AS TURKCELL GROWS...
ANNUAL REPORT 2016
...LIFE GROWS...
Total Number of Customers (Million)
48.6
50.7
52.0
51.6
50.1
2012
2013
2014
2015
2016
...HAPPINESS GROWS...
Total Number of Fixed Customers (Thousand)
845.4
1,191.3
1,520.2
1,861.9
604.3
2012
2013
2014
2015
2016
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5
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A
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(cid:12)
İ
(cid:25)
(cid:5)
T
(cid:12)
(cid:5)
R
M
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(cid:26)
İ
(cid:11)
(cid:21)
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(cid:21)
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(cid:12)
(cid:25)
(cid:47)
N
(cid:5)
T
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(cid:12)
(cid:2)
İ
(cid:12)
(cid:7)
İ
(cid:12)
(cid:5)
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...FUTURE GROWS…
Number of IP TV Subscribers (Thousand)
60.1
2014
223.7
2015
359.7
2016
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(cid:176)
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(cid:11)
(cid:21)
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(cid:25)
(cid:47)
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(cid:5)
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(cid:2)
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(cid:12)
(cid:7)
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(cid:12)
(cid:5)
R
ABOUT TURKCELL
Turkcell is a converged telecommunication and technology
services provider, founded and headquartered in Turkey. It
serves its customers with voice, data, TV and value-added
consumer and enterprise services on mobile and fixed networks.
Turkcell Group companies operate in 9 countries: Turkey,
Ukraine, Belarus, Turkish Republic of Northern Cyprus,
Germany, Azerbaijan, Kazakhstan, Georgia and Moldova.
Turkcell Group reported a TRY 14.3 billion revenue in 2016 with
total assets of TRY 31.6 billion as of December 31, 2016.
Turkcell launched LTE services in its home country on April
1, 2016, employing LTE-Advanced and 3 carrier aggregation
technologies in 81 cities. In 2G and 3G, Turkcell’s population
coverage is at 99.67% and 96.04%, respectively, as of
December 2016. It offers up to 1 Gbps fiber internet speed with
its FTTH services.
Turkcell has been listed on the NYSE and the BIST since July
2000, and is the only NYSE-listed company in Turkey.
Read more at www.turkcell.com.tr
TURKCELL ANNUAL REPORT 2016
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TABLE OF CONTENTS
TURKCELL GROUP
10 2016 at a Glance
12 Chairman’s Message
14 Board of Directors
16 Message from the CEO
20 Executive Officers
22 Top Management of Subsidiaries
24 Financial Indicators
25 Operational Indicators
27 Sustainable Growth with Our Converged Business Model
28
30
32
34
Growth in Digital Services
Growth in Mobile Data and Fixed Data
Growth in International Operations
Growth in Financial Services
35 Our Vision, Targets and Strategies
2016 OPERATIONS
36 Turkcell: The Company Giving Direction to the Technology in the World
38 Our Superior Technology
42 Turkcell as a Converged Communication Company
44 Our Consumer Business
46 Our Corporate Business
50 Digital Services
55 Business Partners Ecosystem and Innovation
56 Turkcell Sales Channels
58 Customer Experience Focus
60 Social Responsibility
68 Human Resources
70 Turkcell Academy
74
76 Domestic Subsidiaries
79 Awards
International Subsidiaries
CORPORATE GOVERNANCE
Investor Relations
82
84 Credit Ratings
Important Developments after the Reporting Period
85
90 2016 Corporate Governance Principles Compliance Report
99 Conclusion of the Affiliation Report
SECTORAL AND FINANCIAL INFORMATION
100 Telecommunications Sector in Turkey
101 Company Developments
104 Turkcell Group: 2016 Financial and Operational Performance
109 Forward Looking Statements
110 Review of Risk Assesment
113 Independent Auditor’s Report and Consolidated Financial Statements
232 Our Offices
233 Glossary
TURKCELL
ANNUAL REPORT 2016
FORMATS
WEB
TABLET
HARD COPY
You can have access to the Digital
Annual Report with the QR Code.
8
TURKCELL ANNUAL REPORT 2016
TURKCELL GROUP
Integrated communications
and technology services group:
TURKCELL
BELARUS - life
Mobile Customers (million) 1.6
Revenues (TRY million) 150
UKRAINE - lifecell
Mobile Customers (million) 12.4
Revenues (TRY million) 571
AZERBAIJAN - Azercell
GERMANY - TURKCELL Europe
Mobile Customers (million) 0.3
KAZAKHSTAN - Kcell
MOLDOVA - Moldcell
Turkcell TURKEY
Mobile Customers (million) 33.0
Fixed Customers (million) 1.9
IP TV Customers(*) (thousand) 360
Revenues (TRY million) 12,788
GEORGIA - Geocell
TRNC (cid:130) (cid:11)uze(cid:79) (cid:11)(cid:96)br(cid:96)s Turkcell
Mobile Customers (million) 0.5
Revenues (TRY million) 136
9
50.1
million
Operating in 9 countries
Total subscribers
TRY
31.6
billion
Total asset
(*) Our OTT TV customers are 1.1 million as of 2016 and are included in our total TV customers.
All financial results in this annual report are prepared in accordance with International Financial Reporting Standards (IFRS) and expressed in Turkish Lira (TRY or TL) unless otherwise stated. The
only exception is the use of figures in the Message from the CEO section, in which the figures are given exactly as they are in our annual report in Turkish.
TURKCELL GROUP
TURKCELL ANNUAL REPORT 2016
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App Store
Google Play
App Store
Google Play
Turkcell TV+
Turkcell Academy
BiP
fizy
Goals on Mobile
Digital Publishing
My Account
lifebox
10
TURKCELL ANNUAL REPORT 2016
2016 AT A GLANCE
11.9%
growth
23
million 4.5G
subscribers
Record high revenue
Turkey’s fastest with 375 Mbps
62.3%
increase
Record high growth in data and
digital services revenue
›
›
All time high revenue and EBITDA
performance.
The growth in Turkcell Group Revenues
and EBITDA was 11.6% and 11.9%,
respectively; 32.3% EBITDA margin
›
›
›
The widest spectrum
2 times more data usage compared to
3G users
As of December 2016, 28% of the total
traffic is being carried through 4.5G
network.
›
›
›
Smartphone penetration reached 64%.
Share of mobile triple play customers
grew to 42%.
Share of fiber play with TV customers
achieved 36%.
32.3%
EBITDA Margin
0.8
Net Debt/EBITDA
3
credit rating
We have achieved
our 2016 targets.
Strong balance sheet structure
Turkcell’s “Investment Grade”
credit rating has been confirmed.
› We have achieved our targets, which we
have disclosed for 2016 regarding Group
and Turkcell Turkey revenue growth,
Group EBITDA margin, and the ratio of
Group operational capital expenditures
(excluding license payments) to sales.
›
In the last quarter, we reduced our
foreign exchange position to USD 125
million(1) from USD 2 billion in 2015,
mitigating the foreign exchange risk.
› We actively managed our balance sheet
and risks.
›
Turkcell is the only company in Turkey
to maintain its 3 “Investment Grade”
credit ratings assigned by the major
credit rating agencies.
(1) Please note that this figure takes into account advance payments and the impact of hedging, and assumes utilizing the option of paying the last instalment of the 4.5G licence in TRY .
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CHAIRMAN’S MESSAGE
In 2016, the dynamism created by our innovative products and services
was one of the driving forces behind our growth. By establishing the
world’s fastest 4.5G infrastructure, we have strengthened our vision of
being Turkey’s most powerful integrated telecom operator.
Our Group, which
realized TRY 3.5 billion
of investment this year,
while strengthening its
leadership position in its
area of operation on one
hand, has not compromised
on its profitability and
operational efficiency on
the other.
Thanks to our strong and
widespread infrastructure,
while offering 4.5G
technology to our
customers, we achieved an
area coverage of 82.5% in
Turkey and increased total
4.5G subscriber number
to 23 million by the end of
2016.
Dear Stakeholders,
We have concluded another year in which our Board of
Directors and Senior Management team worked in great
harmony, underpinned by a unified team spirit. We had a
single goal behind all the work we realized throughout the
year: To provide the maximum benefit to our shareholders
and investors, increasing the value of our Company and
strengthening our leadership position in our country and in
our region. Additionally, we are operating in a sector vital for
our country, not only from an economic perspective, but also
from a strategic one. This also increases our responsibility
to our shareholders and investors, while fostering an even
greater sense of responsibility towards our country and the
wider region.
When we look back on 2016, we note that the effects of
fragility experienced in the global economy were felt more
intensely in developing markets. Britain’s decision to exit
the EU at a referendum, and the presidential election in the
US were the developments, the effects of which were felt
regionally and globally. On the other hand, the July 15 coup
attempt in our country was defeated by strong political will
and our citizens’ efforts to protect their nation and democracy.
The subsequent attempt to create an economic crunch also
remained unsuccessful due to Government-Nation solidarity,
revealing Turkey’s true dynamism and strength, and rationality
of who continued to trust in Turkey.
Even in such a challenging environment shaped by tough
conditions, we have not relinquished our vision of leadership in
investment in 2016. Our Group, which realized TRY 3.5 billion
of investment this year, while strengthening its leadership
position in its area of operation on one hand, has not
compromised on its profitability and operational efficiency on
the other. With the right financing strategy, where resources
were provided at advantageous conditions, exposure to
exchange rate risk has been minimized.
WE MADE THE STRONGEST CONTRIBUTION TO THE
ECONOMY IN THE 4.5G TENDER.
While 2016 is now over for Turkey and the wider world, as
aforementioned, the most significant development of the
year for our industry was undoubtedly the launch of 4.5G
technology. By paying the highest price at the 4.5G tender,
making the strongest contribution to the Turkish economy, and
signing off on the highest infrastructure investment, we have
once again confirmed our dedication to providing the greatest
customer satisfaction by delivering the most advanced
technologies. We also gained the right to use the largest 4.5G
frequency source with a total frequency of 172.4 MHz.
Thanks to our strong and widespread infrastructure, while
offering 4.5G technology to our customers, we achieved
an area coverage of 82.5% in Turkey and increased total
4.5G subscriber number to 23 million by the end of 2016.
The number of users of our digital services such as Turkcell
TV+, BiP, fizy, lifebox, Goals on Mobile and Hello Hope has
increased significantly due to the speed enabled by 4.5G
technology.
We have opened Turkey’s largest data center in Gebze in order
to provide our customers a secure and high quality service.
With the Gebze Data Center, established in line with the latest
developments in communications technology, we aim to offer
technology and communications solutions to our customers in
all areas of life.
WE LAUNCHED A NEW ERA IN
FINANCIAL SERVICES.
In August 2016, we launched Paycell to our customers as
one of our value-added services to leverage our powerful
infrastructure. With the Paycell service, we began to offer our
customers fast and easy payment methods in many new areas
such as markets, restaurant chains, gas stations, parking lot
payments, insurance premium payments and airport fast track
services.
As a company whose activities are wholly realized on
the principle of unconditional customer satisfaction, we
established Turkcell Finansman (Consumer Finance) Company
as of January 29, 2016, having received the necessary
authorization from the BRSA. Accordingly, we started to
provide effective financing facilities for the equipment and
hardware needs of the telecom sector via Consumer Finance
Company, which we established with our own equity, under
the Financell brand name.
OUR EXPERTISE AND EXPERIENCE GIVE DIRECTION
TO OUR SUBSIDIARIES...
We have also concluded a successful year in terms of our
international subsidiaries, which we have structured on the
strength of Turkcell Turkey’s deep-rooted experience and
expertise. lifecell, carrying out its operations in the Ukrainian
market since 2005, continued to grow, increasing its data
revenues through the 3G+ service it offers. Additionally, we
launched our lifecell brand in the Turkish Republic of Northern
Cyprus as a digital brand, opening up a new service area
through the “more internet” approach. We foresee lifecell,
which accelerated its investments in Ukraine after having
become 100% owned by Turkcell, continuing its successful
financial and operational performance going forward. BeST,
which carries out its operations in the Belarusian market,
continued to grow with the favorable impact of the 4G launch
in 2016, as well as its expanding subscriber base and growing
device sales. In these markets, we will continue to offer our
customers the latest technologies in a timely manner, together
with innovative products and digital services to the extent
allowed by local legislation.
TURKCELL ANNUAL REPORT 2016 TURKCELL ANNUAL REPORT 2016
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We continued to contribute to
the sustainable development of
Turkey with our comprehensive
social responsibility projects
initiated in 2016.
Turkcell will continue
to unite people through
information and technology,
and in this respect, will
continue to offer equal
opportunities for all.
THE SOCIAL RESPONSIBILITY COMMITMENT THAT
MAKES A DIFFERENCE...
As Turkcell, while we work to create economic bene(cid:206)t for our
shareholders and investors on one hand, on the other, we seek
to contribute to the enrichment of our country’s cultural and
educational life, to convey social values to future generations
and to create bene(cid:206)t for all. Because ultimately, we are part
of a society that even puts out nesting boxes for weary birds
in migration.
With this sensitivity, we continued to contribute to the
sustainable development of Turkey with our comprehensive
social responsibility projects initiated in 2016. The number
of high school and university scholarships, which our Group
has been granting uninterruptedly for 16 years, exceeded
100,000. We launched numerous online educational materials
and applications within Turkcell Academy for the disabled,
whom we always stand by. We supported the education of our
disabled and gifted children by creating technology classes and
professional workshops within the scope of our “Education
without Boundaries” and “Whiz Kids” social responsibility
projects initiated under the auspices of the Ministry of
National Education.
And neither have we been indifferent to the ongoing
humanitarian crisis in (cid:19)yria of more than (cid:206)ve years. (cid:23)e
launched our “Hello Hope” project in an attempt to facilitate
the lives of our Syrian guests, enabling them to better adapt to
society. (cid:7)oin(cid:61) forward, we remain (cid:206)rmly supportive of (cid:19)yrian
youth with our technology to provide them with a meaningful
opportunity in life while they undergo a period of adaptation.
Within the scope of our sponsorship activities, we continued
to diversify our social investments by providing sponsorship
support to a number of distinguished organizations such as the
World Energy Congress, EXPO 2016 Antalya, and Innovation
Week, which were realized in our country and attracted global
interest.
WE WILL ENERGIZE THE STEADY RISE OF TURKEY...
We believe that our duty as the Board of Directors and Senior
Management Team is to prepare Turkcell, one of Turkey’s
most valuable companies, for the coming decades. We have
evaluated each day with a focus on this target, and are
committed to evaluating the future with the same approach
and determination. Turkcell will continue to unite people
through information and technology, and in this respect, will
continue to offer equal opportunities for all. Moreover, we will
continue to succeed in both producing technology, and making
ef(cid:206)cient use of it.
On behalf of the Board of Directors and the entire Turkcell
family, we thank all of our stakeholders who provided their
unwavering support in our 2016 operations, and who share our
journey of sustainable success, focused on long-term goals.
Turkcell will continue its corporate development without
interruption, in step with the steady rise of our country. This
is evidenced in our successful (cid:206)nancial and operational results
achieved in our 20(cid:176)(cid:181) operations, and also in our diversi(cid:206)ed
products and services that meet our customers’ needs and
expectations.
With the support of our shareholders as well as all our
stakeholders, I hope to achieve new successes going forward...
Respectfully yours,
AHMET AKÇA
Chairman of the Board of Directors
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TURKCELL ANNUAL REPORT 2016
BOARD OF DIRECTORS
FRONT ROW, FROM LEFT TO RIGHT:
ATİ(cid:12)(cid:12)A (cid:11)(cid:15)(cid:213)(cid:125) AHM(cid:5)T A(cid:11)(cid:213)A(cid:125) M(cid:5)HM(cid:5)T Hİ(cid:12)Mİ (cid:7)(cid:53)(cid:12)(cid:5)R
BACK ROW, FROM LEFT TO RIGHT:
(cid:2)(cid:5)(cid:11)İR (cid:16)A(cid:11)(cid:4)(cid:5)MİR(cid:12)İ(cid:125) (cid:10)AN (cid:5)R(cid:9)(cid:11) R(cid:21)(cid:4)(cid:2)(cid:5)R(cid:7)(cid:125) (cid:5)R(cid:9)(cid:11) (cid:2)(cid:5)(cid:12)(cid:6)RA(cid:7)(cid:5)(cid:125) M(cid:5)HM(cid:5)T (cid:2)(cid:15)STAN
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AHMET AKÇA
Chairman of the Board and Independent Board Member*
Ahmet Akça was appointed to the Board of Directors by Capital Markets
Board decision. From 1981 to 1988, Mr. Akça served as a Foreign Trade
Manager in the glass and food industry. In 1988 he became CEO of an
International Trading Company, a position he held until 1992. He later
started his own business, which he still runs. Mr. Akça is the Founder and
Chairman of the Board of Directors of logistics company Akça Lojistik
(cid:8)izmetleri ve Ticaret A.(cid:217). (cid:8)e was a Member of the Committee of Trustees in
(cid:10)anuary 20(cid:176)0, at the time of the Bezmialem (cid:22)akıf (cid:21)niversity establishment,
and has been serving as the Chairman of the Committee of Trustees since
November 2011. After studying mathematics at Middle East Technical
University and sociology at Istanbul University for a certain period, Mr.
Akça graduated from the Bursa Economics and Commercial Sciences
Academy’s Department of Economics.
ATİ(cid:12)(cid:12)A (cid:11)(cid:15)(cid:213)
Independent Board Member*
Atilla Koç was appointed to the Board of Directors by Capital Markets Board
decision. Having worked as an Undersecretary at the Ministry of Interior,
and as Chief of Police in Konya, he served as the District Governor of the
(cid:21)lubey, (cid:14)usaybin and Bayındır districts, and as the (cid:7)overnor of (cid:19)iirt and
Giresun provinces. He has also been the Prime Minister’s Undersecretary,
the General Secretary of Ankara Metropolitan Municipality, and the Central
(cid:7)overnor. Then, Mr. Koç served as AKP Aydın (cid:4)eputy in the 22nd and 23rd
period of the Grand National Assembly of Turkey and as Minister of Culture
and Tourism in the 59th Government. He graduated from Ankara University’s
Faculty of Political Science.
M(cid:5)HM(cid:5)T Hİ(cid:12)Mİ (cid:7)(cid:53)(cid:12)(cid:5)R
Independent Board Member*
Mehmet Hilmi Güler was appointed to the Board of Directors by Capital
Markets Board decision. He formerly worked as a Project Engineer and
(cid:7)roup Chairman at T(cid:21)(cid:19)A(cid:217) Aerospace Industries. Mr. (cid:7)üler also served
as Vice President and Board Member of the Scientific and Technological
(cid:18)esearch Council of Turkey (T(cid:53)BİTAK), as Chairman and (cid:7)eneral Mana(cid:61)er
of the Machines and Chemical Industries Board (MKEK), as the General
Manager and Chairman of Etibank, as the Chief Undersecretary to the Prime
Minister, and as Board Member and (cid:5)(cid:78)ecutive (cid:4)irector at (cid:5)(cid:18)(cid:4)(cid:5)Mİ(cid:18) and
İ(cid:7)(cid:4)A(cid:217). Mr. (cid:7)üler also served as Minister of (cid:5)ner(cid:61)y and (cid:14)atural (cid:18)esources
in the 58th, 59th and 60th Governments. Mr. Güler graduated from Middle
East Technical University’s Department of Metallurgical and Materials
Engineering where he obtained his Master’s and Doctorate degrees.
MEHMET BOSTAN
Board Member**
Mehmet Bostan was appointed to the Board of Directors by Capital Markets
Board decision. Mr. Bostan formerly worked as Senior Relationship Manager
at B(cid:14)P Ak (cid:4)resdner Bank A.(cid:217), Mana(cid:61)er at T(cid:19)KB, Chief Turkey (cid:18)epresentative
of (cid:4)resdner Bank A(cid:7) and (cid:4)eputy (cid:7)eneral Mana(cid:61)er at (cid:7)üne(cid:218) (cid:19)i(cid:61)orta. (cid:8)e has
served as the (cid:7)eneral Mana(cid:61)er and Board Member of (cid:22)akıf (cid:5)meklilik since
2010. During his position as the President of the Turkish Prime Ministry
Privatization Administration, he has been appointed as the Chairman of
the Board and General Manager of Sovereign Wealth Fund of Turkey on
November 2, 2016. He is also a Board Member of Turkish Tennis Federation.
Mr. Bostan graduated from International Relations, from the Faculty of
Economics, at Istanbul University. He holds an MBA from Bilgi University.
(cid:4)R. (cid:2)(cid:5)(cid:11)İR (cid:16)A(cid:11)(cid:4)(cid:5)MİR(cid:12)İ
Board Member**
Bekir Pakdemirli was appointed to the Board of Directors by Capital
Markets Board decision. Pakdemirli has been an entrepreneur in
food, computer and automotive industries, besides taking roles in the
establishment and management of various companies. During his career, he
also served as the General Manager of a ceramics company, which is among
the 500 industrial companies in Turkey and a publicly-traded food company.
He has served in executive management positions at McCain Foods, a
multinational company, and still offers consultancy services to McCain
Company. Serving as a Member of the Board of Directors of Albaraka Türk
Participation Bank, Pakdemirli also continues his roles as a member of the
Board of (cid:4)irectors of Tarkem(cid:144)Tarihi Kemeraltı A.(cid:217)., Turkish (cid:6)oundation for
Mental Healthcare, as well as being a Member of the Board of Trustees of
Anatolian Autism Foundation and a Member of Capital Markets Investors
Association with his attention to social responsibility. Mr. Pakdemirli
presents a weekly economic program on Ege TV. He is a captain, pilot and an
amateur radio operator. After graduating from Bilkent University, Faculty of
Business Administration, he completed his Master’s degree in Management
at Ba(cid:218)kent (cid:21)niversity, and his Ph(cid:4) de(cid:61)ree in (cid:5)conomics at Celal Bayar
University.
JAN ERIK RUDBERG
Board Member***
Jan Erik Rudberg was appointed to the Board of Directors by Capital
Markets Board decision. He is currently Chairman of the Board of Directors
of Kcell JSC (Independent Director) and the Chairman of the Board of
Directors of Hogia AB. Since 2010, Mr. Rudberg has also been a member of
the Board of Directors of PJSC MegaFon (Independent Director). Between
1994 and 2003 he held various executive positions at Telia AB, after having
served as the Chief Executive Officer of Tele2 AB, Executive Vice President
of Nordbanken AB, Chief Executive Officer of Enator AB, as well as the
Chief Executive Officer of Ericsson Information Systems Sweden AB, and
having held several managerial positions at IBM. Mr. Rudberg holds a
degree in Economics and Business Administration from the Gothenburg
School of Economics.
ERIK BELFRAGE
Board Member***
Erik Belfrage was appointed to the Board of Directors by Capital Markets
Board decision. In the 70´s and 80´s, Mr. Belfrage worked as a Swedish
Diplomat in Geneva, Washington, Bucharest, Beirut, and in Paris. He has
served as Senior Vice President at SEB between 1987 and 2011, and as
an advisor to Dr. Peter Wallenberg between 1987 and 2015. In 2011, Mr.
Belfrage set up a consultancy firm Consilio International AB, of which he
is also the Chairman. The firm advises large Nordic corporates. Currently,
Mr. Belfrage is Chairman of several boards. He holds an MBA from the
Stockholm School of Economics.
*
**
The Board Members who were appointed by the Capital Markets Board as “Independent
Board Members” pursuant to Article 17, second paragraph, of the Capital Markets Law
No.6362. The CMB decision was dated March 11, 2013.
The Board Members who satisfy independency criteria were appointed by the Capital
Markets Board pursuant to sub-paragraph (k) of the first paragraph of article 128 of Capital
Markets Law No.6362. The CMB decision was dated August 15, 2013.
*** The Board Members who satisfy independency criteria were appointed by the Capital
Markets Board pursuant to sub-paragraph (k) of the first paragraph of article 128 of Capital
Markets Law No.6362. The CMB decision was dated September 13, 2013.
16
TURKCELL ANNUAL REPORT 2016
MESSAGE FROM THE CEO
In our journey of transformation from an infrastructure company to a
service-oriented experience player, we have recorded a strong growth
performance also in 2016.
As Turkcell Group, in 2016,
we pioneered the rapid
development in the area
of communications and
technology in Turkey and
the countries in which we
operate.
The number of 4.5G
subscribers of our
Company, which brings our
customers Turkey’s fastest
4.5G service, reached 23
million, while 28% of our
data traffic is carried on our
4.5G network as of the end
of 2016.
Dear Stakeholders,
When announcing our three-year targets at the end of
2015, we had set our goals as attaining the leadership
in total telecoms in Turkey, achieving strong growth
and being a player with a larger regional footprint
through products and services that are globally
relevant. 2016 has been a year during which we
confidently progressed towards our targets.
By the end of 2016, as Turkcell Turkey and Turkcell
Group, we achieved all time high results in both
revenues and EBITDA with a performance that
solidifies our brand value on a global scale. Turkcell
Group revenues reached TRY 14.3 billion on 11.9%
growth, with EBITDA rising to TRY 4.6 billion on a
11.6% increase, while EBITDA margin was at 32.3%.
The Group’s proforma net profit was realized at TRY
2.5 billion, while Turkish Accounting Standards (TAS)
net income stood at TRY 1.5 billion. Turkcell Turkey,
which represents 90% of our Group revenues, grew
11.4%, recording an EBITDA margin of %32.5.
USING THE POWER OF COMMUNICATION FOR
GROWTH AND STABILITY
the most favorable price per subscriber. In 2016,
we established the world’s strongest 4.5G network,
making the highest contribution to the economy in
4.5G. We transformed Istanbul, Ankara and Izmir into
the world’s fastest cities in mobile internet.
Thanks to our infrastructure investments implemented
with the aim of providing our customers with the best
4.5G service in Turkey, we have achieved 82.5% 4.5G
coverage in Turkey. In 2016, with 4.5G investments,
operational capital expenditures to revenues were
realized at 23%.
The number of 4.5G subscribers of our Company,
which brings our customers Turkey’s fastest 4.5G
service, reached 23 million, while 28% of our data
traffic is carried on our 4.5G network as of December
2016. With the contribution of 4.5G users, data usage
per user rose to 2.8 GB, recording an increase of 68%.
in the last quarter. In 2016, with 4.5G investments,
operational capital expenditures to revenues were
TURKCELL: MARKET LEADER IN FIBER AND
CHAMPION OF A NATIONAL MOBILIZATION FOR
FIBER ACCESS
While demonstrating this successful performance
in the financial area, we have continued to
support economic growth and stability in our
home country Turkey, and have not compromised
from our responsibilities towards our society. As
a communications company, we played a leading
role in defeating the treacherous coup attempt that
Turkey experienced on July 15 by meeting the urgent
communication needs of our people.
On the fixed side, we created a success story similar
to what we have achieved on the mobile side with
4.5G. The number of our fixed broadband customers,
consisting of fiber and ADSL customers, increased
by 342 thousand, reaching 1.9 million. We have
strengthened the market leader position that we
gained in the last quarter of 2014, while the number
of customers preferring internet access at fiber speed
rose to over 1 million.
Through our infrastructure and technology, and with
our strong financial management, we continue to work
with all our strength to sustain the economic growth
in all geographies where we operate, including Turkey.
THE MOST ADVANCED LTE EXPERIENCE THROUGH
4.5G: THE FASTEST OF THE FASTEST IS IN TURKEY
WITH TURKCELL.
The key national development for our sector in
2016 was the launch of 4.5G technology. During the
auction held in 2015, we received the highest number
of frequencies purchasing a total of 172.4 MHz at
Another area where Turkcell has taken on a leading
role was creating an awareness regarding the vital
need for fiber internet access in Turkey. In the third
quarter, we started negotiations with other alternative
internet service providers in Turkey to establish a
common infrastructure company to increase fiber
access in our country. We are pleased to observe that
our call for a fiber mobilization, which will surely
play an important role in Turkey’s development, is
viewed positively by both our government and our
counterparts.
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We have crowned our
leadership in technology
and our vision for the
future of the telecom
industry with a successful
financial performance while
not compromising on our
responsibilities towards the
society.
With these steps, we have increased the number
of customers downloading our strategic services
from 21.4 million to 44.2 million within the last
year. Demonstrating the validity of our convergence
strategy, our triple play ratio, which is the ratio of our
customers using at least one of our services in addition
to voice and data in the mobile segment, grew by 25
percentage points to 42% compared to the end of last
year. We have also achieved success in multi-play on
the fixed front. The ratio of our customers using TV
service increased by 10 percentage points to 36%
compared to the end of last year.
WE OPENED TURKEY’S LARGEST DATA
CENTER IN GEBZE.
Instead of only offering raw data for consumption
to our customers, we focused on creating value by
processing data and, with this focus, opened Turkey’s
largest data center in Gebze. Our data center, which
has 10 thousand m2 of usable space (“white space”),
helps our customers, our country and the companies in
our region to safely store and process generated data.
STUNNING GROWTH IN DIGITAL SERVICES WITH
END-TO-END SERVICE CONCEPT
Thanks to the high service quality enabled by our
mobile and fixed infrastructure, we have achieved
a real success story both in terms of data growth,
and also digital services and solutions. As a result of
this success, we recorded 62.3% growth in data and
service revenues.
Setting out as an instant messaging application, BiP
has now become a content platform, having registered
nearly 12 million downloads with users from all
countries of the world. Turkcell TV+ not only became a
product intensely preferred by our fiber customers on
the fixed side, but also transformed the video viewing
experience on the small screen through the power of
4.5G on mobile. Today it is a powerful TV platform
reaching to over a total of 1 million customers. In
digital music, we created one of the best platforms in
the world with fizy. We reshaped our portfolio, which
includes services such as lifebox, My Account, Goals
on Mobile, Hello Hope, UpCall, Digital Publishing
and My Dream Companion, on the basis of strong
infrastructure, rich content and effective customer
experience. We made our products and services
available to other operators’ customers in order for all
users to experience Turkcell quality.
We made our products
and services available to
other operators’ customers
in order for all users to
experience Turkcell quality.
18
MESSAGE FROM THE CEO
LOAN SUPPORT TO 1.9 MILLION CUSTOMERS
THROUGH TURKCELL CONSUMER FINANCE
COMPANY
Turkcell Finansman Şirketi (“Financell”), which we
launched in the 2016 operating period, offers attractive
financing opportunities for our customers to reach
smartphones that will enhance the quality of their lives.
Financell played an important role in strengthening our
customers’ loyalty by providing TRY 2.9 billion loans to
a total of 1.9 million customers by the end of 2016. The
intensive investor interest in the TRY 250 million nominal
value bond issue of Financell once again demonstrated
the high brand value of Turkcell.
Paycell, our mobile payment company, is progressing
towards ranking among the groundbreaking technology
applications in the finance sector. Having started
out as a financial player with a BRSA license; Paycell
has expanded its portfolio of services with brand
and platform partnerships and will continue to be an
increasingly influential player in the mobile payments
scene in 2017.
WE COVERED ALL REGIONS IN UKRAINE WITH 3G
AND LAUNCHED 4G SERVICE IN BELARUS.
2016 has been a year in which we carried our
technological leadership in Turkey to other countries
in which we operate. Our subsidiary lifecell, the first
operator to launch 3G in Ukraine, worked with the same
high performance to bring 3G services to every region of
the country. In Ukraine, we are the leading operator in
terms of both population and geographical coverage as
of year-end 2016. Our leadership position in smartphone
penetration levels – which stands at 57%- gives us the
confidence that lifecell’s 3G-focused growth will continue
in 2017.
life:), our subsidiary in Belarus, has launched its 4G
services in Minsk as of August 2016 through the use of
common infrastructure as required by the regulations
in Belarus. We are looking forward to the opportunity
to serve all of our customers nationwide with the most
advanced with 4G service as the infrastructure expands.
A KEY STEP IN EXPANDING OUR MOBILE SERVICES
FOCUS IN OUR REGION: LIFECELL DATA PACKAGES
In 2016, we have taken important steps to open up the
world of mobile internet to our Ukrainian and Belarussian
customers by carrying our experience in Turkey with 4.5G
and mobile services. In 2017, we will continue to maintain
our focus on this front.
proposal from Kuzey Kıbrıs Turkcell, our subsidiary in
the Turkish Republic of Northern Cyprus. With lifecell
packages, we meet all the communication needs of
our clients in the TRNC via our BiP, TV+, fizy and
lifebox services, which combine our telecom and OTT
capabilities.
AN OPERATOR EXAMPLE TO THE WORLD FOR
SOCIAL RESPONSIBILITY
Turkcell, which has placed its social responsibilities at
the center of its work and business conduct since its
inception, continued to be a leader in this area in 2016.
In Turkey, the country hosting the largest number
of refugees according to the UN, we have been the
leading and exemplary company in the field of social
responsibility with our projects, especially those provided
to the Syrian immigrants. Turkcell serves 1.3 million
Syrian customers with connectivity and its Arabic Call
Center – we have complemented these services with our
“Hello Hope” mobile application, and the fiber-connected
technology center we have initiated as a pilot project
at the Kahramanmaras Refuge Center. We support our
Syrian users in having access to education materials,
in learning Turkish and in maintaining their daily lives
through instant voice translation – in other words,
helping them integrate into the society more comfortably.
Over the course of 2016, our work has attracted the
attention of the GSMA, the United Nations and the
World Economic Forum (WEF). We had the opportunity
to share our experience and insights both with our
counterparts in the telecommunications sector and with
institutions and organizations outside our industry at
the UN Private Sector Forum 2016 (held in the margin of
the United Nations General Assembly) and at the World
Economic Forum’s Annual Meeting in Davos.
OUR JOURNEY OF SUCCESS WILL CONTINUE...
As the Turkcell family, we thank all of our stakeholders,
for their support in the 2016 activities of our Group,
which deliver solutions touching every aspect of our
customers’ lives as an integrated communications and
technology provider. Together, we will continue our
journey of sustainable success in the periods to come, by
achieving financial and operational results that will add
to the wealth of our shareholders in all geographies in
which we operate.
Yours sincerely,
Another important development in this regard was the
launch of lifecell, a data- and mobile service-oriented
KAAN TERZİOĞLU
Turkcell CEO
Financell played an
important role in
strengthening our
customers’ loyalty by
providing TRY 2.9 billion
loans to a total of 1.9
million customers by the
end of 2016.
2016 has been a year in
which we carried our
technological leadership in
Turkey to other countries in
which we operate.
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EXECUTIVE OFFICERS
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7
8
3
1
KAAN TERZİOĞLU (1)
Chief Executive Officer
Kaan Terzioğlu was appointed Turkcell’s Chief Executive Officer on April 1, 2015.
He began his professional life in 1990 as an Independent Auditor and CPA at Arthur
Andersen Turkey. In 1992, Mr. Terzioğlu joined Arthur Andersen USA as the IT
Strategies and Security Specialist, and in 1994, began working at Arthur Andersen
Belgium as the Leader of Information Management and Digital Strategy Services. In
1998, he was appointed Vice President of Consultancy Services Turkey Operations.
Between 1999 and 2012, he served as the Team Leader of E-Commerce Strategies
for the EMEA region, Sales Director of Advanced Technologies for the EMEA region,
Managing Director of Technology Marketing Organization for the EMEA region, and
Vice President of Central and Eastern Europe at the Cisco Systems Brussels branch,
respectively. Between April 3, 2012 and April 1, 2015, Mr. Terzioğlu was a Member
of the Board of Directors at Akbank, Aksigorta A.Ş., Teknosa İç ve Dış Ticaret A.Ş.
and Carrefoursa A.Ş. Kaan Terzioğlu graduated from the Department of Business
Administration at Boğaziçi University.
BÜLENT AKSU (2)
Executive Vice President – Finance (CFO)
Bülent Aksu has been appointed as the Chief Financial Officer, effective as of July 20,
2016. He has 20 years of managerial experience in the field of finance, accounting,
tax and management in various sectors including energy, petrochemicals, textiles and
auditing. Bülent Aksu started his professional career as an inspector on the Inspection
Board at Kuveyt Türk A.Ş. in 1997. He held the role of Finance Manager and CFO at
Çalık Holding, respectively in 2003. He held the role of CFO and Board Member at
Akfel Group between 2008-2012. He worked at Petkim Petrokimya Holding A.Ş, a
subsidiary of Azerbaijan’s national oil and gas company SOCAR between 2012-2013,
and most recently was the CFO at Star Rafineri A.Ş, a subsidiary of SOCAR. In 2016,
Mr. Aksu was named among the 50 Most Efficient CFOs by Fortune Turkey Magazine.
Mr. Aksu graduated from the department of Business Administration (English) of
Istanbul University in 1996.
İSMAİL BÜTÜN (3)
Executive Vice President - Marketing
İsmail Bütün, has been appointed Executive Vice President of Marketing (CMO) as
of July 1, 2016. Mr. Bütün started his career at the Çuhadaroğlu Holding Moscow
Office in 1996. Between 1997 and 2000, he worked at the Enka Group Foreign Trade
department in Moscow as Sales and Business Development Manager. Starting from
2000, he worked at Nestle as CPW Turkey Country Manager, Regional Marketing
Director for Central Asia based in Uzbekistan, and later as Head of National Key
Accounts for Nestle Turkey. After 2011, he served at Nestle’s Global Headquarters
in Switzerland, first as Business Excellence Manager at the Global Customer and
Sales Management Unit and then as Marketing Manager at the Beverages Strategic
Business Unit. Most recently, Mr. Bütün was the General Manager of Nestle Turkey
Beverages Group, also serving as a Board Member. İsmail Bütün, joined Turkcell as
Senior Vice President of Retail Sales on January 15, 2016. He, graduated from the
Boğaziçi University Business Administration department in 1996.
SERHAT DEMİR (4)
Executive Vice President - Legal and Regulation
Serhat Demir joined Turkcell as the Executive Vice President of Legal and Regulation
Function in May 2015. Mr. Demir started his professional career in 1997 at
Dun&Bradstreet. He worked as a lawyer and held executive and directorial positions
responsible for legal affairs at Yıldız Holding and Çalık Holding A.Ş.. He was a Member
of the Board of Directors of Çalık Holding AS and Albtelecom ShA and currently is a
Member of the Board of Directors of Banka Kombetare Tregtare ShA and Aktif Yatırım
Bankası A.Ş.. Serhat Demir graduated from the Faculty of Law at Istanbul University
and has a Masters of Business Administration degree.
MURAT ERKAN (5)
Executive Vice President - Sales
Murat Erkan joined Turkcell Group in June 2008 as the General Manager of Turkcell
Superonline and as of December 1, 2015, was appointed Executive Vice President
of Sales. Prior to this position, he had served as the Senior Vice President of Retail
and Active Sales and Senior Vice President of the Home and Consumer Business,
respectively. Mr. Erkan, who started his professional life at Toshiba, became an
Application Engineer at Biltam Mühendislik and then became the first “System
Engineer” of Turkey at Cisco Turkey. He served as Chief Officer at Cisco Systems in
charge of technology, sales, business development and channel management for ten
years. Prior to his position at Turkcell Superonline, Mr. Erkan had been the Business
Unit Manager at Aneltech working on solutions related to Telecommunication, Mobile,
ICT, defense industry and industrial products sectors since 2006. He graduated
from the Yıldız Technical University Electronics and Telecommunication Engineering
Department in 1992. He completed the Strategic Marketing Program at Harvard
Business School in 2010.
SEYFETTİN SAĞLAM (6)
Executive Vice President - Business Support
Seyfettin Sağlam joined Turkcell as Chief Group Human Resources Officer in July
2014. He was appointed Executive Vice President of Business Support Officer in
April 2015. He began his career in MSC Consulting lnc. in 1998. He worked as a HR
professional at Tekstilbank and as the Human Resources Group Manager at Yıldız
TURKCELL ANNUAL REPORT 2016 21
2
4
6
5
11
10
Holding, responsible for the Packaging, IT, Finance and Retail Groups. He also served
as the Assistant General Manager of T.C. Ziraat Bankası. Subsequently, he was
appointed Vice Chairman and Member of the Executive Committee at Rixos Hotels and
Sembol Construction Inc. Mr. Sağlam has also served as an Executive Vice President
of Borsa Istanbul. He graduated from the Department of Sociology at Middle East
Technical University. He received a Master’s degree from the Marmara University
Business Administration Department in International Quality Management. He also
completed the HR Management & Leadership Programs at INSEAD.
İLTER TERZİOĞLU (7)
Executive Vice President - Strategy
İlter Terzioğlu joined Turkcell in 2003 as Business Strategies, Regulation and Risk
Consolidation Division Head. In October 2015, he was appointed as the Executive
Vice President of Strategy. Previously, he had served as Senior Vice President of
International Business under the Strategy Function. He has also undertaken the roles
of acting Chief of International Business, Chief Strategic Projects Officer and Chief
Network Operations Officer at Turkcell. Prior to joining Turkcell, he had worked as
Assistant General Manager at Turkcell Group companies, including Show TV and
Superonline. He had worked at Ericsson Turkey as the Assistant General Manager
responsible for Turkcell between 1994 and 2002. He graduated from the Department
of Econometrics at Istanbul University.
AYŞEM ERTOPUZ (8)(*)
Senior Vice President - Digital Services and Solutions
Ayşem Ertopuz joined Turkcell in January 2016 as Strategic Planning Director. In
November 2016 she was appointed Senior Vice President of Digital Services and
Solutions. She started her career at Arçelik A.Ş., where she had served as Quality
System Engineer between 1993-1997. She started to work in Arthur Andersen in 1997
as Strategic Consultancy Services Manager. Joining Cisco’s EMEA Region Organization
in 2001 in Belgium, Ayşem Ertopuz assumed managerial positions in several functions
including Strategic Planning, Business Intelligence, Operations and Global Customer
Management. She served as manager of the Business Intelligence Group within Cisco’s
New York-based Global Sales Strategy and Planning organization between 2006
and 2015, focusing on the fields of Service Providers sector, market and competition
dynamics, business strategy and performance, and utilization of digital services in
new business models. Ayşem Ertopuz graduated from the Middle East Technical
University Industrial Engineering Department and received her MBA degree from the
New York University, Stern School of Business.
DOĞUŞ KURAN (9)(*)
Senior Vice President - Customer and Experience Management
Doğuş Kuran joined Turkcell as Senior Vice President of Customer and Experience
Management Function as of October 1, 2015. He had begun his career at Alcatel-
Teletaş. After holding executive positions in sales, business development and internet
solutions consultancy within Cisco Systems and Microsoft Turkey organizations, he
served as Chief Sales and Operations Officer at Ericsson Turkey. Prior to his position
in Turkcell, he worked as a Partner at the Accenture Turkey Office responsible for
the telecommunication, media and technology sectors. Mr. Kuran graduated from
the Istanbul Technical University, Electrical and Electronics Engineering department
in 1995. He received his Master’s degree in Management Engineering from Portland
State University in 1997.
SERKAN ÖZTÜRK (10)(*)
Senior Vice President - Information and Communication Technologies
Serkan Öztürk joined Turkcell in 2000 as Project Supervisor. In September 2015
he was appointed as Senior Vice President of Information and Communication
Technologies. Previously, he worked as Project Supervisor and Manager at Turkcell
Project Management office between 2000-2009. He served as Chief Information
Technologies Officer in lifecell between 2009-2010 and in Turkcell Superonline
between 2010-2011. Prior to his recent appointment, he has been serving as Director
of Customer Relations Management and Business Intelligence Solutions (CRM &
BIS). Serkan Öztürk graduated from Middle East Technical University Electrical and
Electronics Engineering department. He received his MBA degree from Istanbul
University.
GEDİZ SEZGİN (11)(*)
Senior Vice President - Network Technologies
Gediz Sezgin joined Turkcell as Network Engineer in 1995. In October 2015 he was
appointed Senior Vice President of Network Technologies under the Technology
Function. Previously, he was Senior Vice President of Information and Communication
Technologies, Chief Information and Communication Technologies Officer, Director of
Application Operations, and Director of Service Network under the ICT Function, and
held various executive positions in the Technology Function. Mr. Sezgin started his
career at Alcatel Teletaş in 1991. He graduated from Istanbul Technical University in
Electronics and Communication Engineering and received his Master’s degree from the
same university.
Executive Officers include our management team reporting directly to the CEO as of the end of 2016.
(*) The titles of our Company’s Senior Vice Presidents have been changed to Executive Vice President. In addition, the title of Ali Türk, who had been working as the Senior Vice President of Supply Chain
Management within our Company, has been changed to Executive Vice President and re-positioned so as to report directly to the CEO as of March 1, 2017.
TURKCELL GROUPTURKCELL ANNUAL REPORT 2016
22
TOP MANAGEMENT OF SUBSIDIARIES
2
3
4
5
1
KAAN TERZİOĞLU (1)
Chief Executive Officer
Please see page 20 for detailed CV.
BURAK ERSOY (2)
General Manager of lifecell
Burak Ersoy began to work at Turkcell in December 2006. Since October
2015, Ersoy has been the General Manager of lifecell Ukraine. Prior to
being appointed to this position, he had served as the Turkish Retail
Sales Manager, Small Scale Business Channel Director and Executive Vice
President of Consumer Sales, respectively. Beginning his professional
career in 1993 as an Investment Advisor at Bayındır Menkul Kıymetler,
Ersoy worked as the Ankara Regional Manager at Marsh until 1999, and as
Trade Marketing Manager, Sales Development Manager and Turkey Sales
Manager at MarSA Kraft until 2006. Following his graduation from the
Middle East Technical University Mining Engineering Department, and from
Gazi University Marketing with a postgraduate degree, Ersoy completed
the Strategic Development programme at the University of Chicago Booth
School of Business.
DINA TSYBULSKAYA (3)
General Manager of BeST
In March 2016, Dina Tsybulskaya was appointed as the General Manager
of BeST. Prior to this position, Tsybulskaya had worked as the Chief
Marketing Officer from July 2012. She began her career in 2004 at the
Belarus office of Publicis, one of the largest advertising agencies in the
world. Transferring to the telecommunication sector in 2007, Tsybulskaya
worked as the Marketing Director at mobile operator velcom until joining
Turkcell Group. Dina Tsybulskaya received her bachelor’s degree of Foreign
Languages and International Politics from the Minsk University (Linguistics)
in 2000, and her postgraduate degree in International Politics at the
European Humanitarian University. Tsybulskaya also received professional
certificates and diplomas in General Management and Economics from the
Ontario Business School in 1999, in Marketing from the Charted Institute
of Marketing London in 2007 and in Business Development for Top
Management from the TAG Business School and INSEAD Business School in
2012.
İSMET YAZICI (4)
General Manager of Kuzey Kıbrıs Turkcell
İsmet Yazıcı joined Turkcell in 2009. Since December 2015, Yazıcı has been
working as the General Manager of Kuzey Kıbrıs Turkcell. Before being
appointed to this position, Yazıcı worked as the Deputy General Manager
of Sales and Business Development at Global Tower between 2009-2010
and then as the General Manager between 2010-2011. Between 2011-2015,
he served as the General Manager at BeST, Turkcell’s subsidiary in Belarus.
Beginning his professional career in 1993, Yazıcı served as the Research &
Development Engineer, International Sales Engineer, Romanian Country
Manager, Product Marketing Manager, EMEA Region CDMA Business
Development Director, and Enterprise Leader, respectively, at the Turkey
and USA offices of Nortel until 2009. İsmet Yazıcı received his bachelor’s
degree in Electric-Electronic Engineering at Hacettepe University in 1992,
and postgraduate degrees in Political Science at Marmara University in 1998
and in International Marketing and Management at the University of Texas
in 2001. He completed his second undergraduate degree by graduating from
the Istanbul University, Faculty of Law in 2011.
NİHAT NARİN (5)
General Manager of Global Tower
Nihat Narin has been appointed as Global Tower CEO in June 2016. He
also serves as Board Member at Inteltek Technology and Investments Co.
and UkrTower LLC. Mr. Narin began his career in investment banking in
1996 and worked in various roles including corporate finance and research
analyst. During his position at Ata Invest as Telecom Analyst, he worked
in many IPO projects, including IPO of Turkcell. He joined Turkcell in 2000
and worked as senior specialist at Investor Relations Department until
2004. Subsequently, he served as Director of Internal Audit, Director
of Investor Relations & International Media and Group M&A Director at
Turkcell. Mr. Narin received his BA degree from the Faculty of Economics
and Administrative Sciences at Marmara University and MBA degree from
Middlesex University while completing his graduation project on Capital
Markets of U.K. Mr. Narin also holds Turkish Capital Markets Advanced
Degree License and Corporate Governance Licenses.
TURKCELL ANNUAL REPORT 2016 23
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7
8
9
10
AHMET SEZER (9)
General Manager of İnteltek
Ahmet Sezer joined İnteltek in 2004 as the General Manager. Sezer began
his career at Aselsan. Subsequently, he served as the System Engineer,
Senior Deputy General Manager, Deputy General Manager and General
Manager at IBM Turk, Intertech and Vestel Group and Vestel Consulting
respectively, and as General Manager at Probil. Ahmet Sezer graduated
from Istanbul Technical University in 1982, having studied at the Electronics
and Communication Engineering Department.
EREN EYGİ (10)
General Manager of Azerinteltek
In July 2015, Eren Eygi was appointed General Manager of Azerinteltek.
Beginning his professional career at Saben in 1993, Eygi subsequently
worked at Gama Construction Russia as a Resident Engineer between
1994-1995, Uniroyal Chemical Company as the Regional Manager for
Central Asian Countries between 1996-1997, Colgate-Palmolive as the
Country Manager of Uzbekistan, Turkmenistan, Tajikistan, General Manager
in Kazakhstan between 1997-2008, Kcell as the Marketing Director in
2008, and at Danone CIS as the Country Manager of Belarus and Danone
Russia as the Regional Commercial Director and Regional Administrative
Director between 2008-2015. Eren Eygi graduated from the Department of
Mechanical Engineering at Boğaziçi University in 1993.
ÇAĞATAY AYNUR (6)
General Manager of Turkcell Global Bilgi
Çağatay Aynur joined Turkcell Group in 2000 as an Account Manager. In July
2015, he was appointed as the General Manager of Turkcell Global Bilgi.
Prior to his appointment to this position, he had served as the Regional
Manager in Charge of Strategic Customers and Public Affairs, Sales
Manager in Charge of Large Scale Businesses, Corporate Sales Director in
Charge of Large Scale Businesses and Corporate Sales Director in Charge of
Mid Scale Businesses. Beginning his professional career at Erkunt Döküm
Sanayi, Çağatay Aynur served as the Sales Manager at Martı Ltd. Çağatay
Aynur graduated from the Department of Metallurgical Engineering at
Middle Eastern Technical University in 1993.
MEHMET CANTEKİN (7)
General Manager of Turkcell Finansman
Mehmet Cantekin joined Turkcell as Group Internal Audit Director in 2014
and in May 2016 he was appointed as the General Manager of Turkcell
Finansman A.Ş.. Starting his professional career in 1992 within the Banking
Regulation and Supervision Agency (BDDK) Mr. Cantekin assumed various
managerial positions until 2007. After working as a Department Head in
BDDK in 2007, he assumed position as VakıfBank A.Ş. Credit Monitoring and
Regional Offices Assistant General Manager. While working as VakıfBank
A.Ş. Assistant General Manager, Cantekin also assumed position as the
Chairman of the Risk Center of the Banks Association of Turkey in 2012.
Mehmet Cantekin completed his BA degree in 1990 at Ankara University,
Faculty of Political Sciences Finance Department. In 2006, he received a
postgraduate degree in Accounting from the University of Illinois.
MELİKE KARA (8)
General Manager of Turkcell Payment Services
Melike Kara, has worked in managerial positions within Turkcell Mobile
Financial Services Department since 2011. In February 2015, Ms, Kara was
appointed as Turkcell Ödeme Hizmetleri A.Ş. (Turkcell Payment Services
Inc.) General Manager. Kara graduated from the Middle East Technical
University Department of Business Administration in 2004 and began
working at PricewaterhouseCoopers Istanbul Office the same year. After
2 years of PwC experience, she assumed various positions in the field of
marketing and business development within Garanti Bank Payment Services
business line.
TURKCELL GROUPTURKCELL ANNUAL REPORT 2016 24
TURKCELL ANNUAL REPORT 2016
FINANCIAL INDICATORS
Turkcell Group revenues reached TRY
14.3 billion on 11.9% growth, while
EBITDA rose 11.6% to TRY 4.6 billion,
while the EBITDA margin was 32.3%.
Turkcell Group Revenues
(TRY million)
Turkcell Group Financial Indicators
9
6
7
,
2
1
5
1
0
2
6
8
2
,
4
1
6
1
0
2
11.9%
GROWTH
Turkcell Group EBITDA(1)
(TRY million)
32.4%
1
4
1
,
4
5
1
0
2
11.6%
GROWTH
32.3%
0
2
6
,
4
6
1
0
2
Turkcell Group Net Income and Proforma
Net Income(2) (TRY million)
8
6
0
,
2
5
1
0
2
2
9
4
,
1
6
1
0
2
8
4
3
,
2
5
1
0
2
2
2
5
,
2
6
1
0
2
Net Income
Proforma Net Income
2015
2016
Change
Turkcell Turkey (TRY million)
Revenues
EBITDA
EBITDA Margin (%)
Turkcell International (TRY million)
Revenues
EBITDA
11,481
3,760
32.7%
856
246
12,788
4,161
32.5%
875
235
EBITDA Margin (%)
28.7%
26.9%
Turkcell Other Subsidiaries(3)
(TRY million)
Revenues
EBITDA
432
135
623
223
EBITDA Margin (%)
31.2%
35.8%
11.4%
10.7%
(0.2 pp)
2.2%
(4.3%)
(1.8 pp)
44.2%
65.4%
4.6 pp
(1) EBITDA is a non-GAAP financial measure. .
(2) We use “proforma net income” as a means of presenting our net income net of certain non-operating items and items
that we believe are non-recurring. We believe “proforma net income” facilitates performance comparisons from period to
period and management decision making. We define “proforma net income” in this document as net income excluding FX
gain / (loss) (including tax and minority impact), interest Income on time deposits of Turkcell İletişim Hizmetleri, interest
expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a
non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income
to arrive at “proforma net income.” Please see page 107 for a reconciliation of Group and Turkcell Turkey proforma net
income to net income as per IFRS.
“Other subsidiaries” is mainly comprised of our information and entertainment services, call center business revenues,
financial services revenues and inter-business eliminations.
(3)
TURKCELL ANNUAL REPORT 2016
25
OPERATIONAL INDICATORS
In 2016, the total number of customers
was 50.1 million, of which 35.3 million
were in Turkey.
T
U
R
K
C
E
L
L
G
R
O
U
P
ARPU (TRY)
Turkcell Turkey Operational Indicators
5
.
4
2
5
1
0
2
8
.
6
2
6
1
0
2
9.4%
GROWTH
Number of Subscribers (million)
Mobile Postpaid (million)
Mobile Prepaid (million)
Fiber (thousand)
ADSL (thousand)
IP TV subscribers (thousand)
2015
35.8
16.6
17.4
899.4
620.8
223.7
2016
35.3
17.4
15.7
1,043.9
818.0
359.7
Change
(1.4%)
4.8%
(9.8%)
16.1%
31.8%
60.8%
On the mobile front, our postpaid customers
expanded by 797 thousand net additions, while
prepaid customers declined by 1.8 million in
line with our strategy of focusing on valuable
customers and in 2016 our mobile customers
were 33 million. The share of our postpaid
customers increased to 52.5% of our total
mobile customer base.
On the fixed front, we reported 342 thousand
net additions to our fixed customer base
in 20(cid:176)(cid:181)(cid:126) (cid:176)(cid:179)(cid:179) thousand were fiber and (cid:176)9(cid:182)
thousand were ADSL customers. Our fixed
customers reached 1.9 million, while our fiber
customers exceeded 1 million. IP TV customers
reached 360 thousand on 136 thousand annual
net additions.
26
TURKCELL ANNUAL REPORT 2016
TURKCELL ANNUAL REPORT 2016
27
T
U
R
K
C
E
L
L
G
R
O
U
P
Sustainable
Growth with
Our Converged
Business Model
GROWTH IN DIGITAL SERVICES
p. 28
Alon(cid:61) with (cid:179).5(cid:7), our di(cid:61)ital services continue to attract considerable attention.
The number of customers usin(cid:61) BiP, Turkcell T(cid:22)+, lifebo(cid:78), (cid:7)oals on Mobile ((cid:7)oller
Cepte), fizy, My Account ((cid:8)esabım), (cid:4)i(cid:61)ital Publishin(cid:61) ((cid:4)er(cid:61)ilik) and Turkcell
Academy (Turkcell Akademi) applications has continued to increase.
GROWTH IN MOBILE DATA AND FIXED DATA
p. 30
As the inte(cid:61)rated communications and technolo(cid:61)y services player, Turkcell aims
to e(cid:78)pand the scope of the creative products and services it offers throu(cid:61)h the
mobile and fi(cid:78)ed network platform.
GROWTH IN INTERNATIONAL OPERATIONS
p. 32
Continuing its direct operations in Ukraine, Belarus, Northern Cyprus and
Germany in addition to Turkey, Turkcell continues its leadership in the
international arena.
GROWTH IN FINANCIAL SERVICES
p. 34
As an important part of its strategies of solidifying Turkcell’s position in Turkey and
stron(cid:61) balance sheet, Turkcell (cid:6)inansman A.(cid:217). started its operations in March 20(cid:176)(cid:181)
and ac(cid:71)uired Turkcell (cid:47)deme (cid:8)izmetleri A.(cid:217) (Payment (cid:19)ervices) in May 20(cid:176)(cid:181).
28
TURKCELL ANNUAL REPORT 2016
GROWTH IN DIGITAL SERVICES
Digital Services Revenues
(TRY million)
9
5
6
5
1
0
2
94.6%
ANNUAL
CHANGE
Consumers have gained the privilege of using all mobile
applications that require high internet speed and quota
whenever they want, independent of time and space, thanks to
the superiority that 4.5G has brought to our lives.
The number of our customers downloading BiP, Turkcell TV+,
lifebox, Goals on Mobile (Goller Cepte), fizy, My Account
((cid:8)esabım), (cid:4)i(cid:61)ital Publishin(cid:61) ((cid:4)er(cid:61)ilik) and Turkcell Academy
(Turkcell Akademi) applications increased from 21.4 million to
44.2 million.
2
8
2
.
1
6
1
0
2
11.1
million
Number of BiP downloads
8.0
million
Number of fizy downloads
Having been developed totally with domestic sources, BiP continues to gain
worldwide attention, including in Europe and the US. While BiP has achieved great
success by having seen more than 11.1 million downloads in 192 countries within a
short period of time, the application has made an important step towards becoming
a global brand with the number of downloads abroad exceeding 1.2 million. BiP,
which brought a new perspective to the concept of communication, has initiated a
new feature enabling users to send faxes via BiP message, marking a world first.
In April 2016, we transformed Turkcell Music service into a structure that is also
available to other operators. This way, in addition to Turkcell subscribers, we also
started to acquire subscribers from other operators. During the same period, the
brand name was changed from Turkcell Music to fizy. fizy is one of Turkey’s biggest
music platforms with its video clips and live concert broadcasts. fizy’s 9 live concert
broadcasts rounded to 1.6 million views.
TURKCELL ANNUAL REPORT 2016
29
T
U
R
K
C
E
L
L
G
R
O
U
P
Mobile Turkcell TV+
2.3 M Downloads
3.6 M Downloads
My Account
14.2 M Downloads
Goals on Mobile
2.9 M Downloads
Turkcell Academy
1.2 M Downloads
Digital Publishing
0.9 M Downloads
30
TURKCELL ANNUAL REPORT 2016
GROWTH IN MOBILE DATA AND FIXED DATA
In 2016, Turkcell Turkey grew by 65.1%
in mobile data and 27.4% in fixed data,
generating a total of TRY 5.5 billion in
revenues.
In 2016, the number of our mobile, fixed and IP TV customers
in Turkey totaled 35.3 million. In the mobile segment, our total
customer number was 33 million. The number of our postpaid
customers increased by 797 thousand compared to last year,
reaching 52.5% of our customer base. In the fixed segment, the
number of our fiber customers rose 144 thousand on an annual
basis to over 1 million, while the number of our total fixed
customers reached 1.9 million.
By the end of 2016, the share of mobile data in Turkcell Turkey
revenues was at 35.0%, the share of fixed data was at 8.2%,
and the share of digital services was at 10.0%.
Mobile Data (TRY million)
2
1
7
,
2
5
1
0
2
65.1%
ANNUAL
CHANGE
Fixed Data (TRY million)
8
2
8
5
1
0
2
27.4%
ANNUAL
CHANGE
8
7
4
,
4
6
1
0
2
4
5
0
,
1
6
1
0
2
TURKCELL ANNUAL REPORT 2016
31
T
U
R
K
C
E
L
L
G
R
O
U
P
23
million
Number of 4.5G subscribers
In 2016, Turkcell continued its 4.5G investments at
full speed, whereby the ratio of operational capital
expenditures to sales registered at 23%. As of today, the
number of 4.5G subscribers has exceeded 23 million, while
the share of data traffic carried through the 4.5G network
is at 28%. Data used per person rose 68% in the fourth
quarter compared to last year, realized at 2.8 GB with
the contribution of 4.5G users. Meanwhile, smartphone
penetration in Turkey has gained further momentum,
reaching 64% by the end of 2016.
32
TURKCELL ANNUAL REPORT 2016
GROWTH IN INTERNATIONAL OPERATIONS
Turkcell International’s revenues
increased by 2.2% on a year-on-year
basis to TRY 875 million in 2016.
Continuing its direct operations in Ukraine, Belarus, Northern Cyprus, and Germany,
in addition to Turkey, Turkcell maintains its leadership in the international arena.
Turkcell International Revenues Breakdown
Turkcell International Financial Indicators
lifecell
65%
(TRY million)
Revenues
EBITDA
BeST
17%
(cid:11)uze(cid:79) (cid:11)(cid:96)br(cid:96)s
Turkcell
16%
Others
2%
EBITDA Margin (%)
28.7%
26.9%
Turkcell International Subscriber Numbers
2015
856
246
2016
Change (%)
875
235
2.2%
(4.3%)
(1.8 pp)
(million)
Ukraine
Belarus
Northern Cyprus
Turkcell Europe
2015
13.5
1.5
0.5
0.3
2016
12.4
1.6
0.5
0.3
Change (%)
(8.1%)
6.7%
-
-
TURKCELL ANNUAL REPORT 2016
33
T
U
R
K
C
E
L
L
G
R
O
U
P
8.1%
Revenue growth ratio of lifecell
Ukrayna
lifecell revenues rose 8.1% in local currency terms, driven by mobile broadband
revenues, which grew due to the 3G+ service and with increasing device sales
following its launch in June 2016. The first operator to realize direct device
sales in Ukraine, lifecell recorded revenues of Grivna 4.8 billion and nominal
EBITDA of Grivna 1.4 billion in local currency terms, with an EBITDA margin of
28%, as of the end of 2016.
