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Turkcell Iletisim Hizmetleri A.S. Full Year 2008 ResultsISTANBUL, Turkey, February 25 /PRNewswire-FirstCall/ -- Turkcell , the leading provider of mobile communications services in Turkey, today announced results for the fourth quarter and year ended December 31, 2008. All financial results in this press release are unaudited, prepared in accordance with International Financial Reporting Standards ("IFRS") and expressed in US$. Please note that all financial data is consolidated and comprises Turkcell Iletisim Hizmetleri A.S., (the "Company", or "Turkcell") and its subsidiaries and its associates (together referred to as the "Group"). All non-financial data is unconsolidated and comprises Turkcell only. The terms "we", "us", and "our" in this press release refer only to the Company, except in discussions of financial data, where such terms refer to the Group, and where context otherwise requires. Turkcell Iletisim Hizmetleri A.S. Results for the Full Year 2008 Highlights of the 2008 Full Year - The Group recorded solid financial results despite the volatile global markets, which resulted in a sharp 25% devaluation of TRY against USD in the fourth quarter of 2008, and adversely impacted our results for the full year 2008 - Revenue increased by 10.1% to US$7.0 billion (US$6.3 billion) due to higher usage, subscriber growth, tariff increases and the positive contribution of our consolidated subsidiaries - EBITDA* decreased by 1.8% to US$2.6 billion (US$2.6 billion) on an annual basis. EBITDA margin was 37.0% (41.5%) - Net income grew to US$1.8 billion (US$1.4 billion), up by 36.0% on an annual basis - Turkcell's subscriber base grew by 4.5% on an annual basis to 37.0 million (35.4 million) as of December 31, 2008 - Average revenue per user ("ARPU") remained flat at US$14.5 (US$14.3) - Blended minutes of usage per subscriber ("MoU") increased by 25.7% to 95.9 minutes (76.3 minutes) - Turkcell's Ukrainian subsidiary, Astelit successfully increased its revenue by 71.4% to US$439 million (US$256 million) and recorded a positive full year EBITDA for the first time. *EBITDA is a non-GAAP financial measure. See pages 13-14 for the reconciliation of EBITDA to net cash from operating activities. In this press release, a year on year comparison of our key indicators is provided and figures in parentheses following the operational and financial results for the fourth quarter 2008 refer to the same item in the fourth quarter of 2007 and figures in parentheses following the operational and financial results for the year end 2008 refer to the same item in the year end of 2007. For further details, please refer to our consolidated financial statements and notes as at and for the year ended December 31, 2008 which can be accessed via our web site in the investor relations section (http://www.turkcell.com.tr/). Comments from the CEO, Sureyya Ciliv We are pleased with our 2008 performance in one of the most challenging environments in business history. The global crisis had an impact on our key markets where GDP growth has slowed down significantly, consumer confidence declined and the currencies were sharply devalued. Despite these challenges and serious competition, we achieved solid results: Turkcell Group recorded revenue of U$7.0 billion (10% increase yoy), EBITDA of US$2.6 billion (2% decrease yoy), and net income of US$1.8 billion (36% increase yoy). The number of Turkcell Group subscribers reached 62 million. In Turkey, we maintained our market leadership, growing our subscriber base as well as share of traffic and revenue in an increasingly competitive environment. Thanks to our strong value propositions, we completed the year with net additions during the Mobile Number Portability implementation process. I am particularly pleased with the progress we made in Value Added Services where revenue increased by 27%. We are also very happy and proud about winning 2009 GSMA award in Best Mobile Advertising Services area. We have continued to contribute to Turkey's future, economy, and social welfare as a leading player in corporate social responsibility initiatives. We are particularly proud to support educational programs for youth and to have opened call centers in the Eastern part of Turkey, creating employment opportunities. Looking ahead, with our healthy net cash position and cash generation ability, we believe we are well positioned as the leading communications and technology company in the area to evaluate new growth opportunities in Turkey and international markets. Once more, we have completed a challenging year, successfully meeting our major goals and objectives. This was definitely a great team effort! Therefore, I would like to thank all of our employees, customers, business partners, and shareholders for their contributions and continuing confidence in Turkcell." OVERVIEW OF 2008 In 2008 our competitors have continued with their aggressive subscriber acquisition initiatives, dealer activities and campaigns to manage subscribers' price perception. This situation was intensified by the introduction of Mobile Number Portability (MNP) in November. The mobile line penetration rate in Turkey rose to 92% as at year end 2008. At the beginning of 2008, certain regulatory developments led to a setback in our campaigns and activities until the end of February, when we regained our marketing flexibility to launch new campaigns and offers. Starting from the second quarter of 2008, there was a recovery