Turkcell en FR 2010

TURKCELL
ANNUAL REPORT 2010
GET MoRE oUT of LIfE WITh TURKCELL
CoNTENTS
our Vision / our Values / our Strategic Priorities Turkcell Group in Numbers Turkcell: Leading Communication and Technology Company Letter from the Chairman Board Members Letter from the CEo Executive officers Superior Technologies More Advantages Best Quality Service More Social Responsibility Awards Managers of Turkcell Affiliates Subsidiaries human Resources Mobile Telecommunication Sector International Ratings Investor Relations Corporate Governance Turkcell offices Consolidated financial Statement and Independent Audit Report Dematerialization of The Share Certificates of The Companies That Are Traded on The Stock Exchange The Boards Dividend Distribution Proposal
PAGE 4 6 8 10 12 14 16 22 32 40 46 53 54 56 62 66 72 74 78 95 96 204 205
oUR VISIoN
To ease and enrich the lives of our customers with communication and technology solutions.
oUR STRATEGIC PRIoRITIES

As a Leading Communication and Technology Company, to grow in our core mobile communication business through increased use of voice and data, to grow our existing international subsidiaries with a focus on profitability, to grow in the fixed broadband business by creating synergy among Turkcell Group companies through our fiber optic infrastructure, to grow in the area of mobility, internet and convergence through new business opportunities, to grow in domestic and international markets through communications, technology and new business opportunities, to develop new service platforms that will enrich our relationship with our customers through our technical capabilities.
oUR VALUES
We believe that customers come first We are an agile team We promote open communication We are passionate about making a difference We value people
Turkcell Annual Report 2010
xxxxxxxxxxxxxxxxxx
TurkCeLL Group IN Numbers
2010
TRY 9.0 billion
Revenue
33%
TRY 2.9 billion
Group revenue slightly improved to TRY9.0 billion mainly due to increasing mobile internet revenues and the higher contribution of Group companies, despite the negative impact of regulatory decisions in Turkey. Turkcell Turkeys revenue was TRY8.0 billion, which included higher mobile internet revenues, up 74% to TrY454 million and a higher postpaid subscriber base, despite the negative impact of significant regulatory changes. The share of mobile internet and service revenues in Turkcell Turkeys revenues increased by 4 percentage points to 20%. Topline contribution of subsidiaries increased to 11% in 2010, mainly due to strong revenue growth of 33% to TrY335.1 million at superonline.
ebITDA contribution of subsidiaries improved to 9% in 2010 from 5% in 2009, mainly due to the significantly improved operational performance of superonline and Astelit. Despite challenging market conditions and regulatory changes, Group EBITDA margin was maintained at 33%, while Group ebITDA was at TrY2.9 billion. Group net income increased by 4% to TRY1.8 billion. Turkcells capital expenditures totaled TRY18 billion since inception and TrY1.7 billion in 2010.
EBITDA*
ebITDA margin
TRY 1.8 billion
60.4 million
Net Income
Group subscribers
* ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_release.pdf for the reconciliation of ebITDA to net cash from operating activities. please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation.
TurkCeLL: LeADING CommuNICATIoN AND TeCHNoLoGY CompANY

1
Turkey - TURKCELL
subscribers (mn) market share revenues (million TrY) 33.5 54% 7,991
3 9 7 1 6 8 5 2 4
60.4 million
subscribers
3rd in Europe
Ukraine - life :)
subscribers (mn) market share revenues (million $) 9.1 18% 339
Belarus - life :)
14 in the World
th
operating in
9 countries
Kazakhstan - Kcell
subscribers (mn) market share revenues (million $) 8.9 50% 1,013
Azerbaijan - Azercell
Georgia - Geocell
Moldova - Moldcell
TRNC - KKTCell
Turkcell is a leading regional player, with market leadership in five of the nine countries in which it operates with its approximately 60.4 million subscribers as of 2010. Turkcell has been listed on the NYse and the Ise since July 2000 and is the only NYse-listed company in Turkey.
TURKCELL Europe- Germany

mVNo operations commenced in Q1 2011
LeTTer From THe CHAIrmAN

CoLIN J. WILLIAms
In 2010, the Turkcell Group has once again executed well, which is mainly attributable to growing contribution from its subsidiaries, mobile internet and services revenues, despite the challenging competitive and regulatory environment. In 2010, we recorded TrY9.0 billion in revenues, an ebITDA margin of 33% and TrY1.8 billion in net income. The Turkish mobile market, had gone through a difficult period in 2009 and its ripple effects prevailed in the market during 2010 in terms of competition and regulation. Turkish mobile market witnessed some radical changes during the year, with interconnection rates and maximum prices decreasing significantly, which had a material impact on our financials. In the face of these developments, we responded and adapted rapidly to these critical changes and maintained our market leadership in the sector. During this difficult period, we continued our investments, which totaled TrY 1.7 billion in 2010, in order to maintain our technological leadership. We established a strong 3G network and fiber infrastructure while further strengthening our existing 2G network. We built up our business model on mobile broadband and total telecom solutions, and prepared for the future. Through this strategic focus, in the first year of 3G in Turkey we established one of the worlds leading 3G networks and I am proud to say that we are providing mobile internet speed, which is faster than average speeds of many european mobile operators. Looking ahead, we are moving into a new era, in which we will continue to grow our business model through our mobile data and services as well as applications tailored for our customers needs. In this new period, the market is characterized by increasing smartphones and expanding 3G network. We strongly believe that Turkcell is well-positioned to push the technological boundaries. For this purpose, we benefit from the increasing synergies with our fixed broadband business superonline and also Turkcell Technology, which contributes remarkably to the Group on research and development activities. Going forward, we remain determined to capitalize on the considerable growth potential of mobile data which we perceive as the growth engine of our business, while building up on our strong voice revenues. During the year, Turkcell Groups success was also attributable to significant improvement in international subsidiaries, in which the management team focused on profitability. Gradual improvement in macroeconomic environment of our international subsidiaries also contributed to this outcome. In 2010, our subsidiaries contribution to consolidated revenues increased to 11% from 10% a year ago and expected to improve further. meanwhile, our fixed broadband business superonline improved its contribution to Turkcell Group as a result of its increased synergy with the Group. Additionally, outside of Turkey we continue to look for opportunities to expand our business into new markets. In this context, we made a wholesale traffic purchase agreement in Germany in 2010, which allows us to introduce the Turkcell brand, know-how and benefits to a Western european market. All along, Turkcells long-term success has been built on three core values: responsibility, sensitivity, and service. our objective has been to enrich the countrys social and cultural life in different fields, ranging from education to sports, from culture to employment through our corporate social responsibility projects. based on our dividend policy, we have consistently distributed dividends for the last seven years. based on our dividend policy, our board of Directors proposed cash dividends of approximately TrY1.3 billion (about $0.9 billion) of Turkcells 2010 distributable net income to the approval of General Assembly. managing the only Turkish company with a dual listing on the New York and Istanbul stock exchanges, Turkcells board of directors is determined to conduct all our business by ensuring the high standards of corporate governance. our aim is to enhance our corporate governance practices and to generate long-term economic value for the companys shareholders. In conclusion, I would like to emphasize that Turkcell faces the future with confidence, supported by our strong, agile and dedicated team across the Group and our growing fixed and mobile broadband business. on behalf of the board, I take this opportunity to convey my gratitude to Turkcells management team, employees, retailers, suppliers, and associates and, most of all, to our loyal customers for their continued support which has made our success possible.
All along, Turkcells long-term success has been built on three core values: responsibility, sensitivity, and service. Turkcells board of directors is determined to conduct all our business by ensuring the high standards of corporate governance.
10
11
board members*
Colin J. Williams
Chairman
Colin J. Williams, age 69, was appointed as the Chairman of the board of Directors on February 25, 2010 and re-appointed on April 29, 2010. He also serves as a Voting member and Chairman of the Audit Committee of Turkcells board of Directors. He is Chairman of Clondalkin and Chair of the Audit and remuneration Committees of Clondalkin, a consumer and industrial packaging company. From January 2001 to December 2004, mr. Williams served as president of sCA, North America, which is active in the packaging sector, personal care and paper tissue products. He was a long-term board member and Vice Chairman of ICCA, the International Corrugated packaging Institution, the european Federation of packaging and the Federation of paper producers (CepI). mr. Williams is the founding president of propak europe and was a board member of the Greater philadelphia Chamber of Commerce between 2002 and 2004. From 1988 to 2001, mr. Williams was the president of sCA packaging, prior to which he served as the managing Director of bowater, a corrugated packaging company, for four years. From 1978 to 1984, he was first the sales Director and then the General manager of Chicopee in the Netherlands, a non-woven fabrics company of Johnson & Johnson. mr. Williams holds an mbA degree in finance from New York university, an m.sc. degree in physical chemistry and an honorary doctorate from Lund university in sweden.
Karin Eliasson
member
karin eliasson, age 49, was appointed as a member of the board of Directors on April 29, 2010. ms. eliasson has been senior Vice president and Head of Group Human resources at Teliasonera since 2008. prior to joining Teliasonera, ms. eliasson was senior Vice president of Human resources at svenska Cellulosa Aktiebolaget, sCA. From 2000 until 2003 she served as the Ceo of Novare Human Capital Ab. ms. eliasson is a member of the board of Directors of proffice Ab and Insurance company prI pensionsgaranti mutual. she holds a bachelor of science in Human resources from mid sween university.
oleg Malis
member
oleg malis, age 37, was appointed to the board of Directors on may 22, 2006 and re-appointed on April 29, 2010. He is also senior Vice president of Altimo. mr. malis began working for Altimo as Chief of the Current project management unit in 2005. between 2003 and 2005 mr. malis was senior Vice president and m&A Director at Golden Telecom. before joining Golden Telecom, mr. malis founded Investelectrosvyaz and Corbina Telecom. mr. malis holds a degree in systems engineering from moscow state Aviation Technological university.
Mehmet Bulent Ergin

member
mehmet bulent ergin, age 63, was first appointed as a member of the Turkcell board of Directors on April 29, 2005 and was re-appointed on April 29, 2010. After having taken responsibility in Hochtief AGs First bosphorus project and Tekfen A.s.s Iraq-Turkey pipeline project, mr. ergin worked in various positions at Cukurova Group companies. He held a managerial position at Cukurova Ithalat ve Ihracat T.A.s. and was a managing director at maysan A.s. and baytur Trading s.A. Currently, mr. ergin is the Chairman of the board of Directors of Genel Denizcilik Nakliyati A.s., show TV, Aksam Gazetesi and Genel enerji A.s., and he also holds the position of board membership in Cukurova Holding. mr. ergin majored in Civil engineering at robert College, Turkey.
Tero Erkki Kivisaari

member
Tero erkki kivisaari, age 39, was appointed to the board of Directors on may 14, 2007 and was re-appointed on April 29, 2010. mr. kivisaari has been the president of Teliasonera in eurasia since may 1, 2007 and the Chairman of the board of Directors of Fintur Holdings b.V. previously, mr. kivisaari has served as the chief financial officer and vice president of Teliasonera in eurasia. mr.kivisaari is a member of the board of Directors of Azercell, moldcell, A.s oJsC megafon and Nurminen Logistics plc; and the Chairman of Fintur Holdings bV board. He served as CFo of Fintur Holding b.V from 2003. mr. kivisaari has been the CFo of smartTrust Ab, a mobile software company owned by Carlyle Group, Ge Capital, eqvitec and sonera Group. before that, mr. kivisaari held the position of Vice president of sonera Groups International operations. mr. kivisaari served as an associate professor of finance at the Helsinki school of economics and holds an mbA in finance.
Gulsun Nazli Karamehmet Williams

member
Gulsun Nazli karamehmet Williams, age 33, was appointed to our board of Directors on April 29, 2010. since 2004, she has worked in different positions at Digiturk (Digital platform letisim Hizmetleri A.s), where she currently holds the positon of Chief Content officer and executive member of the board. prior to Digiturk, she worked at bskyb england. she studied at sarah Lawrence College (usA) and richmond university (uk) and has a b.A in Communications.
Alexey Khudyakov
member
Alexey khudyakov, age 40, was appointed to the board of Directors on may 22, 2006 and re-appointed on April 29, 2010. He is Vice president of Altimo, a leading investor in telecoms, and also serves as non-executive Chairman and Chair of the Audit Committees of High river Gold mines, a gold mining company. prior to his appointment to Altimo, mr. khudyakov held a Vice president position with Alfa bank, managing the banks direct investments in the telecom sector. before that, he was a management consultant with mckinsey & Co. mr. khudyakov holds a master of business Administration degree from INseAD and a masters degree in Applied mathematics and physics from the moscow Institute of physics and Technology. He is a non-executive board member of Turkcell. He is also an observer member of the Audit Committee of Turkcells board of Directors. mr. khudyakov was named to the Audit Committee in reliance on rule 10A-3(b)(1)(iv)(D) under the securities exchange Act of 1934.
12
* The term of office of board of Directors is three years upon selection.
13
LeTTer From THe Ceo

I am pleased to note that we achieved solid execution in 2010, even though regulatory environment remained a challenge. During the year the sector was characterized mainly by non-profit oriented and market share focused competition. As Turkcell, we essentially attribute our strong execution and commitment to long-term growth to two items, which will remain our core focus areas: 1. Notable contribution from mobile internet and services revenues, 2. significant increase in profitability of our subsidiaries. These two main focus areas will decrease the share of voice revenues in our consolidated revenues going forward, and diversify our portfolio, which will make us stronger in such a competitive environment. Without doubt, a new era of mobility is emerging with its key pillars being mobility, internet and convergence. Global trends point to mobile internet revenue as the key growth driver. Indeed, going forward, we anticipate a rise in mobile internet user number through wider internet usage in the remotest corners of the world. For this reason, we are very excited by the industry we operate in, and remain committed to our smart investments. In line with this technological revolution, as Turkeys technology leader, we continued with investments whereby our 3G technology available in Turkey has been certified as one of the fastest in the world. As such, within a year we have reached population coverage of 82% in Turkey. In 2010, time and results thoroughly justified our actions and investments in 3G, and we have every reason to be proud of this outcome. our mobile internet revenues have climbed 86% on average over the past two years. Today, the number of smartphones in our network has reached 2 million, thus 6% of total subscribers from 3% a year ago, confirming further significant growth potential. meanwhile, we clearly identify fixed and mobile communications convergence as the next platform to substantially impact our lives. our continued fiber-optic backbone investment through fixed broadband subsidiary, superonline reflects this belief. meanwhile, with superonlines recently-signed regional Cable Network project, Istanbul will become the easts internet gateway to europe, and the worlds new internet hub due to its geostrategic position. As Turkcell, we are both aware of our pioneering role in this new era with our new strategic responsibilities. Turkcell is well-positioned for this new era, deriving strength from its strategy, entitled Turkcell 2.0. our strategy may be summarized as sharpening our customer focus, offering superior solutions, delivering the best value propositions and increasing user experience in data usage. While our story over the past 17 years has been about voice, the next chapter is definitely about data. Accordingly, we have introduced our mobile Constitution geared to ensuring customer satisfaction and trust through operational excellence, transparency, and cultural change. During the year, in line with our long-term strategy of providing superlative services, we have continued to invest in our fiber-optic backbone
sureYYA CILIV
and 2G and 3G networks. our capital expenditures since inception have totaled TrY18 billion. We differentiate ourselves from the competition through completed core investments in our 3G and fiber-optic infrastructure. While mobile internet will be a key focus going forward, we will retain attention on the core mobile business and rising contribution of our subsidiaries. In 2010, we were delighted to observe that our investments in domestic and international subsidiaries begin to yield desired results. In ukraine, our turnaround strategy led to improved operational profitability to 19% from 5.7% a year ago. meanwhile, our fixed broadband subsidiary, superonline, increased its full-year ebITDA margin to 9.8% from 1.4% a year ago. Looking ahead we remain confident of our subsidiaries continued solid performance. We also expanded our operations into nine countries by initiating mVNo services in Germany through the wholesale traffic purchase agreement signed in 2010. During the year in the Turkish market, mobile line penetration decreased by 2 pp to 85%, mainly due to the continuing decline in multiple sIm card usage, while we maintained our leadership with a 54% subscriber market share. Throughout 2010, we offered our customers even more affordable prices, thereby increasing both usage and customer satisfaction. As the only Turkish Company with a dual listing on the NYse and Ise, over the past 17 years we have continuously provided service to Turkish people with the same passion we felt on our very first day. We are operating in line with the best-practice international standards and regulations of the capital markets, adhering to professional ethical values, realizing projects of social responsibility, protecting investor interests and building strong investor relations through enhanced transparency. In 2010, we continued to extend scholarship to school-age girls who cannot continue their education due to financial reasons. We provided educational grants to 10,000 girls in a year with the snowdrops project, which has grown from a drop into an avalanche. We have touched the lives of 130,000 children within three years via our bridge of Hearts project carried out in conjunction with the ministry of National education. At the same time, Turkcell has continued to provide employment opportunities for young people through its erzurum and Diyarbakr Call Centers in the east and south east region on Turkey since 2006. All in all, we are pleased to observe the tangible benefits of the business model that we have successfully implemented. I feel confident that we will continue to lead the way through further investment in cutting edge technology, and by increasing the quality and range of our services. I trust that you share the excitement we feel at our role in this new era both in our industry and the world. I would like to express my gratitude to all of our customers, employees, business partners, and shareholders for their continued support.
14
15
executive officers
10
11
12
13
14
15
Sureyya Ciliv Ceo
Burak Sevilengul Chief Consumer business officer Lale Saral Develioglu Chief Group marketing services officer
Koray ozturkler Chief Corporate Affairs officer Selen Kocabas Chief Corporate business officer
Ilter Terzioglu Chief Network operations officer Serkan okandan Chief Financial officer
Emre Sehsuvaroglu Division Head Corporate risk management Ilker Kuruoz Chief Information and Communication Technologies officer
10 Umit Akin
Chief Legal Affairs officer
11
hulusi Acar Chief Consumer sales officer Ekrem Yener Chief International expansion officer
12
Tayfun Cataltepe Chief Corporate strategy & regulations officer
Emre Sayin Chief Consumer strategic projects officer
13
14 Cenk Bayrakdar
Chief products and services management
15
16 Meltem Kalender ozturk

Chief Human resources officer*
* As of march 14, 2011
16
17
executive officers
Sureyya Ciliv
Chief Executive officer
sureyya Ciliv, age 53, was appointed the Chief executive officer of Turkcell on January 9, 2007. Having previously worked as microsoft Turkey country manager between 1997-2000, he served in various management positions in microsoft Global sales, marketing and service Group in the usA between 2000 and 2007. prior to 1997, mr. Ciliv was the General manager and Chairman of Novasoft systems Inc., a company he established in boston, usA. sureyya Ciliv received his mbA degree from Harvard university in 1983 after successfully graduating with honors in Industry & operations engineering and Computer engineering from the university of michigan in 1981.
Emre Sayin
Chief Consumer Strategic Projects officer
emre sayin, age 44, is the Chief Consumer strategic projects officer of Turkcell. prior to his current position, he was performing as the Chief Corporate business officer and Chief Consumer sales officer of Turkcell. sayin worked for evyap pazarlama ve Tic. A.s. as the Deputy General manager in charge of marketing in 2005-2006 and for kodak A.s. as the General manager in 2002-2005. prior to that emre sayin was the Chief marketing officer for microsoft Turkey between 1999-2002. sayin worked as the marketing and Category manager of unilever Turkey between 1992-1999. emre sayin is a graduate of bosphorus universitys Department of Industrial engineering and holds a masters degree in systems and Industrial engineering from rutgers university.
Emre Sehsuvaroglu
Division head of Corporate Risk Management
emre sehsuvaroglu, age 40, joined Turkcell in 2006 and has served as the Division Head in charge of Corporate risk management since November 13, 2006, working on such issues as compliance with the sarbanes-oxley Act, internal audit, corporate risk management, business continuity program management and data security. mr. sehsuvaroglu started his professional career at Deloitte Independent Audit in 1993 and then served as Audit Group Director at Arkas Holding between 2003 - 2006. mr. sehsuvaroglu is a graduate of marmara university Department of management, a Certified Accountant and a Certified Internal Auditor.
13
Ilker Kuruoz
Chief Information and Communication Technologies officer
Ilker kuruoz, age 42, is Turkcells Chief Information and Communication Technologies officer as of september 2009. He joined Turkcell in 2006. kuruz has started his professional career in 1994 in AbT. He then worked in NCr as a system Consultant, in Garanti Teknoloji as a business unit manager and in Accenture as a senior manager. prior to his current position at Turkcell, he was the Capability management Division Head of Turkcell. Ilker kuruoz graduated from bilkent university Computer engineering in 1992 and holds a masters degree from the same department.
Burak Sevilengul
Chief Consumer Business officer
burak sevilengul, age 38, joined Turkcell in 2001 and has been Chief Consumer business officer since August 2010. prior to this appointment, he was the Division Head for the Consumer business group and had various other managerial responsibilities within the marketing Department. burak sevilengl is a graduate of middle east Technical universitys Department of business Administration and holds an mbA degree university of Georgia, Terry College of business.
10 6
Umit Akin
Chief Legal Affairs officer
umit Akin, age 41, joined Turkcell in 2002 and was appointed Chief Legal Affairs officer on February 1, 2010. prior to his current position, he was the Division Head of Turkcells regulatory Legal Affairs department. mr. Akin began his professional life in 1996 at Ankara universitys Faculty of Law as a research Assistant. He then worked as a Lawyer at ericsson. umit Akin graduated from Ankara university, Faculty of Law in 1995 and holds a masters degree in public Law.
14
Cenk Bayrakdar
Chief Products and Services Management officer
Cenk bayrakdar, age 43, joined Turkcell in 2000 and was appointed Chief product and services management officer on september 1, 2009. Having started his professional career at Arcelik, he held several managerial positions on the IT and production Teams. He then worked at Corbuss as the business Development Coordinator between 2001-2002 and served as the partnership Development Division Head of Turkcell between 2002 and 2004. prior to his current position at Turkcell as the Chief product and services management officer, mr. bayrakdar acted as the Chief Information and Communication Technologies officer.
Lale Saral Develioglu