19.4% Belarus
BeST’s revenues surged by 19.4% in local currency terms due to growth in
the subscriber base and the rise in voice and device revenues, in parallel to
increasing smartphone sales. The EBITDA margin rose 1.8 pp to 4.0% on the
back of revenue growth and effective operational cost management.
Revenue growth ratio of BeST
3.8% Northern Cyprus
Kuzey Kıbrıs Turkcell revenues increased by 3.(cid:183)(cid:186) on a year-on-year basis to
TRY 136 million with the impact of mobile broadband revenues, which grew
thanks to rising data demand. EBITDA was TRY 50 million, while the EBITDA
margin was realized at 36.8%.
Revenue growth ratio of Kuzey
(cid:11)(cid:96)br(cid:96)s Turkcell
34
TURKCELL ANNUAL REPORT 2016
GROWTH IN FINANCIAL SERVICES
As an important part of its strategies to solidify Turkcell’s position in Turkey and
a stron(cid:61) balance sheet, Turkcell (cid:6)inansman A.(cid:217). (Consumer (cid:6)inance Company)
started its operations in March 2016 and acquired Turkcell Ödeme Hizmetleri
A.(cid:217) (Payment (cid:19)ervices) in May 20(cid:176)(cid:181). By supportin(cid:61) the rise in smartphone
penetration through the synergy to be created with Turkcell Group, it contributed
to the rise in smartphone penetration of our network to 64% this year. Consumer
Finance Company, providing customer services from a single point that meet their
telecom, device and financing needs with its technology and financial institution
perspective, offers personalized and flexible payment plans.
2.9
TRY billion
Total loans granted by Financell
Turkcell (cid:6)inansman A.(cid:217)., operatin(cid:61) under the (cid:6)inancell brand, was established
to ensure financing for the needs of consumer and corporate customers for
device and hardware purchases in the telecom sector. Continuing its activities
throughout Turkey, Financell had provided a total of TRY 2.9 billion in loans to
approximately 1.9 million customers for the financing of smart device purchases
by the end of the year.
33
million
Number of transactions via Paycell
Being the first and only operator subsidiary to be granted a payment institution
license by the BRSA, Turkcell Ödeme Hizmetleri was established to create payment
solutions that best suit customer needs, and to provide them with a quick and easy
shopping experience. With the Paycell brand, it undersigned various campaigns and
collaborations with trademarks such as Shell, Zubizu and Google. Thanks to Paycell,
many institutions will be able to seamlessly and perfectly deliver the mobile
payment experience to their customers in the upcoming periods.
OUR VISION, TARGETS AND STRATEGIES
TURKCELL ANNUAL REPORT 2016
35
T
U
R
K
C
E
L
L
G
R
O
U
P
CONVERGED COMMUNICATIONS AND TECHNOLOGY SERVICES
COMPANY WITH GLOBALLY RELEVANT SERVICES
VISION
TARGETS
STRATEGIES
CONVERGED TELECOM LEADER IN TURKEY
STRENGTHENING OUR POSITION IN TURKEY
LEADER IN THE REGION
EXPANDING IN EXISTING AND NEW MARKETS
GLOBALLY RELEVANT SERVICES
DEVELOPING AND SPREADING DIGITAL SERVICES
FOCUS ON SUSTAINABLE SHAREHOLDER RETURN
36
TURKCELL: THE COMPANY GIVING DIRECTION
TO THE TECHNOLOGY IN THE WORLD
Our CEO Kaan Terzioğlu has been re-elected Member of the Board of
Directors of the GSMA, the most important platform of the mobile
communication world.
With its studies aimed
at Syrian refugees,
Turkcell has taken place
on the agenda of the
GSMA platforms, the
United Nations (“UN”)
General Assembly, the UN
Humanitarian Summit,
the World Economic
Forum in Davos and the
international media. It has
been mentioned on the
international media with
its innovative steps in
technology.
• Our CEO Kaan Terzioğlu told about the Hello Hope
mobile application during the UN Private Sector
Forum held in the UN General Assembly, and the
CNN International broadcast.
• Mr. Terzioğlu delivered a speech on bringing the
fiber connection to the Kahramanmaraş Shelter
Center and the educational content to the Syrian
families within the scope of Hello Hope, at the
annual meeting of the WEF World Economic Forum
in Davos.
• Turkcell’s support realized through the projects
for the Syrians as well as for the children with
disabilities and who are gifted, within the scope of
UN Development Goals, reached out to the world
from Davos, via our CEO’s interview on #SDGlive,
which is a joint initiative of the United Nations
Foundation and the GSMA.
• Turkcell, which is positioned among the leading
operators with its work in humanitarian disasters
by the GSMA and GSMA Foundation, became the
first Turkish telecommunications company to sign
the Humanitarian Connectivity Charter, committing
for the continuity of communication in disaster
situations.
• Our CEO Kaan Terzioğlu has shared our experience-
oriented business model with the world of
technology and telecom from the main stage at the
Mobile World Congress organized by the GSMA
every year.
• Our investments in Ukraine and our 3G launch
were featured on the front page of the Wall Street
Journal.
• The success of our innovative product BiP, our
4.5G launch in Turkey, our data center investment
and our vision of enriching human life with
technology, has been featured in news coverage
of the mainstream media such as WSJ and CNBC
Europe, as well as on the influential medium of the
technology and telecom sector.
TURKCELL ANNUAL REPORT 2016 37
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 38
OUR SUPERIOR TECHNOLOGY
We started to carry 28% of our data traffic on our 4.5G network
with 4.5G subscribers totaling 23 million by the end of 2016.
widest FDD spectrum of 214.4 MHz. Turkcell has
been the only operator to have customers experience
speeds of up to 375 Mbps, by using Triple Carrier
Aggregation Technique in 81 provinces.
Our success has been certified by the measurements
done by independent entities. We are by far ahead of
our competitors in network speed in Turkey based on
Ooakla Speed Test data, which is frequently used in
measuring mobile and fixed network speed.
WE ARE IN 81 PROVINCES AND ALL DISTRICTS
WITH 4.5G.
One of our targets was to ensure wide coverage
throughout Turkey in order for us to offer the best
4.5G service to our customers. We started to offer
4.5G services on April 1 with a widespread coverage
plan so as to include major cities and seasonal
regions in 81 provinces of Turkey. We continued our
investments after the launch at full speed, achieving
an 82.5% coverage ratio by the end of 2016 by rolling
out 4.5G services in all districts. While ensuring
coverage, we have also applied 85% multi-carrier
support (LTE-Advanced Carrier Aggregation) on our
network and enabled our customers to experience the
real speed of4.5G.
CRYSTAL CLEAR SOUND EXPERIENCE WITH VOLTE
ON 4.5G
In wireless communication systems; 2G has a
voice-oriented and 3G has a voice and data-oriented
architectural structure, whereas 4.5G basically aims
at providing a high speed data service. There are two
ways in which voice calls originating from the 4.5G
network can reach the other party; voice service can
be provided by transferring the 2G/3G network, or
through Voice Over LTE (VoLTE) technology on the
4.5G data network. In general, operators prefer to
offer the VoLTE service once their 4.5G networks
have matured. The most troublesome process, namely
the building of the architectural infrastructure, is
completed, along with increased coverage. Turkcell
has quite possibly made its VoLTE architectural
infrastructure ready in the fastest manner the
world has seen, beginning to offer VoLTE services
to its subscribers as of the launch of 4.5G. Thus,
WE PUT OUR 4.5G NETWORK, WHICH IS THE
FASTEST OF THE FASTEST, INTO SERVICE.
After acquiring the rights to use the widest spectrum
in the IMT Spectrum Tender held on August 26,
2015, we accelerated our LTE-Advanced technology
infrastructure preparations for 4.5G service. Following
a long preparation, demo, and trial period, we
introduced the 4.5G service to our customers on April
1, 2016.
With our highly detailed preparations, we enjoyed
a very successful 4.5G launch. We were the first
operator to offer a 4.5G network to all users in 15
minutes, and reached out to more than 1 million
subscribers in the first 3 minutes.
We started to carry 28% of our data traffic on our
4.5G network with 4.5G subscribers totaling 23 million
by the end of 2016.
We have planned ahead and realized the latest LTE-
Advanced technologies (4x4 MIMO, DL 256 QAM, UL
64 QAM, etc.) on the 4.5G network we have deployed.
Turkcell has utilized the advantage of having Europe’s
4.5G
With our highly detailed
preparations, we enjoyed a
very successful 4.5G launch.
We were the first operator
to offer a 4.5G network to
all users in 15 minutes, and
reached out to more than 1
million subscribers in the
first 3 minutes.
TURKCELL ANNUAL REPORT 2016 39
As Turkcell, we have
taken an active role in
the development of the
4.5G local base station as
a result of the consensus
agreement signed
between Turkcell and
the Undersecretariat for
Defense Industries in March
2014.
Turkcell, which has
Turkey’s most advanced
LTE infrastructure, brings
together many innovations
and introduce them to its
customers in the TechCity.
our customers with VoLTE compatible terminals are
experiencing a unique sound experience with faster
call setup and crystal clear sound quality.
WE CONTINUE OUR SUPPORT FOR LOCAL
PRODUCTS.
As Turkey’s Turkcell, we have continued to contribute
to the ULAK project in step with our priority to always
support local production and technology. ULAK
is a vital project, which can position Turkey in the
category of technology producing countries in mobile
communications in the mid and long term.
As Turkcell, we have taken an active role in the
development of the 4.5G local base station as a result
of the consensus agreement signed between Turkcell
and the Undersecretariat for Defense Industries in
March 2014. Following the technical negotiations
initiated in February 2015; the studies continued with
the product roadmap, features to be supported, and
laboratory tests.
In this process, we transfer our know-how in mobile
network operations to the project and provide
all manner of support to the local base station to
become a competitive product on the market. Going
forward, we aim to successfully integrate the product
to our network through site tests and live network
applications.
Our work on local products is not limited to 4.5G
base stations alone, as we are also working on local
antennas, radio link, and small cell.
WE MAKE LIFE EASIER WITH TECHNOLOGICAL
CITIES.
Within the scope of the TechCity project, new
technologies, features initially developed, and
competencies come to life in Ankara, selected to
become the tech city. Turkcell, which has Turkey’s
most advanced LTE infrastructure, brings together
many innovations and introduce them to its customers
in the TechCity. By using these technologies while
they are walking around in big shopping malls, our
customers will easily find the location of the shops
they want to walk into, find where their cars are
and get instant information about the campaigns.
Furthermore, we also prepare the infrastructure of
the technologies and services necessary for the public
institutions and organizations to rapidly intervene and
coordinate any incidents in case of significant social
events and disasters. Some of the innovations set to
come to life with the TechCity project are as follows:
• Thanks to LiTRA technology; technology and
service infrastructure is being prepared, which is
required for the rapid intervention and coordination
of public institutions and organizations in the
event of major social events and disaster scenarios.
Relevant teams are able to coordinate with each
other by making audio and video calls. Privileged
Emergency Squads (such as safety, ambulance, fire
brigade) and large institutional corporations can
utilize the LiTRA service. In addition to the custom-
made handsets designed for the service, the LiTRA
application can be installed and used on classic
Android smartphones. Live network demo for LiTRA
has been performed at the Istanbul’s upcoming third
airport.
With the implementation of IoT, It is possible to
control electricity and water meters remotely, track
parking locations and information panels.
Field tests and feasibility analysis have been
completed for the products that will offer high-
speed data experience as a result of converting the
cable modems by using wireless technologies.
The indoor navigation system enables customers
especially in large buildings to easily find the stores
they want, to easily reach their vehicles in the
parking lot, and to receive instant messages inviting
them to a store they are passing by, offering them
special offers while shopping at the shopping mall.
•
•
•
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 40
TURKCELL ANNUAL REPORT 2016
OUR SUPERIOR TECHNOLOGY
Turkcell will lead the site work that will guide the roadmap of 5G
technology within the scope of the NGMN test and trial studies.
WE MODERNIZE OUR 2G AND 3G NETWORKS
WHILE CONTINUING 4.5G INVESTMENTS.
In 2016, in addition to the intensive 4.5G studies,
Turkcell has renewed existing products used in the
radio network to offer its customers Turkey’s widest
frequency spectrum with equipment supporting the
latest technologies, and to have them experience
the best mobile communication. With the multi-
technology support of renewed products, the
transition to higher technology becomes faster
and easier, providing the advantage of investment
flexibility in our country where spectrum can now be
used independent of the technology.
Moreover, thanks to this modernized infrastructure,
Turkcell contributes to the national economy by
providing energy savings of up to 30%, adopting
an environmentally friendly stance. Renewal and
modernization efforts will continue at full speed in
2017, and the Turkcell radio network will consist of
the most advanced technology products.
NEXT GENERATION DATA CENTER
We opened the first new generation data center of
Turkey on an area of 33 thousand m2 in Gebze, in June
2016. On the back of the next generation SDN-Ready
network infrastructure at our data center, we can
provide our customers many advanced technology
services such as “overlay network”, “data center
interconnect”, “VPN services”, etc.
Within the scope of Turkcell’s vision of technology
leadership, we continue our studies to open next
generation data centers in Ankara and Izmir in the
upcoming periods.
FACEBOOK CONTENT IS ON TURKCELL.
Unique customer experience in line with our target of
offering unique customer experience and positioning
Istanbul as the re(cid:61)ional internet hub(cid:126) (cid:6)acebook
Caching Servers will be located on, and start to serve
our network at the beginning of 2017. The contents of
the Facebook service, which has an important share in
Turkey’s internet traffic, will be brought to Turkey, and
Facebook will be provided on the Turkcell network.
5G speed record by Turkcell
5G
As Turkcell, we have
strengthened our mission
of being the technology
leader with the importance
we place on our 5G efforts.
In December 2016, we have
conducted the first 5G
test in Turkey, becoming
one of the first companies
in the world to test 5G
technologies.
WE ARE THE PIONEERS OF 5G…
As Turkcell, we have strengthened our mission of
being the technology leader with the importance we
place on our 5G efforts. In 2015, we also exhibited
our leadership in 5G by signing 5G agreements with
Huawei, Aselsan, and Ericsson. In December 2016,
we conducted the first 5G test in Turkey, achieving
transmission speeds of 24.7 Gbps using the 15
GHz band. This test also makes us one of the first
companies in the world to test 5G technologies.
In the international arena, participation in the ITU,
NGMN and GSMA 5G studies has begun to bear
fruit. Turkcell will lead the site work that will guide
the roadmap of 5G technology within the scope
of the NGMN Test and Trial studies. Additionally,
Turkcell is involved in many business packages at
NGMN and GSMA focusing on 5G. At the same time,
Turkcell is involved in European Union 5G Phase-2
project processes on key projects. Turkcell will also
be a key player in bringing together the academic
world and the industry on 5G, and in adapting the
products developed by the academic world to the
requirements of the vertical sectors. In view of the
fact that 5G-focused studies should be carried out
with researchers and academics in Turkey, Turkcell has
been carrying out processes that will encourage the
adoption of local 5G products by signing framework
agreements with various universities.
Our customers will reach Facebook content with higher
quality and in a faster manner, and will enjoy a much
better experience. In addition, keeping the traffic
generated by Facebook content within our network will
result in significant cost optimization.
DIRECT CONNECTION WITH POPULAR CONTENT
PROVIDERS
In line with our strategy on internet access and peering;
we establish high capacity, direct connections with
popular and important internet content providers, which
make up a significant portion of the world’s internet
content.
By doing so, while we ensure cost optimization in internet
access, we minimize the probability of facing problems
by reducing the access time to popular content with our
“Unique Customer Experience” strategy. Accordingly, we
assure that our customers experience faster and more
quality internet access.
OUR FIBER INFRASTRUCTURE HAS EXCEEDED
37 THOUSAND KILOMETERS.
At the end of 2016, we reached 2.74 million households
in 18 cities with our fiber infrastructure. Our fiber
infrastructure has reached 37,154 km.
This year, the cities of Manisa, Denizli and Tekirdağ were
also introduced to Turkcell fiber internet. As Turkcell,
we offer 10 times faster than average internet speed in
Turkey to our customers in Manisa, Denizli and Tekirdağ.
When complete, we aim to offer fiber broadband to more
than 56 thousand households in Manisa, 42 thousand
households in Denizli, and 35 thousand households in
Tekirdağ.
Moreover, we continue to connect our base stations
to our fiber infrastructure. Thus, we guarantee our
continued provision of the fastest and top-quality
broadband experience to our customers, and at the same
time, ensure that our network is ready for 4.5G.
WE ARE MAKING OUR ACCESS TRANSPORT
NETWORK READY FOR THE NEW SERVICES AND
SDN ARCHITECTURE.
We are migrating our Access Transport network to a
model that will facilitate end-to-end redundancy and
ease the transition to SDN (Software Defined Network).
We aim to have a fully automated network infrastructure
based on service and application with software based
programmable structures. We make it easier to deliver
end-to-end backup services with next generation
equipment supporting ultra-fast convergence.
41
WITH “MOBILE VPN” SERVICE, WE ARE ABLE TO
PROVIDE A FASTER AND MORE FLEXIBLE SERVICE TO
OUR CORPORATE CUSTOMERS.
We have completed the preparations of our next generation
VPN service using our strong 4.5G network infrastructure.
We will be offering our Mobile VPN service, which can be
an alternative to fixed VPN, be quickly installed, and provide
flexible solution to our customers.
OUR ENVIRONMENTALLY CONSCIOUS APPROACH
As Turkcell, we became the first telecommunications operator
in Turkey to receive ISO 14064 - Accounting and Verification
of Corporate Greenhouse Gas Emissions Certification.
In 2015, we were awarded ISO 14064 Certification,
which is the management standard of voluntary and
independent greenhouse gas emissions projects. As
Turkcell, we have fulfilled all our responsibilities regarding
greenhouse gas emissions standards, and we became the
first telecommunications operator in Turkey to receive
the ISO 14064 - Accounting and Verification of Corporate
Greenhouse Gas Emissions. Also in 2016, we became entitled
to receive ISO 14064 Certification. We continue to fulfill
all responsibilities related to greenhouse gas standards. As
Turkcell, we work on the risks and opportunities that climate
change poses, and make these efforts a part of our strategic
plans.
WE CONCENTRATE ON ENERGY EFFICIENCY STUDIES TO
REDUCE OUR CARBON FOOTPRINT.
With the new generation energy efficient equipment and
energy saving implementation in our network, we are
continuing to invest in reducing our carbon footprint. Key
actions taken in this regard and the amount of energy saved
were as follows:
• 45,750,000 kilowatt-hours per year from inverter-type air
conditioners at 19,075 sites with high energy efficiency
preferences in product selection,
• 14,665,000 kilowatt-hours from high efficiency power
supplies at 11,498 sites,
• 7,355,000 kilowatt-hours per year from passive cooling
systems at 11,412 sites,
• 720,000 kilowatt-hours per year from locally
manufactured outdoor cabinets at 1,230 sites,
• 3,788,000 kilowatt-hours per year through optimizing the
number of power source modules,
• 7,500,000 kilowatt-hours per year from equipment
modernizations at 1,445 sites in 2016 alone,
• 365,000 kilowatt-hours per year through the use of
renewable energy systems,
• 1,357,000 kilowatt-hours per year with improvement
works made in the energy infrastructures of buildings,
• 600,000 kilowatt-hours per year with the revision works
of buildings’ lighting and mechanical systems.
Thus, we have saved as much energy as the annual
energy consumption of 30,400 households by consuming
approximately 82.1 million kilowatt-hours less within a year.
37,154 km
At the end of 2016, we
reached 2.74 million
households in 18
cities with our fiber
infrastructure. Our fiber
infrastructure has reached
37,154 kilometers.
We have saved as much
energy as the annual energy
consumption of 30,400
households by consuming
approximately 82.1 million
kilowatt-hours less within
a year.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 42
TURKCELL AS A CONVERGED COMMUNICATION COMPANY
In 2016, we maintained our position as the leader in the mobile
industry with 33 million customers. We continued to rapidly grow,
reaching 1.9 million customers on fixed broadband.
WHAT HAVE WE ACHIEVED?
TURKCELL IS THE ONLY OPERATOR TO ACHIEVE
MOBILE AND FIXED CONVERGENCE EXPERIENCE.
MULTIPLAY
Mobile*
CONVERGED
TURKCELL
“Converged mobile customer
and household focus”
Converged products and
services
“One stop shop”
Converged customer
experience & service
In moving towards the goal of excelling in leadership of the
converged telecommunication sector by the end of 2018;
we have completed our studies in the first half of 2016 and
gathered mobile and fixed services under one roof.
Along with converged offers, we provide with the fastest and
best quality service at competitive prices, independent of the
network. We started to bring all our products and services
from every point together with our customers. With these
offers, we have developed a single customer perspective,
enabling our customers to gain competence in viewing and
managing all of their products on a single platform. With the
4x4 offers that we launched in April, we were the first and
only operator to introduce a single invoice to its customers.
We also started to provide a seamless broadband internet
service for all products on a single bill, offering a single call
center experience.
Single service channel
0532 532 0000 joint call center number
Single mobile application for all subscription
transactions, both mobile and in the home
Seamless connection
4.5GB bonus to be used for 1 month for all XDSL
subscribers until the XDSL internet setup at home is
completed
Free of charge installation
Free of charge installation service at home for fixed
internet
•
•
•
•
42%
43%
43%
44%
41%
17%
33%
24%
28%
28%
36%
21%
42%
31%
27%
4Q15
1Q16
2Q16
3Q16
4Q16
Single Play
Double Play
Triple Play
Fiber Residential
46%
28%
26%
42%
30%
29%
38%
33%
36%
34%
30%
34%
34%
32%
30%
4Q15
1Q16
2Q16
3Q16
4Q16
Single Play
Double Play
Multiplay with TV**
WE CONNECT OUR CUSTOMERS TO LIFE BOTH AT
HOME AND ON THE MOBILE.
In Turkey, we provide services to our consumer and corporate
customers with our mobile, fixed broadband and TV products.
4x4 offers on a single invoice
Unlike competition, we offer fixed and mobile internet
together for the first time and only on a single invoice.
4.5G subscribers can benefit from the Double Internet
Campaign throughout the launch period.
In 2016, we maintained our position as the leader in the mobile
industry with 33 million customers. We continued to rapidly
grow, reaching 1.9 million customers on fixed broadband. The
number of customers using our Turkcell TV+ product, which
we introduced almost two years ago, has reached 1.1 million.
Our post-paid mobile customer base continued to grow on the
back of our superior network quality and innovative products
and services. Our post-paid customers, which reached 17.4
million on a yearly increase of 797 thousand, constitute 53%
of our total mobile customer base.
Single invoice
* The calculation excludes the subscribers who do not use their lines within the last 3 months between mobile voice users.
**Multiplay customers with TV: Internet + TV users & internet + TV + voice usersrevenues and inter-business eliminations.
TURKCELL ANNUAL REPORT 2016
2
0
1
6
O
P
E
R
A
T
I
O
N
S
TURKCELL ANNUAL REPORT 2016
43
The ratio of the customers using multiple products in the
mobile and fixed segment has increased. In the mobile
segment, the ratio of our triple play, which uses one of
the voice, data and strategic services, reached 42% with
an 25 percentage point increase. Subscriber acquisition
continued with the multi-play offers that we proposed along
with our Turkcell TV+ product. The ratio of our customers
who purchased the Turkcell TV+ service (offered to fiber
customers) in addition to fixed internet and fixed voices
services, reached 36% with an 10 percentage point increase.
We have responded to our customers’ ever-increasing data
re(cid:71)uirements with our (cid:206)(cid:78)ed broadband products by means of
our converged communications infrastructure and technological
services. (cid:23)ith our (cid:206)ber, (cid:22)(cid:4)(cid:19)(cid:12) and A(cid:4)(cid:19)(cid:12) campai(cid:61)ns, we have
continued to offer our customers the experience of internet at
the speed of light. We brought together all the communication
requirements that our customers would need on their mobile
and at home under Turkcell 4x4 offers and 5in1 offer including
our TV product.
While our number of fixed broadband customers consisting
of fiber and ADSL customers reached 1.9 million with a
342 thousand increase, 1 million have preferred fiber speed
internet. We have continued to gain customers with multiple
play offers that include our Turkcell TV+ product.
4.5G - WE ARE CONNECTED WITH THE FASTEST.
We continued our investments at full speed in order to
provide with the best service to our customers. With the
frequencies, which we obtained the right to use in the 4.5G
Authorization Tender(cid:126) we are the only mobile operator
offering our customers mobile internet speed of up to 375
Mbps with the Carrier Aggregation Technology as of April 1,
2016.
Following the 4.5G tender, Turkey has become one of the
countries providing the highest frequency to operators across
Europe. While the frequency bandwidth used ranges from 800
MHz to 2,600 MHz, today Turkcell is the operator with the
second widest frequency in Europe, with a total frequency
bandwidth of 234.4 MHz.
We have launched our double internet packages as a
periodical bonus for our customers to quickly adapt to new
technology.
With 4.5G, the number of users of Turkcell’s popular services
such as BiP, fizy, Turkcell T(cid:22)+, My Account ((cid:8)esabım),
lifebox and Goals on Mobile (Goller Cepte) has also rapidly
increased. The viewing time on Turkcell TV+ per day has risen
from 7 minutes to 34 minutes. Our lifebox service, providing
free storage space that customers can use at 4.5G speed has
become the second most known individual cloud platform by
doubling its number of users in 2016. With subscribers using
these services more intensively, total mobile internet traffic
has increased by nearly two-fold since April 1, 2016, while
our 4.5G users have generated twice as much traffic as other
users. In 2016, the number of 4.5G subscribers on the Turkcell
network reached 23 million. The rapid rise in the number of
devices indicates that those actively using 4.5G will further
increase in the coming period.
5G, which was named among Turkey’s 2020 targets last year,
has become one of the main agenda items of Europe. Having
established one of the world’s strongest infrastructures in
4.5G technology, which is expected to form the backbone
of 5G, Turkcell has managed to position Istanbul as a city
with the world’s fastest mobile network, while continuing its
5G studies at an accelerated pace. According to Speedtest,
the world’s most popular platform that tests the speed of
the internet connection used, Turkcell’s network in Istanbul
emerged as the world’s fastest mobile network. Ookla, the
owners of Speedtest, had already announced on April 1st
during the roll out of 4.5G that Istanbul, Ankara and Izmir had
broken speed records.
Since the 4.5G launch on April 1, Turkcell has successfully
deployed 4.5G coverage in all centers of the provinces
and districts in Turkey. As such, Turkcell’s 4.5G population
coverage ratio has reached 82.5%.
4.5G, which in a very short period of time has initiated a
major change in every aspect of life from the industrial sector
to service, and from social media to communications, is
contributing billions of USD to the economy.
SMARTPHONE PENETRATION
DATA USAGE (GB/SUBSCRIBER)
64%
2
.
9
1
52%
1
.
6
1
5
1
0
2
6
1
0
2
Smartphone (million)
Penetration(%)
9
.
0
4
1
0
2
4
.
1
5
1
0
2
40%
7
.
2
1
4
1
0
2
3
.
4
4
.
2
6
1
0
2
6
1
0
2
Total Subscriber
4.5G Users
1 million
fiber subscribers
1.9
million
fixed subscribers
1.1
million
Turkcell TV+ subscribers
44
OUR CONSUMER BUSINESS
In 2016, we introduced our customers to our converged services
along with the fastest 4.5G experience. In the 4.5G process, we have
implemented our tariff structure, which is enriched with the life-
facilitating services to meet our customers’ growing data demand.
As Turkcell, we created the
animated emoji characters
called Emocan to announce
the most suitable offers
being presented to meet
Turkey’s communication
and technology needs.
6 different Emocans,
appealing to everyone
from 7 to 70, became
the new face of Turkcell
advertisements and met
with our customers.
In 2016, we introduced our customers to our converged services
along with the fastest 4.5G experience. In the 4.5G process, we
have implemented our tariff structure, which is enriched with
the life-facilitating services to meet our customers’ growing
data demand. With this tariff structure, our customers have
stepped into a world where exceeding the package quota is
no longer a problem and changing the package is easier. With
4.5G, we’ve accelerated our customers’ switch to higher quota
packages thanks to their enhanced benefits and rich service
content. We have ensured that both our existing and new
customers use higher quota packages at increasing rates.
With the foundation and launch of Turkcell Consumer Finance
Company, we have made it easier for our customers to get
smartphones equipped with the latest technology. Also,
with the support of our value-added mobile applications,
we strengthened our customers’ loyalty to Turkcell with our
personalized offer structure that provides solutions tailored to
the different needs of our customers.
WE HAVE BROUGHT TOGETHER OUR NEW
COMMUNICATION PLATFORM EMOCANS WITH OUR
CUSTOMERS.
As Turkcell, we created the animated emoji characters called
Emocans to announce the most suitable offers being presented
to meet Turkey’s communication and technology needs.
Six different Emocans, appealing to everyone from 7 to 70,
became the new face of Turkcell advertisements and met with
our customers. Within the scope our fun campaign “Shake
and Win” launched in November, we have distributed millions
of gifts through Emocans for 5 weeks. Millions of Turkcell
customers won a total of 30 million GB and 13 billion minutes
by shaking their phones while on the My Account (Hesabım)
application.
WE ARE ALWAYS BY OUR PLATINUM CUSTOMERS’ SIDE
WITH OUR PRIVILEGED SERVICES.
We have applied a single price strategy by equalizing the
offers of our existing and new subscribers and ironed out the
inconvenience that stemmed from different prices. With the
new internet tariff designed for our users who exceed their
quota, our customers no longer need additional packages.
We launched new 4.5G Platinum packages ranging from
10 GB to 30 GB with rich internet content and switched a
significant portion of our customers to these packages. By
adding Turkcell TV+, fizy, lifebox, BiP and Digital Publishing
(Dergilik) services to all our packages, we provided content
that differentiates us from the competition, adding color to
the customer’s life.
We have enriched the lives of our customers again this year
with the sponsorships and privileges we offered through
Turkcell Platinum’s world of privileges. We have been by
our customers’ side at the Turkcell Platinum Bosphorus Cup,
Turkcell Platinum International Alaçatı Fishing Tournament,
Turkcell Platinum Golf Challenge and through summer/winter
venue sponsorships. We enabled them to explore different
experiences with Platinum off-road and archery activities.
Through the privileges we offered, we have contributed to the
comfort, pleasure and speed of their lives. By achieving the
highest levels in customer satisfaction scores, we have further
opened the gap between our competitors in image criteria.
We also raised the recommendation rate to its highest level of
the past two years. The Platinum application, the only way to
reach all Platinum privileges, has again been downloaded and
used by hundreds of thousands of our customers.
TURKCELL ANNUAL REPORT 2016 45
tariff with no advantage. Additionally, Turkcell customers
have the opportunity to realize free calls abroad with BiP’s
100 MB (average 250 min.) internet bonus; making free calls
and sending free messages in 58 countries via BiP. Calls
originating from BiP in all directions are being charged at
domestic rates.
WITH OUR SOCIALLY RESPONSIBLE CONSCIOUSNESS,
WE CONNECT OUR CUSTOMERS WHO HAVE DIFFERENT
NEEDS TO LIFE.
With the Hello Hope application, we are connecting
Syrian refugees to life, and with the My Dream Companion
application, we share the dreams of our visually impaired
customers. The My Dream Companion allows movies in
theaters to be followed with an audio description feature,
while navigation services can be obtained in public spaces.
Our visually impaired customers can have access to
Turkcell’s entertainment and information services, up-to-
date news, columns, hundreds of audio books, magazines
and education.
Turkey, today home to 3 million Syrians, is among the
countries that host the world’s highest number of
immigrants. Serving more than 1.2 million Syrian citizens,
Turkcell has stood by their rights since the beginning of
the crisis, with its infrastructure throughout Turkey and
communication services it has provided at refugee camps.
Turkcell launched the first Arabic call center service in
Turkey from its Call Center opened in Siirt.
Turkcell added a new one to these efforts with its new
application, “Hello Hope”, which will facilitate the lives of
the Syrians and enable them to adapt to Turkish culture.
“Hello Hope” is designed to be open for all operators’
customers.
With this application developed by Turkcell Academy as a
world first, native Arabic speakers can learn those words
and phrases most frequently used in Turkish, both vocally
and in writing. In addition to the feature of language
learning, they can also benefit from the simultaneous audio
translation in Turkish-Arabic and Arabic-Turkish.
WE HAVEN’T FORGOTTEN THE FOOTBALL FANS IN 2016.
For Trabzon, the fanatic supporters of Turkey; we have
offered numbers that start with 0561. 61CELL’s most
valuable 100 thousand number reached people supporting
Trabzon by September 2016. With the agreement between
Trabzonspor and Turkcell; for the first time in Turkey, the
plate number of a city has been used as the initial code of
the Trabzonspor’s supporters’ phone numbers.
With special Fırtına tariffs, Fırtına 4 GB, Fırtına 8 GB
and Fırtına 16 GB Platinum packages; Trabzonspor
supporters can make long phone calls and surf the internet.
Additionally, by subscribing to Goals on Mobile 1967, they
can instantly watch Trabzonspor’s goals on their mobile and
enjoy 100 MB of mobile internet matching the number of
goals scored by Trabzonspor.
We have enriched the lives
of our customers again this
year with the sponsorships
and privileges we offered
through Turkcell Platinum’s
world of privileges.
55 countries
Customers can use their
domestic tariffs in 55
countries abroad as if they
are in Turkey, in exchange for
an additional daily fee.
WE BECAME A PART OF YOUNG PEOPLE’S LIVES WITH
THE GNÇ APPLICATION AND ITS BENEFITS.
In 2016, we launched new prepaid and post-paid GNÇ offers,
to raise the “value-for-money” perception, among all people
under the age of 26. After the 4.5G launch, we offered
internet content, which is needed the most, with the slogan
“At nights, we give as much internet as there is on your
package”. In our offers, we also provided BiP, fizy, lifebox,
TV+, Digital Publishing (Dergilik) services within internet
services in order for our customers to experience the
world of colorful applications. We offered these contents
to all young people under the age of 26 at the same price,
without making a distinction between new and existing
customers. We have become a part of young people’s lives
with the GNÇ application, through which we offered them
special surprises tailor made for their needs, enabling them
to purchase the co-branding offers designed with their
must-have brands with a single touch; and allowing them
to contact gencaverler (VIP customer representatives)
whenever they wished. We have repositioned our brand
with the communication we have made through the GNÇ
application. The application was downloaded by 2.3 million
young people and we attained an increase in all brand
criteria within one year.
TURKCELL SUBSCRIBERS ARE ALSO FREELY
CONNECTING TO LIFE ABROAD.
2016 has been a year where Turkcell has gained strength
with its services abroad. Turkcell brand perception grew
stronger and customer satisfaction has increased. Customers
can use their domestic tariffs in 55 countries abroad as if
they are in Turkey, in exchange for an additional daily fee.
In order for our customers to use this feature, which is
available in most countries around the world; it is sufficient
for them to be on a post-paid tariff bundle, which consists of
mobile broadband, minutes, and SMS regardless of the price
of the tariffs, or the club it belongs to.
When our customers go abroad, they can benefit from our
Smart Roaming Tariff for protection instead of the linear
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 46
TURKCELL ANNUAL REPORT 2016
OUR CORPORATE BUSINESS
We remain the strategic business partners in projects designed to make
all processes, especially site operations, manageable from mobile devices,
anytime and anywhere.
OUR COMPETITIVE OFFERS FOR OUR CORPORATE
CUSTOMERS
With the launch of 4.5G, we have renewed all
our corporate bundle tariffs consisting of mobile
broadband, minutes and SMS. In addition to the rich
internet content ranging from 2 GB to 30 GB for the
needs of companies of every sector and scale(cid:126) we
offer services such as BiP, lifebox, and TV+ as well as
tariffs differentiating us from the competition with its
Platinum features.
We have developed new tariffs tailored to the needs
of our craftsman customers. In addition to unlimited
calls with fi(cid:78)ed lines between (cid:182)(cid:127)00 am and (cid:182)(cid:127)00 pm(cid:126)
we brought our craftsman the abundance of Turkcell
with tariffs including plenty of internet and mobile
services.
WE ARE ALSO SUPPORTIVE OF TURKEY’S
ENTERPRISES ABROAD.
We have undersigned many innovations for our
corporate customers to comfortably continue their
businesses abroad. We ensured that internet, minutes
and SMS bundle tariffs can be used abroad, as in
Turkey.
Besides, through packages such as Platin Prestige at
Work, Mega, and Elite that we exclusively offered
to our corporate customers, employees can use their
tariffs free of charge for the first four days of each
month in 56 countries as if they are in Turkey. Specific
to these packa(cid:61)es(cid:126) we are (cid:61)ivin(cid:61) (cid:176),000 minutes and
100 SMS as bonus valid in 150 countries to be used to
make international calls.
BUSINESSES MAKE A DIFFERENCE WITH MOBILE
TRANSFORMATION.
Businesses are undergoing a critical mobile
transformation process along with the development of
corporate applications, cloud technology and devices,
as well as mobile internet and access solutions. We
remain the strategic business partners in projects
Catch real-time with Turkcell, and make a difference in competition
We are expanding our
business and maintaining
our leading position
by offering all of our
customers’ communication
and technology needs in an
integrated structure and
approach.
WE OFFER INNOVATIVE SOLUTIONS TO OUR
CORPORATE CUSTOMERS.
We help our corporate customers grow their
businesses and make a difference through our
superior network platform, which is even stronger
than ever with 4.5G as well as innovative solutions
and approaches we have developed in the area of
communications and technology.
In the mobile access and solutions market, we maintain
our revenue and leadership position with our value-
added solutions and content-rich offerings, especially
through the Machine-to-Machine Communication and
Business Applications, which we position within the
framework of Mobile Transformation projects.
With new generation
learning methods and
education consultancy
services; we develop close
to 100,000 employees from
companies, which have
different dynamics and
operate in sectors such as
retail, health, technology,
finance, food, service, and
energy throughout Turkey
and around the world.
47
designed to make all processes, especially site
operations, manageable from mobile devices, anytime
and anywhere.
In addition to our network platform, which is even
stronger than ever with 4.5G; we offer our customers,
from every sector solutions that ensure real-time
information and data exchange between employees
and machines, with the vision of end-to-end design
from a single point.
With new generation learning methods and education
consultancy services; we develop close to 100,000
employees from companies, which have different
dynamics and operate in sectors such as retail,
health, technology, finance, food, service, and energy
throughout Turkey and around the world. We support
mobile transformation initiatives by contributing to
the more efficient development of the institutions’
human resources and ecosystems, and to the way they
do business.
We support businesses’ marketing efforts.
Businesses reach their existing and potential
customers with Turkcell Mobile Marketing and
Messaging Solutions in the right place at the right
time. They communicate much more effectively with
their customers with Content-Rich Messaging. And
with Turkcell Smart Talents and Smart Map, companies
enrich the experience offered to their customers with
instant queries and Turkcell Big Data, and boost their
efficiency.
•
•
Mass Messaging Volume Increase: 29%
Content-Rich Messaging Volume Increase: 50%
We grow with our fixed telecom solutions.
Through our fixed network, which we support
with fiber investment reaching 37,154 km, our rich
portfolio including all the solutions required by the
communication networks of corporations, and our
convergence vision, we have also achieved significant
growth this year in the area of fixed telecom access
and solutions.
We continue to deliver communication solutions to
many more companies by expanding our coverage
through our fiber infrastructure, which day by day
becomes more widespread in Turkey. We have also
included the Manisa Organized Industrial Zone, which
is positioned as the contemporary industrialization
leader of Turkey within our coverage; and have
provided 220 participating companies the advantage
of establishing fast and seamless communication.
Additionally, in order not to have any unresolved
customer issue at any location, we have mobile
access to places where fiber infrastructure cannot
reach, and provide convergence solutions within the
infrastructure.
MACHINE-TO-MACHINE (M2M)/INTERNET OF
THINGS (IOT):
A technology that benefits both companies and the
national economy
M2M/IoT solutions, which gained further importance
in 2016 with Industry 4.0, continues to benefit both
companies and national economy by providing various
benefits such as increasing savings and productivity,
physical security, health and safety, and positively
affecting the environment.
We have set up Turkey’s first M2M platform and
converted it into a system that in 2016 includes
2 million Turkcell SIM cards. Considering that in
Turkey there are 150 million devices, which has the
potential to be remotely managed, we aim to realize
our country’s savings potential of trillions of Turkish
Liras and maintain our leadership in this area.
•
•
•
•
120,000 companies control approximately 650
thousand vehicles through the “Vehicle Tracking
System”.
21 electricity distribution companies monitor 225
thousand meters with the “Smart Energy Service”.
Over 200 thousand next generation cash registers
Approximately 100 thousand TeamMobile customers
BUSINESS APPLICATIONS
Our Customers manage fax transmissions from
anywhere with Smart Fax.
With the Smart Fax application, businesses can
now receive and send faxes by mobile phone, e-mail
and web without requiring a fax machine. With this
application, employees and executives can send faxes
without having to visit the office, and faxes stored
in the cloud are easily accessible from anywhere
needed. In 2016, our customers utilized this benefit by
receiving and sending 2 million faxes via Smart Fax.
We accompany the developmental journey of
employees with Turkcell Academy Corporate.
We offer end-to-end services for our corporate
customers through Turkcell Academy Corporate,
which we launched at the last quarter of 2015. With
online training, we enable employees’ developmental
journeys to be more efficient.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016
48
OUR CORPORATE BUSINESS
With the opening of the Gebze Data Center, we manage Turkey’s
largest data center capacity on a total white space of 17,500 m2;
we provide end-to end cloud, security and access services to our
customers.
With the launch of the Gebze Data Center, we manage
Turkey’s largest data center capacity on a total white
space of 17,500 m2; we provide end-to end cloud,
security and access services to our customers. At
the Gebze Data Center, we provide operator backup,
as well as backup infrastructure on our own fiber
infrastructure.
Through 99.98% infrastructure availability, security
standards and geographical location, the Gebze Data
Center provides strategic assurance for our customers
and our country’s data.
WE ARE BUILDING THE FIRST NATIONAL CLOUD
DATA CENTER WITH ORACLE TURKEY.
As part of our strategic alliance with Oracle Turkey,
we have pressed the button to open the Oracle Cloud
structure at the Gebze Data Center equipped with
the latest technology. The data center, scheduled to
be opened in 2017, will support the installation of
Oracle’s PaaS and IaaS cloud services.
While this structure will support local regulations
concerning where to deploy the data, it will enable
Turkish companies to reduce their costs through cloud
solutions, while increasing their flexibility and agility.
WE PROTECT TURKEY’S DATA TOGETHER WITH
OUR CUSTOMERS.
We continue to invest in security solutions in an
attempt for our customers’ systems to be supported by
a scalable, seamless and secure infrastructure. We are
expanding our portfolio of security solutions against
rising cyber security threats; especially in response to
the growing critical importance of data exchange for
institutions.
This year we increased our DDoS protection capacity
by 83%. With DDoS+ product that we added to our
portfolio of manageable security products, we also
provide protection against application layer attacks
and provide our customers with advanced DDoS
protection.
As part of our strategic
alliance with
Oracle Turkey
we are building the first
National Cloud Data Center.
DATA CENTER AND OUR CLOUD
SERVICES
WE UNDERSIGNED TURKEY’S LARGEST DATA
CENTER INVESTMENT.
We launched the Turkcell Gebze Data Center, the
largest data center in the country, in order to most
effectively meet Turkey’s digital data management
need, as the nation undergoes a very significant
and rapid digital transformation process, both in the
corporate and consumer arenas. Having had Tier-3
design and operation certification, the data center
is also designed to protect energy efficiency at the
highest level with its green building. In the next two
years, we plan to increase our number of data centers
to 8, thereby enhancing our data center capacity on a
total white space of 17,500 m2 to 30,000 m2 in 2018.
TURKCELL ANNUAL REPORT 2016 We are moving ahead
towards providing our
customers the solutions for
their telecom and IT needs
from a single point, with
the end-to-end approach
that we have adopted in
our corporate business
area and supported by
our Professional Services
organization.
7,100
participants
We have staged the Turkcell
Technology Summit for the
eighth time under the title
“Change is Accelerating
with 4.5G”.
49
END-TO-END SOLUTIONS AND
PROFESSIONAL SERVICES
CORPORATE
EVENTS
We are moving ahead towards providing our
customers the solutions for their telecom and IT needs
from a single point, with the end-to-end approach that
we have adopted in our corporate business area and
supported by our Professional Services organization.
In this area, we meet all of our customers’ access,
data center, cloud infrastructure and application level
needs with managed service capabilities, reducing
their operational burden, increasing efficiency and
providing cost advantages.
The projects, for which we proposed strategic
infrastructure and solutions required by our
customers’ mobile transformation and end-to-end
IT initiatives, provide significant growth and depth
potential, particularly in large customer segments.
We are proud to be business partners with more
than 100 of our customers this year in their Mobile
Transformation, IT Managed Services and System
Integration projects; and to have grown our revenue
in this area over 100%. We have crowned the success
ensured by our focus with two mega projects realized
with Renaissance Health Invest and Erzurum Youth
Olympics.
In addition to our professional services approach; we
are proud to see that the public sector focus that we
have adopted in our organization, and our mission
to be critical business partner in the restructuring
processes to advance our country, has also brought
significant gains.
WE ARE STRENGTHENING OUR BOND WITH OUR
CUSTOMERS WITH CONTENT-RICH EVENTS.
We have staged the Turkcell Technology Summit
for the eighth time under the title “Change is
Accelerating with 4.5G”. The Turkcell Technology
Summit, which we have been organizing since 2010 to
bring together our corporate customers and business
partners with the opinion leaders of the world of
science and technology, has become one of the most
comprehensive events of its own league within the
country.
Over 50 sessions of the summit realized with 100
opinion leaders and 7,100 participants were viewed
by 375,000 people through live online channels, while
250,000 people viewed the videos after the event.
Technology Meetings, of which we were the
main sponsor, have brought together SMEs from
different sectors in 11 provinces to create vision in
entrepreneurship, technology and e-commerce issues,
and follow up on the developments.
In addition to the organizations, which we have
supported as sponsors in different areas, such as
Retail Days, Energy Summit, CFO Summit; we have
come together with our customers at “Cyber Attacks
of the Future with Marc Goodman” organized with
the Institution of Information Society, and at the
Turkcell Cyber Security Meeting organized for public
institutions.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 50
TURKCELL ANNUAL REPORT 2016
DIGITAL SERVICES
Thanks to Turkcell TV+, television, an indispensable part of our life, has now
been integrated on the mobile phones of its audience in addition to their
homes. The next generation digital communication platform BiP had been
downloaded in 192 countries by 11.1 million people by the end of 2016.
NUMBER OF TURKCELL TV+ USERS EXCEEDED
1 MILLION.
Thanks to Turkcell TV+, television, an indispensable part of
our life, has now been integrated on the mobile phones of its
audience in addition to their homes. Accordingly, the number
of Turkcell TV+ viewers exceeded 1 million in 2016.
For Turkcell TV+, 2016 was active and highly efficient in
terms of business results.
Thanks to the superior features that 4.5G brought into
our lives in 20(cid:176)(cid:181)(cid:126) customers had the privile(cid:61)e of usin(cid:61) all
mobile applications that require high speed internet and
quota, whenever they want, regardless of time and place.
Accordingly, the habit of watching TV was directed to the
internet. Turkcell TV+ turned TV lovers’ mobile phones and
tablets into a television. With Turkcell TV+, the most critical
matches, favorite movies, and unmissable series(cid:126) in short, all
TV content, has become easily accessible for the audience,
at home, or beyond.
Turkcell TV+ supports watching habits, differentiating itself
with the power of mobile transformation.
Turkcell TV+ doesn’t just offer valuable content, each more
valuable than the next, such as hundreds of free movies, the
latest series, international sports, documentaries, children’s
and news channels. It also gives its users the flexibility to
watch without having to keep track of the current stream by
providing the opportunity to stop, rewind and record.
At 4.5G, Turkcell’s strategically prioritized services were
the driving force.
On Turkcell TV+, viewing time through mobile has increased
from 7 minutes per day to 34 minutes along with the launch
of 4.5G, and especially on those days with an intense news
agenda, the use of OTT TV+ expanded sevenfold.
BiP: NEXT GENERATION
COMMUNICATION PLATFORM
In addition to the video call, disappearing message and
CAPS creation features of the next generation digital
communication platform BiP(cid:126) in 20(cid:176)(cid:181) we have added the
feature of exploring location and launched the “Explore”
feature, which is positioned as a new marketplace. While
there are 70 official accounts under Explore, it was
followed by 3 million users in a year. Different channels
were launched in many diverse subjects under the Category
heading, ranging from banking transactions to airplane
check-in, from daily content such as sports, magazines and
newspapers, to entertainment accounts. Sending faxes via
an instant messaging application became possible for the
first time with BiP through the BiP “Smart Fax” feature.
BiP, with a user base growing at an accelerating pace, had
been downloaded in 192 countries by 11.1 million people by
the end of 2016. Following Turkey, the countries in which
it was downloaded the most were Ukraine, the United
Arab Emirates and Germany. Besides, 41% of users are the
customers of other operators.
OTT TV(*)& IP TV (thousand)
3 million
In addition to the video call,
disappearing message and
CAPS creation features of
the next generation digital
communication platform BiP;
in 2016 we have added the
feature of exploring location
and launched the “Explore”
feature, which is positioned
as a new marketplace.
0
6
9
6
4
2
2
4
3
3
0
6
3
6
7
7
Turkcell TV+ has been the locomotive of Over the Top
(“OTT”) services with the effect of 4.5G in our 2016 growth.
4
1
0
2
4
1
0
2
5
1
0
2
5
1
0
2
6
1
0
2
6
1
0
2
IP TV&OTT TV
Only OTT TV
(*) OTT refers to TV subscribers on mobile device, computer,
tablet etc.
Turkcell TV+, with its strong content strategy and focus
on the members of Turkcell Platinum and Gnçtrkcll, posted
109% growth.
In terms of the viewing time, on the other hand, we have
seen approximately five times of rise due to the next
generation mobile viewing habits of our growing customer
base.
51
Turkey’s most popular and
commonly used platform
fizy, has been downloaded
by 8 million times and 650
million songs have been
played through fizy only in
2016.
With the launch of 4K
and the addition of new
4K content, we have
strengthened our fiber
power. With our 4K Ultra
HD box option, we offered
4K quality to our TV+
customers.
* Source: The “Mobile Services Tracking
Survey made by Ipsos for Turkcell” in
August-September 2016 period, across
12 regions representing Turkey, using
a computer-assisted telephone survey
method with 2,069 participants who
use internet on their mobile phones, and
who are randomly selected out of group
of 15-70 year-old smartphone users with
3% answering ratio.
Our IP TV customer base increased by 136 thousand as
the number of customers reached 360 thousand.
Our most popular campaigns were the offers designed
to meet television, fiber internet and fixed call needs
in one package. In this way, we continued to meet all
of our customers’ needs on single invoice. And so we
have delivered our customers convergence offers, in
which we have combined fixed and mobile needs with
our television service.
With the launch of 4K and the addition of new 4K
content, we have strengthened our fiber power. With
our 4K Ultra HD box option, we offered 4K quality to
our TV+ customers.
We purchased the broadcasting rights of the one of
the world’s most prestigious leagues, England Premier
League and NBA for 3 years and started broadcasting.
We have strengthened our strong content strategy
in TV broadcasting. And it’s good news for football
fans, as in addition to starting live match broadcast
of the Premier League, considered one of the most
prestigious leagues in the world, we have added
international channels, notably the NBA, Discovery
and Eurosport channels, and Al Jazeera, as well as
France 24 to our platform. We have also purchased the
broadcasting rights for Bundesliga and Formula 1.
With “Turkcell TV+ for Everyone”, we launched our first
operator-independent mobile package.
In an attempt to ensure that everyone with a smartphone
can enjoy the Turkcell TV+ experience irrespective of
the operator, and to increase our visibility in the whole
market, we offered our “Turkcell TV+ for Everyone”
package. Irrespective of their operator, everybody
who subscribes to the in-app purchase model via Apple
Store and Google Play Stores can have the Turkcell TV+
experience.
We launched the TV+ OTT service abroad on the way to
becoming a regional operator.
In order for Kuzey Kıbrıs Turkcell customers to benefit from
the TV viewing experience on Turkcell TV+, we offered our
TV+ package in Northern Cyprus under the lifecell brand.
Kuzey Kıbrıs Turkcell customers had the opportunity
to watch the 7 most popular Cypriot channels live,
with the TV+ package used within the scope of lifecell.
Furthermore, our Kuzey Kıbrıs Turkcell customers also
started to utilize the superior technological features
offered to Turkcell customers in the consumer segment
by Turkcell TV+, such as rewinding a live broadcast up to
24 hours and recording in the cloud. Thus, we have taken
our first step in the international market with Northern
Cyprus.
The TV experience on Turkcell TV+ is further enriched
with applications. It became possible to reach diverse
content, such as YouTube and fizy with one button. Our
customers also began to watch national live broadcasts on
next generation Apple TV.
TURKCELL MUSIC BECAME FIZY.
fizy: Turkey’s most known and widely used music
platform!*
In April, we transformed Turkcell Music service into a
structure that can be used by other operators. In this
manner as well as Turkcell subscribers, we also started to
acquire subscribers from other operators. During the same
period, the brand name was changed from Turkcell Music
to fizy. The long-awaited transformation of fizy started
with the change in logo in practice and an entertaining
communication campaign was ensured with the inclusion
of users and their boot messages on fizy.com.
We broadcasted live concerts.
In April, we added a video feature to our fizy application.
We have offered hundreds of thousands of domestic and
international video clips to our users at 4.5G speed and
quality. We signed off on a first for Turkey in May, with
the live broadcast of three singers’ (Murat Boz, Model and
Mustafa Sandal) concerts that took place simultaneously
in Ankara, Izmir, and Istanbul.
We have broadcasted four (Bengü, Mustafa Ceceli, Göksel
and Volkan Konak) of the Turkcell Starry Nights Concerts
in July and August, live through the fizy application,
reaching 1 million people.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 52
TURKCELL ANNUAL REPORT 2016
DIGITAL SERVICES
(cid:23)ith 250 ma(cid:61)azines in its portfolio(cid:126) (cid:4)i(cid:61)ital Publishin(cid:61), Turkey(cid:135)s richest
and most popular digital magazine reading platform, also offers many
features that enrich the reading experience.
DIGITAL PUBLISHING (DERGILIK): THE
APPLICATION THAT CHANGES READING HABITS
In 2016, we launched our Digital Publishing application
with a new face for the service of our users. Digital
Publishing offers the opportunity to read hundreds
of Turkey’s popular magazines digitally from one
platform. In addition to its user-friendly experience,
by improving its magazine downloading and magazine
reading performance, we have also made it more
enjoyable for our users to read magazines.
(cid:23)ith 250 ma(cid:61)azines in its portfolio(cid:126) (cid:4)i(cid:61)ital Publishin(cid:61),
Turkey’s richest and most popular digital magazine
reading platform, also offers many features that enrich
the reading experience. Among others, below are some
of the features offered by Digital Publishing:
• Reading offline and automatically downloading
the current edition of the magazine with one
instruction.
• Being informed about the current edition of
magazines listed on the favorite list.
• A subscription offer that enables the reading of
hundreds of magazines at the price of a single
magazine.
In an attempt to add value to our customers’ lives,
in September 2016, we started to offer a monthly
5 GB mobile internet package that can be used to
download and read magazines in the Digital Publishing
application. The package was offered within the scope
of consumer tariffs. Users pay no extra fees in addition
to their tariffs for these benefits that serve to support
Turkcell loyalty.
LIFEBOX: ALL MEMORIES ARE ALWAYS SAFE, AND
ALWAYS WITH YOU!
Smart Storage, which enables the safe storage and
sharing of photos, videos, music and other files, was
opened up to all operators and the world in October
2016, and was renewed as lifebox with brand new
features.
Our service, which provides free storage space for
users to use at the speed of 4.5G, became the second
best known consumer cloud platform by doubling the
In the last days of 2016, fizy
was launched with a brand
new design and world of
color.
Weekly Discovery List
Through the “Weekly Discovery List” tracing
footprints of songs listened to by our users, we have
enabled music lovers to spend more time on the
application, while discovering new songs and artists
with fizy.
We switched to the new design.
In the last days of 2016, fizy was launched with a
brand new design and world of color.
New features offered by the application: “Popular
Lists” based on the most listened lists, “Hot Hot –
S(cid:96)cak S(cid:96)cak” carefully selected from newly-released
albums, artist pages where you can more easily access
your favorite artists’ content, features for saving and
switching off line, favorite radio channels and more
(eksen, voyage, babylon and fizy).
2
0
1
6
O
P
E
R
A
T
I
O
N
S
TURKCELL ANNUAL REPORT 2016
53
of (cid:14)ational (cid:5)ducation(cid:126) can follow the lawsuits filed
a(cid:61)ainst them(cid:126) in(cid:71)uire about their unpaid ta(cid:78) liability,
electricity bills, and traffic fines, if any(cid:126) and (cid:71)uery
their Findeks credit note. In 2016, 23.7 million
inquiries were made on the application, which can
send the requested information to our subscribers
without them having to query repeatedly.
PAYCELL: THE PIONEER OF MOBILE
PAYMENT IN TURKEY
Turkcell (cid:47)deme (cid:8)izmetleri A.(cid:217). (T(cid:47)(cid:8)A(cid:217)) was
established to create payment solutions that best
suit the needs of our customers and to provide them
with a (cid:71)uick and easy shoppin(cid:61) e(cid:78)perience. T(cid:47)(cid:8)A(cid:217)
is the first and only operator subsidiary to have been
granted a payment institution license by the BRSA
on August 12, 2016. We have expanded our business
network of over 2,000 members where we served as
the Paycell service, and have introduced quick and
easy payment methods in various new areas, such as(cid:126)
application markets, restaurant chains, petrol stations,
car park payments, insurance premium payments and
airport fast track services. Together with the payment
agency license, we will continue to make a difference
in the lives of our users by expanding our customer
and business network with new products and services.
Paycell aims to expand its services beyond Turkey to
countries in the region.
GAMECELL: INTEGRATED GAMING PLATFORM
Launched in September 2016, Gamecell is Turkey’s
first integrated gaming platform. Gamecell, which
realized a first by combining the different dynamics
of the game industry under one roof, consists of five
different components. It aims to cover all players with
the Buzz, Hive, Pin, Market and APP components.
Buzz is a media platform where players can follow
up on up-to-date sectoral news. Hive, the first local
e-sports brand, hosts prize tournaments organized
by the Gamecell team and those tournaments hosted
by players. Pin & Market is a combination that
provides users with the purchase of games and game
accessories at feasible prices and with different
payment options. APP is a domain where mobile
applications and native developers’ applications are
displayed to the end user.
Professional e-sports teams realized more than 50
matches within the context of tournaments organized
on the Gamecell Hive platform. These matches, which
were broadcasted live, were watched by more than
170,000 players in total.
number of users in 2016. We offered a 500 GB free
storage space and a 5 GB free mobile internet package
for our Platinum package customers enabling them to
use lifebox without any deduction from their internet
packages.
On its new design, our lifebox users can initiate
searches among photos and videos based on date and
location taken, and can select the photos and videos
they wish, create their own stories, and share these
stories on social media easily.
UPCALL: APPLICATION THAT CHANGES THE
CALLING EXPERIENCE
Our new UpCall application, launched in October,
enriches and facilitates our customers’ calling
experience with many different features it offers.
When a call is received from a number that is not
saved in the phonebook, the caller can be seen on the
screen when the phone rin(cid:61)s(cid:126) while initiatin(cid:61) the call,
a note stating the reason of the call can be delivered
to the other party without him having to pick up the
phone(cid:126) a (cid:61)roup can be created, everyone in the (cid:61)roup
can be called and talked at the same time with one
click(cid:126) when an unwanted call is received, a warnin(cid:61)
appears on the screen, informin(cid:61) in advance(cid:126) with the
smart call feature, the desired location can be called
just by typing its name. Additionally, users can easily
track all service-related notifications from one screen
with UpCall, and can manage calls more effectively.
CROPY: BRAND NEW EXPERIENCE OF SHARING
As Turkcell, we launched the Cropy solution in January
2016. With Cropy, all internet users in Turkey can cut
out any piece of text or visual content as they wish,
which they saw while surfing the internet, and can
customize and share them, save them on their mobile
devices, or computers, and archive them.
Cropy is being brought to users by integrating it with
the internet medium, which has a high number of
visitors in Turkey.
Throu(cid:61)h its mobile application to be launched in 20(cid:176)(cid:182)(cid:126)
Cropy, the newest and easiest way of sharing, will
not only be a solution that offers a cut-and-share
experience, but will also enable the sharing of the cut-
off content with personalized and enriching features.
M(cid:25) (cid:15)(cid:6)(cid:6)(cid:9)C(cid:9)A(cid:12) TRANSACT(cid:9)(cid:15)NS (R(cid:5)SMİ İŞ(cid:12)(cid:5)RİM):
INFORMATION THAT OUR CLIENTS NEED ABOUT
GOVERNMENT TRANSACTIONS IS NOW ON THEIR
MOBILES
Through the Turkcell Official Transactions application,
which we offered by combining the information in
public institutions with our mobile infrastructure(cid:126)
our subscribers can track their children’s school exam
results and report cards approved by the Ministry
Turkcell Ödeme Hizmetleri
A.Ş. (T(cid:47)HAŞ)(cid:125) establis(cid:62)ed
to provide them with a
quick and easy shopping
experience, is the first and
only operator subsidiary
to have been granted a
payment institution license
by the BRSA on August 12,
2016.
54
DIGITAL SERVICES
We aim to bring speed and convenience to the lives of company
representatives with the My Company application, enabling them
to make all transactions related to company lines, online.
MY ACCOUNT (HESABIM): CONTROL OF YOUR
LINE IS ON YOUR MOBILE!
We offered the My Account application in 2014 in
order to facilitate their lives and ensure that they
access easily from everywhere to everything they look
for regarding Turkcell.
Our application has been downloaded more than 14
million times, and also registered 10.1 million active
users per month in 2016. With the My Account, our
customers can quickly access information such as
remaining minutes for use on their lines and invoice
details, without having to call the call center; and
can easily perform transactions such as paying bills,
purchasing packages, topping up TRY , changing
international, internet and call settings.
We have received the first prize in the area of “Best
User Experience” at the Loyalty Awards with our
turkcell.com.tr and My Account application. In 2017,
we will introduce our customers to a brand new My
Account.
MY COMPANY (ŞİRKETİM): “CORPORATE ONLINE
TRANSACTIONS” APPLICATION EXCLUSIVE FOR
COMPANIES
We aim to bring speed and convenience to the lives
of company representatives with the My Company
application, enabling them to make all transactions
related to company lines, online. With My Company, it
is possible to make many transactions such as invoice
transactions, package transactions, international
transactions, and changing SIM card within seconds
by mobile phone. The My Company application, which
enables company representatives to perform bulk
transactions 24/7, approve requests from company
employees, and instantly track the use of lines, has
been used by 45,000 companies to date for 25 million
transactions.