in our operational performance thanks to strong value propositions. Our actions resulted in growth in the postpaid subscriber base as a proportion of total subscribers and sustained prepaid acquisitions along with increased availability of Turkcell brand. We increased community advantages for various segments including the corporate segment resulting in increased customer loyalty. We effectively communicated our advantageous offers and benefits with a new communication theme throughout the year, achieving much better perception of Turkcell products and services. Our co-branding offers for youth and corporate club members expanded during year. We led the market with smart phones particulary achieving great customer perception during the launch of Blackberry Bold, and IPhone 3G. On November 9th 2008 MNP was launched in Turkey. Thanks to our strong value propositions and on-going marketing an sales activities, we have faced competition successfully and we have closed year with net subscriber additions related to this process. Our continued focus on Value Added Services has helped us to stand out against the competition. Subscriptions to data lines and mobile internet packages led to higher revenue. Our VAS revenue constituted 14% of our Group's consolidated revenue. Macro environment Information Q4 2008-Q4 Q3 Q4 2007 Q4 2007 2008 2008 % Chg TRY / US$ rate Closing Rate 1.1647 1.2316 1.5123 29.8% Average Rate 1.1851 1.1959 1.4769 24.6% INFLATION Consumer Price Index 4.0% 0.8% 3.0% (1.0)pp GDP Growth 3.6% 0.5% n/a - TABLE CONTINUED BELOW YE 2008- Q4 2008-Q3 YE YE YE 2007 2008 % Chg 2007 2008 % Chg TRY / US$ rate Closing Rate 22.8% 1.1647 1.5123 29.8% Average Rate 23.5% 1.3031 1.2768 (2.0%) INFLATION Consumer Price Index 2.2pp 8.4% 10.1% 1.7pp GDP Growth - 4.6% 3.0* - * GDP growth nine months Turkey was adversely impacted by the global financial market turmoil in 2008. The GDP growth rate dropped to 0.5% in the third quarter of 2008. As noted above, TRY deteriorated sharply by 25% against USD in the fourth quarter of the year, impacting our USD financial results for the fourth quarter and year end. The consumer confidence index declined significantly in 2008 from 93.89 to 69.90. In 2009, the GDP growth rate in Turkey is expected to weaken further in line with the global economy, which may have some impact on our operational performance. Even though it is hard to quantify, we believe that the developments in the macroeconomic environment and consumer confidence as well as geopolitical, regulatory and competitive dynamics in Turkey may adversely affect our results of operations, business and financial performance in 2009. Consequently, in determining our business plans we will continue to closely monitor developments in these areas and take into consideration the potential impact of global volatility on the Turkish economy. Financial and Operational Review of the Fourth Quarter and Full Year 2008 The following discussion focuses principally on the developments and trends in our business in the fourth quarter and full year 2008. Selected financial information for the fourth quarter of 2007, third quarter of 2008, and full year 2007 is also included at the end of this press release. For your convenience, selected financial information in TRY prepared in line with the Capital Markets Board of Turkey's standards is also included at the end of this press release. Financial Review Profit & Loss Statement Q4 Q3 Q4 Q4 2008-Q4 2007 (million US$) 2007 2008 2008 % Chg Total Revenue 1,807.6 2,055.9 1,585.0 (12.3%) Direct cost of revenue (849.2) (935.5) (801.4) (5.6%) Depreciation and amortization (204.2) (172.0) (142.9) (30.0%) Administrative expenses (89.1) (87.9) (75.8) (14.9%) Selling and marketing expenses (328.0) (366.8) (326.2) (0.5%) EBITDA 745.4 837.8 524.5 (29.6%) EBITDA Margin 41.2% 40.8% 33.1% (8.1 p.p.) Net financial income / expense) (10.8) 67.0 (41.5) 284.3% Financial expense (105.7) (16.7) (88.8) (16.0%) Financial income 94.9 83.7 47.3 (50.2%) Share of profit of associates 21.5 25.1 28.6 33.0% Income tax expense (125.2) (160.3) (144.3) 15.3% Net Income 403.2 603.8 319.8 (20.7%) TABLE CONTINUED BELOW Profit & Loss Statement Q4 YE YE YE 2008-Q3 2008-YE 2008 2007 (million US$) % Chg 2007 2008 % Chg Total Revenue (22.9%) 6,328.6 6,970.4 10.1% Direct cost of revenue (14.3%) (3,103.4) (3,409.0) 9.8% Depreciation and amortization (16.9%) (793.0) (679.9) (14.3%) Administrative expenses (13.8%) (252.8) (309.3) 22.3% Selling and marketing expenses (11.1%) (1,138.2) (1,351.7) 18.8% EBITDA (37.4%) 2,627.1 2,580.3 (1.8%) (7.7p.p.) 41.5% 37.0% (4.5p.p.) EBITDA Margin Net financial income / expense) (161.9%) (242.7) 305.3 (225.8%) Financial expense 431.7% (551.1) (136.8) (75.2%) Financial income (43.5%) 308.4 442.1 43.4% Share of profit of associates 13.9% 64.9 103.0 58.7% Income tax expense (10.0%) (322.4) (549.8) 70.5% Net Income (47.0%) 1,350.2 1,836.8 36.0% Revenue: In the fourth quarter and full year 2008, the increase in our subscriber base, the partial effect of the increase in usage, upward price adjustments, and the impact of our consolidated subsidiaries contributed positively to our revenue compared to a year ago, despite the sharp decrease in interconnection rates. During the fourth quarter, Turkcell recorded revenue of US$1,585.0 million, down 12.3% due mainly to the TRY depreciation against USD. For the full year, our revenue increased by 10.1% to US$6,970.4 million. In TRY terms, revenue in the fourth quarter of 2008 increased by 8.9% to