Chief Group Marketing Services officer
Lale saral Develioglu, age 43, joined Turkcell in 2003 and since August 2010 has been Chief Turkcell Group marketing services officer. prior to this position, she was the Chief marketing officer from 2006 to 2010 and the Individual marketing Division Head of Turkcell between December 2003 and June 2006. starting her career at unilever, Lale saral Develioglu served as brand manager for 5 years and marketing manager for 7 years in various product categories and markets between 1992 and 2003. she is a graduate from the department of Industrial engineering of bogazici university. she also holds a masters degree in management engineering from rensselaer polytechnic Institute, New York.
Koray ozturkler
Chief Corporate Affairs officer
koray ozturkler, age 48, joined Turkcell in 1998 and since April 9, 2008 he has been the Chief Corporate Affairs officer in charge of corporate communications, investor relations and Corporate Citizenship. prior to this appointment he was the Investor relations division head at Turkcell since 2002 and before that he was the division head of International business Development. mr. ozturkler started his career in the usA at Accenture Consulting. He continued his career at Yapi kredi bank. mr. ozturkler is a graduate of Johnson C. smith university marketing Division and he received his mbA majoring in mIs from mercer university.
11
hulusi Acar
Chief Consumer Sales officer
Hulusi Acar, age 40, joined Turkcell in 2000 and was appointed Chief Consumer sales officer on December 10, 2009. He graduated from Istanbul universitys business Administration department in 1995. mr. Acar worked in sales positions in THY and koctas A.s. At Turkcell he worked as Area sales manager, marmara region Coordinator and Turkey sales manager between 2000-2004. between march 2004 and November 2006 he was sales and Customer relationship Chief executive officer of Astelit. prior to his current position as Chief Consumer sales officer, he worked as the sales management and Wholesale and Distribution management Division Head.
15
Ekrem Yener
Chief International Expansion officer
ekrem Yener, age 50, joined Turkcell in 2007, and has held positions as Chief Corporate business officer and Chief special projects officer. Currently, he is acting as Turkcells Chief International expansion officer. He worked for Aysu Dis Tic. A.s. and Digital equipment A.s. as a sales manager from 1991-1998. Yener worked as the Ankara regional manager of microsoft Turkey in 1998. He was appointed microsofts Deputy General manager in Charge of marketing in 2002 and was the Deputy General manager in charge of business and strategy Development between 2004-2007. He graduated from the Istanbul Technical universitys Department of metallurgical engineering in 1982 and received a masters Degree in material sciences from the university of California at berkley in 1986 and in High Level marketing management from kellogg university.
Selen Kocabas
Chief Corporate Business officer
selen kocabas, age 43, joined Turkcell in 2003 and she is the Chief Corporate business officer. prior to this appointment, she was the Chief business support officer in charge of human resources, corporate information systems, procurement and contract management, and administrative issues. mrs. kocabas started her professional career as a management Trainee at koc Holding, mrs. kocabas later worked as Human resources expert at Arcelik, then as a Human resources Coordinator at marshall, followed by Groupe Danone sA where she worked as Human resources Director. selen kocabas is a graduate of economics from Istanbul university. she also obtained a masters degree in Human resources management from marmara university.
Ilter Terzioglu
Chief Network operations officer
Ilter Terzioglu, age 45, joined Turkcell in 2003 and since April 1, 2006 he has been the Chief Network operations officer. mr. Terzioglu has worked in the communications sector since 1993 and served as Assistant General manager at ericsson, superonline and show TV. mr. Terzioglu is a graduate of the Department of econometrics at Istanbul university. prior to his current position in Turkcell as the Chief Network operations officer, he was performing as the Head of business strategies, regulation and risk Consolidation in Turkcell.
12
Tayfun Cataltepe
Chief Corporate Strategy & Regulations office
Tayfun Cataltepe, age 50, is the Chief Corporate strategy & regulations officer. After graduating from the electronic engineering Department of bosphorus university, Cataltepe received his msc degree from michigan Technology university and doctorate degree from the university of California, Los Angeles. From 1990 to 1998, he worked as a research and Development engineer in the bell Laboratories. In 1998 he moved on to AT&T as the Ip Network and service planning projects manager, where he worked until 2003. Following AT&T, he started to work at Aycell as the Deputy General manager in charge of Technical operations. He was then Deputy General manager in charge of Network operations at AVeA from 2004 to 2006. In 2007, mr. Cataltepe served as the europe Telecom sector expert in the Transaction Integration services Department of ernst & Young. since 2007, he has been working at Turkcell as a Chief officer.
16
Meltem Kalender ozturk

Chief human Resources officer
* meltem kalender ozturk, age 37, joined Turkcell in 1998. she was assigned as Division Head of employee relations management between 2001 and 2011 in charge of training, performance and talent management, remuneration, employee relations, organizational development and quality management. mrs. ozturk, the Chief Human resources officer since march 14, 2011, worked also in Human resources areas in Logo business solutions and Iklar Holding. meltem kalender ozturk is a graduate of business Administration from marmara university.
Serkan okandan
Chief financial officer
serkan okandan, age 41, joined Turkcell in 2000. since January 1, 2006, he has been the Chief Financial officer of Turkcell. prior to this appointment, he was the Financial Control and reporting Division Head of Turkcell. mr. okandan started his professional career at pricewaterhouseCoopers in 1992. He then worked for DHL and Frito Lay as a Financial Controller. serkan okandan is a graduate in economics from bosphorus university.
18
19
Get More out of Life With Turkcell

In the 17 years since its inception, Turkcell has developed customized communication solutions, changed lifestyles with its innovations, supported young athletes and national teams and held the hands of the snowdrops who want an education; Turkcell has become Turkeys Turkcell. And now, from the east to the West, it is time to bring more life across Turkey. because there is life in this nation and we all have dreams for the better.
Technology evolves and improves every day. Technologies that we couldnt have dreamed of just five years ago are today essential elements of our existence. We now carry our daily lives and our business in our pockets. We all want to be accessible anytime, anywhere, and we want effortless access to our loved ones, and to information. With its technology, innovation, services, and corporate social responsibility projects, Turkcell strives to provide more to its subscribers and to Turkey. Turkcell is making a difference with its technological infrastructure, with the advantages and services it offers, and with its investments in Turkey. In the 17 years since its inception, Turkcell has developed customized communication solutions, changed lifestyles with its innovations, supported young athletes and national teams and held the hands of the snowdrops who want an education; Turkcell has become Turkeys Turkcell. And now, from the east to the West, it is time to bring more life right across Turkey. because there is life in this nation, and we all have dreams for the better. For that reason, we need more well-being, more success, more simplicity, more communication, more returns, more abundance, more support, more hope, more options, more freedom, and more education. Now, get more out of life with Turkcell.
GET MoRE
oUT of
LIfE WITh TURKCELL
20
21
GET MoRE
22
SUPERIoR TEChNoLoGIES
oUT of LIfE
superior Technologies
Superior Technologies
We have made greater investments into more advanced technologies towards broader, higher-quality and faster communication
Turkcell Group made a TRY1.7 billion investment in 2010. Broadest Coverage

We continued to deliver the highest quality services to Turkeys largest mobile subscriber base, with population coverage of 99.07 percent, geographic coverage of 86.97 percent and eDGe coverage of 100 percent in our network, in 2G technology, as of December 31, 2010. We maintained our leadership of 3G in Turkey with population coverage of around 82 percent. As a first among global 2G/3G operators, we used the iDirect VsAT systems under 3G service via satellite communication technology, linking the 3G base station to the network via satellite. Consequently, we were able to offer 3G speeds usually only available in urban areas anywhere within the borders of our country (in rural areas to which the infrastructure companies cannot bring service, and where microwave communication is impossible under severe weather conditions, during disasters and festivals, etc.).
We reached a speed of 42 mbps with our 3G technology We have achieved a speed of 42.2 mbps in 3G through dual carrier technology to become one of the first ten operators worldwide to implement this technology. We doubled our speed in 2G technology We have ranked among the firsts to successfully test the eeDGe (evolved eDGe) technology, one of the latest technological advances in mobile communications, on our network. eeDGe technology provides the best user experience in mobile internet applications and data services, and doubles the speed for customers in Gsm/2G services. The fastest Mobile Internet In 2010, as well as 2009, we were again certified as the leader in terms of 3G Internet speeds among mobile operators in Turkey by p3 Communications, an independent international ranking and audit company, following field tests conducted in Istanbul, Ankara, and Izmir. We ranked first in theAverage mobile Internet speed among fifteen european mobile operators in field tests conducted to compare 3G mobile Internet speeds of mobile operators in Turkey and europe. The tests were conducted in paris, berlin, and London; and in Istanbul, Diyarbakir, and Trabzon, and are certified by IrIs Telekom, an independent testing and evaluation organization. In addition, two of Turkcells six radio Network Controllers (rNC) ranked first and second in data speed among 657 rNCs to be evaluated in the Global 3G performance Comparison report issued by ericsson in 2010. our remaining four rNCs also ranked among the ten fastest. We gained strength through the fiber optic infrastructure We reinforced our network infrastructure with superonlines fiber-
optic infrastructure of more than 22,000 km in 73 provinces. superonline now carries 69 percent of our network traffic. We executed, together with superonline, one of the worlds longest marine crossover projects in radio link connection of 95 km, to provide an alternative transmission method to Northern Cyprus-Turkey fiber optic line. In December 2009, superonline won the public tender for the fifteen-year lease of boTAss fiber optic infrastructure of 11,280 km, with a bid of eur20.9 million. Thanks to this tender, superonline was able to use these boTAs routes to access all geographical regions of Turkey. Along with the route provided by the tender, superonline added new international exit points to the two existing ones, increasing their number to seven by the end of 2010; its fiber optic infrastructure exceeded 22,000 km. superonline is set to continue with selective investments in this infrastructure in 2011. It signed the regional Cable Network (rCN) project, involving seven operators from five countries, in December 2010. The project involves the establishment of the longest uninterrupted land Internet infrastructure in the region, through the placement of a 7,750-km fiber optic cable line from the city of Fujairah, in the united Arab emirates, to Istanbul. The project is scheduled to commence operations in the second half of 2011, and to become the internet gateway for 2 billion people. Consequently, Istanbul will become the easts internet gateway to europe, and the worlds new Internet base, due to its geostrategic position. superonline came together with Turkeys six leading Internet service providers (borusan Telekom, Dogan Telekom, Global Iletisim, Grid Telekom, ko.net, and TurkNet) to establish the Turkish Network Infrastructure platform (TNAp), contributing to the Turkish component of international investment into positioning Istanbul as the worlds new internet base. We continued to increase mobile internet usage with devices and applications that deliver the best Internet experience We have continued to make a difference in the lives of our customers in 2010 with our innovative 3G products and services. In march, for the first time in Turkey, we introduced the Turkcell 3G multiVINN, allowing five individuals to feel the freedom of enjoying wireless Internet with 3G speed - anytime and anywhere.
42.2 Mbps speed with 3G
82% 3G coverage
22,000+ km fiber-optic backbone
Broad International Coverage

We provide an international roaming service via 662 operators in 208 countries as of December 31, 2010. We cover 95 percent of the world and 100 percent of europe in terms of number of countries. We also continue to enable our customers to experience 3G speed abroad via 204 operators in 108 countries.
The Latest Technology