GOALS ON MOBILE (GOLLER CEPTE): EXCLUSIVE
SERVICE FOR FANS
With our Goals on Mobile applications exclusively
designed for fans of the four largest teams (Goals on
Mobile 1903, Goals on Mobile 1905, Goals on Mobile
1907, Goals on Mobile 1967), we provide our customers
with live goals, flash news and special videos, as well as
live scores from all over the world, score stats, league
tables and live commentary during games. Our exclusive
application designed for İddaa lovers, Goals on Mobile
Live Score, enables our customers to view the results of
live matches from all over the world. Our applications,
which enable the fans on the tribunes to chat with other
fans and provide them an opportunity to discuss the
agenda, were downloaded 2.9 million times by year-end
2016. More than 100,000 videos were viewed per week
through our service with its renewed content structure,
which has started to display images this season from
Spain’s La Liga, England’s Premier League and many
other important leagues of the world.
2.9 million
Goals on Mobile Live Score,
enables our customers to view
the results of live matches
from all over the world.
TURKCELL ANNUAL REPORT 2016 55
BUSINESS PARTNERS ECOSYSTEM AND INNOVATION
Our Turkcell Business Partner Candidacy Program supports
technology initiatives in order to promote Turkcell’s growth and
create a strong entrepreneurial environment in Turkey.
The Turkcell Partner Network, one of Turkey’s long-
established business ecosystems, has been working with
business partner companies since 2004, and manages an
ecosystem of more than 200 business partners, who employ
over 10,000 people, including distribution channels. The Partner
Network creates and announces business models for companies
within the ecosystem; monitors business partners’ compliance
with stipulated criteria and regulations; measures performance,
and incorporates successful business partners into the Gold and
Silver partnership programs.
and global innovation centers to closely monitor global market
trends and identify new business opportunities. As Turkcell
Business Partnerships and Innovation, we continuously support
acceleration program partnerships, university awareness
seminars, and many other entrepreneurial activities. We will
continue to work with entrepreneurs, institutional investors,
universities, business incubators and acceleration centers, as
well as non-governmental organizations and angel investors to
develop Turkcell’s innovation capacity with external innovation
resources.
In this context we also selected 12 Gold and 19 Silver business
partners in 2016. We evaluated the performance of our
business partners and shared the Performance Evaluation
Reports with them. With an improvement carried out this year,
we gained the ability to develop Scorecard and Performance
Evaluation Reports through the Turkcell Partner Management
System and share them on turkcellpartner.com. We have made
significant progress in terms of information security, speed and
cost.
We have continued development studies on turkcellpartner.
com, which is the window of Turkcell Partner Network opening
to the world. We have also simplified the application form for
external business partner candidates. Additionally, we have
made many changes to the part that can be connected to
through login and reached by our current business partners; we
have switched to a more user friendly structure.
The total number of downloads of our Turkcell Partner
Mobile application, which includes the display of more
than 400 products and services belonging to our partners,
reached 14,425 in 2016. Moreover, our partners can send
their own content directly to the application integrated with
turkcellpartner.com as of this year, and these contents can be
published after a short approval process.
In the context of New Partner Development and Innovation,
we continued our discovery studies in 2016 to improve our
partner base. Being aware of the fact that our new business
partners will come from our local and international innovation
network; we are striving to improve our relationships with
companies that develop innovative products and services to
go beyond their existing business models and to meet their
consumer and corporate customer needs. In 2016, we continued
to periodically visit local techno parks, organizing a hackathon.
We have strengthened our relationships with leading local
Our Turkcell Business Partner Candidacy Program supports
technology initiatives in order to promote Turkcell’s growth
and create a strong entrepreneurial environment in Turkey.
In 2016, we supported 11 start up companies with our
acceleration program. We are evaluating the market size,
value propositions, team capacities and growth rates of start
up companies in the area of telecom, M2M/IoT, cloud solutions,
mobile payment, media, entertainment and community
management. At the end of the process, companies with
rapid development capacity can join the Turkcell Partnership
Network.
TURKCELL BEEHIVE (ARIKOVANI): TURKEY’S FIRST
TECHNOLOGY-FOCUSED CROWD FUNDING PLATFORM
With Beehive, the crowd funding platform bringing
entrepreneurs and technology enthusiasts together; we
intended Turkcell to provide effective support to the
entrepreneur ecosystem, and to add things learned through
open innovation from the ecosystem to the in-house culture
of innovation. On Beehive, the award-based crowd funding
platform; the funding process of the first 3 projects started in
January 2016. In March 2016, Turkey’s first record was broken;
the Twin Science Kit project became the technology project to
raise the highest funding of the period, gathering TRY 182,879.
This record was followed by the Outliers Smart Notebook
project, which has so far raised the highest funding on the
Beehive platform, at TRY 339,733. The WeWALK Intelligent
White Walking Stick project, which raised TRY 289,971 at the
end of the campaign, has undersigned another first by collecting
TRY 140,000 in funding in the first 24 hours. In 2016, 20 new
projects were realized on the Beehive platform. Thirteen
projects that attracted their first customers and completed the
campaign generated a total of TRY 1.75 million in funding. We
continue to work to bring more entrepreneurs together with
their potential customers, both in Turkey and around the world.
With Beehive (Arıkovanı),
the crowd funding platform
bringing entrepreneurs and
technology enthusiasts
together; we intended
Turkcell to provide effective
support to the entrepreneur
ecosystem, and to add
things learned through
open innovation from the
ecosystem to the in-house
culture of innovation. On
Beehive, the award-based
crowd funding platform;
the funding process of the
first 3 projects started in
January 2016.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 56
TURKCELL SALES CHANNELS
We continue to provide services and solutions through our Turkcell
Consumer Sales Channel, Alternative Sales Channels, Turkcell
Superonline Fiber and DSL Solution Centers and Corporate Sales
Channel.
In the Exclusive Channel, we serve our customers
with a team of 6,750 service personnel and 116
specially-trained Technology Experts at 1,019 TİMs.
We offer consultancy services with our experts in
fixed and mobile communications technologies to
around 18 million visitors each month concerning
new technologies that make their lives easier. With
our Technology Specialists, who coach store staff
on technology, we enable our customers to better
experience the products.
In the Non-exclusive Channel, we supply and provide
information about our products and services to 2,212
Authorized Sales Points and 6,651 Turkcell Sales
Points (TSN) through 15 Turkcell Distribution Centers
(TDM). We introduce our new technologies, services
and offers to our customers with our Field Activity
Team of 170 people, the extension of TDM in the field,
and 65 TSN Support Experts.
Turkcell Flagship Stores, provide service at six popular
locations in three major cities (Istanbul, Ankara, and
Antalya). These stores reflect Turkcell’s leadership in
the telecommunications industry to the retail sector,
representing an “experience transfer platform” for
Turkcell’s wide retail channel. As pioneering venues
with a strong design, they provide unique customer
satisfaction in both service and models, and are
positioned as role models for their sales methods and
retail practices. We continuously train them to become
experts through courses in technology solutions and
sales. We will continue to serve in these stores in the
upcoming periods without sacrificing satisfaction and
quality, by differentiating our activities.
As Non-Telecom Sales Channels, we sell at more than
12,617 national and local market points to enable our
customers to reach Turkcell products and services
quickly, easily and from anywhere possible, and
continuously expand our network.
Within the framework of
our integrated structure,
we present our fixed and
mobile integrated Turkcell
solutions all over Turkey
through our Turkcell
Communication Centers
(TİM) and Authorized Sales
Points (YTSN).
OUR CHANNEL STRUCTURE
We bring all advantages, campaigns, devices,
services and facilities offered by Turkey’s leading
communication and technology company Turkcell,
to our customers. We continue to provide services
and solutions through our Turkcell Consumer Sales
Channel, Alternative Sales Channels, Turkcell
Superonline Fiber and DSL Solution Centers and
Corporate Sales Channel.
Within the framework of our integrated structure,
we present our fixed and mobile integrated Turkcell
solutions all over Turkey through our Turkcell
Communication Centers (TİM) and Authorized Sales
Points (YTSN). We work to provide our customers
with the same service quality at each point.
TURKCELL ANNUAL REPORT 2016 57
OUR ALTERNATIVE SALES CHANNELS
OPERATOR RELATIONS AND WHOLESALE
In Tele-sales channel we continue to ensure that
our customers can reach our products and services
anytime, anywhere and easily through our Inbound
and Outbound Channels, which were awarded the
“Silver Stevie” prize for the increase in our sales
conversion ratio in 2015 due to our focus. In 2016,
we focused on making our channel more digital and
intelligent, and to instantly offer the products and
services that customers need. And in doing so, we
increase our sales conversion ratio and satisfaction
level. In 2016, we increased the share of our channel
in all our products and became the main sales channel
of our VAS products, which hold strategic importance.
We are contributing to Company profitability by
realizing more profitable, volume sales at lower cost.
We made significant contributions to the change in
International Roaming, Interconnection, Wholesale
Voice and Wholesale Data services of Turkey’s
telecommunications sector, with our Wholesale
Segment and focus on partnership with national and
international operators.
We have become the most important capacity and
internet provider of many neighboring countries.
This resulted from the intensive studies that we have
been carrying out since 2009, in line with our vision
of transforming the silk road into a fiber one, and in
support of our main strategy of positioning Turkey as
the main internet route, with Istanbul as the regional
internet hub.
Our Online Sales Channel enables our customers to
easily access our products and services at any time
and from any location. In 2015, we have initiated the
“With A Single Click” project, facilitating port-in from
other operators, and in 2016 we activated post-paid
subscription transactions, enabling our customers
to become a Turkcell subscriber as conveniently and
easily as with a single click. Within the scope of our
pilot project “purchase from web channel, delivery
from store” that we have developed in parallel with
our multi-channel management vision, we began to
offer our customers a new and easy experience that
diversifies our delivery alternatives. With the vision of
converting each smartphone into a store, we offered
contracted and pre-paid sales services through mobile
devices and ensured that turkcell.com.tr was equipped
with functions and features appropriate for an
e-commerce site. In 2016, we continued to design our
omnichannel projects that bring our retail channels
and online channels together.
In our Self-Service Channels, we constantly maintain
a wide network of ATMs, call centers and Internet
branches of banks, whereby our customers can quickly
and easily access Turkcell services from every possible
location.
CORPORATE SALES
In corporate sales, we continue to provide service
with Turkey’s largest and most widespread sales force,
customer management, retail and digital channels. We
provide mobile, fixed and DC/Cloud services on an
end-to-end basis.
A team of 1,300 employees at our Corporate Solutions
Centers realizes active sales to small-scale companies.
Additionally, we provide services from our Global Bilgi
Call Center for all company requests. We also provide
portfolio management services by conducting regular
calls with 400 portfolio managers.
Through our collaborations with the world’s leading
Tier-1 operators, we have served as a bridge providing
wholesale customers with seamless access from east
to west, at the speed of light.
Our international carrying capacity exceeded 3.5 Tbps.
We have cooperated with the world’s largest global
traffic exchange platforms and played a major role in
their decision to come to Turkey. Thus, we have taken
another crucial step in transforming Istanbul into
the traffic exchange hub of the region. We have also
played a significant role in bringing content providers
to the point where they wish to provide their services
from Istanbul.
As Turkcell, we have enabled other national operators
in the telecommunications sector to benefit from
the infrastructures that we own. In this context, we
have signed off on successful major projects with our
business partners.
After we acquired a 100% stake in Ukraine lifecell, a
key step taken as part of our strategy of expanding
in the international arena, we focused on group
synergies to be created in the wholesale segment
in our Northern Cyprus, Ukraine, and Belarus
operations in 2016. We began to act as a group,
especially regarding agreements reached with other
operators within the scope of international roaming.
And we have been able to leverage the efficiency
gained through our cooperation with many major
international operators as a benefit for our consumer
and corporate customers’ international tariffs. And
so, even when our subscribers are abroad, we are in a
position to meet all their communication needs with
advantageous offers.
The number of average
monthly visitors has
reached 18 million
visiting Turkcell’s 1,019
Communication Centers,
which are scattered
throughout Turkey. Turkcell
has also more than 10
thousand sales points.
As Turkcell, we have
enabled other national
operators in the
telecommunications
sector to benefit from
the infrastructures that
we own. In this context,
we have signed off on
successful major projects
with our business partners.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016
58
CUSTOMER EXPERIENCE FOCUS
As customer experience, we listen to the “voice of the
customer” at every interaction, and based on the feedback
we received, we strive to provide customers the most feasible
value propositions.
OUR CUSTOMER PROMISES
We use every means available to satisfy our
customers, and guarantee Turkcell’s customer
commitment with our promises. During the 4.5G
launch realized on April 1, 2016, we released our
customer promises, having doubled the internet quota
of our 4.3 million customers. We have ensured that
our 387,000 customers’ packages on 4.5G tariffs
are also valid abroad, sparing them an unexpected
invoice. We quickly provided a backup phone for our
2,100 customers whose smartphone was broken,
and took care of them all the way. We have sold 2
million devices with the brand new flexible payment
options offered by Turkcell Finansman. We have
defined an emergency communication package to
enable our customers to continue communicating with
their relatives in the event of extraordinary regional
disasters, in and beyond Turkey.
VOICE OF THE CUSTOMER
As customer experience, we listen to the “voice of
the customer” at every interaction, and based on the
feedback we receive, we strive to provide customers
the most feasible value propositions.
We receive a diversity of feedback from our
customers; during their calls and through the sales
channels, and My Account, My Company and other
digital channels, as well as social media among many
others, after which we evaluate their wishes and
complaints.
We conduct and evaluate customer questionnaires,
focus group studies, and similar market surveys
regarding our products and services at each point;
from the initial idea stage to presentation to the
customer, and from usage to pricing. In so doing
we are able to provide necessary feedback to our
employees, improve ourselves, and offer a better
customer experience. We share all these customer-
focused activities with our employees during annual
evaluations held with management every year, as well
as meetings and site visits.
As Turkcell, we strive to provide our customers with
a superior and unique customer experience; we build
strong relations with them; we work to sustain their
comfort, and ease their lives, and to provide the best
solutions for their needs. We know full well that
while successful companies need to meet the needs
of their customers today, they must also be prepared
for future challenges and opportunities. Today, our
greatest promise in terms of customer experience is to
know our customers superbly, offer them personalized
value propositions, and facilitate their lives with sales
and after-sales service. By doing so, we promise to
enable all our customers to experience the privileges
of Turkcell.
Customer experience is one of the core priorities of
all Turkcell employees. Many employees, including
the management team of Turkcell, have customer
experience responsibilities, and all employees are
responsible for fulfilling our commitments.
In order to improve the customer experience we
measure our performance with the internationally
recognized “Net Recommendation Score” survey. This
research method enables us to measure how much
our customers recommend both us, and other mobile
communication service operators that they use. By
doing so, we are able to view Turkcell through the
eyes of our customers thanks to the independent
research companies we use, and have the opportunity
to measure ourselves by comparing annual scores. We
continue to be Turkey’s Turkcell in 2016, as the most
highly recommended operator among others in both
fixed and mobile consumer segments.
Many employees, including
the management team of
Turkcell, have customer
experience responsibilities
and all employees are
responsible for fulfilling
our commitments.
TURKCELL ANNUAL REPORT 2016 59
We also reach our
customers through our
digital channels in order
to facilitate their lives
and ensure they have the
access from everywhere to
everything they look for
from Turkcell.
We work 24/7 with all our
sales channels and call
centers, which provide
service in Turkish and many
other foreign languages
in order to provide our
customers with a superior
and unique customer
experience. We also apply
the ISO 10002 system for
customer satisfaction
management.
EMERGENCY PACKAGES
As Turkcell, we do not abandon our customers in the
event of natural disasters and extraordinary events,
either within, or beyond Turkey. We immediately
provide them with free voice, SMS and data packages
in regions where an incident takes place, which
ensures seamless communication during extraordinary
events.
SERVICE CHANNELS
We are designing a pre-sales and post-sales end-to-
end journey for our customers with our integrated
communication and technology services. This provides
them with a holistic experience of Turkcell as they use
our products and services. Thus, we offer seamless
services that are converged across all service channels
through which we communicate with our customers.
We work 24/7 with all our sales channels and call
centers, which provide service in Turkish and many
other foreign languages in order to provide our
customers with a superior and unique customer
experience. We also apply the ISO 10002 system for
customer satisfaction management.
We also reach our customers through our digital
channels in order to facilitate their lives and ensure
they have the access from everywhere to everything
they look for from Turkcell. Through My account,
developed for customer needs and digital habits, and
My Company, used by our Company representatives,
all of our customers can realize their transactions
online from their mobile or computer, and can readily
access all information on our products and services.
Also, we have not neglected our customers on any
channel, providing them live services (400,000 times
BiP Chat, 3.1 million times Web Chat and 3.6 million
live SMS) last year.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 60
TURKCELL ANNUAL REPORT 2016
SOCIAL RESPONSIBILITY
With its social responsibility awareness, Turkcell allocated up to
1% of its total revenues for social investment works in 2016.
HELLO HOPE EDUCATION CENTER
The situation of the Syrian refugees who have been
forced to leave their countries since 2012 has turned
into a human tragedy for the whole world. As Turkcell,
we also evaluated the issue with the awareness of
the responsibility we have to take. We planned all our
steps in this sensitive manner.
We launched our “Hello Hope” education center
at the Kahramanmara(cid:218) Temporary (cid:18)efu(cid:61)e Center
in cooperation with AFAD and Prodea Systems, on
Saturday, December 17th.
At our (cid:8)ello (cid:8)ope center, we provide(cid:126)
• The first free fiber internet connection service
offered for the education of refugees in Turkey,
• The Hello Hope application, which is a solution to
the need to learn Turkish, where communication and
information accessing is done on Turkcell T tablets,
• Opportunity of listening to music with fizy and
watching TV on Turkcell TV+,
• Khan Academy’s content on K12 training, news and
health.
In addition to their basic needs(cid:126) we know the
importance of mobile communication for the Syrian
refugees, and continue to connect them to life, and to
their loved ones.
“A POWER ALLIANCE FOR AID” FROM TURKCELL
AND THE RED CRESCENT
The Turkish Red Crescent, which has been helping
people in need in times of disaster for 150 years,
together with Turkey’s Turkcell have crowned their
goodwill protocol, that will carry their cooperation
further, with a TRY 5 million aid package. A goodwill
protocol, covering forward looking studies, was signed
between the two institutions at the “Power Alliance
for Aid” meeting jointly organized by the Turkish Red
Crescent and Turkcell.
Accordin(cid:61) to the protocol si(cid:61)ned(cid:126) the Turkish (cid:18)ed
Crescent, which stands by people in times of disaster
in and beyond Turkey, and Turkcell, which has the
duty of mobilizing technology and the power of
A power alliance for aid
The Turkish Red Crescent,
which has been helping
people in need in times
of disaster for 150 years,
together with Turkey’s
Turkcell have crowned their
goodwill protocol, that will
carry their cooperation
further, with a TRY 5 million
aid package.
The “Project Lift” initiated by the Maya Foundation
to heal the trauma suffered by Syrian children was
discussed in the European Parliament in Brussels at
the invitation of the European Parliament Turkish
Friendship Group.
Supporting this project, Turkcell took the first step
by bringing an exhibition named “From the Eye of a
Child: The Syrian Refugee Story and Empathy” to the
attention of an audience in Brussels. The exhibition
consisted of the pictures of children receiving trauma
therapy, as well as the photographs of artist Kaan
(cid:212)uhacı.
The photo(cid:61)raphic work of Kaan (cid:212)uhacı with (cid:19)yrian
children examines their footsteps, drawing attention
to the distance they have to cover and how far they
are from their homes. These photographs, together
with the drawings of the children themselves while
in trauma rehabilitation make up the “From the Eye
of a Child: The Syrian Refugee Story and Empathy”
exhibition.
The exhibition was opened to the visitors with Turkcell
support between March 3 and 23, 2016 in Brussels.
61
Within the scope of the project, Turkcell designed
special laboratories aimed at technological
productivity, thereby channeling of the “maker”
culture in Science and Art Centers (BİLSEM) where
particularly talented students in seven regions of
Turkey received post-school project-based training. In
these laboratories, these students will be introduced
to 3D printers, Arduino electronic learning kits, robots
and software equipment, and will be trained on the
internet of things and software. The face-to-face
trainings given in these laboratories will be supported
by online training through www.zeka-kupu.com.
Thus, talented young people of Turkey will speak the
same language as technology producers all over the
world and grow up in the “maker” culture. These young
people will become the active and productive players
of the 4th Industrial Revolution, where information
technology transforms every phase of production, and
which will be shaped by the Internet of Things.
In addition to Ordu, the project was initially adopted
in BİLSEMs in Adana, Erzincan, Ankara, Istanbul,
Kütahya and Şanlıurfa. Turkcell targets establishing
laboratories in 106 BİLSEMs across 80 cities to reach
10,000 families, teachers and students within 3 years.
20,000 children were given a maker-kit at
Whiz Kids Project
Turkcell, which has opened next generation
technology laboratories in 7 regions of Turkey, and
which provides training, encourages particularly
talented children to use their potential in the fields
of science and technology. Turkcell distributed the
first coding kits to the students of technology classes
in BİLSEMs, which are opened within the context of
the “Whiz Kids” project initiated under the auspices
of the Ministry of National Education. The kits were
distributed during the summer holiday in order for
students to experience them. In the new academic
term, Turkcell aims to deliver 20,000 coding kits
prepared for BİLSEM students at different levels
ranging from the 3rd grade (8 years old) of elementary
school, to the 12th grade (17 years old) of high school.
Turkcell CEO Kaan Terzioğlu met with BİLSEM
students to give them the coding kits in person.
Thanks to the coding kits distributed within this
project, which aims to uncover the potential of
particularly talented students from all over Turkey,
the goal is for these children to grow up in the “maker”
culture of the world. By paving the way for young
people to write their own programs, Turkcell educates
special talents in Turkey to enable them to speak the
same language as technology producers all over the
world.
communication, will come together and expand
humanitarian aid. As a pioneer in donation and
volunteering, raising awareness, providing added value
in operational areas, and creating a business model
for Turkey and the world among our goals. Turkcell
committed to contributing to the improvement of life
with a TRY 5 million donation to the Red Crescent in
2016.
Initially, Turkcell distributed infant aid packages
consisting of food, diapers and cleaning materials
prepared in accordance with the directions of the
Red Crescent. Turkcell’s donation in kind, consisting
of clothing and toys, was also delivered to people in
need at the Öncüpınar camp. Turkcell will increase its
support to the Red Crescent through technology, as
well as donations.
TURKCELL PARTICIPATED IN THE UN
HUMANITARIAN SUMMIT AS THE REPRESENTATIVE
OF THE TELECOMMUNICATION SECTOR.
Turkcell has participated in the United Nations (“UN”)
Humanitarian Summit, which convened in a world first,
as the sole representative of the telecommunication
industry. The summit was hosted by Turkey, in Istanbul
on May 23-24. On the panel entitled “Placing People in
the Center” organized within the scope of the summit,
Turkcell’s humanitarian contributions through business
continuity were shared. In this context, studies carried
out to eliminate the basic needs of Syrian refugees,
improve their living conditions and facilitate their
adaptation process, were communicated. Additionally,
Turkcell became the first telecommunications company
in Turkey to sign the “Humanitarian Connectivity
Charter” supported by OCHA (the Office for the
Coordination of Humanitarian Affairs), within the
GSMA (The World GSM Association).
During the Summit; Turkcell CEO Kaan Terzioğlu and
the Secretary General of the UN Ban Ki-moon held
a private meeting. Furthermore, Turkcell sponsored
the West-Eastern Divan Orchestra, which aims to
establish a cultural bond between the East and West
and serve inter-communal peace, to stage in the
opening ceremony of the summit.
TURKCELL WHIZ KIDS PROJECT
In an effort to support youth and children, who want to
overcome impossibilities and find suitable educational
opportunities for themselves; Turkcell rolled up its
sleeves for the development of exceptionally talented
students, Turkey’s greatest assets, through next
generation technology and education. The “Turkcell
Whiz Kids Project” was initiated under the auspices of
the Ministry of National Education for unique students
from all over Turkey with the potential to steer the
future. The project aims to enable such students to
realize their potential and access technologies that can
shape the future.
Turkcell became the first
telecommunications
company in Turkey to
sign the “Humanitarian
Connectivity Charter”
supported by OCHA, within
GSMA.
Turkcell, which has
opened next generation
technology laboratories
in 7 regions of Turkey, and
which provides training,
encourages particularly
talented children to use
their potential in the fields
of science and technology.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016
62
TURKCELL ANNUAL REPORT 2016
SOCIAL RESPONSIBILITY
No Boundaries Education
The “Turkcell Dialogue
Museum” established
by the Istanbul Social
Enterprise with the support
of Turkcell, to better
understand the daily
difficulties experienced by
disabled people, has now
started to serve Istanbul
residents as a permanent
museum.
PEOPLE WITHOUT BOUNDARIES
As the Turkcell family, we attach great importance to equal
opportunities among all segments of our society for the
economic and social development of our country, and are
taking concrete steps in this regard. In accordance with this
vision, we provide solutions in a diversity of (cid:206)elds under
the roof of “People without Boundaries” to make the lives
of our disabled citizens easier, and to better integrate them
into daily life.
We continue to support the development of disabled
children with our “No Boundaries Education Program”.
We have carried out a new project with the Ministry of
National Education geared at disabled children with special
educational requirements to enable them to participate in
daily social life. We support the development of disabled
students with regards to education and employment
through the “No Boundaries Education Program” under
the auspices of the Ministry of Education. The goal here
is to increase the competencies of disabled children with
special educational requirements, and enable them to take
part in social life. With this program, we plan to create
occupational workshops and technology classes in 80
schools where students with disabilities receive special
education. In 2015-2016 we catered to 47 target schools.
Our goal is to reach 10,000 students by facilitating 80
schools in 2017.
Within this program, we will establish “Technology” and
“Information Technologies” classes at 15 schools for the
visually impaired and 20 schools for the hearing impaired
to contribute to the students’ personal development, and
generate opportunities through the use of technology.
Additionally, we will prepare visually impaired students for
business life through the career workshops to be designed
at 45 Special Education - Career Education Schools. We
have already begun to set up information technology
classes to support the employment of hearing impaired
youth in graphic design, computer technologies and similar
(cid:206)elds. In these technolo(cid:61)y classes, we aim to enable them
to access information more easily, and facilitate their
personal and professional development with the advantages
of technology, by utilizing devices specially developed for
the visually impaired.
We also offer the “Turkcell – Young Guru Academy
Leadership Program” to visually impaired students. At the
initial phase of the program, where disabled leaders with
the potential to be role models are trained, 50 visually
impaired students of secondary school age participate
in a (cid:176)0-week education pro(cid:61)ram. Twenty (cid:206)ve visually
impaired students who successfully complete the program
participate in a 5-day Leadership Camp. At this camp,
through an intensive training program, students learn to
‘succeed together’ by better experiencing the projects
they participate in, and are inspired by the speeches of
role model leaders. The stars selected from among these
candidates, and who are trained for 10 weeks at workshops,
receive one-on-one coaching from a role model leader.
We invite everyone to the Turkcell Dialogue Museum for a
different perspective on life.
The “Turkcell Dialogue Museum” established by the Istanbul
Social Enterprise with the support of Turkcell, to better
understand the daily dif(cid:206)culties e(cid:78)perienced by disabled
people, has now started to serve Istanbul residents as
a permanent museum. The “Turkcell Dialogue Museum”
became a permanent museum with the addition of the
“Dialogue in the Dark” and “Dialogue in Silence” exhibitions.
These exhibitions, with the partnership of Istanbul Social
Enterprise, İBB and Metro Istanbul arose out of the
importance of creating awareness in order to offer solutions
to social problems. The “Dialogue in the Dark” exhibition
offers the opportunity to experience Istanbul as the visually
impaired do, while the “Dialogue in Silence” exhibition allows
one to step into the world of the hearing impaired.
The “Dialogue in the Dark” and subsequent “Dialogue in
Silence” exhibitions, which saw their world premiere in
Germany 27 years ago, have been shown in Turkey since
2014 with the support of Turkcell. It is also significant
that Turkcell’s support for the “Dialogue in the Dark” and
“Dialogue in Silence” exhibitions marks another global first,
in what is a vital social initiative project that has proved its
value in many countries across the world.
A very quiet experience
The Dialogue in Silence exhibition at the Turkcell Dialogue
Museum invites the viewer to understand and empathise
with people with hearing impairment by experiencing their
lives. The exhibition takes place in a special sound-proof area,
which is completely silent. Participants refrain from talking
for an hour and hear nothing due to a headset they wear.
Visitor groups are also accompanied by hearing-impaired
guides.
Discovering Istanbul in the dark
The Dialogue in the Dark exhibition invites participants to
visit once, in the dark, those urban places that have become
symbols of Istanbul. The exhibition, which has various
sections such as boarding a ferry, walking around parks,
crossing the street in traffic, taking the Beyoğlu tram and
visiting the local market, is staged with the participation of
visually impaired guides, while new “sight” forms based on
the senses are also being discovered. Within the scope of the
exhibition, visitors can experience how the visually impaired
read books via the Turkcell My Dream Companion service on
a ferry crossing.
Turkcell My Dream Companion
My Dream Companion is a free service that serves the
8020 short code of the visually impaired, on the My Dream
Companion mobile application compatible with iOS and
Android operating systems, and via www.hayalortagim.com.
Within the scope of the service, visually impaired people
can follow the agenda in different categories such as science
and technology, health, sports, politics, economics, and
disability, as well as through the current articles of over 150
columnists. Additionally, they can access intellectual content,
including close to 3,000 audio books, journals and magazines.
Visually impaired users can obtain detailed information on
stores in their vicinity through the My Dream Companion
application with beacon technology at 12 Shopping Malls in
cities such as Istanbul, Gaziantep, Konya, Izmir, Antalya and
Mersin. They can use the navigation service for areas such
as a shop they wish to visit, an elevator, reception, or toilet
facilities.
63
With the audio description technology we launched in
December 2015, the visually impaired can follow all movies,
at all movie theaters in Turkey, without missing any visual
details. My Dream Companion application automatically
synchs with the movie anywhere during the film; and
in scenes where there is no dialogue, by describing all
visual details with external sound, it improves the viewing
experience of the visually impaired. The audio description
service implemented for the first time in the world was
awarded in the category of Accessibility and Inclusion in
Social Life at GSMA 2016.
In July 2016, we realized a pilot project using Beacon
technology to improve the public transport experience of
the visually impaired in cooperation with the Gaziantep
Metropolitan Municipality. With this project, visually
impaired people in Gaziantep can access information such as
the arrival time of the bus they are waiting for while at the
bus stop; the stops they pass while on the bus, and arrival
at their final destination via the My Dream Companion
application. Additionally, while the visually impaired user
waits at the bus stop, the driver of that bus is informed that
a visually impaired person will board their bus.
We continue to carry out initiatives in different fields to
integrate our disabled citizens into daily life.
We remain active in different fields to integrate our
disabled citizens into everyday life in the sporting arena
through our cooperation with the Blind Sports Federation.
Having started our cooperation with the Turkish Football
Federation and Turkish Blind Sports Federation in 2013, we
are still the main sponsor of the National Blind Football
Team and the name sponsor of the Turkcell Those Who See
the Sound League, which is a football league for the visually
impaired.
Turkcell Academy’s online education platform www.
turkcellakademi.com offers special trainings for visually
impaired and hearing impaired people under the category of
“Education without Boundaries”. Many training programs
for the hearing impaired ranging from technology to
personal development, and from the business world to
leadership are provided with the language sign option.
There are trainings for the hearing impaired that teach
“Turkish Sign Language” prepared in cooperation with
the Turkish Federation of the Hearing Impaired, as well as
trainings for the visually impaired that teach smartphone
usage specific to iOS and Android. What is more, Turkcell
Academy has started to offer educational programs for
parents with hearing and visually impaired children that can
support child development.
Turkcell Scholarship Programs Bring Hope to Thousands of
Young People.
More than 6,000 students were supported by scholarship
programs in 2016 as part of related projects through which
Turkcell provides educational support to tens of thousands
of students. With these programs, over 100,000
scholarships have been granted continuously over 16
years.
The “Dialogue in the Dark”
and subsequent “Dialogue
in Silence” exhibitions,
which saw their world
premiere in Germany 27
years ago, have been shown
in Turkey since 2014 with
the support of Turkcell.
3,000
My Dream Companion is a free
service that serves the 8020
short code of the visually
impaired, on the My Dream
Companion mobile application
compatible with iOS and
Android operating systems, and
via www.hayalortagim.com.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 64
SOCIAL RESPONSIBILITY
We attach great importance to compliance with environmental principles,
which are among the United Nations Development Program’s Sustainable
Development Goals.
SUSTAINABILITY INITIATIVES
As Turkey’s integrated communications and technology company,
we detect our environmental impact areas with a keen awareness
of our environmental responsibilities, and manage our operations
by taking these into consideration. We are aware of the fact
that innovations in the telecommunication sector we operate in
contribute significantly to reducing the environmental impact of
business world overall.
We attach great importance to compliance with environmental
principles, which are among the United Nations Development
Program’s Sustainable Development Goals. While supporting
sustainable industrialization with our technology, we build our
infrastructure by taking the future of the climate and environment
into account. And in developing our services, we aim to reduce our
environmental impact.
We closely monitor our carbon footprint in combating climate
change and in targeting reduced carbon emissions, we annually
increase the use of renewable energy sources in our business
processes. In order to improve our energy efficiency, we focus on
energy saving in our process improvement efforts. We also reduce
our waste and dispose of it by separating it at its source.
Sustainability Report 2014-2015
With our sustainability report published in September 2016, we
shared the sustainability management approach of Turkcell İletişim
Hizmetleri A.Ş., and the sustainability practices and performance
of the operating period between January 1, 2014 and December 31,
2015 with our stakeholders in full transparency.
This report, in which we adopted the internationally accepted
sustainability reporting standard of the Global Reporting Initiative
(GRI) G4 Sustainability Reporting Principles as a guide, also
contains the seventh Communication on Progress of the United
Nations Global Compact (UNGC), of which we have been a
signatory party since 2007. We have declared our support for
UNGC’s principles regarding human and employee rights, the
environment and the fight against corruption, as well as our
progress in these fields.
Data for 2012 and 2013 has been included to illustrate our
economic, social and environmental performance, and to enable
comparisons. Stakeholder feedback is important for us to enhance
our sustainability performance and improve our reporting. For this
reason, stakeholder opinions gathered from different channels, and
related to several of our applications and initiatives, are included
in the report.
Carbon Disclosure Project (CDP)
As a company that has long internalized sensitivity to climate
change, we have been studying the risks and new opportunities
created by climate change, and have turned these studies into a
part of our strategic plans. In 2016, we participated in CDP Turkey
(Carbon Disclosure Project) and shared the comprehensive report
we prepared for our 2015 performance with the public.
In 2015, we saved over 350,000 kilowatt hours of energy in
total with our transition to LED lighting systems in our plaza
buildings, and our energy efficiency studies on our air conditioning
systems including the change of chillers, pump and revisions of air
conditioner at Samsun Plaza. Additionally, we were able to reduce
our energy consumption by approximately 2,000,000 kilowatt
hours in total by switching off servers we don’t use at Turkcell
and Superonline data centers, and the reduced thermal load that
resulted. With the reduction in energy consumption due to the
systems switched off, we were able to save approximately TRY
550,000. While we saved about 13 million kilowatt hours of energy
with our energy efficiency projects finalized at our plaza buildings,
data centers and base stations in 2015, we also avoided 5,985 tons
of CO2 greenhouse gas emissions.
ISO 14064 Certification
We have proven to be an environmentally friendly company with
human and benefit-oriented initiatives related to international
standards in social, economic and environmental areas of influence.
We have fulfilled all our responsibilities regarding greenhouse
gas emissions standards, and in 2015 we became the first telecom
operator to receive the “ISO 14064 – Accounting and Verification
of Corporate Greenhouse Gas Emissions” certificate in Turkey. In
2016, we continued our studies and have again received ISO 14064
certification.
BIST Sustainability Index
With the sense of responsibility that comes with our position in the
industry, we adopt sustainability as a principle in environmental,
social and corporate governance. The BIST Sustainability Index
provides a performance evaluation means of making improvements
in companies, and of establishing new objectives. The index
also provides the opportunity for companies to develop their
risk management skills regarding corporate transparency and
accountable sustainability. As Turkcell, we have been on the
2015 and 2016 BIST Sustainability Index on the strength of our
achievements regarding the selection criteria.
We have proven to be an
environmentally friendly
company with human
and benefit-oriented
initiatives related to
international standards
in social, economic and
environmental areas of
influence.
TURKCELL ANNUAL REPORT 2016 65
In addition to the many years of sponsorship of our National Teams,
this year we also became the “Official Communications Sponsorship of
the Spor Toto Super League” organized by the Turkish Football Clubs
Union.
In addition to the many years of sponsorship of our
National Teams, this year we also became the “Official
Communications Sponsorship of the Spor Toto Super
League” organized by the Turkish Football Clubs
Union. We reached approximately to 120,000 fans
at 11 matches in 10 provinces through the “Turkcell
Match of the Week” project initiated within the scope
of this sponsorship deal.
Additionally, while we emphasized our love of football
with the “Turkcell Super Cup” sponsorship to which we
gave our name and support in August, we also had the
opportunity to introduce our products and services at
a match followed by 40,000 people at the stadium and
millions of viewers on the screen. We plan to present
“Turkcell Super Cup”, which we will organize for the
second time in 2017, to football fans with a brand new
design and the visual world.
We have continued our support for our National
Basketball Team, which represented our country in the
2015 European Basketball Championship, for 14 years.
Within the context of our agreement that we extended
until 2019, this year we also became the sponsor
of the Women’s National Team, which reached the
quarter-finals at the Rio Olympics. We will continue to
support our National Teams with events and projects
at the EuroBasket Women’s and Men’s European
Championships to be held in 2017.
National Blind Football Team and League of Those
Who See the Voice
We continue our cooperation in sports with the Blind
Sports Federation as part of our diverse efforts to
enable our disabled citizens to take a fuller part
in life. Our support for the National Blind Football
Team, which started with our cooperation with the
Turkish Football Federation and Turkish Blind Sports
Federation in 2013, continues in the form of “Main
Sponsorship”. Additionally, we have since then
continue to support the Turkcell League of Those Who
See the Voice as the name sponsor.
Our National Blind Football Team, which became
the European Champion in 2015, has successfully
represented our country in the 2016 Rio Olympics.
We continue our
cooperation in sports with
the Blind Sports Federation
as part of our diverse
efforts to enable our
disabled citizens to take a
fuller part in life.
SPONSORSHIPS
Our Support for the Development of Turkish Sports
Continues
For so many years now, Turkcell has maintained its
pioneering efforts to develop sports in Turkey, and to
help Turkish athletes and National Teams enjoy a solid
reputation nationally and internationally. In 2016,
we continued to support basketball, football, sailing
and cycling in team sports; and athletics, swimming,
running, fishing and golf, in individual sports.
Football and Basketball
Since 2005, we have been the “Main Sponsor” of our
National Football Team, which we started to support
as the “Official Communications Sponsor” in 2002. Our
support for the National Team, which has successfully
qualified for Euro 2016, representing our country at
the European Championship in France, continues on its
way to the 2018 World Championship.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 66
SOCIAL RESPONSIBILITY
In athletics, we have reached more than 32 thousand young athletes in
64 contests, to which we gave our name and support. We also sent
31 athletes to the 2016 Rio Olympics.
with an A Ranking. With the Turkcell High Performance
Program ongoing in six cities, we have developed 40
elite athletes for National Teams and won 80 medals in
international competitions.
In Athletics, we have reached more than 32 thousand
young athletes in 64 contests, to which we gave our
name and support. We also sent 31 athletes to the 2016
Rio Olympics.
We continue the construction of the Turkcell Olympic
High Performance Center and Turkey’s first IAAF-
certified camp center.
Full Support in Rio
Turkcell, which has been serving Turkish sports
continuously since 2002, is positioned as the first brand
to support the Turkish Olympic Team in the history of our
country, in cooperation with the Ministry of Youth and
Sports and General Directorate of Sports.
As a record in Turkey’s Olympic history, Turkcell sent
105 sportsmen in 21 branches off to Rio. Turkcell has
introduced athletes to Turkey through commercial films
and outdoor and indoor visuals, thereby announcing its
full support for the team. The Olympic team supported by
Turkcell returned to our country with 8 Olympic medals.
Turkcell Gallipoli Marathon
We run for peace!
We realized the second outing of Turkey’s first thematic
marathon on October 2 in the unique atmosphere of
the historic Gallipoli Peninsula. The marathon was
participated in by more than 6,000 athletes. We reached
out to more than 20,000 people at the 3-day Marathon
Fair, set up in Çanakkale Pier Square, where dozens of
brands participated as supporters and sponsors. With
Turkcell events and promotions, we had the opportunity
to reach more than 10,000 people individually. We
provided access to close to 40,000,000 people with our
outdoor, digital, TV+ and active site promotions.
Within the scope of the marathon, we planted a sapling
for each runner and created the “Turkcell Peace Forest”
in Çanakkale. We also combined our project with the
“Letters to Çanakkale” Project and planted 10,000
saplings in the Güzelyalı region pine forest, which had
been destroyed by fire.
28 million
By 2020, we plan to invest
TRY 28 million in the
Swimming and Athletics
projects initiated in
partnership with the
Turkish Ministry of Youth
and Sports in 2013.
Swimming and Athletics
We give the greatest support to amateur sports. By
2020, we plan to invest TRY 28 million in the swimming
and athletics projects initiated in partnership with the
Turkish Ministry of Youth and Sports in 2013. Within this
plan, we have, thus far, provided the greatest support to
amateur sports in Turkey.
We are actively involved at every stage of the project,
which aims to increase the number of Turkish athletes
and the number of licensed athletes in the international
arena. We are conducting studies with the Athletics
and Swimming Federations on various project elements
including the selection of management and athletes,
training methods and institutional development
consultancy.
In three years, we have increased the number of licensed
athletes in swimming from 18,000 to 38,000. We have
established the first certified Swimming Learning System
of Turkey and taught 34,000 children to swim with the
right techniques in 40 provinces. With the Bob Bowman
Program, we have provided 6 athletes and 21 coaches
with the opportunity of sportive development in the US.
For the first time in Turkey’s history, our 2 swimmers
from the National Team participated in the Olympics
TURKCELL ANNUAL REPORT 2016 67
Business World Went Fishing in Çeşme with Turkcell
Platinum
The Turkcell Platinum Alaçatı International Fishing
Tournament was held in Port Alaçatı, between October
6 and 9. For two days, 300 notable individuals from the
business world who enjoy sports fishing, gathered with
more than 80 vessels. This year, with a catch of 65 kg of
tuna, the record that had stood for the past 10 years has
been broken.
Culture and Art
With our vision of positioning culture and the arts
among Turkey’s most important values, and to advance
its value, we have remained the “Communications and
Technology Sponsor” of Istanbul Modern, Turkey’s first
contemporary art museum, since 2012. In this context,
we have developed unique solutions and applications for
Istanbul Modern, such as QR code NFC enabled labels,
which will enhance the pleasure felt by art lovers, and
have also pioneered Turkey’s first Beacon compatible
museum application.
In 2014, we became the “Communications and Technology
Sponsor” of Sakıp Sabancı Museum. With the “My Ticket
on Mobile” service, we made it easier to purchase tickets,
and also provided convenience at the museum entrance
for museum visitors. For the first time in Turkey, we
designed educational programs for toddlers aged 0-36
month to enable them to participate in museum visit with
their families.
We will continue to support culture and the arts by
integrating our technology that improves and facilitates
life, into museums.
Turkcell Starry Nights
With Turkcell Starry Nights, which took place between
July 5 and August 31, music lovers enjoyed a wonderful
series of summer concerts. Thirty-two performances
staged by 50 artists were watched by 150,000 people at
concert venues, and by more than 1 million people from
all over Turkey live on fizy and Turkcell’s Facebook page.
With concerts in Istanbul, Izmir and Bodrum, Turkcell
Starry Nights became the longest series of concerts of
the summer, with the broadest participation.
EXPO 2016
As the main Communications and Technology Sponsor
of EXPO 2016 Antalya, which hosts the international
botanical exhibition and which holds great importance in
the promotion of Turkey, we dubbed two of the venues
Turkcell Tower and Turkcell Amphitheater.
We set up the entire infrastructure of the fair and offered
free Wi-Fi service to domestic and foreign guests. This
event was visited by approximately 5 million attendees,
while almost 2 million people had the opportunity to
listen to the concerts of 85 local and 3 foreign artists and
groups who performed at the Turkcell Amphitheater.
We have been the
Technology and
Communication Sponsor
of the Turkish Presidential
Cycling Tour, which is one of
the most important sports
organizations in the world,
organized for the 52nd time
this year.
We have been the name
sponsor of the Turkcell
Platinum Bosphorus Cup,
organized for the 15th time
this year, since 2015.
We will continue our support for the marathon, where we
provided athletes and sports fans with a unique running
experience, over the years to come.
Presidential Cycling Tour
We have been the Technology and Communication
Sponsor of the Turkish Presidential Cycling Tour, which
is one of the most important sports organizations in the
world, organized for the 52nd time this year. With the
4.5G tent pitched at the start, finish and most exciting
stage of the tour, and through the Virtual Reality
application, we enabled the audience to experience the
excitement of the race.
Golfing Addicts at the “Turkcell Platinum Golf Challenge”
The Turkcell Platinum Golf Challenge was held at the
Kemer Country Golf Club in Istanbul on 22-23 October.
Over 200 opinion leaders, key executives of the business
world and celebrities attended the two-day tournament,
which was organized for the second time this year.
Sailing Show on the Bosphorus with the “Turkcell
Platinum Bosphorus Cup”
Turkcell Platinum Bosphorus Cup 2016 took place at the
Caddebostan and Bosphorus course between May 26
and 29 with the participation of approximately 70 yachts
and 600 athletes. We have been the name sponsor of the
Turkcell Platinum Bosphorus Cup, organized for the 15th
time this year, since 2015. The races, mentioned mostly
with their technology this year, have been watched live
through Turkcell Platinum application. Besides, sports
fans had the opportunity to watch the race from diverse
camera angles with Turkcell’s 4.5G technology, and were
able to follow the location of the yachts on a map with
the “Right Here” service. The Hydros team, which broke
world records one after the other with their 15-meter
trimaran, was the guest of the Bosphorus Cup this year.
Guests who attended the event were able to experience
the world’s fastest catamaran, the Hydros Trimaran, from
land using virtual reality glasses.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 68
HUMAN RESOURCES
At the heart of Turkcell Group’s practices and policies, there
is a vision focused on both the present and future needs of
our work and our employees; a vision of ensuring an excellent
employee experience.
HR ONCE AGAIN...
The “HR Once Again” initiative we launched in 2016 to
revise our Turkcell Group Human Resources practices
is the key component of our vision of excellence in
employee experience.
Under this initiative we have formed 14 project teams.
Besides our HR teams, 850 employees from every
grade and different functions actively work on these
projects.
With the “Open Door HR” meetings that we organize
regularly, we structure our human resources processes
by canvassing the views of our employees. With the
participation of senior management, we hold “Have
Your Say” communication meetings where employees
share ideas and suggestions about our work.
Rapidly-digitalizing and evolving communications
technologies, along with Industry 4.0 ensure that
businesses are more effectively being managed. They
also enable different operational models that serve to
humanize the workplace. Technological infrastructure
and mobile platforms provided by Turkcell allow us to
manage our business processes from outside the office,
and thereby, continue our business in the event of
crisis or disaster, regardless of physical location. Our
employees manage their work more effectively and
efficiently thanks to “Mobile Work”, “Plan the Day”,
“Part-time Work” and “Office Station” designed in
2016, which provide the flexibility to work from offices
in different locations. Additionally, new mothers can
work flexibly to adapt more quickly to working life,
and to maintain their work-life balance. With the
different working models we design for our employees,
we aim to generate ideas everywhere, and to realize
these ideas and release the unlimited creativity of our
employees.
Starting from the recruitment process, we TRY to
share all our employees’ special moments to provide
them the best experience during their working lives
at Turkcell; and we implement practices that make
them feel special. We touch both our employees’ and
their family’s lives, with the aim of strengthening their
commitment to our Company.
2016 has been a year in which we greatly simplified
management layers in pursuit of greater agility and a
simpler organizational structure, capable of swifter
decision making. In this regard, we achieved a 40%
improvement in the number of employees per manager.
We have implemented the backup plans for our
management positions within Turkcell Group with the
“Talent Management” process, whereby in 2016, our
internal promotion rate reached 84%.
HUMAN RESOURCES ANALYTICS
HR Analytics studies conducted to determine Human
Resources strategies and actions, with data-based
forecasts, were one of our key focus areas this
year. We have thoroughly examined our employees’
expectations and needs with data mining studies on the
employee commitment survey, performance evaluation
results and other employee data, and determined the
critical factors affecting their commitment to our
Company. We have improved all our HR practices by
reviewing the data obtained. And overall, we believe
that our studies have pioneered the dissemination of
the data-based decision-making culture in Turkey in
the area of Human Resources.
NEW APPROACH IN PERFORMANCE
MANAGEMENT: FLEX PERFORMANCE SYSTEM
In 2016, we implemented the Flex Performance
system, which is compliant with our strategic targets
and grounded on each job’s own dynamic and needs.
The Flex Performance System allows a targeting
and assessment process tailored to the needs and
dynamics of each job, instead of a uniform performance
management system that does not overlap with the
realities of the business. With this system, each
working group can conduct their own performance
management system determined for themselves,
and are able to objectively evaluate employee
contributions to the realization of business targets.
Our new performance management system makes it
possible to use multiple performance management
applications simultaneously in line with business
requirements.
850
Under “HR Once Again”
initiative we have formed 14
project teams. Besides our
HR teams, 850 employees
from every grade and
different functions actively
work on these projects.
Starting from the
recruitment process,
we TRY to share all
our employees’ special
moments to provide them
the best experience during
their working lives at
Turkcell; and we implement
practices that make them
feel special.
TURKCELL ANNUAL REPORT 2016 69
Thanks to the Flex Performance System, our employees
will be able to closely monitor the effect of their work in
performing tasks assigned them in accordance with their
targets throughout the year. And meanwhile, its structure
supports continuous feedback. We intend for our new
performance system to increase co-operation within our
organization through common goals.
They worked on Turkcell’s product-related projects and
developed suggestions, contributing to our business.
Approximately 70 of our Young Talents had the opportunity
to get to know the Turkcell ecosystem better by paying
visits to our overseas business partners, and to observe
developments related to our business at the world’s best
high-tech manufacturing facilities.
With the Flex Performance System, which makes it
possible to assign tasks to employees throughout the
year in accordance with their targets, and which supports
continuous feedback, our employees will be able to closely
monitor their performance.
OUR PROMISES TO EMPLOYEES
We believe that Turkcell’s key resource is its employees.
The realization of our strategic goals will only be possible
through the humanization of our working life, the
establishment of ergonomic systems, the pursuit of balance
between employees’ work and private life, and with happy
and connected employees.
With this in mind, in 2016 together with our management
team, we have charted the roadmap for our employees
enabling the best experience throughout their working
lives at Turkcell, while constituting our “Employee
Commitments”. Thus, together with our management team,
we made pledges to our employees on 24 issues that will
contribute to their happiness, productivity and development.
We believe the vows we made are the key to developing
more connected employees and a stronger Turkcell.
NEXT GENERATION RECRUITMENT: GNÇYTNK
Innovation and technology are inherent in Turkcell’s DNA.
In 2016, we approached our recruitment process with a
new perspective to develop the GNÇYTNK program, with
technology at the forefront. Under this program, our young
candidates were evaluated through the enjoyable and
interactive recruitment processes that we have developed
on digital platforms.
The 26,000 young candidates who applied for the program
experienced a different recruitment process that relied on
digital technologies with online game, online question and
web-based interviews stages. Of the young people to have
successfully completed the process, this year 165 started to
work full time at Turkcell and 125 as interns. Our employees
who started to work with the GNÇYTNK program were
included in a unique orientation and training program. They
experienced an intensive and efficient orientation process
featuring virtual reality films about Turkcell, presentations
made by senior management, activities that combine games
and training, and social responsibility projects. They had the
opportunity to get closely acquainted with our customers
through visits to our call center and stores. Additionally,
our Young Talent employees were involved in the process of
setting our three-year strategy, and had the opportunity to
present their views and suggestions to senior management.
IN 2016, TURKCELL VOLUNTEERS REACHED 2,126
CHILDREN PROVIDING THEM AT LEAST ONE
OPPORTUNITY TO LAUGH.
Turkcell Volunteers, formed by a group of Turkcell
employees, realized new projects in 2016 with the moral and
material support of our employees.
In order to grow up curious, environmentally aware and
questioning individuals with strong communication skills
and technological literacy, our volunteers’ first project was
to transform Erzurum 50th Year Middle School’s seldom used
and under-stocked library this year. Accordingly, this idle
room was completely renewed, becoming the “Curiosity
Room”. Today, this room, which now has a beautiful library
stocked with brand new books, had become a place where
our volunteers talk about various subjects ranging from bees
to space, and from trees to art.
Turkcell Volunteers presented books to all children at the
Cumhuriyet Primary and Middle School in Artvin’s Borçka
district, also gifting them new coats and boots to stay warm
during winter.
For children with similar needs, our volunteers working in
Northern Cyprus also presented sweaters, sportswear and
shoes to students of the Şehit Mustafa Kurtuluş Primary
School, Polat Paşa Primary School, and Atatürk, Çağlayan,
Şehit Doğan Ahmet, Şehit Tuncer and Şehit Ertuğrul Primary
Schools in Nicosia.
Our volunteers, who continued the “Choose Your Sibling
– Schools Are Opening” projects, which established a
special bond between Turkcell Volunteers and 932 children,
also contributed to the education life of children in seven
provinces; from Sivas to Mersin, Konya Ereğli to Giresun,
and Samsun to Urfa, presenting them stationery materials,
school bags and special science sets.
With the “I can hear you” project, we learned sign language
for the 100 children in the Bornova Tülay Aktaş Hearing
Impaired Elementary School in Izmir. In order to surprise
them, we realized the school visit after learning the chorus
of a song. We practiced with the students and Turkcell
Volunteers who were visiting, learnt to dance and prepared
a small demonstration together. At the same time, we gave
gift packs with personal belongings ranging from sweat suits
to slippers, and from toothpaste to tissues, to these children
who are of reduced financial means. We also made partial
renovations to the rooms of boarding students to raise their
standard of living.
TURKCELL İLETİŞİM
EMPLOYEE PROFILE
Female Manager 24%
Male Manager 76%
Master & PhD 22%
High School
Two-year Degre
4%
5%
Graduate
69%
Female
69%
Male
31%
While the number of
Turkcell Group employees
reaches 18,999, the
number of Turkcell İletişim
employees is 3,870 as of
December 31, 2016.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016
70
TURKCELL ACADEMY
We demonstrate our commitment to knowledge and technology
through our “again and afresh” learning mission at Turkcell Academy.
We continue to take important steps towards developing Turkey
through education.
with this goal, Turkcell Academy reached 2.1 million
people in the Turkcell Group ecosystem and provided
a total of 2.6 million hours of training in 2016; the
average training time per person was 57 hours. We
targeted for our new employees, who started to work
at customer contact points and sales teams, to be
ready to serve to Turkcell quality standards. We also
continued to support and develop our employees in
2016, with the Start of Employment Programs, which
include video training, “coaching at work” solutions,
and classroom case applications.
WE ARE INCREASING THE EXPERTISE OF OUR
SALES TEAMS.
We are continuously improving the quality of
employees of our Turkcell Communication Center
(TİM), Turkcell Corporate Solution Center and
Fiber Solution Center, in a time sensitive manner. In
this direction, and with the leadership of Turkcell
Academy, we started the Certification Program
specifically prepared for our employees across Turkey.
In this program, which we designed to train more
competent and well-equipped dealer employees,
we have benefited from the experience of Turkcell
Academy’s extensive instructor staff and the Certificate
Programs of the Digital Academy. Within the scope
of the Turkcell Academy Certification Program, we
have provided special training sessions to 5,500
employees throughout Turkey. We evaluated the level
of employees’ knowledge with the examinations held
at 43 locations in 40 cities in August and November.
Those who were successful were entitled to participate
in the Face to Face Development Center. We prepared
development plans for 2017 based on the Development
Center Individual Results Reports, which were
presented between August and November.
We have continued our studies within the context of
the Corporate Sales Development Program, which we
designed to render Turkcell Corporate Sales teams much
more equipped and specialized in providing integrated
solutions to our corporate customers. We continued
to carry out training sessions on fixed telecom and IT
solutions, and workshops that facilitate the transfer of
lessons learned to business life, as well as one on one
case studies and coaching sessions.
We are continuously improving
the quality of employees of
our Turkcell Communication
Center (TİM), Turkcell
Corporate Solution Center and
Fiber Solution Center, in a time
sensitive manner.
WE ARE CONNECTED TO KNOWLEDGE THROUGH
TECHNOLOGY BY LEARNING “AGAIN AND AFRESH”!
Since 2006, we have continued our studies at Turkey’s
first “Corporate University”, Turkcell Academy, with
the mission of delivering information to the masses by
blending it with our technology. The basis of this entity
is our vision of bringing value to society and the sector
in the awareness that our real capital is human. Through
Turkcell Academy, we offer the latest technologies
in educational development solutions, such as the
virtual classroom, web-video, e-learning and mobile
learning, while focusing on “equal opportunity in
education”. By combining mobile training applications
with different learning solutions, we offer firsts to our
employees. We apply the most feasible methods in
training sessions with no constraints in time or space
to sustain individual development. We demonstrate
our commitment to knowledge and technology through
our “again and afresh” learning mission at Turkcell
Academy, which we opened for use across Turkey in
2014, having also digitalized it. We continue to take
important steps towards developing Turkey through
education.
WE LEAD THE SECTOR WITH TRAINING SOLUTIONS
OFFERED TO THE TURKCELL ECOSYSTEM.
With our development solutions, we focus on the
advancement of our employees and managers, and
ensure the continuity of their performance. We support
and develop our business partners as well as promising
young people from a technological perspective. In line
TURKCELL ANNUAL REPORT 2016 71
60 stores
We have implemented
the TİM Convergence
Development Program
for the employees of
our 60 stores that have
been renewed to focus on
customer experience.
WE SUPPORT OUR EMPLOYEES WITH REGIONAL
ACADEMY TRAINERS.
We have contributed to arriving at solutions tailored
to local needs by improving the knowledge and skills of
our employees working at Corporate Solution Centers,
Fiber Solution Centers and TİMs. We have implemented
the TİM Transformation Development Program for the
employees of our 60 stores that have been renewed
to focus on customer experience. And we enabled our
customers at TİMs to say: “I’m glad I bought it from
Turkcell,” and “Turkcell Finds Me Solutions!”. The
program, which was attended by employees and store
managers, included topics on retailing, smart devices,
customer processes and systems, one-stop service and
sales skills, as well as unique customer experience,
store management, digital and classroom training and
learning enhancing simulation applications.
WE ARE ENHANCING EXPERTISE THROUGH OUR
TECHNOLOGY DEVELOPMENT PROGRAMS.
Increasing the awareness of Turkcell employees in
particular, on one of the most critical and trendy topics
in the world of technology: “big data,” and ensuring
that they gain expertise on the subject matter, remain
among our key focal points. With the “Data Scientist
Bootcamp Development Program,” participants have
developed their competencies in strategic decision-
making, risk management and innovative product
development by conducting project studies, in addition
to gaining theoretical knowledge on big data analysis.
Within the scope of Bootcamp, we cooperated with
Coursera and EdX and carried out certified training on
Data Scientist.
Managing Data Centers effectively and efficiently and
specializing in Data Center technologies are among
the most important issues in the field of technology.
Therefore, we launched the Data Center Expertise
Program in order to increase the competencies of our
technical teams working on this issue.
To sustain superior Turkcell network quality, we have
designed a special program for our Regional Solution
Partners, where around 2,500 people in our ecosystem
work. Within the context of the program, we studied
Mobile Network, Fixed Network, 4.5G Technology,
and Tower Infrastructure Systems with mixed training
methods.
WE OFFER THE PERFECT 4.5G EXPERIENCE.
The most important technological development for
Turkcell in 2016 was 4.5G. We have designed the 4.5G
Development Program through Turkcell Academy
for the development of our employees, as well as
regional solution partners, dealers and customers.
With this program, we aimed to equip the technical
teams responsible for installation, and all employees
who will ensure 4.5G convergence at customer service
points, as well as the Turkcell customers themselves.
We have been providing a smooth 4.5G experience
since April 1, 2016, thanks to the 3-step training,
which we have named “Convert Network”, “Convert
Information” and “Convert Life”.
WE ARE PREPARING FOR THE FUTURE WITH THE
“CONVERGENCE DEVELOPMENT PROGRAM”.
Aimed at becoming a leader in the integrated telecom
market, Turkcell Group launched the “Convergence
Project” in 2015. Within the scope of the project, all
employees of Turkcell Group and customer contact
points were targeted to converge; that is, it was
targeted for them to have a grasp of our fixed and
mobile products and services, and our future goals,
thereby providing our customers the best possible
experience.
As Turkcell Academy, we undertook the responsibility
of designing and implementing the most appropriate
development program, which ensures convergence
of the culture, knowledge and skill of approximately
20,000 people, in order for the project to achieve its
goal.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 72
TURKCELL ACADEMY
Through Turkcell Academy, we support young people on their path to
development with university-industry co-operation to train qualified
human resources for the sector.
WE TRAIN LEADERS TO CARRY US TO THE FUTURE.
We continued to develop Turkcell Group leaders in
2016 with programs targeting around 700 managers
from new executive to CXO level through the
leadership and talent development solutions we
offer. This year we have in particular transformed the
two-year development program for the new executive
level into a three-year development journey of “self-
team-business” focus. We aimed for the program to
contribute to our goals and business results. Unlike
previous years, we have initiated the Function Specific
Leadership Programs.
WE EMBRACE TURKCELL OVERALL WITH
PROGRAMS FOR LIFE.
We also carried out Programs For Life (HAP) trainings
prepared by Turkcell Academy to support personal
development in 2016. In addition to experimental
hands-on trainings, we contributed to our employee’s
commitment through training sessions, in which they
can participate with their spouse, and have enabled
our employees to participate in trainings through
live broadcast throughout Turkey, by leveraging
technology.
WE SUPPORT YOUNG PEOPLE THROUGH
UNIVERSITY-INDUSTRY COOPERATION.