TRY 2,331.7 million. In 2008, TRY based revenue increased by 8.0% to TRY 8,844.6 million. In 2009, we will aim to achieve revenue growth in TRY terms. Direct cost of revenue: In the fourth quarter of 2008, direct cost of revenue, including depreciation and amortization, decreased by 5.6% year on year in nominal terms. The proportion of direct cost of revenue to total revenue increased by 3.6 percentage points to 50.6% despite the 2.3 percentage point decrease of depreciation and amortization expenses as a proportion of revenue. The increase in the cost base was mainly due to increasing network-related expenses and handset costs offered as part of our loyalty programs coupled with the absence of the one-off positive Treasury share impact recorded in the fourth quarter 2007 in regards to sales discounts in 2006. In 2008, direct cost of revenue including depreciation and amortization increased 9.8% in nominal terms compared to a year ago. However, as a percentage of revenue it remained flat at 48.9%, mainly due to the decrease in depreciation and amortization expenses as a percentage of revenue, offset by an increase in network related expenses, handset costs and wages and salaries. Selling and marketing expenses: In the fourth quarter of 2008, selling and marketing expenses remained almost flat and increased by 18.8% in nominal terms to US$1,351.7 million for the full year. As a percentage of revenue, selling and marketing expenses increased by 2.5 percentage points to 20.6% in the fourth quarter and 1.4 percentage points to 19.4% in 2008. The primary reasons for this trend were higher selling expenses stemming from higher acquisitions, and restructuring in the sales channel, and a higher prepaid usage fee payment. Administrative expenses: General and administrative expense as a percentage of revenue remained almost flat at 4.8% in the fourth quarter of 2008 compared to a year ago. For the full year, it increased by just 0.4 percentage points compared to 2007 to 4.4%, mainly due to an increase in bad debt expense following the increase in our postpaid subscriber base. Share of profit of equity accounted investees: In the fourth quarter of 2008, our share in net income of unconsolidated investees, consisting of the net income/(expense) impact of Fintur and A-Tel, increased by 33.0% to US$28.6 million including the negative effect of exchange rate fluctuations. For 2008, our share in net income of unconsolidated investees increased by 58.7% to US$103.0 million compared to US$64.9 million in 2007 mainly due to Fintur's successful performance in 2008. The results of our 50% owned subsidiary A-Tel impacted two items in our financial statements. A-Tel's revenue generated from Turkcell, amounting to US$49.1 million in 2008, is netted off from the selling and marketing expenses in our consolidated financial statements. The difference between the total net impact of A-Tel and the amount netted off from selling and marketing expenses amounted to US$48.1 million and is recorded in the 'share of profit of equity accounted investees' line of our financial statements. Net finance income/(expense): In the fourth quarter of 2008, we recorded net financial expense of US$41.5 million compared to US$10.8 million in the same quarter of 2007. Even though Turkcell recorded a translation gain from exchange rate fluctuations between the TRY versus USD and Euro on its f/x long position during the fourth quarter of 2008, foreign exchange losses of Astelit resulting from the 58% depreciation of the local currency against USD as of December 31, 2008 compared to September 30, 2008 in Ukraine and the translation loss recognized on the deferred payment for the BeST acquisition led to a higher net finance expense. In 2008, we recorded net financial income of US$305.3 as opposed to a net financial expense of US$242.7 million in 2007. The net financial income in 2008 was a result of absence of high foreign exchange losses incurred on structured forward contracts and translation losses on foreign currency long position recognized in 2007 as well as our increasing cash balance. Income tax expense: The total taxation charge in the fourth quarter of 2008 increased to US$144.3 million from US$125.2 million in the fourth quarter of 2007. Out of the total tax charge during the fourth quarter of 2008, US$135.2 million related to current tax charges and a deferred tax expense of US$9.1 million was realized during the quarter. For 2008 the total taxation charge increased to US$549.8 million from US$322.4 million in 2007. Out of the total tax charge during 2008, US$567.2 million related to current tax charges and deferred tax income totalled US$17.4 million. Q4 Q3 Q4 Q4 2008-Q4 2007 2007 2008 2008 % Chg Current tax expense (114.7) (172.5) (135.2) 17.9% Deferred Tax income / (expense) (10.5) 12.2 (9.1) (13.3%) Income Tax expense (125.2) (160.3) (144.3) 15.3% TABLE CONTINUED BELOW Q4 YE YE YE 2008-Q3 2008-YE 2008 2007 % Chg 2007 2008 % Chg Current tax expense (21.6%) (412.5) (567.2) 37.5% Deferred Tax income / (expense) (174.6%) 90.1 17.4 (80.7%) Income Tax expense (10.0%) (322.4) (549.8) 70.5% EBITDA*: In the fourth quarter of 2008, nominal EBITDA declined by 29.6% to US$524.5 million while the EBITDA margin was 33.1%, a decrease of 8.1 percentage points. In 2008, nominal EBITDA decreased by 1.8% to US$2,580.3 million while the EBITDA margin decreased from 41.5% in 2007 to 37.0%. The decrease in EBITDA in TRY terms was 12.8% in the fourth quarter of 2008 and 4.1% in 2008 compared