As always, we have strived to continue to make our network available with the latest technology, and to maintain our technological leadership.
Two of Turkcells six radio Network Controllers ranked first and second in data speed among 657 rNCs to be evaluated in the Global 3G performance Comparison report issued by ericsson in 2010.
24
25
At Turkcell, we provide even more of the best mobile Internet experience to our customers, enabling them to connect to life anytime and anywhere. The Turkcell 3G VINN modem, with 43.2 mbps, is compatible with dual carrier technology; by using it our customers have doubled their Internet speed to an unparalleled level. In march, for the first time in Turkey, we introduced the Turkcell 3G multiVINN, allowing five individuals to enjoy the freedom of wireless Internet with 3G speed - anytime and anywhere. In october, we introduced the three-month VINN campaign, the shortest contract campaign in the market, which won much attention from our customers. We increased the penetration of Internet usage from handsets with applications we developed, and by facilitating easier mobile access to social networking sites. With two campaigns launched in January and may, Facebook Free and Facebook Zero, we provided all Turkcell subscribers with free access to Facebook on their handsets. our campaigns particularly attracted the interest of the youth segment; each day, an average of 1.2 million subscribers accessed Facebook on their handset. In 2010 we continued to increase mobile internet usage through our smartphone device bundled offers. And as of year-end 2010, the number of smartphones on our network had reached 2 million, representing 6% of total subscribers. In the first year of 3G technology, we designed and executed the 3G enabled mobile Devices campaign. Including for the first time seven producers and more than 70 models, we enabled more users to fully enjoy life with Turkcell, introducing the campaign with broad-based communication efforts. We provided our customers with the liberty
We increased the penetration of internet usage from handsets with applications we developed, and by facilitating easier mobile access to social networking sites.
to use the 3G enabled device of their choice, with a very advantageous Turkcell offer. on september 24, we also introduced Apples iphone 4, which has generated huge interest worldwide, with special Turkcell offers. We designed different Internet and voice packages for two models of the iphone 4 - the 16 Gb and 32 Gb memory capacity models. Nokias global music platform, Comes With music (CWm), was offered to the Turkish market for the first time, by Turkcell and on the Turkcell channels, with the launch of two new Nokia products, the X6 and 5235. We provided free local and international music downloads to purchasers of those Nokia phones for a period of one year with the CWm concept. Turkcell also introduced to the Turkish market samsungs 2010 flagship product: the Galaxy s. We additionally offered our customers the Nokia e72, with affordable payment options to enable users to enjoy the Internet with 3G speed and make video calls. We offered Turkcell customers, for the first time, the HTC Touch2, with a computer-like Internet experience and touch screen; and the HTC HD2, with the largest screen (4.3) and the fastest processor (1 GHz) on the market. both phones were introduced to Turkcell consumers with extremely advantageous campaign offers. We also brought the samsung Galaxy Tab to the Turkish market for the first time, with Turkcell 3G differentiation and advantages. In addition to the features found on a regular tablet, the samsung Galaxy Tab includes features like voice and short messaging, and video call capability. Turkcell subscribers can have this tablet with advantageous call, messaging, and Internet offers.
Wireless internet for 5 individuals with 3G MultiVINN
Turkcell 3G VINN with 43.2 Mbps
1.2 million daily facebook users
As of year-end 2010, the number of smartphones on our network had reached 2 million, representing 6% of total subscribers.
The Turkcell 3G VINN modem, with 43.2 mbps, is compatible with dual carrier technology; by using it our customers have doubled their internet speed to an unparalleled level.
26
27
We introduced the first Turkcell-branded mobile device: Turkcell T10 We introduced the Turkcell T10, the first Turkcell-branded device, with the slogan, A smartphone for everyone, with the objective of providing equal opportunity in mobile Internet usage. A standout, with its easy-to-use menu and attractive design, the Turkcell T10 ensures seamless connection to life through an advanced mobile Internet experience. The stylishly-designed Turkcell T10 won kudos, providing mobile Internet service with 3G speed, mobile TV service, a touch screen, Turkcell applications and access to the most popular Internet sites with one click at an affordable price. With the T10, we continued to empower our subscribers internet habits, increasing their mobile Internet use by 10 times, compared with usage prior to purchasing the T10.
TV & Video Services With Turkcell mobileTV service providing data flow with 3G speed, subscribers may watch TV channels and recorded content on their mobile phones. Turkcell also provides recorded video services via turkcell-im and expert TV WAp pages. The Turkcell-im WAp page offers popular videos collected from various web sources that are open to public access. Social Community and Entertainment Services Turkcell provides a variety of sports services focusing on football given the size of the fan base and popularity of this sport within Turkey. partnering with a major national TV provider, Turkcell provides a social football platform Footbo.com in Turkish to consumers to create fan pages, forums and discussions. Also, Turkcell launched an online social game Footbocity in 2010, widely appreciated by football fans, which enable users to play interactive games and build their own virtual cities. Launched in 2010 as a location-based social micro-blog service, Gezenzi enables our users to share their status information, photos and comments, and follow comments and messages in their areas of interest. Information Services Turkcell developed the Ibb mobile Traffic application in cooperation with the Istanbul metropolitan municipality to ease the lives of its users with updated, reliable information on Istanbul traffic. This application has been downloaded one million times since its launch in 2008. With the location-based Turkcell Compass application, users can determine the nearest police stations, pharmacies, hospitals, etc. within a specific area around their own location. Turkcell seyahat is a travel companion service, enabling users to buy tickets or make reservations with major airline companies and view live flight information as well as weather conditions at their destinations. Who Called me is an information service that notifies users of any calls received and those numbers - while their mobile device was shut off and/or outside coverage area. Who Called me retrieves callers and numbers when the users device is again in service. With the common address book feature, the calling numbers are matched with the contact in address book, to ensure a fuller experience. Education Services school (okul.com.tr) is an online educational platform developed for teachers, parents and students. It combines rich educational materials with socialized content to reinforce communication. school is also intended to be a platform where adults can receive lifelong education.
applications
3,000+
19 million download
22 Turkcell branded applications
We continue to provide new products and services to further ease the lives of our customers
We closely follow global trends, both to meet local market needs and to continue to provide creative and pioneering solutions in cooperation with our business partners. In 2010, our mobile internet and service revenues represented 20% of the total Turkcell Turkey revenues. our value-added services, with the exception of data and messaging, were used by more than 20 million customers in 2010. Turkcell Enablers & Platforms Turkcell invests in platforms that enrich user experience and increase the distinctiveness of its products and services. The Turkcell Application store enables users to download more than 3,000 free or paid applications, with more than 1,000 compatible mobile devices. With a download rate of one application per second, the Application store had more than 4 million distinct users who downloaded 19 million applications in 2010. The download numbers for 22 Turkcell applications - including Compass, Travel, Goals on Your mobile, mobile TV, Gezenzi, Footbo, and Click to Win - exceeded 3.8 million.
2 million smartphone in network
Introduced Samsung Galaxy Tab in Turkey
T10: first Turkcell branded smartphone
We closely follow global trends, both to meet local market needs and to continue to provide creative and pioneering solutions in cooperation with our business partners.
Music Services Gncplays vision is to be the go-to place for unlimited online music streaming. Although the platform can be used by everyone, the user interface is particularly designed for the young segment. users can create their own play lists and share them with friends. users can listen to limitless music, follow specific radio stations, create song lists and share them with their friends. The ring back Tone Turkcell service enables users to play music for their callers.
We introduced the Turkcell T10, the first Turkcell-branded device, with the slogan, A smartphone for everyone.
28
29
Mobile financial Services With Turkcell mobile payment service, users can use their Turkcell invoice or TrY accounts for expenses of up to TrY 35 in participating stores. The Turkcell mobile payment service can be used in more than 470 locations. Turkcell launched the first contactless payment solution for iphone in europe in 2010 in cooperation with Visa europe and Yap kredi bank. other Services With the Click to Call service, we offer our subscribers the opportunity to make calls without using their mobile phone numbers. When the Click to Call button is pressed on contracted websites, the call between two subscribers begins without dialing numbers. If, for any reason, Turkcell customers do not wish to share their mobile phone numbers, they may acquire a rumara number to call other Turkcell subscribers. rumara users can receive calls from other rumara users, and also from all Turkcell subscribers. Machine-to-Machine Communication (M2M) since 2009, Turkcell has been focused on its m2m business, the principal markets of which in Turkey are car telematics, team tracking, fleet management, pos terminals, security alarms, smart metering and sales force automation applications. Location and Authentication A first in its area, the location-based survey application enables researchers to display the location-based distribution of votes on a map, adding a new dimension to their decision-making.
In just one year, we added 26 more patented applications to our existing 31, while increasing the number of our international applications to 18.
mobile signature enables customers to sign electronic documents and transactions with a legally-accepted digital signature using Gsm sIm cards. There are currently 50 application providers in the market, representing industries as diverse as banking, e-government, insurance, healthcare and e-commerce. We made our mark on the world of R&D with TURKCELL TEKNoLoJ We conducted different projects with more than 200 leading technology companies and research centers from europe. In just one year, we added a further 26 patented applications to our existing 31, while increasing the number of our international applications to 18. Already last years leader in patent applications in our sector, this year we further overtook other applicants. We developed unique products: With our expertise in sIm card technology, we developed an infrastructure that can manage the sIm cards of Turkcell subscribers, along with the vast majority of applications run on the cards, from a single point. We also introduced the mobile signature platform in the second quarter of 2010 to reduce licensing and additional development costs, as well as to provide more consistent service. In the last months of 2010, we accelerated and completed the development studies, which has begun in 2008 on NFC (Near Field Communication) technology. With this technology, Turkcell acquired the necessary infrastructure for the secure transmission of applications used in the banking sector, such as credit cards to the sIm card, and for the development of the mobile wallet concept.
Compass
Click to Win
Travel
MobileTV
Goals on Your Mobile
Gezenzi
IBB Mobile Traffic
The Turkcell Application store enables users to download more than 3,000 free or paid applications, with more than 1,000 compatible mobile devices.
With a download rate of one application per second, the Application store had more than 4 million distinct users who downloaded 19 million applications in 2010.
30
31
MoRE ADVANTAGES
GET MoRE
oUT of LIfE
32
more Advantages
More Advantages
We presented more varied offers, in more ranges, at affordable prices and with higher quality
We continued to present more advantageous offers for various needs and differentiated solutions for our consumer and corporate customers
As the market leader, our aim in 2010 was to enable not only our own subscribers, but everybody, to easily experience Turkcell quality; thus we launched the my Turkcell is Your Turkcell campaign. In just about one week, more than 1.5 million people had enjoyed Turkcell quality and difference. With our Thanks campaign, we offered free minutes for up to three days, from 6:00 a.m. to 6:00 p.m., to our longterm post-paid subscribers in the consumer segment as a thank you for the years they have spent with us. We let them know how much we have valued their loyalty to us over the years as Turkcell customers, and cemented that loyalty by providing them with a satisfying present. We continued to offer advantageous offers to meet the needs of our customers with special tariffs and community offers such as for farmers and public employees. The Turkcell Farmer package, designed to aid Turkeys farmers in increasing their production, attracted widespread interest. We provided not only useful and informative communication offers, but also mobile training programs to raise productivity, location-based daily weather forecasts, local and global news, product-based information, and discounts through co-branded offers. With local campaigns, we offered several advantages to our customers in rural regions and priority provinces, further expanding our market share in these regions. In the world of Hazrkart (prepaid service), we provided our customers with monthly pomegranate packages, which offer five free units for each unit purchased that included both voice and sms services. We made a difference in the transition from units to Turkish lira We, together with Turkcell Technology, successfully completed the unit-to-TrY transition period, an important IT transformation project. Turkcell conducted the most transparent and seamless transition from
units to Turkish lira. one week before the transition date, we announced the Turkish lira fees of our tariffs to all of our Hazrkart customers, through sms, as well as our websites, voice response system, dealers, and call centers. We converted the units remaining on our customers lines at a higher unit price than the one they had paid to load them, acting on the principle of customer satisfaction. The transition was completely smooth and entirely flawless for 26 million customers. As of April 1, our subscribers were able to view on their screens the amount used, the total, and the remaining amount after each use. We provided assistance for the Turkish lira transition through a dedicated service line and answered all related questions. We continued to offer more freedom to young subscribers We introduced an advantageous postpaid tariff to the youth segment and created an alternative to Hazrkart, also leading the sector in this area. We diversified our sms packages, a very important communication tool for youth. With gntrkcll club, we supported and encouraged youth throughout the year, providing young people with platforms where they could demonstrate their power In 2010 Turkcells youth club, gntrkcll, provided total savings of TrY20 million to millions of gntrkcll members, through 35 campaigns. We offered free meals at mcDonalds and burger king in different periods, and a free ticket with each ticket purchased at movie theaters, throughout the year. We also supported our young customers with special offers and prices on online shopping. In addition to brand partnerships and price advantages, we reached 440,000 people with 14 activities/sponsorships. We provided more benefits to our customers with continuing brand partnerships We continued our brand partnerships in 2010, offering numerous advantages to our customers through 65 campaigns that included 35 brands. Two million Turkcell customers gained a total value of approximately TrY53 million in shopping benefits. Customers took ad-
vantage of special offers ranging from fuel to food, textiles to transport, and tourism to technology, by using the passwords we sent them. With 2.5 million hits, our Turkcell users Win campaign saved each customer an average of TrY21. Turkcell Platinum continued to expand privileges Turkcell platinum subscribers continued to benefit from various exclusive advantages and privileges in 2010. platinum subscribers received dedicated support regarding their Turkcell lines and mobile phones from a special service Team, who were dispatched to the customer wherever they were with related services and products; and with the 24/7 special Customer services, which provided a timely free-of-charge response. platinum subscribers also benefited from special discounts on their mobile phone bills, VINN 3G modem, and mobile devices; and from home delivery services for any device they desired. over the summer, Turkcell platinum subscribers were given the opportunity to attend Turkcell kurueme Arena concerts with a guest; they could also attend - again with a guest - special film previews and parties. In addition, platinum subscribers could participate in Flugtag, the Yeilam Awards Ceremony and IF Festival. Turkcell platinum subscribers were periodically presented with special discounts and gifts, across more than 10 brands. We continued to offer advantageous tariffs and packages to our corporate customers We revamped our corporate tariff structure in January 2010, offering more advantageous packages to our customers and simplifying the options, making it easier to choose the optimal package for employees. We introduced plus packages in 2010; these allow our corporate customers to meet all their local voice, data, and sms needs with a single, pricepredictive tariff package. In July 2010, we launched easy packages to enable our corporate customers to easily allocate lines to employees and business partners. Also launched in 2010, the Italy campaign, russia-ukraine campaign, u.s.Canada package, saudi Arabia package, and the Great britainGermanyFrance Daily Voice package met the international communication needs of our corporate customers at more advantageous prices. We gradated our international data tariffs to provide our heavy users with data service at more advantageous prices.
Counter to TRY transition of 26 million customers
2 million subscribers TRY53 million benefits
65 campaigns TRY20 million benefits with gntrkcll
As the market leader, our aim in 2010 was to enable not only our own subscribers, but everybody, to easily experience Turkcell quality; thus we launched the my Turkcell is Your Turkcell campaign.
34
35
more Advantages
We provided special advantages to different professional groups With the objective of meeting the communication needs of craftsmen within a single package, we introduced the Tcell Craftsman package, treating them as corporate customers and offering them corporate advantages. Following the 2009 launch of its first packages for self-employed individuals like physicians, lawyers, and pharmacists, Tcell focused on real estate agents in 2010. We addressed the needs of these leading groups in the self-employment sector and accordingly enhanced offers for these clubs. Family doctors who are affiliated with the Tcell Doctors Club benefit from discounts, with a mobile application specifically designed for them, while all member doctors have free access to the WAp portal that contains customized information and applications. real estate agents affiliated with the Tcell real estate Agents Club can post discounted ads on the website at sahibinden.com, while attorneys affiliated with the Tcell Lawyers Club have discounted access to uYAp (National Judicial Network project) using their mobile signature. We provided total benefits of TRY18 Million to 30,000 corporate customers with the TEKAZAN program We launched our corporate loyalty program, TekAZAN, on march 1, 2010. The program provided our corporate customers with savings of up to 50 percent on expenditures including food, fuel, cargo, office materials, insurance, finance, security, transport, software, hardware, meetings, hotel accommodation, training, advertising, Internet, and technology. 30,000 companies gained total savings of TrY18 million through discount contracts signed with more than 30 different brands across different sectors; contracted brands recorded a total turnover of approximately TrY219 million as of year-end 2010.
Tcell Doctors Club
Tcell Craftsman Package
TRY18 million benefit for 30K corporate customers
With the objective of meeting the communication needs of craftsmen within a single package, we introduced the Tcell Craftsman package, treating them as corporate customers and offering them corporate advantages.
on November 23, 2010, we organized the first TCeLL Technology summit, with the theme of opportunities to make a Difference in your business with mobile Technologies. Notable speakers included world-renowned technology gurus Geoffrey moore and Don Tapscott, as well as Turkeys top brand managers, who met with our corporate customers. We provided more advantages to our customers through our corporate loyalty program, TECEP The corporate loyalty program with contracts, TeCep, produced a catalog with 26 alternatives in total, including 29 offers and 12 de-
We provided total benefits of TrY18 million to 30,000 corporate customers with the TekAZAN program. Contracted brands recorded a total turnover of approximately TrY219 million as of year-end 2010.
36
37
more Advantages
vice options from all manufacturers, with the launch of 11 new offers introduced in september and November 2010. TeCep provided more advantages to our corporate customers with an increased number of gifts. We made a difference to the special needs of our customers through corporate solutions and increased their efficiency As the leading communication and technology company in Turkey, we endeavor to fully understand the needs of our corporate customers, and maximize their efficiency in terms of business-team, assets and customer management, with tailor-made mobile solutions. Accordingly, in 2010, we introduced approximately 5,000 initiatives to meet the needs of small, medium and large companies. We helped our corporate customers to reduce their operating costs, increase their efficiency, and make a difference among the competition. In 2010, We enabled our corporate customers to communicate with their clients and employees through approximately three billion messages, The Turkcell Vehicle Tracking service, used in 150,000 vehicles across Turkey, ensured fuel savings of up to 30 percent for companies, and reduced their maintenance costs by 10 percent, With our remote meter Tracking solution, we prevented electricity and water losses and theft by up to 80 percent. We reduced incorrect meter reading rates by 7 percent, With the VINN 3G multimodem solution, implemented in cooperation with the Istanbul public Transport authority, we provided 18,000 passengers with Internet access at 3G speed in public buses, daily, With the 3G backup solution, we shortened the supermarket chains new store opening time by three days, With our field automation solutions, we reduced companies field operating expenditures. As a Total Telecom Solutions Provider we continued our investments in more advantageous services for our customers We embarked on our goal of becoming a Total Telecom solutions
Within the Total Telecom solutions provider, we designed a first joint offer by Turkcell and superonline.
provider (TTsp), and will provide our total solutions from a single source. our product and service catalogue, expanded with our transition project, will provide our customers with faster and more global solutions, with more advantageous total costs and higher service quality. After this transition, we will provide the business world with total solutions through our voice (mobile, fixed), internet (mobile, fixed), end-to-end communication, network, and data center services and corporate applications within our revised product and service catalogue. We position a variety of office products and offers to comply with all office needs, most notably voice and Internet services Accordingly, on the office mobile voice service side, we enhanced the FCT voice (ekomini) package contents for both local and international calls and created ekomini offers with free devices in 2010. With these voice packages, we helped our customers to reduce their fixed phone expenses by at least 65 percent. Within the TTsp, we designed a first joint offer by Turkcell and superonline and provided ADsL and 3G together for soHos (small offices/ home offices) through the Corporate solution Centers. We introduced an automatic 3G backup service with a VINN device attachable to the ADsL modem and provided companies with uninterrupted communication. We drew up a service Level Agreement (sLA) for the infrastructure of the Corporate package Data Access and added value for our corporate customers, thus increasing their satisfaction. In addition, with an unlimited 3G backup package, we meet their need to back up land lines and switch to 3G technology. We delivered data traffic at its second level through L2Tp tunneling to those of our customers who requested it, thus taking the first steps into the buy and sell model of mobile Internet; this will begin entering our lives through Virtual mobile operators in the near future. In the world of mobile Internet, we broke new ground throughout 2010. We provided VINN owners with cost control options, with packages that discontinued when the first limit was reac-
hed, and offered unlimited Internet packages with a fair use policy. With our bulk purchase advantages, we gave special discounts to users who immediately made further commitments with us. We continued to deliver technological advances and innovations to our customers via our digital platforms We continued to employ a number of new technologies and launched micro-sites and demos, including micro-websites with video productions, demos on our services, and applications utilizing social media tools as well as through the use of interactive media. In 2010, we introduced many new micro-sites and demos. The Facebook 100 Things To Do While You Are Young page created within the context of 100 Things To Do While You Are Young campaign became a video sharing platform during the campaign period. This page then became an interactive communication platform for the sharing of the movie, music and entertainment content of gnctrkcll, and the communication of gnctrkcll campaigns. This page has the highest subscriber number of 350,000 among Turkish brands. With www.turkcellliningucu.com website, we created a platform for our subscribers to enable them to create their own videos interpreting our coverage theme song. We then broadcast our selected submissions on TV as an advertisement. Gnctrkcll club designed an engaging micro-site, www.iliskininadinikoy.com, for Valentines Day, using Facebook Connect. A micro-site directed towards the gntrkcll audience, www. gnctrkccsessizsinema.com, which is an entertaining micro-site with a video-based online charades game, was launched in march 2010. We also completed the design of the home and sub-page for Gezenzi, Turkcells locationbased mobile micro-blogging service, and launched www.gezenzi.com in 2010. We offered Turkcell subscribers who wished to participate in the Turkeys Got Talent television show an opportunity to post their videos online. A jury evaluated videos posted on the www.turkcellleyeteneksizsiniz.com website that met predetermined criteria; those selected by the jury showcased their talent on the television show. We provided more advantages with Mobile Marketing In 2010, we developed 1,600 projects with 353 different companies across 50 assorted sectors within our mobile marketing service, which always provides more advantages. In europes largest permission-based database, 11.4 million people received various benefits. With 700 million advertisement impressions realized in the year, sponsored free packages benefited 4.4 million people. mobile marketing team qualified to the finals in six categories of the Global mobile marketing Awards; and published the first mobile marketing book in Turkey in cooperation with mcGraw Hill.
1,600 mobile marketing project
Sponsored free packages for 4.4 million people
We made a difference to the special needs of our customers through corporate solutions and increased their efficiency.
mobile marketing team qualified to the finals in six categories of the Global mobile marketing Awards; and published the first mobile marketing book in Turkey in cooperation with mcGraw Hill.
38
39
BEST QUALITY SERVICE
GET MoRE
oUT of LIfE
40
best Quality service
Best Quality Service

With our expanded, widespread and trained service Team, we produce more innovative and practical solutions to better meet your needs.
More service with the most widespread sales network

Turkcell Communication Centers We have around 1,000 exclusive Turkcell Communication Centers, providing expertise in communication technologies; these centers offer customers a warm, reassuring atmosphere at the most frequented and accessible locations (81 cities, 222 districts), and provide standard and solution-oriented services. At the Turkcell Communication Centers, our widest exclusive face-to-face service channel, we continue our efforts to win the hearts and minds of our customers. We continued to lead the market by reflecting our leadership approach back to entire retailing sector with our Turkcell Communication Centers which act on the motto, Technology is a way for us to make your life easier and the vision of, specialist retailing in communication technologies. our stores are visited by 22 million people on average each month, and our customers are served by a competent team composed of 6,500 trained, well-natured people with expertise in communication technologies. Technology experts, who have been providing service in our stores since 2008, present our customers with a variety of devices equipped with the latest technology and applications to make life easier. They also focus on the development of store employees to ensure the satisfaction of customer needs at first contact. We continue to invest in consistent training for store employees towards ongoing improvement of our service quality. Accordingly, we provided 200,000 hours of training in 2010. We have engaged independent research companies to measure the quality of our services, and to track the advances in our performance. our stores are routinely audited to ensure sustainable, standardized, and high-quality service. We provide our customers with more comprehensive service through the distinctive applications in our stores, two of which draw the greatest attention; fast battery charger and telephone backup:
Fast battery Charger: a feature unique to Turkcell among global operators, these devices quickly complete charging in 15 minutes. In 2010, the device was used 1.1 million times. Telephone backup Device: a feature unique to Turkcell in Turkey, this device is used both for telephone backup and the downloading of various applications, to make life easier. In 2010, approximately 1 million applications were downloaded.
other Channels We have been providing service to our customers through electronic Chain stores since 2008; we can offer the Turkcell advantages at any point where our customers come together with technology. our customers can meet both their subscription and device needs through the partnerships with eight brands and in approximately 100 stores. We also provide our customers with other channels for their routine needs, including bank ATms and online branches, call centers, kiosks, post office (pTT) and the Turkcell website.
17,000 Turkcell Sales Points

50 Turkcell Distribution Centers
We provide our customers with efficient product supply, and fast and efficient information at 17,000 Turkcell Sales Points and 50 Turkcell Distribution Centers
Turkcell Sales Points There are approximately 17,000 Turkcell sales points, offering the products of all operators in Turkey and providing service even in the most outlying locations. With this figure, Turkcell is one of the most prominent examples of a telecom supply chain in europe. It is essential for us that our customers can easily access Turkcell products and services and get the best service possible at these stores. Accordingly, we established 50 Turkcell Distribution Centers to make weekly visits to these sales points, thus ensuring efficient product supply, as well as providing correct, fast and efficient information on our products and services. In 2010, we introduced another distinctive service for Turkcell sales points: Turkcell Ambassadors Club. With this club, Turkcell sales points win points for their performance and use them in shopping. This system ensures the creation of a one-to-one communication platform with Turkcell sales points, thus improving their performance and motivation. our customers are also able to purchase their units on digital environments via digital pos use generalized in 2010. They can thus meet their unit needs anytime and anywhere, either by cash or credit card payment.
We maintained our focus on customer satisfaction in our Call Center and remained the acknowledged leader; our success was recognized with awards
Turkcell Global bilgi formed special service teams in 2010 as part of the service segmentation efforts carried out in Turkcell Consumer operations; thus enabling those users with different service needs to obtain these services from trained expert customer representatives. Designed under the leadership of Turkcell Global bilgi Customer relationship management, and with the efforts of the IT department, the system differentiates itself from other practices in the sector with its technological features and process for the maintenance of satisfied customers. protected by Tasdix, the first digital time stamp introduced to the end-user in Turkey, this program was entered into TbTAk registers, and its usage rights are under proprietary protection. In 2010, Turkcell Global bilgi ranked first in the world and the emeA region in the 2010 Top ranking performers assessment by ContactCenterWorld.com; for the Gaining New Customers - soHo* project, designed for professional groups in Turkcell Corporate operations. The soHo project is a club, covering professional groups including doctors, lawyers, pharmacists, public accountants and real estate agents. It operates under the membership system to provide members with exclusive services related to their own professional groups. With the aim of facilitating its members businesses, the project enriches customer experience with benefits that include customer services through a free, dedicated number; educated customer representatives who have a command of the terminology
*small office home office
fast Battery Charger
Telephone Backup Device
At around 1,000 Turkcell Communication Centers, our widest exclusive face-to-face service channel, we continue our efforts to win the hearts and minds of our customers.
42
43
best Quality service
of the related professional group; bulk sms packages; web assistant service; mobile knowledge banks; and special discounts from brand partnerships. The soHo project speeds up campaigns and club membership sales compared with traditional sales methods, as well as providing cost efficiency. With the achievement of many firsts since its establishment, and with an investment of TrY 125 million over 10 years, Turkcell Global bilgi contacted 230 million customers in 2010. It responded to 15,000 video calls through mobile internet technology with 3G speed, and provided for the first time a video call center for the hearingimpaired. Turkcell Global bilgi has won 25 national and international awards over the past five years as a result of its differentiating service approach.
15,000 video calls

Voice signature
We both increased customer satisfaction and reduced costs, by implementing voice recognition for our customers
We introduced voice signature on February 9, implementing voice recognition so that our customers are no longer obliged to answer security questions before speaking to a service representative.
25 awards in 5 years to Global Bilgi
We eased the lives of company executives with refinements to Corporate online Transaction
New features were added to Corporate online Transaction, which enables company executives to manage corporate lines through approximately 200 transaction options; companies were provided with 24/7 online transaction capability. With the addition of new reports, customers can produce any report they need from this channel. We provide corporate customer services customized to company employee profiles With Tcell business Class Customer services for company executives and decision makers; Technical support service for IT executives; and Tcell Corporate Customer services for company employees, we provide exclusive services with tailor-made solutions for the varying requirements of different profiles.
With the achievement of many firsts since its establishment, and with an investment of TrY 125 million over 10 years, Turkcell Global bilgi contacted 230 million customers in 2010.
New features were added to Corporate online Transaction, which enables company executives to manage corporate lines through approximately 200 transaction options; companies were provided with 24/7 online transaction capability.
44
45
MoRE SoCIAL
RESPoNSIBILITY
GET MoRE
46
Turkcell Annul Report 2010
oUT of LIfE
more social responsibility
More Social Responsibility

