawsuit is still pending. However, the Company benefited from the early payment
option and deserved a 25% discount and paid TL 24,066 (equivalent to $15,567 as at 31 December 2010) on 1 August 2008.
187
Dispute on Payment Request of Savings Deposits Insurance Fund
On 26 July 2007, Savings Deposits Insurance Fund (“SDIF”) requested TL 15,149 (equivalent to $9,799 as at 31 December 2010) to be paid
in one month period on the ground that the stated amount is recorded as receivable from the Company in the accounting records of Telsim,
which is taken over by SDIF. On 20 September 2007, the Company filed a lawsuit for the injunction and cancellation of the SDIF’s request.
Council of State accepted the injunction request of the Company. On 19 January 2010, the Court accepted the Company’s claim and cancelled
the aforementioned request of SDIF. SDIF appealed the decision. Appeal process is still pending.
Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee (continued)
According to the 51st article which is headed “Applicable Law and Settlement of Disputes”, of the concession agreement of the Company,
parties agreed on settling disputes by arbitration and three arbitrator which are selected within the scope of ICC. Pursuant to mentioned article, disputes on the scope, application or termination of the agreement, shall primarily resolved by negotiations at the License Coordination
Commission; in case the dispute cannot be resolved within 30 days, one of the party shall notify other party regarding the arising dispute,
structure and reasons of the dispute and intention for applying to the arbitration; if the dispute cannot be resolved within 15 days as from
notification date, dispute shall be resolved by arbitration.
SDIF issued payment orders for the above mentioned amount and, on 19 October 2007, the Company initiated a lawsuit for the cancellation of
the payment request of SDIF. On 6 February 2008, the Court accepted the Company’s injunction request. On 29 March 2010, the Court decided
on the cancellation of the payment order. SDIF appealed such decision. The appeal process is pending.
2009: None).
Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee
At the end of 2006, Tax Auditors of the Company claimed that gross revenue in the statutory accounts should include discounts granted to
distributors although the Company recorded these discounts in a separate line item as sales discounts.
Starting from 1 January 2007, the Company started to deduct discounts granted to distributors from gross revenue and present them on a
net basis. Accordingly, the Company decided that, it has paid excess treasury share and universal service fund for the year 2006 totalling TL
51,254 (equivalent to $33,153 as at 31 December 2010).
Through the letter dated 23 February 2007, the Company requested treasury share amounting to TL 46,129 (equivalent to $29,838 as at 31 December 2010) and interest accrued amounting to TL 5,020 (equivalent to $3,247 as at 31 December 2010) from Turkish Treasury and universal
service fund amounting to TL 5,125 (equivalent to $3,315 as at 31 December 2010) and interest accrued amounting to TL 558 (equivalent to
$361 as at 31 December 2010) from Turkish Ministry to be paid in 10 days. Since Turkish Treasury and Turkish Ministry have not made any
payment, the Company started to deduct these amounts from ongoing monthly payments. As at 31 December 2007, the Company deducted TL
51,254 (equivalent to $33,153 as at 31 December 2010) from monthly treasury share and universal service fund payments.
Turkish Treasury sent a letter to the Company dated 17 July 2007 and objected the deduction of the discounts granted to the distributors from
the treasury share payments. Accordingly, the Company is asked to return TL 2,960 (equivalent to $1,915 as at 31 December 2010) that is
deducted from treasury share payment for May 2007. The Company has not made the related payment and continued to deduct such discounts
treasury share and universal service fee amount related to discounts granted to distributors for the year 2006.
Management believes that the Company has the legal right to make deductions with respect to this issue. Accordingly, the Company has not
recorded any provisions with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010.
188
The Company filed two lawsuits before ICC claiming that the Company is not obliged to pay treasury share and ICTA Fee in accordance with the
8th and 9th Articles of the concession agreement, respectively, on discounts granted to distributors. On the both lawsuits, ICC have decided in
favour of the Company. As stated in both of the Final Awards, the Company is not under obligation of paying Treasury Share and the Contribution to the expenses of Authority pursuant to Article of 8 and 9 of the Concession Agreement dated March 10, 2006. ICTA filed lawsuits for
cancellation of these Final Awards. Both cases are still pending.
Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006
Turkish Treasury, through a letter which is based on the Report of the Treasury Controller’s Board following the examinations covering the
period between 1 June 2004 and 9 March 2006, requested additional treasury share payment regarding the mentioned period. The Company
initiated a lawsuit before ICC on 18 December 2009 in order to obtain a declaratory judgment on the Company is not obliged to pay TL 3,320
(equivalent to $2,147 as at 31 December 2010) of the requested amount and treasury share over the exchange differences arising from roaming revenue. The case is still pending.
ICTA, through a letter dated 14 May 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering
the period between 1 June 2004 to 9 March 2006, requested additional treasury share payment of TL 4,909 (equivalent to $3,175 as at 31
December 2010) together with the monetary fine of TL 12,171 (equivalent to $7,873 as at 31 December 2010) on the ground that the treasury
share and treasury share over the exchange differences arising from roaming revenue are not paid entirely. On 26 May 2010, the Company, in
order to provide the suspension of the payment, requested a preliminary injunction from the Civil Court of First Instance based on the grounds
that the payment of additional treasury share payment of TL 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary
fine of TL 12,171 (equivalent to $7,873 as at 31 December 2010) is a pending case before ICC Arbitration Court. The Civil Court of First Instance
accepted the Company’s request. ICTA raised an objection to the preliminary injunction and this objection has been rejected.ICTA, through a
letter dated 19 October 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering the period
between 10 March 2010 and 31 December 2010, requested treasury share of TL 72,527 (equivalent to $46,913 as at 31 December 2010) and
conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010). The Company paid TL 1,535 (equivalent to $993 as at
31 December 2010) of the aforementioned amount.
On 13 December 2010, the Company, in order to provide the suspension of the payment, requested a preliminary injunction from the Civil
Court of First Instance based on the grounds that the payment of treasury share of TL 70,992 (equivalent to $45,920 as at 31 December 2010)
and conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010) is a pending case before ICC Arbitration Court. The
Court accepted the Company’s request. ICTA’s objection against the decision has been rejected.
189
Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006 (continued)
2009: None).
Penalty of ICTA on Value Added Services
On 1 March 2010, ICTA decided to initiate an investigation against the Company upon administrative fine of 31,822 TL (equivalent to $20,583
as at 31 December 2010) is revoked by The Ministry of Industry and Trade on the ground that the Company did not refund the subscribers who
are unsubscribed in the period and did not demand content and this is contrary to the article 11/A of the law numbered 4077. The investigation report has been sent to the Company and the Company has submitted its written defence to ICTA.