to a year ago. This was due to lower revenue growth compared to increase in direct cost of revenue, resulting from network-related expenses, handset costs offered as part of our loyalty programs, selling and marketing expenses. In 2009, there are challenges in our operating environment notably we expect the macro environment to remain volatile and competition to increase, which may lead to further pressure on our margins. *EBITDA is a non-GAAP financial measure. See pages 13-14 for the reconciliation of EBITDA to net cash from operating activities. Net income: Net income in the fourth quarter of 2008 decreased 20.7% year on year to US$319.8 million. The decrease was mainly attributable to the proportionally lower revenue growth compared to the cost base. Net income margin was 20.2%. In 2008, net income increased by 36.0% to US$1,836.8 million compared to US$1.350.2 million in 2007. This was mainly due to the positive effect of the decrease in the translation loss in 2008 to US$44.5 million from US$460.8 million in 2007 and higher interest income of US$442.1 million compared to US$308.4 in 2007. Net income margin increased to 26.4% in 2008 from 21.3% compared to that in 2007. Total Debt: Consolidated debt amounted to US$785.9 million as of December 31, 2008. US$541.8 million of this was related to Turkcell's Ukrainian operations. All of our consolidated debt is at a floating rate and US$655.9 million will mature in less than a year. Despite having a strong balance sheet with solid cash position and debt/annual EBITDA of 30.5% as of December 31, 2008, we may consider a roll-over of Astelit's $390 million debt in 2009. Consolidated Cash Flow Q4 Q3 Q4 YE YE (million US$) 2007 2008 2008 2007 2008 EBITDA 745.4 837.8 524.5 2,627.1 2,580.3 LESS: Capex and Licence (274.3) (175.7) (210.6) (783.1) (808.2) Turkcell (144.2) (80.8) (111.0) (444.3) (388.4) Ukraine* (76.8) (47.7) 5.2 (206.0) (155.8) Investment&Marketable Securities - (300.0) 46.6 27.1 (285.5) Net Interest Income/Expense 67.2 101.6 74.7 218.0 349.8 Other 31.9 (256.3) (369.9) (244.7)(1,281.1) Net Change in Debt 10.6 73.2 37.7 64.2 111.5 Dividend paid by Turkcell - - - (411.9) (502.3) Cash Generated 580.8 280.6 103.0 1,496.7 164.5 Cash Balance 3,095.3 3,156.8 3,259.8 3,095.3 3,259.8 (*)The devaluation of local currency against USD is included in this line. Cash Flow Analysis: Capital expenditures in the fourth quarter of 2008 amounted to US$210.6 million. For 2008, capital expenditures totalled US$808.2 million, of which US$155.8 million was related to the Ukrainian operations. Turkcell generated free cash flow (cash flow from operating activities minus capital expenditure) of US$866.2 million in 2008, a decrease of 37% compared to US$1,373.1 million in 2007. Other items were mainly composed of corporate tax payments amounting to US$125 million in the fourth quarter of 2008 and US$782 million in 2008. In 2009, we expect to double our capital expenditures. In Turkey, we plan to spend US$1,300 million for our 2G and 3G related expenses, including 3G license fee, as well as for other consolidated subsidiaries. As for our international subsidiaries, we plan to spend approximately US$300 million. Operational Review Q4 2008- Q4 2008- YE 2008-YE Summary of Q4 Q3 Q4 Q4 2007 Q3 2008 YE YE 2007 Operational Data 2007 2008 2008 % Chg % Chg 2007 2008 % Chg Number of total subscribers (million) 35.4 36.3 37.0 4.5% 1.9% 35.4 37.0 4.5% Number of postpaid subscribers (million) 6.4 7.2 7.5 17.2% 4.2% 6.4 7.5 17.2% Number of prepaid subscribers (million) 29.0 29.1 29.5 1.7% 1.4% 29.0 29.5 1.7% ARPU (Average Monthly Revenue per User), blended (US$) 15.5 17.3 12.6 (18.7%) (27.2%) 14.3 14.5 1.4% ARPU, postpaid (US$) 40.3 41.9 30.7 (23.8%) (26.7%) 37.6 36.8 (2.1%) ARPU, prepaid (US$) 10.0 11.2 8.1 (19.0%) (27.7%) 9.2 9.1 (1.1%) ARPU, blended (TRY) 18.3 20.6 18.6 1.6% (9.7%) 18.5 18.4 (0.5%) ARPU, postpaid (TRY) 47.7 50.1 45.2 (5.2%) (9.8%) 48.7 46.6 (4.3%) ARPU, prepaid (TRY) 11.9 13.4 11.9 0.0% (11.2%) 11.8 11.6 (1.7%) Churn (%) 5.9% 6.2% 6.2% 0.3 p.p. 0.0 p.p. 19.9% 23.8% 3.9 p.p. MOU (Average Monthly Minutes of usage per subscriber), blended 69.9 109.2 108.2 54.8% (0.9%) 76.3 95.9 25.7% Subscribers: Our subscriber base in Turkey reached 37.0 million as of December 31, 2008, increasing 4.5% on annual basis. For the whole year, net additions stood at 1.6 million subscribers in a slower growing market. In 2008, we focused on the postpaid and corporate segment with attractive acquisition and retention campaigns and promoted switches from prepaid to postpaid subscriptions. On the channel front, we made revisions to our existing subdealer network and the premium structure to increase availability of Turkcell brand and concentrate more on prepaid subscribers. Of the gross new subscribers added in 2008, the share of postpaid acquisition improved to 15% from 11% a year ago. Net additions in the fourth quarter of 2008 increased by 9.9% to 0.7 million compared to a year ago despite the higher competition that resulted from MNP. In the fourth quarter of 2008, 294,000 subscribers ported their numbers to Turkcell due to the implementation of MNP, which started on November 9, 2008. Additionally, the switch from prepaid to postpaid subscriptions contributed to the increase. In 2009, we expect our subscriber base to remain flat compared to 37.0 million in 2008 in a slowly growing market where mobile line penetration is likely to increase only slightly over 2008. Churn Rate: Churn refers to voluntarily and involuntarily