Through Turkcell Academy, we support young people
on their path to development with university-industry
co-operation to train qualified human resources for
the sector. Within this context, we have delivered
a qualified work force to the IT sector by accessing
more than 2,500 students in 15 universities with nine
certificate programs prepared with the corporate
knowledge and experience of Turkcell Academy in the
October 2015-December 2016 period. We brought
Turkcell Group managers together with more than
16,000 students from 50 universities, at more than 70
events. During the events, we pioneered the sharing
of Turkcell’s vision on topics such as “Transformation
in Society with 4.5G”, “New Technologies”, GNCYTNK,
and leadership.
We continued to develop
Turkcell Group leaders
in 2016 with programs
targeting around 700
managers from new
executive to CXO level
through the leadership
and talent development
solutions we offer.
WE RAISE INNOVATIVE TURKCELL LEADERS OF
THE FUTURE WITH MIT.
Turkcell Academy, which has initiated the GNÇYTNK
training program with the aim of raising the innovative
Turkcell leaders of the future, has signed a new
cooperation with the Massachusetts Institute of
Technology (“MIT”), one of the leading universities in
the world. Turkcell - MIT Leadership and Innovation
Boot Camp Program is the first training program
prepared by the MIT for a company. GNÇYTNKs, who
participated in the MIT’s world famous “New Venture”
program, also were trained in setting up business
plans and developing presentation skills while learning
global new technologies and global product / service
life cycles.
After a week of very intense program, among the
successful teams that have presented their projects to
Turkcell and MIT juries, the first 3 projects and teams
will continue to work in the MIT Boston Campus in
May 2017. The champion “Internet of Things, Face
Recognition Systems and Video Call” projects will
continue to be developed by the world-renowned
professors and mentors.
TURKCELL ANNUAL REPORT 2016 TURKCELL DIGITAL ACADEMY
We add value to society with the collective power of
knowledge. We have continued to add value to society
through our studies to bring individuals and sectors
closer with the help of the unifying power of information
through Turkcell Digital Academy, launched in 2014. We
have also cooperated with many renowned education
platforms in the world. We took a giant step to enable
equality of opportunity in education in cooperation with
the Khan Academy Turkish, known as the free learning
platform, boasting the richest content in the world.
In this context, we provided young people with the
opportunity to access the -rich and high quality Turkish
education, which will help in their lessons, under the
category of Khan Academy Turkish at Turkcell Academy.
From the first year until the end of the 12th grade, we
have enabled Turkcell customers to benefit, free of
charge, from data available on the platform, which hosts
supporting sources on all courses pertaining to formal
education, and an archive available to licensed students.
Since 2014, Digital Academy has offered more than 3,000
items of educational content and attracted 20 million
educational views, while teaching English lessons and
preparing more than 700,000 people for tests. Having
been downloaded by more than 1.2 million users, the
Digital Academy has quickly become an important
source for individuals and institutions, with its rich
content. In 2016, through Turkcell Digital Academy
platform, we provided development categories such as
English, Preparation for Exams, Certificate Programs,
Useful Information for SMEs, Personal Development,
Entrepreneurship, Innovation, Technology, Education
without Boundaries, and Khan Academy Turkish.
WITHIN THE SCOPE OF SOCIAL RESPONSIBILITY,
WE ARE UNDERSIGNING PIONEERING MOBILE
APPLICATIONS IN EDUCATION.
Since the foundation of Turkcell Academy, we have
undersigned leading mobile applications in education
within the scope of our social responsibility. We are
working on the employment and education of the
disabled, and lifting the barriers they face in daily life.
We also contribute to raising awareness on this matter
through the Education without Boundaries program.
With the basic trainings offered at the Turkcell Digital
Academy, we support the development of both the
disabled and their families.
WE ENABLE ALL OPERATORS TO SERVE THEIR
SYRIAN CUSTOMERS
We also enable all operators to serve their Syrian
customers through the Hello Hope mobile application
that Turkcell Academy launched in 2016. By using this
application, developed by Turkcell Academy as a world
first, native Arabic speakers can learn those words and
phrases most frequently used in Turkish, both vocally
and in writing. In addition to the feature of language
73
learning, they also benefit from simultaneous audio
translation from Turkish to Arabic and Arabic to Turkish.
In addition to the features of the application allowing
access to critical information that facilitates daily
life, there are also location-based services that help
to register, access healthcare services and locate the
closest service points. Users can call Turkcell’s Arabic
Call Center with one touch through the application.
WITH TURKCELL ACADEMY CORPORATE, WE
BECOME THE EDUCATION BUSINESS PARTNER OF
CORPORATES.
We offer end-to-end services for our corporate
customers with online trainings, which enable our own
employees’ development path to be more efficient
through Turkcell Academy Corporate launched in 2015.
With new generation learning methods and education
consultancy services, we help to develop close to
100,000 employees from companies of diverse dynamics
and operating in sectors ranging from retail, health, and
technology, to finance, food, services, and energy, across
Turkey and around the world. We contribute to the more
efficient development of those institutions’ ecosystems
and way of doing business.
Employees can utilize the training sessions anytime,
anywhere and are evaluated through the examination
system, having access to the most up-to-date and
accurate information through the Turkcell Academy
education infrastructure.
WE ARE BUILDING ON OUR GLOBAL SUCCESS WITH
NEW AWARDS.
Turkcell Academy, which has won more than 35
prestigious international awards, was also awarded three
prizes in 2016 at the Brandon Hall Group Excellence
in Learning Awards with its training and development
projects prepared for “4.5G” and “Convergence”. Indeed,
Turkcell Academy, annually the recipient of prizes at the
awards organization held by Brandon Hall, one of the
most prestigious consulting companies in the world, has
added further achievement to its global success. This
year, Turkcell Academy received awards in the categories
of “Best Sales Training and Performance Program”, “Best
Business Strategy Transformation Support Program”
and “Best Creative and Extensive Education Initiative
Program”.
Turkcell Academy has won 3 prizes at Brandon Hall
HCM Excellence in Technology Awards with the Turkcell
Academy Corporate Education Management Platform,
My Academy Mobile Application and Turkcell Service
Sales Model Simulation. Turkcell’s success was registered
in the “Best Development in Education Management
Technologies” category, with the Turkcell Academy
Corporate; at the “Best Mobile Education Technology”
category, with My Academy Mobile Application; and at
the “Gaming and Simulation Applications” category, with
the Turkcell Service Sales Model Simulation.
1.2 million
Having been downloaded
by more than 1.2 million
users, the Digital Academy
has quickly become an
important source for
individuals and institutions,
with its rich content.
Since the foundation of
Turkcell Academy, we have
undersigned leading mobile
applications in education
within the scope of our
social responsibility.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 74
TURKCELL ANNUAL REPORT 2016
INTERNATIONAL SUBSIDIARIES
By the end of 2016, lifecell had 3.3 million 3-month active 3G data
users, while its smartphone penetration was at 57% level.
12.4 million
100% owned by Turkcell,
the number of lifecell’s
3-month active subscribers
as of 2016 year end was 9.2
million, while the number of
registered subscribers was
realized at 12.4 million.
UKRAINE:
Established in February 2005 to provide mobile service in
Ukraine, lifecell covers 99% of Ukraine’s population and
95% of its land area. 100% owned by Turkcell, the number
of lifecell’s 3-month active subscribers as of 2016 year end
was 9.2 million, while the number of registered subscribers
was realized at 12.4 million.
Since January 2016, operating in Ukraine under a new
brand of lifecell, the Company has already launched
a number of new services and products. Among them
–BiP messenger that has gained the popularity with
young people as a convenient and attractive tool for
communication.
In summer lifecell launched absolutely new business
direction – terminal sales, offering its clients the most
popular smartphones models together with the bunch
of mobile services. In September the operator started to
promote smartphones sales with the launch of an own web
shop. Today it offers popular phones with free delivery
service throughout Ukraine.
lifecell acquired the most advantageous frequencies
range at the national tender, organized by the Ukrainian
Regulatory Government Committee in February 2015.
Enjoying this advantage, the support by the parent
Company and striving to provide innovative services of
the best quality, lifecell made a great contribution in 3G
development in Ukraine. By the end of 2016 the operator
was the leader in geographical 3G coverage and speed,
providing 3G+ technology on the territory, inhabited by
more than 25 million people. lifecell provides 3G services
in 24 regions of Ukraine (except the territory of the
Autonomous Republic of Crimea temporarily occupied by
Russia) and plans to deploy its 3G network in residential
areas with 10 thousand inhabitants within 6 years after the
moment of license acquisition.
As at the end of 2016, lifecell had 3.3 million 3 months
active 3G data users and a 57% smartphone penetration.
75
lifecell, enhancing its innovative and solicitous image,
arranged several big entertaining and educational
events for Ukrainians in 2016. Thus, at the end of May
all Kyiv citizens as well as the guests of the city got the
opportunity to enjoy a spectacular 3D Mapping Show,
telling about the inventions made by Ukrainians in
different times. On April 2016 within the socio-educational
program ‘lifecell universities’ the operator launched a
special laboratory for students of technical specialties
at the National Technical University “Igor Sikorsky Kyiv
Polytechnic Institute”. It became the first stage of the
project, the main idea of which is to provide the biggest
technical universities of Ukraine with modern telecom
equipment.
To support roaming customers lifecell has signed a
memorandum with the Ministry of Foreign Affairs in July.
As a result, the operator joined the programme to send SMS
to inform roaming customers of emergency situations in the
destination country, providing support with text messages
that contain contact information for Ukrainian embassies,
and opportunity to call Ukraine free.
At the end of August, 3 lifecell branded trucks started their
journey round Ukraine from Kyiv. And for about a month
they were bringing knowledge about 3G technology and
its possibilities to dwellers of small towns and inhabited
settlements.
In terms of new technologies development in August
lifecell has tested a new 4.5G network and became the
speed leader in this technology in test environment with
Huawei equipment reaching maximum download speeds of
1.5 Gbps/s thanks to five band aggregation.
BELARUS:
Belarusian Telecommunications Network (BeST) shares
were purchased by Turkcell in July 2008. Being the first
operator to launch 3G services in Belarus in November
2009, BeST increased its coverage to 99.6% (geographical
coverage 97.7%) as of 2016. BeST, which is the third
operator in the market with 1.6 million customers,
launched its 4G service in August 2016, on common LTE
infrastructure established by beCloud. BeST aims to offer
new mobile services to the Belarus market, in parallel
with Turkcell’s strategy of providing global services in the
days to come, while offering a wide commercial product
portfolio covering a diversity of data packages.
With growing subscriber base and device sales, BeST
has increased its revenues on local currency by 19.4% in
2016 to reach BYN 98.6 million. On the Turkish Lira basis,
revenues increased by 5.9% and realized as TRY 150
million.
NORTHERN CYPRUS:
Kuzey Kıbrıs Turkcell was established in 1999 as a 100%
Turkcell-owned affiliate. Having operated until 2007 as
part of a revenue-sharing agreement with the Northern
Cyprus Telecommunication Department, the Company
signed an 18-year GSM license contract in the same year.
And having begun to offer 3G products and services in
October 2008, Kuzey Kıbrıs Turkcell started the initial
studies of 4G technology in 2009 and ran tests in 2014. In
2016, it undersigned a first for Turkcell Group, in the TRNC
and in the world, by launching its new digital brand lifecell,
which exclusively operates via the internet.
Also in September lifecell began to support football in
Ukraine becoming the Technology Sponsor of the National
Football team and Premium-Sponsor of the football club
Dynamo Kyiv which is one of the most prominent and
popular football clubs in Ukraine.
The Company is the market leader in the TRNC with an
infrastructure covering 100% of the population, and
has a market share of 62% according to data from the
Information and Communication Technologies Authority as
of the third quarter of 2016.
In December lifecell CEO signed the Letter of Declaration
on cooperation in the framework of the development of 5G
in Ukraine with the Director of “Huawei Ukraine” and Head
of Ericsson in Ukraine. Signing of this Letters in Ukraine by
each of the partner companies has become an important
local result of a global Memorandum signed by Turkcell
with Ericsson and Huawei in 2015.
With annual revenue growth of 8.1% in local currency
terms by increasing data usage of 3G+, lifecell EBITDA
EBITDA margin was 28%. In Turkish Lira terms, lifecell’s
revenue rose 1.1% to TRY 571 million in 2016, due to
annual depreciation of the local currency.
Kuzey Kıbrıs Turkcell’s revenues rose by 3.8% to TRY 135.9
million in 2016.
GERMANY:
Turkcell Europe, which was established in Germany as a
Virtual Mobile Network Operator in 2010, continues to
operate through a “Marketing Partnership” agreement with
Telekom Deutschland Multibrand (TDM) signed on August
27, 2014. As per the new business model, the customers and
operations of Turkcell Europe were transferred to TDM on
January 15, 2015. The Turkcell Europe brand continues to
provide services to its subscribers in Germany.
99.6%
Being the first operator
to launch 3G services in
Belarus in November 2009,
BeST increased its coverage
to 99.6% (geographical
coverage 97.7%) as of 2016.
Kuzey Kıbrıs Turkcell
is the market leader
in the TRNC with an
infrastructure covering
100% of the population,
and has a market share
of 62% according to data
from the Information
and Communication
Technologies Authority as
of the third quarter of 2015.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 76
DOMESTIC SUBSIDIARIES
Global Tower, Turkey’s first and only independent tower
infrastructure company also operates in international markets such
as Ukraine, Belarus, TRNC, in addition to Turkey.
GLOBAL TOWER
SITE PORTFOLIO
Global Tower, Turkey’s first and only independent tower
infrastructure company also operates in international markets
such as Ukraine, Belarus, TRNC, in addition to Turkey. Global
Tower*, which is the 5th largest independent tower Company
in Europe in terms of the number of towers, is a 100%
subsidiary of Turkcell.
Global Tower has 5 main operational areas:
Rental services: “Leasing Services” capture the largest share
with 80% from Global Tower’s total revenues. The company
also offers its leasing services to Turcell Group and customers
outside Turkcell Group including mobile operators, internet
service providers (ISPs), radio and television broadcasters,
local and administrative agencies and network service
providers.
Build and sell services: Global Tower offers a variety of
turnkey, build and sell services such as field research and
acquisition, procurement, planning and installation.
Contract management services: The Company provides
land lease contract management services for areas owned by
Turkcell with no right to lease, as well as for certain rooftop
areas.
Maintenance services: Global Tower offers passive
infrastructure maintenance service for all the areas owned by
Turkcell.
Other: As part of its full range of services, Global Tower also
offers a variety of other services for its customers in Turkey,
including cogeneration energy solutions, energy transmission
line solutions and tower dismantling for the Turkcell Group.
Global Tower stands out in the sector with the following
strengths:
•
•
•
It is an international player in the growing
telecommunications industry, with high operational
leverage and strong cash flow.
It has a specified revenue stream defined with long
term contracts and with its strong, prestigious customer
portfolio.
It has the opportunity to focus on the main operational
area through low initial investment expenditure using the
infrastructure sharing model and outsourcing in operations.
10,140
TOTAL TOWERS
3,393
TURKEY
Owned
2,388
TURKEY
Operated/Sub-lease
2,213
TURKEY(1)
Contract Management
1,201
UKRAINE(2)
Owned
830
BELARUS(3)
Right of Use/Sub-lease
115
TRNC
Right of Way/Sub-lease
(*) Source: Tower Exchange
(1)Excluding rooftops and other,
(2) The number of Ukrainian towers includes mobile and indoor systems, and excludes non-operational towers in the Crimea.
(3) In Belarus, the right of use agreement has been signed for 767 out of 830 towers, which were evaluated for ownership, while
negotiations for the others are ongoing.
TURKCELL ANNUAL REPORT 2016 Global Tower recorded
TRY 162.3 million in
revenues and an EBITDA of
TRY 54.2 million in the first
six months of 2016. The
adjusted EBITDA margin
stood at 53.8% while the
adjusted free cash flow*
was realized at TRY 49.8
million.
12 thousand
With 14 locations in Turkey
and 4 locations in Ukraine,
Turkcell Global Bilgi
operates in 18 locations in
total as of the end of 2016
and provides employment to
approximately 12 thousand
people, with a table
capacity of 8 thousand.
2
0
1
6
O
P
E
R
A
T
I
O
N
S
•
It has an attractive dividend distribution policy with
the aim of distributing at least 75% of the annual
distributable net income as dividends.
• Organic growth is sustained through strong capital
structure, low indebtedness and solid balance sheet,
while inorganic growth opportunities are being evaluated
in a disciplined manner.
Global Tower recorded TRY 162.3 million in revenues and an
(cid:5)BIT(cid:4)A of T(cid:18)(cid:25) 5(cid:179).2 million in the (cid:206)rst si(cid:78) months of 20(cid:176)(cid:181).
The adjusted EBITDA margin stood at 53.8% while the
ad(cid:64)usted free cash (cid:207)ow(cid:154) was realized at T(cid:18)(cid:25) (cid:179)9.(cid:183) million.
* Adjusted figures are calculated on net revenues excluding pass-through
revenues.
T(cid:21)R(cid:11)C(cid:5)(cid:12)(cid:12) (cid:7)(cid:12)(cid:15)(cid:2)A(cid:12) (cid:2)İ(cid:12)(cid:7)İ
Turkcell Global Bilgi offers new generation creative
solutions in customer service by closely monitoring the
technological innovations in addition to its 17 years
customer experience. With this understanding, it delivers
special solutions for the needs of more than 60 companies,
including Turkcell.
With 14 locations in Turkey and 4 locations in Ukraine,
Turkcell Global Bilgi operates in 18 locations in total as of
the end of 2016 and provides employment to approximately
12 thousand people, with a table capacity of 8 thousand.
Turkcell (cid:7)lobal Bil(cid:61)i, which is ranked (cid:206)rst both in Turkey
and in Ukraine in terms of revenues in the call center
outsourcing market, is among the top 500 IT companies in
Turkey.
Turkcell (cid:7)lobal Bil(cid:61)i, which realized the (cid:206)rst technolo(cid:61)y
investment in the east of Turkey with the Erzurum Call
Center, is also the (cid:206)rst, and still the only Turkish call center
to serve abroad with its Ukrainian investment. With 7,000
women employees, the ratio of women employed in total at
Turkcell Global Bilgi is 61%.
Turkcell (cid:7)lobal Bil(cid:61)i has won (cid:206)rst prize in the cate(cid:61)ory
of “Best Customer Experience” at ContactCenterWorld’s
“2016 Top Ranking Performers” awards, which is among
the world’s largest organizations of the call center industry.
To(cid:61)ether with this prize, Turkcell (cid:7)lobal Bil(cid:61)i has won (cid:206)rst
place in the world 9 times in total in different categories of
the same awards over the past eight years.
Turkey’s Customer Experience Solutions Center, Turkcell
Global Bilgi, creates value for companies with its services
that range from customer satisfaction management
to revenue growth. Turkcell Global Bilgi manages
communication with the end consumer from many channels
such as face-to-face service, telephone, audio and video
response systems, e-mail, SMS, web chat and the next
generation customer experience platform BiP. It also
develops tailor-made solutions for its customers through its
design team, which handles customer services end-to-end
to create a unique customer experience.
TURKCELL ANNUAL REPORT 2016
77
T(cid:21)R(cid:11)C(cid:5)(cid:12)(cid:12) (cid:6)İNANSMAN
(CONSUMER FINANCE COMPANY)
Turkcell (cid:6)inansman A.(cid:217). received its operational permit
from the Banking Regulation and Supervision Agency in
March 2016 and started to serve in approximately 3,000
Turkcell stores throughout Turkey with Financell brand, by
carryin(cid:61) Turkcell (cid:71)uality to the (cid:206)nance sector to provide
(cid:207)e(cid:78)ible payment solutions to customers(cid:135) e(cid:71)uipment needs
throu(cid:61)h (cid:206)nancial loans.
Turkcell (cid:6)inansman A.(cid:217). has (cid:61)ranted appro(cid:78)imately T(cid:18)(cid:25)
3 billion in loans to around 2 million customers within
a short period of time and became one of the most
important players in the Turkish (cid:206)nancin(cid:61) sector with an
asset size of more than TRY 2.5 billion.
T(cid:21)R(cid:11)C(cid:5)(cid:12)(cid:12) (cid:47)(cid:4)(cid:5)M(cid:5) Hİ(cid:26)M(cid:5)T(cid:12)(cid:5)Rİ
(PAYMENT SERVICES COMPANY) - PAYCELL
Established at the beginning of 2015, Turkcell Ödeme
(cid:8)izmetleri A.(cid:217).* operates as the (cid:206)rst licensed operator
subsidiary of Turkcell in the area of mobile payment with
a payment institution license obtained from the Banking
Regulation and Supervision Agency on August 12, 2016.
Turkcell (cid:47)deme (cid:8)izmetleri A.(cid:217). aims to continue addin(cid:61)
value through alternative payment solutions in Turkey
and its region by expanding its product and customer
portfolio, which provides quick and easy payment services
to over 2,000 member merchants and over 5 million
customers with its Paycell brand.
T(cid:21)R(cid:11)C(cid:5)(cid:12)(cid:12) T(cid:5)(cid:11)N(cid:15)(cid:12)(cid:15)(cid:10)İ
Turkcell Teknoloji is conducting its R&D and innovation
activities in Küçükyalı Teknolo(cid:64)i Plaza with over (cid:182)00 (cid:18)(cid:111)(cid:4)
personnel, as one of Turkey’s largest R&D centers serving
from one location.
In addition to Turkcell (cid:7)roup(cid:126) this center, which carries out
its product and service development processes end-to-end
under a single structure, delivers services to 15 countries
with diverse products, services and infrastructures.
The Company’s focus areas are as follows: Big Data
Processing, Business Intelligence Applications, Customer
Relations Management and Solutions, Network
Management Solutions, Location Based Technologies,
Next Generation Value Added Services, SIM Technologies,
Mobile Financial Systems, Music and Entertainment
Services, IP TV Services, Revenue Management
Competencies, Cloud Computing, Terminal Applications,
Mobile Marketing Solutions, Internet of Things (IoT),
Campaign Management Systems.
(cid:154) As at 20 (cid:6)ebruary 20(cid:176)(cid:182) the trade name of Turkcell (cid:47)deme (cid:8)izmetleri A.(cid:217).
has chan(cid:61)ed as Turkcell (cid:47)deme ve (cid:5)lektronik Para (cid:8)izmetleri A.(cid:217).
78
DOMESTIC SUBSIDIARIES
Turkcell Teknoloji continues to maintain its technology and software
export activities in the Commonwealth of Independent States, the Middle
East, Africa and Europe. Sales and maintenance after sales operations are
carried out with 24 products abroad.
involved in these processes, is also a part of this strategy.
In this context, a joint graduate/doctorate program in
association with the Özyeğin University is initiated within
the Company every year since 2013, and students are
accepted. Through this program, where the courses take
place at the Turkcell Teknoloji R&D Center, academic
research and the adoption of research results within
Turkcell Teknoloji itself, are encouraged.
Turkcell Teknoloji continues its university level
cooperation in line with the Strategic Focus Areas
determined at the beginning of 2016. Through new
university cooperation, information regarding universities’
research focus areas, postgraduate programs, research
laboratories and primary research topics, research project
portfolios and their involvement in incentive projects is
being obtained and new project applications realized.
İNTELTEK
İnteltek (owned 55% by Turktell, 20% by Intralot
SA, and 25% by Intralot Iberia Holding SA) conducts
Head Agency, Central System Administration and Risk
Management operations within Turkey’s Sports Betting
Administration, through an exclusive contract signed with
Spor Toto Teşkilat Başkanlığı (“Spor Toto”).
İnteltek is one of the world’s largest operators in the
state-controlled betting games sector with its “iddaa”
game and brand. The added value of “iddaa” in terms
of tax and public contribution to the Turkish economy
exceeded TRY 3.5 billion in 2016.
İnteltek has been successfully operating in the same field
in Azerbaijan through its 51% subsidiary “Azerinteltek”
and “Topaz” brand.
Turkcell Teknoloji maintains its technology activities in
abroad
Turkcell Teknoloji continues to maintain its technology
and software export activities in the Commonwealth
of Independent States, the Middle East, Africa and
Europe. Sales and maintenance after sales operations are
carried out with 24 products abroad. Both designed and
developed by Turkcell Technology, RoamSelect is used
in 10 countries, SimSelect in 7 countries and Campaign
Management System (CMS) in 6 countries.
Turkcell Teknoloji aims to be a pioneering technology
company on a global scale with its national and
international patent applications. The patent application
process is a significant contributor for Turkcell
Teknoloji services and products to make a difference,
be competitive, and have the export potential. The
Company continues to work intensively for increasing the
awareness of the process, and shares this experience with
the universities, SMEs and other business partners. With
513 national and 56 international patent applications
filed since 2008, Turkcell Teknoloji is the leader of the
telecommunications sector in Turkey. Turkcell Technology,
which ranked second in patent applications in 2015, aims
to maintain its leadership of its sector in the long term.
Carrying out its R&D activities on the EUREKA platform
within the context of its international business
partnerships, Turkcell Teknoloji continues to actively
participate in H2020 events and work on new project
applications. Turkcell Teknoloji has been investing much
effort into its responsibility as a Board of Directors
member at the ITEA3 and CELTIC+ league and in bringing
SMEs within its ecosystem into to the international
platform with the support of TUBITAK. The experience
gained through joint participation in ITEA projects
continues with international leadership in various projects
during the operational period, while other Turkish
companies in the national innovation ecosystem are also
being encouraged to participate in international business
partnership platforms.
Turkcell Teknoloji has “human” oriented R&D and
innovation strategies. Giving academic development
opportunities to Turkcell Teknoloji researchers who are
513
With 513 national and
56 international patent
applications filed since
2008, Turkcell Teknoloji
is the leader of the
telecommunications sector
in Turkey.
Turkcell Teknoloji continues
its university level
cooperation in line with
the Strategic Focus Areas
determined at the beginning
of 2016.
TURKCELL ANNUAL REPORT 2016 AWARDS
79
Our Awards;
• Gold Mixx in the Rich Media Display Advertising Category
with Turkcell TV+ “Travel in Time”
• Gold Mixx at the IAB MIXX Awards, one of the world’s most
prestigious competitions, in the Location Based Advertising
Category with Turkcell Connect “Internet on Offline Mode”
• Silver Mixx in the Native Advertising Category with Turkcell
TV+ “Travel in Time”
• Silver Mixx in the Mobile Brand Destination Sites and Micro
Sites Category with Turkcell Connect “Internet on Offline
Mode”
• Silver Mixx in the Interactive Out of Home Category with
Turkcell Connect “Internet on Offline Mode”
• Bronze Mixx in the Mobile Campaigns Category with
Gnçtrkcll “We have to Talk”
MARCH
The Stevie Awards
We won silver in the “Innovation in Customer Service -
Telecommunication Industries” category at the Stevie Awards,
one of the world’s key awards in the field of customer
experience with “Out of the Box Super Heroic Stories” initiated
at Turkcell Superonline.
APRIL
JANUARY
Mobile Excellence Awards
The winners of the Mobile Excellence Awards, which has been
organized for the 8th time this year, were announced at CES 2016.
Our Turkcell Connect project has won the major prize in the “Best
International Category”.
We have won the first
prize with the My
Dream Companion Audio
Description service at the
Global Mobile Awards,
organized within the GSMA
Mobile World Congress, and
recognized as the Oscar of
the mobile world.
Webrazzi Awards
Our Company has been chosen as the “Best Social Media User
Brand” by Webrazzi readers.
5th Turkish Patent Awards
Turkcell has become the second best in Turkish patent league
in 5th Turkish Patent Awards, which has organized by Turkish
Patent Institute.
European Business Awards
Turkcell Academy has become the country champion in the
“Customer Focus” category at the European Business Awards,
and was authorized to represent our Company for the “Ruban
d’Honneur” prize, for which all European winners will be
competing.
Most Admired Companies of Capital Turkey
We were selected as the most admired company in Turkey in
the telecom sector with the votes of 1,600 executives from over
700 companies in “Turkey’s Most Admired Companies” research
conducted by Capital Magazine. Our Company was named the
second most admired company in Turkey in the general ranking.
AI Deal of the Year Awards
Our Company’s acquisition of Euroasia Telecommunications has
been selected as “The Netherlands TMT Deal of the Year” in the
telecommunications, media and technology (TMT) sector in the
Netherlands.
FEBRUARY
Global Mobile Awards
We have won the first prize with the My Dream Companion Audio
Description service at the Global Mobile Awards, organized within
the GSMA Mobile World Congress, and recognized as the Oscar
of the mobile world. The award, in the “Best Use of Mobile for
Accessibility and Inclusion” category, was received by our CEO
Kaan Terzioğlu on behalf of our Company.
Mixx Awards
Our Company has received 2 Golden, 3 Silver and 2 Bronze Mixx
Awards at Mixx Awards Turkey.
MAY
Turkey Youth Awards
Our CEO Mr. Kaan Terzioğlu has been named “CEO of the Year”
at the Turkey Youth Awards organized by the MCD Youth Club,
the MCD Youth Agency and the World Youth Policy Association.
Effie Turkey
We won the Bronze prize in the Internet/Telecom category with
Turkcell Superonline’s My Super Home Campaign.
A.L.F.A. Awards
We have been ranked first in the “Communication” category
within the context of the A.L.F.A. awards organized in
association with Marketing Türkiye and Şikayetvar.com. A.L.F.A.
Awards, Turkey’s first experience management index, reward
brands that best manage the complaint process.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 80
AWARDS
1.2 Gbps
Turkcell Finansman A.Ş.
received the “Innovation in
Customer Services” award
and the 1.2 Gbps speed
test, conducted by Turkcell,
received the “Mobile
Infrastructure Innovation”
award for 5 Carrier
Aggregation Technology.
JULY
LACP Vision Awards
Our company was deemed worthy of the Silver Prize in the
Annual Report Competition within the context of LACP 2015
Vision Awards.
SEPTEMBER
Brandon Hall
As Turkcell Academy, our Convergence and 4.5G Development
Programs have been granted excellence awards by Brandon Hall,
one of the most prestigious consulting companies in the world.
We have received prizes with the Convergence Development
Program in the field of the “Best Learning Program Supporting
a Change Transformation Business Strategy”, and with 4.5G
Development Program in the field of “Best Advance in Creating
an Extended Enterprise Learning Program”.
Lovie Awards
We won a prize in the “Digital Campaign” category at the Lovie
Awards with the Letters to Gallipoli project.
OCTOBER
Turkey Reputation Index Survey
As Turkcell, we have been the most prestigious brand of our
country in the GSM sector in the Turkey Reputation Index
Survey conducted by the Turkey Reputation Academy for the
fifth time.
Crystal Apple
As Turkcell, we have been granted 9 prizes at the Crystal
Awards, which is one of the most important organizations in the
field of advertising in Turkey. These prizes are as follows:
fizy
• Creative/Innovative Use of the Social Media Platform –
Crystal Apple
• Digital Advertising/Use of Medium Which Break Taboos –
Bronze Apple
• Use of Media/Use of Web – Bronze Apple
• Use of Media/Most Innovative Technology – Use of Digital
Media – Bronze Apple
Turkcell TV+
• Radio Service – Crystal Apple
• Radio Campaign – Silver Apple
• Technology Services – Bronze Apple
GTB Telecoms Innovation Awards
Both of our nominees, who advanced to the final, were deemed
worthy of prizes at the Telecoms Innovation Awards 2016
organized by Global Telecoms Business. Turkcell Finansman A.Ş.
received the “Innovation in Customer Services” award and the
1.2 Gbps speed test, conducted by Turkcell, received the “Mobile
Infrastructure Innovation” award for 5 Carrier Aggregation
Technology.
Turkish Public Relations Association (“TÜHİD”) Golden Compass
Awards
Our Company has received the “Sponsorship Communication”
award at the 15th Golden Compass Turkish Public Relations
Awards, organized by TÜHİD. We have received the Sports
Sponsorship award for our sponsorships of the Visually Impaired
Football National Team and the League of Those Who See the
Voice, as well as communication studies realized for the projects.
JUNE
EMEA Finance Awards
At the EMEA Finance Achievement Awards organized by EMEA
Finance Magazine, we received the “Best Corporate Bond in
EMEA” award for our Eurobond issuance.
Ekovitrin Stars of the Year Awards
Our CEO Mr. Kaan Terzioğlu has been named “CEO of the Year”
at the Stars of the Year Awards, organized for the 15th time by
Ekovitrin, the international monthly economy and business world
magazine.
The Loyalty Magazine Awards
Our Company picked up the “Organization of the Year” prize at
the Loyalty Magazine Awards; the organization is recognized as
the most important in the EMEA region in the field of customer
loyalty. Having advanced to the final in 12 categories, Turkcell
has been awarded in the “Best Use of Gamification to Enhance
Loyalty” category for the GNÇ application, and the “Best User
Experience” category for the Turkcell Platinum Application“.
Additionally, Turkcell Transformer Security Service (Turkcell
Trafom Güvende) has received the “Gamechanger of the Year”
award.
TURKCELL ANNUAL REPORT 2016 81
Felis Awards
As Turkcell, we have won the first prize in four categories and
received two achievement awards within the scope of Felis
Awards this year. “Turkcell My Dream
Companion” has won the first prize in three categories: (Media
Category: Target Audience - Special Target Mass, Masses; Media
Category, Sectoral: Communication – Telecommunication;
Health Communication and Good Life Categories: Best
Corporate Social Responsibility Campaign), and “What a
Beautiful Thing Football Is!” won the first prize in a category:
(Media Category, Medium: New Technology).
DECEMBER
Meffys
The Turkcell My Dream Companion was deemed worthy of the
major prize in the “Innovation in Social Impact” category, at the
13th Meffys organized by the Mobile Ecosystem Forum.
The Turkcell My Dream
Companion was deemed
worthy of the major prize
in the “Innovation in Social
Impact” category, at the 13th
Meffys organized by the
Mobile Ecosystem Forum.
Letters to Gallipoli
• Most Creative Social Responsibility Campaign – Silver Apple
European Excellence Awards
We have been awarded for “Letters to Gallipoli” in the Turkey
category at the European Excellence Awards.
BiP
• Technology Service Film – Silver Apple
Digital Impact Awards
Letters to Gallipoli were deemed worthy of awards in three
separate categories within the scope of the Digital Impact
Awards. We received the bronze awards in the “Best Corporate
Viral Campaign”, “Best Online Video Usage” and “Technology,
Media & Telecommunication” categories.
NOVEMBER
MMA Smarties
We have been awarded the Silver prize in the “Brand
Awareness”, and Bronze prize in the “Innovation” with the
Dialogue Museum at the MMA Smarties Turkey, organized
for the third time. Additionally, the “What a Beautiful Thing
Football Is!” project has been deemed worthy of the Bronze
prize in the “Mobile Web Site” category. And at the MMA
Smarties EMEA, organized on November 22; the “Dialogue
Museum” received the Gold prize in the “Brand Awareness”
category, and “What a Beautiful Thing Football Is!” received the
Bronze prize in the “Mobile Web Site” category.
IPRA Golden World Awards
We have won the big prize with our “Visually Impaired Football
National Team” and the “League of Ones Who See the Voice”
sponsorships, in the sponsorship category at the Golden World
Awards organized by IPRA.
ContactCenterWorld
Turkcell Global Bilgi has been ranked the first in the
world in the “Best Customer Experience” category at the
ContactCenterWorld’s “2016 Top Ranking Performers” awards.
InovaLİG 2016 Awards
As Turkcell, we ranked third in the “Innovation Resources”
category at InovaLIG 2016 organized in association with
the Turkish Exporters Assembly (“TİM”) and international
management consultancy firm A.T. Kearney. Our Company has
also received the Technology Development Special Prize at the
Turkey Innovation Week organized at the same time by TİM.
Capital 500
Turkcell has ranked second in the category of “The Most
Profitable Companies” in the “Top 500 Private Companies
Survey of Turkey” conducted by Capital magazine. The
companies were evaluated in terms of revenue, profitability,
export and employment figures, and given 24 awards in
8 categories during the survey, which was conducted for the
19th time.
Bosphorus IT Awards
As Turkcell, we have been named the “Best Mobile Operator”
through ballot and jury evaluation, at the Bosphorus Information
Technologies Awards organized by Bosphorus IT Club (Compec).
Turkcell Superonline has been named “Best Internet Provider” in
the same organization.
Brandon Hall HCM Excellence in Technology Awards
Turkcell Academy has been deemed worthy of three separate
prizes within the scope of the Turkcell Academy Corporate
Education Management Platform, My Academy Mobile
Application and Turkcell Service Sales Model Simulation at the
Brandon Hall HCM Excellence in Technology Awards. Turkcell’s
success was registered in the “Best Advance in Learning
Management Technology” category, with Turkcell Academy
Corporate; in the “Best Advance in Mobile Learning Technology”
category, with the My Academy Mobile Application; and in the
“Best Advance in Gaming and Simulation Technology” category,
with the Turkcell Service Sales Model Simulation.
2016 OPERATIONSTURKCELL ANNUAL REPORT 2016 82
INVESTOR RELATIONS
Having a market capitalization value of TRY 21.5 billion (USD 5.90
billion) as of December 31, 2016; Turkcell, the only Turkish company
listed on both BIST and the NYSE, has become the 6th largest among the
companies trading on BIST.
SHARE PERFORMANCE
Turkcell is the only Turkish company listed on the BIST and NYSE. Its
Eurobond issued this year trades at the Irish Stock Exchange. Turkcell shares
commenced trading simultaneously at the Borsa Istanbul (BIST) and the
New York Stock Exchange (NYSE) on July 11, 2000. Shares are traded as
American Depositary Shares (ADS) at the BIST under the TCELL ticker, and
at the NYSE under the TKC ticker. Two ADSs represent five shares. Turkcell’s
Eurobond issued in 2015 trades at the Irish Stock Exchange.
Turkcell’s issued capital has a nominal value of TRY 2.2 billion, including
2.2 billion shares, each with a nominal value of TRY 1. Having a market
capitalization value of TRY 21.5 billion (USD 5.90 billion) as of December 31,
2016; Turkcell, the only Turkish company listed on both BIST and the NYSE,
has become the 6th largest among the companies trading on BIST.
The size of Turkcell’s American Depositary Receipts as of year-end 2016 is
60.2 million.
On October 16, 2015, Turkcell issued bonds of an aggregate principal amount
of USD 500 million with a 10 year maturity and coupon rate of 5.75% based
on a 5.95% re-offer yield, to be traded on the Irish Stock Exchange.
Our Company’s Board of Directors has decided to execute share buyback
transactions and purchase our Company’s bonds in an attempt to protect
our investors against any instability perception that may arise in the short
and medium term; subsequent to the events on, and after July 15, 2016,
and due to the potentially negative reflection of global macroeconomic
volatility on Turkey. Accordingly, within the framework of the Capital
Markets Board’s announcements dated July 21, 2016 and July 25, 2016, the
Board of Directors has resolved that the maximum fund amount set aside
for share and bond buyback would be TRY 150 million and the maximum
number of shares and bonds to be bought back should be determined not
to exceed this amount. Within this context, a total of 6,815,563 shares (in
exchange for TRY 65.6 million in total), and bonds of a USD 18,000,000
nominal value, were bought back in 2016.
Turkcell’s institutional investors constitute 79.7% of the shareholder base.
Additionally, 49.7% of Turkcell’s institutional investors are located in North
America, 32.7% in the UK and Ireland, and 11.8% in Europe (including
Turkey). While 49.7% of the institutional investors are “Value” focused
investors, more than 90% of institutional investors have been investing in
Turkcell for more than a year. (Source: IPREO, January 2017)
Share Information*
TCELL (TRY)
Lowest
Highest
Closing
TKC (USD)
Lowest
Highest
Closing
Stock Exchange Symbols
Country
Share
ADR
Bond
*Share prices are adjusted for dividend payments. (Source: Bloomberg)
2012
7.03
10.07
10.03
2012
9.41
14.02
14.02
2013
8.86
11.07
9.86
2013
11.25
15.43
11.60
2014
9.36
12.81
12.42
2014
10.48
14.42
13.13
2015
9.90
13.55
9.90
2015
8.38
14.35
8.49
Stock Exchange
Borsa Istanbul
NYSE
Irish Stock Exchange
ISIN: XS1298711729
2016
8.89
12.45
9.75
2016
6.35
10.87
6.90
Ticker
TCELL
TKC
TURKCELL ANNUAL REPORT 2016 SHARE PERFORMANCE (RELATIVE) 2016
BIST100
TURKCELL
Analyst Recommedations
TURKCELL ANNUAL REPORT 2016
83
1,30
1,25
1,20
1,15
1,10
1,05
1,00
0,95
0,90
56% hold
36% buy
8% sell
6
1
0
2
.
1
0
6
1
0
2
.
2
0
6
1
0
2
.
3
0
6
1
0
2
.
4
0
6
1
0
2
.
5
0
6
1
0
2
.
6
0
6
1
0
2
.
7
0
6
1
0
2
.
8
0
6
1
0
2
.
9
0
6
1
0
2
.
0
1
6
1
0
2
.
1
1
6
1
0
2
.
2
1
Source: Bloomberg
OUR BUSINESS PRINCIPLES
We adopt corporate governance principles.
The basic work policies adopted by the Turkcell Investor Relations Department
include accessibility, rapid feedback to stakeholders and analysts, and the perpetual
informing of stakeholders transparently, consistently and in a timely fashion.
Accordingly, we disclose information to all investors through our user-friendly,
up-to-date website, Investor Relations Application (IR App) and Twitter on a timely
basis.
Investor Relations team members have a deep and active understanding of the
Company and sector dynamics, and are able to clearly communicate the Company’s
story. The Turkcell Investor Relations team has an accurate knowledge and a grasp
of its Company’s strategies, while analyzing the business model and opportunities,
and makes a difference by effectively communicating these strategies to investors.
The inquiries and requests of investors and analysts are met rapidly and accurately
within the framework of related legislation. As the Investor Relations Department,
throughout 2016, we:
• held 271 meetings with analysts and institutional investment funds,
• held 27 investors meeting at the headquarters,
• participated in 13 conferences,
• (cid:23)e shared our (cid:206)nancial results in (cid:179) teleconferences durin(cid:61) the year,
• Over 1,000 phone and email requests were received throughout the year, and we
responded to all of them.
The main topics of questions most frequently asked to the Investor Relations
in 2016
• 4.5G and its effects
• Our mobile and (cid:206)(cid:78)ed conver(cid:61)ence strate(cid:61)y
• Turkcell TV+ and content management
• Our global services
• Share performance and dividend
• Turkcell (cid:6)inance Company and its bene(cid:206)ts
• Merger and acquisitions and IPO
• Joint Venture Fiber Infrastructure Company
• Shareholder structure
36 analysts, almost half of who are from foreign companies, actively cover Turkcell.
As of the end of 2015, there were 13 analysts with “buy”, 20 analysts with “hold”,
and 3 analysts with “sell” recommendations.
We work to provide the maximum benefit to Turkcell and our stakeholders.
As Turkcell Investor Relations, our primary goal is to increase the market
capitalization of our company and the trading volume of Turkcell’s shares. Within
this conte(cid:78)t, our tar(cid:61)et is to develop and deepen Turkcell(cid:135)s investor pro(cid:206)le, and
increase the weight and number of long-term investors in the institutional investor
base.
On the other hand, investor relations standards are shaped by the constantly
developing and intensifying needs of the capital markets. The implementation
of any practice that carries a publicly-traded company one step further creates
a strategically valuable differentiation between companies and, ultimately,
contributes to the Turkish Capital Markets.
Our focus is on creating value for our stakeholders.
Our aim is to transparently share the value created by Turkcell with our
stakeholders, be it throu(cid:61)h (cid:206)nancial and operational performance, strate(cid:61)ic
priorities, or via our strong reputation and powerful brand management, always
ensuring that the company is well understood.
We make a difference with our communication.
Turkcell believes in simultaneous and open communication with its stakeholders.
As Turkcell Investor Relations, we use social media tools such as Twitter and the
Investor Relations application as well as communication channels such as the
web site and Public Disclosure Platform to provide extensive, accurate and timely
information to our investors. With the Turkcell IR App, our investors and analysts
can follow the most recent announcements, (cid:71)uarterly (cid:206)nancial results, press
releases, operational results, presentations and annual reports in both Turkish and
English on iOS and Android based smartphones and tablets, at any time and from
any location.
We care about sustainability.
In 2014, Borsa Istanbul launched the Sustainability Index. This index indicates each
company(cid:135)s approach to si(cid:61)ni(cid:206)cant sustainability-related issues important for both
Turkey and the wider world, including global warming, the depletion of natural
resources, including water, as well as healthcare, safety, and employment. In
total, the index enables companies’ activities and decisions to be assessed from an
independent perspective, and then be con(cid:206)rmed by Borsa Istanbul. In the third year
of the Sustainability Index comprising November 2016 - October 2017, Turkcell, one
of the 43 companies in the index, has remained on it since its inception.
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
84
CREDIT RATINGS
The clearest sign of the improvement in balance sheet structure and
international market’s confidence in Turkcell is the “investment grade”
ratings Turkcell has maintained from three leading international credit
rating agencies in 2016.
The clearest sign of a balanced improvement in balance sheet structure and international market confidence in Turkcell is the “investment grade” level
ratings Turkcell has continued to receive ratings from three leading international credit rating agencies. Turkcell was also the only Turkish company to
receive “investment grade” from 3 institutions. As a reflection of the company’s rating, Turkcell Bonds are also evaluated at the “investment grade” level by
all three rating institutions.
Last Update
Local Currency
LT Foreign Currency
S&P
Moody’s
Fitch
Outlook
Grade
Outlook
Grade
Outlook
Grade
November 2016
September 2016
August 2016
Stable
Stable
BBB-
BBB-
Stable
Stable
Baa3
Baa3
Negative
Negative
BBB-
BBB-
INVESTOR RELATIONS CONTACT INFORMATION
Tel
Fax
E-mail
Web
Address
: +90 (212) 313 18 88,
: +90 (216) 504 40 58,
: investor.relations@turkcell.com.tr
: http://www.turkcell.com.tr/en/aboutus/investor-relations
: Turkcell Küçükyalı Plaza, Aydınevler Mahallesi İnönü Caddesi No:20 B Blok Küçükyalı Ofispark, 34854 - Maltepe / ISTANBUL
TURKCELL ANNUAL REPORT 2016 TURKCELL ANNUAL REPORT 2016
85
IMPORTANT DEVELOPMENTS AFTER THE REPORTING PERIOD
JANUARY 2, 2017
Announcement Regarding the Share Buy-back Transactions
Within the scope of our Board of Directors’ share buy-back decision on July 27, 2016, our company purchased a total of 2,159,500 shares at a price range of
TRY 9.48 – 9.75 totaling TRY 20,871,994 on December 30, 2016. With this transaction, our ratio of shares in company capital has reached 0.310%.
The details of the transaction are listed below.
Transaction
Date
Type of
Transaction
Nominal Value
of Shares
Subject to
Transaction
(TRY)
Transaction
Price (TRY/
Unit)
Transaction
Value (TRY)
Nominal Value
of Shares
Owned before
Transaction
(TRY)
Ratio of
Shares Owned
in Company
Capital before
Transaction
(TRY)
Nominal Value
of Shares
Owned after
Transaction
(TRY)
Ratio of
Shares Owned
in Company
Capital after
Transaction
(TRY)
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
30.12.2016
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
82
40,699
50,465
91,500
31,824
45,000
45,758
63,215
102,496
16,000
9,390
81,259
179,373
36,350
13,500
20,082
58,690
77,713
56,787
35,934
186,574
108,100
808,709
9.48
9.49
9.5
9.51
9.52
9.53
9.54
9.56
9.57
9.58
9.59
9.6
9.61
9.63
9.64
9.65
9.66
9.67
9.68
9.69
9.7
9.71
9.75
777
386,234
479,418
870,165
302,964
428,850
436,531
604,335
980,887
153,280
90,050
780,086
1,723,775
350,051
130,140
193,791
566,945
751,485
549,698
348,200
1,809,768
1,049,651
7,884,913
4,656,063
4,656,145
4,696,844
4,747,309
4,838,809
4,870,633
4,915,633
4,961,391
5,024,606
5,127,102
5,143,102
5,152,492
5,233,751
5,413,124
5,449,474
5,462,974
5,483,056
5,541,746
5,619,459
5,676,246
5,712,180
5,898,754
6,006,854
0.212%
0.212%
0.213%
0.216%
0.220%
0.221%
0.223%
0.226%
0.228%
0.233%
0.234%
0.234%
0.238%
0.246%
0.248%
0.248%
0.249%
0.252%
0.255%
0.258%
0.260%
0.268%
0.273%
4,656,145
4,696,844
4,747,309
4,838,809
4,870,633
4,915,633
4,961,391
5,024,606
5,127,102
5,143,102
5,152,492
5,233,751
5,413,124
5,449,474
5,462,974
5,483,056
5,541,746
5,619,459
5,676,246
5,712,180
5,898,754
6,006,854
6,815,563
0.212%
0.213%
0.216%
0.220%
0.221%
0.223%
0.226%
0.228%
0.233%
0.234%
0.234%
0.238%
0.246%
0.248%
0.248%
0.249%
0.252%
0.255%
0.258%
0.260%
0.268%
0.273%
0.310%
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IMPORTANT DEVELOPMENTS AFTER THE REPORTING PERIOD
JANUARY 2, 2017
JANUARY 30, 2017
Announcement Regarding the Merger of Our Affiliates through Acquisition
Announcement Regarding the Board of Directors’ Resolution on Annual
General Assembly
Pursuant to our announcement dated 25.11.2015, merger of our affiliates,
Lifecell Ventures Coöperatief U.A. (formerly known as Beltur Coöperatief
U.A., “Lifecell Ventures”) and Euroasia Telecommunications Holdings
Coöperatief U.A. (formerly known as Euroasia Telecommunications Holdings
B.V., “ETH”) has been completed through the acquisition of ETH by Lifecell
Ventures.
JANUARY 23, 2017
Announcement Regarding Investor Relations
Yesim Tohma, who held the Investor Relations Executive position, and
thus was a Corporate Governance Committee Member, has resigned
from her position. As per the Article 11 of the Communiqué II-17.1 on
Corporate Governance published by the Capital Markets Board of Turkey
(“Communiqué”); Emre Alpman, who holds the licenses which are set forth
in the Communiqué, has been appointed to her position. Contact details of
the Investor Relations responsibilities are stated below.
Zeynel Korhan Bilek
Investor Relations and Mergers&Acquisitions Director
e-mail: korhan.bilek@turkcell.com.tr
Tel: +90 212 313 1888
Emre Alpman
Capital Markets and Compliance Executive
e-mail: emre.alpman@turkcell.com.tr
Tel: +90 212 313 2222
Capital Market Activities Advanced Level License No: 203743
Corporate Governance Rating Specialist License No: 700292
JANUARY 24, 2017
Announcement Regarding Application to the CMB for the Issuance
Certificate of Asset-backed Securities
Aktif Yatırım Bankası A.Ş. Turkcell Asset Finance Fund, founded by Aktif
Yatırım Bankası A.Ş. and mandated to issue asset-backed securities with a
structure in which our Company’s 100% subsidiary Turkcell Finansman A.Ş.
will be the originator, has applied to the Capital Markets Board of Turkey
(“CMB”) for the issuance certificate of asset-backed securities with an
amount of up to TRY 100,000,000 within one year. Public disclosure will be
made by our Company once the asset transfer is completed.
Our Company’s Board of Directors has decided:
•
to call the Annual General Assembly Meeting of our Company
pertaining to the year of 2016 to convene on March 30, 2017 at 10:00
am at the address of “Aydınevler Mahallesi, İnönü Caddesi, No:20, C
Blok Conference Hall, Küçükyalı Ofispark, 34854, Maltepe/Istanbul”
and to discuss the attached agenda; and
•
to appoint PwC Bağımsız Denetim ve Serbest Muhasebeci Mali
Müşavirlik A.Ş as the independent audit firm to audit our Company’s
accounts and operations for the year 2017 in accordance with Capital
Markets Law, the Turkish Commercial Code, and related legislation and
to submit this decision to the approval of our shareholders during the
first Annual General Assembly Meeting of our Company.
TURKCELL İLETİŞİM HİZMETLERİ A.Ş. AGENDA OF THE ANNUAL
GENERAL ASSEMBLY MEETING FOR 2016
1- Opening and election of the Presidency Board;
2- Authorizing the Presidency Board to sign the minutes of the meeting;
3- Reading the annual report of the Board of Directors relating to fiscal
year 2016;
4- Reading the summary of the Independent Audit Firm’s report relating to
fiscal year 2016;
5- Reading, discussion and approval of the Turkish Commercial Code and
Capital Markets Board balance sheets and profits/loss statements
relating to fiscal year 2016;
6- Release of the Board Members individually from the activities and
7-
operations of the Company pertaining to the year 2016;
Informing the General Assembly on the donation and contributions
made in the fiscal year 2016; discussion of and decision on Board of
Directors’ proposal concerning determination of donation limit to be
made in 2017, starting from the fiscal year 2017;
8- Subject to the approval of the Ministry of Customs and Trade and
Capital Markets Board; discussion of and decision on the amendment of
Articles 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 24, 25 and
26 of the Articles of Association of the Company;
9- Election of new Board Members in accordance with related legislation
and determination of the newly elected Board Members’ term of office
if there will be any new election;
10- Determination of the remuneration of the Board Members;
11- Discussion of and approval of the election of the independent
audit firm appointed by the Board of Directors pursuant to Turkish
Commercial Code and the capital markets legislation for auditing of the
accounts and financials of the year 2017;
TURKCELL ANNUAL REPORT 2016 TURKCELL ANNUAL REPORT 2016
87
FEBRUARY 16, 2017
Announcement Regarding the Signing of The Contract to Purchase Services
to Add Mobile Broadband Services to the Existing GSM Infrastructure
Under Universal Service Law and to Operate the New and Existing
Networks Together
Our Company and the Ministry of Transport, Maritime Affairs and
Communications, Directorate General of Communications signed a contract
to continue the contract, signed on 20.02.2013 to establish and operate
mobile communication infrastructure and operation in uncovered areas,
(Phase 1) until 31.12.2018 and to add mobile broadband services to the
existing infrastructure providing GSM services under Universal Service Law
and to operate the new and existing networks together.
Mobile broadband services will be added to the existing infrastructure
established in accordance with Phase 1 in 1,799 rural locations. The new and
the existing infrastructure will be operated together.
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12- Decision permitting the Board Members to, directly or on behalf of
others, be active in areas falling within or outside the scope of the
Company’s operations and to participate in companies operating in the
same business and to perform other acts in compliance with Articles
395 and 39(cid:181) of the Turkish Commercial Code(cid:126)
13- Discussion of and decision on the distribution of dividend for the fiscal
year 20(cid:176)(cid:181) and determination of the dividend distribution date(cid:126)
14- Informing the shareholders regarding the guarantees, pledges and
mortgages provided by the Company to third parties or the derived
income thereof, in accordance with the Capital Markets Board
re(cid:61)ulations(cid:126)
15- Closing.
JANUARY 30, 2017
Announcement Regarding the Amendment of Articles of Association
Our Company’s Board of Directors has decided on necessary actions to be
taken to obtain the approval of the Capital Markets Board and the Ministry
of Customs and Trade, for amendment of the Articles of Association as
attached, in accordance with the principles of Capital Markets Law, the
Turkish Commercial Code, and related legislation. Amendment of Articles of
Association is subject to approval of the General Assembly.
JANUARY 30, 2017
Announcement Regarding the Board of Directors Resolution on Buy-Back
of Securities
Our Company’s Board of Directors authorized the management to execute
share buy-back transactions on July 27, 2016, within the scope of the
announcements dated July 21, 2016 and July 25, 2016 made by the Capital
Markets Board. The purpose was to protect our investors against potentially
negative reflections on Turkey that could arise due to the instability
perception in the short and medium term subsequent to the events on
and after July 15, 2016, and/or due to potential global macroeconomic
volatilities. In this context, it was resolved that the maximum fund amount
set aside for share buy-back would be TRY 150 million and the maximum
share number to be bought back would be determined so as not to exceed
this amount.
Our Company’s Board of Directors has decided to increase the above
mentioned fund amount to TRY 300 million in order to be utilized for
share buy-back, including our American Depositary Receipts (ADRs) being
traded at the (cid:14)ew (cid:25)ork (cid:19)tock (cid:5)(cid:78)chan(cid:61)e ((cid:14)(cid:25)(cid:19)(cid:5)) and bond buy-back(cid:126) and
to buy, sell and/or redeem at the price and level that the management will
determine, within the maximum fund amount set above.
88
IMPORTANT DEVELOPMENTS AFTER THE REPORTING PERIOD
FEBRUARY 17, 2017
Announcement Regarding the Registration and Announcement Application to Incorporate an Energy Company
Turktell Bilişim Servisleri A.Ş., our Company’s %100 subsidiary, will make the registration and announcement application to incorporate a company with an
initial capital of TRY 2,000,000 (TRY two million) in order to carry out activities with respect to electricity energy trade and wholesale and retail electricity
sale.
Board Decision Date for Acquisition:
Title of Non-current Financial Asset Acquired:
Field of Activity of Non-current Financial Asset whose Shares were being
Acquired:
Capital of Noncurrent Financial Asset:
Acquirement Way :
Date on which the Transaction was/will be Completed:
Acquisition Conditions:
Nominal Value of Shares Acquired:
Purchase Price Per Share:
Total Purchasing Value:
Ratio of New Shares Acquired to Capital of Non-current Financial Asset
(%):
Total Ratio of Shares Owned in Capital of Non-current Financial Asset After
Transaction (%):
Total Voting Right Ratio Owned in Non-current Financial Asset After
Transaction (%) :
Ratio of Non-current Financial Asset Acquired to Total Assets in Latest
Disclosed Financial Statements of Company (%):
Effects on Company Operations:
Did Takeover Bid Obligation Arised?:
Will Exemption Application be Made, if Takeover Bid Obligation Arised?:
Title/ Name-Surname of Counter Party:
Relation with Counter Party if any :
Value Determination Method of Non-current Financial Asset:
Did Valuation Report be Prepared?:
Reason for not Preparing Valuation Report if it was not Prepared:
Value Determined in Valuation Report if Exists:
Reasons if Transaction wasn’t/will not be performed in Accordance with
Valuation Report:
FEBRUARY 20, 2017
Announcement Regarding the Change in Organizational Structure
28.11.2016
-
Electricity energy trade, wholesale and retail electricity sale.
TRY 2,000,000
Incorporation
A license application to Energy Markets Regulatory Authority (“EMRA”) will
be made to obtain permission to operate following the completion of the
incorporation of a company by means of registration and announcement.
-
-
-
-
-
-
-
-
-
No
No
-
-
-
No
Not required by the legislation.
-
-
The titles of our Company’s Senior Vice Presidents have been changed to Executive Vice President, and their functional groups have been re-positioned so
as to report directly to the CEO as of March 1, 2017, to ensure a lean and more efficient management structure. Meanwhile, Banu İşçi Sezen, Senior Vice
President responsible for Turkcell Academy, will continue in her role as the General Manager of Turkcell Academy.
TURKCELL ANNUAL REPORT 2016 TURKCELL ANNUAL REPORT 2016
89
FEBRUARY 20, 2017
Announcement Regarding the Registration of the Incorporation of Turkcell Enerji Çözümleri ve Elektrik Satış Ticaret Anonim Şirketi
The incorporation of Turkcell (cid:5)ner(cid:64)i (cid:212)özümleri ve (cid:5)lektrik (cid:19)atı(cid:218) Ticaret Anonim (cid:217)irketi, whose field of activities are electricity ener(cid:61)y trade and wholesale
and retail electricity sales, has been registered. The registration application was announced on 17 February 2017.
Board Decision Date for Acquisition:
Title of Non-current Financial Asset Acquired:
Field of Activity of Non-current Financial Asset whose Shares were being
Acquired:
Capital of Noncurrent Financial Asset:
Acquirement Way :
Date on which the Transaction was/will be Completed:
Acquisition Conditions:
Nominal Value of Shares Acquired:
Purchase Price Per Share:
Total Purchasing Value:
Ratio of New Shares Acquired to Capital of Non-current Financial Asset (%):
Total Ratio of Shares Owned in Capital of Non-current Financial Asset After
Transaction (%):
Total Voting Right Ratio Owned in Non-current Financial Asset After
Transaction (%) :
Ratio of Non-current Financial Asset Acquired to Total Assets in Latest
Disclosed Financial Statements of Company (%):
Effects on Company Operations:
Did Takeover Bid Obligation Arised?:
Will Exemption Application be Made, if Takeover Bid Obligation Arised?:
Title/ Name-Surname of Counter Party:
Relation with Counter Party if any :
Value Determination Method of Non-current Financial Asset:
Did Valuation Report be Prepared?:
Reason for not Preparing Valuation Report if it was not Prepared:
Value Determined in Valuation Report if Exists:
Reasons if Transaction wasn’t/will not be performed in Accordance with
Valuation Report:
FEBRUARY 20, 2017
28.11.2016
Turkcell (cid:5)ner(cid:64)i (cid:212)özümleri ve (cid:5)lektrik (cid:19)atı(cid:218) Ticaret Anonim (cid:217)irketi
Electricity energy trade, wholesale and retail electricity sale.
TRY 2,000,000
Incorporation
Turkcell (cid:5)ner(cid:64)i (cid:212)özümleri ve (cid:5)lektrik (cid:19)atı(cid:218) Ticaret Anonim (cid:217)irketi has
been incorporated on 20.02.2017. A license application to EMRA will be
made in order to start operations.
-
-
-
-
-
-
-
-
-
No
No
-
-
-
No
Not required by the legislation.
-
-
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Announcement Regarding the Capital Increase in Turktell
At the Board of (cid:4)irectors of our (cid:176)00(cid:186) owned subsidiary Turktell Bili(cid:218)im (cid:19)ervisleri A.(cid:217). ((cid:136)Turktell(cid:137)), it was decided to increase Turktell(cid:135)s issued capital of
TRY 2,824,076,134 by TRY 150,000,000 in cash to TRY 2,974,076,134. The capital increase is registered by exercising our Company’s pre-emption rights in
its entirety.
FEBRUARY 27, 2017
Announcement Regarding the Completion of the Sale Process of Turkcell Finansman A.Ş.’s Commercial Paper
The sale process of our Company(cid:135)s (cid:186)(cid:176)00 subsidiary Turkcell (cid:6)inansman A.(cid:217).(cid:135)s (cid:176)(cid:182)9-day commercial paper(cid:154) with a nominal amount of T(cid:18)(cid:25) (cid:176)50,000,000,
maturity date of August 25, 2017 and an annual simple interest of 11.80% to qualified investors within Turkey, without public placement was completed on
February 27, 2017. As of this date, in the scope of the announcement dated November 7, 2016, further announcements regarding the issuance will be made
by Turkcell (cid:6)inansman A.(cid:217).