As Turkeys Turkcell, we continue to support not only technology, but also economic, environmental, and social development.
We invest in the future of future generations in the areas of education, sports, and employment, by developing or supporting sustainable, long-lasting and measurable projects that promote youth development.
began with 46 mentors and grew yearly, with 160 mentors in total mentoring their snowdrops to date. The project recently opened up at different levels, gaining international recognition. In 2008, the snowdrops project was filmed by National Geographic. prior to the documentary, an 11-person National Geographic team conducted interviews with snowdrop girls and their families, in Istanbul, kars, erzurum, and mardin, from september 2008 to April 2009. As a result, for the first time in Turkey, a social responsibility project was filmed as a documentary on the National Geographic Channel. A snowdrops photo exhibition, displaying images taken during the shoots, toured cities across Turkey. In march 2010, the snowdrops project was selected by the united Nations as an exemplary project and introduced to the world through a series of activities. With this project growing from a drop into an avalanche, we now provide educational grants to 10,000 girls every year. since 2000, 20,000 girls have received scholarships; 9,634 students have graduated from high school; 3,437 of them have entered college; and 976 are college graduates. Thus far, the snowdrops project has garnered 16 national and international awards.
Snowdrops
We provide educational grants to 10,000 girls every year with the Snowdrops project, which has grown from a drop into an avalanche The snowdrops project was initiated in 2000 in cooperation with the society for supporting modern Life and provided grants to 5,000 girls who are decisive and determined to study. Turkcell extended the project in 2007 to increase the number of grants given every year to 10,000. The snowdrops project strives to provide equal educational opportunities to girls unable to continue their education due to the economic disadvantages of their families; and subsequently to develop them into open-minded individuals with a profession. Concluding its first decade in 2010, snowdrops is Turkeys pioneering education project, also marking Turkcells first comprehensive social responsibility initiative. snowdrops has grown into an avalanche over the years with public support to become one of Turkeys most important social responsibility projects, providing educational opportunities to tens of thousands of girls. A mentorship program was initiated in 2004 as a supporting process for the snowdrops project, to further contribute to the development of real-life skill sets for the snowdrops continuing their education at university level. Volunteers were chosen from among Turkcell executives, leading female journalists and columnists in the media world, as well as successful businesswomen to assume a guiding role; they then joined the program as informed mentors, following long and meticulous study and training. The mentorship program
16 national and international awards to Snowdrops
976 college graduates
Scholarships to 20,000 girls
Bridge of hearts
Initiated in 2008 in partnership with the ministry of education, the bridge of Hearts project enables ten thousands of children from around Turkey to visit different provinces and establish new and long-lasting friendships with other children, while also discovering the natural and cultural beauties of our country. Five-day tours are arranged as part of the bridge of Hearts project, to support students personal and social development, as well as to
We invest in the future of future generations in the areas of education, sports, and employment, by developing or supporting sustainable, long-lasting and measurable projects that promote youth development.
48
49
increase their awareness of social issues, diversity, and voluntary activity. students visit historical and touristic sites, plant trees, and participate in environmental activities during the first three days of the tour, according to the plan of the provincial Directorate of education. The remaining two days are scheduled by the family hosting each student. Having reached 130,000 students in three years, the bridge of Hearts project continues to grow each year. In 2010, special day activities were included in the project. students were taken to the Antkabir mausoleum on April 23 and to samsun on may 19, to experience the enthusiasm of national holidays. International tours were also included to expand students horizons. Within the bridge of Hearts project; In 3 years, 130,000 students from 81 provinces visited provinces they had never seen, and experienced new cultures, more than 5 million kilometers were covered, 3,250 administrators and 6,500 teachers were appointed to accompany the students. bridge of Hearts teams were formed in 81 provinces, Thousands of students for the first time experienced: planes, the sea, the metro and trains, Hundreds of thousands of friendship were established.
Turkcell is the main sponsor of the National football and Basketball Teams
From its start as the official Communication sponsor in 2002, Turkcell has continued its support for the National Football Team since 2005, as the main sponsor. Turkcell intends to continue its support of the national team, recognizing the importance of the teams achievements in enhancing national morale, as well as our nations international prestige. Turkcell also supports the National basketball Team, encouraging and inspiring upcoming generations. starting off as the official Communication sponsor in 2002, we became the main sponsor in 2006. Turkcell was also the main sponsor of the World basketball Championship 2010, where our national team achieved great success by picking up a silver medal.
Support the training of athletes aged 12-18

An eco-system of 50,000 people
Contribution to employment
At Turkcell, we also prioritize investing in employment. Turkcell Group employs approximately 11,000 people. We have established an eco-system of 50,000 people, including our dealers and business partners. In line with the importance we place on employment, we have initiated an important project in partnership with kur (Turkish employment Agency). In 2010, we provided 1,600 unemployed young people with comprehensive training opportunities in the retailing and call center sectors. more than 1,000 of them were employed in our eco-system. We will continue this partnership with kur in 2011, and provide training and job opportunities to more than 2,000 people. We also focus on employing physically challenged individuals. Accordingly, Turkcell Group employs 285 physically challenged individuals, while Turkcell Global bilgi has 180 physically challenged employees. A project developed with the ministry of Transportation employs 7 such individuals, who are able to provide call center service from their homes. With our Turkcell Global bilgi call center, we employ 7,500 people in 12 locations in total, including nine in Turkey (Istanbul, Izmir, erzurum, eskiehir, Diyarbakir, Ankara, and karaman), two in ukraine, and one in belarus.
The main sponsor of the National football and Basketball Teams
Runners to the future

Developed in cooperation with the General Directorate of Youth and sports, the runners to the Future project aims to support the training of athletes aged 12-18 who can achieve success in individual sports. Included in the national plan of the united Nations project, Alliance of Civilizations, the project selects young athletes based on their talent, and coaches them in sports, including weightlifting, skiing, swimming, tennis, and athletics, along with cycling for the visually-impaired, across Turkey; they are trained to become national athletes who will successfully represent Turkey in the international arena. Within this project, Turkcell also sponsors marsel lhan, the number one-ranking tennis player in Turkey and 90th in the world; as well as Cagla buyukakcay, another national tennis player.
Employs approximately 11,000 people
At Turkcell, we also prioritize investing in employment. Turkcell Group employs approximately 11,000 people.
We offer Job opportunities to Thousands of Young People through the Turkcell Academy - KUR Cooperation
As retail and call center sectors prosper in Turkey, the need for human resources trained in technology and communication, and in marketing, sales, and customer-centric services constantly increases. Acting on the ideas of people Are our priority, people Are our pioneers and Investing in people, the Turkcell Academy established cooperation with
Turkcell was also the main sponsor of the World basketball Championship 2010, where our national team achieved great success by picking up a silver medal.
50
51
Turkcell Continued To Win Awards in 2010

kur, the employment agency affiliated with the Turkish ministry of Labor and social security, to both introduce qualified labor to these sectors and offer employment opportunities to this qualified labor. The primary function of the Turkish employment agency is defined in its articles of incorporation: to meet the personnel needs of employers with qualified labor. In this cooperative effort, we brought together the nationwide human resources of kur, the academic knowledge of the universities and the Turkcell Groups corporate knowledge and experience under the expertise of the Turkcell Academy; we designed two programs: the Turkcell retail sales Development program and the Customer relations Development program. From the young people registered with kur, those with qualifications defined according to business criteria passed through a three-stage selection procedure, including a telephone interview, general examination, and face-toface interview, for an opportunity to attend these programs. In these programs, instructors from ege university, erzurum Atatrk university, and Turkcell Academy offered theoretical lessons in classrooms and then practical instruction that covered in-store and web-based call center sessions. In 2010, 1,600 young people were trained; and 110 of them were employed in Turkcell call centers and with dealers. We will continue this cooperation in 2011 and will hold new, augmented training programs designed for the call center and retail sectors; offering job opportunities for 2,000 unemployed young and talented individuals in twelve cities. non-governmental organizations, and ensures the individual support of Turkcell employees through in-house organizations. Turkcell Volunteers projects to date have included Would You share Your Toy?; Lets Heat the Yukar Tandr Village; my First Holiday; A book for every Child; We regenerate the Fatih elementary school in rnak; recreational Area Arrangement for the kapkaya elementary school in siverek; and Curiosity room. Turkcell Volunteers were granted the excellence in public relations Golden World Award by the International public relations Association (IprA) in 2007; an honorary award from the pr News Nonprofit pr Awards in the united states in 2009; and The best social responsibility project Created by employees award, by the united states-based e2e, in 2010. Turkcell was presented with an Alliance Excellence Awards in 2009, in the Growth Company: AllianceManagement Excellence category, for our Turkcell partner program. The Turkcell partner program is the major pillar of all our business partnership management programs. We have been implementing the Turkcell partner program at Turkcell since 2004 and at our Group Companies since 2010. The Corporate university Xchange is considered one of the most respected organizations in the world in terms of designing inhouse workshops. It presented the Turkcell Academy with the CorpU Award for Excellence and Innovation in the Learning Technologies category for the 11th time this year. We were honored with an award for Best
Turkcell won the Trade Financing Solution of the Year award. Turkcell and Astelit, a Turkcell Group
company in ukraine, signed a facility agreement in the amount of approximately $360 million to be used for the 2009 financing of infrastructure investments originating from ericsson. The facility was arranged by Credit Agricole CIb and Nordea bank Ab with the guarantee of the swedish export Credits Guarantee board, and was assigned to the swedish export Credit Corporation. This financing transaction was awarded as the Trade Financing solution of the Year by euromoney.
We ranked high in thirteen categories in the International Business Awards; in three of these, we
ranked the highest. Accordingly, we garnered First place in the marketing Website category with www.turkcell3g.com; First place in the Financial services category, with Garanti e-trader; and production Development Team of the Year with AdinAction Development Team. Turkcell also won ten
Responsible Technology
We enabled location information for 112 emergency calls We managed, through improvements to our network, to send call location information to emergency institutions for the calls made to the 112 emergency Center in Ankara, Antalya, and Isparta; a first for Turkey. At Turkcell, we are prepared to provide this service to other cities and continue the effort with the ministry of Health. We opened our network infrastructure to the Earthquake Information System project We signed a cooperation protocol with bogazici university, kandilli observatory, and the earthquake research Institute to conduct joint studies on the earthquake Information system project. We opened our base stations and network infrastructure to these scientific projects. We saved energy A new generation feature recently integrated into our network enabled us to reduce the power consumption of network equipment that experiences less use during low-traffic hours. We achieved energy savings of 4-5 percent and reduced Co2 emissions by 8,800 tons. We produced alternative energy solutions We increased the number of our base stations powered by hybrid energy systems to 17. We used wind power at 217 base stations, under the Greencell project, supporting the production of green energy.
Financial Disclosure Procedures in Europe at the 2010 Investor Relations Global Rankings Awards in
Amsterdam. kariyer.net recognized Turkcell with its Company Receiving the Highest Job Applications award; and the Turkcell Global bilgi with its Company Generating the Highest Employment at the Respect for Humanity Award Ceremony. In the best-managed Companies in Central and eastern europe 2010 survey, conducted by Euromoney magazine, Turkcell ranked first in the Most Satisfactory and Consistent Company Strategy in the Mobile Sector category, and third in the Best Managed Company category.
honorary awards in seven different categories.
Turkcell Volunteers
The Turkcell Volunteers group, composed of Turkcell employees, identifies people in need and related projects in cooperation with
Turkcell Academy received an excellence Award in the Leadership Development category from AsTD (American society for Training and Development).
We won the Grand prize from the
Turkcells Ceo sreyya Ciliv was presented with an honorary award in the executive of the Year in europe category, while the snowdrops and bridge of Hearts projects each received honorary awards in the social responsibility projects of the Year category. The Turkcell management Team was recognized in the management Team of the Year category; the Turkcell Corporate Communications Team was recognized in the Communication Team of the Year category; Turkcell VINN in the marketing Campaign of the Year category; Tklakonu and Turkcell konuanlan in the New services of the Year category; and Turkcell mobile Learning and Turkcell-NTV News package in the New Telecommunication services of the Year category.
Digital Age Awards:

most Creative Viral Campaign: Certificate of Achievement:
Turkcell Volunteers were granted the The best social responsibility project Created by employees, by the united states-based e2e, in 2010.
International Public Relations Association (IPRA) in the Best Service Launch category for the 3G launch. Global Bilgi ranked first in the Call Centers list in the bilisim 500.

Gezenzi Lost Campaigns

First: 100 most Creative Digital Centered, Integrated
Digital
Turkcell
Things To Do When You Are Young Internet Video
We won the grand award in the bilisim 500 competition for our Mobile Application. Turkcell
most Creative Video: First Award: Gezenzi
Global Bilgi won the Grand prize in the Best Telemarketing category for the emeA (europe, middle-
We won the Grand prize at the Golden Drum in the Best PR Event category with the First Year Event of 3G.
east and Africa region).
We were awarded Capital Magazines Most Admired Company in 2010 Award.
52
53
Awards
managers of Turkcell Affiliates
Astelit Alexander Barinov

Alexander barinov was appointed General manager of Astelit on December 1st 2010. mr. barinov has extensive experience in the telecommunications industry both in ukraine and at the international level. before joining Astelit he worked as Vice president of the supervisory board of starLightmedia. From June 2008 till April 2010 mr. barinov worked for Vympelcom Group, where he held the positions of Vice president for sales of Vympelcom (beeline) russia and General Director of ukrainian radio systems (beeline) ukraine. before that, mr. barinov had held a number of top-managerial positions, including Vice president for product, marketing and strategic Development of Ibs Group (russia), General manager of Aegis media (russia), General Director of Depo Computers (russia) and marketing Director of philips Ce russia. mr. barinov graduated from moscow state Academy of Chemical engineering, where he completed his phD, and also carried out his research in Dortmund university (Germany).
Superonline - Murat Erkan

murat erkan joined the Turkcell family as the General manager of Tellcom in June 2008. After launching his career at Toshiba, mr. erkan became Turkeys first systems engineer at Cisco. prior to joining Tellcom, he worked as the business unit manager at Aneltech, responsible for providing solutions to the telecom, mobile communication, information and communications technology, defense and industrial production sectors. He also managed the merger of Tellcom and superonline in 2008. mr. erkan graduated from the Department of electronics and Communications engineering at Yldz Technical university in 1992.
BeST ozcan Ermis

ozcan ermis has been serving as the General manager of besT in belarus since october 2008. mr. ermis was the sales and marketing Director at Astelit ukraine in his previous post, and served as the sales and marketing Director of Vodafone Turkey until 2006. prior to that, he served as the marketing Director of Telsim until 2003. He started his career in the automotive sector in the marketing department in 1992. ozcan ermis is a graduate of the Department of mechanical engineering of bosphorus university and holds an mbA degree from the same university.
Turkcell Teknoloji Kadir Semih Incedayi

kadir semih Incedayi joined Turkcell Teknoloji Arastirma ve Gelistirme A.s. in April 2007. before becoming the General manager of Turkcell Teknoloji, he joined Turkcell in December 2006 as the Division Head of research and Development. After ten years with the koc Group, mr. Inceday served as manager for four years at Telsim and two years at borusan Telekom. kadir semih Incedayi graduated from the Department of Computer engineering at middle east Technical university after attending Istanbul erkek High school.
Global Bilgi - Bahadir Pekkan

bahadir pekkan started working for Global bilgi A.., Turkeys leading call center, in 2005, after holding managerial positions in various companies. At Global bilgi, mr. pekkan served as the Chief Financial officer for approximately eighteen months and then, from June 1, 2006 on, as the General manager. bahadir pekkan is also the president of the Association of Call Centers, established in 2008. born in Istanbul in 1967, mr. pekkan is a graduate of the Department of business Administration of marmara university. He also holds masters degrees in Capital markets & stock exchanges from marmara university and in Finance-Accounting from Yeditepe university.
Inteltek - Ahmet Sezer

Ahmet sezer has served as the General manager of Inteltek since 2004. After graduating from the Department of electronics and Communications engineering at Istanbul Technical university in 1982, he began his career as an engineer at Aselsan, and continued at Ibm Turk Ltd. between 1988 and1994. During his career as a professional manager, he has been the Assistant General manager of Intertech A.., 1994-1997, the Group Vice president of the Vestel Group of Companies, 1997-1998, the General manager of Vestel Consultancy and professional services, 1998-2001, and the General manager of probil A.., 2001-2004.
KKTCell - Daghan fellahoglu

Daghan Fellahoglu joined the Turkcell family on August 1, 2008 and since then has been serving as the General manager of kkTCell. His expertise, developed from holding senior positions in local and foreign telecommunications and IT markets, rests in marketing, sales, product management and network design. between 1996 and 2007, mr. Fellahoglu served in various senior management positions at ericsson in Turkey and sweden; between 2007 and 2008, he worked in singapore as the sales Development Director for south east Asia. born in baf in 1971, he is a graduate of the Department of electric and electronic engineering of eastern mediterranean university and Turkish maarif College.
Global Tower - Ismet Yazici

Ismet Yazici joined Global Tower on February 2, 2009 as Assistant General manager for business Development & sales and became Deputy General manager on February 18, 2010. He became General manager at Global Tower on November 8, 2010. He joined Nortel Netas in 1993 as an r&D engineer. He received a masters degree in political science at marmara university (1998) and an mbA degree at the university of Texas (2000). mr. Yazici worked in the International sales & marketing Department at Nortel Netas between1995 and1999 and served the same company as the manager of the romanian office between 1997 and1999. mr. Yazici was CDmA product marketing manager at Nortel Networks richardson, Texas, usA, between1999 and 2003, and became the Nortel Networks emeA product marketing & business Development Director in 2003. He was honored with the exceptional Contribution and Leadership recognition awards for his contribution to the introduction of CDmA technology to the region and to the expansion of Nortel Networks to new markers. mr. Yazici served in the Turkey unit of Nortel in 2006 and held the position of marketing, business Development, and Corporate sales Leadership until the end of January 2009. born in may 1968 in Duzce, Ismet Yazici graduated from the Department of electronic engineering at Hacettepe university.
54
55
subsidiaries
Subsidiaries
In 2010 Turkcell, continued its operations in a wide geography spanning from Germany to kazakhstan
International Subsidiaries
In 2010, Astelits ebITDA tripled compared to 2009 within the context of the turnaround strategy and effective cost control initiatives. Its ebITDA margin increased to 19.0% in 2010 from 5.7% a year before. The main drivers of this increase were the tariff redesigns resulting in a decrease in interconnection costs, together with cost cutting measures. In 2010, Astelits number of registered and three-month active subscribers stood at 9.1 million and 6.1 millon, respectively. The 3-month active Arpu rose by 5.4% in 2010, mainly due to a decline in the number of active subscribers, along with the change in active subscriber definition. mou increased by 8.3% in 2010 yearon-year.
Ukraine: Astelit by the beginning of February 2005, Turkcells 55% indirect subsidiary Astelit had launched its Gsm operations in ukraine under the life:) brand name. of the companys shares, 45% belong to the system Capital management Group. Astelit covers 96% of ukraines population and 88% of the countrys territory. Summary Data for Astelit 2009 2010 9.1 6.1 171.9 2.6 3.9 2,691 339.3 64.5 19.0% (101.0) 66.5 y/y % chg (25.4%) (21.8%) 8.3% 4.0% 5.4% (1.8%) (3.4%) 219.3% 13.3pp (9.7%) (69.2%)
besT was able to achieve 76.2% geographical coverage and 96.3% population coverage in just two years, while increasing its subscriber market share to 14% in a market with a penetration rate of 110% as of 2010. besTs subscriber base rose by 25% year-on-year to 1.5 million. As the first mobile operator in belarus to launch 3G services in November 2009, besT continued its investments, with a TrY185.4 million capital expenditure in 2010, which rendered the Company the leader in the belarusian market in 3G rollout, increasing its brand awareness to 88% with its own brand, namely life:). fINTUR Turkcell holds a 41.45% stake in Fintur Holdings bV. Fintur has focused on Gsm investments in growing markets of relatively low penetration rates, such as Azerbaijan, kazakhstan, moldova and Georgia. Finturs subscriber base continued to grow in 2010. The overall subscriber number rose by 16.9% to 15.9 million, mainly as a result of strong growth in kazakhstan. Finturs consolidated revenue increased by 8.2% to us$1,737 million in 2010, mainly driven by a 17.4% increase in the revenues of our kazakhstan operation, along with strong subscriber acquisitions and an improved macroeconomic environment. We account for our investment in Fintur using the equity method. Finturs contribution to income was us$153.0 million in 2010.
Deriving its strength mainly from its wide coverage area, strong network structure, high quality service, extensive product range, highly professional staff and support of shareholders, Azercell allows its subscribers to make calls using the networks of 406 operators in 152 countries around the world. As of the end of 2010, Azercell had approximately 4 million subscribers, and held the leading position in the telecommunication sector. Additionally, the Company holds the majority stake in Azeronline, the internet service provider established as a limited liability company in December 1999.
Number of subscribers (million) Total 12.2 Active (3 months) 1 7.8 MoU (minutes) 158.7 Average Revenue per User (ARPU) in US$ Total 2.5 Active (3 months) 3.7 Revenue (UAH million) 2,740 Revenue (US$ million) 351.1 EBITDA2 (US$ million) 20.2 EBITDA margin 5.7% Net Loss (US$ million) (111.8) Capex (US$ million) 216.0
1
fINTUR Subscriber (million) Kazakhstan Azerbaijan Moldova Georgia TOTAL Revenue (US$ million) Kazakhstan Azerbaijan Moldova Georgia Other* TOTAL
(*) Includes intersegment eliminations
2009 7.2 3.8 0.7 1.9 13.6
2010 8.9 4.0 0.9 2.0 15.9
y/y % chg 23.6% 5.3% 28.6% 5.3% 16.9%
Active subscribers are those who in the past three months made a transaction which brought ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at
revenue to the Company.