disconnected subscribers. In the fourth quarter of 2008, our churn rate remained almost flat at 6.2%, despite increasing competition due to MNP. As expected, the annual churn rate increased slightly to 23.8% from 19.9% compared to a year ago due to our large subscriber base as well as intensified competition in the Turkish market throughout the year due to MNP. The majority of the churners were low ARPU generating prepaid subscribers. In 2009, we expect a higher churn rate than in 2008 due to increasing competition. MoU: MoU increased by 54.8% year on year to 108.2 minutes in the fourth quarter of 2008. This can be attributed mostly to the positive impact of Super Tariff, Bizbize Kampus tariff, Surprise Campaign, which gives two day on-net usage incentives free of charge, and effective communication to manage our subscribers' price perception, despite the seasonally lower usage. Consequently, with the positive effects of the successful tariffs and communication themes, MoU increased by 25.7% on an annual basis to 95.9 minutes in 2008 compared to 76.3 minutes in 2007. In 2009, we believe that usage will increase as our successful incentives and loyalty programs continue. ARPU: In the fourth quarter and full year 2008, TRY based blended ARPU remained at similar levels compared to a year ago at TRY18.6 and TRY18.4 respectively, despite the decreasing interconnect rates and the dilutive impact of prepaid subscribers. Post paid ARPU in TRY terms decreased slightly by 5.2% to TRY45.2 in the fourth quarter of 2008 and by 4.3% to TRY46.6 in 2008 year on year mainly due to the increase in subscriptions to minute packages and data lines. Prepaid ARPU remained unchanged at TRY11.9 in the fourth quarter of 2008 and slightly decreased by 1.7% to TRY11.6 in 2008 compared to a year ago, mainly due to the effects of new tariffs and campaigns. In the fourth quarter of 2008, USD based blended ARPU decreased by 18.7% to US$12.6 mainly due to the depreciation of TRY against USD, while remaining almost flat at US$14.5 in 2008. Post paid ARPU decreased by 23.8% to US$30.7 in the fourth quarter of 2008 and slightly decreased by 2.1% to US$36.8 in 2008 compared to a year ago, mainly due to depreciation of TRY against USD. In the fourth quarter of 2008, prepaid ARPU decreased by 19.0% to US$8.1, while declining slightly by 1.1% to US$9.1 compared to a year ago. This was mainly due to the increase in usage along with the ongoing Super Tariff and Bizbize Kampus. In 2009, we expect ARPU in TRY terms to remain flat which was realized at TRY18.4 in 2008. Regulatory Environment In 2008, the Regulator reduced Reference Call Termination Rates by 33%, which adversely affected our financial results for the year 2008. Currently the mobile call termination rates in Turkey are 57% below the EU average. For this reason we believe the mobile termination rates should not be brought down further. However, there can be no assurance that the Regulator will not make future actions to revise rates downwards. The tender process was conducted on November 2008 and Turkcell won A type 3G license, for consideration of EUR358 million (excluding VAT). The approval process is still ongoing and the implementation of 3G in the Turkish market is expected by mid-2009. The Electronic Communications Law prepared by the Turkish Ministry of Transportation with the aim of establishing a similar legislative system to the EU regulatory framework and existing Telecommunications Authority regulations, was approved by Parliament on July 31, 2008 and enacted on November 10, 2008. Currently, the Regulator is in the process of preparing regulations for MVNOs (Mobile Virtual Network Operators). On the other hand, there is no specific timeline for a potential implementation process. It is also expected to see issuance of Fixed Telephony Service (FTS) licenses in 2009, before the implementation of Fixed Number Portability in the Turkish Market in May 2009. International Operations Fintur Turkcell holds a 41.45% stake in Fintur and through Fintur has interests in GSM operations in Kazakhstan, Azerbaijan, Moldova, and Georgia. YE 2007 YE 2008 YE 2008 - FINTUR Subscriber Subscriber YE 2007 as of December 31, 2008 (million) (million) %Chg Kazakhstan 6.0 7.1 18.3% Azerbaijan 3.0 3.5 16.7% Moldova 0.5 0.6 20.0% Georgia 1.3 1.6 23.1% Other* - - - TOTAL 10.8 12.8 18.5% TABLE CONTINUED BELOW YE 2007 YE 2008 Revenue Revenue YE 2008 - FINTUR YE 2007 (US$ (US$ as of December 31, 2008 million) million) %Chg Kazakhstan 825.4 1,011.1 22.5% Azerbaijan 439.8 537.4 22.2% Moldova 53.9 63.0 16.9% Georgia 165.1 210.0 27.2% Other* 2.2 1.6 (27.3%) TOTAL 1,486.4 1,823.1 22.7% (*) includes intersegment eliminations Fintur further strengthened its position in the markets in which it operates, with consolidated revenue reaching US$472.8 million in the fourth quarter of 2008, recording growth of 12% on an annual basis. Fintur added approximately 0.4 million net new subscribers in the fourth quarter of 2008 and its total subscriber base grew to 12.8 million. We account for our investment in Fintur using the equity method. Fintur's contribution to income was US$42.4 million in 2008. In 2008, Fintur's consolidated revenue increased by 23% to US$1,823.1 million mainly due to the increase in subscriber base to 12.8 million, with a net addition of 2.0 million in 2008. Fintur's contribution to net income for the year was US$151.1 million. Astelit Astelit, in which we hold a 55% stake through Euroasia, has operated in Ukraine since February 2005 