This announcement appears for information purposes only. It does not constitute an offer to purchase or a solicitation of offers with respect to the
securities. The securities have not been and will not be registered for sale with the authorities in any country outside of Turkey. In particular, the securities
have not been and will not be registered under the US Securities Act of 1933.
* Capital Markets Board’s decision dated November 30, 2016, approving the issuance of domestic debt securities is for an amount up to TRY 1,500,000,000.
90
2016 FINANCIAL YEAR CORPORATE GOVERNANCE COMPLIANCE
REPORT
Turkcell İletişim Hizmetleri A.Ş.’s (“Company”) Corporate Governance Principles
Compliance Report of the year 2016; has been prepared in accordance with the
format specified with the decision n.2/35 published in the Capital Markets Board
(“CMB”)’s Weekly Bulletin n.2014/2 dated 27th of January 2014 and outlined in the
sections given below.
SECTION 1- STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE
PRINCIPLES
We have begun to implement corporate governance mechanisms in parallel with
the corporate governance efforts that we launched as of the Company’s IPO and
accelerated in 2003 by establishing an Investor Relations Department; this step
was based on the belief that maintaining high standards of corporate governance is
crucial to the perpetuation of successful business practices and the generation of
long-term economic value for the Company’s shareholders.
Within the activity period that ended on the 31st of December 2016, our Company
has adopted and implemented the corporate compliance principles specified in the
annex of the Communiqué on Corporate Governance. On the other hand, considering
the current situation, principles that are not yet complied with, so far have not led to
any conflicts of interest between the stakeholders.
In the relevant sections of the report, necessary explanations are given regarding
the principles that are not yet complied and complied with the corporate governance
principles specified in the annex of the Communiqué on Corporate Governance,
during the activity period that ended on the 31st of December 2016. Specific actions
taken regarding compliance to the corporate governance principles within this period
is summarized below;
Regarding the corporate governance principle 1.3.10 which specified in the annex
of the Capital Markets Board (“CMB”)’s Communiqué on Corporate Governance
numbered II-17.1 (“Communiqué”) and was applicable in the 2016 activity period;
the Donation Policy of our Company which is accepted with our Company’s Board
of Directors’ resolution n.1280 taken on the 28th of January 2016, was approved by
the shareholders at the ordinary general assembly meeting held on the 29th of March
2016.
With our Company’s Board of Directors’ resolution n.1280 taken on the 28th of
January 2016; in order to prevent bribery and corruption in all the activities of
Turkcell and its affiliates, necessary principles, rules and risks were determined,
decreased, and managed while responsibilities for providing information and
reporting on this issue were determined. Thus, in order to protect the integrity and
reputation of our Company, the “Anti-Bribery and Corruption Policy” was accepted
and put into practice.
Within 2016, there were no related party transactions or significant transactions
that were not approved by the independent members and thus had to be presented
for the approval of the general assembly.
(1)Due to Yeşim Tohma leaving her position; as of 23rd of January 2017, Capital Markets and Compliance Executive
Emre Alpman was appointed for the vacant position of Yeşim Tohma who was Investor Relations Department
Executive and within this scope a Member of the Corporate Governance Committee.
SECTION 2 – SHAREHOLDERS
Shareholding Structure (31st of December 2016)
SHAREHOLDER
Turkcell Holding A.Ş.
Free Float
Other(*)
Total
NOMINAL
VALUE (TRY THOUSAND)
1,122,000
1,077,004
996
2,200,000
SHARE
(PERCENTAGE)
51.00%
48.95%
0.05%
100.00%
Within the framework of the announcement made via Public Disclosure Platform
(“KAP”) on the 6th and 7th of December 2016; Sonera Holding B.V. made an
application to the Merkezi Kayıt Kuruluşu A.Ş. (Central Registry Agency), to convert
Turkcell shares into tradable shares with nominal value TRY 287,632,179.557 and
that were registered in the Board.
(*) The number of Company shares pledged by certain entities are 995,509 as of December 31, 2016.
2.1. Investor Relations Department
The communication between Turkcell İletişim Hizmetleri A.Ş. and its investors is
maintained, in line with the corporate governance principles, through the Investor
Relations Department which serve under the Investor Relations and Merger and
Acquisition Directorate, reporting to the Deputy General Directorate of Finance.
The duties stipulated in the article 11 of the Communiqué on Corporate Governance
numbered II-17.1 are performed by our Company’s full-time employees whose
contact details are given below.
Investor Relations and Merger and Acquisition Director: Zeynel Korhan Bilek
Address: Turkcell Küçükyalı Plaza, Aydınevler Mahallesi İnönü Caddesi No:20 B Blok
Küçükyalı Ofispark 34854 Maltepe/Istanbul
Phone: +90 (212) 313 18 88
e-mail: korhan.bilek@turkcell.com.tr
Investor Relations Executive: Yeşim Tohma(1)
Address: Turkcell Küçükyalı Plaza, Aydınevler Mahallesi İnönü Caddesi No:20 B Blok
Küçükyalı Ofispark 34854 Maltepe/Istanbul
Phone: +90 (212) 313 18 88
e-mail: yesim.tohma@turkcell.com.tr
Licenses: Capital Market Activities Level 3 License No: 210035Corporate Governance
Rating License: 702144
Investor Relations and Business Development Directorate position was restructured
as Investor Relations and Merger and Acquisition Directorate, and Zeynel Korhan
Bilek was appointed to this position as of the 1st of November 2016. Until the 1st of
November 2016, this position was assumed by Nihat Narin.
The main activities of the Investor Relations Department in 2016 are briefly
summarized as follows:
• The maintenance of the records with respect to the correspondences between the
investors and the Company as well as other information and documents has been
ensured in a reliable, safe and up-to-date manner and the transactions at Central
Registry Agency have been coordinated with the Legal Department.
TURKCELL ANNUAL REPORT 2016 • The questions addressed to the department and the shareholders’ requests for the
information regarding partnership during the reporting period, excluding those
re(cid:61)ardin(cid:61) undisclosed information considered as con(cid:206)dential and trade secret, have
been responded in an open and transparent manner either face-to-face or through
various communication means in accordance with the Disclosure Policy of the
Company.
• Ordinary general assembly meeting convened in the respective term was held in
cooperation with the related departments and the Legal Department in accordance
with the provisions of the applicable law, Articles of Association and other internal
rules and regulations.
• Methods to facilitate the participation of shareholders in the general assembly
meetin(cid:61) and to stren(cid:61)then communication durin(cid:61) the meetin(cid:61) have been developed(cid:126)
an Investor Package containing documents, of which shareholders can make use, has
been created(cid:126) and the website is re(cid:61)ularly updated so that shareholders can have
constant and open information.
• The Company’s shares performance, and domestic and international comparable
•
Company (cid:206)nancial and operational benchmark analyses have been conducted and the
outcomes of these studies have also contributed to the Company’s communication
strategies.
In addition to material disclosures made in accordance with the legislation, the
coordination of the communication with the public has been ensured, meetings with
investors and analysts have been made, additionally conferences, panels, seminars and
road shows have been participated by payin(cid:61) re(cid:61)ard to the ful(cid:206)lment of obli(cid:61)ations
arising from the capital markets legislation including any issue related with the
corporate governance and the public disclosure.
(cid:4)urin(cid:61) 20(cid:176)(cid:181), the Investor (cid:18)elations (cid:4)epartment participated in (cid:176)3 investor conferences(cid:126)
convened 27 investor meetings at the Company headquarter, and communicated with 271
analysts and investors. Over 1,000 information requests were received during the year via
phone or e-mail, all of which were responded to.
The Investor Relations Department regularly provides the Board of Directors with a
report regarding the operations which are carried out. Additionally, the strategy plan
regarding the Investor Relation pertaining to the following year is presented to the CFO
at the end of each year.
2.2. The Use of Shareholders’ Rights to Obtain Information
No discrimination is made between the shareholders in using shareholders’ right to obtain
information and review. All shareholders have right to obtain information and review. In
the Articles of Association, there is no provision, limiting the right to receive information.
The Company’s shareholders and stakeholders made many requests for obtaining
information concerning various subjects throughout the year 2016. These requests,
e(cid:78)cludin(cid:61) those concernin(cid:61) undisclosed information considered as con(cid:206)dential and trade
secret, were responded in an open and transparent manner within the shortest time
possible in accordance with the Disclosure Policy of the Company.
The Company launched its website (www.turkcell.com.tr) in 1996 and began to provide
its both local and foreign shareholders the information foreseen for the website within
the CMB’s Corporate Governance Principles in both Turkish and English, under the
Investor Relations section of the website allowing them to exercise their right to receive
information. Updating and monitoring information posted on the Company’s Investor
Relations website was carried out under the responsibility of the Investor Relations
Department.
As per the regulations, the disclosures made to the Public Disclosure Platform (KAP) to
public disclosure were also provided to those registered in the Company’s database by
e-mail, social media and smartphone application, both in Turkish and in English.
(cid:4)urin(cid:61) the year, no information or disclosures which could in(cid:207)uence the e(cid:78)ercisin(cid:61) of
shareholding rights were published on the website of the Company.
TURKCELL ANNUAL REPORT 2016
91
The appointment of a special auditor has not been separately included in the Company’s
Articles of Association since this is a right vested to the minority shareholders by law.
During the period, no requests for the appointment of a special auditor were submitted.
2.3. General Assembly Meetings
Call for the general assembly meeting is made, in a manner that will make sure the
Company reaches the maximum number of shareholders possible, minimum three
weeks prior to the general assembly meeting date via Public Disclosure Platform
(KAP), Electronic General Assembly System (EGKS), Company’s corporate website and
Turkish Trade Registry Gazette. Furthermore, before the general assembly meeting an
“informative document” regarding the agenda items is prepared and publicly disclosed.
All announcements and disclosures are made in conformity with the Turkish Commercial
Code (TCC), capital markets legislation, CMB regulations and decisions, and the Articles
of Association.
As per article 410 of the TCC, upon the call made by the Board of Directors of our
Company, 2015 ordinary general assembly meeting of our Company was held on the
29th of March 20(cid:176)(cid:181) at the Company head(cid:71)uarter located at the address of Aydınevler
Mahallesi, İnönü Caddesi, (cid:14)o(cid:127)20/3(cid:181), C Blok, Conference (cid:8)all, Küçükyalı O(cid:206)spark, 3(cid:179)(cid:183)5(cid:179),
Maltepe, Istanbul.
The call for the general assembly meeting to be held on the 29th of March 2016 was
made in conformity with the TCC, CMB Corporate Governance Principles and Articles
of Association, and in a way that will cover the agenda items, via Turkish Trade Registry
Gazette n.9025 published on 4th of March 2016 and Dünya newspaper published on 4th
of March 20(cid:176)(cid:181) and (cid:25)eni (cid:217)afak newspaper published on (cid:179)th of March 2016, as well as the
Electronic General Assembly System, the Company’s www.turkcell.com.tr web address,
and the Public (cid:4)isclosure Platform(cid:126) and within the stipulated timeframe by sendin(cid:61)
registered letter to registered shareholders, and informing them about the meeting date
and agenda. Furthermore, within the scope of the Corporate Governance Principle n.1.3.1,
all information such as the annual report, (cid:206)nancial statements re(cid:61)ardin(cid:61) the (cid:7)eneral
Assembly, was made available for shareholders’ review electronically on the Company
website and physically at the Company headquarter. Simultaneously, a call was also
made to the shareholders abroad. No media member was invited to the general assembly
meeting, and the meeting results were immediately shared with the public.
(cid:6)ollowin(cid:61) items were included On the a(cid:61)enda of the (cid:61)eneral assembly meetin(cid:61)(cid:126) approval
of the balance sheets and pro(cid:206)t-loss accounts re(cid:61)ardin(cid:61) 20(cid:176)5 activities, release of the
members of the Board of Directors for the relevant periods, discussion and approval of
pro(cid:206)t distribution for the relevant period, and determinin(cid:61) the pro(cid:206)t distribution date,
approval of the amendments, made as per CMB’s consent and Ministry’s approval, to the
Company’s Articles of Association, in order to comply with the New Turkish Commercial
Code n.(cid:181)(cid:176)02 and the Capital Markets (cid:12)aw n.(cid:181)3(cid:181)2, determination of the term of of(cid:206)ce
and election for the new members of the Board of Directors, determination of the
remuneration of the members of the Board of Directors, appointment of an independent
auditor for the year 2016, discussion and approval of the proposal regarding the
Company’s Donation Policy within the scope of the corporate governance principles,
presentation of information on the aids and donations made in 2015, discussion and
approval of the Board of Directors’ proposal made with regard to determination of
the upper limit of the donations to be made in 2016, starting from the beginning of
20(cid:176)(cid:181) accountin(cid:61) period(cid:126) discussion and approval of the proposal to authorize (cid:144) within
the framework of CMB’s Communiqué n.II-22.1 On Buy-Backed Shares – the Board
of Directors share buy-back program, and authorization of the Board of Directors for
carrying out the transactions which will be made within the scope of this program,
authorization of the members of the Board of Directors of the Company in accordance
with the provisions of article n.395 and n.396 of the TCC, informing the shareholders
about the revenue or bene(cid:206)ts obtained by, and collaterals, pled(cid:61)e, mort(cid:61)a(cid:61)e, and sureties
(cid:61)iven by the Company for the bene(cid:206)t of third parties within the framework of CMB
regulations.
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The members of the Board of Directors, other relevant persons, the personnel and
the auditors responsible for preparing the financial statements are present at the
general assembly meeting in order to provide necessary information and answer any
questions about the specific items on the agenda.
During the general assembly meeting, the chairman of the meeting has paid utmost
attention to cover the agenda items in an objective and detailed manner with a clear
and understandable method, and thus the shareholders were given opportunity to
express their opinions, and ask questions under equal circumstances. During the
general assembly meeting, shareholders’ questions that do not interfere with trade
secrets are directly answered. In case the question is not relevant to the agenda or
in case it is too broad to be answered immediately, a written answer is given by the
Investor Relations Department to such questions as soon as possible, and the answer
is publicly disclosed. During the ordinary general assembly meeting held in 2015, no
question was asked within this scope.
The proposal made considering our Company’s cash projections, future expectations
regarding its activities, investment plans, and the circumstances in the capital
markets and in line with our Company’s Board of Directors’ resolution n.1294 taken
on the 29th of March 2016, on distribution of dividend in cash, which corresponds
to approximately 58% of the net distributable profit of the fiscal year 2015, was
presented for the shareholders’ approval and rejected by majority vote at the
ordinary general assembly meeting held on the 29th of March 2016.
Our Company adopts and implements the corporate compliance principles. However,
even the mandatory amendments, that must be made in order for the Articles of
Association to comply with the principles and determined by the resolution of the
Board of Directors and in line with CMB’s approval, presented for the shareholders’
approval at the ordinary general assembly meeting held on the 29th of March 2016
upon receiving Ministry of Customs and Trade’s permission; sufficient decision
quorum was not met and no resolution was reached within this regard, as a Board of
Directors’ decision to be resolved. The aim is to make the necessary amendments to
the Articles of Association during the next general assembly meeting.
On the other hand, the process for electing independent members was not launched
due to ongoing issues to be settled in court between the controlling shareholders
of the Company. The item on the agenda of the ordinary general assembly meeting
held on the 29th of March 2016, on the election of other members of the Board of
Directors and determination of their term of office, could not be voted due to the
fact that no candidates were nominated. In this context, the aim is to comply with
the principle n.4.3.7 at the following general assembly meeting.
The proposal of the Board of Directors made within the framework of CMB’s
Communiqué (II-22.1) on Buy-Backed Shares and for the adoption of the Board
of Directors’ share buy-back program, and for the authorization of the Board of
Directors to carry out the transactions which will be made within the scope of this
program, was presented for the shareholders’ approval and rejected by majority vote
at the ordinary general assembly meeting held on the 29th of March 2016.
2.4. Voting Rights and Minority Rights
Pursuant to the Articles of Association of the Company, there are no privileges
granted regarding the voting right for any group or shareholder.
The minority shareholders and stakeholders are not represented in the Board of
Directors and the ratio stated in the TCC and CMB provisions concerning minority
rights are applied.
However, three independent board members serve to represent all shareholders,
particularly minority shareholders, and stakeholders equally.
The Company has no reciprocal shareholding relation with its affiliates and subsidiaries
and thus no situation which would require voting rights stemming from such a
relationship to freeze at the general assembly meeting has taken place as of December
31, 2016.
2.5. Dividend Rights
In the Articles of Association, there are no privileges granted on the participation to the
Company’s profit. All shares have equal right with respect to the right to receive dividend.
The Company has a specific and consistent Profit Distribution Policy that is determined
considering the provisions of the TCC, Capital Markets Law, tax codes and other
respective legislation and the Articles of Association. This policy was presented for the
shareholders’ approval at the general assembly meeting, and it was also included in the
annual report and publicly disclosed on the Company’s website.
The minimum information that will enable the investors to foresee the principles and
procedures for distribution of the profit that will be made by the Company in the future,
is included in the Company’s Profit Distribution Policy that was set with the Board of
Directors resolution taken on the 13th of May 2013, and revised, in accordance with the
capital markets legislation, with the Board of Directors resolution n.1104 taken on the
18th of February 2014 to present for the approval of the general assembly. A balanced
policy between the shareholders’ and Company’s benefits is pursued in Profit Distribution
Policy, that is given below in full text.
Our Company’s Profit Distribution Policy;
Our Company aims to distribute at least 50% of the distributable net profit in cash. This
policy is subject to our Company’s cash projections, future expectations regarding its
activities, investment plans, and the circumstances in the capital markets. Regarding
the issue of dividends, a separate resolution is taken by the Board of Directors for each
accounting period and this resolution is subject to the approval of the general assembly.
Dividend distribution shall be initiated on the date that will be determined by the general
assembly, provided that dividend distribution is made until the end of the year in which
the general assembly meeting is held. The Company, in conformity with the provisions of
applicable legislation, may consider distributing advance dividend or distributing dividend
in equal or varying payments.
Moreover; in order to create more added-value for its shareholders, the Company
may consider buy-back of its own shares within the scope of the above mentioned
circumstances and relevant legislation.
At the ordinary general assembly meeting held on the 29th of March, the proposal
-considering our Company’s cash projections, future expectations regarding its activities,
investment plans, and the circumstances in the capital markets- of our Company’s
Board of Directors’ accepted with resolution n.1294 taken on the 29th of March 2016,
to distribute dividend in cash, which corresponds to approximately 58% of the net
distributable profit of the fiscal year 2015, was presented for the shareholders’ approval
and rejected by majority vote.
2.6. Transfer of Shares
While there is no limitation in the Articles of Association of our Company with respect
to the transfer of shares, the provisional article 4, clause 1, paragraph c, phrase 3 of the
Authorizing Regulation in Electronic Communications Sector states that Information
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and Communication Technologies Authority shall be informed with regard to “all share
transfers, acquisitions and movements”, within one month at the latest, and phrase 4 states
that written approval of the Information and Communication Technologies Authority is
required for “share transfers, acquisitions and movements resulting in change of control”.
Human Resources (HR) processes within the Company are developed by an
Organizational Development team reporting to the Deputy General Directorate of
Business Support, and the Turkcell Employee Relations Management Department
executes these processes.
SECTION 3 – PUBLIC DISCLOSURE AND TRANSPARENCY
3.1. Corporate Website and Its Content
Turkcell’s corporate website (www.turkcell.com.tr) was launched in 1996 in order to
provide shareholders, stakeholders and the general public with information in an open,
clear and timely manner. Turkcell has disclosed the Communiqué on Corporate Governance
Principles as well as resolutions and announcements concerning the implementation of
these principles published by the Capital Markets Board on the Company’s corporate
website under the Investor Relations section (http://www.turkcell.com.tr/en/aboutus/
investor-relations) and regularly provides updates. The website content is also provided
in (cid:5)n(cid:61)lish. The Company website additionally includes matters speci(cid:206)ed in the corporate
governance principles.
3.2. Annual Report
The independently audited annual report for the 2016 accounting period was prepared – in
a detailed manner that will enable the public to reach full and accurate information about
the Company activities and in accordance with the Article 518 and the third paragraph of
Article 516 of the Turkish Commercial Code– including the minimum content stipulated in
the Ministry of Customs and Trade “Regulation on Determining the Minimum Content of
the Annual Reports of the Companies” provisions and the 8th Article of the Capital Markets
Board (“CMB”) Communiqué on “Principles Regarding Financial Reporting in the Capital
Markets”.
SECTION 4 – STAKEHOLDERS
The duty and the authority of conducting employee relations have been assigned to
(cid:19)eyfettin (cid:19)a(cid:215)lam, the (cid:5)(cid:78)ecutive (cid:22)ice President of Business (cid:19)upport. The main tasks of
the said individuals are to secure employee commitment, and to enhance organizational
ef(cid:206)ciency, to desi(cid:61)n all (cid:8)(cid:18) strate(cid:61)ies, policies and implementations and to ensure their
implementation in accordance with our strategic priorities.
Written procedures and guidelines concerning all human resources processes
(recruitment, career movements, performance and talent management, human
resource plannin(cid:61), compensation and bene(cid:206)ts, or(cid:61)anizational development and process
improvements, internal communication) are available and these documents are kept in a
portal that is accessible by all employees. Furthermore, employees are informed about
these subjects on a regular basis via internal postings and e-mail.
In Recruitment, Training & Development, Performance and Talent Management, Career
Management, Compensation and other human resources processes, all employees
are treated equally in accordance with the equal opportunities policy without any
discrimination of ethnicity, language, religion, race or gender.
In 2016, the Company had not received any complaints of discrimination from its
employees.
Job descriptions, performance and rewarding criteria were determined with the internal
guidelines of the Company and these documents are kept in a portal that is accessible by
all employees.
4.1. Stakeholder Communication
Turkcell informs its stakeholders by organizing pre-scheduled and regular meetings such
as communication meetings for employees, platforms where the employees can put across
their ideas and provide their suggestions, supplier events for the members of the supply
chain, business partner events for the partner companies of Turkcell for providing value-
added services and dealership meetings. Information is shared at periodic meetings, and/or
through e-mail and intranet system.
4.4. Code of Ethics and Social Responsibility
Code of Ethics
The Company’s Code of Ethics has been regulated by Turkcell’s internal directives of
Common Values and Business Ethics Rules. Turkcell’s Business Ethics Rules are in unity
with Turkcell’s policies, values and principles, and all employees including the senior
management are requested to comply with them.
The Company has set policies and procedures to inform its employees and stakeholders.
It is possible for Turkcell customers to reach the Company for their questions through
various communication channels. Questions can be communicated in writing or verbally
through Turkcell Customer Services Call Centers and Video Customer Services at 532
or 5325320000, over Turkcell Service accounts on social media, complaint sites or via
government institutions and organizations. Although the Company receives questions or
complaints through various channels, these are directed to one center which handles and
resolves them as necessary. The Company has established a necessary infrastructure for
transferring complaints through relative channels and this infrastructure is continuously
updated.
Each employee of Turkcell is obliged to notify the cases and the allegations which may
constitute a contradiction with the rules and the regulations set forth in Turkcell’s
Common Values and Business Ethics Rules Handbook or which cause reasonable doubt
or concern for constituting such a contradiction to Turkcell’s Ethics Committee through
suitable noti(cid:206)cation channels. Bein(cid:61) a part of the stakeholders, the employees may
directly inform the Audit Committee or indirectly inform them via internal forms on the
intranet, or by telephone, or e-mail the Ethics Committee regarding transactions that
are contrary to the legislation and are unethical. On the other hand, the transactions of
other stakeholders such as customers and suppliers which are contrary to the legislation
and are unethical are conveyed to the Ethics Committee or the Audit Committee by way
of noti(cid:206)cation and complaint.
4.2. Participation of Stakeholders to the Management
There is no special arrangement concerning the participation of stakeholders to the
mana(cid:61)ement(cid:126) however, when re(cid:71)uired, stakeholders (themselves)/senior mana(cid:61)ers are
invited to participate in Board of Directors meetings in order to provide information.
Shareholders and other stakeholders are represented by independent members of the
Board of Directors.
4.3. Human Resources Policy
The main principles of our Company’s Human Resources Policy are to provide high ethical
standards determined by Turkcell Common Values and Business Ethic Rules by adopting the
responsibilities of the employees against society, the market, the Company and each other.
In general, the Code of Ethics is posted on the Company’s corporate website, under the
Investor Relations section under the Corporate Governance heading. These codes of
ethic are complementary to other related policies, codes of conduct, and guides that
have already been published or shall be published by the Company. Training programs
and noti(cid:206)cations are provided to employees throu(cid:61)h various channels durin(cid:61) the year in
order to increase their awareness and acknowledgement with respect to the Common
Values and Business Ethics Rules.
Ongoing and new social responsibility projects of the Company in 2016 are listed below.
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Contributions to Education
Turkcell Scholarship Programs
In 2016, more than 6 thousand students were supported with the scholarship
programs granted by our Company.
People without Boundaries
In order to increase the competency of disabled children who need special education
and to help them join in social life, our Company, in collaboration with the Turkish
Ministry of Education, supports employment and disabled students’ education with
the “No Barrier Education Program”. In 2015-2016, workshops and technology
classes were established in 47 schools covered within this aim.
Moreover, in collaboration with Istanbul Social Enterprise, İBB and Metro Istanbul,
“Turkcell Dialogue Museum” was turned into a permanent museum organizing the
“Dialogue in the Dark” exhibition, which offered the opportunity to experience the
visually impaired people’s Istanbul, and the “Dialogue in Silence” exhibition, which
gave the visitors the chance to step into the world of the hearing impaired.
My Dream Companion
Our Company provides a free service called My Dream Companion for the visually
impaired to access information content such as current news, articles, audio books,
education programs, magazines; giving them the opportunity to use audio navigation
in shopping malls, and audio decoding technologies in cinemas.
Furthermore, Turkcell Academy provides visually impaired and hearing impaired
individuals with special education under the “Education without Boundaries”
category. Our Company, in collaboration with the Federation of the Hearing Impaired,
organized “Turkish Sign Language” trainings and trainings that teach visually
impaired individuals to use special smartphones with iOS and Android.
Turkcell Whiz Kids Project
The “Whiz Kids Project” was out into practice under the supervision of the Ministry
of National Education for developing talented students with new generation
technology and education. Within the scope of the project, for talented students
to have project-based education after school in BİLSEMs (Science and Art Centers)
through the 7 regions of Turkey, our Company created specially designed laboratories
at 7 BİLSEMs targeting technological productivity with “do it yourself” culture.
Other
Our Company, represented the telecommunications community in the first-ever UN
World Humanitarian Summit held in Istanbul on May 23rd and 24th. Our Company
became the first telecommunication company in Turkey signing the “Humanitarian
Connectivity Charter” launched by GSMA (World GSM Association) and supported
by OCHA (the Office for the Coordination of Humanitarian Affairs).
Contribution to Sports
For many years, our Company has continued its contribution so that sports develop
in Turkey, and Turkish athletes and national teams are praised in national and
international arenas. In 2016, our Company continued to support team sports such
as basketball, football, sailing and cycling, and individual sports such as athletics,
swimming, running, fishing and golf.
Our Football and Basketball Sponsorships
Since 2005, our Company has been the “Main Sponsor” for the sponsorship of
our National Football Team. This year, our Company in collaboration with the
Football Clubs Association, has also become the “Spor Toto Super League Official
Communication Sponsor”.
Furthermore in August, our Company also continued its support for football with the
“Turkcell Super Cup” sponsorship.
At the same time, our Company continues to support the National Basketball Team
for 14 years. This year, sponsorship support was given also to the Women’s National
Team within the scope of the contract that was extended until 2019.
Visually Impaired National Football Team and Turkcell Sound Seers League
Our Company continues to be the “Main Sponsor” of the Visually Impaired National
Football Team, giving its name as the sponsor of the Turkcell Sound Seers League.
Other Branches
Until 2020, as we plan to invest TRY 28 million in our Swimming and Athletics
Performance Projects, that we launched in 2013 under the supervision of the
Ministry of Youth and Sports, our Company continues to provide support in this
direction.
A Power Alliance for Aid a goodwill protocol covering a TRY 5 million aid package,
has been signed between the Turkish Red Crescent and our Company.
Turkcell became the first brand to support the Turkish Olympic team in the history
of our country as a result of the collaboration with the Ministry of Youth and Sports
and General Directorate of Sports.
Collaboration between Turkcell and Maya Foundation
“Project Lift”, a program designed and implemented by Turkey’s Maya Foundation to
rehabilitate Syrian child refugees in Turkey, was under the spotlight in Brussels on
Thursday. The project became a topic of discussion at the European Parliament in a
session hosted by the MEPs of the “Friends of Turkey” group. Later in the day, the art
exhibition “Through a Child’s Eyes: The Syrian Refugee Story” was officially opened
with Turkcell’s (NYSE:TKC) (BIST:TCELL) support in the prestigious Bozar Centre for
Fine Arts in the capital of the European Union.
Moreover, the second Turkcell Gallipoli Marathon, Turkey’s first thematic marathon,
was held on the 2nd of October and a sapling was planted for each runner within the
scope of the marathon as the “Turkcell Peace Forest” was established in Çanakkale.
This project was combined with Letters to Çanakkale Project; 10 thousand saplings
were planted in the pine forests of the Güzelyalı region, which had been destroyed
in the fire.
Our Company became the technology and communication sponsor for the 52nd time
Presidential Cycling Tour of Turkey.
Organizing events such as Turkcell Platinum Golf Challenge, Turkcell Platinum
Bosphorus Cup and Turkcell Platinum Alaçatı International Fishing Tournament, our
Company also supports many athletes under different branches.
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Contribution to Culture –Art
Our Company has been the Communication and Technology Sponsor of Istanbul
Modern since 2012.
Résumés of the members of the Board of Directors of our Company are given under the
“Board of Directors” section in 2016 Annual Report, and there was no situation publicly
disclosed on Company’s corporate website that would breach independence of the
independent members in this period.
In 20(cid:176)(cid:179), our Company also became the Communication and Technolo(cid:61)y sponsor of (cid:19)akıp
(cid:19)abancı Museum, and started offerin(cid:61) ticket services to facilitate museum entrance with
the “My Ticket on Mobile” (Biletim Cepte) service.
For the Board of Directors Chairman and members to make business that interfere with
Company activities, on their own account or on behalf of others, and to become partners
in companies that make such business, general assembly’s approval is required within the
scope of Articles n.395 and n.396 of the TCC.
Our Company has organized 32 events under the name of Turkcell Starry Nights event,
and has also become the main communication and technology sponsor of EXPO 2016
Antalya.
Sustainability at Turkcell
As an integrated communication and technology company in Turkey, we are aware
of our environmental responsibilities, and thus we locate our environmental impact
areas and manage our operations with these areas in mind. We outline our projects
that are managed with this vision, under three main topics. As we publicly shared
the sustainability mana(cid:61)ement approach of Turkcell İleti(cid:218)im (cid:8)izmetleri A.(cid:217). and its
sustainability practices and performance in the operating period between January 1, 2014
and December 31, 2015, we also issued a comprehensive report to share our 2015 carbon
footprint projects and outputs including CDP Turkey (Carbon Disclosure Project). Also in
20(cid:176)(cid:181), we ful(cid:206)lled all responsibilities related to (cid:61)reenhouse (cid:61)as standards and continued
to be the (cid:206)rst telecom operator in Turkey receivin(cid:61) the (cid:136)I(cid:19)O (cid:176)(cid:179)0(cid:181)(cid:179) - Calculation and
(cid:18)eportin(cid:61) of Corporate (cid:7)reenhouse (cid:7)as (cid:5)missions(cid:137) certi(cid:206)cate in 20(cid:176)5. As a conse(cid:71)uence
of our comprehensive projects in progress, we have been entitled to be listed in the BIST
Sustainability Index for 2016-17.
SECTION 5- BOARD OF DIRECTORS
5.1. Structure and Formation of the Board of Directors
According to the provisions of the second paragraph of article 17 of the Capital Markets
Law No. 6362, Ahmet Akça, Atilla Koç and Mehmet Hilmi Güler have been appointed as
the independent board members under the resolution no. 2013/8 of the CMB dated 11th
of March 20(cid:176)3 for holdin(cid:61) this of(cid:206)ce until the election of independent board members
in place of them duly or until the adoption of a new resolution related thereto by the
CMB in order to ensure the ful(cid:206)lment of the re(cid:71)uirement with respect to the election
of independent board members amon(cid:61) the Corporate (cid:7)overnance Principles(cid:126) Mehmet
Bostan and Bekir Pakdemirli have been appointed as the board members under the
resolution no. 2013/27 of the CMB dated 15th of August 2013 pursuant to the provision
of the sub-para(cid:61)raph (k) of the (cid:206)rst para(cid:61)raph of the article (cid:176)2(cid:183) of the Capital Markets
Law No. 6362 in place of the board members who have been elected in general assembly
meeting dated 29th of April 2010 for a duty period of 3 years and whose duty periods
have expired but their successors could not be elected by the shareholders to hold this
of(cid:206)ce until election of new members by the Company(cid:135)s (cid:61)eneral assembly meetin(cid:61) in
accordance with the legislation or appointment of other members by the CMB in addition
to 3 independent board members appointed pursuant to the resolution no. 8/271 of CMB
dated 11th of March 20(cid:176)3 and(cid:126) (cid:5)rik (cid:10)ean Christian Antoine Belfra(cid:61)e and (cid:10)an (cid:5)rik (cid:10)ean
(cid:18)udber(cid:61) noti(cid:206)ed to the CMB by (cid:19)onera (cid:8)oldin(cid:61) B(cid:22) have been appointed as the board
members under the resolution no.2013/30 of the CMB dated 13th of September 2013 for
2 board memberships remained vacant as a result of e(cid:78)-of(cid:206)cio appointments made to
the Board of Directors under resolutions no. 8/271 and 28/921 of the Board dated 11th
of March 2013 and 15th of Au(cid:61)ust 20(cid:176)3 respectively in order to hold this of(cid:206)ce until the
election of new members by the Company’s general assembly meeting in accordance with
the legislation or appointment of other members by the CMB.
Following the appointment of the board members made by the CMB, the Board of
Directors of Turkcell currently consists of 7 (seven) non-executive members meeting the
independency criteria in total and 3 (three) of them are independent members.
Members of the Board of Directors can freely communicate and express their views
without any in(cid:207)uence. There have been female members in the Board of (cid:4)irectors in
the previous years(cid:126) nevertheless, no tar(cid:61)et ratio (not less than 25(cid:186)) and time for the
presence of female members in the Board of Directors has been determined, and no policy
in order to reach these targets has not been created yet.
Our Company has af(cid:206)liate companies and subsidiaries. There is no restriction for the
members of the Board of Directors of the Company to assume duties outside the
Company in these companies’ management due to the fact that such action would be for
the bene(cid:206)t of the (cid:61)roup. (cid:4)uties of the members of the Board of (cid:4)irectors outside the
Company are listed in the table above.
5.2. Principles of Activities of the Board of Directors
The agenda of the meetings of the Board of Directors is prepared by the Chairman of the
Board of Directors, who takes into account requests made by members of the Board of
Directors and executives. The Board of Directors met 9 times in total during the year 2016
via physical participation and teleconference. The overall rate of attendance at these
meetings was 89%. The resolutions in the meetings were adopted with unanimity at a
rate of 87%.
In order to assure proper attendance, Turkcell set the schedule of the Board meetings
to be held in the followin(cid:61) year at the end of the current year and noti(cid:206)ed the members
within this regard. Thus, the members are offered the opportunity to schedule their
activities according to their meetings, and the date of the next board meeting is also
determined taking the requests of the members into account at each board meeting. In
urgent matters, additional meetings can always be convened without waiting for the next
meeting date. Invitations to the meetings are sent via e-mail. In line with the corporate
governance principles, the secretariat which has been set up within the structure of the
Board of Directors informs the board members by notifying the agenda of the meeting
and the documents related to the agenda, writes and archives the discussions conducted
by the Board members during the meetings on a report, and records the reasons of the
counter votes regarding matters for which a different opinion has been expressed.
As per Articles of Association: board meetings are possible with there being a quorum of
at least (cid:206)ve members at the meetin(cid:61). At board meetin(cid:61)s, ordinary resolutions are taken
with four af(cid:206)rmative votes at the meetin(cid:61)s where (cid:206)ve members are present and with (cid:206)ve
af(cid:206)rmative votes at the meetin(cid:61)s where more than (cid:206)ve members are present.
Neither the Chairman of the Board of Directors nor the Board members hold any
preferential voting rights or the right to veto the resolutions made by the Board of
Directors. All board members, including the Chairman, have equal voting power.
Powers and responsibilities of the members of the Board of (cid:4)irectors are clearly speci(cid:206)ed
in the Articles of Association. These powers are used in conformity with the principles
speci(cid:206)ed in the internal directive that was issued with our Board of (cid:4)irectors(cid:135) resolution
n.1269 taken on the 17th of December 2015, registered on the 25th of February 2016, and
announced on the 2nd of March 2016 – as per the n.367 and n.371 of the TCC.
Any damage to the Company which may be caused by the failures of the Board members
during the performance of their duties has been insured and the insurance limit in the
September 2015 – September 2016 period was accepted as USD 400 million and USD
734,983.19 were paid as insurance premiums.
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BOD MEMBER
NAME-SURNAME
DUTY
DUTIES WITHIN THE
GROUP
DUTIES OUTSIDE THE
GROUP: COMPANY NAME
DUTIES OUTSIDE THE
GROUP: TITLE/POSITION
Ahmet Akça
Chairman of the
Board of Directors
Mehmet Hilmi Güler
Board Member
Atilla Koç
Board Member
Mehmet Bostan
Board Member
Bekir Pakdemirli
Board Member
Jan Erik Rudberg
Board Member
Erik Jean Christian
Antoine Belfrage
Board Member
- lifecell LLC Chairman
of the Board of Directors
- Kule Hizmet and
İşletmecilik A.Ş. Chairman
of the Board of Directors
- Superonline İletişim
Hizm. A.Ş. Chairman of
the Board of Directors
-Kuzey Kıbrıs Turkcell
Chairman of the Board of
Directors -Kule Hizmet
ve İşletmecilik A.Ş. Board
Member
-
- Fintur Holdings B.V.
Representative of the
Board Member - Kuzey
Kıbrıs Turkcell Board of
Directors Vice Chairman
- TÖHAŞ Chairman of
the Board of Directors
-Turkcell Finansman A.Ş.
Chairman of the Board of
Directors
CJSC “Belarusian
Telecommunication
Network” Chairman of the
Board of Directors
-lifecell LLC Board
Member - Kule Hizmet
ve İşletmecilik A.Ş. Board
Member
(1) Akça Lojistik Hizmetleri ve
Ticaret A.Ş.
(2)Bezmiâlem Vakıf Üniversitesi
(1) Chairman of the Board of
Directors
(2) Chairman of the Board of
Trustees
(1) ICBC Turkey Bank A.Ş.
(1) Board Member
-
-
(1) Board Member
(2) Board Member & General
Manager
(3) Board Member
(4) Chairman of the Board of
Directors &General Manager
(1) Chief Consultant
(2) Director
(3) Board Member
(4) Member of Board of
Trustees
(5) Association Member
(6) Board Member
(7) Board Member
(1) Chairman of the Board
of Directors (Independent )
(2) Chairman of the Board
of Directors (Independent)
(3) Board Member
(Independent)
(1) Board Member
(2) Board Member
(3) Honorary Consul General
(4) Chairman of the Board of
Directors
(5) Chairman
(6) Vice Chairman
(7) Board Member
(8) Chairman
(9) Advisor to Chairman (10)
Advisor to Chairman
(1) Vakıf Pension
(2) Pension Supervision Center
(3) Turkish Tennis Federation
(4) Sovereign Wealth Fund of
Turkey
(1) Adres Danışmanlık Ltd. Şti. (2)
McCain Foods Limited (3) Tarkem
Tarihi Kemeraltı A.Ş. (4) Anatolia
Autism Foundation (5) Capital
Markets Investors Association
(6) Albaraka Türk Katılım
Bankası A.Ş.
(7) Gürtel Telekomünikasyon
Yatırım ve Dış Ticaret A.Ş.
(1) Hogia AB
(2) Kcell JSC
(3) PJSC Megafon
(1) KIBI AB (2) Eramet Steel
(3) Philippines Republic
(Stokholm)
(4) The International Council of
Swedish Industry
(5) International Chamber
of Commerce - Corporate
Responsibility and Fighting
Corruption Committee
(6) International Chamber of
Commerce - Finance Committee
(7) The Trilateral Commission
(8) Sigtunaskolan Humanistiska
Laroverket (Sigtuna School)
(9) SEB Marcus Wallenberg (10)
Investor AB Jacob Wallenberg
TERM OF
OFFICE
REMAINING
TERM OF
OFFICE
Until
replacement
Until
replacement
Until
replacement
Until
replacement
Until
replacement
Until
replacement
Until
replacement
TURKCELL ANNUAL REPORT 2016 5.3. Number, Structure and Independence of the Committees Established Under
the Board of Directors
In order for the Board of (cid:4)irectors to properly ful(cid:206)ll its duties and responsibilities
the following committees have been established under the Board of Directors: Audit
Committee, Corporate Governance Committee, Early Detection of Risks Committee,
Compensation Committee, and Candidate Nomination Committee. Board of Directors
determined the committees’ tasks, their working principles and members, and
relevant information was publicly disclosed as an outline on the Company website.
All members of the Audit Committee are independent members of the Board
of Directors. Chairman of the Corporate Governance, Early Detection of Risk
Committee, Compensation and Candidate Nomination Committee are also
independent members of the Board of Directors. Early Detection of Risk Committee,
Audit Committee and Candidate Committee are composed of three members(cid:126)
Corporate Governance Committee and the Candidate Nomination Committee
composed of (cid:206)ve members.
Throu(cid:61)hout the (cid:206)nancial year of 20(cid:176)(cid:181), the Audit Committee, Corporate (cid:7)overnance
Committee, Compensation Committee and Early Detection of Risks Committee
carried out their operations. The following resolutions were taken during the
meeting of our Company’s Board of Directors dated 19th of August 2013 regarding the
distribution of work in the committees:
•
•
•
•
•
the Audit Committee to be constituted of Ahmet Akça, Mehmet Hilmi Güler and
Atilla Koç, our independent Board members(cid:126) Ahmet Akça to be appointed as the
chairman of the Committee(cid:126)
the Early Detection of Risks Committee to be constituted of Mehmet Hilmi
(cid:7)üler, Mehmet Bostan and Bekir Pakdemirli(cid:126) Mehmet (cid:8)ilmi (cid:7)üler to be
appointed as the chairman of the Committee(cid:126)
the Corporate Governance Committee(2) to be constituted of Mehmet Hilmi
(cid:7)üler, Mehmet Bostan and Bekir Pakdemirli(cid:126) Mehmet (cid:8)ilmi (cid:7)üler to be
appointed as the chairman of the Committee(cid:126)
the Compensation Committee to be constituted of Atilla Koç, Mehmet Hilmi
(cid:7)üler and Mehmet Bostan(cid:126) Atilla Koç to be appointed as the chairman of the
Committee(cid:126)
the Candidate Nomination Committee to be constituted of Ahmet Akça, Mehmet
(cid:8)ilmi (cid:7)üler, Atilla Koç, Mehmet Bostan and Bekir Pakdemirli(cid:126) Ahmet Akça to be
appointed as the chairman of the Committee.
Due to the fact that the Chairman of the Board of Directors is an independent
member, he also assumes position in the Audit Committee and the Candidate
Nomination Committee while the General Manager does not assume any position in
any of the committees.
As per the corporate governance principles, there are no executive members in the
committees, except the “Investor Relations Department” executive and Investor
Relations and Mergers and Acquisition Director in the Corporate Governance
Committee. Due to the structure of the Board of Directors, members of the Board of
Directors may assume duties in more than one committee.
Necessary resources and support is provided by the Board of Directors for the
committees to ful(cid:206)ll their tasks and duties. Committees may invite necessary
managers/directors to their meetings, and take their opinions.
TURKCELL ANNUAL REPORT 2016
97
Committees convene frequently enough, and they prepare all work in writing,
and keep record of all their activities. Reports covering the information about the
activities of the committees and meeting results are presented to the Board of
Directors.
Information about the committees established under the Board of Directors is
available under the Corporate Governance topic of the Investor Relations Section on
the Company’s website (www.turkcell.com.tr).
5.4. Risk Management and Internal Control Mechanism
(cid:4)urin(cid:61) the process of selectin(cid:61) the independent e(cid:78)ternal auditor(cid:126) the Audit
Committee considers the competencies and independence status of the independent
audit (cid:206)rms, and advises the Board of (cid:4)irectors presentin(cid:61) a report about the most
suitable audit (cid:206)rm.
During our Company’s Ordinary general assembly meeting held on 29th of March
20(cid:176)(cid:181), Ba(cid:218)aran (cid:14)as Ba(cid:215)ımsız (cid:4)enetim ve (cid:19)erbest Muhasebeci Mali Mü(cid:218)avirlik
A.(cid:217). was appointed as the Company auditor for auditin(cid:61) our Company(cid:135)s (cid:206)nancial
statements of 2016 as per the TCC. (3)
Moreover, the Internal Audit Function operates with the Board of Directors and is
responsible for the auditin(cid:61) of Turkcell İleti(cid:218)im (cid:8)izmetleri A.(cid:217). and all of the (cid:61)roup
companies which are subsidiaries, and reports the results of the audit carried out
in line with the International Standards for the Professional Practice of Internal
Auditing to the Audit Committee. The auditing activities of the Internal Audit
function mainly comprise of operational audits conducted pursuant to annual audit
plans and audits in accordance with Article 404 of the Sarbanes-Oxley Act.
Operational audit activities are carried out according to annual audit plans prepared
with respect to a risk based audit approach. Through conducting operational audits,
Internal Audit function evaluates and improves effectiveness of risk management,
control, and governance processes and provides assurance to help Turkcell
accomplish its objectives.
On the other hand, as we are listed on the New York Stock Exchange in the United
States, audits are conducted within the framework of the annual plan to provide
assurance in terms of the adequacy and effectiveness of internal control system
across Turkcell and Turkcell (cid:61)roup companies, of which (cid:206)nancials are consolidated,
and whether this structure operates effectively, in compliance with the provisions
of Article 404 of the Sarbanes-Oxley Act, which all publicly traded companies are
re(cid:71)uired to comply with. All sta(cid:61)es from the plannin(cid:61) sta(cid:61)e to the speci(cid:206)ed internal
control insuf(cid:206)ciencies and followin(cid:61) and concludin(cid:61) actions of the audit activities
carried out in accordance with said Article are reported to the Audit Committee, CEO
and CFO at regular intervals.
The Internal Audit Unit also provides consultancy in current matters and matters
requested by the management.
The Internal Audit Unit reports the compliance practices as per Sarbanes Oxley Rule
Act Section 404 to the Audit Committee while Corporate Risk Management Unit
reports to the Early Detection of Risks Committee. The Internal Audit mechanism
operates with a risk based audit approach. Within this scope, functionally and
institutionally probable risks are continuously monitored, where the risk analyses
resulting from these conducted operations constitute the main input of audit
activities.
(2)Investor Relations and Merger and Acquisition Director Zeynel Korhan Bilek and Investor
(cid:18)elations and Mer(cid:61)ers and Ac(cid:71)uisitions (cid:4)epartment (cid:5)(cid:78)ecutive (cid:25)e(cid:218)im Tohma (cid:64)oined the
committee on the 1st of November 2016. As of 23rd of January 2017, Capital Markets and
Compliance (cid:21)nit (cid:5)(cid:78)ecutive(cid:5)mre Alpman was appointed for the vacant position of (cid:25)e(cid:218)im
Tohma.
(3)As of (cid:176)2th of (cid:4)ecember 20(cid:176)(cid:181), Ba(cid:218)aran (cid:14)as Ba(cid:215)ımsız (cid:4)enetim ve (cid:19)erbest Muhasebeci Mali
Mü(cid:218)avirlik A.(cid:217).(cid:135)s (Independent Auditor and (cid:6)inancial Consultant Company) tradename was
chan(cid:61)ed to PwC Ba(cid:215)ımsız (cid:4)enetim ve (cid:19)erbest Muhasebeci Mali Mü(cid:218)avirlik A.(cid:217)..
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2016 FINANCIAL YEAR CORPORATE GOVERNANCE COMPLIANCE REPORT
Furthermore, there is an Enterprise Risk Management (ERM) process which
comprises identifying the risks that may affect Turkcell’s performance in achieving
its targets, coordinating risk analysis activities, planning necessary actions,
sharing, reporting and following the outcomes with the Company management.
The Enterprise Risk Management Unit is responsible for coordinating the ERM
process under the supervision of the Group Internal Audit Directorate. The Turkcell
Enterprise Risk Management Unit aims to develop an approach, where the risk
management process is conducted in an integrated manner with the fundamental
management processes. While enabling this, a framework associated with
the process was identified in accordance with an Enterprise Risk Management
procedure as per the COSO ERM framework and ISO 31000 standard. During the
risk identification and evaluation period, different methods such as workshops,
brainstorming sessions, reports from risk contacts, thorough interviews, research
reports, etc. are used. Thus, the objective was to extensively identify, evaluate and
effectively manage risks causing uncertainties.
As of the end of the financial year of 2012, the “Early Detection of Risks Committee”
has been in operation in order to perform activities in a manner affiliated with the
Board of Directors within the scope of article 378 of the TCC and the Communiqué
on Corporate Governance of the CMB. The Early Detection of Risks Committee
supports the Board of Directors by performing studies for the purpose of early
diagnosis of the risks which may jeopardize the existence, development and
continuity of the Company, implementing the necessary measures related with
the identified risks and managing the risks. The Committee reports to the Board of
Directors once every 2 months and the reports are sent to an independent audit
Company. The Board of Directors regularly provides an evaluation regarding the risks
affecting the Company through the Early Detection of Risks Committee.
The Enterprise Risk Management Unit is responsible for coordinating the risk
assessment and risk avoidance activities at departments as well as reporting the
results to the Early Detection of Risks Committee within the scope of Enterprise Risk
Management methodology. During this process, the ownership of the risks and the
responsibility of risk avoidance activities belong to the business and not transferred
to the responsibility of the Enterprise Risk Management Unit.
In 2000, Turkcell formulated its business continuity plans in a manner also
encompassing its technical operations and repositioned its business continuity plan
as Business Continuity Management by broadening the extent thereof in 2004.
With the restructuring in 2011, the scope of the program expanded so as to comprise
Turkcell Group companies and suppliers. Turkcell Group Business Continuity
Management System has been structured and certified in a manner ensuring the
continuity of our call, messaging, Internet and societal security services as per the
“ISO 22301, Societal security - Business continuity management systems” standard.
Regular drills are conducted for our business continuity plans formed by considering
the customers’ expectations, corporate policies and legal obligations in order to
guarantee their operation in emergency cases.
Thanks to our geographically dispersed technical infrastructure, extensive coverage,
solution partner network, mobile exchanges, additional capacity, emergency centers
and extensive experience in handling emergencies enable us to minimize the impact
of risks as much as possible and additionally, the experience of our Group companies
in customer services, our high speed fiber-optic infrastructure, data storage services
and our experienced software development teams allow us to effectively manage
any disasters from another center, thereby ensuring the continuity of our activities.
5.5. Strategic Goals of the Company
With the vision of “Converged Communications and Technology Services Company
with Globally Relevant Services”; as Turkcell Group, our aim is to be the converged
telecom leader in Turkey, to become the leader in the region by being one of the top
two in every country we are present, and to offer globally relevant services with
over 100 million users. To achieve these goals, we have set our values as working
together to create value for customers, colleagues, shareholders and ecosystem
partners. We adopt a culture that gives value, works together to create value, and
that focuses on superior customer experience, that differentiates with technology
leadership and solution-oriented approach. Our strategy on this route is to
strengthen our position in Turkey, expand in existing and new markets, develop and
spread the digital services; and focus on sustainable shareholder return.
5.6. Financial Rights
The shareholders were informed with a separate agenda topic at the ordinary
general assembly meeting held on 26th of March 2015 within the framework of
the Remuneration Policy approved with the decision of the Company’s Board
of Directors and made public on the Company’s website. During the financial
year 2012 a Compensation Committee, which is responsible for determining the
remuneration principles that apply to the Board members and senior management
taking into account the long-term strategic goals of the Company, for setting out the
remuneration criteria for the Board members and senior management’s performance
and makes compensation recommendations to the Board, had been established.
All rights, benefits and remuneration provided to board members and senior
management on a cumulative basis and the criteria along with remuneration
principles used in the determination of these are being shared with the public
through the Company’s Remuneration Policy and annual reports. Within this
scope, the sum of the payments made to the members of the Board of Directors
and executives within the framework of the Remuneration Policy is also publicly
announced in the footnotes of our financial statements. Not presenting the benefits
on a per-person basis did not lead to any conflict of interest.
The total benefit paid and provided to the key management personnel amounts to
TRY 60 million 544 thousand for the financial year which ended on December 31,
2016.
In addition to their salaries, the Company provides fringe benefits to the directors
and the executive officers as well as contributes to their pension plans. The Company
is obliged to contribute to such pension plans at a certain percentage of the
employee’s salary.
With the scope of the resolution adopted at general assembly meeting dated 29th
of April 2010 for the payment of net EUR 250,000 per year to the Chairman of the
Board of Directors and net EUR 100,000 per year to each member of the Board of
Directors during the period of their service, said payments are continued.
No loans, credits or assurances such as the surety for benefit are granted to board
members and senior executives of the Company.
TURKCELL ANNUAL REPORT 2016 CONCLUSION OF THE AFFILIATION REPORT
TURKCELL ANNUAL REPORT 2016
99
01.01.2016-31.12.2016
Conclusion of the Report on the relationship among the Parent Company and the subsidiaries as per the Article 199 of the Turkish Commercial Code:
(cid:136)(cid:4)etails of the le(cid:61)al transactions of our Company with Turkcell (cid:8)oldin(cid:61) A.(cid:217). and its subsidiaries durin(cid:61) the fiscal year 20(cid:176)(cid:181) are (cid:61)iven in the above tables.
There is neither any le(cid:61)al transaction made in favor of Turkcell (cid:8)oldin(cid:61) A.(cid:217), nor one of its subsidiaries, nor any action taken, or avoided in favor of Turkcell
(cid:8)oldin(cid:61) A.(cid:217). or one of its subsidiaries upon directive from Turkcell (cid:8)oldin(cid:61) A.(cid:217).
Details of services provided and/or fixed asset purchases/sales performed under operational activities carried out between our Company and Turkcell
(cid:8)oldin(cid:61) A.(cid:217). and/or its subsidiaries that are in full conformity with the market durin(cid:61) the fiscal year 20(cid:176)(cid:181) are included in this (cid:18)eport.(cid:137)
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TELECOMMUNICATIONS SECTOR IN TURKEY
The Information and Communication Technologies Authority (ICTA)
established for the regulation and supervision of the telecommunication
sector as an independent management authority has been in operation since
August 2000.
According to the ICTA Market Data report, the number of players in the
Turkish electronic communications sector was 615 as of the third quarter of
2016 and the number of authorizations given to these players numbers 994.
In the first three quarters of 2016, the total net sales revenues of mobile
operators [Turkcell İletişim Hizmetleri A.Ş. (“Turkcell”), Vodafone
Telekomünikasyon A.Ş. (“Vodafone”), Avea İletişim Hizmetleri A.Ş. (“Avea”)]
and Türk Telekomünikasyon A.Ş. (“Türk Telekom”) were approximately TRY
26 billion, while the net sales revenues of other operators were realized at
TRY 7.2 billion. The total amount of investments made in the same period
was close to TRY 4.7 billion.
MOBILE MARKET
There are 74.5 million mobile subscribers in total in our country,
corresponding to a penetration rate of approximately 94.6% as of the end
of September 2016. (Mobile penetration rate excluding the population aged
0-9 years: 107%).
INTERNET & BROADBAND MARKET
The number of broadband internet subscribers, which was around 6
million in 2008, had exceeded 59.1 million as of the end of the third
quarter of 2016. In total, there was an increase in internet subscriptions of
approximately 7.0% in comparison to the previous three-month term, and
the general upward trend in the number of internet subscribers continued
with the increase in mobile and fiber internet subscribers. Meanwhile, the
annual rate of increase in the total number of internet subscribers was
26.5%. The number of xDSL subscribers approached 7.5 million and fiber
subscribers exceeded 1.8 million. The total length of the fiber infrastructure
of alternative operators had reached 61,317 km.
The total amount of revenue in relation to internet service providers in the
third quarter of 2016 was approximately TRY 1.5 billion, remained same as
previous quarter. The average monthly usage of fixed broadband internet
subscribers reached 67.8 GB. Approximately 70.8% of fixed broadband
subscribers in Turkey were seen to prefer packages offering connection of
10-30 Mbit/sec. The share of service provided with xDSL technology by
alternative operators in the broadband industry was at 17.4% as of the
second quarter of 2016.
TV MARKET
In the third quarter of 2016, the number of 4.5G subscribers stood at 45.7
million, while the number of 3G subscribers decreased to 23.5 million.
With 3G and 4.5G services, the number of mobile broadband subscribers
increased to 49.0 million.
As of the third quarter of 2016, there are 20 operators, which have the
Cable Broadcast Service (CBS) authorization. While the number of Türksat’s
cable TV subscribers is 1,159,638; among the operators providing IP TV
services, Superonline has 323,306 and TTNet has 428,114 subscribers.
Among those operators authorized to provide satellite platform services,
Digitürk, DSmart, Filbox and Tivibu are actively engaged in the operations.
FIXED VOICE MARKET
As of the end of the second quarter of 2016, there are 11,08 million fixed
telephone subscribers in our country, while the penetration ratio of the
population is approximately 14.1%.
As of the third quarter of 2016, 50.8% of mobile subscribers were in
postpaid tariffs while 49.2% were in prepaid tariffs. The number of prepaid
mobile broadband subscribers was 22.8 million and the number of postpaid
mobile broadband subscribers was 26.1 million, while the number of M2M
subscribers reached 3.8 million.
In the third quarter of 2016, the number of mobile numbers ported
decreased by 19.72% compared to the previous quarter and stood at 2.3
million. As of November 4, 2016, 98.4 million mobile number portability
transactions were realized in total.
In terms of market share distribution based on the number of subscribers,
Turkcell has a 44%, Vodafone a 31.3% and Avea a 24.7% market share.
Approximately 89.3% of mobile subscribers are consumer and 10.7% are
corporate subscribers.
Average monthly usage of mobile broadband was at 2.2 GB levels, while
data usage of subscribers whose devices and SIM cards were compatible
with the 4.5G service realized as 5.6 GB. Total mobile traffic volume for the
third quarter of 2016 increased by 8.8% compared to the same period of
last year, and registered at 62.1 billion minutes. As per the operators’ traffic
volume, the increase was 6.3% for Turkcell, 1.1% for Vodafone and 0.4%
for Avea.
In terms of the revenues from subscribers, Turkcell’s market share stood at
44.7%, Vodafone’s 31.8% and Avea’s 23.5%.
TURKCELL ANNUAL REPORT 2016 101
COMPANY DEVELOPMENTS
TURKCELL FİNANSMAN A.Ş. (“TFŞ”, acting as consumer finance
company): TFŞ has been granted the operational permit with the decision of
the Banking Regulation and Supervision Agency (“BRSA”) dated 21.01.2016,
numbered 6686 and published in the Official Gazette dated 29.01.2016.
The operational permit has been granted within the framework of Article 7
of Financial Leasing, Factoring and Financing Companies Law No. 6361, as
well as Article 5, Clause 2 of the Legislation regarding the Establishment
and Operational Principles of Financial Leasing, Factoring and Financing
Companies. As a financing company with an operational permit from the
BRSA, in addition to Law No. 6361, TFŞ is subject to the provisions and
related legislation of Law No. 5549 on the Prevention of the Laundering of
Proceeds of Crime and Law No. 6502 on Consumer Protection. As of 2017,
TFŞ will also be engaged in insurance agency activities related to consumer
loans, and will be subject to insurance agency provisions in this context.
TURKCELL ÖDEME HİZMETLERİ A.Ş (“TÖHAŞ”, acting as payment
service provider): TÖHAŞ has been granted an operational permit following
the BRSA decision of 12.08.2016, numbered 6984 and published in the
Official Gazette dated 20.08.2016. The operational permit has been granted
pursuant to Article 14, Clause 1 and Article 15, Clause 1 of Law No. 6493 on
Payment and Security Settlement Systems, Payment Services and Electronic
Money Institutions. With the publication of the aforementioned decision,
TÖHAŞ has acquired the status of licensed “Payment Service Provider” and
become Turkey’s first payment service provider offering “Mobile Payment
Service”. TÖHAŞ is basically subject to the provisions and related legislation
of Law No. 6493 together with Law No. 5549. As of 2017, TÖHAŞ will apply
for an operational permit to operate as an Electronic Money Institution
within the scope of the concerning Law, and along with the provision of the
operational permit, it will be liable to the legislative provisions to which
Electronic Money Institutions are subject.
THE ASSOCIATION OF MOBILE TELECOMMUNICATION OPERATORS: The
Association of Mobile Telecommunication Operators was established with
the participation of Turkcell, Vodafone and Avea, in order to improve the
investment environment of the mobile telecommunication services sector
in Turkey. It objectives are also to ensure that global practices are best
implemented in our country with sector stakeholders, public organizations
and institutions, and to carry out activities and operations aimed at
increasing the contribution of the sector to the economic development of
our country.
SHARED INFRASTRUCTURE COMPANY (“OAŞ”): An investment model is
being evaluated with key stakeholders of the electronic communications
sector within the framework of related regulations; through which, our
country’s national broadband and fiber household penetration and service
quality targets are achieved, country resources are used in an effective and
balanced manner, financial risks of investments are shared in cooperation
with the private and public sectors, whereby the most effective operational
opportunity is ensured.
REGULATORY DEVELOPMENTS – SECTORAL REGULATION
LAW ON THE PROTECTION OF PERSONAL DATA (“KVK”): “Law on
the Protection of Personal Data” number 6698 came into effect upon
publication in the Official Gazette on 07.04.2016. Regulations regarding
the “transfer of personal data, transferring abroad, rights of persons,
application, complaint investigation, register, crimes, and misconducts”,
which were delayed for six months as of the law’s effective date, came into
force on 07.10.2016. One of the changes introduced by the Law was the
establishment of the Personal Data Protection Board.
CANCELLATION OF THE MINIMUM PRICE OBLIGATION FOR ON-NET
UNIT PRICES (“ARMU”): The minimum price obligation on voice and
SMS services, applied by the ICTA exclusively to Turkcell since 2009,
and negatively impacting our Company’s competitive strength, has been
abolished with the decision dated 16.08.2016. Removal of the subject
restriction applied to our tariffs and campaigns, will broaden our Company’s
options in making offers best suited to our customers’ needs. The reasons
for lifting the obligation were: developments in the mobile electronic
communication market, the increasing importance of mobile internet service
in the market, the widespread use of Over The Top (OTT) services that
enable communication through the internet, the decreased importance
of voice and SMS services in the market compared to the period when
regulations were applied, as well as the drop in the ratio of on-net calls and
the discrepancy between on-net and off-net pricing.