2
Belarus: BeST Turkcell purchased 80% of belarusian Telecommunications Network (besT) for us$500 million from the state Assets Committee of the republic of belarus in July 2008 as part of the Companys strategy to capitalize on the emerging investment potential in neighboring countries. The purchased amount is scheduled to be paid in three installments: The initial payment of us$300 million was made on August 26, 2008, and the second installment of us$100 million was made on December 31, 2009. The remaining installment of us$100 million was made on December 31, 2010. An additional payment of us$100 million falls due when besT first announces a net annual profit. The acquisition of besT gives Turkcell the opportunity to enter a market of growth potential. belarus growing economy and young and well-educated population, make it an attractive market in a region where Turkcell is keen to grow.
http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ release.pdf for the reconciliation of ebITDA to net cash from operating activities. please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation.
Azerbaijan: Azercell established in 1996, Azercell was a joint venture between Azertel and the Azerbaijani ministry of Communications. Currently, Fintur owns approximately 51% of Azercell through direct and indirect holdings. Despite incessant and intensifying price competition, the Company has managed to maintain its market leadership since its first year of operation.
863 501 63 175 3 1,605
1,013 504 67 152 1 1,737
17.4% 0.6% 6.3% (13.1%) (66.7%) 8.2%
(US$ million) Finturs contribution to Turkcell Groups net income
2009 119.6
2010 153.0
y/y % chg 27.9%
56
57
subsidiaries
ranking among the largest cellular operators in Central Asia, kcell had 8.9 million subscriptions as of the end of 2010. on December 1, 2010, kcell launched 3G services in Astana and Almaty, based on temporary permission. on December 25, 2010, the competent authority signed an addendum to the existing Gsm license, which provides kcell with the rights to operate a 3G network. The addendum requires kcell to provide all locations with a population exceeding 10,000 people with mobile services using umTs/WCDmA standards until January 1, 2015.
Moldova: Moldcell moldcell was granted its Gsm 900 license in November 1999 and commenced operations in moldova in April 2000. The Company is fully-owned by Fintur Holdings b.V. moldcell was the first operator in moldova to provide services ranging from sms to roaming for prepaid subscribers, WAp/Internet Access, Gprs/eDGe, 3.5G and blackberry enterprise solution.moldcells subscriber number had increased to 0.9 million by the end of 2010.
Following its establishment, superonline obtained the license for long distance telephone services (LDTs), which allows it to provide long-distance call origination and termination for individual and corporate customers, as well as wholesale voice-carrying services. The Company received its Internet service provider license in February 2005, and was granted a landline data transmission license in June 2005 and an infrastructure operating license in April 2006. superonline won a major infrastructure tender initiated by the Turkish electricity Transmission Corporation (TeIAs) in January 2007, and has been granted the 10-year operational rights for a fiber-optic cable between Istanbul and Ankara. In 2007, superonline became the first alternative operator in Turkey to carry domestic traffic. superonline provides its customers with affordable packages for fiber Internet, the most advanced Internet-access technology in the world. With its fiber-optic-infrastructure investments completed within a relatively short timeframe, superonline introduced its customers to 100 mbps Internet connections in 2007. on December 2009, superonline won the public tender for the 15-year lease of boTAss fiber optic infrastructure, with a bid of eur20.9 million, and has been granted the right to use boTAss 11,280 km of routes. These routes enable superonline to access all of Turkeys regions. In 2010, superonlines fiber-optic network reached 580,000 home passes. In 2010, its contribution to Turkcells financials continued to improve with a 32.8% revenue growth and an ebITDA margin of 9.8%. Throughout the year, the focus on the higher-margin residential segment increased, resulting in year-on-year segment revenue growth of 70%. Corporate segment revenues grew by 30%, leveraging the strengths of the Turkcell Group, while wholesale revenues grew by 26%, in line with increasing Group synergies. Summary data for Superonline 2009 252.4 3.6 1.4% 259.5 2010 335.1 32.9 9.8% 480.3 y/y % chg 32.8% 813.9% 8.4pp 85.1%
Global Tower
Global Tower, which was established in 2006 with the vision of spreading communication everywhere, and with its new business model implemented in Turkey for the first time, provides operators, TV and radio broadcasters, as well as civil and military communication/monitoring corporations in wireless communication with installation, leasing, and maintenance services at international standards for tower, roof and on-premises infrastructural facilities. serving its customers in more than 5,500 tower fields across Turkey, Global Tower stands out as one of europes leading infrastructure operators, with its tower field portfolio. The services provided by Global Tower enable its customers to focus their investments on the efficient use of their human resources and energies in their main business areas, rather than on dealing with exhaustive field operations, the high costs of tower and energy infrastructure, ever-increasing leasing expenditures and its procedures. Turkeys first and only tower service provider, Global Tower aims to extend its rapid growth in Turkey to international markets. Accordingly, in 2009 it began operations in ukraine under the name of ukrToWer.
Georgia: Geocell Geocell was founded in 1996 as a joint venture between the Georgian ministry of Telecommunications and Turkish company Grtel Telekomunikasyon Yatrm ve D Ticaret Anonim irketi (Grtel) as the first Gsm operator in Georgia. Geocell began commercial operations in march 1997 and was granted a Gsm 900 mHz operating license in April 1997. In 2006, the Company acquired its umTs license (2100 mHz frequency), resulting in improved network coverage, added capacity and the possibility for prepaid subscribers to use 3G technology. As of December 2010, Geocell had 2 million subscribers.
Turkish Republic of Northern Cyprus: KKTCell established in 1999, kkTCell is a subsidiary of Turkcell that operated under a revenue-sharing agreement with the government of the Turkish republic of Northern Cyprus (TrNC) until the end of July 2007. In 2007, kkTCell signed an 18-year license agreement for the installation and operation of a digital, cellular, mobile telecommunication system with the TrNC ministry of Communications & Works. This agreement replaced the Gsm-mobile Telephone system Agreement that was based on revenue-sharing. by the end of 2010, kkTCell had 386,000 subscribers and a 69% market share. kkTCell covers 100% of the population, and its coverage reaches beyond the geographical borders of the TrNC. In an exciting development in 2008, kkTCell introduced 3G technology to Northern Cyprus and began offering 3G services and products to the people of Northern Cyprus on october 14, 2008. In 2010, through its radio link project, kkTCell had the only international gateway other than that of the TrNC Telecommunication board.
Domestic Subsidiaries
Kazakhstan: Kcell kcell commenced its activities in 1999 as a joint venture between Fintur Holdings b.V. and kazakhstans national telecommunications operator kazakhtelecom. The Company operates on a renewable 15year licensing agreement that provides the right to run a standard Gsm 900 cellular network. As the undisputed market leader in kazakhstan, based on subscriptions, growth rate, investment volume and variety of services, and Revenue (TRY million) EBITDA1 (TRY million) EBITDA margin Capex (TRY million)
1
Inteltek
Inteltek was established in 2001 and owned by Turktell, a Turkcell affiliate, Intralot and Intralot Iberia Holding, with respective shares of 55%, 20% and 25%. established with the aim of exploring and utilizing available business opportunities within the gaming sector, the Company is the sole operator of sports betting games in Turkey. Inteltek is successfully carrying out, on behalf of the Directorate of the spor Toto organization under the General Directorate of Youth and sports (GsGm), work and related services regarding the establishment and operation of the central betting system for sports ga-
Superonline
Tellcom letiim Hizmetleri A.., founded in 2004, merged its strength and brands with those of Turkeys leading Internet provider, superonline uluslararas elektronik bilgilendirme, Telekomnikasyon ve Haberleme Hizmetleri A.. in may 2009, to operate under the brand name superonline. Turkeys innovative telecom operator superonline is continuing its investments in order to become a complete solution and service provider for its corporate and individual customers.
ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ release.pdf for the reconciliation of ebITDA to net cash from operating activities. please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation.
58
59
subsidiaries
mes based fixed-odds and paramutual betting. It has also established and operates the risk-management system and services of the main dealership, using Intralots technology and know-how, and the strong Gsm infrastructure of Turkcell. Inteltek is now one of the worlds largest operators in the statecontrolled betting-games sector, and has become an exemplary and leading organization with its contributions to the public and Turkish sports, thanks to its operations and iddaa trademark. As a result, it has almost created a sector providing income for thousands of people. Inteltek won the tender held in August 2008 by the Directorate of spor Toto organization under the GsGm to acquire the rights to operate fixed-odds and paramutual betting games based on sports events for a period of 10 years until August 2018. The sales activities of Inteltek in Turkey are managed through a network of over 5,500 agents (incl. 1,000 mobile agents) across 81 provinces, five electronic agents over the Internet, Gsm, a call center and a digital TV broadcasting platforms. An agreement to protect the ethical values of football has been signed with the Turkish Football Federation and spor Toto organization, and a guaranteeing position has been undertaken in Turkish football. Furthermore, a similar agreement has been signed with ueFA and FIFA via a collective platform, constituted by official european betting companies. Inteltek has become a member of the World Lottery Association (WLA) and the european Lottery union (eL) in a bid to participate in the industry at an international level and follow relevant developments. Inteltek, through the iddaa brand managed on behalf of spor Toto organization, continued to create added value for the Turkish economy with tax income generated for the state amounting to TrY1 billion, as well as contributions to Turkish sports of TrY496 million in 2010. As part of Intelteks strategy of capitalizing on the emerging investment potential in neighboring countries, it received the authorization to organize, operate, manage and develop the fixedodds and paramutual sports betting business in Azerbaijan from Azerbaycan Azeridmanservis Limited Company in January 2010. Inteltek owns 51% of Azerinteltek, domiciled in Azerbaijan, for a period of 10 years. Azerinteltek commenced operations on January 18, 2011. Turkcell Global Bilgi Turkcell Global bilgi was established in 1999 as a call center. In response to developments in the sector, as well as evolving and increasing customer expectations, investments were made to transform Global bilgi into a Customer relations management Center. It now has the best technology system in its sector in Turkey, as well as in europe. operating within Turkcell Group, one of Turkeys most valuable companies, and with a firm position on the worlds prestigious technology lists, Turkcell Global bilgi maintains its leadership with a 45% market share. Turkcell Global bilgi provides services with a desk capacity of 5,500, distributed among 12 locations nine in Turkey (in Istanbul, Izmir, erzurum, eskisehir, Diyarbakir, Ankara, and karaman) and three abroad (two in ukraine, one in belarus). Turkcell Global bilgi, which has a young employee profile, solely serves Turkcell customers, from the erzurum and Diyarbakir locations. The erzurum Call Center, established in 2006, employs 880 people, 45% of whom are female and 55% are male. The average age of employees is 26. of the employees, 0.14% of those at the erzurum Call Center hold a doctoral degree, 0.71% hold a masters degree, 34.61% hold a bachelors degree, 36.31% hold an associates degree, 28.09% are high school graduates, and 0.14% are secondary school graduates. Following the success and increase in business volume achieved in erzurum, the Company established the Diyarbakir Call Center in 2008. There are 650 employees in Diyarbakir, of whom 56% are female, and 44% are male. With an average age of 26, 0.49% of the Diyarbakir Call Center holds a masters degree, 16.37% a bachelors degree, and 41.57% an associates degree, while 41.57% are high school graduates. Turkcell Global bilgi is a major employer, creating employment for 7,500 people and providing value-added services to more than 50 million people in Turkey and 10 million in ukraine. Given that the call center sector is undergoing rapid expansion both locally and globally, Turkcell Global bilgi aims to grow in new locations. Turkcell Teknoloji established to develop competitive services and products in information and communication technology, Turkcell Teknoloji stands out as one of Turkeys leading r&D and innovation companies. In 2007, the decision was made to establish a techno-park company and enable r&D staff specialized in information and communication technologies within Turkcell since 1994, to continue their r&D and innovative activities in an optimal setting. Accordingly, in 2008, a building was constructed for Turkcell Teknoloji in the Technology Free Zone; designed with a 500-person capacity, the goal was to establish the most favorable living and working environment for those engineers responsible for software research and development. This building ranked first in the Architectural Design Awards held in Turkey in 2010. Developing services and products in areas including customer relations and channel management, mobile marketing, business intelligence solutions, sIm assets and services management, roaming solutions, value-added services, operational and business support systems, Turkcell Teknoloji employs 360 highly qualified engineers as of 2010. As the first and the sole company from Turkey to become a member of CIsQ (Consortium for IT software Quality), which is setting global standards of software quality, Turkcell Teknoloji focuses on changing, transforming and simplifying peoples lives through its innovative and customer-oriented approach. products under development on in-house platforms incorporate the creative ideas of our employees. The value given to innovative and creative ideas is demonstrated by the increasing number of patents that Turkcell Teknoloji obtains each year. Turkcell Teknoloji establishes partnerships with national and international r&D companies, universities and research centers within its eco-system to develop new ideas, and to transform them into value-added products. playing an active role in international r&D programs, Turkcell Teknoloji is also working with leading r&D technology companies and universities abroad. ensuring the international expansion of differentiating products and solutions of Turkcell and its Group companies, and thus creating value for other operators as well, Turkcell Teknoloji carries out successful technology and software export operations to the CIs, middle east, Africa, and europe, and aims to become a world brand in its area.
60
61
Human resources
human Resources
There is more for me in Turkcell
our Values
We continue to actively sustain the values that guide our actions and conduct, and to extend our sphere of influence through our motto, Get more out of Life with Turkcell. We see our values as distinctive behavior, defining the current success of the Turkcell Group: We believe that customers come first. We are an agile team. We promote open communication. We are passionate about making a difference. We value people. Today, employees at all levels, from senior management on down, participate in this process by declaring There Is more for me in Turkcell, and thus supporting our people-based culture. our Employees: our Most Valuable Asset Acting on our philosophy, people First in a pioneering Turkcell, we consistently prioritize motivating and satisfying our employees. We track technologies that will shape our industry, not only in Turkey, but globally; we work to lead exemplary worldwide practices. by creating a flexible, sensitive, and democratic work environment where change is supported, we constantly review the investments that add value to our company in order to motivate our team. our business setting is characterized beyond a work environment as a living environment, and we proceed within this understanding. We demonstrate our motto - more Joy with the shopping advantages offered to Turkcell employees through contracted corporations in our TClub service, in order to make shopping more fun. Through Turkcell social Activity Group (TsAG) we offer enjoyable programs for our employees by organizing social and entertainment activities. separately, in addition to regular vacation, all employees receive one additional day off for their birthdays. More opportunities We recruited 343 employees in 2010, in line with our new projects
and corporate growth. In accordance with the career opportunities we offered, the internal promotion rate was 87%; 312 people were transferred to, or rotated within different divisions in Turkcell to take on new roles and responsibilities, supporting their career development. In 2010, employee turnover rate in our company was 4.66%. More Sharing We offer more sharing opportunities to our team through social channels like Habercell and paylas Turkcellli / Turkcell blog. We distribute news related to developments in the Company through Habercell (News-cell); we offer our services to customers through our employees with the paylas Turkcellli application, a practice used by all Group companies. More Convenience We offer more of Convenience to our team with additional benefits that enhance their professional and private lives; including Flex menu, Turkcell Assist, and the Individual pension plan. Through Flex menu, our flexible additional benefits program, our employees may select each year the package that best suits their needs among available options including shopping vouchers, holiday packages, as well as interim payments for individual pension plans and healthy living packages. Turkcell Assist, the employee support line launched on september 1, 2010, is available to employees and their families free of charge. With Turkcell Assist, they find easier and faster solutions to issues in their private lives; general information and guidance services are provided 24/7 by experts on medical, financial, legal, psychological, and everyday issues. The Individual pension plan covers all Turkcell employees and offers them the opportunity to invest in their future through a mutual contribution model. Female employees with child(ren) aged 2-5 years are offered a monthly child care allowance.
The demographics of Turkcell employees are provided in the following table: Employee Male Female Average Age 2007 1,854 1,021 32 2008 1,798 1,011 33 2009 1,728 981 33 2010 1,778 1,011 33
More Development: Turkcell Academy