under the brand "life:)". - Astelit grew its revenue by 34.5% in the fourth quarter of 2008 compared to the same quarter of 2007 and by 71.4% in 2008. - Astelit recorded a positive EBITDA of US$15.3 million during the fourth quarter of 2008 and completed 2008 with a positive EBITDA of US$32.3 million, marking its first full year of profitability. - Astelit's operational indicators have also remained very strong, with subscribers reaching 11.2 million with a market share of more than 20% and growth of 28.4% on an annual basis. In 2008: - 3 month active subscriber base grew 31.5% on an annual basis and reached 63% of the total subscriber base. - 3 month active ARPU increased by 17.3% on an annual basis. Despite the negative effects of the depreciation of the Hrvnia against the USD, Astelit recorded encouraging financial and operational performance during the year, supporting its first full year of positive EBITDA. Q4 2008- Q4 Q3 Q4 Q4 2007 Summary Data for Astelit 2007 2008 2008 % Chg Number of subscribers (million) Total 8.8 10.7 11.2 27.3% Active (3 months)[1] 5.4 6.3 7.1 31.5% Average Revenue per User (ARPU) in US$ Total 3.3 4.1 3.4 3.0% Active (3 months) 5.4 7.0 5.7 5.6% Revenue 82.3 127.8 110.7 34.5% EBITDA[2] 2.7 11.3 15.3 466.7% Net Loss (34.8) (24.2)(251.2) 621.8% Capex 76.8 47.7 (5.2) (106.8%) TABLE CONTINUED BELOW Q4 2008- YE 2008 - Q3 2008 YE YE 2007 Summary Data for Astelit % Chg YE 2007 2008 %Chg Number of subscribers (million) Total 4.7% 8.8 11.2 27.3% Active (3 months)[3] 12.7% 5.4 7.1 31.5% Average Revenue per User (ARPU) in US$ Total (17.1%) 3.2 3.6 12.5% Active (3 months) (18.6%) 5.2 6.1 17.3% Revenue (13.4%) 255.9 438.7 71.4% EBITDA[4] 35.4% (20.5) 32.3 (257.6%) Net Loss 938.0% (167.7) (326.5) 94.7% Capex (110.9%) 206.0 155.8 (24.4%) Along with a worsening economic and political macro-environment in Ukraine, the Hrvinia depreciated around 52% against USD as of December 31, 2008 compared to December 31, 2007. Having observed that this unstable and challenging environment is continuing into 2009, we have cautiously reduced our capital expenditures in the fourth quarter of 2008. In 2008, we spent US$155 million in capital expenditures as opposed to our revised plan of US$250 million in the third quarter of the year. In 2009, despite the severe macroeconomic challenges in the Ukrainian market, based on our growth projections, we expect to spend higher than 2008 capex. However, we intend to evaluate capex levels on ongoing basis, based on developing market conditions. Going forward, we expect operational expenses to increase particularly during Q1 2009 and therefore we may not have similar EBITDA margin trend in the same quarter compared to Q4 2008. In summary, our Ukrainian operation is challenged by economic conditions. However, our focus will continue to be improving operational profitability of the company. Reconciliation of Non-GAAP Financial Measures We believe that EBITDA is a measure commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our cash generation ability and liquidity position and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors. Beginning from the 2006 fiscal year, we have revised the definition of EBITDA which we use and we report EBITDA using this new definition starting from the first quarter of 2006 results announcement to provide a new measure to reflect solely cash flow from operations. The EBITDA definition used in our previous press releases and announcements had included Revenue, Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses, Administrative expenses, translation gain/(loss), financial income, share of profit of equity accounted investees, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense). Our new EBITDA definition includes Revenue, Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses and Administrative expenses, but excludes translation gain/(loss), financial income, share of profit of equity accounted investees, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense). EBITDA is not a measure of financial performance under IFRS and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity. The following table provides a reconciliation of EBITDA, which is a non-GAAP financial measure, to net cash from operating activities, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS. Q4 2008- TURKCELL Q4 Q3 Q4 Q4 2007 US$ million 2007 2008 2008 % Chg EBITDA 745.4 837.8 524.5 (29.6%) Income Tax Expense (125.2) (160.3) (144.3) 15.3% Other operating income/(expense) (21.3) 3.7 12.6 (159.2%) Financial income (1.3) 2.0 9.3 (815.4%) Financial expense (25.5) (8.4) (31.7) 24.3% Net increase/(decrease) in assets and liabilities (14.7) (20.8) 225.2 (1,632.0%) Net cash from operating activities 557.4 654.0 595.6 6.9% TABLE CONTINUED BELOW Q4 2008- YE 2008 - TURKCELL Q3 2008 YE YE YE 2007 US$ million % Chg 2007 2008 %Chg EBITDA (37.4%) 2,627.1 2,580.3 (1.8%) Income Tax Expense (10.0%) (322.4) (549.8) 70.5% Other operating income/(expense) 240.5% (14.7) (3.9) (73.5%) Financial income 365.0% 1.6 11.2 600.0% Financial expense 277.4% (264.4) (55.1) (79.2%) Net increase/(decrease) in assets and liabilities (1,182.7%) 129.0 (308.3) (339.0%) Net cash from operating activities (8.9%) 2,156.2 1,674.4 (22.3%) Q4 2008- EUROASIA (Astelit) Q4 Q3 Q4 Q4 2007 US$ million 2007 2008 2008 % Chg EBITDA 2.7 11.3 15.3 466.7% Other operating income/(expense) 0.2 0.6 (0.4) (300.0%) Financial income 1.2 2.0 1.7 41.7% Financial expense (15.2) (8.5) (12.9) (15.1%) Net increase/(decrease) in assets and liabilities 