REMOVAL OF THE MAXIMUM TARIFF OBLIGATION: While Turkcell has
been subject to the maximum tariff obligation since the signing date of the
concession agreement, the liability has been abolished as a result of the
lawsuits filed within the scope of the disputes.
PRICING OF THE BITSTREAM ACCESS SERVICE AT IP LEVEL (IP VAE):
With the ICTA decision dated 11.12.2013, number 2013/DK-ETD/634, it
was decided to switch to a pricing model based on “Port and Transmission”
from a package based pricing in wholesale DSL tariffs received from Türk
Telekom. Port and Transmission fees have been re-determined with the
decision of ICTA dated 29.06.2016, number 2016/DK-ETD/327, and the
latest transition date was set as October 1, 2016.
While the operators had been purchasing package-based wholesale tariffs
defined by Türk Telekom prior to October 2016, they will be able to identify
their own packages in the new period. Our Company has also transitioned
to the new model as of October 1, 2016. This new model consists of the
two cost items of “Port” (fixed fee paid per subscriber) and “Transmission”
(charge on traffic generated by the subscribers). Due to the high Port and
Transmission charges set for the new model, the ISPs cost of wholesale DSL
is expected to rise. In order to create a fair competitive environment, sector
stakeholders are working on a pricing scheme so as to include volume-based
discounting (logarithmic) as in the global transmission fee examples.
SECTORAL AND FINANCIAL INFORMATION TURKCELL ANNUAL REPORT 2016 102
COMPANY DEVELOPMENTS
ELECTRONIC COMMUNICATION SECTOR MARKET ANALYSIS:
Market analysis studies, realized at the latest every 3 years, have been
initiated by the ICTA, and are expected to be completed by 2017.
The mobile and fixed markets analyzed within the study are as follows:
• Mobile Access and Call Origination Market,
• Mobile Call Termination Market,
• Fixed Call Termination Market,
• Fixed Call Origination Market,
• Wholesale Broadband Access Market including Bitstream,
• Physical Infrastructure Access Market.
The legal process to cancel Turkcell’s designation and certain of its
obligations, as an operator holding significant market power in the Access
to Mobile Networks and Call Originating Markets, continues, and the
mentioned obligations are anticipated to be abolished. This will enable the
processes where MVNOs (Mobile Virtual Network Operators) are involved
to continue on a solid commercial ground.
selected by the subscriber, unless the subscriber demands otherwise; on
the condition that the subscriber does not request otherwise, advertising
and promotion can be done at the end of the KMSH and FÜS SMSs; FÜS
obligations shall be imposed on all subscribers unless the subscribers
demand otherwise; and all operators shall establish a real-time charging
system.
REGULATION RELATED TO 80 GHZ (E-BAND) R/L USAGE FEES: The
decision to amend the Council of Ministers’ decree dated 18/5/2009,
numbered 2009/15001 on “the Determination of Minimum Values Regarding
the Right of Usage Fees” has been published in the Official Gazette
numbered 29818. Along with the decision; an 80% discount has been made
on the fee of the 80 GHz (E-band) R/L Right of Usage, which is critical in
meeting the high capacity needs of short distance communications over
4.5G, and a saving of up to 40% has been provided in national frequency
allocations.
DEVELOPMENTS REGARDING 4.5G AUTHORIZATION
EXEMPTION ON FIBER (FIBER HOLIDAY): With a decision dated 3.11.2011,
numbered 2011/DK-10/511; ICTA has decided Fiber Access Services to be
exempted from the regulations for a period of 5 years, or until the ratio of
fiber internet subscribers reaches 25% of the fixed broadband subscribers.
The mentioned five-year period ended on October 3, 2016. The exemption is
expected to be finalized and the fiber access services to be regulated in the
market analysis process.
SUBSCRIPTION: The Board Decision dated 18.02.2016, and numbered
2016/DK-THD/120 includes obligations in order for existing 2G and 3G
subscriptions to be switched to 4.5G subscriptions. Accordingly, subscribers’
verifiable approval shall be obtained via SMS, call center, internet and
similar means; the offer for 4.5G subscription shall be made at most 4 times
in one year; those subscribers, who will switch to 4.5G shall be informed in
detail regarding the conditions of use, and subscription contracts shall be
changed technology neutral.
ANNEX AMENDMENT ON THE ELECTRONIC COMMUNICATIONS
LAW IN REGARDS TO THE ARTICLE REGULATING AUTHORITY OF
THE BOARD: According to Article 60 of the Electronic Communications
Law entitled Competence of Authority and Administrative Sanctions, an
amendment has been made on 15.08.2016. The amendment authorizes
the Prime Ministry to set necessary measures and notify the ICTA for
implementation in cases where any delay is inconvenient, based on one
or more of the reasons stated in Article 22 of the Constitution; the ICTA
President is then to immediately notify the operators, access providers,
data centers and related content and location providers regarding the Prime
Minister’s decision on the measures it deems necessary.
AMENDMENT IN REGULATION ON AUTHORIZATION: Through the
Regulation on Authorization related to the Electronic Communications
Sector, various amendments have been made in regards to requirements
for the authorization of companies and the obligations of those authorized
companies. With the amendment to the regulation, the authorization
conditions and procedures have been updated in line with the objectives of
increasing the supervision of operators, increasing quality standards in the
sector and reducing customer mistreatment.
PROCEDURES AND PRINCIPLES RELATED TO SERVICES WITH LIMITED
USAGE (KMSH) AND IMPLEMENTATION OF INVOICE UPPER LIMIT
(FÜS):
According to the Procedures and Principles expected to become effective
as of 01.12.2017: Fixed Telephony Service operators with 200,000 or more
subscribers shall comply with the obligations of the KMSH notification; in
international data usage, the data service shall be terminated at the limit
LOCAL PRODUCT OBLIGATION: Operators that have been granted
4.5G authorization, have submitted their first reports in regards to their
obligation to source local products in their network related investments.
Accordingly, following the 4.5G authorization, operators shall provide their
network related investments (hardware and software products related to
network and communication services, including, but not limited to, base
station, switches, router, etc.) from products determined to be of local
content within the scope of Law No. 4734 and related legislation. The local
product purchase obligation is defined in three periods: 30% for the first
year, 40% for the second year and 45% for the third and subsequent years.
INTER-OPERATOR FREQUENCY REPLACEMENT PLANNING: The
frequency planning studies to ensure that the existing frequencies of
mobile electronic communications operators in the 900 MHz band and
the frequencies allocated by the IMT authorization are consecutive, were
finalized in February 2016.
REGULATIONS REGARDING INFRASTRUCTURE NOTIFICATIONS: With
Board Decision number 2016/DK-SYD/157, the issues of how to issue
notifications regarding 4.5G infrastructures were determined, and it has
become possible to make calculations related to the TRx notifications and
radio fees over TRx numbers “actually used”. The regulation is positive in
the sense that it encourages widespread use of higher-capacity, but lower-
unit-cost equipment supporting all technologies, in the networks.
TURKCELL ANNUAL REPORT 2016 103
DRAFT REGULATION ON FAIR USAGE POLICY (FUP): With the draft
regulation, it was aimed a more transparent informing of consumers in the
provision of internet services was aimed at. Alternative regulations such as
increasing speeds after FUP, removing FUP from fixed internet packages,
etc. by the end of 2018 are being discussed.
REGULATIONS BEING PLANNED REGARDING ZONING LEGISLATION,
MUNICIPALITIES AND INSTALLATION AND OPERATION OF ELECTRONIC
COMMUNICATIONS INFRASTRUCTURE FACILITIES: A request has been
made to the Ministry of Transportation and the Ministry of Environment
and Urbanization in regards to the incompatibility of current legislation
with our infrastructure facilities; its inability to be implemented practically
and technically; and practices causing installation and operational problems
due to duplicate processes. The Ministry of Environment and Urbanization
is working on a regulation that takes into consideration the technical
characteristics of the MTMAC and ICTA infrastructures, as well as the
immovable properties established on the planning necessities and systems.
Parallel to international practices, regulation classifies the systems, based
on their physical characteristics, such as the area they occupy and their
height, and sets forth gradual exemptions and/or facilities to eliminate
duplicate processes.
Within the framework of the studies carried out by MTMAC and ICTA, the
Ministry of Environment and Urbanization is also working on processes
related to the right of way applications, excavation licenses and soil
destruction costs of the fiber infrastructure. The studies include the
general framework of information, documents and fees to be requested,
the maximum periods for which permit applications can be concluded, and
constitution of the higher application authority and ways and additionally
the processes that are compatible with/applicable to the technical and
physical essence of the electronic communications systems.
DEVELOPMENTS CONCERNING THE INSTALLATION AND OPERATION
OF INFRASTRUCTURE FACILITIES
The following developments have taken place in order to prevent the
difficulties experienced in the installation and operation of Infrastructure
Facilities.
INSTRUCTION WRITTEN BY THE MINISTRY OF TRANSPORT, MARITIME
AFFAIRS AND COMMUNICATIONS (MTMAC), GENERAL DIRECTORATE
OF COMMUNICATIONS DATED 19.10.2016, NUMBERED 77592;
Along with this letter written by the General Directorate of
Communications aimed at preventing obstacles during the establishment
and operation of base stations during the State of Emergency (OHAL),
and to ensure seamless communication, the following institutions were
instructed;
1- An instruction by the MTMAC to Public Institutions and Organizations,
2- An instruction by the Energy Market Regulatory to energy distribution
companies, for them to facilitate subscription transactions,
3- An instruction by the General Directorate of Forestry to facilitate the
base station installation processes in forest areas.
DRAFT STUDIES
DRAFT REGULATION ON CONSUMER RIGHTS IN THE ELECTRONIC
COMMUNICATIONS SECTOR:
Having dealt with a number of issues related to the provision of
services to consumers by operators in the sector, and considered to be a
framework regulation; the regulation on Consumer Rights in the Electronic
Communications Sector is expected to be amended in accordance with
changing market conditions and updated general consumer legislation.
DRAFT REGULATION ON VALUE ADDED SERVICES (VAS):
In the draft regulation, certain liabilities deemed to potentially make the
customer experience more difficult and result in a decline in VAS revenues,
have been foreseen; such as approval from different media of the VAS
purchase offered via WAP, double opt-in for all services in purchases via
SMS, and regulation of VAS intermediated for collection. In this context,
it is expected that regulations contributing to the development of the VAS
market, and enabling it to compete with global OTTs, will be passed.
SECTORAL AND FINANCIAL INFORMATION TURKCELL ANNUAL REPORT 2016 104
TURKCELL GROUP: 2016 FINANCIAL & OPERATIONAL REVIEW
Our audited annual consolidated financial statements including our consolidated statements of financial position as of December 31, 2016 and 2015 and our
consolidated statements of profit and loss, comprehensive income, changes in equity and cash flows for the two years in the period ended December 31,
2016 and the related notes included in this annual report have been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (“IFRS Report”). The following financial and operational overview focuses principally on the developments
and trends in our business in the full year 2016 and should be read in conjunction with the IFRS report. The figures are expressed in Turkish liras (TRY)
unless otherwise stated. A year on year comparison of key indicators is provided and figures in parentheses following the operational and financial results
for the year end 2016 refer to the same item for the year end of 2015 unless otherwise stated.
TURKCELL GROUP: FINANCIAL SUMMARY
CONSOLIDATED PROFIT & LOSS STATEMENT (TRY MILLION)
Total Revenue
Direct cost of revenues(1)
Depreciation and amortization
Gross Profit Margin
Administrative expenses
Selling and marketing expenses
EBITDA(2)
EBITDA Margin
Net finance income/(expense)
Finance expense
Finance income
Other income/(expense)
Non-controlling interests
Income tax expense
Discontinued operations
Net Income
(1) Including depreciation and amortization expenses.
(2) EBITDA is a non-GAAP financial measure.
CONSOLIDATED BALANCE SHEET DATA (YEAR END) (TRY MILLION)
Cash and cash equivalents
Total assets
Long term debt
Total debt
Total liabilities
Total equity
2015
12,769.4
(7,769.5)
(1,667.8)
39.2%
(625.3)
(1,901.9)
4,140.5
32.4%
(43.4)
(799.5)
756.1
(225.9)
164.1
(667.1)
367.3
2,067.7
2015
2,918.8
26,207.3
3,487.8
4,214.2
11,788.4
14,418.9
2016
CHANGE %
14,285.6
(9,236.6)
(2,203.2)
35.3%
(721.8)
(1,910.9)
4,619.5
32.3%
(172.8)
(1,237.6)
1,064.8
(234.3)
(51.7)
(423.2)
(42.2)
1,492.1
2016
6,052.4
31,600.2
6,935.1
9,781.2
15,531.8
16,068.4
11.9%
18.9%
32.1%
(3.9pp)
15.4%
0.5%
11.6%
(0.1pp)
298.2%
54.8%
40.8%
3.7%
(131.5%)
(36.6%)
(111.5%)
(27.8%)
CHANGE %
107.4%
20.6%
98.8%
132.1%
31.8%
11.4%
TURKCELL ANNUAL REPORT 2016 CONSOLIDATED CASH FLOW (MILLION TRY )
EBITDA
LESS:
Capex and License
Net interest Income
Other
Net Change in Debt
Cash generated/(used)
Cash balance before dividend payment
Dividend paid
Cash balance after dividend payment
PROFITABILITY AND SOLVENCY RATIOS (%)
Gross Profit Margin
EBITDA Margin
Net Profit Margin
Total Liability/Equity Ratio
Total Debt / EBITDA Ratio
105
CHANGE %
11.6%
(59.1%)
38.4%
(252.0%)
n.m
(243.2%)
(11.6%)
n.m
107.4%
CHANGE %
(3.9pp)
(0.1pp)
(5.8pp)
14.9pp
109.9pp
2015
4,140.5
(8,536.2)
445.8
1,987.0
(225.3)
(2,188.1)
6,843.8
(3,925.0)
2,918.8
2015
39.2%
32.4%
16.2%
81.8%
101.8%
2016
4,619.5
(3,494.7)
616.9
(3,020.0)
4,411.9
3,133.6
6,052.4
-
6,052.4
2016
35.3%
32.3%
10.4%
96.7%
211.7%
Revenue(1): Group revenues grew by 11.9% to TRY 14,286 million
(TRY 12,769 million) in 2016.
• Turkcell Turkey revenues, constituting 90% of Group revenues, rose by
11.4% to TRY 12,788 million (TRY 11,481 million).
-
Consumer segment revenues increased by 11.9% to TRY 10,216 million
(TRY 9,127 million), while corporate segment revenues grew by 7.9%
to TRY 2,192 million (TRY 2,032 million). Mobile data revenues rose
by 65.1% to TRY 4,478 million (TRY 2,712 million), while fixed data
revenues increased by 27.4% to TRY 1,054 million (TRY 828 million).
Digital services revenues grew by 94.6% to TRY 1,282 million (TRY 659
million). Overall, data and digital services revenues rose by 62.3% to
TRY 6,814 million (TRY 4,198 million).
Selling and marketing expenses: Selling and marketing expenses as a
percentage of revenues declined to 13.4% (14.9%) on the back of the
decrease in selling expenses (0.8pp), and in other cost items (1.0pp), despite
the increase in marketing expenses (0.3pp) in 2016.
EBITDA: EBITDA grew by 11.6% year-on-year with an EBITDA margin of
32.3% (32.4%) in 2016. Direct cost of revenues (excluding depreciation
and amortization) and administrative expenses rose by 1.4pp and 0.2pp,
respectively, while selling and marketing expenses fell by 1.5pp.
• Turkcell Turkey’s EBITDA rose by 10.7% to TRY 4,161 million (TRY 3,760
million), while the EBITDA margin was at 32.5% (32.7%).
• Turkcell International EBITDA was at TRY 235 million (TRY 246 million),
- Wholesale revenues grew by 17.4% to TRY 453 million
while the EBITDA margin was at 26.9% (28.7%).
(TRY 386 million).
• The EBITDA of other subsidiaries rose by 65.4% to TRY 223 million (TRY
• Turkcell International revenues increased by 2.2% to TRY 875 million
135 million).
(TRY 856 million).
• Other subsidiaries’(2) revenues rose by 44.2% to TRY 623 million (TRY
432 million). The consumer finance company recorded revenues of TRY
185 million for the full year.
Direct cost of revenues: Direct cost of revenues as a percentage of
revenues rose to 64.7% (60.8%) mainly due to the rise in depreciation and
amortization expenses (2.4pp) and retail sales related device costs (1.5pp)
in 2016.
Administrative expenses: Administrative expenses as a percentage of
revenues increased to 5.1% (4.9%) in 2016.
Net finance expense: Net finance expense rose to TRY 173 million (TRY
43 million), mainly due to higher translation losses and interest expenses in
relation to loans and 4.5G payables, as well as the decline in interest income
from time deposits in 2016.
Asset held for sale and discontinued operations: The Group believes that
an exit from Fintur countries is deemed highly probable within one year
and therefore Fintur should be classified as held for sale and reported as
discontinued operations as at 1 October 2016.
Income tax expense: The income tax expense declined by 36.6% to TRY
423 million (TRY 667 million) of which TRY 201 million comprised current
tax charges and TRY 222 million was the deferred tax expense recorded.
(1) Please refer to the notes to the consolidated financial statements for the definition of Turkcell Turkey, Turkcell International and other subsidiaries.
(2) “Other subsidiaries” is mainly comprised of our information and entertainment services, call center business revenues, financial services revenues and inter-business eliminations.
SECTORAL AND FINANCIAL INFORMATION TURKCELL ANNUAL REPORT 2016 106
TURKCELL GROUP: 2016 FINANCIAL & OPERATIONAL REVIEW
Cash flow analysis: Capital expenditures, including non-operational
items were at TRY 3,495 million of which TRY 3,144 million was related to
Turkcell Turkey and TRY 337 million to Turkcell International. The cash flow
item noted as “other” included payment of the second and third instalments
of the 4.5G license (TRY 2,704 million), payment to benefit from the tax
amnesty based on Article 6736 (TRY 130 million) and the negative impact
of increased advances given for fixed asset purchases (TRY 210 million),
prepaid expenses (TRY 35 million) and the positive impact of the change in
other working capital (TRY 59 million).
In 2016, operational capital expenditures (excluding license fees) at the
Group level were at 23.0% of total revenues.
Donations: Turkcell İletişim Hizmetleri A.Ş. has donated TRY 75,136,159.54
to various associations, oundations and charitable organizations in 2016.
Net income: Group net income as per IFRS declined to TRY 1,492 million
(TRY2,068 million) in 2016. This was mainly due to higher translation
losses, increased interest expenses in relation to loans and 4.5G payables,
the negative Fintur impact, a higher amortization expense due to the 4.5G
license, the decline in interest income from time deposits and the expenses
incurred to benefit from tax amnesty based on Article 6736.
Total cash & debt: Consolidated cash as of December 31, 2016 increased
to TRY 6,052 million, of which TRY 2,841 million (USD 807 million) was
denominated in USD, TRY 1,403 million (EUR 378 million) in EUR and TRY
1,700 million in TRY , despite the TRY 1.4 billion third instalment payment of
the 4.5G license in Q416.
Consolidated debt as of December 31, 2016 rose to TRY 9,781 million from
TRY 8,132 million as of September 30, 2016. This was mainly due to the
higher debt portfolio of our consumer finance company through utilization
of loans, as well as commercial paper issuance with a nominal amount of
TRY 250 million. Meanwhile, the translation increase in the FX denominated
debt portfolio of Turkcell Turkey, due to depreciation of TRY against USD
and EUR, also led to a rise in our total consolidated debt.
• Turkcell Turkey’s debt was TRY 7,605 million, of which TRY 3,668 million
(USD 1,042 million) was denominated in USD, TRY 3,548 million (EUR
956 million) in EUR and the remaining TRY 388 million in TRY .
• The debt balance of lifecell was TRY 407 million, denominated in UAH.
• Our consumer finance company had a debt balance of TRY 1,763 million,
of which TRY 93 million (EUR 25 million) was denominated in EUR.
TRY 5,578 million of our consolidated debt is set at a floating rate, while
TRY 2,846 million will mature within less than a year. (Please note that the
figures in parentheses refer to USD or EUR equivalents).
TURKCELL ANNUAL REPORT 2016 107
PROFORMA NET INCOME - NET INCOME RECONCILIATION
We use “proforma net income” as a means of presenting our net income net of certain non-operating items and items that we believe are non-recurring.
We believe “proforma net income” facilitates performance comparisons from period to period and management decision making. We define “proforma
net income” in this document as net income excluding FX gain/(loss) (including tax and minority impact), interest Income on time deposits of Turkcell
İletişim Hizmetleri, interest expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a non-
GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at “proforma net income.” The
reconciliation of adjusted net income to income is as shown below.
Below table presents reconciliation of Turkcell Group proforma net income to net income per IFRS:
Net income impacts (TRY million)
Proforma net income
FX impact (net of tax and minority interest)
Interest income (net of tax)
Interest expense (net of tax)
One-off impacts (net of tax)
Commercial Agreement Termination
Turk Telekom Settlement
4.5G VAT receivables discount
4.5G license amortization
Fintur impact
Other impacts
Net income - IFRS
FY15
2,348
(404)
181
(118)
(118)
(51)
(30)
(6)
349
(83)
2,068
Net income impacts (TRY million)
Proforma net income
FX impact (net of tax)
Interest income (net of tax)
Interest expense (net of tax)
One-off impacts (net of tax)
Coup attempt emergency communication packages
Expenses incurred in relation to tax amnesty
4.5G VAT receivables discount
4.5G license amortization
Fintur impact
Other impacts
Net income - IFRS
Below table presents reconciliation of Turkcell Turkey proforma net income to net income per IFRS:
Net income impacts (TRY million)
Proforma net income
FX impact (net of tax)
Interest income (net of tax)
Interest expense (net of tax)
One-off impacts (net of tax)
Commercial Agreement Termination
Turk Telekom Settlement
4.5G VAT receivables discount
4.5G license amortization
Other impacts
Net income - IFRS
FY15
2,291
302
181
(39)
(118)
(51)
(30)
(6)
(46)
2,484
Net income impacts (TRY million)
Proforma net income
FX impact (net of tax)
Interest income (net of tax)
Interest expense (net of tax)
One-off impacts (net of tax)
Coup attempt emergency communication packages
Expenses incurred in relation to tax amnesty
4.5G VAT receivables discount
4.5G license amortization
Other impacts
Net income - IFRS
FY16
2,522
(643)
403
(342)
(48)
(136)
30
(260)
(40)
6
1,492
FY16
2,384
(608)
403
(301)
(48)
(136)
30
(260)
16
1,480
SECTORAL AND FINANCIAL INFORMATION TURKCELL ANNUAL REPORT 2016 108
TURKCELL GROUP: 2016 FINANCIAL & OPERATIONAL REVIEW
OPERATIONAL REVIEW (TURKEY):
Summary of Operational Data
Number of subscribers (million)
Mobile Postpaid (million)
Mobile M2M (million)
Mobile Prepaid (million)
Fiber (thousand)
ADSL (thousand)
IP TV (thousand)
Churn (%)
Mobile Churn (%)
Fixed Churn (%)
ARPU (Average Monthly Revenue per User)
Mobile ARPU - Blended (TRY)
Postpaid
Postpaid (excluding M2M)
Prepaid
Fixed Residential ARPU, blended (TRY)
Average Mobile Data Usage per User (GB/user)
Mobile MOU (Average Monthly Minutes of Usage per Subs)Blended
Our postpaid customers expanded by 797 thousand net additions, while
prepaid customers declined by 1.8 million in 2016 in line with our strategy
of focusing on valuable customers. Our total mobile customers were 33
million. Postpaid customers comprised 52.5% (48.7%) of total mobile
customers. We reported 342 thousand annual net additions to our fixed
customer base; 144 thousand were fiber and 197 thousand were ADSL
customers. Accordingly, our fixed customers reached 1.9 million, while our
fiber customers exceeded 1 million. IP TV customers reached 360 thousand
on 136 thousand annual net additions.
Mobile churn declined 2.7pp on the back of our value focused customer
strategy, and value propositions that meet our customers’ needs. On the
fixed side, the churn rate was at 18.9% (16.7%).
Mobile ARPU reached a record high of TRY 26.8 on 9.4% growth. Mobile
ARPU growth was mainly driven by our upsell strategy, favourable change
in customer mix, focus on high value customer groups, and increased
package penetration. The triple play ratio(1), which includes customers of
voice, data and digital services combined reached 42% and contributed
to the ARPU rise. Fixed residential ARPU rose 4.9% with the increase in
multiplay customers with TV2 to 36% of total residential fiber customers,
along with upsell efforts.
FY15
35.8
16.6
1.9
17.4
899.4
620.8
223.7
27.3%
16.7%
24.5
38.5
42.7
12.4
48.7
1.4
296.6
FY16
35.3
17.4
2.1
15.7
1,043.9
818.0
359.7
24.6%
18.9%
26.8
39.2
44.0
13.9
51.1
2.4
323.9
% CHANGE
(1.4%)
4.8%
10.5%
(9.8%)
16.1%
31.8%
60.8%
(2.7pp)
2.2pp
9.4%
1.8%
3.0%
12.1%
4.9%
64.7%
9.2%
We saw solid demand for our mobile data offerings with the introduction
of 4.5G, which led to 64.7% growth in average mobile data usage per user.
Average mobile data usage of 4.5G users increased to 5GB in December
2016.
Mobile MoU rose 9.2% with an increased postpaid base and upsell efforts.
Smartphone penetration on our network reached 64% with 3.1 million
annual net additions. Accordingly, there were 19.2 million smartphones on
our network at year end, with 55% being 4.5G enabled.
(1) Breakdown among mobile voice users which excludes subscribers who do not use their line in
the last 3 months
(2) Multiplay customers with TV: Internet + TV users & internet + TV + voice users
TURKCELL ANNUAL REPORT 2016
TURKCELL ANNUAL REPORT 2016
109
FORWARD LOOKING STATEMENTS
In 2016, we delivered on our guidance for consolidated revenue
growth, EBITDA margin and operational capex/sales ratio
(excluding license fees).
2016
2017 GUIDANCE
MIDTERM TARGET
(2017-2019)
Revenue Growth
12%
13%-15%
12%-14%
EBITDA Margin
32.3%
32%-34%
33%-35%
OP.CAPEX/Sales*
23.0%
~20%
~16% (in 2019)
In 2017, we target increasing our Group revenues by 13-15%, an EBITDA margin of 32-34%, and an operational capex to sales ratio of 20%.
In the medium term, between 2017-2019, we are targeting to have our Group revenues grow by 12-14%, with an EBITDA margin target of 33-35% and the
operational capex to sales ratio to decline to 16% by 2019.
* Excluding license fees.
Please note that above paragraphs contain forward looking statements based on our current estimates and expectations regarding market conditions for each of our different businesses. No assurance
can be given that actual results will be consistent with such estimates and expectations. For a discussion of factors that may affect our results, see our Annual Report on Form 20-F for 2016 filed with
U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.
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110
REVIEW OF RISK ASSESSMENT
The headlines below with regards to financial, operational, strategic, legal
and regulatory, reputational and business continuity risks are monitored
within the context of our corporate risk governance practice:
• Any challenges in competition in the Turkish market where majority of
our revenues are generated;
Risk Management and Internal Control Mechanism
During the process of selecting the independent external auditor; the Audit
Committee considers the competencies and independence status of the
independent audit firms, and advises the Board of Directors presenting a
report about the most suitable audit firm.
• The possibility of not attaining expected returns on new investments and
new businesses;
• Regulatory decisions and changes in the regulatory environment;
• Any downturn in the macroeconomic environment or political instability
in Turkey and internationally;
• Any regulatory and legal regulations having adverse effect on our
operations in those countries where we have operations;
• Macroeconomic instability and currency fluctuations in those countries
where we have operations;
• Foreign exchange rate risks and risks relating to our cash balance
•
management that could significantly affect our results of operation;
Increase in our borrowing requirements as a result of cash generated
from operations and related costs;
• Limitations on spectrum as a scarce resource in mobile
telecommunication systems and speculation regarding base transceiver
stations;
• Turkcell’s existing ownership structure and ongoing disagreements
among our main shareholders;
• Our dependence on certain systems and third-party suppliers related to
the products and services we provide;
• Transition period in case of a resignation of our key personnel, our
partners and their employees;
• Resolutions in various claims and legal actions arising in the ordinary
course of our business;
• Risk of errors, misconduct or omissions in financial reporting despite
regular internal controls;
• Threats of natural disasters, cyber-attacks, sabotage and unplanned
operational cuts risks towards our network and information technology
infrastructure;
• Risk of decrease in our market share as a result of not being able
to develop products and services that meet customers’ needs and
expectations;
• Risk of not being able to meet the expected increase in value as a result
of falling behind of expected developments and improvements in sales
channels and
• Risk of not being able to keep up with the advancement in technology
and thus the risk of significant increase in investments.
During our Company’s Ordinary general assembly meeting held on 29th of
March 2016, Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali
Müşavirlik A.Ş. was appointed as the Company auditor for auditing our
Company’s financial statements of 2016 as per the TCC.
Moreover, the Internal Audit Function operates with the Board of Directors
and is responsible for the auditing of Turkcell İletişim Hizmetleri A.Ş.
and all of the group companies which are subsidiaries, and reports the
results of the audit carried out in line with the International Standards
for the Professional Practice of Internal Auditing to the Audit Committee.
The auditing activities of the Internal Audit function mainly comprise of
operational audits conducted pursuant to annual audit plans and audits in
accordance with Article 404 of the Sarbanes-Oxley Act.
Operational audit activities are carried out according to annual audit plans
prepared with respect to a risk based audit approach. Through conducting
operational audits, Internal Audit function evaluates and improves
effectiveness of risk management, control, and governance processes and
provides assurance to help Turkcell accomplish its objectives.
On the other hand, as we are listed on the New York Stock Exchange in the
United States, audits are conducted within the framework of the annual
plan to provide assurance in terms of the adequacy and effectiveness of
internal control system across Turkcell and Turkcell group companies, of
which financials are consolidated, and whether this structure operates
effectively, in compliance with the provisions of Article 404 of the
Sarbanes-Oxley Act, which all publicly traded companies are required to
comply with. All stages from the planning stage to the specified internal
control insufficiencies and following and concluding actions of the audit
activities carried out in accordance with said Article are reported to the
Audit Committee, CEO and CFO at regular intervals.
The Internal Audit Unit also provides consultancy in current matters and
matters requested by the management.
TURKCELL ANNUAL REPORT 2016
111
In 2000, Turkcell formulated its business continuity plans in a manner
also encompassing its technical operations and repositioned its business
continuity plan as Business Continuity Management by broadening the
extent thereof in 2004.
With the restructuring in 2011, the scope of the program expanded so
as to comprise Turkcell Group companies and suppliers. Turkcell Group
Business Continuity Management System has been structured and certified
in a manner ensuring the continuity of our call, messaging, Internet and
societal security services as per the “ISO 22301, Societal security - Business
continuity management systems” standard. Regular drills are conducted
for our business continuity plans formed by considering the customers’
expectations, corporate policies and legal obligations in order to guarantee
their operation in emergency cases.
Thanks to our geographically dispersed technical infrastructure, extensive
coverage, solution partner network, mobile exchanges, additional capacity,
emergency centers and extensive experience in handling emergencies
enable us to minimize the impact of risks as much as possible and
additionally, the experience of our Group companies in customer services,
our high speed fiber-optic infrastructure, data storage services and our
experienced software development teams allow us to effectively manage
any disasters from another center, thereby ensuring the continuity of our
activities.
The Internal Audit Unit reports the compliance practices as per Sarbanes
Oxley Rule Act Section 404 to the Audit Committee while Corporate Risk
Management Unit reports to the Early Detection of Risks Committee. The
Internal Audit mechanism operates with a risk based audit approach. Within
this scope, functionally and institutionally probable risks are continuously
monitored, where the risk analyses resulting from these conducted
operations constitute the main input of audit activities.
Furthermore, there is an Enterprise Risk Management (ERM) process which
comprises identifying the risks that may affect Turkcell’s performance
in achieving its targets, coordinating risk analysis activities, planning
necessary actions, sharing, reporting and following the outcomes with
the Company management. The Enterprise Risk Management Unit is
responsible for coordinating the ERM process under the supervision of the
Group Internal Audit Directorate. The Turkcell Enterprise Risk Management
Unit aims to develop an approach, where the risk management process
is conducted in an integrated manner with the fundamental management
processes. While enabling this, a framework associated with the process
was identified in accordance with an Enterprise Risk Management procedure
as per the COSO ERM framework and ISO 31000 standard. During the risk
identification and evaluation period, different methods such as workshops,
brainstorming sessions, reports from risk contacts, thorough interviews,
research reports, etc. are used. Thus, the objective was to extensively
identify, evaluate and effectively manage risks causing uncertainties.
As of the end of the financial year of 2012, the “Early Detection of Risks
Committee” has been in operation in order to perform activities in a manner
affiliated with the Board of Directors within the scope of article 378 of
the TCC and the Communiqué on Corporate Governance of the CMB. The
Early Detection of Risks Committee supports the Board of Directors by
performing studies for the purpose of early diagnosis of the risks which
may jeopardize the existence, development and continuity of the Company,
implementing the necessary measures related with the identified risks and
managing the risks. The Committee reports to the Board of Directors once
every 2 months and the reports are sent to an independent audit Company.
The Board of Directors regularly provides an evaluation regarding the risks
affecting the Company through the Early Detection of Risks Committee.
The Enterprise Risk Management Unit is responsible for coordinating the
risk assessment and risk avoidance activities at departments as well as
reporting the results to the Early Detection of Risks Committee within the
scope of Enterprise Risk Management methodology. During this process,
the ownership of the risks and the responsibility of risk avoidance activities
belong to the business and not transferred to the responsibility of the
Enterprise Risk Management Unit.
SECTORAL AND FINANCIAL INFORMATION TURKCELL ANNUAL REPORT 2016 113
TURKCELL İLETİŞİM HİZMETLERİ A.Ş. AND
ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED 31 DECEMBER 2016 AND INDEPENDENT
AUDITOR’S REPORT
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 114
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Turkcell İletişim Hizmetleri A.Ş.
In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of profit or loss,
comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of Turkcell İletişim Hizmetleri
A.Ş. and its subsidiaries at December 31, 2016, and the results of their operations and their cash flows for the year then ended in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over
Financial Reporting appearing on Item 15 of the 2016 Annual Report to Shareholders. Our responsibility is to express opinions on these financial
statements and on the Company’s internal control over financial reporting based on our integrated audits. 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
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
We also have audited the adjustments to reflect the discontinued operations to the 2015 and 2014 financial statements, as described in Note 17. In
our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to
the 2015 and 2014 financial statements of the company other than with respect to the adjustments and, accordingly, we do not express an opinion
or any other form of assurance on the 2015 and 2014 financial statements taken as a whole.
TURKCELL 2016 ANNUAL REPORT
115
A company’s internal control over financial reporting is a process designed 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 (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
PwC Bağımsız Denetim ve
Serbest Muhasebeci Mali Müşavirlik A.Ş.
Gökhan Yüksel, SMMM
Partner
Istanbul, Turkey
March 20, 2017
TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION 116
TURKCELL ILETISIM HIZMETLERI AS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)
Note
31 December 2016
31 December 2015
Assets
Property, plant and equipment
Intangible assets
GSM and other telecommunication operating licenses
Computer software
Other intangible assets
Investment properties
Other non-current assets
Investments accounted for using the equity method
Trade receivables
Receivables from financial services
Deferred tax assets
Total non-current assets
Inventories
Due from related parties
Trade receivables and accrued income
Receivables from financial services
Other current assets
Derivative instruments
Cash and cash equivalents
Subtotal
Assets classified as held for sale
Total current assets
Total assets
Equity
Share capital
Share premium
Treasury shares (-)
Additional paid in capital
Reserves
Remeasurements of employee termination benefit
Retained earnings
Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS
Non-controlling interests
Total equity
Liabilities
Borrowings
Employee benefits
Provisions
Other non-current liabilities
Trade and other payables
Deferred tax liabilities
Total non-current liabilities
Borrowings
Current tax liabilities
Trade and other payables
Due to related parties
Deferred revenue
Provisions
Derivative instruments
Total current liabilities
Total liabilities
Total equity and liabilities
13
14
15
18
16
20
21
22
38
20
21
23
33
24
17
25
28
29
31
27
19
28
32
38
29
30
33
8,195,705
8,235,989
6,160,536
1,838,409
237,044
46,270
575,234
-
235,393
909,466
51,255
18,249,312
131,973
5,861
3,289,904
1,486,906
770,135
390,958
6,052,352
12,128,089
1,222,757
13,350,846
31,600,158
2,200,000
269
(65,607)
35,026
1,102,896
(41,786)
12,780,967
16,011,765
56,632
16,068,397
6,935,102
164,553
187,541
427,547
-
458,160
8,172,903
2,846,060
71,638
4,101,991
11,201
93,800
192,442
41,726
7,358,858
15,531,761
31,600,158
6,821,494
8,232,637
6,505,739
1,570,346
156,552
49,572
441,940
981,939
836,256
-
48,615
17,412,453
75,471
11,760
4,098,928
-
1,689,686
216
2,918,796
8,794,857
-
8,794,857
26,207,310
2,200,000
269
-
35,026
861,111
(14,320)
11,272,731
14,354,817
64,085
14,418,902
3,487,786
114,869
130,619
366,670
1,270,610
113,437
5,483,991
726,454
12,855
5,283,070
6,555
121,078
152,115
2,290
6,304,417
11,788,408
26,207,310
The accompanying notes on page 7 to 114 are an integral part of these consolidated financial statements.
F1
TURKCELL 2016 ANNUAL REPORT
TURKCELL ILETISIM HIZMETLERI AS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31 December 2016
(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)
117
Revenue
Direct costs of revenue
Gross profit from non-financial operations
Revenue from financial services
Direct costs of revenue from financial services
Gross profit from financial operations
Gross profit
Other income
Selling and marketing expenses
Administrative expenses
Other expenses
Operating profit
Finance income
Finance costs
Net finance costs
Monetary gain / (loss)
Share of profit of equity accounted investees
Profit before income tax
Income tax expense
Profit from continuing operations
Profit/ (loss) from discontinuing operations
Profit for the year
Profit / (loss) attributable to:
Owners of Turkcell Iletisim Hizmetleri AS
Non-controlling interests (*)
Profit for the year
Basic earnings per share- Total group (in full TL)
Basic earnings per share- from continuing operations (in full TL)
(*) Profit attributable to non-controlling interests solely derives from continuing operations.
Note
7
12
7
12
8
12
12
8
10
10
11
26
26
2016
14,100,863
(9,166,384)
4,934,479
184,698
(70,223)
114,475
5,048,954
78,569
(1,910,947)
(721,849)
(312,801)
2,181,926
1,064,794
(1,237,593)
(172,799)
-
-
2,009,127
(423,160)
1,585,967
(42,164)
1,543,803
1,492,088
51,715
1,543,803
0.68
0.70
2015
12,769,415
(7,769,483)
4,999,932
-
-
-
4,999,932
44,454
(1,901,859)
(625,279)
(270,446)
2,246,802
756,039
(799,514)
(43,475)
-
-
2,203,327
(667,112)
1,536,215
367,336
1,903,551
2,067,654
(164,103)
1,903,551
0.94
0.77
2014
12,043,587
(7,383,947)
4,659,640
-
-
-
4,659,640
58,929
(1,974,608)
(562,694)
(135,177)
2,046,090
955,401
(1,246,986)
(291,585)
205,068
4,466
1,964,039
(730,444)
1,233,595
202,821
1,436,416
1,864,640
(428,224)
1,436,416
0.85
0.76
The accompanying notes on page 7 to 114 are an integral part of these consolidated financial statements.
F2
TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION 118
TURKCELL ILETISIM HIZMETLERI AS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME For the year ended 31 December 2016
(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)
Profit for the year
Other comprehensive income / (expense):
Items that will not be reclassified to profit or loss:
Remeasurements of employee benefits
Income tax relating to remeasurements of employee termination benefits
Items that may be reclassified to profit or loss:
Changes in cash flow hedge reserve
Exchange differences on translation of foreign operations
Exchange differences arising from discontinuing operations
Income tax relating to these items
Other comprehensive (loss) / income for the year, net of income tax
Total comprehensive income for the year
Total comprehensive income/ (loss) attributable to:
Owners of Turkcell Iletisim Hizmetleri AS
Non-controlling interests
Total comprehensive income for the year
Total comprehensive income/ (expense) attributable to the
owners arises from:
Continuing operations
Discontinued operations
2016
1,543,803
(34,532)
7,066
(27,466)
-
63,920
154,552
(87,381)
131,091
103,625
1,647,428
1,594,465
52,963
1,647,428
1,496,209
98,256
1,594,465
2015
1,903,551
(13,466)
2,563
(10,903)
719
166,730
(551,196)
(5,749)
(389,496)
(400,399)
1,503,152
1,616,867
(113,715)
1,503,152
1,798,094
(181,227)
1,616,867
2014
1,436,416
(819)
196
(623)
1,089
477,592
(9,114)
(3,646)
465,921
465,298
1,901,714
2,098,610
(196,896)
1,901,714
1,711,654
190,060
1,901,714
The accompanying notes on page 7 to 114 are an integral part of these consolidated financial statements.
F3
TURKCELL 2016 ANNUAL REPORT 119
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F4
TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
120
TURKCELL ILETISIM HIZMETLERI AS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)
Note
2016
2015
2014
Cash flows from operating activities
Profit before income tax from
Continuing operations
Discontinued operations
Profit before income tax including discontinued operations
Adjustments for:
Depreciation and impairment of fixed assets and investment property
Amortization of intangible assets
Net finance (income)
Fair value gains on derivative financial instruments
Income tax expense
(Gain) on sale of property, plant and equipment
Unrealized foreign exchange (loss)/ gain on operating assets
Provisions
Share of profits/ (losses) of discontinued operations
Share of profit of equity accounted investees
Loss on sale of A-tel
Negative goodwill
Reversal of provision for equity accounted investees
Deferred revenue
Change in trade receivables
Change in due from related parties
Change in receivables from financial operations
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 non-current liabilities
Change in employee benefits
Change in other working capital
Interest paid
Income tax paid
Dividends received from discontinued operations
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
Acquisition of subsidiary net off cash acquired
Proceeds from currency option contracts
Payment of currency option contracts premium
Proceeds from sale of A-tel
Change in property, plant and equipment advances
Change in financial assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Acquisition of non-controlling interest
Capital decrease in subsidiaries
Proceeds from issuance of loans and borrowings
Proceeds from issuance of bonds
Repayment of borrowings
Dividends paid
Treasury shares
Change in non-controlling interest
Decrease/(increase) in cash collateral related to loans
Net cash generated by/(used in) financing activities
Net increase/(decrease) 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
1,585,967
(42,164)
1,543,803
1,281,539
921,812
(117,598)
(383,452)
423,160
197,543
42,164
-
-
-
-
(20,350)
4,408,898
1,197,053
7,514
(2,396,372)
(62,090)
643,444
78,770
4,302
(2,733,901)
(14,477)
15,151
29,286
1,177,578
(434,521)
(135,920)
-
607,137
(2,572,401)
(855,097)
49,639
-
-
-
-
(209,686)
-
610,837
(2,976,708)
-
(9,000)
9,381,318
167,500
(4,932,768)
(51,416)
(65,607)
-
349,004
4,839,031
2,469,460
2,918,796
664,096
6,052,352
1,536,215
367,336
1,903,551
1,118,499
549,251
(515,040)
-
667,112
196,588
(367,336)
-
-
-
-
8,095
4,126,951
(821,208)
3,907
-
(4,526)
(771,583)
(70,030)
(20,530)
348,472
(14,088)
5,125
23,423
2,805,913
(153,529)
(751,078)
-
1,901,306
(2,135,358)
(2,461,612)
24,192
-
1,070
-
-
228,070
19,350
761,328
(3,562,960)
(267,920)
-
4,866,381
1,439,862
(6,551,001)
(4,025,515)
-
-
(349,243)
(4,887,436)
(6,549,090)
9,031,881
436,005
2,918,796
1,233,595
202,821
1,436,416
1,157,720
481,737
(855,645)
-
730,444
155,931
(202,821)
(23,627)
902
(2,085)
(19,161)
(24,935)
3,768,021
(1,156,196)
7,838
-
(2,541)
(77,524)
(31,927)
3,131
191,011
29,045
12,842
(51,806)
2,691,894
(94,107)
(699,293)
92,263
1,990,757
(1,553,590)
(575,885)
28,094
(27,900)
2,770
(33)
597
(236,042)
38,336
945,663
(1,377,990)
-
-
4,736,913
-
(4,635,652)
(8,172)
-
(75)
-
93,014
705,781
8,128,418
197,682
9,031,881
13
14
10
11
31
30
20
38
21
22
23
18
38
32
27
29
13
14
24
The accompanying notes on page 7 to 114 are an integral part of these consolidated financial statements.
F5
TURKCELL 2016 ANNUAL REPORT 121
Page
7
8
14
43
45
48
52
53
53
54
55
57
59
61
66
69
70
71
72
74
75
75
76
77
77
80
80
81
83
84
84
86
87
89
98
98
99
106
111
114
TURKCELL ILETISIM HIZMETLERI AS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended 31 December 2016
(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)
Notes to the consolidated financial statements
1. Reporting entity
2. Basis of preparation
3. Significant accounting policies
4. Determination of fair values
5. Financial risk management
6. Operating segments
7. Revenue
8. Other income and expenses
9. Personnel expenses
10. Finance income and costs
11. Income tax expense
12. Expenses by nature
13. Property, plant and equipment
14. Intangible assets
15. Investment property
16. Investments accounted for using the equity method
17. Asset held for sale discontinued operation
18. Other non-current assets
19. Deferred tax assets and liabilities
20. Trade receivables and accrued income
21. Receivables from financial services
22. Inventory
23. Other current assets
24. Cash and cash equivalents
25. Equity
26. Earnings per share
27. Other non-current liabilities
28. Borrowings
29. Employee benefits
30. Deferred revenue
31. Provisions
32. Trade and other payables
33. Derivative instruments
34. Financial instruments
35. Operating leases
36. Guarantees and purchase obligations
37. Commitments and contingencies
38. Related parties
39. Subsidiaries
40. Subsequent events
F6
TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
122
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 Maltepe Aydinevler Mahallesi Inonu Caddesi No: 20, Kucukyali Ofispark / İstanbul. It is engaged in
establishing and operating a Global System for Mobile Communications (“GSM”) network in Turkey and regional states.
In April 1998, the Company signed a license agreement (the “2G License”) with the Ministry of Transport, Maritime Affairs 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 26 August 2015, “Authorization Tender on IMT Services and Infrastructure” publicly known as 4.5G license tender, was held by the ICTA and the
Company was awarded with a total frequency band of 172.4 MHz for 13 years. The tender price is EUR 1,623,460 (excluding VAT of 18%). IMT authorization
period expires on 30 April 2029 and operators were be able to commence service delivery for 4.5G starting from 1 April 2016. 2x1.4 MHz frequency band in
900MHz spectrum and 2 units of 2x5 MHz frequency bands in 2100 MHz spectrum were commenced on 1 December 2015, while remaining packages were
commenced on 1 April 2016. For details please refer to Note 14.
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 started to pay
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.
The Company's parent is Turkcell Holding A.S., which holds 51.0% of the Company's shares as of 31 December 2016. The main shareholders of Turkcell
Holding A.S. are Sonera Holding B.V. (“Sonera”), Cukurova Group and Alfa Telecom Turkey Limited (“Alfa”) according to the information obtained from
public sources.
F7
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
123
After failure to comply with corporate governance principles for election of independent board members, the CMB with its resolution dated 11 March
2013 appointed 3 independent board members. In addition, the CMB with its resolutions dated 15 August 2013 and 13 September 2013, announced the
appointment of 4 members, of which 2 members were chosen from the independent nominees list submitted by Sonera, as board members who satisfy
the independence criteria. All members shall serve as members until new members are elected by the general assembly or until the CMB announces a new
resolution. After appointment of board members by the CMB, Turkcell board is comprised of 7 non-executive board members who satisfy the independence
criteria and of which 3 are independent board members.
The consolidated financial statements of the Company as at and for the year ended 31 December 2016 comprise the Company and its subsidiaries (together
referred to as the “Group”) and the Group’s interest in an associate. Subsidiaries of the Company, their locations and their nature of operations are disclosed
in Note 39. The Company’s and each of its subsidiaries’ and associate’s financial statements are prepared as at and for the year ended 31 December 2016.
2. BASIS OF PREPARATION
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and interpretations
issued by the IFRS Interpretations Committee (“IFRS IC”) applicable to companies reporting under IFRS. The financial statements comply with IFRS as
issued by the International Accounting Standards Board (“IASB”).
The Company selected the presentation form of “function of expense” for the statement of profit or loss in accordance with International Accounting
Standards (“IAS”) 1 “Presentation of Financial Statements”.
Authority for reissue and approval of consolidated financial statements belongs to the General Assembly. Consolidated financial statements are authorized
for issue by the Board of Directors with the recommendation of Audit Committee of the Company.
The Group’s audited consolidated financial statements prepared as at 31 December 2015 were approved by the General Assembly on 29 March 2016.
The consolidated financial statements as at and for the year ended 31 December 2016 were authorized for issue by the Board of Directors on 15 February
2017.
(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. The financial statements have been prepared on a historical cost basis, except for derivative
financial instruments measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at
the measurement date.
F8
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 124
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing
transactions that are within the scope of IAS 17 “Leases”, transactions that are within the scope of IFRS 2 “Share based payments” and measurements that
have some similarities with fair value but are not fair value, such as net realizable value in IAS 2 “Inventories” or value in use in IAS 36 “Impairment of
assets”.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair
value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
(c) Functional and presentation currency
The consolidated financial statements are presented in Turkish Lira (“TL”), rounded to the nearest thousand. Moreover, all financial information expressed
in US Dollars (“USD” or “$”), Euro (“EUR”) and Ukranian Hryvnia (“UAH”) and Belarusian Ruble (“BYN”, formerly coded “BYR”) 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 Financell BV (“Financell”) is USD. The functional currency of Eastasian Consortium BV (“Eastasia”), Lifecell
Ventures Coöperatief U.A, (“Lifecell Ventures”), Fintur Holdings BV (“Fintur”) and Turkcell Europe GmbH (“Turkcell Europe”) is EUR. The functional
currency of lifecell LLC (“lifecell”), LLC Global Bilgi (“Global LLC”) and UkrTower LLC (“UkrTower”) is UAH. The functional currency of CJSC Belarusian
Telecommunication Network (“Belarusian Telecom”), Lifetech LLC (“Lifetech”) and Beltower LLC (“Beltower”) is BYN. The functional currency of
Azerinteltek QSC (“Azerinteltek”) is Azerbaijan Manat.
Effective from 1 July 2016, Belarusian Ruble has been redominated by 10,000 and coded as “BYN”, formerly known as “BYR”.
(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.
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 below:
F9
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
125
Allowance for doubtful receivables
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.
Useful lives of assets
The economic useful lives and residual values 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 GSM and other telecommunication operating licenses are based on
the duration of the license agreements.
Belarusian Telecom has 10 years of special GSM and UMTS services licenses acquired on 26 August 2008. In addition, the license period has been committed
and signed for an additional 10 years for a small fee. The amount of amortization on the consolidated financial statements was accounted on the assumption
that the duration of the license would be extended.
Gross versus net presentation of revenue
When the Group sells goods or services as a principal, income and payments to suppliers are reported on a gross basis in revenue and operating costs. If
the Group sells goods or services as an agent, revenue and payments to suppliers are recorded in revenue on a net basis, representing the margin earned.
Whether the Group is considered to be the principal or an agent in the transaction depends on analysis by management of both the legal form and
substance of the agreement between the Group and its business partners; such judgements impact the amount of reported revenue and operating costs but
do not impact reported assets, liabilities or cash flows.
F10
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 126
Multiple element arrangements
In arrangements which include multiple elements where the Group acts as principal, 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.
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.
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.
F11
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
127
Provisions, contingent Liabilities and contingent Assets
As detailed and disclosed in Note 37, the Group is involved in a number of investigations and legal proceedings (both as a plaintiff and as a defendant)
during the year arising in the ordinary course of business. All of these investigations and litigations are evaluated by the Group Management in accordance
with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and disclosed or accounted in the consolidated financial statements. Future results
or outcome of these investigations and litigations might differ from Group Management’s expectations. As at the reporting date, the Group Management
believes that appropriate recognition criteria and measurement basis are applied to provisions, contingent liabilities and contingent assets and that
sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount by considering current conditions and
circumstances.
Annual impairment review
The Group tests annually whether goodwill and intangible asset not yet available for use have suffered any impairment in accordance with the accounting
policy stated in Note 3. Additionally, the carrying amounts of Group’s nonfinancial assets are reviewed at each reporting date to determine whether there
is an indication of impairment. If any indication exists the assets recoverable amount is estimated in accordance with the accounting policy stated in Note
3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of
estimates as discussed in Note 14.
As at 31 December 2014, Astelit has impaired its assets in Crimea region amounting to TL 17,951. The risk of further annexations of Luhansk and Donetsk
regions still remain as a possibility. As at 31 December 2016, the net book value of non-current assets of the Group located in Donetsk and Luhansk
amounts to TL 14,450 and TL 1,198 respectively (31 December 2015: TL 20,687 and TL 2,908 respectively).
Current and potential future political and economic changes in Belarus and Ukraine could have an adverse effect on the subsidiaries operating in these
countries. The economic stability of Belarus and Ukraine depends on the economic measures that will be taken by the governments and the outcomes of the
legal, administrative and political processes in these countries. These processes are beyond the control of the subsidiaries established in these countries.
Consequently, the subsidiaries operating within Belarus and Ukraine may subject to foreign currency and interest rate risks related to borrowings and
the subscriber’s purchasing power and liquidity and increase in corporate and personal insolvencies, that may not necessarily be observable in other
markets. The accompanying consolidated financial statements contain the Group management’s estimations on the economic and financial positions of its
subsidiaries operating in Belarus and Ukraine. The future economic situation of Belarus and Ukraine might differ from the Group’s expectations. As at 31
December 2016, the Group’s management believes that their approach is appropriate in taking all the necessary measures to support the sustainability of
these subsidiaries’ businesses in the current circumstances.
Fair value measurements and valuation processes
Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability,
the Group uses market-observable data to the extent it is available. Where Level 1 and 2 inputs are not available, the Group can engage third party
qualified valuers to perform the valuation, if necessary. The management works closely with the qualified external valuers to establish the appropriate
valuation techniques and inputs to the model. Information about the valuation techniques and inputs used in determining the fair value of various assets
and liabilities are disclosed in Note 34.
F12
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
128
Contracted handset sales
The Company, the distributors and dealers offer joint campaigns to the subscribers which may include the sale of device by the dealer and/or distributor
and a communication service to be provided by the Company. The Company does not recognize any revenue for the device in these transactions by
considering the below factors:
- the Company is not primary obligor for the sale of handset,
- the Company does not have control over the sale prices of handsets,
- the Company has no inventory risk,
- the Company has no responsibility on technical compability of equipment delivered to customers
- the responsibility after sale belongs to the distributor and
- the Company does not make any modification on the equipment.
Changes in accounting policies
Other than the adoption of the new and revised standards as explained in Note 3(v), and change in Company’s reportable segments (Note 6) 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.
The Group did not make any major changes to the accounting estimates during the current year.
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.
As at 31 December 2016, remeasurements of employee termination benefits and derivative instruments have been disclosed separately in financial
statements, formerly disclosed under retained earnings, other current assets and borrowings respectively.
F13
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
129
The Company has for 2015 revised the manner in which it accounts for the cash paid to acquire the shares held by the non-controlling interest in Euroasia
Telecommunications Holding BV (“Euroasia”) in its statement of cash flows and has revised its presentation of 2015, resulting in a revision in net cash used
in investing activities and net cash used in financing activities in the statement of cash flows. The Company believes that the changes to prior period 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:
For the year ended 31 December 2015:
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Cash and cash equivalents
3. SIGNIFICANT ACCOUNTING POLICIES
As previously reported
1,901,306
(3,830,880)
(4,619,516)
2,918,796
Revisions
-
267,920
(267,920)
-
As revised
1,901,306
(3,562,960)
(4,887,436)
2,918,796
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.
(a) Basis of consolidation
(i) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally
recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:
• deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS
12 “Income Taxes” and IAS 19 “Employee Benefits” respectively;
• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group
entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date; and
• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” are
measured in accordance with that Standard.
F14
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 130
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the
fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s
previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of
liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s
identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are
measured at fair value or, when applicable, on the basis specified in another IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the
‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends
on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and
its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with IAS 39 “Financial Instruments: Recognition and measurement”, or IAS 37 “Provisions, Contingent Liabilities and Contingent
Assets”, as appropriate, with the corresponding gain or loss being recognized in profit or loss.
F15
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
131
(ii) Subsidiaries
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to its acquisition-date fair
value and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that
have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest
were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see
above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition
date that, if known, would have affected the amounts recognized at that date.
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the
Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give
it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing
whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the
time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary.
Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and
other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.
F16
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
132
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting
policies.
(iii) Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests
in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognized directly in equity and attributed to owners of the Company. In this context, the Group’s ownership interest in lifecell was increased
to 100% in July, 2015 and the deficit representing the difference between the non-controlling interests derecognized and the consideration paid for the
acquisition of shares amounting to TL 929,013 has been reduced from retained earnings in July 2015 and attributed to the owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive income in relation
to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss
or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary
at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on
initial recognition of an investment in an associate or a joint venture.
(iv) Business combinations 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 profit or loss are consolidated starting from the year that
the comparative financial statements are presented and financial statements of previous financial years are restated. Any positive or negative goodwill
arising from 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 acting in their capacity as
owners).
(v) Transactions eliminated on consolidation
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full
on consolidation. 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.
F17
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
133
(vi) 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 shareholders’ interests
derecognized is recorded under equity.
For the business combinations after 1 January 2009, subsequent changes in the fair value of the put option liability are recognized in profit or loss
(vii) Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating
policy decisions of the investee but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of
accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 “Non-
current Assets Held for Sale and Discontinued Operations”. Under the equity method, an investment in an associate or a joint venture is initially recognized in
the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive
income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate
or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture),
the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate or joint venture.
F18
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
134
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a
joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net
fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is
recognized immediately in profit or loss in the period in which the investment is acquired.
The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an
associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with
IAS 39 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount.
Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with
IAS 36 to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date the investment is classified as held for sale.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or
joint venture are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not
related to the Group.
(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. 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 profit
or loss, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized directly in equity.
Exchange differences are recognized in profit or loss in the period in which they arise except for:
• Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of
those assets where they are regarded as an adjustment to interest costs on those foreign currency borrowings;
• Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur,
which form part of the net investment in a foreign operation, and which are recognized in the foreign currency translation reserve and recognized in
profit or loss on disposal of the net investment.
F19
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
135
(ii) Foreign operations
The consolidated financial statements are presented in Turkish Liras, which is the presentation currency of the Group. The Group started to use TL as the
presentation currency starting from 31 December 2015 since the majority of the Group’s income and expenses are in TL.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to TL 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
TL at monthly average exchange rates excluding foreign operations in hyperinflationary economies which are translated to TL at exchange rates at the
reporting date.
The income and expenses of foreign operations in hyperinflationary economies are translated to TL at the exchange rate at the reporting date. Prior to
translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current period are restated to
account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the reporting date.
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 IFRS, such differences have been recognized in the foreign currency translation reserve.
Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising
are recognized in other comprehensive income.
F20
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 136
(c) Financial instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, borrowings, and trade and other payables.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
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:
• 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.
A financial asset is classified as held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
•
• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of
short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
•
F21
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
137
A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a
fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as at fair
value through profit or loss.
•
Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the statement of
profit or loss.
• 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 held-to-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 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 profit of loss.
• Other
Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.
(ii) Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
F22
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
138
(iii) 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, swap, option and participating cross currency swap contracts. These derivatives are
accounted 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.
Also the Group enters into derivative financial instruments to manage its exposure to interest rate, including interest rate collar. Further details of
derivative financial instruments are disclosed in Note 33.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at
the end of each reporting period. The resulting gain or loss is immediately recognized in the statement of profit or loss unless the derivative is designated
and effective as a hedging instrument, in which event the timing of the recognition in statement of profit or loss depends on the nature of the hedge
relationship.
(iv) Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity item in accordance with the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments
issued by the Group are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Group’s own equity instruments is recognized and deducted directly in/ from equity. No gain or loss is recognized in profit or loss on the
purchase, sale, issue or cancellation of the Group’s own equity instruments.
Subordinated debt instruments
The foreign subsidiaries of the Company have issued subordinated debt instruments to the Company. These instruments are treated as equity instruments
in subsidiaries’ separate financial statements and carried at historic cost in accordance with IAS 32 Financial Instruments: Presentation as it includes no
contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity
under conditions that are potentially unfavorable to the issuer.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
F23
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
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Financial liabilities at fair value through profit or loss
Financial liabilities are classified as at fair value through profit or loss where the financial liability is either held for trading or it is designated as at fair
value through profit or loss.
Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the finance income and cost line
items. Fair value is determined in the manner described in Note 34.
Other financial liabilities
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an
effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between
the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
(v) Offsetting financial assets and financial liabilities
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.
F24
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
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(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are initially stated at cost less accumulated depreciation (see below) and accumulated impairment losses (see
note 3(h)(ii)). Property, plant and equipment related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during
the hyperinflationary period which ended on 31 December 2005. Since the inflation accounting commenced on 1 January 2011, property, plant and
equipment related to the subsidiaries operating in Belarus are adjusted for the effects of inflation. However, decrease in inflation rate in subsequent
years led the three-year cumulative rate as of the end of 2014 to decrease to 65%. Accordingly, the economy of Belarus was considered to transit out of
hyperinflationary status and 2015 is determined to be appropriate to cease applying IAS 29. Therefore, subsidiaries operating in Belarus ceased applying
IAS 29 in 2015.
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 construction 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.
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 profit or loss.
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 profit or loss.
(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 profit or loss as incurred.
F25
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
141
(iii) Depreciation
Depreciation is recognized in the statement of profit or loss 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
21 – 25 years
4 – 20 years
3 – 25 years
4 – 8 years
2 – 10 years
4 – 6 years
5 – 10 years
3 – 5 years
Depreciation methods, useful lives and residual values are reviewed at least annually unless there is an indicator of impairment.