The company filed a lawsuit before ICC on 12 January 2011 regarding the part of treasury share which is not covered in the lawsuits previously
finalized in favor of the Company and the conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010). The lawsuit
is still pending
Dispute on treasury share amounts which are absorbed due to retrospective board decisions taken by ICTA
In consequence of collection of treasury share from the Company without considering its payments to the other operators and some subscribers due to the retrospective procedure amendments of ICTA on both interconnection fees and some tariffs; the Company commenced a
lawsuit on 5 August 2010 before ICC on the ground that treasury share which collected from diminishing returns are unlawful and deductions
committed by the Company between the years 2006 - 2010 from the treasury share are rightful and claimed payment of TL 1,600 (equivalent
to $1,035 as at 31 December 2010) and its interest to the overpayment amount which is paid under the name of treasury share, against ICTA
due to its administrative act leading to this case and against Turkish Treasury and Turkish Ministry due to making benefit from aforementioned
amount. The lawsuit is still pending.
190
On 13 January 2011, ICTA decided to apply administrative fine of TL 748 (equivalent to $484 as at 31 December 2010). Since the administrative
fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and provision amounting to TL 555
(equivalent to $359 as at 31 December 2010) is set in the consolidated financial statements as at and for the year ended 31 December 2010.
Dispute of Astelit with its Distributor
Astelit and one of its distributors had an agreement for the sale of Astelit’s inventory to third parties. Under this agreement, the sale of products had to be performed within 30 days after delivery and proceeds from such sale had to be transferred to Astelit excluding commissions
due to the distributor for performing the assignment. At a certain stage of the relationship under this agreement, the distributor began to
violate its obligations for indebtedness for received, due but unpaid products.
financial statements prepared as at and for the year ended 31 December 2010 (31 December 2009: None).
Despite the distributor is factually a debtor under the agreement, the distributor filed a lawsuit against Astelit on recovery of HRV 106,443
(equivalent to $13,369 as at 31 December 2010), which is allegedly the sum of advance payment for undelivered goods. In the course of court
proceedings, Astelit made a counterclaim on recovery of indebtedness in the amount of HRV 35,292 (equivalent to $4,433 as at 31 December
2010).
Dispute with the Ministry of Industry and Trade
Ministry of Industry and Trade notified the Company that the Company is not informing the subscribers properly before service subscriptions
and content sales and charged administrative fine of TL 68,201 (equivalent to $44,114 as at 31 December 2010). On 24 August 2009, the
Company initiated a lawsuit for the cancellation of the payment order and related decision of the Ministry of Industry and Trade. The Court
rejected the Company’s injunction request. The Court cancelled the payment order on 8 June 2010. Ministry of Industry and Trade appealed
the decision. Appeal process is still pending.
As a result of consideration of two claims, the Court of First Instance in Kiev dismissed the claim of the distributor and sustained the counterclaim of Astelit. Subsequently, The Kiev Economic Court of Appeal repealed the decision of the Court of First Instance and dismissed the
claim of Astelit and sustained the claim of the distributor on recovery of HRV 106,443 (equivalent to $13,369 as at 31 December 2010). The
resolution of The Higher Economic Court of Ukraine dated 20 October 2009 remained unaltered the appellate court’s ruling. Thereafter, Astelit
management has filed a lawsuit against this conclusion in the Supreme Court of Ukraine, which is the supreme and final degree of jurisdiction
against the resolution of the Higher Economic Court of Ukraine.
On 14 December 2009, the Company filed a lawsuit for the injunction and cancellation of the payment order of TL 68,201 (equivalent to
$44,114 as at 31 December 2010) with respect to the decision of Ministry of Industry and Trade. The Court rejected the appeal request of
the Company. The Company objected to the decision and Istanbul Regional Administrative Court accepted the objection of the Company and
decided to suspend the order of payment.
In December 2009 the Supreme Court of Ukraine has revoked the previous court decisions and forwarded the court file to the Court of First
Instance in Kiev to other judges for new legal proceedings. New legal proceedings have started in February 2010. It was decided by the court
to conduct judicial expertise by specially authorized Kiev research institute of judicial expertise in order to define real indebtedness. The expertise was initiated in April 2010 and still is in process.
2009: None).
Management believes that such conclusion of the courts has no proper legal basis and does not conform to the facts of the case and evidences.
Accordingly, the Company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the
year ended 31 December 2010.
191
Dispute of Astelit related to Withholding Tax on Interest Expense
Ukranian Tax Administration sent a tax notice to Astelit stating that witholding tax rate on interest expense for the loan agrrement with Euroasia should be 10% for the year 2009. According to Ukrainian legislation and Convention on avoiding double taxation, Astelit paid witholding
tax at 2%. Astelit filed the suit to cancel tax notice, which imposed Astelit to pay additional HRV 11,651 (equivalent to $1,463 as at 31 December 2010). Administrative court of first instance decided in favour of Astelit on 30 November 2010. Tax Inspection appealed the case on 27
December 2010. Based on the management opinion, provision amounting to $2,635 is set for the risks belonging to years 2009 and 2010 in
the consolidated financial statements as at and for the year ended 31 December 2010.
Lawsuit initiated by Mep Iletisim AS
On 31 December 2008, Mep Iletisim AS, which is former distributor of the Company and whose agreement is no longer valid, initiated a
lawsuit against the Company claiming that it has a loss of TL 64,000 (equivalent to $41,397 as at 31 December 2010) due to the applications
of the Company and requested TL 1,000 (equivalent to $647 as at 31 December 2010) and remaining amount to be reserved. The case is still
pending.
Dispute on VAT and SCT on Roaming Services
On 21 October 2009, based on the Tax Investigation Reports dated 2 October 2009, Presidency of Large Taxpayers Office, Audit Group Management notified the Company that VAT and SCT should be calculated on charges paid to international GSM operators for the calls initiated
by the Company’s subscribers abroad and collect from the subscribers and requested TL 255,298 (equivalent to $165,135 as at 31 December
2010) for the period from April 2005 to July 2009, and for an interest to be calculated until the payment date. The Company filed a lawsuit
for the cancellation of the aforementioned request. Based on the settlement between the Company and Ministry of Finance, the Company has
withdrawn from the lawsuits.
As a result of the settlement made with Ministry of Finance Settlement Commission on 1 June 2010, penalty fee has been settled at TL 20,163
(equivalent to $13,042 as at 31 December 2010) and late payment interest expense was settled at TL 15,998 (equivalent to $10,348 as at 31
December 2010) and related payment was made on 27 July 2010.