21.1 36.4 (55.9) (364.9%) Net cash from operating activities 10.0 41.8 (52.2) (622.0%) TABLE CONTINUED BELOW Q4 2008- YE 2008 - EUROASIA (Astelit) Q3 2008 YE YE YE 2007 US$ million % Chg 2007 2008 %Chg EBITDA 35.4% (20.5) 32.3 257.6% Other operating income/(expense) (166.7%) 0.4 0.2 (50.0%) Financial income (15.0%) 2.7 6.3 133.3% Financial expense 51.8% (63.7) (43.0) (32.5%) Net increase/(decrease) in assets and liabilities (253.6%) 64.6 44.5 (31.1%) Net cash from operating activities (224.9%) (16.5) 40.3 344.2% Turkcell Group Subscribers We had approximately 61.5 million GSM subscribers as of December 31, 2008. This figure is calculated by taking the number of GSM subscribers in Turkcell and each of our subsidiaries and unconsolidated investees. This figure includes the total number of GSM subscribers in Astelit, BeST, in our operations in the Turkish Republic of Northern Cyprus ("Northern Cyprus") and Fintur.In the past, when presenting our total group subscribers, we have presented this figure on a proportional basis, adjusted to reflect our ownership interest in each subsidiary. We believe that the method of calculation given above is a good indicator of our Group's reach and intend to use this new method of calculation going forward. Turkcell Group Q4 2008- Subscribers Q4 Q3 Q4 Q4 2007 (million) 2007 2008 2008 % Chg Turkcell 35.4 36.3 37.0 4.5% Ukraine 8.8 10.7 11.2 27.3% Fintur 10.8 12.4 12.8 18.5% Northern Cyprus 0.3 0.3 0.3 0.0% Belarus - 0.2 0.2 - TURKCELL GROUP 55.3 59.9 61.5 11.2% TABLE CONTINUED BELOW Turkcell Group Q4 2008-Q3 YE 2008 - Subscribers 2008 YE 2007 (million) % Chg YE 2007 YE 2008 %Chg Turkcell 1.9% 35.4 37.0 4.5% Ukraine 4.7% 8.8 11.2 27.3% Fintur 3.2% 10.8 12.8 18.5% Northern Cyprus 0.0% 0.3 0.3 0.0% Belarus 0.0% - 0.2 - TURKCELL GROUP 2.7% 55.3 61.5 11.2% Forward-Looking Statements This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, "may," "will," "expect," "intend," "plan," "estimate," "anticipate," "believe" or "continue." Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements particularly in the current operating and macro environment. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2007 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. http://www.turkcell.com.tr/ ABOUT TURKCELL Turkcell is the leading GSM operator in Turkey with 37.0 million postpaid and prepaid customers as of December 31, 2008 operating in a three player market with a market share of approximately 56% as of December 31, 2008 (Source: operators' announcements). In addition to high-quality wireless telephone services, Turkcell currently offers General Packet Radio Service ("GPRS") countrywide and Enhanced Data Rates for GSM Evolution ("EDGE") in dense areas, which provide for both improved data and voice services. Turkcell provides roaming with 607 operators in 202 countries as of February 17, 2009. Serving a large subscriber base in Turkey with its high-quality wireless telephone network, Turkcell reported US$7.0 billion net revenue for the year ended December 31, 2008 as per IFRS financial statements. Turkcell has interests in international GSM operations in Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Northern Cyprus and Ukraine. Turkcell has been listed on the NYSE ("New York Stock Exchange") and the ISE ("Istanbul Stock Exchange") since July 2000 and is the only NYSE listed company in Turkey. 51.00% of Turkcell's share capital is held by Turkcell Holding, 0.05% by Cukurova Group, 13.07% by Sonera Holding, 2.32% by M.V. Group and 0.08% by others while the remaining 33.48% is free float. --------------------------------- [1] Active subscribers are those who in the past three months made a transaction which brought revenue to the Company. [2] EBITDA is a non-GAAP financial measure. See page 13-14 for the reconciliation of Euroasia's EBITDA to net cash from operating activities. Eurasia holds 100% stake in Astelit. [3] Active subscribers are those who in the past three months made a transaction which brought revenue to the Company. [4] EBITDA is a non-GAAP financial measure. See page 13-14 for the reconciliation of Euroasia's EBITDA to net cash from operating activities. Eurasia holds 100% stake in Astelit. TURKCELL ILETISIM HIZMETLERI A.S. SELECTED CMB* FINANCIALS (TRY Million) Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, 2007 2008 2008 Consolidated Statement of Operations Data Revenues Communication fees 2,021.6 2,348.2 2,144.3 Commission fees on betting business 77.3 44.2 65.0 Monthly fixed fees 17.9 21.0 18.5 Simcard sales 2.6 11.3 10.5 Call center revenues and other revenues 22.6 33.7 93.3 Total revenues 2,142.0 2,458.4 2,331.6 Direct cost of revenues (998.6) (1,114.4) (1,176.4) Gross profit 1,143.4 1,344.0 1,155.2 Administrative expenses (105.5) (105.1) (111.6) Selling & marketing expenses (388.8) (438.6) (481.0) Other Operating Income / (Expense) (24.5) 4.5 20.0 Operating profit before financing costs 624.6 804.8 582.6 Finance expense (126.5) (20.0) (161.0) Finance income 113.6 100.3 89.4 Share of profit of equity accounted investees 22.0 32.0 40.2 Income before taxes and minority interest 633.7 917.1 551.2 Income tax expense (150.0) (192.6) (208.7) Income before minority interest 483.7 724.5 342.5 Minority interest (2.9) 3.2 122.7 Net income 480.8 727.7 465.2 Net income per share 0.218636 0.330752 0.211456 Other Financial Data Gross margin 53% 55% 50% EBITDA(*) 883.4 1,001.8 770.2 Capital expenditures 299.1 219.7 486.3 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 3,605.1 3,887.9 