We Develop our Leaders, our Employees, our Business Partners and our Entire Eco-system, with our Development Solutions As a leading technology company, Turkcell endeavors to communicate to our team the latest content and the most current issues in development programs, through the most effective technological solutions and infrastructures, due to its evolving working conditions and Turkcells own dynamic structure. We systematically follow the performance and potential of all individuals within our eco-system, in particular the Turkcell Group and field teams, and develop them in line with a dynamic business environment and our corporate strategy of being ready for the competition. With these perspectives in mind, the Turkcell Academy offers different development solutions for topics that include Customer, Technology and Leadership. In 2010, Turkcell Academy provided 1,026,579 hours of training to 48,685 people in the Turkcell Group eco-system. our distinctive development solutions in 2010: Turkcell Group sales program: covering all Turkcell Group employees - including dealers, business partners and corporate solution centers - who have contact with Turkcell customers; the program was offered to more than 30,000 people, and featured a broad range of development solutions through training programs. These included common service issues and sales culture, products and services, and specialization. We regularly measured the technical knowledge level of program participants and offered proactive distant learning solutions for areas of development. The Turkcell Academy offered real Customer experience through Customer 2.0: We offered five different development solutions for improving the awareness and knowledge levels of Turkcell Group executives and employees as Turkcell Ambassadors, through Customer 2.0, a customer-focused conversion program.
Education Level Post-graduate Degree 484 University Degre 2,066 High School Graduate 316 Secondary School Graduate 9 At Least One Foreign Language 2,064 Two or More Foreign Language 799
500 2,025 277 7 1,910 855
535 1,918 248 8 1,819 789
569 1,986 226 8 2,046 743
This chart does not include part-time employees and interns.
More Appreciation
We Promote Innovation At Turkcell, we continue to use the process called I Have a Great Idea! that works via the Innovation office, enabling our employees to pass on original ideas that add value to the Company. We continue to reward ideas generated through the I Have a Great Idea! program, and to date Turkcell has recognized 612 employees under this scheme. Their total contribution to the company has amounted to us$236 million. Turkcell is Turkeys Most Admired Company our priority is to recruit and retain the best talent. our distinctive human resources practices continue to create dedicated people who yield successful results. our employees, in turn, say There Is more for me at Turkcell and reward Turkcell with the highest rates in both the industry and in Turkey, in employee retention studies conducted by independent research companies.
62
63
Human resources
We offered specialized training opportunities in mobile Communication and knowledge Technologies, with 300 different training programs in the Technological Development program. We supported corporate progress with development programs specifically designed for 45 different technical profiles, as well as 500 different classroom training programs. Within the Leadership Development programs, we implemented a specific management preparation program for high-performance individuals who were candidates for managerial positions. With the Turkcell Academy marketing Conferences, we continued to bring together Turkcell Group and top management of the other leading companies with globally known authorities in their fields. Last year, Turkcell Academy hosted conferences with well-known figures such as malcolm Gladwell and David plouffe, and brought Dan Ariely to Turkey in January 2011. New Graduates are at Turkcell Group with Turkcell Academy PAf (first Step to Professionalism) Training Program In 2010, Turkcell Academy continued its First step to professionalism (pAF) program, which it initiated to enable successful young talents to begin their professional life one step ahead and in the right direction. The pAF program encompasses the internshipparttime employmentnew graduate recruitment phases, and aims to improve the awareness of these young people of professional life, business fields, companies, and jobs, while widening their perspective. We seek to offer them part-time and then full-time job opportunities within the Group, according to their individual and project performance during their traineeship. In 2010, the Company offered internships to 195 students under this program. We Add Value to our Business through University-Industry Cooperation We support many local and international academic studies and
implement joint programs and events with universities under the university-Industry Cooperation program, conducted with Turkcell Academy, the corporate university of the Turkcell Group. In the knowledge that the upcoming younger generation will shape both our nation and our technology, we have designed three programs, the Turkcell mobile Communication and Technology Development program, the Turkcell Customer relations Development program, and the Turkcell mobile marketing Development program to, share our knowledge and experience with university students, and to introduce a qualified labor force to the rapidly evolving information sector. Turkcell Academy visited universities in 2010 under the Life with Turkcell and If You Are Young, You Are the Future projects, coming into contact with more than 22,000 university students at 75 universities in 25 cities, with seminars on mobile Innovation, New Technologies, entrepreneurship, and Careers. Turkcell Academy supports, in addition to many of Turkeys most prestigious universities, selected academic research and projects on technology, innovation, entrepreneurship, and leadership at worldrenowned universities such as Harvard business school and the massachusetts Institute of Technology (mIT), facilitating their coordination with its businesses units. ranked among the business partners of baheehir Co-op (Cooperative education) and sabanc CAp (Company Action project) programs, the Turkcell Academy continues to carry out joint projects and programs with these universities. We Support Technologically Promising Young Talent! We have maintained the Turkcell Academy postgraduate scholarship program, supporting the development of technologically promising young talent and introducing a qualified labor force to the sector, since 2007. Designed with the valuable contributions of the Turkish Information Association, this program supports postgraduate and doctoral students with whom we will conduct joint projects in focus areas of the Turkcell Group, and we facilitate their collaboration with our business units. The m.I.T. enterprise Forum, established under the leadership of the massachusetts Institute of Technology, one of the worlds most prestigious universities, was held for the second time in a european country Turkey - with the cooperation of Turkcell. A significant part of our social responsibility vision is the investment in qualified human resources and good ideas, and support of value-added projects in Turkey. With this collaboration, our aim is to transform the
innovative ideas in Turkcells focus areas into sustainable business models that will add value to our society and support entrepreneurship and innovation. Turkcell Academy is Also a Leader in Training Technologies In parallel with our leading position in technology, in our training programs, as alternatives to classical classroom training, we endeavor to use the most suitable methods for individual development with the platforms we have designed. As one of the first Turkish companies to provide its employees with e-learning solutions, we continue to offer development opportunities to approximately 25,000 people through our Turkcell Academy e-learning platform. In 2010, we implemented 71% of our educational development solutions through distant learning methods, using education technology. We thus saved us$10 million. Mobile Training The Turkcell Academy mobile Training platform brings training and technology together to make life easier and ensure easy access to information. This platform can be used with any mobile device that has a mobile network (eDGe, WiFi, 3G, etc.) and WAp/web access, and stands out as a pioneering practice, in line with Turkcells leading vision in technology. Virtual Classroom The Turkcell Academy Virtual Classroom enables people from different locations to attend web-based training activities or conferences (webinars) independent of their locations. The virtual classroom platform, accessible to large audiences through interactive presentations, makes information sharing highly effective. Web-Based Development Platforms With the growth of the Internet and social media, web-based selflearning tools gain increasing importance, allowing our employees to access best practices, reports, videos, and other resources in any areas they require. Within the Academy, the use of various platforms by our employees is increasing; including the virtual library (Getabstract), virtual dictionary (Information Dictionary), video learning (Academy Instructor TV), electronic database Ieee; Harvard manage mentor offered to our executives (created by Harvard business publishing and acknowledged as the worlds most effective leadership development portal), and the Harvard business publishing portal. Turkcell Academy Differentiated among International Platforms Turkcell Academy, the strategic development center of the Turkcell Group, has been recognized with many awards in recent years. Turkcell
TsAG organized approximately 500 activities in 2010 alone, in which more than 30,000 employees and their families participated.
Academy won the honorary award in the best New Corporate university category of the Cubic Awards (Corporate university best in Class) and was presented the excellence award in the Learning Technologies category of the Annual Corporate university Xchange Awards for excellence and Innovation, held by the Corporate university Xchange, for most effective use of learning technologies.Following this global success, this Turkcell Academy-specific project was published in 2010 as a case study by the Corporate university Xchange, a leading and highly respected international organization in the development sector, with members among corporate universities of leading international companies in the u.s. Again, the mobile learning practices of Turkcell Academy were cited as a case study in a book on mobile learning, The mobile edge, by Gary Woodill, an analyst at brandon Hall; one of the most prestigious research organizations in the distance learning field. Turkcell Academy was also honored with Leadership Development program and excellence in practice awards in 2010 by the American society for Training & Development (AsTD), the worlds largest organization engaged in learning and performance at work. In parallel with these achievements, Turkcell Academy was invited to enter the Corporate university Xchange/Global Leadership Advisory board. Turkcell Social Activity Group The Turkcell social Activity Group (TsAG) continues to design distinctive activities for our employees with the motto, The Fun part of Work. every week, TsAG organizes tours, tournaments, kids club activities, training courses, competitions, parties, daytime events and dozens of special activities. TsAG organized approximately 500 activities in 2010 alone, in which more than 30,000 employees and their families participated. our Corporate Sports Clubs We continue to support approximately 150 athletes from Turkcell, with corporate sports teams for basketball, cycling, bowling, football, carting, table tennis, volleyball, sailing, and swimming. We take unique pride in the achievements of our corporate sports teams, representing Turkcell in various leagues.
Turkcell Academy visited universities in 2010 under the Life with Turkcell and If You Are Young, You Are the Future projects, at 75 universities in 25 cities.
64
65
mobile Telecommunication sector
Mobile Telecommunication Sector

With its young and dynamic population and the current penetration levels Turkish market still has a growth potential in the mid-term.
Penetration
The increased importance of operational profitability is in part due to the change in partnership structures in the Turkish telecommunications sector. This change came about with the sale of Telsim, the privatization of Trk Telekom, the sale of Telecom Italia mobiles shares in Avea to Trk Telekom, and the purchase of Telsim by Vodafone. mobile number portability (mNp), which was introduced to the Turkish market on November 9, 2008, led to aggressive flat rate offers that negatively impacted the previously rational approach to competition between operators in the Turkish market. unlimited flat rates for calls resulted in a change in traffic composition from on-net to off-net and a decline in multiple sIm card usage. Together these factors had a negative effect on operational profitability as well as a decrease in mobile line penetration. mobile line penetration, which is approaching 130% in european countries, fell 2 percentage points in Turkey to 85% in 2010 due to a decline in multiple sIm card usage. on the other hand, with its young and dynamic population and the current penetration levels, Turkish market still has a growth potential in the mid-term. In 2011, we expect the number of mobile lines to grow in parallel to population growth, and mobile line penetration to remain in-line with the year-end 2010 level. 2008 7.1 2009 19.4 2010 65.8 55.7 42.4 Europe Developing Countries Turkey 127% 101% 85%
Mobile Line Penetration
Source: bofA merrill Lynch, the ICTA
Mobile Subscriber Number

(millions) 65.8 62.8
Source: the ICTA
3G
2G
61.8
66
67
Competitive offers in the market have remained aggressive. Turkcell maintained its leading position with a 54% subscriber market share.
Competition Competitive offers in the market have remained aggressive. All operators focused on increasing their postpaid subscriber base by providing high minute incentive port-in offers, launching lower priced voice packages and continuing to offer flat rate minute packages for all directions. The focus on segmented offers continued throughout the year, while 3G and terminal bundled offers gained pace towards the year-end. Turkcell maintained its leading position with a 54% subscriber market share. Regulation The Turkish mobile market witnessed some radical changes in 2010. The significant decrease in interconnection rates by 52% and maximum prices by 38% negatively impacted the market and further pressured per minute revenue and profitability. Additionally, we have seen some regulatory changes, such as the introduction of an upper limit for calls of up to 60 seconds; transition to TrY from unitbased pricing for prepaid subscribers, and the change in the defini19%
Financial Review (Consolidated) Profit & Loss Statement (million TRY) 2009 Total Revenue 8,936.4 Direct cost of revenues1 (4,769.3) Depreciation and amortization (908.7) Gross Margin 46.6% Administrative expenses (421.2) Selling and marketing expenses(1,676.2) EBITDA2 2,978.4 EBITDA Margin 33.3% Net finance income / (expense) 223.8 Finance expense (287.1) Finance income 510.9 Share of profit of associates 118.8 Income tax expense (529.1) Net Income 1,701.6 2010 9,003.6 (5,039.2) (1,139.7) 44.0% (521.9) (1,633.9) 2,948.3 32.7% 264.0 (153.4) 417.4 184.7 (483.5) 1,764.3 y/y % chg 0.8% 5.7% 25.4% (2.6pp) 23.9% (2.5%) (1.0%) (0.6pp) 18.0% (46.6%) (18.3%) 55.5% (8.6%) 3.7%
Direct cost of revenues: In 2010, direct cost of revenues including depreciation and amortization increased by 5.7% to TrY5,039.2 million. As a percentage of revenue, direct costs increased from 53.4% to 56.0% at 2010, mainly due to increases in depreciation and amortization (up 2.5 pp), network-related expenses (up 0.4 pp), and other items (up 0.7 pp); which were partially offset by the decrease in interconnect costs (down 1.0 pp). Administrative expenses: General and administrative expenses as a percentage of revenue increased by 1.1 pp to 5.8% in 2010. This was mainly due to higher bad debt expenses arising from the increase in the postpaid subscriber base together with higher wages and salaries. Selling and marketing expenses: For the full year, selling and marketing expenses as a percentage of revenue decreased by 0.7 pp to 18.1% mainly due to lower selling expenses and frequency usage fees paid for prepaid subscribers as a result of the decline in the prepaid subscriber base, which were partially offset by the higher wages and salaries. EBITDA: In 2010, nominal ebITDA was at TrY2,948.3 million, while
2009, partially netted off by the decrease in interest income on deposits due to lower interest rates and the increase in interest expense on loans as a result of the increase in outstanding debt balance. Share of profit of equity accounted investees: our share in the net income of unconsolidated investees, consisting of the net income/(expense) impact of Fintur and A-Tel, increased by 55.5% to TrY184.7 million for the full year, mainly due to the higher net income contribution from Fintur (particularly from the operations in kazakhstan). Income tax expense: For 2010, the total taxation charge decreased by 8.6% to TrY483.5 million as a result of a decrease in profit before tax. of the total tax charge for FY 2010, TrY508.1 million is related to current tax charges while the deferred tax income totaled TrY24.6 million. Net Income: Net income increased by 3.7% to TrY1,764.3 million. Consolidated Balance Sheet Data (million TRY) (at period end) 2009 2010 Cash and cash equivalents 4,660.9 5,105.1 Total assets 14,034.3 15,142.4 Long term debt 1,236.4 2,175.7 Total debt 2,276.6 2,840.8 Total liabilities 5,156.4 5,505.3 Total shareholders equity / Net Assets 8,877.9 9,637.1 Total Debt Cash Position:
1 including depreciation and amortization expenses. 2 EBITDA 2 ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ release.pdf for the reconciliation of ebITDA to net cash from operating activities. please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation.
tion of active subscribers lengthening the duration of prepaid churn to nine months from seven months. TURKCELL GRoUP: fINANCIAL AND oPERATIoNAL PERfoRMANCE IN 2010 The following discussion focuses principally on the developments and trends in our business in 2010. All financial results in this annual report are prepared in accordance with International Financial
the ebITDA margin was at 32.7%. 1.1 pp higher general and administrative expenses together with 0.2 pp higher direct cost of revenues were partially compensated by the 0.7 pp lower selling and marketing expenses. Net finance income/(expense): For the full year, we recorded net finance income of TrY264.0 million mainly due to an increase in interest income in 2010 arising from the absence of legal provisions in
y/y % chg 9.5% 7.9% 76.0% 24.8% 6.8% 8.6%
our Company has a significantly high net working capital and a strong balance sheet. Turkcell has a net cash position of TrY2.3 billion as at year-end 2010. We manage the exchange rate - interest risks of the balance sheet by using financial tools and keeping our foreign-exchange denominated assets at optimum levels. We plan to use vendor financing that spread the payables to the vendors related to our infrastructure investments over the long-term. Consolidated debt amounted to TrY2.8 billion as of December 31, 2010. TrY941 million of this was related to Turkcells ukrainian operations. TrY1,878 million of our consolidated debt is at a floating rate and TrY665 million will mature in less than a year. During 2010, our debt/annual ebITDA ratio increased to 96.4%.
19%
Subscriber Market Share

19% 27% 27% 27%
Turkcell 54% reporting standards (IFrs) and expressed in Turkish liras and/or Vadafone Dollars unless otherwise stated. . 54% Avea
54%
Revenue: For the year 2010, consolidated revenue slightly improved to TrY9,003.6 million, mainly due to the 26.4% increase in mobile internet and services revenues of Turkcell Turkey to TrY1,619.1 million, as well as the 11.1% higher contribution from subsidiaries year-on-year (particularly, through superonline, which increased
Source: the ICTA
revenues by 32.8% to TrY335.1 million from TrY252.4 million), despite the adverse effects of mTr and price cap cuts.
our Company has a significantly high net working capital and a strong balance sheet. Turkcell has a net cash position of TrY2.3 billion as at yearend 2010.
68
69
In 2010 we registered 734,000 net new postpaid subscribers. our postpaid subscriber base increased by 7.4% in to 10.1 million, from 9.4 million a year earlier.
In 2010, major cash outflows were the capital expenditures and dividend payment. In 2010, our capital expenditures totaled TrY1,667.5 million, of which TrY782.4 million was related to Turkcell Turkey, TrY102.7 million to our ukrainian operations, TrY185.4 million to our belarusian operations, and TrY480.3 million to superonline. In 2010, we also paid a cash dividend of TrY859.3 million to our shareholders. until the end of the 3rd quarter of 2007, Turkcell Turkey benefited from investment incentives, and we did not use any in 2010. Group subsidiary Turkcell Technology, received support for 60% of its expenditures accepted under the Industry r&D projects supporting program, which is conducted in association with TubITAk and the undersecretaries of Foreign Trade. In 2010, TrY1.1 million is deducted from the direct cost of revenues item. Group capex for 2011 is expected to be in line with 2010 (TrY1.7 billion). Turkcell Turkey had TrY713 million in loans as of year-end 2010. Also, at the Group level, there are some loans obtained from banks. Currently, our company has no financial instrument in circulation in the capital markets. All Group companies meet their cash needs covered in their business plans and approved by their board of Directors through credit or capital increases in alignment with central management. The Company may undertake long and short-term debt in accordance with Group financing needs and market forecasts. Debt tools used range from bank loans to export Credit Agency loans, and include
Consolidated Cash Flow (million TRY) EBITDA1 LESS: Capex and License Turkcell Ukraine2 Investment & Marketable Securities Net Interest Income/Expense Other Net Change in Debt Dividends paid Cash Generated Cash Balance
1
varied capital market tools in order to maintain capital diversity. All 2009 2,978.4 (2,664.0) (1,823.1) (325.2) (232.1) 223.5 (595.7) 1,119.0 (1,098.0) (268.9) 4,660.9 2010 2,948.3 (1,667.5) (782.4) (102.7) (64.3) 283.8 (662.6) 465.9 (859.3) 444.3 5,105.1 debt activities are managed so as to ensure not to negatively impact ratings, while also taking into account fundamental debt ratios. subsidiaries included in the consolidation have no stake in shareholders equity. Donations Made in 2010: A total of TrY8,556,709 in cash donations was made in 2010 consisting of TrY8,469,952 cash donations to various associations, foundations and institutions; and TrY86,757 donations in kind to schools and projects approved by the ministry of Culture and Tourism.
interconnection rates. The rise was mainly attributable to rising mobile internet revenues and postpaid subscriber base. postpaid Arpu in TrY terms fell by 2.4% to TrY40.0, while prepaid Arpu decreased slightly by 1.7% to TrY11.4. This was mainly due to the negative impact of declining mTrs and the reduction of the maximum price cap, as well as the dilutive impact of prepaid to postpaid switches.
forward Looking Expectations

Going forward, we view mobile internet in Turkey and our subsidiaries contribution as an important growth driver. We will continue to invest in our network quality. We will keep our value focus, maximizing customer experience to ensure loyalty, while building on our strong brand name. In 2011, we expect our revenues to grow which will mainly be driven by increasing mobile internet revenues, as well as growing contributions from our subsidiaries.
ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ release.pdf for the reconciliation of ebITDA to net cash from operating activities. please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation. 2 The appreciation of reporting currency (TrY) against us$ is included in this line.
operational Review (Turkcell Turkey)

Subscribers: our subscriber base in Turkey totaled 33.5 million as of December 31, 2010, down by 5.4% year-on-year. In 2010, we maintained our focus on the postpaid segment with newly launched campaigns and offers, increased data lines and promoted switches from the prepaid to the postpaid segment. This resulted in a 7.4% increase in our postpaid subscriber base to 10.1 million, from 9.4 million a year earlier. Demonstrating the success of our value focused subscriber acquisition approach in 2010 we registered 734,000 net new postpaid subscribers. Accordingly, the postpaid subscriber base made up 30.1% of our overall subscriber base, up from 26.6% in the same period of the previous year. At the same time, we saw a slowdown in the contraction of the prepaid subscriber base, which declined by 10.4% to 23.3 million, from 26.0 million a year earlier. Churn Rate: Churn refers to voluntarily and involuntarily disconnected subscribers. our annual churn rate rose by 1.3 pp to 33.9%, mainly due to declining multiple sIm card usage. The majority of churners comprised low Arpu generating prepaid subscribers. MoU: mou increased by 33.4% to 179.1 minutes in 2010, up from 134.3 minutes in 2009, driven by attractive tariffs and campaign offers. In 2011, we expect healthy growth in usage as our successful incentives and loyalty programs continue. ARPU: In 2010, blended average revenue per user (Arpu) in TrY terms increased by 5.4 to TrY19.5, respectively, despite decreasing
Profitability and Solvency Ratios Gross Profit Margin EBITDA Margin Net Profit Margin Total Liability/Equity Ratio Total Debt/EBITDA Ratio
2009 46.6% 33.3% 19.0% 58.1% 76.4%
2010 44.0% 32.7% 19.6% 57.1% 96.4%
y/y % chg (2.6pp) (0.6pp) 0.6pp (1.0pp) 20.0pp
Operational Summary (Turkcell Turkey) Turkcell Turkey 2009 Number of total subscribers (mn) 35.4 Number of postpaid subscribers (mn) 9.4 Number of prepaid subscribers (mn) 26.0 ARPU (Average Monthly Revenue per User), blended (US$) ARPU, postpaid (US$) ARPU, prepaid (US$) ARPU, blended (TRY) ARPU, postpaid (TRY) ARPU, prepaid (TRY) Churn (%) MOU (Average Monthly Minutes of usage per subscriber), blended 2010 33.5 10.1 23.3 y/y % chg (5.4%) 7.4% (10.4%)
12.0 26.6 7.5 18.5 41.0 11.6 32.6%
13.0 26.6 7.6 19.5 40.0 11.4 33.9%
8.3% 1.3% 5.4% (2.4%) (1.7%) 1.3 pp
We will continue to invest in our network quality. We will keep our value focus, maximizing customer experience to ensure loyalty, while building on our strong brand name.
134.3
179.1
33.4%
70
71
International Ratings
International ratings For Turkcell As of march 2011
Moodys
Local currency rating Foreign currency rating outlook Ba2 Ba2 Positive
other Information About our operations

public Announcements from December 31, 2010 to April 4, 2011
february 22, 2011
sale process of 51% of serbia Telecoms shares. Following the evaluation process, we have decided not to bid in the tender for the 51% of serbia Telecoms shares. In the event of any material development which needs to be publically disclosed, our Company will make the necessary announcements according to the Circular VIII, No: 54 of Turkeys Capital markets board.
Standard & Poors