Dispute on VAT and SCT regarding Shell & Turcas Petrol A.S Campaign
Turkcell and Shell&Turcas Petrol A.S. signed an agreement on 27 November 2007 where eligible subscribers can get free counters and minutes from the Company or free oil from Shell&Turcas Petrol AS.
As a result of the tax investigation, Tax Controllers notified that VAT and special communication tax are not calculated over the free counters
and minutes and imposed special communication tax amounting to TL 1,214 (equivalent to $785 as at 31 December 2010) and tax penalty
of TL 1,822 (equivalent to $1,179 as at 31 December 2010) and VAT amounting to TL 874 (equivalent to $565 as at 31 December 2010) and
tax penalty of TL 1,315 (equivalent to $851 as at 31 December 2010). On 16 September 2009, the Company filed lawsuits for the cancellation
of the tax penalty. The court decided to accept the case. Tax Administration appealed the decisions. Based on the management opinion, the
Company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the year ended 31
December 2010.
192
2009: None).
Investigation of ICTA on the wrongful declarations of the Company and the Company’s refrain from signing the minutes
ICTA decided to initiate an investigation based on the reason that the information provided by the Company within the frame of another
investigation of ICTA is inconsistent and wrong, the Company is not in a helpful approach regarding the conduction of the investigation and
refraining from signing the minutes drafted by the Audit Committee of ICTA. Investigation report has been sent to the Company. The Company
submitted its defence within the due time. In accordance with the decision of ICTA dated 10 February 2011, no penalty has been charged for
the Company.
2009: None).
Decisions of ICTA on tariff plans
On 15 November 2009, ICTA notified that the Company has changed the conditions of a tariff plan after the launch and shall reimburse overcharged amounts to the subscribers. On 1 February 2010, the Company initiated a lawsuit for the cancellation of the decision of ICTA. The Court
rejected the Company’s stay of execution request. The case is still pending.
Amount to be reimbursed to the subscribers is calculated as TL 15,660 (equivalent to $10,129 as at 31 December 2010) and deducted from
revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made
in January 2010.
On 17 May 2010, ICTA decided to impose TL 802 (equivalent to $519 as at 31 December 2010) administrative fine against Turkcell on the
ground that one of the tariff option of Turkcell contradicts the board decision which sets lower limit to the on-net tariffs. The payment was
made within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and TL 601 (equivalent to $389
as at 31 December 2010) as fine on 21 June 2010. Besides, the Company filed a lawsuit on 21 July 2010 in request for the cancellation of fine.
The Court overruled the suspension of execution request and the Company objected to this decision. The Court rejected the objection request
of the Company. The lawsuit is still pending.
193
Decisions of ICTA on tariff plans (continued)
On 8 March 2010, ICTA informed the Company that an investigation took place on another tariff plan. As a result of the investigation, ICTA decided to apply administrative penalty amounted TL 26,483 (equivalent to $17,130 as at 31 December 2010) to the Company on 22 September
2010. Administrative fine was paid within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and
TL 19,862 (equivalent to $12,847 as at 31 December 2010) is paid as a fine on 7 December 2010. The Company initiated a lawsuit to suspend
the execution of administrative fine and cancellation, on 10 December 2010. The Court overruled the suspension of execution request and the
Company objected to this decision. On 17 February 2011, the Court decided to suspend the execution. On 1 March 2011, the Court accepted
the Company’s request for full refund of the amount paid to ICTA. ICTA reimbursed the related amount on 30 March 2011.
Investigation of ICTA based on the complaint of a subscriber
ICTA decided to initiate an investigation through its decision dated 12 May 2010 based on the complaint of Ozalp Insaat Pazarlama Tic. Ltd.
Sti., and requested certain information and documents from the Company. The Company provided its response related to the matter to ICTA.
Investigation report is notified to the Turkcell and Turkcell has submitted its defence statement to ICTA within the due date.
Amount to be reimbursed to the subscribers is calculated as TL 13,432 (equivalent to $8,688 as at 31 December 2010) for the year 2010 and
deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2010. Reimbursement to subscribers was made in February 2011.
Decision of ICTA regarding telephone directory and unknown numbers service
On 7 July 2010, ICTA decided to fine the Company by TL 401 (equivalent to $259 as at 31 December 2010) and transfer back all kinds of software, hardware, infrastructure and equipment which make available the telephone directory and unknown numbers service to the ownership of
the Company from its wholly owned subsidiary on the ground that ownership of the whole system related to telephone directory and unknown
number service is not pertain to the Company. Administrative fine was paid within 1 month following the notification of the decision of ICTA.
Therefore, 25% discount was applied and TL 301 (equivalent to $195 as at 31 December 2010) as fine on 7 September 2010.
The Company filed a lawsuit on 22 September 2010 for the suspension and cancellation of the execution. The Court overruled the suspension
of execution request of the Company and the Company objected to this decision however the court rejected the Company’s objection. The
lawsuit is still pending.
Investigation of the Competition Board regarding applications to the distributors
On 11 November 2009, Competition Board decided to initiate an investigation against the Company on the ground that the Company, through
its applications to its distributors, violates the related clauses of the Competition Act numbered 4054. Within the context of the investigation, the Company submitted its statement of defence. The investigation took place as an on-site examination and inspection in March 2010.
The Competition Board decided to examine the claims of Vodafone regarding this investigation within the context of this file. Besides, the
Company’s action concerning abuse of dominant position in the wholesale or retail market of sim card, unit card, digital unit, activation and
other subscriber services by obstructing the activity of Avea is examined in the context of this investigation and Avea is accepted as a complainant. Investigation report is submitted to the Company in August 2010 and the Company submitted its defence statement to Competition
Board. Additional Written Opinion is submitted to the Company in February 2011 and the Company will submit its written defence to Additional Written Opinion within due date.
194
On 13 January 2011, ICTA decided to impose administrative fine to the Company amounting to TL 8,020 (equivalent to $ 5,188 as at 31 December 2010) for making some subscribers suffer and TL 2,005 (equivalent to $ 1,297 as at 31 December 2010) for misinforming the Authority. Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and
provision totalling to TL 7,430 (equivalent to $4,806 as at 31 December 2010) is set in the consolidated financial statements as at and for the
year ended 31 December 2010. The Company filed two lawsuits on 21 March 2011 for the suspension of execution and cancellation of the
administrative fine.