4,929.8 Total assets 9,770.1 11,708.9 12,127.2 Long term debt 163.5 186.0 196.6 Total debt 885.1 909.3 1,188.6 Total liabilities 2,938.3 3,580.4 3,955.1 Total shareholders' equity / Net Assets 6,831.7 8,128.5 8,172.1 TABLE CONTINUED BELOW 12 months 12 months December December 31, 31, Consolidated Statement 2007 2008 of Operations Data Revenues Communication fees 7,729.4 8,335.0 Commission fees on betting business 234.6 224.6 Monthly fixed fees 73.4 82.1 Simcard sales 27.7 35.9 Call center revenues and other revenues 121.8 167.0 Total revenues 8,186.9 8,844.6 Direct cost of revenues (3,992.4) (4,314.7) Gross profit 4,194.5 4,529.9 Administrative expenses (325.1) (393.8) Selling & marketing expenses (1,472.3) (1,722.2) Other Operating Income / (Expense) (15.7) 0.2 Operating profit before financing costs 2,381.4 2,414.1 Finance expense (705.4) (219.5) Finance income 398.4 568.1 Share of profit of equity accounted investees 70.4 132.5 Income before taxes and minority interest 2,144.8 2,895.2 Income tax expense (427.0) (703.6) Income before minority interest 1,717.8 2,191.6 Minority interest 40.8 121.2 Net income 1,758.6 2,312.8 Net income per share 0.799375 1.051273 Other Financial Data Gross margin 51% 51% EBITDA(*) 3,395.2 3,255.2 Capital expenditures 912.1 1,222.2 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 3,605.1 4,929.8 Total assets 9,770.1 12,127.2 Long term debt 163.5 196.6 Total debt 885.1 1,188.6 Total liabilities 2,938.3 3,955.1 Total shareholders' equity / Net Assets 6,831.7 8,172.1 * Capital Market Board of Turkey ** For further details, please refer to our consolidated financial statements and notes as at and for the year ended 31 December 2008 on our web site. TURKCELL ILETISIM HIZMETLERI A.S. SELECTED IFRS FINANCIALS (US Dollar Million) Quarter Ended Quarter Ended Quarter Ended December 31, September 30, December 31, 2007 2008 2008 Consolidated Statement of Operations Data Revenues Communication fees 1,706.1 1,963.9 1,457.8 Commission fees on betting business 65.2 37.1 44.4 Monthly fixed fees 14.8 17.6 12.6 Simcard sales 2.2 9.4 7.1 Call center revenues and other revenues 19.3 27.9 63.1 Total revenues 1,807.6 2,055.9 1,585.0 Direct cost of revenues (849.2) (935.5) (801.4) Gross profit 958.4 1,120.4 783.6 Administrative expenses (89.1) (87.9) (75.8) Selling & marketing expenses (328.0) (366.8) (326.2) Other Operating Income / (Expense) (21.3) 3.7 12.6 Operating profit before financing costs 520.0 669.4 394.2 Finance expense (105.7) (16.7) (88.8) Finance income 94.9 83.7 47.3 Share of profit of equity accounted investees 21.5 25.1 28.6 Income before taxes and minority interest 530.7 761.5 381.3 Income tax expense (125.2) (160.3) (144.3) Income before minority interest 405.5 601.2 237.0 Minority interest (2.3) 2.6 82.8 Net income 403.2 603.8 319.8 Net income per share 0.183275 0.274451 0.145344 Other Financial Data Gross margin 53% 54% 49% EBITDA(*) 745.4 837.8 524.5 Capital expenditures 274.3 175.7 210.7 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 3,095.3 3,156.8 3,259.8 Total assets 8,469.0 9,570.3 8,067.9 Long term debt 140.4 151.0 130.0 Total debt 760.0 738.3 785.9 Total liabilities 2,537.8 2,918.7 2,624.3 Total equity 5,931.2 6,651.5 5,443.6 TABLE CONTINUED BELOW 12 months 12 months December 31, December 31, 2007 2008 Consolidated Statement of Operations Data Revenues Communication fees 5,976.9 6,576.9 Commission fees on betting business 181.3 176.2 Monthly fixed fees 54.8 65.1 Simcard sales 20.8 28.2 Call center revenues and other revenues 94.8 124.0 Total revenues 6,328.6 6,970.4 Direct cost of revenues (3,103.4) (3,409.0) Gross profit 3,225.2 3,561.4 Administrative expenses (252.8) (309.3) Selling & marketing expenses (1,138.2) (1,351.7) Other Operating Income / (Expense) (14.7) (3.9) Operating profit before financing costs 1,819.5 1,896.5 Finance expense (551.1) (136.8) Finance income 308.4 442.1 Share of profit of equity accounted investees 64.9 103.0 Income before taxes and minority interest 1,641.7 2,304.8 Income tax expense (322.4) (549.8) Income before minority interest 1,319.3 1,755.0 Minority interest 30.9 81.8 Net income 1,350.2 1,836.8 Net income per share 0.613710 0.834920 Other Financial Data Gross margin 51% 51% EBITDA(*) 2,627.1 2,580.3 Capital expenditures 783.1 808.2 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 3,095.3 3,259.8 Total assets 8,469.0 8,067.9 Long term debt 140.4 130.0 Total debt 760.0 785.9 Total liabilities 2,537.8 2,624.3 Total equity 5,931.2 5,443.6 * Please refer to the notes on reconciliation of Non-GAAP Financial measures on page 11 ** For further details, please refer to our consolidated financial statements and notes as at 31 December 2008 on our web site. For further information please contact Turkcell Corporate Affairs Koray Ozturkler, Chief Corporate Affairs Officer Tel: +90-212-313-1500 Email: [email protected] Investors: Nihat Narin, Investor and International Media Relations Tel: +90-212-313-1244 Email: [email protected] [email protected] Media: Filiz Karagul Tuzun, Corporate Communications Tel: +90-212-313-2304 Email: [email protected] Turkcell CONTACT: For further information please contact Turkcell: CorporateAffairs, Koray Ozturkler, Chief Corporate Affairs Officer, Tel:+90-212-313-1500, Email: [email protected]; Investors: NihatNarin, Investor and International, Media Relations, Tel: +90-212-313-1244,Email: [email protected], [email protected];Media: Filiz Karagul Tuzun, Corporate Communications, Tel: +90-212-313-2304,Email: [email protected] |