(e) Intangible assets
(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, where applicable, less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)). GSM and
other telecommunication operating licenses related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during the
hyperinflationary period which ended on 31 December 2005. Since the inflation accounting commenced on 1 January 2011 and ceased by 1 January 2015,
GSM and other telecommunication operating licenses related to the subsidiaries operating in Belarus are adjusted for the effects of inflation until 1 January
2015.
Amortization
Amortization is recognized in the statement of profit or loss 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
3 – 25 years
F26
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 142
(ii) Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software.
Costs associated with maintaining computer software programmes 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 profit or loss 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
(iii) Other intangible assets
3 – 8 years
Other 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, where applicable, less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)). Other
intangible related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during the hyperinflationary periods ceased
by 31 December 2005. Since the inflation accounting commenced on 1 January 2011 and ceased by 1 January 2015, other intangible assets related to the
subsidiaries operating in Belarus are adjusted for the effects of inflation until 1 January 2015.
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.
(iv) 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 profit or loss as incurred. Capitalized costs generally relate to the application development stage; any other costs incurred during the pre and
post-implementation stages, such as repair, maintenance or training, are expensed as incurred.
F27
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 143
Borrowing costs should be capitalized as part of cost of qualifying assets. Borrowing costs eligible for capitalization may include:
•
interest on loans and borrowings calculated using the effective interest rate method as described in IAS 39 - Financial Instruments: Recognition and
Measurement; and
• finance charges in respect of finance leases recognized in accordance with IAS 17 Leases.
• exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset. Such
borrowing costs are capitalized as part of the cost of the asset when it is probable that they will result in future economic benefits to the entity and the
costs can be measured reliably. An entity shall cease capitalizing borrowing costs when substantially all the activities necessary to prepare the qualifying
asset for its intended use or sale are complete.
An entity shall suspend capitalization of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
Exchange differences arising from foreign currency borrowings should be capitalized.
The amount of borrowing costs that may be capitalized should lie between the following two amounts:
• actual interest costs denominated in the foreign currency, translated at the actual exchange rate on the date on which the expense is incurred; and
• notional borrowing costs based on commercial interest rates prevailing in the functional currency at the date of initial recognition of the borrowing.
F28
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 144
Amortization
Amortization is recognized in the statement of profit or loss 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 list
Brand name
Indefeasible right of use
5 – 10 years
7 – 10 years
2 – 15 years
9 – 10 years
15 years
Amortization methods, useful lives and residual values are reviewed at least annually unless there is an indicator of impairment.
Goodwill
From 1 January 2010 the Group has applied IFRS 3 (2008) “Business Combinations” in accounting for business combinations.
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.
When the excess is negative, a bargain purchase gain is recognized immediately in the statement of profit or loss.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses if any. 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.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
F29
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
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(v) Internally generated intangible assets – research and development expenditure
Computer software includes internally generated capitalized software development costs that meet the definition of an intangible asset.
Expenditure on research activities is recognized as an expense under cost of sales in the period in which it is incurred.
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, development expenditure is charged to the
statement of profit or loss 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.
(vi) Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in
profit or loss when the asset is derecognized.
(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 and related financial liability are 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.
All other leases are operating leases and the leased assets are not recognized on the Group’s statement of financial position.
F30
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
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(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 2016 and 2015, inventories mainly consist of mobile phones, sim-cards, and
devices.
(h) Impairment
(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.
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.
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 profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognized
previously in equity is transferred to the statement of profit or loss.
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 profit or loss. For
available-for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehensive income. For available-for-sale equity
investments carried at cost, the reversal is not permitted.
(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 and intangible
asset not yet available for use, the recoverable amount is estimated each year at the same time.
F31
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 147
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 profit or loss. 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.
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.
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.
F32
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
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(i) Employee benefit obligations
(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 up to a of maximum full TL 4,297 as at 31 December 2016, per year of employment at the rate of
pay applicable at the date of retirement or termination. Termination benefits paid to key executive officers are classified in other expenses. 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. The retirement pay
liability is calculated annually by independent actuaries using the projected unit credit method.
(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 profit or loss 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.
(iii) Share-based payment
The Company provides a cash-settled share-based payment plan for selected employees in return for their services. For cash-settled share-based payment
plan, the Company measures the services received and the liability incurred at the fair value of the liability. Until the liability is settled, the Company
remeasures the fair value of the liability at each reporting date and at the settlement date, with any changes in fair value recognised in profit or loss for
the period. Cash-settled share-based payments are conditional upon meeting specified vesting conditions. As at 31 December 2016, the Company did not
recognize any liability in the consolidated financial statements as vesting conditions for the year ended 31 December 2016 were not met.
( 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.
F33
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
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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.
Personnel 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 is able
to make a reliable estimate of the obligation.
(k) Revenue
Revenue is recognized at the fair value of the consideration received or receivable, net of returns, trade discounts and rebates. Revenue from
telecommunication services includes postpaid and prepaid revenue from,voice, data, messaging and value added services, interconnect revenue, monthly
fixed fees, simcard sales and roaming revenue. Revenue from telecommunication services are recognized at the time services are rendered.
With respect to prepaid revenue, 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 telecommunication services. Deferred revenue is recorded under current liabilities.
Services may be bundled with other products/services and these bundled services and products involve consideration in the form of fixed fee or a fixed
fee coupled with a continuing payment stream. Total arrangement considerations relating to a bundled contract is allocated among the different units
accounting the following criteria:
• the deliverable has standalone value to the customer; and
• the fair value of the deliverable 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 deliverable of the transactions.
Revenue allocated to products given where the Group is the principal, 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.
Revenue for device sales is recognised when the device is delivered to the end customer and the significant risks and rewards of ownership have
transferred. For device sales made to intermediaries, revenue is recognised if the significant risks associated with the device are transferred to the
intermediary and the intermediary has no general right to return the device to receive a refund. If the significant risks are not transferred, revenue
recognition is deferred until sale of the device to an end customer by the intermediary or the expiry of any right of return.
The Company, the distributors and dealers offer joint campaigns to the subscribers which may include the sale of device by the dealer and/or distributor
and a communication service to be provided by the Company. In particular campaigns, the dealer makes the handset sale to the subscribers whose
instalments will be collected by the Company based on the letter of undertaking signed by the subscriber. With the letters of undertaking, the dealer
assigns its receivables from device sale to the distributor and the distributor assigns its receivables to the Company.
F34
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 150
The Company pays the distributor the net present value of the instalments to be collected from the subscribers upfront and recognizes contracted
receivable in its statement of financial position. The undue portion of assigned receivables from the distributors which were paid upfront by the Company
is classified as “undue assigned contracted receivables” in trade receivables (Note 20). When monthly installment is invoiced to the subscriber, related
portion is presented in “receivables from subscribers”. The Company collects the contracted receivables in installments during contract period and does not
recognize any revenue for the device in these transactions as the Company is not the principal for the sale of handset.
Starting from 2014, the subscribers has an option to buy the handset by bank loan whose instalments will be collected by the Company on behalf of the
bank. The Company does not bear any credit risk in this type of transactions. Since the Company collects the receivables during the contract period and is
agent for the sale of device in this bank loan structure, the Company does not recognize any revenue for the device in these transactions.
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. Monthly fixed fees are included telecommunication services revenues for the years ended 31 December 2016
and 2015.
Revenues from betting business 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 and mobile agent revenues comprised of 7.25% of mobile agency turnover after deducting VAT and gaming tax as head agent
starting from 23 March 2010. Revenues from betting business 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.
Azerinteltek received authorization from Azeridmanservis Limited Liability Company set under the Ministry of Youth and Sport of the Republic of
Azerbaijan to organize, operate, manage and develop the fixed odds and paramutual sports betting business. Since Azerinteltek acts as principal, total
consideration received from the player less payout (distribution to players) and amounts collected from players on behalf of Ministry of Sports is
recognized at the time all the services related with the games are fully rendered.
Azerinteltek has been authorized for the Lottery games by Azerlotereya. Azerinteltek has been generating commission revenue over Lottery games
turnover through its own agencies by applying 15% commission rate according to agreement between Azerinteltek and Azerlotereya. Commission revenues
are recognized at the time all the services related with the games are fully rendered.
Simcard sales are recognized upon delivery to distributors, net of returns, discounts and rebates. Simcard costs are also recognized upon sale of the simcard
to the distributors. Simcard sales are included telecommunication services revenues for the years ended 31 December 2016 and 2015.
Call center revenue are recognized at the time services are rendered.
Starting from 2016 the Company and distributors started to offer the option to buy a device through Turkcell Financing loan, which will be collected by
the Company. The Group carries a risk of collection in these transactions. Turkcell Finansman collects the purchased credit from the subscriber during the
contract period, and does not record revenue related to the device since it is not the main contractor in the device sale. Revenue from financial services
comprise of interest income generated from consumer financing activities. Interest income is recognized as it accrues, using the effective interest method.
F35
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
151
The revenue recognition policy for other revenue 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 profit or loss 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.
Lease income from operating leases where the Group is a lessor is recognised as income on a straight-line basis over the lease term. The respective leased
assets are included in the balance sheet based on their nature.
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 and held-to-maturity 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. As further discussed in Note 34, the Group’s exposure to foreign currency risk mainly results
from cash and cash equivalents, trade receivables, borrowings, other non-current liabilities and trade and other payables.
F36
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
152
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.
To the extent that an entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset, management determines the amount of
borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the weighted average
of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the
purpose of obtaining a qualifying asset.
All other borrowing costs are recognized in the statement of profit or loss in the period in which they are incurred.
(n) Transactions with related parties
The definition of a related party includes the following persons and entities:
(a) A person (or a close member of that person’s family) is related to the reporting entity if the person:
-has control or joint control over the reporting entity
-has significant influence over the reporting entity, or
-is a member of the key management personnel of the reporting entity, or of a parent of the reporting entity.
(b) The reporting entity is related to another entity if:
-The reporting entity and another entity are members of the same group (that is all entities within a group are related to each other)
-The reporting entity is an associate or joint venture of another entity. In this case reporting entity is related to all members of the group that another
entity belongs to
- The reporting entity and another entity are joint ventures of the same third party
- The reporting entity is a joint venture of this third party and another entity is an associate of this third party (or vice versa)
- Another entity is a post-employment benefit plan for the benefit of employees of reporting entity or an entity related to reporting entity. If reporting
entity is itself a post-employment benefit plan, any sponsoring employers are also related to reporting entity
- Another entity is controlled or jointly controlled by a person identified in (a) above
- A person who has control or joint control over reporting entity has significant influence over another entity or is a member of the key management
personnel of another entity, or
- Another entity (or any member of the group of which another entity is a part) provides key management personnel services to reporting entity or
reporting entity’s parent.
Related party transactions are transfers of resources, services or obligations between the reporting entity and a related party, regardless of whether a price
is charged.
F37
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
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(o) Income taxes
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of profit or loss except to the extent that it
relates to items recognized directly in equity or in other comprehensive income.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated statement of
profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. Current tax
is calculated 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 as the Group is able to control the
reversal of the temporary difference. 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 liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized,
based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. 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.
Interest and penalties assessed on income tax deficiencies are presented based on their nature.
(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 attributable to
ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding excluding treasury shares 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.
In Turkey, companies can raise their share capital by distributing “Bonus Shares” to shareholders from retained earnings. In computing earnings per share,
such “bonus share” distributions are treated as issued shares. Accordingly, the retrospective effect for such share distributions is taken into consideration in
determining the weighted-average number of shares outstanding used in this computation.
F38
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
154
(q) Operating segment
An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses including revenue
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 has aggregated its operations under two reportable segments within the year 2015 in accordance with its integrated communication and
technology services strategy as Turkcell Turkey and Turkcell International which represent economical integrity.
(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 revenue 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 profit or loss 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 transferred to
the statement of profit or loss on a straight-line basis over the expected useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred recognized in profit or loss in the period in which they
become receivable.
F39
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 155
(t) Investment property
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes).
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at
cost less accumulated depreciations and any accumulated impairment losses.
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic
benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.
(i) Depreciation
Depreciation is recognized in the statement of profit or loss on a straight-line basis over the estimated useful lives.
The estimated useful lives for the current and comparative periods are as follows:
Investment Property
25 - 45 years
Depreciation methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.
(u) Non-current asset held for sale and discontinued operations
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any
subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.
An associate or joint venture must meet the conditions to be classified as held for sale. It is first measured in accordance with applicable standards. Such
standard is IAS 28, and so the share of profits and remeasurement of carrying amounts are done in accordance with normal associate and joint venture rules
up to the point of classification as held for sale. The associate or joint venture is then measured in accordance with IFRS 5. It is be measured at the lower of
carrying amount and fair value less costs to sell. Equity accounting is ceased from the date the held for sale criteria are met.
Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of
business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss.
F40
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
156
v) New standards and interpretations
(i) Amendments to IFRSs affecting amounts reported and/or disclosures in the consolidated financial statements
None.
ii) Standards, amendments and interpretations applicable as at 31 December 2016
- Annual improvements 2014, effective from annual periods beginning on or after 1 January 2016. These set of amendments impacts 4 standards:
• IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal.
• IFRS 7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1) regarding servicing contracts.
• IAS 19, ‘Employee benefits’ regarding discount rates.
• IAS 34, ‘Interim financial reporting’ regarding disclosure of information.
- Amendment to IFRS 11, 'Joint arrangements' on acquisition of an interest in a joint operation, effective from annual periods beginning on or after 1
January 2016. This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business.
The amendments specify the appropriate accounting treatment for such acquisitions.
- Amendment to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets', on depreciation and amortisation, effective from annual periods
beginning on or after 1 January 2016. In this amendment the it has clarified that the use of revenue based methods to calculate the depreciation of an
asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption
of the economic benefits embodied in the asset. It is also clarified that revenue is generally presumed to be an inappropriate basis for measuring the
consumption of the economic benefits embodied in an intangible asset.
- Amendments to IAS 27, ‘Separate financial statements’ on the equity method, effective from annual periods beginning on or after 1 January 2016. These
amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial
statements.
- Amendment to IFRS 10 ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’, effective from annual periods
beginning on or after 1 January 2016.These amendments clarify the application of the consolidation exception for investment entities and their
subsidiaries.
- Amendment to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative, effective from annual periods beginning on or after 1 January
2016, these amendments are as part of the IASB initiative to improve presentation and disclosure in financial reports.
F41
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
157
iii) Standards, amendments and interpretations effective after 31 December 2016
- Amendments to IAS 7 ‘Statement of cash flows’ on disclosure initiative, effective from annual periods beginning on or after 1 January 2017. These
amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing
activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.
- Amendments IAS 12 ‘Income Taxes’, effective from annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for
deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. It also clarify certain other aspects of accounting
for deferred tax assets.
- Amendments to IFRS 2, ‘Share based payments’ on clarifying how to account for certain types of share-based payment transactions, effective from
annual periods beginning on or after 1 January 2018. This amendment clarifies the measurement basis for cash-settled, share-based payments and
the accounting for modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles in IFRS 2
that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax
obligation associated with a share-based payment and pay that amount to the tax authority.
- Amendment to IAS 40, Investment property’ relating to transfers of investment property, effective from annual periods beginning on or after 1 January
2018. These amendments clarify that to transfer to, or from, investment properties there must be a change in use. To conclude if a property has changed
use there should be an assessment of whether the property meets the definition. This change must be supported by evidence.
- Annual improvements 2014–2016, effective from annual periods beginning on or after 1 January 2018. These amendments impact 3 standards:
• IFRS 1,’ First-time adoption of IFRS’, regarding the deletion of short-term exemptions for first-time adopters regarding IFRS 7, IAS 19, and IFRS 10
effective 1 January 2018.
• IFRS 12,’Disclosure of interests in other entities’ regarding clarification of the scope of the standard. These amendments should be applied
retrospectively for annual periods beginning on or after 1 January 2017.
• IAS 28,’Investments in associates and joint ventures’ regarding measuring an associate or joint venture at fair value effective 1 January 2018.
- IFRIC 22,’ Foreign currency transactions and advance consideration’, effective from annual periods beginning on or after 1 January 2018. This IFRIC
addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The
interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The
guidance aims to reduce diversity in practice The Group is currently evaluating the impacts of the new pronouncements on its results, financial position
and cash flows, which are not expected to be material, except for the following:
- IFRS 15 ‘Revenue from contracts with customers’, effective from annual periods beginning on or after 1 January 2018. IFRS 15, ‘Revenue from contracts
with customers’ is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue
and improve comparability of the top line in financial statements globally.
F42
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
158
- Amendment to IFRS 15, ‘Revenue from contracts with customers’, effective from annual periods beginning on or after 1 January 2018. These amendments
comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus
agent assessment (gross versus net revenue presentation). New and amended illustrative examples have been added for each of those areas of guidance.
The IASB has also included additional practical expedients related to transition to the new revenue standard.
- IFRS 16 ‘Leases’, effective from annual periods beginning on or after 1 January 2019, This standard replaces the current guidance in IAS 17 and is a
farreaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a
‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value
assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated
the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the
new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS
16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
- IFRS 9 ‘Financial instruments’, effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in IAS 39. It
includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that
replaces the current incurred loss impairment model.
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) Investment property
The fair value of investment property is based on valuations performed by appointed independent registered appraisers taking into account valuation
methods such as market approach, discounted cash flow (“DCF”) method, replacement cost method, or the combination of two or all of these methods based on
the applicability of the valuation method to the respective property. All these methods often provide different values for investment property, therefore
the appraiser(s) reconcile the varying results and meld the results of the methods utilized in a reasonable way. Based on the valuation method utilized,
appraisers estimate the value of investment property which best reflects the market conditions at the balance sheet date.
(ii) 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.
F43
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
159
(iii) Trade and other receivables and receivables from financial services
The fair values of trade and other receivables and receivables from financial services are estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date.
The rate used for discounting these assets is 8.5% as at 31 December 2016 (31 December 2015: 10.75%).
(iv) Derivatives
The fair value of forward exchange contracts, swap contracts and option contracts are based on their listed market price, if available. If a listed market price
is not available, then fair values are derived from inputs other than quoted prices that are observable for the asset or liability or are derived 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.
(v) 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.
The rate used for discounting non-derivative financial liabilities is 8.5% as at 31 December 2016 (31 December 2015: 10.75%).
F44
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
160
5. FINANCIAL RISK MANAGEMENT
The Group practice is to centrally manage the Group’s predetermined capital / debt ratios by capital injection or using available credit facilities. The Group
obtains short and long-term borrowings according to the Group’s financial needs and market predictions. Debt instruments include commercial bank loans
to money market instruments and capital market instruments such as debt securities issued which are seldom used in order to maintain diversified source of
financing. The Group’s financial borrowing ratios are monitored for all transactions in order to prevent any negative effect on the Group’s credit ratings.
The Group has exposure to the following risks from its use of financial instruments:
• 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. Please refer to Note 34 for additional information on the Group’s exposure to risks.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Additionally, the Company
established a Risk Committee in accordance with the new Turkish Commercial Code effective from 1 July 2012.
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.
F45
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
161
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 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 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.
Investments are preferred to be in liquid securities. The counterparty limits are set depending on their ratings from the most credible rating agencies and
the amount of their paid in capital and/or shareholders equity. Policies are in place to review the paid-in capital and rating of counterparties periodically to
ensure credit worthiness.
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.
The Group’s policy is to provide financial guarantees only to subsidiaries and distributors. At 31 December 2016, TL 1,409,749 guarantees were outstanding
(31 December 2015: TL 1,254,989).
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.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn borrowing facilities) and cash and cash equivalents on
the basis of expected cash flows. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering
the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and
maintaining debt financing plans.
F46
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
162
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 optimizing 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
and risk management.
Currency risk
The Group is exposed to currency risk on certain revenues such as wholesale revenues, purchases and certain operating costs such as roaming expenses
and network related costs and resulting receivables and payables, borrowings, payable in relation to the acquisition of telecommunication license in Turkey,
deferred payments related to the acquisition of Belarusian Telecom that is 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 and USD.
The Group holds a significant portion of cash portfolio in foreign currency to manage currency risk. Additionally, derivative financial instruments such as
forward, swap and option contracts are used to hedge exposure to fluctuations in foreign exchange rates.
For the year ended 31 December 2015, TL depreciated against both USD and EUR by 25.4% and 12.7%, respectively. Whereas for the year ended 31
December 2016 TL depreciated against both USD and EUR by 21.0% and 16.8% respectively. For the year ended 31 December 2015, UAH depreciated
against the USD by 52.2% compared to 31 December 2014 and 13.3% for the year ended 31 December 2016 compared to 31 December 2015. BYN
depreciated against USD by 56.7% through 2015 compared to 31 December 2014 and for the year ended 31 December 2016 depreciated by 5.5% when
compared to the exchange rates as at 31 December 2015.
Interest rate risk
The Group’s exposure to interest rate risk is related to its financial assets and liabilities. The Group manage its financial liabilities by providing an
appropriate distribution between fixed and floating rate debts. The risk is managed by the Group by maintaining an appropriate mix between fixed and
floating rate borrowings. The use of financial derivatives is governed by the Group’s policies approved by the Audit Committee, which provide written
principles on the use of financial derivatives consistent with the Group’s treasury and risk management strategy. The Group also closely monitored various
hedging alternatives to hedge interest risk with a minimum cost. Between June - August 2016 the Group converted its floating foreign currency interest
rate liabilities into fixed TL liabilities via cross currency swaps and long term options.
F47
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
163
6. OPERATING SEGMENTS
The Group has two main reportable segments in accordance with its integrated communication and technology services strategy as Turkcell Turkey, and
Turkcell International. Some of 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 economic conditions.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating
decision maker function is carried out by the Board of Directors, however Board of Directors may transfer the authorities, other than recognized by the law,
to the General Manager and other directors.
Turkcell Turkey reportable segment includes the operations of Turkcell, Turkcell Superonline, Turkcell Satis ve Dagitim Hizmetleri A.S. (“Turkcell Satis”),
group call center operations of Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri A.S. (“Turkcell Global Bilgi”), Turktell Bilisim Servisleri A.S.
(“Turktell”), Turkcell Teknoloji Arastirma ve Gelistirme A.S. (“Turkcell Teknoloji”), Turkcell Interaktif Dijital Platform ve Icerik Hizmetleri A.S. (“Turktell
Interaktif”), Kule Hizmet ve Isletmecilik A.S. (“Global Tower”), Rehberlik Hizmetleri Servisi A.S. (“Rehberlik”), Turkcell Odeme Hizmetleri A.S. (“Turkcell
Odeme”) and Turkcell Gayrimenkul Hizmetleri A.S. (“Turkcell Gayrimenkul”). Turkcell International reportable segment includes the operations of Kibris
Mobile Telekomunikasyon Limited Sirketi (“Kibris Telekom”), Eastasia, Euroasia, lifecell, Lifecell Ventures, Beltel, Belarusian Telecom, UkrTower, Global LLC,
Turkcell Europe, Lifetech, Beltower and Fintur. The operations of these legal entities aggregated into one reportable segment as the nature of services are
similar and most of them share similar economic characteristics. Other reportable segment mainly comprises the information and entertainment services in
Turkey and Azerbaijan, non-group call center operations of Turkcell Global Bilgi and Turkcell Finansman AS (“TFS”).
In first, second and third quarter of the year 2015, the operations of Turkcell Global Bilgi were included in Turkcell Turkey reportable segment. Since the
Group changed its reportable segments which are the dominant source of information to evaluate the performance and to allocate resources in the fourth
quarter of 2015, group call center operations of Global Bilgi were included in Turkcell Turkey reportable segment whereas non-group call center operations
of Global Bilgi were included in Other reportable segment. Since the assets and liabilities of Turkcell Global Bilgi could not be allocated to group and
non-group operations and are mainly related to group operations, total assets and liabilities of Turkcell Global Bilgi are reported under Turkcell Turkey
reportable segment except trade receivables.
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. Reconciliation of Adjusted EBITDA to consolidated profit before income tax and profit for the period in the
accompanying notes.
F48
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
164
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B
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
9
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F50
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
31 December 2016
4,160,861
235,348
222,849
451
4,619,509
1,064,794
(1,237,593)
78,569
(312,801)
-
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(2,203,351)
2,009,127
(423,160)
1,585,967
31 December 2015
3,759,590
245,959
134,484
511
4,140,544
756,039
(799,514)
44,454
(270,446)
-
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(1,667,750)
2,203,327
(667,112)
1,536,215
31 December 2016
21,762,110
2,508,008
(49,406)
1,222,757
-
6,052,352
51,255
53,082
31,600,158
31 December 2016
5,021,751
229,754
(32,063)
9,781,162
458,160
72,997
15,531,761
31 December 2014
3,326,389
281,011
154,643
(248)
3,761,795
955,401
(1,246,986)
58,929
(135,177)
205,068
4,466
(1,639,457)
1,964,039
(730,444)
1,233,595
31 December 2015
22,162,600
85,884
(10,921)
-
981,939
2,918,796
48,615
20,397
26,207,310
31 December 2015
7,350,215
105,460
(10,089)
4,214,240
113,437
15,145
11,788,408
166
Turkcell Turkey adjusted EBITDA
Turkcell International adjusted EBITDA
Other
Intersegment eliminations
Consolidated adjusted EBITDA
Finance income
Finance costs
Other income
Other expenses
Monetary gain
Share of profit of equity accounted investees
Depreciation and amortization
Consolidated profit before income tax
Income tax expense
Profit from continuing operations
Assets
Total assets for reportable segments
Other assets
Intersegment eliminations
Assets classified as held for sale
Investments accounted for using the equity method
Cash and cash equivalents
Deferred tax assets
Other unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Other liabilities
Intersegment eliminations
Borrowings
Deferred tax liabilities
Other unallocated liabilities
Consolidated total liabilities
F51
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
167
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
Azerbaijan
Belarus
Turkish Republic of Northern Cyprus
Germany
Non-current assets
Turkey
Ukraine
Belarus
Turkish Republic of Northern Cyprus
Azerbaijan
Unallocated non-current assets (*)
31 December 2016
31 December 2015
31 December 2014
13,321,503
573,951
108,329
149,005
129,785
2,988
14,285,561
11,779,345
571,630
145,654
141,219
125,668
5,899
12,769,415
10,735,138
765,410
179,628
151,845
135,954
75,612
12,043,587
31 December 2016
16,548,162
1,211,789
291,498
117,243
13,563
67,057
18,249,312
31 December 2015
15,032,606
993,546
224,784
116,180
14,727
1,030,610
17,412,453
(*) Unallocated non-current assets as at 31 December 2015 comprises of “investments accounted for using the equity method” which are accounted in “assets classified as held for sale” as at 31 December
2016.
7. REVENUE
Telecommunication services
Equipment revenues
Revenue and commission fees on betting business
Call center revenues
Revenue from financial services
Other
2016
12,883,974
624,352
284,496
198,564
184,698
109,477
14,285,561
2015
11,972,443
254,582
277,525
187,840
-
77,025
12,769,415
2014
11,259,956
241,470
297,918
165,714
-
78,529
12,043,587
F52
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
168
8. OTHER INCOME AND EXPENSE
Other income amounts to TL 78,569, TL 44,454 and TL 58,929 for the years ended 31 December 2016, 2015 and 2014, respectively.
Other expenses amount to TL 312,801, TL 270,446 and TL 135,177 for years ended 31 December 2016, 2015 and 2014 respectively.
Other income for the years ended 31 December 2016 and 2015 mainly consist of fixed asset sales gain and reversal of legal provisions. Other income for the
year ended 31 December 2014 mainly consists of reversal of provision for equity accounted investees amounting to TL 19,161.
Other expenses for the year ended 31 December 2016 mainly consist of commercial agreements termination expenses, donations and litigation expenses
(Note 37).
Other expenses for the year ended 31 December 2015 mainly consist of commercial agreements termination expenses and litigation expenses.
Other expenses as of 31 December 2014 mainly consist of payments and provisions for the penalties imposed by ICTA for not complying with relevant
regulations as explained in Note 34 and payments regarding to litigation expenses to consolidated financial statements.
9. PERSONNEL EXPENSES
Wages and salaries (*)
Increase in liability for long-service leave (**)
Contributions to defined contribution plans
2016
1,450,262
32,977
7,722
1,490,961
2015
1,317,655
30,593
8,364
1,356,612
2014
1,185,382
32,435
7,876
1,225,693
(*) Wages and salaries include compulsory social security contributions and bonuses.
(**) The remeasurements of employee termination benefit losses for the years ended 31 December 2016 and 2015 and 2014 amounting to TL 34,532, TL 13,466 and 819 respectively, are reflected in other
comprehensive income.
F53
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 10. FINANCE INCOME AND COSTS
Recognized in the statement of profit or loss:
Interest income on bank deposits
Interest income on financial assets measured at amortized cost
Changes in the fair value of derivative financial instruments
Discount interest income
Other interest income
Finance income
Net foreign exchange loss
Interest expense on financial liabilities measured at amortized cost
Interest expense on participating cross currency swap
Litigation late payment interest expense
Option premium expense
Other
Finance cost
Net finance income / (costs)
2016
158,206
520,465
385,560
74,522
563
1,064,794
(782,463)
(343,290)
(93,038)
-
(10,114)
(8,688)
(1,237,593)
(172,799)
2015
303,221
449,889
1,070
13,865
1,859
756,039
(489,320)
(224,724)
-
(68,083)
(2,290)
(15,097)
(799,514)
(43,475)
169
2014
650,780
295,512
2,770
6,339
955,401
(1,110,833)
(120,414)
-
(6,963)
(33)
(8,743)
(1,246,986)
(291,585)
Capitalization rates and amounts other than borrowings made specifically for the purpose of acquiring a qualifying asset are 9.9%, 9.7% and 12.8%, TL
76,899 and TL 75,315 and TL 15,320 for the years ended 31 December 2016, 2015 and 2014 respectively. Weighted average capitalization rate for general
borrowings is 86% as at 31 December 2016 (31 December 2015: 48% and 31 December 2014: 36%).
Finance income for the years ended 31 December 2016, 2015 and 2014 are mainly attributable to interest income from contracted handset sales, changes in
fair value of derivative financial instruments and interest income on bank deposits.
Finance cost for year ended 31 December 2016 is mainly attributable to financing cost of borrowings and 4.5G license fee payable.
Foreign exchange loss mainly includes foreign exchange losses on borrowings, 4.5G license payable and bonds issued amounting to TL 764,697, TL 264,953
and TL 263,516, respectively whereas the Company has a foreign exchange income amounting to TL 604,597 from its main operations.
Finance cost the for years ended 31 December 2015 and 2014 is mainly attributable to foreign exchange losses in Belarusian Telecom operating in Belarus
and foreign exchange losses in lifecell operating in Ukraine. Foreign exchange losses from Belarusian Telecom and lifecell exclude foreign exchange
losses arising in the foreign operations’ individual financial statements which have been recognized directly in equity in the foreign currency translation
differences in the consolidated financial statements in accordance with accounting policy for net investment in foreign operations as disclosed in Note 3b.
F54
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
2016
(200,663)
(222,497)
(423,160)
Before tax
218,472
-
(34,532)
183,940
(384,466)
719
(13,466)
(397,213)
468,478
1,089
(819)
468,748
2015
(591,297)
(75,815)
(667,112)
Tax (expense) /
benefit
(87,381)
-
7,066
(80,315)
(5,749)
-
2,563
(3,186)
(3,646)
-
196
(3,450)
2014
(709,437)
(21,007)
(730,444)
Net of tax
131,091
-
(27,466)
103,625
(390,215)
719
(10,903)
(400,399)
464,832
1,089
(623)
465,298
170
11. INCOME TAX EXPENSE
Current income tax expense
Deferred income tax expense
Total income tax expense
Income tax recognized directly in equity
2016
Foreign currency translation differences
Change in cash flow hedge reserve
Remeasurements of employee termination benefits
2015
Foreign currency translation differences
Change in cash flow hedge reserve
Remeasurements of employee termination benefits
2014
Foreign currency translation differences
Change in cash flow hedge reserve
Remeasurements of employee termination benefits
F55
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 171
Reconciliation of effective income tax expense
The reported income tax expense for the years ended 31 December 2016 and 2015 are different than the amounts computed by applying the domestic tax
rate to profit before income tax of the Company, as shown in the following reconciliation:
Profit for the year
Total income tax expense
Profit before income tax (*)
Income tax using the Company’s domestic tax rate of 20%
Difference in overseas tax
Effect of exemptions (**)
Non-deductible expenses and permanent differences
Utilization of previously unrecognized tax losses
Unrecognized deferred tax assets (***)
Adjustment of current tax of prior years
Deferred tax effect related to investment in subsidiaries
Other
Total income tax expense
(*) Including profit from discontinued operation before income tax.
(**) Mainly comprises of research and development tax credit.
(***) Mainly comprises of tax losses for which no deferred tax asset has been recognized.
2016
1,543,803
423,160
1,966,963
(393,393)
(15,935)
104,244
(78,571)
1,253
(30,616)
(8,176)
-
(1,966)
(423,160)
2015
1,903,551
667,112
2,570,663
(514,133)
(52,688)
62,163
(16,104)
22,863
(198,364)
-
32,926
(3,775)
(667,112)
2014
1,436,416
730,444
2,166,860
(433,372)
(51,277)
39,274
(72,484)
377
(255,048)
-
-
42,086
(730,444)
The income taxes payable amounting to TL 71,638 and TL 12,855 as at 31 December 2016 and 2015, respectively, represents the amount of income taxes
payable in respect of related taxable profit for the years ended 31 December 2016 , 2015 and 2014, 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.
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.
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.
F56
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 172
With the amendment made in Article 10 of the Corporate Tax Law No. 5520 considering with the amendment made in Article 35 of the Law No. 5746 on
Supporting Research and Development Activities, the R&D allowances to be calculated on research and development expenditures has been increased
from 40% to 100%. Aforementioned law was become effective as of 1 April 2008. According to this law, companies subject to corporate income tax can
consider 100% of the expenditures that has been made during research and development activities for searching new technologies and information during
the determination of tax basis starting from the April 2008. As total 100% of the research and development expenditures made for 2015 and 2014 should be
subject to R&D allowances.
12. EXPENSES BY NATURE
The following table compares expenses by nature for the years ended 31 December 2016 and 2015.
Cost of sales:
Depreciation and amortization
Treasury share
Interconnection and termination cost
Radio cost
Personnel expenses
Gsm equipment expenses
Universal service fund
Transmission costs
Roaming expenses
Outsource expenses
Direct cost of revenue from financial services (*)
Billing and archiving cost
Other
2016
(2,203,351)
(1,491,503)
(1,420,233)
(1,057,618)
(859,143)
(427,081)
(192,045)
(139,185)
(128,429)
(94,419)
(68,546)
(61,647)
(1,187,826)
(9,236,607)
2015
(1,667,750)
(1,418,683)
(1,326,990)
(911,454)
(734,725)
(187,789)
(182,508)
(113,574)
(108,102)
(143,226)
-
(55,056)
(1,062,852)
(7,769,483)
(*) As at 31 December 2016, depreciation and amortization expenses includes depreciation and amortization expenses related to the financial services amounting to TL 1,677.
Selling and marketing expenses:
Selling expenses
Marketing expenses
Personnel expenses
Prepaid subscriber frequency usage fees
Other
2016
(757,869)
(518,382)
(354,380)
(186,530)
(93,786)
(1,910,947)
2015
(783,234)
(428,596)
(381,582)
(191,408)
(117,039)
(1,901,859)
2014
(1,639,457)
(1,331,102)
(1,316,577)
(829,698)
(655,742)
(181,472)
(160,266)
(106,405)
(92,189)
-
(82,530)
(988,509)
(7,383,947)
2014
(858,766)
(451,373)
(358,334)
(186,171)
(119,964)
(1,974,608)
F57
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT Administrative expenses:
Personnel expenses
Bad debt expense
Consultancy expense
Rent expense
Collection expense
Maintenance and repairment expenses
Travel and entertainment expenses
Other
2016
(277,438)
(211,384)
(54,315)
(30,314)
(20,827)
(20,315)
(18,913)
(88,343)
(721,849)
2015
(240,305)
(196,588)
(43,995)
(23,924)
(17,533)
(23,424)
(13,484)
(66,026)
(625,279)
173
2014
(211,616)
(155,931)
(46,131)
(17,292)
(29,759)
(23,861)
(14,807)
(63,297)
(562,694)
F58
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 174
F59
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TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
175
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TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
176
Leased assets
The Group leases equipment under a number of finance lease agreements. At the end of each lease period, the Group has the option to purchase the
equipment at a beneficial price. As at 31 December 2016, net carrying amount of fixed assets acquired under finance leases amounted to TL 89,425
(31 December 2015: TL 91,395).
14. INTANGIBLE ASSETS
Turkcell 2G License
On 27 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 TL 287,390 as at 31 December 2016 (31 December 2015: TL 333,272). The amortization period of the license will end in 2023.
Turkcell 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. 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 a duration of 20 years starting from 30 April 2009. The carrying amount as at 31 December 2016 is TL 474,486 and the amortization
period of the license will end in 2029 (31 December 2015: TL 512,958).
Turkcell 4.5G License
On 26 August 2015, “Authorization Tender on IMT Services and Infrastructure” publicly known as 4.5G, license tender, was held by the Information
Technologies and Communication Authority. The Company has been awarded for 13 years with; 172.4 MHz frequency band for EUR 1,623,460 (equivalent to
TL 6,022,874 as at 31 December 2016) (excluding VAT).
IMT authorization period expires on 30 April 2029 and operators started to commence service delivery as at 1 April 2016. 2x1.4 MHz frequency band in
900MHz spectrum and 2 units of 2x5 MHz frequency band in 2100 MHz spectrum are in operation as at 1 December 2015 and have been recorded as GSM
and other telecommunication operating licenses. Remaining packages amounting to EUR 1,235,520 (equivalent to TL 4,583,656 as at 31 December 2016) are
in operation as at 1 April 2016 and have been recorded as GSM and other telecommunication licenses. As at 31 December 2016, the carrying amount of 4.5G
License is TL 4,930,765 (31 December 2015: TL 5,222,687).
Tender price amounting to EUR 1,623,460 (equivalent to TL 6,022,874 as at 31 December 2016) (excluding VAT of 18%) will be paid semi-annually by four
equal installments total of which are amounting to EUR 1,655,290 (equivalent to TL 6,140,960 as at 31 December 2016) including interest and excluding
VAT of 18%. On 26 October 2015, the Company made the payment amounting to TL 1,321,873 for the original amount of EUR 413,823 as first installment
and total VAT amounting to TL 933,447 for the original amount of EUR 292,223 in cash. Payment was made on effective selling rate of exchange as at 26
October 2015. Second installment payment was made on 25 April 2016 amounting to EUR 413,823 (equivalent to TL 1,319,682 as at transaction date).
F61
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
177
Third installment payment was made on 25 October 2016 amounting to EUR 413,823 (equivalent to TL 1,384,403 as at transaction date). Last installment
will be made on 27 April 2017.
As at 31 December 2016, payables related to 4.5G license amounting to TL 1,522,615 are classified in trade and other payables in current liabilities (31
December 2015: TL 2,591,235 in current liabilities and TL 1,270,610 in non-current liabilities).
Within the scope of the Decree Law No. 683 published on 23 January 2017, the Company will be able to pay EUR denominated 4.5G license obligation
in Turkish liras converted at the buying exchange rate announced by the Central Bank of the Republic of Turkey on 2 January 2017 upon request of the
Company.
lifecell 3G License
3G License tender in Ukraine was held on 23 February 2015. lifecell submitted a bid of UAH 3,355,400 (equivalent to TL 434,276 as at 31 December 2016)
and was awarded the first lot for 15 years, which is the 1920-1935 / 2110-2125 MHz frequency band. The license payment was made on 19 March 2015. The
cost of 3G license has been presented in GSM and other telecommunication operating licenses as at 31 December 2016.
In May 2015, lifecell made the payment amounting to UAH 357,568 (equivalent to TL 46,279 as at 31 December 2016) for the first installment of conversion
of spectrum from military use and conditionally committed approximately UAH 479,009 (equivalent to TL 61,996 as at 31 December 2016) for the remaining
installments of the conversion. Committed amount will be subject to change according to the inflation rates at the date of the payments.
Impairment testing for long-lived asset
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 were tested for impairment as at 31 December 2016.
lifecell
Independent appraisals were obtained for fair values to determine recoverable amount for lifecell. 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 2016, impairment test for long-lived
assets of lifecell is made on the assumption that lifecell is the cash generating unit.
As the recoverable amounts based on the value in use of cash generating units was higher than the carrying amount of cash-generating units of lifecell,
no impairment was recognized. Sensitivity analysis was performed on the change in WACC by +0.5%/-0.5% (31 December 2015: +0.5%/-0.5%). The
assumptions used in value in use calculation of lifecell were:
A 28.7% post-tax WACC rate for 2017 to 2021, a 27.9% post-tax WACC rate for after 2021 and a 6.0% terminal growth rate were used to extrapolate cash
flows beyond the 5-year forecasts based on the business plans. The pre-tax rate for disclosure purposes was 30.0%.
F62
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 178
Belarusian Telecom
The aggregate carrying amount of goodwill arising from the acquisition of Belarusian Telecom was totally impaired as at 31 December 2011. The cumulative
impairment loss recognized in the statement of profit and loss is TL 228,774.
Independent appraisals were obtained for fair values to determine recoverable amount for Belarusian Telecom. 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 2016, impairment
test for long-lived assets of Belarusian Telecom is made on the assumption that Belarusian Telecom is the cash generating unit.
As the recoverable amounts based on the value in use of cash generating units was higher than the carrying amount of cash-generating units of Belarusian
Telecom, no impairment was recognized. Sensitivity analysis was performed on the change in WACC by +0.5%/-0.5% (31 December 2015: +0.5%/-0.5%).
The assumptions used in value in use calculation of Belarusian Telecom were:
A 29.4% post-tax WACC rate for 2017 to 2021, a 28.7% post-tax WACC rate for after 2021 and a 10.0% terminal growth rate were used to extrapolate
cash flows beyond the 5-year forecasts based on the business plans. The pre-tax rate for disclosure purposes was 30.9%.
Impairment testing for cash-generating units 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 as at 31 December 2016, the
date of the goodwill impairment test.
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 adjusted 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.
Turkcell Superonline
As at 31 December 2016, the aggregate carrying amount of goodwill allocated to Turkcell Superonline is TL 32,834 (31 December 2015: TL 32,834).
Impairment testing of goodwill allocated to Turkcell Superonline has not been performed since the carrying amount of goodwill does not have a significant
impact on the financial statements on the grounds of materiality level.
F63
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
6
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T
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
181
15. INVESTMENT PROPERTY
The Group transferred various properties from owner occupied asset to investment property to earn rental income and/or for capital appreciation in 2016.
Determination of the fair value of the Group’s investment properties
The fair value of the Group’s investment properties as at 31 December 2016 has been arrived at on the basis of a valuation carried out on the respective
dates by independent valuation companies which are authorized by the Capital Markets Board, and have appropriate qualifications and recent experience
in the valuation of properties in the relevant locations. The fair value of these investment properties was determined using a variety of valuation methods
which are: direct capitalization approach and income capitalization approach, cost approach and market approach. In estimating the fair value of the properties,
the highest and best use of the property is its current use.
The rental income obtained during the year ended 31 December 2016 is TL 2,317 (31 December 2015: TL 1,836 and 31 December 2014: TL 1,102). Total direct
operating expense from investment property during the year ended 31 December 2016 is TL 22 (31 December 2015: TL 126 and 31 December 2014: TL 119).
Details of the Group’s investment properties and information about the fair value hierarchy as at 31 December 2016 and 2015 are as follows:
31 December 2016
Investment properties in İstanbul:
- Istanbul Tepebasi
- Kucukcekmece
Investment properties in Gebze
Investment properties in Izmir
Other investment properties
Other investment properties
Other investment properties
Total
Level 1
Level 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Level 3
321,835
12,890
12,558
42,315
17,419
8,946
2,410
418,373
Valuation Method
Direct capitalization
Cost approach
Income capitalization
Cost approach
Market approach
Cost approach
Direct capitalization
F66
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 182
31 December 2015
Investment properties in İstanbul:
- Istanbul Tepebasi
- Kucukcekmece
Investment properties in Gebze
Investment properties in Izmir
Other investment properties
Other investment properties
Total
Level 1
Level 2
Level 3
Valuation Method
-
-
-
-
-
-
-
-
-
-
-
-
-
-
310,070
12,240
11,802
39,867
22,281
5,199
401,459
Direct capitalization
Market approach & Cost approach
Income capitalization
Market approach
Market approach
Cost approach
Significant unobservable inputs and sensitivity of the respective investment properties based on the valuation method are as follows:
Fair value of the investment property which is measured based on the “direct capitalization” approach will increase / (decrease) significantly, when there is
a significant decrease/ (increase) in capitalization rate and a significant increase/ (decrease) in current market rentals. Capitalization rate is calculated by
dividing comparable properties’ annual net operating income by the selling price of the respective properties.
In the “income capitalization” approach, a significant increase/ (decrease) in rentals will cause a significant increase/ (decrease) in the fair value. In
addition, a slight decrease/ (increase) in risk premium and discount rate which are calculated by considering the current market conditions will cause a
significant increase/ (decrease) in the fair value.
In the “cost approach”, a significant increase/ (decrease) of construction costs and miscellaneous costs of any similar properties in the market will cause a
significant increase/ (decrease) in the fair value.
In the “market approach”, a significant increase/ (decrease) in the market value of any properties which are located in the similar areas with similar
conditions will cause a significant increase (decrease) in the fair value.
F67
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
183
31 December 2016
31 December 2015
164,467
1,005
-
165,472
(114,895)
-
(3,530)
(777)
(119,202)
46,270
20,199
-
144,268
164,467
(6,801)
(101,634)
(6,460)
-
(114,895)
49,572
Cost value
Opening balance
Addition
Transfer from tangible fixed assets (*)
Ending balance
Accumulated depreciation
Opening balance
Transfer from tangible fixed assets
Charge for the year and impairment during the period (**)
Other
Ending balance
Carrying value
(*) The real estates of the Group, which are held for obtaining rental or appreciation income as at 31 December 2015, are classified as investment property.
(**) Depreciation expenses on investment properties for the year ended 31 December 2014 amounting to TL 2,906 including impairment losses are recognized in direct cost of revenues. The impairment
losses on investment property for the year ended 31 December 2016 is nil (31 December 2015: TL 2,592 and 31 December 2014: TL 2,364 and recognized in depreciation expense).
F68
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 184
F69
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G
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
185
A-Tel
The Company accounted its joint venture A-Tel by applying equity method accounting until 27 August 2014. The Company’s investment in A-Tel amounts
to TL 46,624 as at 31 December 2013. In accordance with Settlement Protocol signed with Bereket Holding A.Ş. (formerly known as Bilgin Holding A.Ş.)
on 27 August 2014, it has been decided to pay a compensation amounting to TL 30,428 to A-Tel and TL 19,161 has been recorded as other income after the
elimination as a result of the decline in initial provision accrued amount from TL 68,750 to TL 30,428. Bereket Holding A.Ş. and Savings Deposits Insurance
Funds (“SDIF”) have waived from the lawsuit regarding alleged loss occurred from termination of Service Provider Agreement.
Additionally, Turkcell’s whole stake in A-tel has been transferred to Bereket Holding A.Ş. for a consideration of TL 31,025 within the context of the Share
Sale Agreement signed on 27 August 2014. Loss on sale amounting to TL 902 was recognized in the statement of profit or loss as detailed below:
Share sale price
Less: carrying amount of investment on the date of sale
Loss recognized
17. ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS
Disposal of Fintur
Classification
31 December 2014
31,025
(31,927)
(902)
The Group believes that an exit from Fintur countries is deemed highly probable within one year and therefore Fintur should be classified as held for sale
and reported as discontinued operations as at 1 October 2016. The Group is committed to plan to exit from Fintur operations in relevant jurisdictions and
initiated an active program to locate a buyer for its associate.
Presentation
Fintur is classified as held for sale and discontinued operations and therefore disclosed separately on a single line as discontinued operations in the
consolidated statements of comprehensive income and the consolidated statements of cash flows. Investment in Fintur is presented as held for sale in
the consolidated statement of financial position. Comparative periods in the consolidated statements of comprehensive income and the consolidated
statements of cash flows are restated to reflect the classification of Fintur as discontinued operations.
Measurement
Equity accounting for Fintur ceased from 1 October 2016, and in accordance with IFRS 5, Fintur has been measured at the lower of carrying amount and fair
value less costs to sell. As at 31 December 2016, carrying value of investment in Fintur is TL 1,222,757 (31 December 2015: TL 981,939) which is lower than
the fair value less costs to sell indicating that no impairment is required as at 31 December 2016.
F70
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 186
The reconciliation of Profit and loss statement of Fintur is listed below (The summary of financial statements are presented in USD);
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Other operating income/ (expenses), net
Operating profit
Finance income/ (expense), net
Profit before income tax
Total income tax
Profit for period
Attributable to:
-owners of the parent
-non-controlling interests
Profit for period
18. OTHER NON-CURRENT ASSETS
Advances given for fixed assets (*)
Prepaid expenses
Receivables from Public Administration (Note 37)
Deposits and guarantees given
VAT receivable
Others
1 January -
30 September 2016
617,214
(369,104)
248,110
(69,983)
(69,818)
(31,258)
77,051
(61,203)
15,848
(30,947)
(15,099)
1 January-
31 December 2015
1,325,535
(674,334)
651,201
(123,244)
(95,380)
(23,850)
408,727
162,357
571,084
(128,121)
442,963
1 January-31
December 2014
1,801,432
(802,969)
998,463
(190,534)
(95,123)
(161,353)
551,453
(17,317)
534,136
(133,773)
400,363
(28,695)
13,596
(15,099)
327,194
115,769
442,963
2016
217,658
183,029
72,848
29,201
28,772
43,726
575,234
227,988
172,375
400,363
2015
7,972
175,543
72,848
23,671
121,905
40,001
441,940
(*) Includes fixed asset advances given related to 4.5G license capital expenditure as at 31 December 2016.
The dividend received amounting to TL 92,263 related to the discontinued operations have been classified in operating cash flows in the statement of cash
flows in 2014.
F71
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 187
19. DEFERRED TAX ASSETS AND LIABILITIES
Recognized deferred tax assets and liabilities
Deferred tax assets and liabilities as at 31 December 2016 and 2015 are attributable to the following:
Property, plant & equipment and intangible
assets
Investment
Provisions and employee terminaton benefit
Trade and other payables
Tax credit carry forwards (Investment tax credit)
Tax Allowance
Other items
Tax assets / (liabilities)
Net of tax
Net tax assets / (liabilities)
Assets
Liabilities
Net
2016
2015
2016
2015
2016
2015
3,516
33,242
55,288
57,686
1,508
32,200
65,905
249,345
(198,090)
51,255
9,172
34,765
70,206
36,632
29,799
-
142,344
322,918
(274,303)
48,615
(532,547)
(90,209)
-
-
-
-
(33,494)
(656,250)
198,090
(458,160)
(303,063)
(69,502)
-
-
-
-
(15,175)
(387,740)
274,303
(113,437)
(529,031)
(56,967)
55,288
57,686
1,508
32,200
32,411
(406,905)
-
(406,905)
(293,891)
(34,737)
70,206
36,632
29,799
-
127,169
(64,822)
-
(64,822)
F72
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
188
Movement in temporary differences as at 31 December 2016 and 2015 are attributable to the following:
Opening balance
Income statement charge
Tax charge relating to component of other comprehensive income
Prior year corporate tax basis differences
Exchange differences
Closing balance, net
As at 31 December 2016, expiration of unrecognized tax losses is as follows:
2016
(64,822)
(222,497)
(7,066)
(109,640)
(2,880)
(406,905)
2015
(1,240)
(75,815)
5,196
-
7,037
(64,822)
Expiration Date
2017
2018
2019
2020
2021
2022
2023
2024-2026
Indefinite
Total
Amount
998
4,726
172
53
74
271,606
127,199
1,098,108
1,551,055
3,053,991
The financial losses arising from lifecell and Belarus Telekom are TL 1,433,685 (31 December 2015: TL 1,319,313) and TL 1,496,699
(31 December 2015: TL 1,200,185), respectively.
F73
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 20. TRADE RECEIVABLES AND ACCRUED INCOME
Receivables from subscribers
Undue assigned contracted receivables
Accrued income
Accounts and checks receivable
189
31 December 2016
1,223,183
1,215,314
558,169
293,238
3,289,904
31 December 2015
1,218,126
2,216,010
393,049
271,743
4,098,928
Trade receivables are shown net of allowance for doubtful debts amounting to TL 964,080 as at 31 December 2016 (31 December 2015: TL 816,071). The
change in allowance for trade receivables and due from related parties is disclosed in Note 38.
Letters of guarantee received with respect to the accounts and checks receivable are amounted to TL 156,647 and TL 134,798 as at 31 December 2016 and
2015, respectively.
The undue assigned contracted receivables are the remaining portion of the assigned receivables from the distributors related to the handset campaigns
which will be collected from subscribers in instalments by the Company. When monthly instalment is invoiced to the subscriber, related portion is
transferred to “Receivables from subscribers”. The Company measures the undue assigned contracted receivables at amortized cost, bears the credit risk
and recognizes interest income throughout the contract period.
The accrued income represents revenue accrued for subscriber calls (air-time) 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 revenue 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
TL 217,492 (31 December 2015: TL 834,833).
The accounts and checks receivable represents receivables from distributors and roaming receivables.
The Group’s exposure to currency risks and impairment losses related to trade receivables are disclosed in Note 34.
F74
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
190
21. RECEIVABLES FROM FINANCIAL SERVICES
Current receivables from financial services
Non- current receivables from financial services
31 December 2016
1,486,906-
909,466
2,396,372
31 December 2015
-
-
The change in allowance for receivables from financial services is disclosed in Note 34.
Starting from 2016 the Company and distributors started to offer the option to buy a device through Turkcell Financing loan, which will be collected by
the Company. The Group carries a risk of collection in these transactions. Turkcell Finansman collects the purchased credit from the subscriber during the
contract period, and does not record revenue related to the device since it is not the main contractor in the device sale.
22. INVENTORY
Mobile phones
Devices
SIM cards
Materials for tower construction
Other
31 December 2016
79,782
31,929
11,852
786
7,624
131,973
31 December2015
31,469
15,708
13,723
7,999
6,572
75,471
Cost of inventories incurred as expense and recognized in cost of sales for the years ended 31 December 2016, 2015 and 2014 are amount to TL 579,400, TL
277,489 and TL 295,708 respectively.
F75
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
191
23. OTHER CURRENT ASSETS
Prepaid expenses
Prepayment for subscriber acquisition cost
Advances given to suppliers
Receivables from tax office
VAT receivable
Special communication tax to be collected from subscribers
Receivables from ministry of transport, maritime affairs and communications (Note 37)
Restricted cash
Other
Prepaid expenses mainly comprises prepaid rent expenses and frequency usage fees.
31 December 2016
294,540
108,628
57,020
52,561
49,211
36,940
32,299
289
138,647
770,135
31 December 2015
290,063
98,656
34,554
1,618
763,844
32,755
29,782
349,243
89,171
1,689,686
Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum consideration.
As at 31 December 2015, VAT receivable mainly results from 4.5G license VAT payment made as at 26 October 2015 amounting to TL 933,447.
As at 31 December 2015, restricted cash amounting to TL 349,243 represents the time deposits at a local bank as guarantees in connection with the loans
utilized by lifecell.
F76
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 192
24. CASH AND CASH EQUIVALENTS
Cash in hand
Cheques received
Banks
- Demand deposits
- Time deposits
Investment funds, bonds and bills
Cash and cash equivalents
31 December 2016
223
-
6,051,472
569,826
5,481,646
657
6,052,352
31 December 2015
453
3
2,912,741
572,895
2,339,846
5,599
2,918,796
As at 31 December 2016, the average maturity of time deposits is 49 days (31 December 2015: 27 days).
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 34.
25. EQUITY
Share capital
As at 31 December 2016, common stock represented 2,200,000,000 (31 December 2015: 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 TL 1. In this respect,
share capital presented in the consolidated financial statements refers to nominal amount of share capital registered by trade registry.
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 2016, total number of pledged shares hold by various institutions is 995,509 (31 December 2015: 995,509).
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 TL.
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.
F77
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
193
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. In this respect, legal reserve presented in the consolidated financial statements refers to
nominal amount of legal reserve.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered
into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated
under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included
as a basis adjustment to the non-financial hedged item, consistent with the relevant accounting policy.
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 non-controlling
shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. Since the current option relates to the business
combinations before 1 January 2009, subsequent changes in the fair value of the put option liability other than unwind of discount and associated foreign
exchange gains and losses are also recognized in this reserve.
Treasury shares
The Company has purchased 6,815,563 shares back with a price range of full TL 8.92 to 9.99 as part of the share buyback decision on 27 July 2016. Total of
the transactions are TL 65,607. Treasury shares are deducted from Equity.
F78
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 194
Dividends
Turkcell:
On 23 March 2016, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2015 amounting to TL 1,200,000
(equivalent to USD 340,987 as at 31 December 2016), which represented approximately 58% of distributable income. This represents a gross cash
dividend of full TL 0.5454545 (net TL 0.4636364) (equivalent to full USD 0.15 and USD 0.13 respectively as at 31 December 2016) per share. This dividend
proposal was discussed and rejected at the Ordinary General Assembly of Shareholders held on 29 March 2016.
Inteltek:
According to the resolution of the Extraordinary General Assembly Meeting of Inteltek held on 22 June 2015 and 11 November 2015, Board of Directors
decided to pay dividend amounting to TL 205,648 from the profit realized in years 2012, 2013 and 2014 and the nine months of period of 2015. The dividend
payments were completed in 2015.
According to resolution of Extraordinary General Assembly Meeting of Inteltek held on 24 March 2016, the shareholders resolved capital decrease amount
of TL 20,000. The payment to the shareholders was executed on 30 June 2016.
According to the resolution of the Extraordinary General Assembly Meeting of Inteltek held on 30 June 2016, Board of Directors decided to pay dividend
amounting to TL 53,586 from the profit realized in 2015 (remaining amount after deducting advance dividends paid in November 2015 amounting to TL
32,192) and TL 20,455 from the profit realized for six months period of 2016. In addition, Board of Directors decided to pay dividend from legal reserves
amounting to TL 25,710 which can be distributed after capital reduction. The dividend payments were completed as at 31 December 2016.
Azerinteltek:
According to the resolution of the General Assembly Meeting of Azerinteltek held in 2014 and 2015, Azerinteltek’s Board of Directors has decided to pay
the dividend accrued for fourth quarter of 2014 and 2015 amounting to AZN 5,895 (equivalent to TL 11,736 as at 31 December 2016). Dividend payments
have been completed in 2015.
According to resolution of the General Assembly Meeting of Azerinteltek held in 2016, Board of Directors decided to pay advance dividend amounting
to AZN 4,793 (equivalent to TL 9,542 as at 31 December 2016) from the profit realized for the first nine months of 2016). Dividend payments have been
completed in 2016.
F79
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 195
26. EARNINGS PER SHARE
The calculations of basic earnings per share were based on the profit attributable to ordinary shareholders for the years ended 31 December 2016, 2015 and
2014 of TL 1,492,088, TL 2,067,654 and TL 1,864,640 respectively and a weighted average number of shares outstanding for the years ended 31 December
2016, 2015 and 2014 is 2,193,184,437, 2,200,000,000 and 2,200,000,000 respectively calculated as follows:
Numerator:
Net profit for the period attributed to owners
Denominator:
Weighted average number of shares (*)
Basic earnings per share- Total group (in full TL)
(*) Note 25- Treasury shares
Numerator:
Net profit for the period attributed to owners
Denominator:
Weighted average number of shares (*)
Basic earnings per share-from continuing operations (in full TL)
(*) Note 25- Treasury shares
27. OTHER NON-CURRENT LIABILITIES
Consideration payable in relation to acquisition of Belarusian Telecom
Deferred revenue
Deposits and guarantees taken from agents
2016
2015
2014
1,492,088
2,067,654
1,864,640
2,193,184,437
0.68
2,200,000,000
0.94
2,200,000,000
0.85
2016
2015
2014
1,534,252
1,700,318
1,661,819
2,193,184,437
0.70
2,200,000,000
0.77
2,200,000,000
0.76
2016
295,062
74,241
58,244
427,547
2015
235,281
83,889
47,500
366,670
Consideration payable in relation to the acquisition of Belarusian Telecom represents the present value of the long-term contingent payment to the seller.
Payment of $100,000 (equivalent to TL 351,920 as at 31 December 2016) is contingent on the financial performance of Belarusian Telecom, and based on
management’s estimations, expected to be paid during the first quarter of 2020 (31 December 2015: the first quarter of 2020). Discount rate of 5.6% used
for the present value calculation of the consideration payable in relation to acquisition of Belarusian Telecom as at 31 December 2016 (31 December 2015:
5.1%).
F80
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
196
28. 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 foreign currency for interest bearing loans, see Note 34.
Non-current liabilities
Unsecured bank loans
Secured bank loans
Finance lease liabilities
Debt securities issued
Current liabilities
Unsecured bank facility
Secured bank facility
Current portion of unsecured bank loans
Current portion of secured bank loans
Current portion of finance lease liabilities
Debt securities issued
31 December 2016
31 December 2015
5,300,756
3,580
41,539
1,589,227
6,935,102
1,581,135
-
922,867
2,054
6,575
333,429
2,846,060
2,086,871
4,262
36,449
1,360,204
3,487,786
130,109
311,682
196,385
1,930
5,389
80,959
726,454
The Company signed a loan agreement with BNP Paribas, Citibank, HSBC, ING and Intesa Sanpaolo SpA for an amount of USD 500,000 (equivalent to TL
1,759,600 as at 31 December 2016) and EUR 445,315 (equivalent to TL 1,652,074 as at 31 December 2016) with an availability period until 30 June 2016
to be utilized by the Company and its subsidiaries for the purpose of funding infrastructure investments and any other potential investment opportunities.
Each respective unsecured loan has 2 years grace period, 5 years maturity, principal repayment every 6 months and an annual interest rate of 3 month
LIBOR/EURIBOR+2%. As at 31 December 2016, the Company has utilized USD 500,000 and EUR 445,315 under this agreement.
F81
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
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TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
198
Finance lease liabilities are payable as follows:
31 December 2016
31 December 2015
Future minimum
lease payments
7,908
46,365
54,273
Present value of
minimum lease
payments
6,575
41,539
48,114
Future minimum
lease payments
6,627
42,357
48,984
Interest
1,333
4,826
6,159
Present value of
minimum lease
payments
5,389
36,449
41,838
Interest
1,238
5,908
7,146
Less than one year
More than one year
29. EMPLOYEE BENEFITS
IAS 19 “Employee Benefits” requires remeasurements of employee termination benefit valuation methods to be developed to estimate the enterprise’s
obligation under defined benefit plans. As detailed in Note 9, such remeasurements of employee termination benefit gains/losses are recognized within
other comprehensive income starting from 31 December 2012. The retirement pay liability is calculated annually by independent actuaries using the
projected unit credit method. The liability for this retirement pay obligation is recorded in the accompanying consolidated financial statements at its
present value using a discount rate 3.43% depending on the expected payout date (31 December 2015: between 4.55% and 4.80%).