Investigation on breaching confidentiality of personal data and relevant legislation which is launched by ICTA
ICTA decided to launch preliminary investigation on breaching confidentiality of personal data and relevant legislation, within the context of
the news in the press regarding unlawful wiretapping. ICTA authorities made an on-site inspection in July 2010. On 22 September 2010, ICTA
decided to launch an investigation against the Company for detailed examination of the matter. Information and documents demanded by
ICTA were submitted to the ICTA. In January 2011, investigation report was sent to the Company. The Company submitted its written defence
within due date.
Dispute on treasury share in accordance with the amended license agreement
Based on the law enacted on 3 July 2005 with respect to the regulation of privatization, gross revenue description used for the calculation
of treasury share has been changed. According to this new regulation, accrued interest charges for the late payments, taxes such as indirect
taxes, and accrued revenues are excluded from the description of gross revenue. Calculation method of gross revenue for treasury share stipulated in the law according to the new regulation shall be valid as of the application date of the Company with the claim of amendment of its
license agreement in compliance with the said Law. In the meanwhile, the Company realized the payments including above-mentioned items
between 21 July 2005 and 10 March 2006, when the amendment in license agreement was effective.
On 9 June 2008, the Company filed a lawsuit before Administrative Court for the difference between the aforementioned period amounting to
TL 102,649 (equivalent to $66,397 as at 31 December 2010) and interest amounting to TL 68,276 (equivalent to $ 44,163 as at 31 December
2010) till to the date the case is filed. The Administrative Court rejected the case and the Company appealed the decision. The appeal process
is still pending.
financial statements as at and for the year ended 31 December 2010 (31 December 2009: None)
195
Dispute on ongoing license fee in accordance with the amended license agreement (continued)
Based on the 9th article of the license agreement dated 10 March 2006, the Company has been obliged to pay 0.35% of its yearly gross revenue once a year as ICTA Fee. However, in the previous license agreement, the Company was obliged to pay 0.35% of its yearly gross revenue
after deducting treasury share, universal service fund and other indirect taxes from the calculation base whereas in the new agreement, these
aforementioned payments are not deducted from the base of the calculation. Therefore, on 12 April 2006, the Company has initiated a lawsuit
for the cancellation of the 9th article of the new license agreement. On 10 March 2009, the Court rejected the case. The Company appealed
the decision. Appeal process is still pending.
Dispute with T-Medya
Arbitration procedures regarding three real estates which are in the ownership of the Company in Izmir, Adana and Ankara, are commenced
with the letter dated 13 August 2010 against T-Medya who is the lessee of the real estates and delinquent for the period between 2003-2010
rental period, to collect the unpaid rentals and its accrued interest in the amount of TL 8,914 (equivalent to $5,766 as at 31 December 2010).
The arbitration processes are still pending.
Dispute on ICTA fee payment based on the amended license agreement
On 21 June 2006, ICTA notified the Company that the ICTA fee for the year 2005 which had been already paid in April 2006 should have been
calculated according to the new license agreement dated 10 March 2006 instead of the previous license agreement which was effective in
the year 2005. Therefore, ICTA requested the Company to pay additional TL 4,011 (equivalent to $2,594 as at 31 December 2010) and its
accrued interest. The Company made the payment and initiated a lawsuit for the injunction and cancellation of the aforesaid decision of ICTA
on 28 August 2006. On 24 July 2009, the Court decided in favor of the Company and annulled additional payment request of ICTA. The ICTA
appealed the decision. Appeal process is still pending. The Company received the related principal amount of TL 4,011 (equivalent to $2,594
as at 31 December 2010) on 8 February 2010 and recorded income in the consolidated financial statements as at and for the year ended 31
December 2009. On 17 March 2010, the Company initiated a lawsuit for the accrued interest amounting to TL 3,942 (equivalent to $2,550 as
at 31 December 2010). The case is still pending.
A bad debt reserve for the receivable amount of 8,755 TL (equivalent to $5,663 as at 31 December 2010) for T-Medya has been recognized in
the consolidated financial statements as at and for the year ended 31 December 2010 in accordance with the bad debt policy of the Company.
Investigation initiated by ICTA upon complaint of subscriber on international roaming campaigns
On 30 December 2010, ICTA decided to initiate an investigation against Turkcell upon a complaint of a consumer regarding the Company’s
billing and pricing applications in order to investigate the billing and pricing problems arising from the international roaming campaigns
within 2009 and 2010. ICTA requested some information about campaigns and the Company submitted its explanations on the issue to ICTA.
Investigation initiated by ICTA regarding Number Portability
On 26 January 2011 ICTA decided to initiate an investigation against the Company regarding refusal of number portability requests and reason
of such refusal. ICTA carried out an inspection in the Company between 28 February and 2 March 2011.
Since it is not virtually certain that an inflow of economic benefits will arise concerning the accrued interests, no asset or related income is
recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Investigation initiated by ICTA upon complaint of subscriber of data tariffs’ charging
On 9 March 2011, ICTA decided to initiate an investigation against the Company upon a complaint of a consumer regarding the Company’s
miss charging about data tariffs. An inspection was carried between 30 March and 1 April in the Company by ICTA.
Penalty issued to Superonline regarding trenching activities
On 13 January 2011 Ankara Municipality issued a penalty of TL 8,863 (equivalent to $5,733 as at 31 December 2010) to Superonline related
to Superonline’s trenching activities. Based on the management opinion, the probability of an outflow of resources embodying economic
benefits to settle the obligation is less than probable, thus, no provision is recognized in the consolidated financial statements as at and for
the year ended 31 December 2010.
Investigation initiated by ICTA regarding the Company’s compatibility to ICTA’s regulations and decisions
On 26 January 2011, ICTA decided to initiate an investigation against the Company about its compatibility of “Terms and Conditions About
Updating Subscribers Records and Subscription Processes of End Users” and ICTA’s decision about limitation of numbers of the subscriptions.
On 23 March 2011, ICTA carried out an inspection in the Company.
Dispute with Avea on SMS interconnection termination fees
On 22 December 2006, Avea initiated a lawsuit against the Company claiming that although there was an agreement between the Company
and Avea stating that both parties would not charge any SMS interconnection termination fees, the Company has charged SMS interconnection
fees for the messages terminating on its own network and also assumed liabilities for the SMS terminating on Avea’s network and made interconnection payments to Avea after deducting the net balance of those SMS charges and accruals. Avea requested provisions of Interconnection
Agreement regarding SMS pricing to be applied and requested collection of its losses amounting to nominal amount of TL 6,480 (equivalent to
$4,191 as at 31 December 2010) for the period between January 2006 and August 2006 with its accrued interest till payment. On 25 November
2008, the Court decided in favor of Avea. The Company has appealed the decision. Appeal process is still pending. The Company has paid the
principal of TL 6,480 (equivalent to $4,191 as at 31 December 2010), late payment interest of TL 5,103 (equivalent to $3,301 as at 31 December
2010) and related fees of TL 524 (equivalent to $339 as at 31 December 2010) on 30 March 2009.