Local currency rating Foreign currency rating outlook BB+ BB+ Positive
on January 8, 2010, moodys affirmed Turkcells ba2 foreign and local currency ratings and upgraded the Companys outlook from stable to positive. moodys attributed this revision to the Companys robust operational and financial performance, as well to as its profitability, sustainable cashflow generation capacity, and the positive momentum in its ukraine business.
on January 26, 2011, s&p upgraded the outlook on Turkcells long-term foreign currency rating from stable to positive and affirmed both Turkcells long-term foreign currency and local currency ratings as bb+. With this rating evaluation, Turkcell remains s&ps highest rated company in Turkey. The revision primarily reflects Turkcells improving profitability and the increasing profitability of Turkcell subsidiaries, particularly superonline in Turkey and Astelit in ukraine, as well as the Companys improving cash generation ability.
on November 5, 2010, we have announced that on september 22, 20101, Turkeys Information and Communication Technologies Authority (ICTA) has decided Turkcell to reimburse its subscribers in regards to a change in one of its tariff options (namely, bizbize Her Yne kamu 1500) following the ICTAs decision of march 25, 20092 and fined Turkcell an amount equal to 0.33% of Turkcells 2009 stand-alone revenues. our company filed a lawsuit for the suspension of execution, then annulment of the mentioned decision and that regional Ankara Administrative Court suspended the execution of the Authoritys decision. (1) reference number 2010/Dk-10/543 (2) reference number 2009/Dk-07/149
March 23, 2011

Announcement regarding Turkcell s board of Directors decision on the ordinary General Assembly. (Detailed information is on page 84)
March 23, 2011

Announcement regarding Turkcell s board of Directors proposal on dividend distribution. (Detailed information is on page 179)
March 1, 2011
on June 27, 2008 Turkcell has announced that the Information and Communication Technologies Authority (ICTA) has issued a fine for the amount of TrY32 million with regards to certain Turkcell campaigns relating to some of its subscription packages that offered free minutes to its customers under certain conditions. Turkcell also added that the Company would take the necessary legal steps to dispute this claim. Turkcell filed a lawsuit requesting the annulment of this decision immediately after the payment of TrY24 million with a 25% discount on August 1, 2008. The Court has rejected our claim, and Turkcell is to appeal against this Courts decision accordingly.
fitch Ratings
Local currency rating Foreign currency rating outlook BBBBBBStable
March 24, 2011

some of the media reported today that our shareholder Teliasonera planned to take legal action against the Chairman of Turkcell, mr. Colin J. Williams. since Turkcell has received no information regarding this issue, we cannot share any development at this stage.
on march 18, 2010, Fitch ratings affirmed Turkcells longterm foreign and local currency Issuer Default ratings (IDr) at bbb-, respectively. The outlook on both IDrs is stable. Fitch ratings claim that the ratings reflect Turkcells leading market share in Turkeys mobile telecom sector, despite increased competition, as well as strong credit metrics compared with peers in the neighboring region.
March 31, 2011

As per the announcement on November 30, 2010, Turkcell stated that the Company had prequalified to receive the specifications and tender documents for the third mobile license tender to be held by the syrian Arab republic. Following evaluation of the current tender conditions, Turkcell has decided not to bid for the third mobile license tender held by the syrian Arab republic.
March 9, 2011
In line with our strategic priorities, we have made changes to our management team to be effective from march 14, 2011. selen kocabas becomes Chief Corporate business officer. emre sayin, who was the Chief Corporate business officer, has been assigned to manage Consumer strategic projects reporting to the Chief executive officer. our business support Function is being restructured and renamed as the Human resources Function and meltem kalender ozturk becomes the Chief Human resources officer.
March 31, 2011

Today; Capital markets board has requested an explanation from our Company, after sonera Holding bVs announcement to the Istanbul stock exchange in regards to the lawsuit initiated against our Companys Chairman of board; Colin J. Williams. As per our announcement following media reports on march 24, 2011, since Turkcell has received no information regarding this issue, we cannot share any developments at this stage.
March 11, 2011

As per the announcement on December 17, 2010, we had stated that our Company was conducting research and analysis regarding the
72
73
Investor relations
Investor Relations
Turkcell had the fourth highest market capitalization among all those listed on the mkb as of December 31, 2010, with a market capitalization of us$15.01 billion.
Investor Information
Shareholder Structure Turkcells free float was initially 10.5 percent, and over time it rose to 34.7 percent as of year-end 2010, as a result of the stake sales of shareholders.
five-year share performance and market capitalization Turkcell shares were simultaneously listed on the Istanbul stock exchange (mkb) and in the u.s., on the New York stock exchange (NYse) on July 11, 2000. The shares are traded with the TCeLL symbol at the Imkb, and the TkC symbol on the NYse, in the form of American Depositary shares (ADs). Currently, two ADss represent five tradable shares. The nominal value of Turkcells issued share capital is TrY2,200,000,000, consisting of 2,200,000,000 shares with a nominal value of TrY1 each.
As of December 31, 2010, Turkcells shareholder structure is as follows:
Shareholder Turkcell holding A.. Sonera holding B.V. MV holding A.. ukurova holding A.. Mflis Bilka Bilgi Kaynak ve Iletisim San. Ve Tic. A.. free float ToTAL
Value of Stake (TRY) Share Capital (%) 1,122,000,000.238 287,632,179.557 26,021,712.590 995,509.429 137,199.575 763,213,398.611 2,200,000,000.000 51.00% 13.07% 1.18% 0.05% 0.01% 34.69%* 100.00%
As the only Turkish company listed on both the mkb and NYse, Turkcell had the fourth highest market capitalization among all those listed on the mkb as of December 31, 2010, with a market capitalization of us$15.01 billion.
15.00 10.00 5.00 0.00 2006 13.21
24.49 17.27
22.28
23.21 30.00 20.00 10.00
1 4
Pnar oz Varas pinar.varas@turkcell.com.tr Yesim Tohma yesim.tohma@turkcell.com.tr
2 5
ozge Aydemir ozge.aydemir@turkcell.com.tr Esra Agca esra.agca@turkcell.com.tr
3 6
Nihat Narin nihat.narin@turkcell.com.tr Banu Uzgur banu.uzgur@turkcell.com.tr
Contact Information for Investor and International Media Relations Phone: +90 (212) 313 18 88 fax: +90 (212) 292 93 22 E-mail: investor.relations@turkcell.com.tr URL: http://www.turkcell.com.tr/en/investorrelations
(*) Although our companys free float is 34.69%, according to the Active Circulation share report announced by the Central registry Agency, pursuant to Capital markets boards (Cmb) decision no. 21/655 of 23.07.2010, modified with its decision no. 24/729 of 18.08.2010, our company has 557,614,008.03 shares in active circulation as of 31.12.2010, its ratio being 25.34%. The difference results from the exclusion of shares that i. are owned by public corporate entities, ii. are owned by corporations associated with the companys founders (companies subject to consolidation), iii. are owned by real and legal partners who own 5% or more of the companys capital, iv. are owned by a) members of the Companys boards of Directors and of supervisors, b) the Director-General or his/her equivalents or superiors in terms of authorities and roles, and c) top managers who report directly to the Director-General or his/her equivalents in terms of authorities and roles, v. are owned by funds and foundations of the company, vi. are granted as equity capital pursuant to the capital markets legislation, collateralized after having been purchased by transaction on credit or granted as collateral, in addition to collateralized shares for clearing bank markets, vii. are legally restricted and cannot be traded, viii. are prohibited, and ix. are seized from the definition of ratio of shares in active circulation, as specified by the spk in its decisions. since the difference may be caused by one or more of the issues specified in the decision, it is not possible for our company to know it.
*based on closing prices
2007 2008 market Cap (billion TrY) 2006 4.46 6.95 2006 8.21 13.17 2007 5.59 12.09 2007 10.73 25.97
0.00 2009 2010 share price* source: bloomberg (TrY) 2008 6.19 11.30 2008 8.74 24.99 2009 2010 6.86 7.80 10.32 11.18 2009 2010 10.04 12.34 17.91 19.59
source: bloomberg
TCELL (TRY) Lowest Highest TKC (US$) Lowest Highest
74
75
Investor relations
Relative share performance in 2010 (TCELL)

1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 mar-10 Apr-10 may-10 sep-10 oct-10 Aug-10 Nov-10 Jan-10 Feb-10 Dec-10 Jun-10 Jul-10
kaynak: bloomberg
Relative share performance in 2010 (TKC)

1.20 1.10 1.00 0.90 0.80 0.70 0.60 mar-10 Apr-10 may-10 sep-10 oct-10 Aug-10 Nov-10 Jan-10 Feb-10 Dec-10 Jun-10 Jul-10
kaynak: bloomberg
In 2010, we won the best Corporate Governance in Turkey award at first global corporate Governance Awards ceremony in London. separately, Turkcell as selected as the company of the Decade in Turkey by World Finance magazine in 2011.
and on rules and regulations to which we are bound to investors and analysts through regular meetings, local and international conferences, analyst days, and teleconferences. Accordingly, we met approximately 550 investors in 2010, by attending 15 local and international conferences, visiting their premises in the u.s., europe, and Canada. moreover, we conducted an Investor & Analyst Day on January 17, 2011 in London, attended by approximately 80 people.
investors, analysts, and other related parties. The Investor relations website received the excellence award in both the Telecommunication and Investor relations categories, from Interactive media Awards (ImA), recognized as one of the worlds most prominent Internet organizations. Contact Information for Investor and International media Relations Turkcells financial information and Company news is available on its website, or may alternatively be obtained from the Investor relations Department.
foreign ownership (%)

100 90 80 70 60 50
Trading volume and foreign ownership Compared with 2009, Turkcells trading volume declined by 20 percent to 9.4 billion in 2010. 2 percent of the total trading volume of mkb-100 index was realized with Turkcell shares. The foreign ownership in Turkcells free float had reached 93 percent as of the end of 2010.
may-10 Aug-10 Nov-10 Jun-10 Jul-10 sep-10 oct-10 Dec-10
Jan-10
mar-10
Feb-10
Apr-10
Investor Relations We have endeavored to continue providing both our company and our shareholders with maximum value in 2010. The Turkcell Investor relations Department strives to ensure Company shares remain a favored investment tool for domestic and overseas institutional investors and shareholders in order to create value for the Company and all its stakeholders. The Department also seeks to translate the Companys operational performance into market value and to promote the company in the most effective way possible. since its shares are traded on both the u.s. and Turkish stock exchanges, Turkcell has shaped its corporate governance model in accordance with the requirements of both markets. In line with these requirements, the Turkcell Investor relations department strives to provide both our company and our shareholders with maximum value, without compromising our corporate policy based on timely and fair disclosure, and our principles of transparency, reliability, accountability, and integrity since the public offering date. Therefore, in 2010, we continued to disclose information on our strategy and activities, on sectors and markets where we operate,
We reinforced the difference we created in Investor Relations with awards in 2010

In February 2010, with World finance Magazines combined 175 years of business journalism and research, our Company won the Best Corporate Governance in Turkey award at World Finance magazines first global Corporate Governance Awards ceremony in London. on march 23, 2010, Turkcell was ranked among the top 5 companies in Europe by its financial Disclosure Procedures and received an award at the 2010 Investor Relations Global Rankings (IRGR) Awards ceremony. A total of 503 companies participated in 2010 IrGr awards, including a number of the worlds leading corporate names such as microsoft, Ibm and procter & Gamble. All companies were categorized in 5 regions. Turkcell was evaluated in the europe region along with other leading european corporate names such as Deutsche Telekom, Credit suisse, bayer and bp. In addition, the Investor relations Department continued to maximize our Investor relations website to communicate with shareholders,
We strive to provide both our company and our shareholders with maximum value, without compromising our corporate policy based on timely and fair disclosure and our principles of transparency, reliability, accountability, and integrity since the public offering date.
76
77
Corporate Governance
Framework of Turkcell Corporate Governance
The Company has adopted the following guiding principles:

Responsibilities of the Turkcell Board of Directors The business affairs of our Company are managed under the direction of the board, which represents and is accountable to our shareholders. The responsibilities and authority of the board consist of, but are not restricted to, the following: building the vision of the Company, approving of local and international business strategies and determining short- and longterm goals; Approving the Companys annual budget and business plans and its revisions; monitoring the strategic and financial performance of the Company and ensuring that corrective measures are carried out as necessary; Controlling important expenditures not included in the annual operating plan of the Company; Consistent with applicable regulations, overseeing the preparation of the annual report and finalizing this report for presentation at the General Assembly of shareholders; Consistent with applicable regulations, approving quarterly financial results, the audit report and amendments to the accounting policies previously adopted by the Company or any material change in the method or timing of reporting of the financial results.
nance Guidelines, the board, taking into consideration the suggestions of the Corporate Governance Committee, is to review its own size and determine the most effective number for future activities. Together, the Corporate Governance Committee and the board of Directors are, within the scope of the current structure of the board of Directors, to reassess the skills and qualification needed for board membership. each board member should have time to devote to the activities of the board, enhance their knowledge about the global telecommunications industry and related industries, and attend annually at least 75% of board meetings. each board member is encouraged to limit the number of other public company boards on which he or she serves and to be mindful of his or her other existing and planned future commitments, so that such other directorships and commitments do not materially interfere with his or her service as an effective and active member of the Companys board. In addition, the Corporate Governance Committee is to develop and supervise an orientation program for new elected board members. on our ordinary General Assembly dated April 29, 2010, Colin J. Williams, Nazli karamehmet Williams, mehmet blent ergin, karin eliasson, Tero kivisaari, oleg malis, Alexey khudyakov were selected as Turkcell board of Directors for a period of three years. operations of the Board of Directors As per Turkcells Corporate Governance Guidelines, the board of Directors should generally have at least 11 regular meetings per year at appropriate intervals to carry out their responsibilities. Additional meetings may always be convened, upon reasonable notice, to address specific needs of the Company. The first board meeting of the year should convene within one month of the Annual General Assembly.
Structure of the Board of Directors The board of Directors consists of at least seven members chosen for a maximum three-year term. As per Turkcells Corporate Gover-
78
79
The Chief executive officer should take the utmost care to ensure an equal flow of information to all board members prior to board of Directors meetings. It is the Chief executive officers responsibility to establish a system through which the board of Directors access to the work of the management and other employees of the company in order to provide an effective flow of information to the board of Directors and to ensure a reasonable access to the management. Committees of the Board of Directors The board of Directors has two committees, each consisting of at least two members: the Audit Committee and the Corporate Governance Committee. If necessary, experts outside the board may be eligible to be commissioned on a committee. The board of Directors can also establish additional committees as required or deemed appropriate. board of Directors members should not serve on more than two committees. each committee serves as advisory bodies to the board of Directors and makes recommendations to it. At the board of Directors meeting on may 27, 2010, within the context of Turkcells Corporate Governance principles and applicable regulations, it was decided that mr. Colin J. Williams and mr. Alexey khudyakov will continue their Audit Committee memberships and that mr. Colin J. Williams will continue as Chairman of the Audit Committee. At the same meeting, it was decided that mr. Colin J Williams, ms. karin b. eliasson, mr. mehmet blent ergin and mr. oleg A. malis are appointed as Corporate Governance Committee members of the Company and that mr. Colin J. Williams will serve as Chairman of the Corporate Governance Committee. Corporate Governance Committee As per Turkcells Corporate Governance Guidelines, the fundamental role of the Corporate Governance Committee is to assist the board with the development and implementation of the Companys corporate governance principles, and presents to the board remedi-
al proposals to that end. As per Turkcells Corporate Governance Guidelines, the committee is to establish a transparent system for the determination, evaluation and training of board member candidates. The Committee also makes recommendations to the board, where appropriate, regarding the Companys compensation strategy both for the board members and the Chief executive officer and Chief Financial officer and the Chief executive officer and Chief Financial officer succession plan. Furthermore, in the relations between the Company and its shareholders, the Committee assists the board. To that end, it oversees the investor relations activities. Audit Committee In compliance with laws and regulations applying to Audit Committees, the chief duties of the Committee are: To assist in determining the quality and integrity of the Companys financial statements and related disclosure; To oversee the implementation and efficiency of the Companys accounting system; To pre-approve the appointment of and services to be provided by the independent audit company; To approve and monitor the agreement between the independent auditor and the Company; To oversee performance and efficiency of the independent auditing system; To oversee performance and efficiency of the internal auditing mechanism.
General Assembly of shareholders whether board members will be remunerated and if such is the case, the form and amount of compensation to be paid to the board members. Evaluation of the Board of Directors and Management, and Management Succession and Development As per Turkcells Corporate Governance Guidelines, the board should conduct a self-evaluation on an annual basis. The board of Directors must determine performance targets for the Company, and therefore, the Chief executive officer and Chief Financial officer each year. In line with the financial and other targets specified, the board of Directors, with the assistance of the Corporate Governance Committee, must evaluate the performance of the Chief executive officer and of the Chief Financial officer at the end of each year and, determine their remuneration. The board of Directors, taking into consideration the recommendations of the Corporate Governance Committee and with the assistance of the Chief executive officer, will review and approve the plan for successions to the posts of Chief executive officer and the Chief Financial officer. Dividend Distribution Policy Turkcell has adopted a dividend policy, which is set out in its Corporate Governance Guidelines. As adopted, our general dividend policy is to pay dividends to shareholders with due regard to trends in our operating performance, financial condition and other factors. since 2004, the board of Directors has endeavored to distribute cash dividends of at least 50% of our distributable net profits per fiscal year, although the payment of dividends remains subject to our cash flow requirements, applicable Turkish laws and the approval of, or amendment by, the board of Directors and the General Assembly of shareholders.
on march 23, 2011, our board of Directors decided to propose an aggregate gross cash dividend of TrY1,328,696,972 , which correspond to 75% of Turkcells distributable income to be paid in cash to our shareholders. Changes in the Articles of Association At the ordinary General Assembly held on April 29, 2010, Article 3 entitled purpose and subject matter of Turkcells Articles of Association was amended in line with Turkeys Capital markets boards arrangement dated september 9, 2009 and numbered 28/780, which rules that public companies can provide guarantees, pledges and mortgages, to third parties for them to carry out their ordinary business operationsonly if such third parties are fully consolidated in the companys financial statements. Capital Markets and Corporate Governance Compliance Unit At Turkcell, in compliance with Article 8 of series: IV, No. 41 Communiqu regarding the principles that apply to public Companies issued by the Capital markets board, a Capital markets and Corporate Governance Compliance officer was appointed in February 2009 pursuant to a board of Directors decision and Capital market Corporate Governance Compliance unit was established in may 2009, for the purposes of: ensuring company compliance with capital market regulations and Coordinating corporate governance practices of the Company.
The board of Directors is to assess the independence and qualifications of every member of the Audit Committee to ensure that he or she is qualified to be a Committee member, and, if necessary utilize outside consultants or advisors. Remuneration of the Board of Directors The remuneration of the members of the board of Directors is to be determined by shareholders at the General Assembly. Currently plans regarding profit sharing, retirement and other similar subjects are not in effect. As per Turkcells Corporate Governance Guidelines, the board, upon the recommendation of the Corporate Governance Committee together with its own determinations, is to decide on a proposal to the
Within the framework of ensuring compliance with capital market regulations, rules and regulations pertaining inside information were provided to management and employees on regular basis. pursuant to Cmb regulations, a list of those having access to inside information is maintained. Furthermore, information regarding rules and regulations pertaining inside information is published on Turkcells internal intranet pages and provided to every new Turkcell employee through the orientation program and reminded via regular e-mails and mobile training programs. Code of Ethics The following is a summary of Turkcell Common Values and Code of ethics (the Code) confirmed by the management and employees of Turkcell are as below.
(TRY) 2004 2005 2006 2007 2008 2009
Cash Dividend 250,127,565 509,075,181 567,039,784 648,713,951 1,098,193,226 859,259,101
Bonus Share 380,247,980 345,112,659 -
Cash Dividend per Share 0.16962 0.27445 0.25775 0.29487 0.49918 0.39057
Turkcell Code of ethichs reflects the values and principles of Turkcell and applies to all employess, officers and board members.
80
81
The Code reflects the values and principles of Turkcell and applies to all employees, officers and board members of Turkcell. Conflicts of Interest employees, officers and directors are prohibited from (a) taking for themselves personally opportunities that are properly within the scope of Turkcells activities, (b) using corporate property, information or position for personal gain, and (c) competing with Turkcell. A conflict of interest exists when a persons private interest interferes in any way, or even appears to interfere, with the interests of Turkcell. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her work for Turkcell objectively and effectively. Conflicts of interest also arise when an employee, officer or director, or a member of his or her family, receives improper personal benefits as result of his or her position in Turkcell. Conflicts of interest are prohibited as a matter of Turkcell policy. each employee, officer or director is expected to avoid any outside activity, financial interest or relationship that may present a possible conflict of interest or appearance of a conflict. Turkcell employees, officers and directors may give presents to or receive presents from, persons, institutions and corporations with whom they have business relations only in compliance within the internally defined rules.
customers of Turkcell. All employees are required to comply with Turkcell Information security and Disclosure policies and procedures, which is published in Turkcells internal intranet pages. Principles for Public Disclosure All communications with investors, financial analysts, press and similar bodies shall be performed in accordance with the Turkcell Disclosure policy which is published on Turkcells website. No employee other than those specifically authorized to perform this duty can make oral or written announcements on behalf of Turkcell. Compliance with Laws, Rules and Regulations Turkcell actively promotes compliance with all applicable laws, rules and regulations. Working Principles Turkcell is committed to providing a safe, secure and efficient working environment to its employees. Therefore Turkcell expects all of its employees to conduct themselves in accordance with the following principles: Turkcell employees must conduct themselves at all times in a professional manner. Turkcell employees may not engage in an abusive, threatening or violent manner, or otherwise behave in an aggressive or harassing manner towards customers, suppliers or fellow employees. Turkcell employees are prohibited from promoting religious or political views in the workplace. All Turkcell employees must not fraudulently alter official documents they issue for the performance of their duties. The employees are responsible timely and accurate preparation and delivery of reports to regulatory authorities and other similar bodies.
oxley), and the rules issued by the us securities and exchange Commission (seC) there under, require an seC reporting company to disclose whether or not it has adopted a written code of ethics applicable to the Companys senior financial officers, including the Companys principal executive officer. The following rules have been adopted by Turkcell in accordance with these provisions and are applicable to Turkcells senior executive and financial officers. The Chief executive officer, Chief Financial officer and other executive officers and financial officers hold important roles in corporate governance. Turkcell, according to the laws and regulations applicable to the Company, has adopted the following code of ethics. This code of ethics is designed to deter wrongdoing and to provide principles to which these officers are expected to adhere and which they are expected to advocate. It complements any other appropriate Turkcell policies or guidelines in force from time to time. Any change to this code of ethics and any explicit or implicit waiver from it for these officers will be disclosed on this web page in accordance with applicable law and regulations. A waiver is defined as a material departure from a provision of this code and an implicit waiver means failure to take action within a reasonable period of time regarding a material departure from a provision of this code that has been made known to an executive officer of the Company. The board of Directors of Turkcell declares that the Chief executive officer, Chief Financial officer and other executive officers and financial officers: 1. Will act with honesty and integrity, including ethically handling actual or apparent conflicts of interest between their personal relationships or financial or commercial interests and their responsibilities to Turkcell; 2. make full, fair, accurate, timely and understandable disclosure in all reports and documents that the Turkcell files with, or submits to, the Turkcells capital markets regulators or otherwise makes public; 3. Comply with all governmental laws, rules and regulations applicable to Turkcell and to its relationship with its shareholders; 4. ensure that their actions comply not only with the letter but the spirit of this code and foster a culture in which compliance with the law and Turkcells policies is at the core of Turkcells activities.
Turkcell has been involved in alternative capital markets to fund and support changing financial structures during the process of operational growth.
The Audit Committee of the board of Directors will apply this code to specific situations. The Chief executive officer, Chief Financial officer and other executive officers and financial officers will report known or suspected violations to the Audit Committee. The Audit Committee will take all appropriate action to investigate any violations reported to it. In a case where a violation has occurred, the board of Directors will take (or authorize) any disciplinary action that it considers appropriate. This action may, in cases of severe breaches, include dismissal or the initiation of judicial proceedings.
TURKCELL CoRPoRATE RISK MANAGEMENT