As at 31 December 2016 and 2015, unused vacation pay provision for the Group are TL 43,798 and TL 40,434 respectively.
Movement in the reserve for employee termination benefits as at 31 December 2016 and 2015 are as follows:
Opening balance
Provision set during the period
Remeasurements of employee termination benefit loss
Unwind of discount
Payments made during the period
Closing balance
2016
74,435
25,933
34,532
8,361
(22,506)
120,755
2015
58,238
17,670
13,466
4,190
(19,129)
74,435
Remeasurements of employee termination benefit loss amounting to TL 34,532 has been reflected in other comprehensive income for the year ended 31
December 2016 (31 December 2015: TL 13,466 remeasurements of employee termination benefit loss and 31 December 2014: TL 819 remeasurements of
employee termination benefit loss).
The liability is not funded, as there is no funding requirement.
Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of profit or loss as incurred. The
Group incurred TL 7,722, TL 8,364 and TL 7,876 in relation to defined contribution retirement plan for the years ended 31 December 2016, 2015 and 2014
respectively.
F83
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
199
As at 31 December 2016 and 2015, sensitivity analysis is performed for the significant assumptions of defined benefit obligation:
31 December 2016
Sensivity Level
Change
Net effect to defined benefit obligation
31 December 2015
Sensivity Level
Change
Net effect to defined benefit obligation
30. DEFERRED REVENUE
Discount Rate
Inflation Rate
1% increase
(14.7%)
(17,751)
1% decrease
18.1%
21,857
1% increase
18.6%
22,460
Discount Rate
Inflation Rate
1% increase
(9.4%)
(7,021)
1% decrease
10.8%
8,007
1% increase
11.2%
8,323
1% decrease
(15.1%)
(18,234)
1% decrease
(9.5%)
(7,097)
Deferred revenue primarily consists of right of use sold but not used by prepaid subscribers and it is classified as current as at 31 December 2016 and 2015.
The amount of deferred revenue is TL 93,800 and TL 121,078 as at 31 December 2016 and 2015, respectively.
31. PROVISIONS
Non-current provisions:
Balance at 1 January 2015
Provision made/ (reversed) during the year (*)
Unwind of discount
Transfer to current provision
Effect of change in foreign exchange rate
Balance at 31 December 2015
Balance at 1 January 2016
Provision made/ (reversed) during the year
Unwind of discount
Transfer to current provision
Effect of change in foreign exchange rate
Balance at 31 December 2016
Obligations for
dismantling, removing
and site restoration
117,093
12,622
3,308
-
(6,507)
126,516
Obligations for
dismantling, removing
and site restoration
126,516
52,031
(1,308)
-
3,413
180,652
Legal
161,293
(155,792)
-
(1,398)
-
4,103
Legal
4,103
4,312
-
(1,526)
-
6,889
Total
278,386
(143,170)
3,308
(1,398)
(6,507)
130,619
Total
130,619
56,343
(1,308)
(1,526)
3,413
187,541
(*) Regarding to the settlement made with Turk Telekom Group (Note 32 and Note 37), the Company has reversed legal provision amounting to TL 156,864 as at 31 December 2015.
Legal provisions are set for the probable cash outflows related to legal disputes.
Obligations for dismantling, removing and site restoration provisions are mainly resulted from operations in Turkey. The rate used for these provisions is
5.4% as at 31 December 2016 (31 December 2015: 4.8%).
F84
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
200
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.
It is expected that the obligations for dismantling, removing and site restoration will be realized in accordance with the useful life of GSM services
materials.
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:
Balance at 1 January 2015
Provision made/ (reversed) during the year
Provisions used during the year
Unwind of discount
Transfer to non-current provision
Effect of change in foreign exchange rate
Balance at 31 December 2015
Balance at 1 January 2016
Provision made/ (reversed) during the year
Provisions used during the year
Transfer to non-current provision
Effect of change in foreign exchange rate
Balance at 31 December 2016
Legal
8,111
2,811
(1,861)
13
1,398
(212)
10,260
Bonus
141,855
251,005
(220,269)
-
800
173,391
Bonus
121,463
178,416
(155,491)
126
-
(2,659)
141,855
Other
-
785
-
-
-
785
Total
129,574
181,227
(157,352)
139
1,398
(2,871)
152,115
Total
152,115
392,247
(354,288)
1,526
842
192,442
Legal
10,260
140,457
(134,019)
1,526
42
18,266
Legal provisions are set for the probable cash outflows related to legal disputes. In Note 37, under legal proceedings section, detailed explanations are
given with respect to legal provisions.
The bonus provision totaling to TL 173,391 comprises mainly the provision for the year ended 31 December 2016 and is planned to be paid in February 2017.
F85
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
32. TRADE AND OTHER PAYABLES
The breakdown of trade and other payables as at 31 December 2016 and 2015 is as follows:
Payables to suppliers
4.5G license payable
Taxes and withholdings payable
License fee and ICTA share accrual
Selling and marketing expense accrual
Accrual for Evrensel Project (Note 37)
Payables regarding the legal settlement with Turk Telekom Group
Other
2016
1,718,788
1,522,615
302,346
262,748
58,879
-
-
236,615
4,101,991
201
2015
1,555,767
2,591,235
319,542
216,602
68,531
39,767
309,250
182,376
5,283,070
Balances payables to suppliers are arising in the ordinary course of business.
4.5G license payables are related to the frequency bands which the Company has been awarded with, from Authorization Tender on IMT Services and
Infrastructure tender.
Taxes and withholdings include VAT payable, special communications tax, frequency usage fees payable to ICTA and personnel income taxes.
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%
of the treasury share as universal service fund to the Turkish Ministry.
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.
Turkcell and Turk Telekom Group agreed to settle ongoing lawsuits and disputes as at 31 December 2015. In this regard, Turkcell agreed to make a payment
of TL 309,250 (including VAT and special communication tax) to Turk Telekom Group. The payment was made on 14 January 2016.
F86
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
202
33. DERIVATIVE INSTRUMENTS
Details of currency and interest swap contracts are given below:
Currency and Interest swap contracts
Buy
Foreign currency
TL
TL
TL
TL
TL
TL
TL
Total current derivative financial instruments assets
Notional Amount
18,455
73,400
824,750
328,600
495,000
435,000
293,500
Foreign currency
EUR
EUR
EUR
EUR
EUR
USD
USD
Sell
Notional Amount
5,000
20,000
250,000
100,000
150,000
150,000
100,000
Fair value (TL)
86
598
116,674
47,949
81,534
84,416
51,481
382,738
Maturity
3 January 2017
24 Mar 2017
12 April 2021
12 April 2021
12 April 2021
16 September 2020
16 September 2020
Total current derivative financial instruments assets includes 8,220 TL interest income.
Details of currency forward contracts as at 31 December 2015 is given below:
Currency forward
contracts Buy
Foreign currency
USD
Notional Amount
57,732
Fair value (TL)
216
Maturity
4 January 2016
F87
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 203
Currency and Interest swap contracts as at 31 December 2016
Sell
Buy
Foreign currency
TL
TL
Notional Amount
21,009
7,050
Foreign currency
USD
USD
Notional Amount
5,960
2,000
Total current derivative financial instruments liabilities
Fair value (TL)
(55)
(18)
(73)
Maturity
3 January 2017
3 January 2017
As at 31 December 2016, total current derivative financial instruments liabilities includes 40,367 TL interest expense accrual additionally.
Currency and Interest swap contracts as at 31 December 2015
Buy
Sell
Foreign currency
EUR
EUR
Notional Amount
180,000
277,000
Foreign currency
USD
USD
Notional Amount
196,961
303,218
Total current derivative financial instruments liabilities
Fair value (TL)
(769)
(1,521)
(2,290)
Maturity
4 January 2016
4 January 2016
Currency forward contracts as at 31 December 2016
Buy
Foreign currency
USD
Notional Amount
30,071
Total current derivative financial instruments liabilities
Fair value (TL)
(1,286)
(1,286)
Maturity
28 February 2017
F88
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
204
34. 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:
Trade receivables
Receivables from financial services
Cash and cash equivalents*
Other current assets**
Other non-current assets**
Due from related parties-current
Currency and interest swap contracts
20
21
24
23
18
38
2016
3,525,297
2,396,372
6,052,129
93,376
-
5,861
390,958
12,463,993
2015
4,935,184
-
2,918,343
394,089
12,687
11,760
-
8,272,063
* Cash on hand is excluded from cash and cash equivalents.
** Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.
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 financial services
Receivables from distributors and other operators
Other
The aging of trade receivables and due from related parties as at 31 December 2016 and 2015:
Not past due
1-30 days past due
1-3 months past due
3-12 months past due
The aging of receivables from financial operations as at 31 December 2016 and 2015:
Not past due
1-30 days past due
1-3 months past due
3-12 months past due
F89
2016
3,061,130
2,396,372
376,204
93,824
5,927,530
2016
3,138,051
184,484
101,069
107,554
3,531,158
2016
2,350,375
14,787
1,746
29,464
2,396,372
2015
4,600,214
-
283,095
63,635
4,946,944
2015
4,508,081
197,250
125,497
116,116
4,946,944
2015
-
-
-
-
-
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
205
Impairment losses
The change in allowance for trade receivables and due from related parties as at 31 December 2016 and 31 December 2015 is as follows:
Opening balance
Impairment loss recognized
Collection made
Effect of change in foreign exchange rate
Amounts written-off
Closing balance
31 December 2016
816,373
452,767
(251,553)
5,038
(58,314)
964,311
31 December 2015
727,732
445,482
(248,894)
(2,563)
(105,384)
816,373
The impairment loss recognized of TL 452,767 for the year ended 31 December 2016 relates to its estimate of incurred losses in respect of trade receivables
and due from related parties(31 December 2015: TL 445,482).
Trade receivables and due from related parties are reserved in an allowance account until the Group can determine that the amounts are no longer
collectible. When this becomes probable the Group reverses the allowance and writes-off the receivable.
The change in allowance for receivables from financial operations as at 31 December 2016 and 31 December 2015 is as follows:
Opening
Impairment loss recognized
Collection made
Closing
Liquidity risk
Current cash debt coverage ratio as at 31 December 2016 and 2015 is as follows:
Cash and cash equivalents
Current liabilities
Current cash debt coverage ratio (*)
31 December 2016
-
11,593
(1,423)
10,170
31 December 2015
-
-
-
2016
6,052,352
7,358,858
82%
2015
2,918,796
6,304,417
46%
(*) Fluctuation between cash debt coverage ratios as at 31 December 2016 and 2015 resulted from the dividend paid in 2015, current portions of 4.5G license payable and debt securities issued (Note 25, 32
and 28 respectively).
F90
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
206
F91
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*
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
Exposure to currency risk
The Group’s exposure to foreign currency risk based on notional amounts is as follows:
Foreign currency denominated assets
Other non-current assets
Due from related parties-current
Trade receivables and accrued income
Other current assets
Cash and cash equivalents
Foreign currency denominated liabilities
Loans and borrowings-non current
Debt securities issued-non- current
Other non-current liabilities
Loans and borrowings-current
Debt securities issued-current
Trade and other payables-current
Trade and other payables-non-current
Due to related parties
Exposure related to derivative instruments
Currency swap contracts
Currency forward contracts
Net exposure
Foreign currency denominated assets
Other non-current assets
Due from related parties-current
Trade receivables and accrued income
Other current assets
Cash and cash equivalents
Foreign currency denominated liabilities
Loans and borrowings-non current
Debt securities issued-non- current
Other non-current liabilities
Loans and borrowings-current
Debt securities issued-current
Trade and other payables-current
Due to related parties
Exposure related to derivative instruments
Currency and interest swap contracts
Currency forward contracts
Net exposure
207
USD
2,576
3,553
21,536
141,385
618,831
787,881
(63,152)
(467,810)
(96,481)
(2,066)
(27,844)
(264,091)
-
(312)
(921,756)
(500,179)
57,732
(576,322)
31 December 2015
EUR
2,131
207
29,947
6,200
17,911
56,396
(499,911)
-
-
(12,328)
-
(833,791)
(399,865)
(141)
(1,746,036)
457,000
-
(1,232,640)
31 December 2016
USD
244
1,210
14,178
19,929
807,372
842,933
(483,910)
(451,588)
(99,273)
(80,029)
(26,845)
(175,083)
(398)
(1,317,126)
257,960
(30,071)
(246,304)
EUR
2,131
388
61,841
7,144
378,057
449,561
(959,482)
-
-
(21,985)
-
(425,992)
(334)
(1,407,793)
525,000
-
(433,232)
Within the scope of the Decree Law No. 683 published on 23 January 2017, the Company will be able to pay EUR denominated 4.5G license obligation
in Turkish liras converted at the buying exchange rate announced by the Central Bank of the Republic of Turkey on 2 January 2017 upon request of the
Company.
F92
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 208
The following significant exchange rates are applied during the period:
USD/TL
EUR/TL
USD/BYN (*)
USD/UAH
Average Rate
Closing Rate
31 December
2016
3.0059
3.3179
1.9846
25.5570
31 December
2015
2.7271
3.0219
15,917
21.7893
31 December
2016
3.5192
3.7099
1.9585
27.1909
31 December
2015
2.9076
3.1776
18,569
24.0007
(*) The official currency of the Republic of Belarus has redenominated on 1 July 2016. As a result, BYR 10,000 has become BYN 1 starting from 1 July 2016.
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, UAH, BYN against the following currencies as at 31 December 2016 and
31 December 2015 would have increased / (decreased) profit or loss before by the amounts shown below. This analysis assumes that all other variables, in
particular interest rates, remain constant.
USD
EUR
Profit or loss
31 December 2016
86,679
160,725
31 December 2015
167,572
391,683
10% weakening of the TL, UAH, BYN against the following currencies as at 31 December 2016 and 31 December 2015 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
31 December 2016
(86,679)
(160,725)
31 December 2015
(167,572)
(391,683)
USD
EUR
F93
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 209
Interest rate risk
As at 31 December 2016 and 2015 the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Time deposits
USD
EUR
TL
Other
Restricted cash
TRY
Finance lease obligations
USD
EUR
Unsecured bank loans
TL fixed rate loans
UAH fixed rate loans
Secured bank loans
BYN fixed rate loans
UAH fixed rate loans
Trade and other payables (*)
EUR fixed rate payables
Debt securities issued
USD
TRY
Variable rate instruments
USD floating rate loans
EUR floating rate loans
Note
24
23
28
28
32
28
28
31 December 2016
31 December 2015
Effective
Interest Rate
Carrying
Amount
Effective
interest rate
Carrying
Amount
3.6%
2.0%
11.0%
11.1%
-
20.7%
3.4%
12.1%
15.0%
11.9%
-
2,817,650
1,383,978
1,243,843
36,175
2.6%
2.6%
12.8%
16.6%
1,787,190
54,814
481,264
16,578
-
2.3%
349,243
(80)
(48,034)
(1,819,944)
(407,171)
(5,634)
-
20.5%
3.4%
10.2%
24.4%
11.9%
29.1%
(88)
(41,750)
(507,775)
(130,109)
(6,192)
(311,682)
2.6%
(1,522,615)
2.6%
(3,861,845)
5.8%
10.7%
3.2%
2.3%
(1,683,700)
(238,956)
(1,984,533)
(3,593,110)
5.8%
-
3.1%
2.4%
(1,441,163)
-
(189,542)
(1,585,939)
(*) Includes 4.5G license payables related to the frequency bands which the Company has been awarded with.
F94
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
210
Sensitivity analysis
Cash flow sensitivity analysis for variable rate instruments:
A change of 100 basis points in interest rates as at 31 December 2016 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 2016 and 2015.
31 December 2016
Variable rate instruments (financial liability)
Cash flow sensitivity (net)
31 December 2015
Variable rate instruments (financial liability)
Cash flow sensitivity (net)
Fair values
Profit or loss
Equity
100 bps increase
100 bps decrease
100 bps increase
100 bps decrease
(55,776)
(55,776)
(17,755)
(17,755)
55,776
55,776
17,755
17,755
-
-
-
-
-
-
-
-
Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives
information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs
used).
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
F95
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
211
Currency swap contracts
Participating cross currency swap
contracts (*)
Currency forward contracts
Consideration payable in relation to
acquisition of Belarusian Telecom (**)
31 December 2016
31 December 2015
611
(2,290)
382,054
(1,286)
-
216
(295,062)
(235,281)
There were no transfers between levels in the period.
Fair values
Fair Value
hierarchy
Level 2
Level 3
Level 2
Level 3
Valuation Techniques
Pricing models based on discounted cash flow
analysis using the applicable yield curve
Pricing models based on discounted cash flow
analysis using the observable yield curve
Pricing models based on period end foreign
currency rates.
Net present value
(*) Participating cross currency swap contracts include EUR-TL interest and currency swap contracts, EUR put and call options, amounting to nominal value of EUR 500,000 in total and also USD-TL interest
and currency swap contracts and put and call options amounting to nominal value of USD 250,000 in total. Regarding this contract, TL 40,367 accrual of interest expense and TL 8,220 accrual of interest
income has been reflected to financial statements as at 31 December 2016. Since bid-ask spread is unobservable input; in valuation of currency and interest swap contracts, prices in bid- ask price range
which were considered the most appropriate were used instead of mid prices. If mid prices were used in the valuation the fair value of currency and interest swap contracts would be lower amounting to
TL 23,291 as at 31 December 2016.
(**) Discount rate of 5.6% used for the present value calculation for the consideration payable in relation to acquisition of Belarusian Telecom as of 31 December 2016 (31 December 2015: 5.1%). Company
management expects consideration payable to be paid during the first quarter of 2020
(31 December 2015: the first quarter of 2020).
Reconciliation of Level 3 fair value of the Group’s financial assets and financial liabilities that are measured at fair value on recurring base is stated below:
Participating cross currency swap contracts:
Opening balance
Total gains or losses:in profit or loss
Closing balance
31 December 2016
-
382,054
382,054
F96
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 212
Consideration payable in relation to acquisition of Belarusian Telecom:
Opening balance
Total gains or losses:
in profit or loss
Closing balance
2016
235,281
59,781
295,062
2015
163,234
72,047
235,281
Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recognized in the
consolidated financial statements approximate their fair values.
The categories of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required) are
stated below:
Assets carried at amortized cost
Other non-current assets**
Due from related parties-short term
Trade receivables and accrued income*
Receivables from financial services
Other current assets**
Currency forward contracts
Currency and interest swap contracts
Cash and cash equivalents***
Liabilities carried at amortized cost
Loans and borrowings-long term
Loans and borrowings-short term
Debt securities issued***
Trade and other payables****
Due to related parties
Currency and interest swap contracts
Currency forward contracts
31 December 2016
31 December 2015
Note
Carrying Amount
Fair Value
Carrying Amount
Fair Value
18
38
20
21
23
23
23
24
28
28
28
32
38
28
28
-
5,861
3,525,297
2,396,372
93,376
-
8,220
6,052,352
12,081,478
(5,345,875)
(2,512,631)
(1,922,656)
(3,241,402)
(11,201)
(40,440)
(1,286)
(13,075,491)
-
5,861
3,525,297
2,396,372
93,376
-
8,220
6,052,352
12,081,478
(5,345,875)
(2,512,631)
(1,921,199)
(3,241,402)
(11,201)
(40,440)
(1,286)
(13,074,034)
12,687
11,760
4,935,184
-
393,873
216
-
2,918,796
8,272,516
(2,127,582)
(645,495)
(1,441,163)
(5,726,862)
(6,555)
(2,290)
-
(9,949,947)
12,687
11,760
4,935,184
-
393,873
216
-
2,918,796
8,272,516
(2,127,582)
(645,495)
(1,430,409)
(5,726,862)
(6,555)
(2,290)
-
(9,939,193)
* Includes non-current trade receivables amounting to TL 235,393 (31 December 2015: TL 836,256).
** Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.
*** Fair value of cash and cash equivalents and debt securities issued are classified as level 1 and fair value of other financial assets and liabilities are classified as level 2.
**** Advances taken, taxes, withholdings payable and accruals are excluded from trade and other payables.
The methods used in determining the fair values of financial instruments are discussed in Note 4.
F97
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
213
35. OPERATING LEASES
The lease contracts, which mainly comprise leases of radio, transmission, office and internet capacity, expire on various dates. The Group does not have
right to purchase the leased asset at the end of the lease period. Price escalation clauses of renewal conditions in operational lease agreements differ
according to various conditions.
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
Payments recognized as an expense:
Minimum lease payments
Contingent lease payments
Total
2016
163,336
345,374
101,328
610,038
2015
751,816
1,733
753,549
2015
163,526
206,030
7,478
377,034
2014
573,973
2,848
576,821
2016
837,575
-
837,575
Payments are recognized under cost of sales and administration expenses for the years ended31 December 2016, 2015 and 2014.
36. GUARANTEES AND PURCHASE OBLIGATIONS
As at 31 December 2016, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and purchase of
sponsorship, rent and advertisement services amount to TL 915,868 (31 December 2015: TL 2,752,139). Payments for these commitments are going to be
made in a 5 year period.
As at 31 December 2016, 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, provided guarantees to private companies and financial guarantees to subsidiaries totaling to TL 2,370,724 as at
31 December 2016 (31 December 2015: TL 2,058,810).
As at 31 December 2016, the amounts the Company has commitments regarding lifecell’s 3G license purchases amounted to UAH 479,009 (equivalent to TL
61,996 as at 31 December 2016). (31 December 2015: UAH 426,311 (equivalent to TL 51,646 as at 31 December 2015)).
F98
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
214
37. COMMITMENTS AND CONTINGENCIES
The following disclosures comprise of material legal lawsuits, investigations and in-depth investigations against the Company.
License Agreements
Turkcell:
On 27 April 1998, the Company signed the Agreement for grant of concession for the establishment and Operation of the Pan-European Mobile Telephone
System, GSM (hereinafter referred to as the "License Agreement”) with the Turkish Ministry. In accordance with the License Agreement, the Company was
granted a 25 year license for the provision of GSM services for a license fee of $500,000.
3G License
On 30 April 2009, the Company signed a separate License Agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and
establishment and operation of the required infrastructure. Turkcell acquired the A 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, Turkcell has provided
IMT 2000/UMTS services starting from 30 July 2009.
4.5G License
The 4.5 licensing process is finalized by signing of IMT License Commitments Document by Turkcell and therefore, ICTA granted Turkcell 4.5G License on 27
October 2015. The 4.5G License is effective for 13 years until 30 April 2029. According to the License, Turkcell started to provide 4.5G services on 1 April
2016.
Belarusian Telecom:
Belarusian Telecom owns a license issued on 28 August 2008 for a period of 10 years and was 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. In accordance with the Edict of the President of the Republic of Belarus dated 26 November 2015, numbered 475, the license is now
issued without limitation of the period of validity. Starting from 1 March 2016, the license is valid from the date of the licensing authority’s decision on its
issue and for an unlimited period. Under the terms of its license, Belarusian Telecom is required to gradually increase its geographical coverage until the end
of 2018. Belarusian Telecom has fulfilled all coverage requirements except covering all Belarusian settlements. The number of uncovered settlements is 657
out of a total of 22,552 settlements.
F99
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
215
lifecell:
lifecell owns twelve activity licenses, for GSM 900, GSM 1800, a technology neutral license, issued for 3G, one license for international and long-distance
calls and eight PSTN licenses for eight regions in Ukraine. As at December 28, 2016, lifecell owned 27 frequency use licenses for IMT-2000 (UMTS), GSM-
900, GSM-1800, CDMA-800 microwave Radiorelay and Broadband Radio Access, which are regional and national. 3G activity and frequency licenses were
issued in March 2015, reissued due to company name change in March 2016 and are valid for 15 years. Additionally, lifecell holds a specific number range
– three NDC codes for mobile networks, twelve permissions on a number resource for short numbers, eleven permissions on a number resource for SS-7
codes (7 regional and 4 international), one permission on a number resource for Mobile Network Code, nine permissions on a number resource for local
ranges for PSTN licenses, two permissions on a service codes for alternative routing selection for international and long-distance fixed telephony and one
permission on a code for global telecommunication service "800".
Inteltek:
On 12 August 2008, Spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting games based on sports
competitions. Inteltek gave the best offer for the tender. On 29 August 2008, Inteltek signed a contract with Spor Toto, receiving the rights to operate the
fixed odds and paramutual betting games based on sports competitions for the next ten years. New commission rate, which is 1.4% of the takings arising
from the operation of the fixed odds and paramutual betting games based on sports competitions (until 1 March 2009, commission rate was 7% of gross
takings), is applicable starting from March 2009. As at 31 December 2016, Inteltek has a letter of guarantee of TL 159,752 (31 December 2015: TL 159,752)
provided to Spor Toto.
Inteltek has a mobile agency agreement with Spor Toto, receiving the rights to assign mobile sub agencies to operate the fixed odds and paramutual betting
games based on sports competitions. As at 31 December 2016, Inteltek has a letter of guarantee of TL 25,000 (31 December 2015: TL 25,000) provided
to Spor Toto for mobile agency agreement. The targeted payout is 50% of the turnover balance including VAT. The fact that Inteltek 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.
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 Public Works of the Turkish Republic of Northern Cyprus which
is effective from 1 August 2007, replacing the previous 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 fulfillment of certain conditions.
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 transmission (air
link) 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.
F100
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 216
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 sports
betting games on 18 January 2011. On 4 March 2015, Azerinteltek authorization of organizing, operating, managing and developing the fixed-odds and para-
mutual sports betting games of was extended till 2 March 2025.
Since January 1, 2013, Azerinteltek was authorized for the sales of lottery tickets as a main distributor by Azerlotereya. As at 1 January 2016, the
authorization for the sales of lottery tickets has extended for one year.
Management believes that the Group is in compliance with the terms and conditions of the license agreements in all material respects as at 31 December
2016 and 2015.
37.1 ONEROUS CONTRACTS
Universal Project that the Company started on 17 January 2013, in order to construct and operate a mobile communication infrastructure in rural areas not
covered by 2G network for the Ministry of Transport, Maritime Affairs and Communications , has been completed as of 3 March 2016. The Company has
continued to provide operational services after 3 March 2016. Since the management of the Company anticipates that TL 32,299 arising from the services
provided after the contract period can be collected, no provision is recognized in the consolidated financial statements as at and for the period ended 31
December 2016.
F101
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
217
37.2 Dispute on Treasury Share Amounts
The Concession Agreement signed by the Company on 27 April 1998 has been renewed by virtue of the Provisional Article 2 of the Law No. 4673 and it was
entered into force on 13 February 2002 upon signature by BTK; certain amendments have been made after the enactment of the Law No. 5398 dated 3 July
2005; subsequently, the agreement has been renewed on 25 February 2009 after the additional frequency band tender for GSM 900 dated 20 June 2008.
The Company also signed another concession agreement on 30 September 2009 for rendering 3G mobile telecommunication services.
The Company is obliged to pay each month 90% of, 15% of its monthly gross sales; with the exception of the interest for late payment of the amounts
charged to its subscribers and of the indirect taxes, fiscal obligations such as fees and duties and the invoiced amounts recorded in the accounts to the
Treasury as treasury share and 10% of the remaining as the universal services share to the Ministry of Transport, Maritime Affairs and Communications.
The Company is also obliged to pay once a year 0,35% of its gross sale as the Authority contribution share.
As per Article 51 titled as “Applicable Law and Settlement of Disputes” of the 2G Concession Agreement, the parties agreed that the disputes shall be
settled by three arbitrators to be appointed in accordance with the arbitration rules of the International Chamber of Commerce. According to the said
provision, the disputes arising from the scope, execution and termination of the agreement shall be first referred to the Licensing Coordination Committee;
if it is not settled by this way within 30 days; one of the parties shall notify the other party by a letter on the outline, reasons of the dispute and its
intention to commence arbitration proceedings; if the dispute cannot be settled within 15 days as of such notification, the dispute shall be solved by
arbitration.
As per Article 45 titled as “Applicable Law and Settlement of Disputes” of the 3G Concession Agreement, the Council of State is authorized to solve the
disputes arising from the agreement and its annexes thereof.
The Undersecretariat of Treasury alleged that the Company made deficient treasury payments in the past and sent requests for payment and BTK
requested penalty fee over the alleged underpaid treasury share amounts. The Company took legal steps to object to these requests and legal proceedings
are ongoing. The maximum loss of the Company, excluding the interest for late payment arising from these disputes, for 2G Concession Agreement and 3G
Concession Agreement could be TL 374,936 and TL 49,634, respectively.
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 period ended 31 December 2016 (31 December 2015: None).
37.3 Dispute on Special Communication Tax
Large Tax Payers Office levied Special Communication Tax (SCT) and tax penalty on the Company amounting to TL 527,639 in total, of which SCT
amounting 211,056 and penalty amounting to TL 316,583 based on the claim stated on Tax Investigation Reports prepared for the years 2008-2012, that the
Company should pay Special Communication Tax over the prepaid card sales made by the distributors. The Company filed 60 lawsuits in the Tax Courts for
the cancellation of each tax and tax penalty claim.
Respective Courts accepted 24 of the cases filed for the cancellation of the fined tax assessment prepared for the year 2008 and 2009. Large Taxpayer
Office appealed the decisions. The Company replied these requests. The Council of State decided that there is no need to grant a decision by the reason of
waiver during the appeal process.
F102
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
218
The Court partially accepted 12 of the cases filed for the cancellation of the fined tax assessment prepared for the year 2011. The Company appealed the
decisions regarding the parts against the Company. The Large Tax Payers Office appealed the decisions regarding the parts against the Large Tax Payers
Office. The Council of State rejected the stay of execution requests, made during the appeal process by the Company. The appeal process is pending.
The Large Tax Payers Office has collected TL 80,355 (TL 77,480 and TL 2,875 overdue interest) calculated for the parts against the Company for the
assessment of the SCT for the year 2011 by offsetting the receivables of the Company from Public Administrations. No provision for the aforementioned
amount is recognized in the consolidated financial statements so that it was shown in other receivables.
The Court partially accepted 12 of the cases filed for the cancellation of the fined tax assessment prepared for the year 2010. The Company appealed the
decisions regarding the parts against the Company. The Council of State rejected the stay of execution requests, made during the appeal process by the
Company. The Council of State decided that there is no need to grant a decision by the reason of waiver during the appeal process.
The Court rejected the other 12 cases filed for the cancellation of the fined tax assessment (TL 122,802), related to the year 2012. The Company appealed
the respective decisions. The Council of State partially accepted the Company’s request for the stay of execution of the First Instance Court’s decisions
during the appeal process. The Council of State decided that there is no need to grant a decision by the reason of waiver during the appeal process.
As per the Law no. 6736, the Company filed applications for the restructuring of penalties and interest on the SCT regarding the dispute on the tax amount
for the years 2008, 2009, 2010, 2011 and 2012. Tax Office accepted the restructuring applications for the years 2008, 2009, 2010, 2012 and the Company
paid the restructuring amount of TL 117,058. Within this scope the Company submitted the waiver petition to the Tax Office related with the cases for
these years. On the other hand, Tax Office rejected the application for the restructuring of the SCT regarding the dispute on the tax amount for the year
2011. The Company filed a case for the cancellation of aforementioned rejection act of Tax Office for the year 2011. The case is pending.
Limited tax investigation has been performed for the year 2013, regarding the aforementioned case and no notification has been received regarding the
result of the investigation by the Company.
Based on the probable payment including interest in case of restructuring the SCT for the year 2013 as per the Law no. 6736, the Company accrued
provisions in the consolidated financial statements as at and for the period ended 31 December 2016 amounting to 14,866 TL (31 December 2015: None).
F103
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
219
37.4 Investigation initiated by ICTA on subscription numbers and radio utilization and usage fees
ICTA commenced in-depth investigations, against the GSM operators, on the accuracy of the subscriber numbers report for the terms, 2004-2009, 2010-
2011 and 2012 which are the key input for the calculation and payment of radio utilization and usage fees. As a result of the investigations, ICTA imposed 3
separate administrative fines to the Company amounting TL 8,251 in total. The administrative fines were paid within 1 month following the notification of
the decision of ICTA, with 25% discount. The Company filed lawsuits for the cancellation of aforementioned administrative fines and ICTA’s administrative
acts implied on the Company for the collection of the radio utilization and a usage fee which was claimed to have been paid deficiently. The cases are
pending.
ICTA filed 4 lawsuits on 13 October 2014, 23 December 2014, 3 March 2015 and 11 April 2016 for the collection of the total amount of TL 113,353. The
amount which was alleged that the Company paid deficiently by the ICTA decision took upon the investigation for the periods 2004 – 2009, 2010 – 2011,
and 2012 on the radio utilization and usage fees, with its accrued interest, which will be calculated.
The Courts decided to take expert report for the cases dated 13 October 2014, 23 December 2014 and
3 March 2015. The Courts decided to consolidate the lawsuits filed by ICTA on 13 October 2014 and
23 December 2014. The expert report has been notified to the Company, for the case dated
13 October 2014. The expert committee has requested additional information and documents from the parties with this report. The Company submitted its
objections and declarations against the expert report and the Court decided to take an additional expert report. The cases are pending.
On the other hand, as a result of the investigation on the same subject for the period of 2013, ICTA has imposed an administrative fine to the Company
in the amount of TL 2,989 and decided that the deficiently paid amount of TL 21,191 should be collected from the Company. The amount of TL 2,241
administrative fine which was issued on 27 September 2016 have been paid within 1 month following the notification of the decision of ICTA, and 25%
discount have been applied. The Company filed a lawsuit for the cancellation of aforementioned administrative fine and ICTA’s administrative acts implied
on the Company for the collection of the radio utilization and usage fees which was claimed to have been paid deficiently. The case is pending.
On the other hand, as a result of the investigation on the same subject for the period of 2014, ICTA has decided that the deficiently paid amount of TL 124
should be collected from the Company. On 29 December 2016 Company applied to ICTA and appealed the decision to ICTA Board again.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits is uncertain, thus, no provision is recognized in
the consolidated financial statements as at and for the period ended 31 December 2016 (31 December 2015: None).
F104
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
220
37.5 Disputes regarding the Law on the Protection of Competition
With the decision dated 6 June 2011 and numbered 230 established on the grounds of the investigation initiated by the Competition Board on the grounds
that the Company violated the competitive environment through abusing its dominant position in the Turkish mobile market and infringements of Article 4
and 6 of the Law No. 4054, it was decided to apply administrative fine amounting to TL 91,942 on the Company. A lawsuit was filed in the Council of State
for the stay of execution and the cancellation of the execution of Article 4 and 6 by the Company.
The Council of State accepted the Company’s request for stay of execution for the part of the Competition Board decision related to the administrative
fine amounting to TL 91,942but rejected the request for the part of the decision stating that the Company abused its dominant position with its practices
subject to the Competition Board decision and has to end this violation. The Competition Board objected to the decision for the accepted part and the
Company objected to the decision for the rejected part. The Plenary Session of Administrative Law Divisions of the Council of State cancelled the stay of
execution decision and decided to send the file back to the first instance court so as to be examined for the reasons related to the basis of the Competition
Board’s stay of execution decision. Upon this decision, the Council of State rejected the Company’s stay of execution request. The Company objected to the
decision. The objection was rejected. Vodafone demanded to be accepted to the case, as the intervening party. The Company also objected to this demand
too. The Court accepted the Vodafone's demand to intervene. The hearing took place on 8 March 2016. The Court granted an interim decision after the
hearing and requested some information and documents from the Competition Authority. The Competition Authority responded to the interim decision. The
Company submitted its statements against the petition of the Competition Authority.
On 8 March 2012, payment order has been sent to the Company by the Tax Office. The Company filed a lawsuit for the stay of execution and cancellation
of the payment order on 13 March 2012. The Court accepted the lawsuit and cancelled the payment order. Tax Office appealed the decision. The Company
replied the appeal request. Appeal process is still pending.
Dogan Dagitim Satis Pazarlama Odeme Aracilik ve Tahsilat Sistemleri A.S. filed a lawsuit against the Company on 5 June 2012 claiming TL 110,484 together
with up to 3 times of the loss amount to be determined by the court for its material damages by reserving its rights for surpluses allegedly on the ground
that the Company caused that damage by its applications to its sub-distributors which constituted a violation of the law no. 4054 and that violation was
proved by the Competition Board decision in which the Board imposed TL 91,942 administrative fine to the Company. The court decided to wait for the
Council of State's final decision. The Court dismissed the interim decision on the expectation of the Council of State files, appointed the day of the hearing
and decided to request information on the latest status of the files. The case is still pending.
Mobiltel İletisim Hizmetleri Sanayi ve Ticaret A.S. filed a lawsuit against the Company on 17 August 2012 claiming TL 500 together with up to 3 times of
the loss amount to be determined by the court for its material damages by reserving its rights for surpluses allegedly on the ground that the Company
gives exclusive competence to its sub-dealers and that violation was proved by the Competition Board decision in which the Board imposed TL 91,942
administrative fine to the Company and that Mobiltel was not able to sale any product to the sub-dealers which were given exclusive competence by the
Company. The court decided to obtain an expert report and to wait for the Council of State's final decision. The lawsuit is pending.
Pamuk Elektronik whose dealership agreement was terminated initiated a lawsuit with a claim of a compensation three times of its alleged damages due
to the Company’s actions falling within the scope of the Competition Board’s administrative monetary fine in the amount of TL 91,942 and also with a
compensation claim in the amount of TL 2,100 due to the alleged unjust termination of the agreement. The Company submitted its reply petition within the
time limits.
F105
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
221
The Court dismissed the case based on the ground that the dispute should be settled by arbitration since there is an arbitration clause in the agreement.
Pamuk Elektronik appealed this decision, the Company submitted its response to appeal request. Subsequently, the Court of Appeal affirmed the dismissal
decision of the first instance. Pamuk Elektronik requested the correction of this decision but the Court of Appeal declined such request. Pamuk sent a
notification to the Company to commence the arbitration proceeding; the Company sent a response thereto. The request for arbitration filed by Pamuk
Elektronik has been received and reply petition has been submitted within the time limit. The case is pending.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits is uncertain, thus, no provision is recognized in
the consolidated financial statements as at and for the period ended 31 December 2016 (31 December 2015: None).
37.6 Other Ongoing Lawsuits
Within consolidated financial statements prepared as of 31 December 2016, obligations which are related to following ongoing disputes have been
evaluated.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits is uncertain, thus, no provision is recognized in
the consolidated financial statements as at and for the period ended 31 December 2016 (31 December 2015: None).
31 December 2016
Anticipated Maximum
Risk (excluding accrued
interest)
31 December 2015
Anticipated Maximum
Risk (excluding accrued
interest)
31 December 2016
Provision
31 December 2015,
Provision
116,000
22,544
-
22,149
-
-
-
-
Subject
Dispute related with the Ministry of Customs
and Trade
Disputes related with ICTA
38. RELATED PARTIES
Transactions with key management personnel:
Key management personnel comprise the Group’s key management executive officers and members of board of directors.
As at 31 December 2016 and 2015, none of the Group’s executive officers has outstanding personnel loans from the Group.
In addition to their salaries, the Group also provides non-cash benefits to 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.
F106
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
222
Total compensation provided to key management personnel is TL 60,544, TL 66,876 and TL 32,817 for the years ended 31 December 2016, 2015 and 2014
respectively as listed below;
Short-term benefits
Termination benefits
Long-term benefits
31 December 2016
50,001
10,064
479
60,544
31 December 2015
52,767
13,454
655
66,876
31 December2014
28,020
4,200
597
32,817
The Company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders.
Due from related parties – short term
MegaFon OJSC (“Megafon”)
Hobim Bilgi Islem Hizmetleri AS (“Hobim”)
GSM Kazakhstan Ltd (“Kazakcell”)
Vimpelcom OJSC (“Vimpelcom”)
Telia Sonera International Carrier AB (“Telia”)
Azercell Telekom MMC (“Azercell”)
Krea Icerik Hizmetleri ve Produksiyon AS (“Krea”) (*)
Millenicom Telekomunikasyon AS (“Millenicom”) (**)
Other
31 December 2016
1,387
1,223
937
586
577
446
-
-
705
5,861
31 December 2015
1,592
-
1,662
5,223
722
633
83
784
1,061
11,760
(*) Krea shares held by Cukurova Group were acquired by BeIN Media Group LLC on 26 August 2016.
(**) Millenicom shares held by Cukurova Group were acquired by EWE Turkey Holding on 21 January 2016.
Due from related parties short term is shown net of allowance for doubtful debts amounting to TL 231 as at 31 December 2016 (31 December 2015: TL 302
and 31 December 2014: TL 80)
.
Due from Megafon, Telia, Vimpelcom, Azercell and Millenicom resulted from telecommunications services such as interconnection and roaming.
Due from Hobim mainly resulted from advances given for game materials.
Due from Kazakcell, mainly resulted from the software services and telecommunications services such as interconnection and roaming.
Due from Krea resulted from rental circuit system, corporate internet services and data center services.
F107
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
Due to related parties – short term
Hobim
Kyivstar GSM JSC (“Kyivstar”)
Megafon
Geocell LLC (“Geocell”)
Other
223
31 December 2016
6,260
2,382
892
445
1,222
11,201
31 December 2015
3,491
1,375
171
144
1,374
6,555
Due to Hobim mainly resulted from rendering invoice printing services and subscription documents services.
Due to Kyivstar , Megafon and Geocell mainly resulted from rendering telecommunications services such as interconnection and roaming.
The Group’s exposure to currency risk related to due from / (due to) related parties is disclosed in Note 34.
Transactions with related parties
Intragroup transactions that have been eliminated are not recognized as related party transaction in the following table:
2016
30,964
20,775
15,761
11,773
3,422
2,585
997
-
3,149
89,426
2015
41,728
20,489
16,955
14,958
4,831
4,183
8,861
217,080
6,049
335,134
2014
69,469
48,360
17,936
30,394
10,746
5,485
10,898
428,234
47,426
668,948
Revenue from related parties
Sales to Kyivstar
Telecommunications services
Sales to Vimpelcom
Telecommunications services
Sales to Telia
Telecommunications services
Sales to Megafon
Telecommunication services
Sales to Krea (*)
Call center services, fixed line services, rent
and interest charges
Sales to Azercell
Telecommunication services
Sales to Millenicom (**)
Telecommunications services
Sales to KVK Teknoloji (***)
Simcard and prepaid card sales
Sales to other related parties
F108
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
224
Related party expenses
Charges from Kyivstar
Telecommunications services
Charges from Hobim
Invoicing and archieving services
Charges from Krea
Digital television broadcasting services
Charges from Megafon
Telecommunications services
Charges from Vimpelcom
Telecommunications services
Charges from Telia
Telecommunications services
Charges from Azercell
Telecommunications services
Charges from Millenicom
Telecommunications services
Charges from KVK Teknoloji
Dealer activation fees and others
Charges from other related parties
2016
47,595
31,832
5,975
3,162
2,721
2,499
1,361
180
-
8,317
103,642
2015
49,608
29,570
15,826
4,342
4,348
3,409
28
5,418
76,743
9,733
199,025
2014
69,947
36,160
12,931
12,688
13,642
15,100
3,157
7,491
112,776
65,834
349,726
(*) Krea income and expenses include the transactions until 26 August 2016.
(**) Millenicom income and expenses include the transactions until 21 January 2016.
(***)KVK Teknoloji’s shares held by Cukurova Group have been acquired by MV Holding on 6 July 2015. KVK Teknoloji income and expenses include the transactions until 6 July 2015.
Transactions with Kyivstar:
Kyivstar, an entity under common control with Alfa, is rendering and receiving telecommunications services such as interconnection and roaming.
Transactions with Vimpelcom:
Vimpelcom, an entity under common control with Alfa, is rendering and receiving telecommunications services such as interconnection and roaming.
Transactions with Telia:
Telia, a subsidiary of Sonera, is rendering and receiving telecommunications services such as interconnection and roaming.
Transactions with Megafon:
Megafon, a subsidiary of Sonera, is rendering and receiving telecommunications services such as interconnection and roaming.
F109
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
225
Transactions with Krea:
Çukurova Holding has signed a share purchase agreement with BeIN Media Group LLC related to the sale of their shares in Krea. Share transfer has finalized
as at 26 August 2016.
Krea, a direct-to-home digital television service company under the Digiturk brand name.
There are no specific agreements between Turkcell and digital channels branded under Digiturk name. Every year, as in every other media channel, standard
ad spaces are purchased on a spot basis. Also, Krea provides instant football content related to Spor Toto Super League to the Company to be delivered to
mobile phones and tablets.
The Company has agreements for fixed telephone, leased line, corporate internet, and data center services provided by the Company’s subsidiary Turkcell
Superonline.
Transactions with Azercell:
Azercell, a subsidiary of Sonera, is rendering and receiving telecommunications services such as interconnection and roaming.
Transactions with Millenicom:
Millenicom shares held by Cukurova Group were acquired by EWE Turkey Holding on 21 January 2016. Millenicom is rendering and receiving
telecommunications services such as interconnection and roaming.
Transactions 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 monthly invoice printing services, manages
archiving of invoices and subscription documents. Prices of the agreements are determined through alternative proposals’ evaluation.
Transactions with KVK Teknoloji:
KVK Teknoloji shares held by Cukurova Group were acquired by MV Holding on 6 July 2015. The Company has a distributorship agreement with KVK
Teknoloji.
F110
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
226
39. SUBSIDIARIES
The Group’s ultimate parent company is Turkcell. Subsidiaries of the Company as at 31 December 2016 and 31 December 2015 are as follows:
Subsidiaries
Name
Kibris Telekom
Turkcell Global Bilgi
Turktell
Turkcell Superonline
Turkcell Satis
Eastasia
Turkcell Teknoloji
Global Tower
Turkcell Interaktif (1)
Financell(2)
Rehberlik
Lifecell Ventures (3)
Beltel
Turkcell Gayrimenkul
Global LLC
UkrTower
Turkcell Europe
Turkcell Odeme (4)
Euroasia (5)
lifecell (6)
TFS(7)
Beltower (8)
Belarusian Telecom
Lifetech
Inteltek
Azerinteltek (9)
Country of
Incorporation
Turkish Republic of Northern
Cyprus
Turkey
Turkey
Turkey
Turkey
Netherlands
Turkey
Turkey
Turkey
Netherlands
Turkey
Netherlands
Turkey
Turkey
Ukraine
Ukraine
Germany
Turkey
Netherlands
Ukraine
Turkey
Republic of Belarus
Republic of Belarus
Republic of Belarus
Turkey
Azerbaijan
Business
31 December 2016 (%)
31 December 2015 (%)
Effective Ownership Interest
Telecommunications
Customer relations management
Information technology, value added GSM
services investments
Telecommunications
Sales and delivery
Telecommunications investments
Research and development
Telecommunications infrastructure business
Content services
Financing business
Directory Assistance
Telecommunications investments
Telecommunications investments
Property investments
Customer relations management
Telecommunications infrastructure business
Telecommunications
Payment services
Telecommunication investments
Telecommunications
Consumer financing services
Telecommunications Infrastructure business
Telecommunications
Research and development
Information and Entertainment Services
Information and Entertainment Services
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
-
100
100
100
80
78
55
28
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
80
78
55
28
(1) As at 28 December 2016, merger of subsidiaries, Turkcell Superonline and Turkcell Interaktif has been completed through the acquisition of Turkcell Interaktif by Turkcell Superonline.
(2) As at 21 December 2016, Board of Directors resolved to liquidate Financell .
(3) The trade name of Beltur Coöperatief U.A. has changed as “Lifecell Ventures Coöperatief U.A” as at 18 August 2016.
(4) As at 12 August 2016, Turkcell Odeme has received official authorization from Banking Regulation and Supervision Agency. As at 20 February 2017 the trade name of Turkcell Odeme Hizmetleri A.S has
changed as Turkcell Odeme ve Elektronik Para Hizmetleri A.S.
(5) As at 30 December 2016, merger of subsidiaries, Lifecell Ventures and Euroasia has been completed through the acquisition of Euroasia by Lifecell Ventures
(6) The trade name of Astelit has changed as “lifecell LLC” as at 2 February 2016.
(7) As at 22 October 2015, the consumer financing company is incorporated and has received official authorization as at 21 January 2016. As at 21 September 2016, Turkcell Finansman has authorized its
brand name as “Financell”.
(8) As at 19 December 2016, Beltower has been incorporated in Republic of Belarus.
(9) Inteltek has directly or indirectly effective ownership interest rate 51% in total on Azerinteltek.
F111
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT 227
Details of non-wholly owned subsidiaries that have material non-controlling interests to the Company are disclosed below:
Name of
subsidiary
Inteltek
lifecell (*)
Individually
immaterial
subsidiaries with
non –controlling
interest
Place of
incorporation and
principal place of
business
Turkey
Ukraine
Proportion of ownership
interests and voting rights held
by non-controlling interest
31 December
2015
45.00%
-
31 December
2016
45.00%
-
Profit / (loss) allocated
to non-controlling interests
31 December
2015
38,362
(209,323)
31 December
2016
39,346
-
Accumulated non-
controlling interests
31 December
2015
63,819
-
31 December
2016
50,863
-
12,369
51,715
6,858
(164,103)
5,769
56,632
266
64,085
(*) Figures for the year 2015 represent the amounts acquired till the date of acquisition of 44.96% shares of lifecell from SCM.
Summarized financial information in respect of Inteltek is set out below. The summarized financial information below represents amounts before intragroup
eliminations.
F112
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT
228
Inteltek
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners
Revenue
Expenses
Profit for the year
Other comprehensive income / (loss) for the year
Dividend paid to non-controlling interests
Net cash inflow from operating activities
Net cash inflow from investing activities
Net cash outflow from financing activities
Effects of foreign exchange rate fluctuations on
cash and cash equivalents
Net cash outflow
Euroasia
Revenue
Expenses
Profit for the year
Other comprehensive income / (loss) for the year
Net cash inflow from operating activities
Net cash inflow from investing activities
Net cash outflow from financing activities
Effects of foreign exchange rate fluctuations on cash and cash equivalents
Net cash outflow
(*) Figures for the year 2015 represent the amounts acquired till the date of acquisition of 44,96% shares of Euroasia from SCM.
31 December 2016
191,199
17,367
30,516
65,020
113,030
31 December 2015
203,028
25,068
31,135
55,141
141,820
2016
178,408
(90,973)
87,435
(618)
(44,888)
69,497
17,470
(119,751)
18,213
(14,571)
2015
139,077
(53,829)
85,248
(379)
(92,542)
66,055
27,355
(205,648)
11,795
(100,443)
2015 (*)
259,537
(725,114)
(465,577)
122,386
213,957
(616,340)
417,498
(49,158)
(34,043)
F113
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)TURKCELL 2016 ANNUAL REPORT
229
40. SUBSEQUENT EVENTS
Within the scope of the Decree Law No. 683 published on 23 January 2017, the Company will be able to pay EUR denominated 4.5G license obligation
in Turkish liras converted at the buying exchange rate announced by the Central Bank of the Republic of Turkey on 2 January 2017 upon request of the
Company.
Aktif Yatırım Bankası A.S. Turkcell Asset Finance Fund, founded by Aktif Yatırım Bankası A.S. and mandated to issue asset-backed securities with a structure
in which our Company’s 100% subsidiary Turkcell Finansman. will be the originator, has applied to the Capital Markets Board of Turkey (“CMB”) for the
issuance certificate of asset-backed securities with an amount of up to TRY 100,000 within one year.
The Company and the Ministry of Transport, Maritime Affairs and Communications, Directorate General of Communications signed a contract to continue
the contract, signed on 20 February 2013 to establish and operate mobile communication infrastructure and operation in uncovered areas, (Phase 1) until 31
December 2018 and to add mobile broadband services to the existing infrastructure providing GSM services under Universal Service Law and to operate the
new and existing networks together. Mobile broadband services will be added to the existing infrastructure established in accordance with Phase 1 in 1,799
rural locations. The new and the existing infrastructure will be operated together
The incorporation of Turkcell Enerji Cozumleri ve Elektrik Satıs Ticaret A.S, whose field of activities are electricity energy trade and wholesale and retail
electricity sales, has been registered. The Company has been incorporated on 20 February 2017.
F114
TURKCELL ILETISIM HIZMETLERI ASNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs at and for the year ended 31 December 2016(Amounts expressed in thousands of Turkish Liras unless otherwise indicated except share amounts. Currencies other than Turkish Liras are expressed in thousands unless otherwise indicated.)SECTORAL AND FINANCIAL INFORMATION TURKCELL 2016 ANNUAL REPORT 230
OUR OFFICES
CITY
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
İSTANBUL
ADANA
ADAPAZARI
ANKARA
ANKARA
ANKARA
ANTALYA
BALIKESİR
BURSA
DENİZLİ
DİYARBAKIR
ERZURUM
ESKİŞEHİR
EDİRNE
GAZİANTEP
HATAY
İZMİR
İZMİR
İZMİT
İZMİT
KAYSERİ
KONYA
MALATYA
MERSİN
MUĞLA
MUĞLA
SAMSUN
TRABZON
TEKİRDAĞ
VAN
ZONGULDAK
LOCATION
HEADQUARTERS
ADDRESS
Aydınevler Mahallesi İnönü Caddesi Küçükyalı Ofispark No: 20 Maltepe/İstanbul
TURKCELL ACADEMY
Meşrutiyet Caddesi No: 71 Beyoğlu/İstanbul
MALTEPE PLAZA
Yeni Mah. Pamukkale Sok. No: 3 Soğanlık Mevkii-Kartal/İstanbul
MALTEPE TECHNOLOGY PLAZA
Soğanlık Yeni Mah. Pamukkale Sokak No: 11 Kartal/İstanbul
TURKCELL TECHNOLOGY PLAZA
Aydınevler Mahallesi İnönü Caddesi Küçükyalı Ofispark No: 20 Maltepe/İstanbul
DAVUTPAŞA PLAZA
Davutpaşa Cad. Serçekale Sok. No: 2 Zeytinburnu/İstanbul
DUDULLU DATA CENTER
Organize Sanayi Bölgesi Nato Yolu 4. Cadde No: 1 Dudullu-Ümraniye/İstanbul
LEVENT OFFICE
KARTAL PLAZA
Büyükdere Cad. Harman Sok. No: 8 Levent/İstanbul
Topselvi Mah. Dipçik Sok. No: 31 Kartal/İstanbul
HALKALI WAREHOUSE
Merkez Mah. Dere Boyu Cad. No: 8/8 Halkalı/İstanbul
MAHMUTBEY OMC
Mahmutbey Mah. İnönü Caddesi No: 89 Bağcılar/İstanbul
ADANA PLAZA
SAKARYA OMC
ANKARA PLAZA
Turhan Cemal Berikel Bulvarı No: 212 Seyhan/Adana
Miktat Paşa Mah. Kamelya Sok. Kule Binası Sakarya/Adapazarı
Eskişehir Yolu 9. Km. No: 2 64 Söğütözü/Ankara
ANKARA CİNNAH PLAZA
Cinnah Caddesi No: 15 Çankaya/Ankara
BAŞKENT OMC
ANTALYA PLAZA
BALIKESİR OMC
BURSA PLAZA
DENİZLİ OMC
DİYARBAKIR PLAZA
ERZURUM PLAZA
ESKİŞEHİR OFFICE
EDİRNE NDC
GAZİANTEP OMC
HATAY OMC
İvedik Mahallesi 1323 Cadde No: 37 Yenimahalle/Ankara
915. Sokak No: 3 Kızıltoprak/Antalya
Kuvai Milliye Mahallesi 194. Sokak No: 15/A Balıkesir
Organize Sanayi Bölge Müd. Kırmızı Cad. No: 4 TSE Yanı Nilüfer/Bursa
Bozburun Mah. 7014 Sok. No: 5 Merkezefendi/Denizli
Urfa Yolu 6. Km Bağlar/Diyarbakır
Ilıca Yolu Organize Sanayi Bölgesi 4. Sok No: 10 Erzurum
Batıkent Mahallesi, Çamören Sokak No: 8 Tepebaşı/Eskişehir
Şükrüpaşa Mah. Kıyık Caddesi Dörtyaka Mevkii Edirne
Kocaoğlan Mah. Demokrasi Bulvarı No: 185/1 Şahinbey/Gaziantep
Güzelbirlik Mah. Yunus Emre Cad. No: 11-B Güzelburç/Hatay
İZMİR PLAZA (New)
367/7. Sokak No: 12 Kazım Direk Mah. Bornova/Izmir
İZMİR OMC
GEBZE DC
İZMİT OMC
KAYSERİ PLAZA
KONYA OMC
MALATYA OMC
MERSİN OMC
BODRUM OFFICE
MUĞLA OMC
SAMSUN PLAZA
TRABZON PLAZA
Ankara Asfaltı No: 64 Kazım Dirik Mh. Bornova/Izmir
Gebze OSB Tembelova Mevkii Mah. 3.300 Sok. Yan Yol No: 3344 Gebze/Kocaeli
Yahyakaptan Mah. Bahçeşehir Sokak No: 30 Yahyakaptan Izmit/Kocaeli
Kayseri Organize Sanayi Bölgesi 13. Cadde No:16 Melikgazi/Kayseri
Horozluhan Mah. Sıhhıye Sok. No: 6 1. Org San. Selçuklu/Konya
Hoca Ahmet Yesevi Mah. 7. Sok. Mahrukatçılar Sitesi No: 34 Merkez/Malatya
Portakal Mah. 80050 Sok. No: 3 Toroslar/Mersin
Atatürk Bulvarı No: 210 Koçtaş Yanı Kobnacık Bodrum/Muğla
Musluhittin Mah. Atatürk Bulvarı No: 61 Muğla
Mimar Sinan Mah. 160. Sok. No: 18 Atakum/Samsun
Çukurçayır Mah. Hasan Turfanda Yolu No: 1 Çukurçayır/Trabzon
ÇORLU WAREHOUSE AND OMC
Yulaflı Mah. Hacı Şeremet Mevkii Çorlu/Tekirdağ
VANSANTRAL
EREĞLİ OMC
Yeni Mah. Sahil Sokak. No: 71 Edremit/Van
Merkez Ören Köyü Bozoklar Mevkii No: 47/1 Karadeniz Ereğli/Zonguldak
TURKCELL 2016 ANNUAL REPORT 231
GLOSSARY
Abbreviation
2G
Term Extension
Second Generation
3G
Third Generation
4.5G
4x4 MIMO
5G
Access Transport
ARPU
Base Station
Carrier Aggregation
Datacenter Interconnect
DL 256 QAM
FDD
GSM
GSMA
IMT Spectrum
ITU
LTE
LTE-A
M2M
Mbps
MHz
NGMN
Ooakla Speed Test
Overlay Network
Roaming
Multi-input multi-output
Fifth Generation
Average Revenue Per User
Frequency Division Duplex
Global Mobile Communication System
International Mobile Telecommunication
Spectrum
The International Telecommunication
Union
Long Term Evolution
Long Term Evolution - Advanced
Machine to Machine
Megabits per Second
Mega Hertz
Next Generation Mobile Network
A speed measurement application
SDN-Ready Network
Software Define Network
SMS
Short Message Service
On-net
TAS
Ultra Fast Convergency
VoLTE
VPN
Turkish Accounting Standarts
Voice over LTE
Virtual Private Network
WiFi
Wireless Connection Area
Explanation
The second generation telecommunication system, which used digital data stream for the first time,
additionally providing packet-based data communication and voice and data services.
A third generation mobile telecommunication system established according to IMT-2000/UMTS standards, or
standards developed based on these standards.
A generation containing technologies of more advanced features than standard 4G technology.
A technology developed to improve performance using multiple antennas simultaneously.
A generation containing technologies having more advanced features than standard 4G technology.
Access Transport Access and carrier network type providing high capacity
Average monthly revenue generated per mobile subscriber.
A fixed transceiver device in each cell of a mobile communications network enabling communication between
mobile phones and radio signals within the cell.
A technique allowing more bandwidth and consequently higher speeds to be obtained by joining frequencies
called carriers.
A technology that enables different data centers to serve, connecting to each other.
The data transmission speed is increased by the coding of a sign in the DL direction over 8 bits (using high
modulation)
A technique using different frequency bands in sending and receiving processes within communication.
This is a digital mobile communication system, standardized by the European Communications Standards
Institute and based on digital transmission with roaming and the cellular network structure being used in
Europe, Japan and various other countries. GSM systems operate at frequency bands of 900 Mhz and 1800
Mhz.
The GSM Association is a community consisting of mobile operators and telecom-related companies with the
aim of standardizing and developing the Mobile Telecommunications Sector.
An international standardization institution with headquarters in Geneva that determines many standards in
telecommunication.
Technology that ensures to achieve very high speeds by combining carriers in the same or different frequency
bands.
A mobile communications standard comprising advanced features such as carrier coupling, which enables
mobile broadband speed of over 150 MBps in LTE.
Machine to Machine is the general name of the technology that allows devices to exchange information and
conduct transactions without human intervention.
A data transmission speed. 1 Mbps equals 2 (20) bpse.
A unit of frequency.
An organization (Next Generation Mobile Networks Association), of which Turkcell is a member, and which
several operators, suppliers and universities in the world are a part of, giving direction to technology
standards and technology producing companies in relation to operator requirements.
An application that measures instant internet speed in fixed or mobile networks.
A term used to describe networks, which are installed on the existing network and that use the existing
infrastructure, but are independently located networks (e.g. IP network installed on the transmission
network).
A mobile communications feature enabling the subscribers of a network to use their own mobile phones and
numbers within the coverage area of another operator.
IP network architecture, which can be programmed with software. Technology that ensures the control of IP
networks with a centralized software and application based routing.
A mobile communication system allowing users to receive and send messages that can be constituted of
both alphabetic and numerical characters of up to 160 characters, to and from mobile phones through a short
message service.
A call originating from an operator network and ending on the same operator network.
Technology that enables the transition on the back up line to be realized very quickly.
IP based high quality audio technology through a 4.5G network.
Technology that can provide secure connectivity through the Internet, or another network and serve point-
to-point, or point-to-multipoint.
A standard generated for the transfer of data through wireless cables. Laptops, smart phones, PCs, etc.
having a receiver and transmitter of WiFi standard can benefit from wireless broadband internet services.
TURKCELL 2016 ANNUAL REPORTSECTORAL AND FINANCIAL INFORMATION
Total Number of Customers (Million)
48.6
50.7
52.0
2012
2013
2014
Turkcell İletişim Hizmetleri A.Ş.
Turkcell Küçükyalı Plaza, Aydınevler Mahallesi İnönü Caddesi
No: 20 Küçükyalı Ofispark B Blok - Maltepe / Istanbul
HQ: +90 (212) 313 1000
Customer Services: 532 or +90 (532) 532 0000
www.turkcell.com.tr
Trade Register Number: 304844
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ANNUAL REPORT 2016