Dispute with Turk Telekom with respect to numbers beginning with 444
The Company filed a lawsuit on 25 April 2008 against Türk Telekom to collect TL 1,777 (equivalent to $1,149 as at 31 December 2010) including principal, overdue interest and delay fee which has been collected by Turk Telekom within the period of March 2007-February 2008
by pricing the calls started from the Company’s network and terminated at the numbers in form of “444 XX XX” which are assigned to the
Company’s subscribers in accordance with special service call termination tariff. The Court decided in favor of the Company on 23 March 2011.
The Court has not prepared the written decision yet.
Investigation of ICTA related with application of an article of the Regulation on Consumer Rights in the Electronic Communications Sector
The ICTA decided to initiate an investigation related with application of an article of the Regulation on Consumer Rights in the Electronic Communications Sector through its decision dated 22 February 2011 and prepared an investigation report. The decision and investigation report
is notified to the Company and the Company will submit its defense statement to ICTA within the due date.
In line with the court decision stating that charging SMS interconnection termination fees violates the agreement between the Company and
Avea, neither SMS interconnection revenue nor SMS interconnection expense has been recognized from February 2005 to 23 March 2007.
Moreover, the Company applied to ICTA for the determination SMS interconnection termination fees and starting from 23 March 2007, the
Company has applied the SMS interconnection termination fees announced by ICTA until January 2009. ICTA determined new SMS termination
rate in January 2009 upon the application of Avea.
196
197
33. Related parties
33. Related parties (continued)
Other related party transactions (continued)
Transactions with key management personnel:
Key management personnel comprise the Group’s directors and key management executive officers.
Due to related parties – short term
As at 31 December 2010 and 2009, none of the Group’s directors and executive officers has outstanding personnel loans from the Group.
In addition to their salaries, the Group also provides non-cash benefits to directors and executive officers and contributes to a post-employment
defined plan on their behalf. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to
fund the benefits.
Total compensation provided to key management personnel is $11,395, $8,044 and $7,912 for the years ended 31 December 2010, 2009 and
2008, respectively.
Hobim Bilgi Islem Hizmetleri AS (“Hobim”)
Intralot SA (“Intralot”)
KVK Teknoloji Urunleri AS (“KVK Teknoloji”)
Mapfre Genel Yasam Sigorta AS (“Mapfre”)
Kyisvstar GSM JSC (“Kyivstar”)
Other
31 December
2010
2,766
910
909
473
44
5,658
10,760
31 December
2009
7,069
519
81
2,457
4,654
14,780
The Company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders.
Substantially, all of the significant due from related party balances is from Cukurova Group companies.
Other related party transactions
Due from SCM, non-controlling shareholder of Euroasia, resulted from the loan that SCM utilized from Financell with maturity of 30 December
2011.
Due from related parties – long term
T-Medya
31 December
31 December
2010
2009
1,044
5,539
Digital Platform Iletisim Hizmetleri AS (“Digital Platform”)
-
15,306
Other
-
194
1,044
21,039
Receivables from T-Medya consists of receivables based on rent agreements, accrued interests for outstanding balance and unpaid building
expenses. Due from related parties long term is shown net of allowance for doubtful debts amounting to $5,897 as at 31 December 2010 (31
December 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $5,897 (31 December 2009 and 2008: nil).
Due from related parties – short term
System Capital Management (“SCM”)
Digital Platform
A-Tel
KVK Teknoloji Urunleri AS (“KVK Teknoloji”)
ADD Production Media AS. (“ADD”)
Kyisvstar GSM JSC (“Kyivstar”)
Other
31 December
2010
38,202
21,307
13,260
8,212
1,796
1,225
4,895
88,897
31 December
2009
63,311
25,563
8,786
5,470
226
5,487
108,843
Due from related parties short term is shown net of allowance for doubtful debts amounting to $2,998 as at 31 December 2010 (31 December
2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $2,998 (31 December 2009 and 2008: nil).
Due from Digital Platform, a company whose majority shares are owned by Cukurova Group, mainly resulted from receivables from call center
revenues, financial support for borrowing repayments and advances given for current and planned sponsorships.
Due from A-Tel, a 50-50 joint venture of the Company and SDIF mainly, resulted from simcard and scratch card sales to this company.
Due from KVK Teknoloji, a company whose majority shares are owned by Cukurova Group, mainly resulted from simcard and scratch card
sales to this company.
Due from ADD, a company whose majority shares are owned by Cukurova Group, resulted from advances given for advertising and sponsorship services.
Due from Kyivstar, whose shares are owned by one of the shareholders of the Company, mainly resulted from call termination and international traffic carriage services rendered to this company.
Due to Hobim, a company whose majority shares are owned by Cukurova Group, resulted from the invoice printing services rendered by this
company.
Due to Intralot, a company incorporated under the laws of Greece and is the shareholder of Inteltek, a subsidiary of the Group. The Group
purchases game software and maintenance services.
Due to KVK, a company whose majority shares are owned by Cukurova Group, resulted from the payables for sales commissions and terminal
purchases.
Due to Mapfre, a company owned by one of the shareholders of the Group, provides insurance services to the Group.
Due to Kyivstar, whose shares are owned by one of the shareholders of the Company, mainly resulted from call termination and international
traffic carriage services received.
The Group’s exposure to currency and liquidity risk related to due from/(due to) related parties is disclosed in Note 29.
198
199
Transactions with related parties
Transactions with related parties (continued)
The significant agreements are as follows:
All intragroup transactions have been eliminated and are not presented as related party transactions in the following table:
Income from related parties
Sales to KVK Teknoloji
Simcard and prepaid card sales
Sales to Kyivstar
Telecommunications services
Sales to A-Tel
Simcard and prepaid card sales
Sales to Digital Platform
Call center revenues and interest charges
Finance income from SCM
Interest income
Sales to Teliasonera International
Sales to Millenicom Telekomunikasyon AS (“Millenicom”)
Sales to CJSC Ukrainian Radiosystems
Related party expenses
Charges from ADD
Advertisement and sponsorship services
Charges from Kyivstar
Charges from A-Tel (*)
Dealer activation fees and others
Charges from KVK Teknoloji
Dealer activation fees and others
Charges from Hobim
Invoicing and archieving services
Charges from Teliasonera International
Charges from Millenicom
Charges from CJSC Ukrainian Radiosystems
2010
2009
2008
507,963
640,312
860,711
42,413
44,195
63,581
30,838
67,558
132,594
22,223
18,766
20,281
14,863
5,213
-
4,793
8,328
7,151
2,979
2,321
5,497
3,388
12,996
8,390
2010
2009
2008
65,957
127,014
165,250
36,039
53,466
63,799
31,618
36,971
49,065
27,706
41,360
103,386
19,446
21,985
20,865
9,162
12,261
11,300
3,194
5,171
8,501
2,211
4,208
6,491
* Charges from A-Tel have been eliminated to the extent of the Company’s interest in A-Tel for the years ended 31 December 2010, 2009 and
2008 amounting to $31,618, $36,971 and $49,065, respectively.
200
Agreements with KVK Teknoloji:
KVK Teknoloji, incorporated on 23 October 2002, one of the Company’s principal simcard distributors, is a Turkish company, which is affiliated
with some of the Company’s shareholders. In addition to sales of simcards and scratch cards, the Company has entered into several agreements with KVK Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which KVK Teknoloji
must place advertisements for the Company’s services in newspapers. The objective of these agreements is to promote and increase handset
sales with the Company’s prepaid and postpaid brand simcards, thereby supporting the protection of the Company’s market share in the
prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for KVK Teknoloji and the total
advertisement benefit received, reflected in the Company’s market share in new subscriber acquisitions. Distributors’ campaign projects and
market share also contributed to the budget allocation.
The amount of handset sales to the subscribers of the Company performed by KVK Teknoloji for the period ended 31 December 2010 is TL
180,922 (equivalent to $117,026 as at 31 December 2010) which is paid to KVK Teknoloji in advance in accordance with certain commitment
arrangements and collected from the subscribers throughout the campaign period.
Agreements with Kyivstar:
Alfa Group, a minor shareholder of the Company, holds the majority shares of Kyivstar. Astelit is receiving call termination and international
traffic carriage services from Kyivstar.
Agreements with A-Tel:
A-Tel is involved in the marketing, selling and distributing the Company’s prepaid systems. A-Tel is a 50-50 joint venture of the Company
and SDIF. A-Tel acts as the only dealer of the Company for Muhabbet Kart (a prepaid card), and receives dealer activation fees and simcard
subsidies for the sale of Muhabbet Kart. In addition to the sales of simcards and scratch cards through an extensive network of newspaper kiosks located throughout Turkey, the Company has entered into several agreements with A-Tel for sales campaigns and subscriber activations.
Agreements with Digital Platform:
Digital Platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the Company’s
principal shareholders, Cukurova Group. Digital Platform acquired the broadcasting rights for Turkish Super Football League by the tender held
on 15 July 2004, until 31 May 2008 and the broadcasting rights were extended until 31 May 2010 with a new agreement dated 5 May 2005.
On 23 December 2005, “Restructuring Framework Agreement” and supplemental sponsorship agreements was signed between Digital Platform and the Company. Within the framework of the agreement, Digital Platform will pay its liabilities to Company including interest accrued
partially in cash and partially by providing sponsorship services until 15 July 2011. On 4 June 2010, Digital Platform notified the Company to
annul Lig TV sponsorship agreement, one of the supplemental agreements within the framework of “Restructuring Framework Agreement”
and declared that Digital Platform will pay its debt to the Company only in cash according to the payment schedule in “Restructuring Framework Agreement”. With the protocol dated 31 January 2011, the agreement dated 23 December 2005 is cancelled with the mutual agreement
of the parties. The remaining receivable balance from Digital Platform will be paid in 2 equal installments in February 2011 and March 2011.
Transactions with related parties (continued)
Agreements with Digital Platform: (continued)
The Company also has an agreement related to the corporate group SMS services that the Company offers to Digital Platform, and an agreement for call center services provided by the Company’s subsidiary Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri AS (“Global”).
201
Agreements with SCM:
SCM, non-controlling shareholder of Euroasia, obtained loan from Financell.
34. Group entities
The Group’s ultimate parent company is Turkcell. Subsidiaries of the Company as at 31 December 2010 and 2009 are as follows:
Subsidiaries
Agreements with Teliasonera International:
Teliasonera International is the mobile operator that provides telecommunication services in the Nordic and Baltic countries. Teliasonera
International is rendering and receiving call termination and international traffic carriage services to and from the Astelit.
Agreements with Millenicom:
European Telecommunications Holding AG (“ETH”), a subsidiary of Cukurova Group, holds the majority shares of Millenicom. Millenicom is
rendering and receiving call termination and international traffic carriage services to and from the Company.
Agreements with CJSC Ukrainian Radiosystem:
CJSC Ukrainian Radiosystems owned by Vimpelcom provides mobile communications services is rendering and receiving call termination and
international traffic carriage services to and from the Astelit.
Agreements with ADD:
ADD, a media planning and marketing company, is a Turkish company owned by one of the Company’s principal shareholders, Cukurova Group. The Company was operating a media purchasing agreement with ADD, which was revised on 1 September 2009 and was effective until 31
August 2010. The purpose of this agreement was to benefit from the expertise and bargaining power of ADD against third parties, regarding
the formation of media purchasing strategies for both postpaid and prepaid brands. However, the agreement was annulled effective from 2
August 2010 as a result of the notification dated 28 May 2010.
Agreements with Hobim:
Hobim, one of the leading data processing and application service provider companies in Turkey, is owned by Cukurova Group. The Company
has entered into invoice printing and archiving agreements with Hobim under which Hobim provides the Company with scratch card printing
services, monthly invoice printing services, manages archiving of invoices and subscription documents for an indefinite period of time. Prices
of the agreements are determined as per unit cost plus profit margin.
Effective Ownership Interest
Kibris Telekom
Global
Country of
incorporation
Turkish Republic of
Northern Cyprus
Turkey
Turktell Bilisim Servisleri AS
Superonline
Turktell Uluslararasi Yatırım Holding AS
Turkcell Kurumsal Satıs ve Dagıtım Hizmetleri AS
Eastasia
Turkcell Teknoloji Arastirma ve Gelistirme AS
Turkey
Turkey
Turkey
Turkey
Netherlands
Turkey
Kule Hizmet ve Isletmecilik AS*
Sans Oyunlari Yatirim Holding AS
Financell
Rehberlik Hizmetleri AS
Beltur BV
Surtur BV
Beltel
Turkcell Gayrimenkul Hizmetleri AS
LLC Global
FLLC Global
Turkey
Turkey
Netherlands
Turkey
Netherlands
Netherlands
Turkey
Turkey
Ukraine
Republic of Belarus
UkrTower
Talih Kusu Altyapi Hizmetleri AS
Turkcell Europe GmbH
Corbuss Kurumsal Telekom Servis Hizmetleri AS
Belarusian Telecom
Inteltek
Euroasia
Astelit
Azerinteltek
Ukraine
Turkey
Germany
Turkey
Republic of Belarus
Turkey
Netherlands
Ukraine
Azerbaijan
Name
Business
Telecommunications
Customer relations management
Information technology, value added GSM
services investments
Telecommunications
Telecommunications investments
Telecommunications
Research and Development
Telecommunications infrastructure
business
Betting business investments
Financing business
Telecommunications
Property investments
Telecommunications infrastructure
business
Telecommunications
GSM services
Telecommunications
Betting business
Telecommunications
Telecommunications
Betting Business
31 December
2010 (%)
31 December
2009 (%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99
80
55
55
55
28
100
100
99
80
55
55
55
-
*Brandname of Kule Hizmet ve Isletmecilik AS is Global Tower.
35. Subsequent events
On 23 March 2011, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2010 amounting
to TL 1,328,697 (equivalent to $859,442 as at 31 December 2010, respectively), which represented 75% of distributable income. This represents a net cash dividend of full TL 0.6039532 (equivalent to full $0.39 as at 31 December 2010) per share. This dividend proposal will be
discussed at Ordinary General Assembly of Shareholders to be held on 21 April 2011.
In the Ordinary General Assembly of Shareholders Meeting of Inteltek held on 6 April 2011, it has been decided to distribute dividends amounting to TL 16,744 (equivalent to $10,831 as at 31 December 2010).
In March 2011, Fintur decided to distribute dividend amounting to $50,000. The Company has received its portion on 7 April 2011.
In March 2011, A-Tel decided to distribute dividend amounting to TL 26,982 (equivalent to $17,453 as at 31 December 2010). The Company
will receive its portion on 11 April 2011.
According to contract which was signed between Fizy Medya İnternet ve Bilişim Teknolojileri Limited Sirketi (“Fizy”) on 28 January 2011, the
Company acquired 70% of the shares. Fizy’s operations consists of providing all kind of advertising and promotion services upon internet and
e-trading, acquiring copyrights, broadcasting, music and video accessing as well as downloading from the internet. Fizy restarted its operations on 1 April 2011 which was previously held in 2010.
202
203
Dematerialization Of The Share Certificates Of The Companıes That Are Traded
On The Stock Exchange
It was decided by the Capital Markets Board (“the Board”) as per article 10/A included in the Capital Markets Act (CMA) No. 2499 to commence
the dematerialization system.
As per the Temporary Article 2 of the Board’s Communiqué Series: IV No.: 28 on the “Procedures and Principles of Keeping the Records of
Dematerialized Capital Market Instruments”, it is set forth that all of the share certificates of the companies that are traded in ISE shall be collectively dematerialized and the related procedures and principles are regulated in the said Communiqué. Legal and actual dematerialization
of the share certificates has commenced on November 28, 2005.
Beginning from November 28, 2005, it is prohibited for the companies listed in ISE to issue new share certificates as a result of capital increases. The new share certificates arising out of capital increases shall be transferred to the accounts of the rightful owners by registration
of securities.
It is obligatory for the share certificates that are not dematerialized and that are kept physically by their rightful owners to be delivered to our
Company (“Issuer”) or an authorized broker for their registration with “Central Registry Agency” that is under supervision and control of the
Board until the end of December 31, 2007.
In addition, as per the Temporary Article 6 of the Capital Markets Act the financial rights attached to the share certificates, which are not dematerialized until the end of 31 December 2007, shall be monitored in a dematerialized manner at the Central Registry Agency from that day
on and in case the share certificates are dematerialized, their financial rights shall be transferred to the accounts of the rightful owners. Any
financial rights related to management for the share certificates that are not dematerialized after December 31, 2007 shall be exercised by
Central Registry Agency until the dematerialization process of existing shares completed. Implementation principles for the aforementioned
article shall be found in the letter of the Central Registry Agency dated January 30, 2008 and numbered 294.
The share certificate records of our Company shall be kept by Central Registry Agency and the issuer in electronic form, which is formed by
the Central Registry Agency.
Accommodation Of The Share Capital Of The Company And Nominal Values Of The Share Certificates To The New Turkish Lira
As per article 6 titled “Share Capital” of the Articles of Association of the Company, the Code numbered 5083 Regarding the Currency Unit of
Turkish Republic Government and the Code numbered 5274 Regarding the Amendment of Turkish Commercial Code, the share capital of the
Company has been made compatible with the New Turkish Lira and such resolution was approved at the Ordinary General Assembly Meeting
on April 29, 2005.
Provisions regarding making nominal values of the share certificates of the Company compatible with the New Turkish Lira are regulated in
the temporary article of the Company’s Articles of Association and such article was approved at the Ordinary General Assembly Meeting on
April 29,2005. The temporary article reads as follows:
The Board’s Dividend Distribution Proposal
In accordance with the Capital Markets Board (“CMB”) Communiqué Serial: IV, No: 27 on “Principles Regarding Distribution of Dividends
and Interim Dividends To Be Followed by the Publicly Held Joint Stock Corporations Subject to Capital Market Law”, clauses set in the article
of association of our company and the dividend distribution policy that was adopted by our Company, pursuant to the Corporate Governance
Principles by the Board of Directors resolution dated November 24, 2004 and numbered 366; the Board of Directors of our Company presents
the following dividend distribution proposal, to be evaluated and determined at the Ordinary General Assembly Meeting of our Company
which will be held on 21 April 2011.
1-As a result of the activities of our Company, pertaining to the period between January 1, 2010 and December 31, 2010, our Company’s
profit, calculated according to the consolidated financial statements, which were audited independently in accordance with the Capital
Markets Board Communiqué Serial: XI numbered 29, named “Communiqué Regarding the Financial Reporting in Capital Markets” is TRY
2.256.966.571- and the commercial profit calculated according to the provisions of Turkish Commercial Code is TRY 2.540.278.988-,
2- TRY 1.771.595.963 - after tax profit calculated according to the consolidated financial statements shall be taken as the basis for dividend
distribution in accordance with “Guide Of Preparation Dividend Distribution Table” which was published on 27 January 2010.
3-As the ceiling designated in the Turkish Commercial Code (TCC) for first legal reserve has been reached by our company; no first legal
reserve set aside,
4- TRY 1.771.595.963- is the distributable dividend of the Company, pertaining to year 2010 and TRY 1.780.152.672- calculated by adding
TRY 8.556.709- which is the aggregate amount of the donations made during the year, to the above mentioned amount shall be taken as
the first dividend basis,
5-In accordance with the provisions declared in Capital Markets Board (“CMB”) Communiqué Serial: IV, No: 27 on “Principles Regarding
Distribution of Dividends and Interim Dividends To Be Followed by the Publicly Held Joint Stock Corporations Subject to Capital Market
Law”, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our Company with
the Board of Directors resolution dated November 24, 2004 and declared to public; TRY 356.030.534-, which is 20%, of the first dividend basis, amounting to TRY 1.780.152.672- shall be distributed as the first cash dividend and the secondary reserve amounting to TRY
121.869.697- shall be separated from the rest of the net distributable current year profit,
a. The total amount of TRY 1.328.696.972-, which shall be distributed in cash, shall be distributed from extraordinary reserves,
b. The withholding tax deductions shall be applicable on the amount to be distributed in cash, TRY 1.328.696.972- as mentioned hereinabove,
c.In this respect, gross amount of TRY 0,6039532- shall be paid in cash to our shareholders for each share, having a nominal value of TRY
1.- (One Turkish Lira),
The aggregate gross amount of cash dividend payment shall be TRY 1.328.696.972-,
“As per the Code numbered 5274 Regarding the Amendment of Turkish Commercial Code, in order to increase the nominal value of the shares
to 1.- (One) New Turkish Liras, 1,000 (One thousand) units of shares, each having a nominal value of 1,000.- (One thousand) Turkish Liras
shall be merged and 1.- (One) unit of share having a nominal value of 1.- (One) New Turkish Liras shall be issued to represent such shares.
Fraction receipt shall be issued for the shares that could not be complemented up to TRY 1. In relation to such change, the shareholders’ rights
arising out of their shares are reserved. Concerning such transaction, the 1st, 2nd, 3rd and 4th series of share certificates, which represent
the existing share capital, shall be merged in the 5th series. In connection with the transactions of share change and merger of series, the
shareholders
rights arising out of their shares are reserved. The transactions regarding the change in share certificates shall be commenced by the Board
of Directors of the Company after the dematerialization of Capital Markets instruments is put into practice and within the framework of related
regulations.”
204
6- TRY 1.649.726.266- which is the remaining of the current year distributable profit after the cash dividend distribution shall be :
a. Regarded as extraordinary reserves and set aside within the Company,
b. The withholding tax deductions shall be applicable on the amount, which shall be transferred to 2011 financial year as extraordinary
reserves, in case such amount shall be subject to redistribution
7-Cash dividend payment to our Company’s shareholders shall commence on 16 May 2011 and shall continue for 15 days in İstanbul Head Office,
Çiftehavuzlar, İzmir and Ankara branches of Finans Yatırım Menkul Değerler A.Ş. and also in Central Registry Agency located at Süzer Plaza
Askerocağı Cad. No: 15 K: 2 34367 Elmadağ - Şişli İstanbul and shall be made in exchange of the dividend share denominations for year 2008,
provided that the physical shares held by the shareholders are registered by the Central Registry Agency and brokerage house authorized for
keeping the shares.
205
Abstract Of Auditor’s Report To General Assembly Of Turkcell İletişim Hizmetleri A.Ş.
Name of the Company
: TURKCELL İLETİŞİM HİZMETLERİ A.Ş.
Headquarters
: İstanbul
Issued Share Capital
: TRY 2,200,000,000
Names, surnames
: İbrahim Alpay DEMİRTAŞ, Hamit Sedat ERATALAR
term of duty of auditors
: 1 (One) Year
whether they are company shareholder
: Neither is a company shareholder or employee
and/or employees
Number of Board of Directors Meetings
Attended, Board of Directors Meetings
Held
: Hamit Sedat Eratalar attended 10 ordinary Board of
Directors meetings.
Moreover, extraordinary Board of Directors meetings were held 17 times.
İbrahim Alpay Demirtaş attended 3 ordinary Board of Directors meetings.
The scope of the examination performed on the partnership accounts, books and records, the dates of such examination
and the conclusions drawn there from
: The quarterly examinations performed on the
statutory books and records revealed that they
were kept and maintained in an orderly and accurate
manner.
The number of counts performed on the
Treasury as Required under Article
353.Paragraph 1, Sub clause 3 o The
Turkish Commercial Code and the results thereof
: The Treasury was counted four times and it was
noted that actual assets and the records were in
coherence.
Dates of examinations performed pursuant
to Article 353 Paragraph 1, Sub clause 4 of
the Turkish Commercial code and the results thereof
: The monthly examinations revealed that securities
were complete and coherent with the books and
records.
Complaints filed in regards to irregularities and proceedings undertaken in respect thereof.
: There were no complaints filed in regards to
irregularities.
Board of Auditors meetings were held four times.
Forward-Looking Statements
This document 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 1995. All statements other than statements of historical facts included in this document, including, without limitation,
certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking 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 2009 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.
We have examined the accounts and transactions of Turkcell İletişim Hizmetleri A.Ş. for the period 01.01.2010 - 31.12.2010 pursuant to Turkish Commercial Code, the Company’s Articles of Association and other legislation and in accordance with the generally accepted Accounting
principles and standards.
In our opinion the accompanying Balance Sheet as of December 31, 2010 reflects the actual financial position of Turkcell İletişim Hizmetleri
A.Ş. where as the Income Statement for the 01.01.2010 - 31.12.2010 period fairly and accurately reflect operational results of the Company,
and that the proposal for dividend distribution is in line with the pertinent law and the Company’s Articles of Association.
We respectfully submit the Balance Sheet and Income Statement for approval and the release of Board of Directors.
Sincerely,
Auditor
İBRAHİM ALPAY DEMİRTAŞ
206
Auditor
HAMİT SEDAT ERATALAR
207
TURKCELL
Turkcell Plaza Meşrutiyet Cad. No: 71 Tepebaşı, 34430 İstanbul
Tel: +90 (212) 313 1000 Fax: +90 (212) 313 0099 www.turkcell.com.tr

turkcell

Transcription

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