since its establishment in 1993, Turkcell Iletisim Hizmetleri A.s. has been involved in alternative capital markets to fund and support changing financial structures during the process of operational growth. In the performance of its corporate obligations, Turkcell has complied with various regulations, laws and rules since 1994. The obligations are liable to change, not only according to the financial regimes of the area in which the Company is active, but according to the requests and obligations of the markets from which it is funded. being listed on the New York stock exchange, Turkcell management is responsible for ensuring the compliance with the provisions of Article 404 of the sarbanes oxley Act, as promulgated by the united states securities and exchange Commission (the seC) as well as Corporate Governance principles since it is also listed on Istanbul stock exchange. Accordingly, Turkcell has formulated an internal control mechanism for itself and for the consolidated group companies which, in audit scope, are in line with Corporate Governance principles. Turkcell Corporate risk management Department coordinates risk management, Internal Audit, business Continuity management, Information security management, and Internal Fraud management processes. by developing and applying a risk management methodology, the
Protection and Proper Use of the Company Assets Turkcells employees should protect the Companys assets and ensure their proper use. All Turkcell assets should be used only for legitimate business purposes. Information is one of the most critical asset categories. employees, officers and directors should maintain the confidentiality of information entrusted to them by Turkcell or
All communications with investors, financial analysts, press and similar bodies shall be performed in accordance with the Turkcell Disclosure policy
The full text of the Code is published in Turkcells internal intranet pages. The Code is explained to each new Turkcell employee via the orientation program and the new employee is made to sign a contract proving that these rules shall constitute an inseparable part of the employees condition of employment. The Code of Conduct rules are defined, updated and published by the ethics Committee. Declaration of Code of Ethics Made in Compliance with the Sarbanesoxley Act section 406 of the us sarbanes-oxley Act of 2002 (sarbanes-
82
83
Company strengthens its focus on corporate risk management practices. Turkcell Corporate risk management Department, in compliance with the principle of independence directly reports to the Audit Committee, the Chief executive officer and the Chief Financial officer. Independent Auditor In accordance with the Audit Committees recommendations, our Companys board of Directors resolved on December 18, 2009, that DrT bamsz Denetim ve serbest muhasebeci mali mavirlik A.. shall be appointed as Turkcells Independent Auditor (as referred to in Article 16 of our Companys Articles of Association) for a period of two years regarding the audit of our Companys consolidated financial statements and that this appointment was approved at the ordinary General Assembly meeting of our Company on April 29, 2010. DRT BAIMSIZ DENETM VE SERBEST MUhASEBEC MAL MAVRLK A.. sun plaza, maslak mahallesi, bilim sokak No.: 5, ili, 34398 Istanbul, Turkey Tel: +90 (212) 366 60 00 Fax: +90 (212) 366 61 65 www.deloitte.com.tr ordinary General Assembly Turkcells board of Directors has decided that the ordinary General Assembly for the year 2010 is to be held at Turkcell plaza, Conference room, mesrutiyet Cad. No:71 Tepebasi, Istanbul on April 21, 2011, at 3.00 pm to resolve the following agenda.
6. review, discussion and approval of the balance sheet and profits/ loss statements relating to fiscal year 2010; 7. release of the board members from activities and operations of the Company in year 2010; 8. release of the auditors from activities and operations of the Company in year 2010; 9. election of auditors for a period of one year and determination of their remuneration; 10. Discussion of and decision on the board of Directors proposal concerning the distribution of profit for year 2010; 11. Informing the General Assembly regarding the donations made in year 2010; 12. Informing the General Assembly regarding the guarantees, pledges and mortgages provided by the Company to third parties or the derived income thereof, in accordance with the Decision of the Capital markets board dated 09/09/2009 and numbered 28/780; 13. Wishes and hopes; 14. Closing.
lations, hold regular meetings with analysts and investors to share developments in Company strategy and operations, and the market, industry and legal environment in which it operates. In addition, Turkcell management regularly holds meetings with media representatives to share publicly available information and to answer questions. An Investor relations Department has existed since Turkcells initial public offering. The Investor and International media relations Department functions under the executive officer in charge of Corporate Affairs. It monitors all disclosures to the public in accordance with Turkcells Disclosure policy that seeks to provide information to the public in a timely, accurate, complete, understandable and equal manner. Detailed contact information of the Investor and International media relations Department can be found on our Companys website (www.turkcell.com.tr) and under the Investor relations heading in the Annual report. Verbal and written questions submitted to this department are answered within the context of publicly disclosed information as quickly as possible. The Company, in accordance with best practices, has a Disclosure Committee responsible for the Companys disclosures in accordance with applicable regulations, and a Disclosure Team charged with ensuring that material information is shared within the Company. In compliance with Article 8 of series: IV, No. 41 Communiqu regarding the principles that apply to public Companies issued by the Capital markets board, at Turkcell a Capital markets and Corporate Governance Compliance officer was appointed in February 2009 pursuant to a board of Directors decision and Capital market Corporate Governance Compliance unit was established in may 2009, for the purposes of: ensuring company compliance with capital market regulations and Coordinating corporate governance practices of the Company.
nouncements are distributed by e-mail to addresses registered in the Companys database. Inquiries, verbal or written, made to the Investor and International media relations Department are replied to as quickly as possible within the scope of publicly disclosed information. provisions for appointment of a special auditor have not been included in the Companys Articles of Association. During this reporting period, no requests for appointment of a special auditor were submitted. 1.3 Information on the General Assembly of Shareholders The Company makes disclosures when the board of Directors take a decision regarding the General Assembly meeting and its agenda and in addition regarding the resolutions of the General Assembly following the General Assembly meeting. The ordinary General Assembly met on April 29, 2010 with a quorum of 74.18%. The participants of the General Assembly included shareholders and their representatives submitting blockage letters within the legal period, the board of Directors, statutory auditors, chief executive officer, deputy executive officers, and the staff organizing the General Assembly. The invitation to attend the meeting was published in the Turkish Trade registry Gazette and national newspapers. At the same time, invitations were issued to shareholders in foreign countries. For owners of registered shares, invitations were extended by registered letter with return receipt, as the law requires. In accordance with the Turkish Commercial Code, applications were received from shareholders of publicly traded shares up to one week before the meeting. During the General Assembly, shareholders exercised their right to ask questions and these were answered by the executive officers. All matters advised by shareholders were duly recorded in the minutes and these minutes were registered and announced in the bulletin of Turkish Trade registry. In addition, the extraordinary General meeting planned to be held on october 20, 2010 could not convene due to the provisions of related legislations since the Government Commissioners failed to show up. 1.4 Voting Rights and Minority Rights pursuant to the Articles of Association of the Company, there are no privileged shares in terms of decision-making and voting rights. Apart from the independent member currently on the board of Directors, shareholders possessing shares greater than 5% are
2010 CoMPLIANCE WITh CoRPoRATE GoVERNANCE PRINCIPLES REPoRT:

Turkcell believes that high standards of corporate governance are important for perpetuating successful business practices and generating long-term economic value for the Companys shareholders. Accordingly, we have paid full attention to applying the principles laid out in the Corporate Governance principles published by the Cmb. Taking into consideration relevant Cmb regulations and best practices and with the aim of meeting the obligations of our Company brought by the capital market regulations and to ensure coordination in corporate governance practices, pursuant to Cmb Communiqu serial: IV, No.: 41, in 2009, we have formed a Capital markets & Corporate Governance Compliance unit. Accordingly, the board of Directors within the responsibilities enumerated in Turkcells Corporate Governance Guidelines, has provided the necessary oversight for preparation of this Annual report which contains the Compliance report.
TURKCELL LETM hZMETLER A.. AGENDA of ThE oRDINARY GENERAL ASSEMBLY MEETING Dated 21 April 2011
1. opening and election of the presidency board; 2. Authorizing the presidency board to sign the minutes of the meeting; 3. reading the Annual reports of the board of Directors relating to fiscal year 2010; 4. reading the Annual reports of the Auditors relating to fiscal year 2010; 5. reading the summary of the Independent Audit Firms report relating to fiscal year 2010;
SECTIoN 1 ShAREhoLDERS
1.1 Shareholders Relations Department representatives of the Investor and International media relations Department within the Turkcell organization, pursuant to existing regu-
1.2 Use of Right of Gaining Information of the Shareholders In order for shareholders to obtain information concerning the Company easily and without discrimination, all publicly disclosed information is available on our website (www.turkcell.com.tr) in Turkish and english in the Investor relations section for the use by Turkish and foreign shareholders equally. In addition, all public an-
84
85
represented, while minority shareholders are not. With regard to the Companys capital, there is no mutual participation. The Cmb Communiqu concerning the right to exercise cumulative voting is optional for the publicly Traded Companies and this voting method has not been used as yet. 1.5 Dividend Distribution Policy and Time of Dividend Distribution We have adopted a dividend policy, which is included in our Corporate Governance Guidelines. As adopted, our general dividend policy is to pay dividends to shareholders with due regard to trends in our operating performance, financial condition and other factors. since 2004, the board of Directors has endeavored to distribute cash dividends of at least 50% of our distributable net profits per fiscal year, although the payment of dividends remains subject to our cash flow requirements, applicable Turkish laws and the approval of, or amendment by, the board of Directors and the General Assembly of shareholders. The Dividend Distribution policy adopted by the board of Directors is published in the annual report of the company as well as on its website (www.turkcell.com.tr) under Corporate Governance in the Investor relations section. In accordance with our Articles of Association, there are no privileged shares and no privileges for dividend distribution. Dividend distributions are made within the periods and in line with the principles stipulated by Cmb regulations. 1.6 Transfer of Shares While there is no limitations in the Articles of Association of our Company with respect to the transfer of shares, provisional Article 4, paragraph c, sentence 4 of the authorizing regulations relating to the electronic Communication sector, to which Turkcell is subject, makes states that the written approval of the Information and Communication Technologies Authority is required for actions of gaining or transferring or movement of shares which shall result in change of control.
nouncements in accordance with the domestic and international capital markets regulations to which Turkcell is subject was prepared and presented to shareholders at the ordinary General Assembly held in 2005. Following the General Assembly, the Disclosure policy Framework Document was published in the Investor relations section of the Companys website, www.turkcell.com.tr, under Corporate Governance heading. Turkcells Disclosure policy was revised in 2009 and published on the website. Turkcell makes public disclosures in compliance with the Cmb, Ise, seC and NYse regulations to which it is subject. The purpose of Turkcells Disclosure policy is to ensure an active and transparent communication which is complete, fair, correct, timely, clear, and cost effectively and equally accessible for all stakeholders including shareholders, investors, employees and customers in accordance with the regulations to which the Company is subject. Turkcell follows-up news and rumors about the Company and in accordance with the Companys procedure on Follow-up of News and rumors public disclosures may be made if deemed appropriate or necessary. The responsibility to maintain and monitor this Disclosure policy is incumbent on the Companys Investor and International media relations Division. 2.2 Public Disclosures In 2010, Turkcell made a total of 45 public disclosures to the domestic and foreign capital markets to which it is subject. since Turkcell shares are quoted on the New York stock exchange, these disclosures were made both in english and Turkish. public Disclosures are available on the Turkcell website (www.turkcell.com.tr) in the Investor relations section. Information provided by our Disclosure Team and/or Disclosure Committee is evaluated under the coordination of the Investor and International media relations Division and with the compliance advice of the Capital markets and Corporate Governance Compliance unit in accordance with the local and the international capital market regulations to which our Company is subject. In cases in which public disclosure is required, such disclosure is to be made by the Investor and International media relations Division. Furthermore, in 2009, Turkcell created a mechanism for the postponement of the public disclosure of inside information, within the framework of Article 15 of the Capital markets board Communiqu on
Disclosure (series: VIII, No. 54), which regulates the postponement of public disclosure of inside information. 2.3 Corporate Website and its Contents Turkcells website is www.turkcell.com.tr. Information for shareholders is provided under the following headings in the Investment relations section: a. b. c. market Information shareholder structure Corporate Governance i. Corporate Governance Guidelines ii. board of Directors iii. board Committees iv. Dividend policy v. Code of ethics vi. Articles of Association vii. Disclosure policy viii. General Assembly Information ix. Compliance report Announcements presentations Financial and operational Information i. key Financial Data ii. key Financial Data TrY iii. Historical us GAAp key Financial Data iv. key operational Data v. Debt and Credit rating vi. International operations vii. Investor kit viii. outlook & strategy ix. Annual report Financial Calendar share Information i. Interactive share Charts ii. Investment Calculator iii. Ticker symbols iv. Analyst Coverage FAQ Contact us
2.4 Announcement of Real Person final Dominant Shareholder / Shareholders The shareholder structure of our Company is as follows: Shareholder Turkcell holding A.. Sonera holding B.V. MV holding A.. ukurova holding A.. Mflis Bilka Bilgi Kaynak ve letiim San. Ve Tic. A.. Public Share* ToTAL Value of Stake (TRY) 1,122,000,000.238 287,632,179.557 26,021,712.590 995,509.429 137,199.575 763,213,398.611 2,200,000,000.000 % of Share 51.00% 13.07% 1.18% 0.05% 0.01% 34.69%* 100.00%
d.
e.
(*) While 34.69% of our company is listed in the stock exchange, the number of our Companys free floating shares on 31.12.2010 was 557,614,008.03 according to a report on Free Float ratios released by the Central registry Agency in accordance with Capital markets boards decision 21/655 of 23.07.2010 as amended by its decision 24/729 of 18.08.2010 and its free float ratio is 25.34%. The difference between those rates results from the exclusion of shares which are i. held by a public entity, ii. Held by the companys incorporators and its affiliates (companies subject to consolidation), iii. Held by shareholders who may be a natural person or a corporate body and control at least 5% of the Companys capital, iv. Held by a) the members of the Companys board of Directors and the board of Auditors, b) General manager or executives who are equal to or superior to a general manager in terms of their powers and functions, c) senior executives who report to General manager or executives who are equal to or superior to a general manager in terms of their powers and functions, v. owned by the savings funds or foundations of companies, vi. provided as equity capital pursuant to regulations applicable to the capital markets legislation or as a collateral in respect of a margin trading or as a collateral except the ones which are given as a collateral only for Central Depository bank markets, vii. Which are legally restricted and cannot be subject to purchase and sale, viii) prohibited , ix. seized in the definition of free float ratio. The difference may result from one or more situations described in the decision and it is not possible for our Company to know.
f. g.
2.5 Disclosure on Insider Traders Turkcells Disclosure policy contains guidelines concerning the blackout period practice relating to insider trading issues. In accordance with these guidelines, employees are prohibited from selling or purchasing Turkcell securities during the blackout period. Turkcell employees with access to inside information that can affect the price of capital market instruments are restricted from selling or purchasing Turkcell securities regardless of blackout periods. pursuant to Cmb regulations, a list of those having access to inside information is maintained, rules and regulations pertaining inside information were provided to management and employees, and regular reminders were made through e-mail and mobile training programs. Furthermore, this information is provided to every new Turkcell employee through the orientation program. employees are
SECTIoN 2 PUBLIC DISCLoSURE AND TRANSPARENCY

2.1 Company Disclosure Policy The Disclosure policy Framework Document, regarding public an-
h i.
86
87
required to sign an affirmation stating that these regulations are an indispensible part of their employment contracts.
vironment not as a place to work, but as a living space; and we carry out our practices based on this approach. To work with and retain the best talent is our priority. With our distinctive human resources practices, we continue to develop dedicated employees who yield successful results. our employees also say, There Is more for me in Turkcell, and evaluate Turkcell with the highest ratings, both in the industry and across Turkey, in employee loyalty surveys by independent research companies. To continue to be a winning team, we will carry on shaping and implementing our human resource strategies, based on our belief in the substance of our corporate culture and the employees and leaders who keep this culture alive. Detailed information is available in the Human resources section of the Turkcell Annual report 2010. 3.4 Information about Relationships with Customers and Suppliers Turkcell uses an approach in line with global quality standards wherever the Company has contact with and/or provides services to its customers. The Company has a holistic view over all products and services to understand the experience from a customers perspective in order to improve the system, the processes, and human resources; and, if necessary, to make timely corrective adjustments to systems or processes related to that specific experience. Turkcell also regularly assesses its services and its approach in all business channels to identify areas of improvement and to make adjustments that simplify the lives of our customers and ensure their satisfaction. We aim to achieve operational perfection at every point where we provide service to our customers and to improve customer satisfaction through consistent evaluation and dynamic actions. We design processes and service structure with the customer in mind and craft strategies based not only on operational goals, but also on the results of our analyses on customer satisfaction and the related emotional consequences. We assess the performance of our suppliers with mystery shoppers and satisfaction surveys; and also encourage them to take corrective actions where necessary. In parallel with ever-changing and improving global conditions, Turkcell does not content itself only with providing superior highquality service, but also plans and implements activities in line with
SECTIoN 3 STAKEhoLDERS
3.1 Informing Stakeholders In addition to the legislation that is currently in effect, company policies and procedures have been created to inform Company employees and stakeholders. 3.2 Participation of Stakeholders in Management While there is no special provision concerning the participation of stakeholders in management, relevant information is shared with Turkcells business partners, staff and other stakeholders through defined and regular meetings, such as staff communication meetings, platforms where the staff can communicate their ideas and suggestions, supplier Day for the supply chain, business partner Day for the firms Turkcell works with on value-added services, and dealer meetings. 3.3 human Resources Policy We continue to maintain the values that guide our decisions and conduct, and to extend our sphere of influence, based on our motto of Get more out of Life With Turkcell. our values manifest themselves in our conduct, which will differentiate the current success of Turkcell Group: our customers come first. We are an agile team. We believe in open communication. We make a difference. We value people. Today all our employees from each level and every team, along with the entire top management, support our human-focused culture, based on our slogan of There Is more for me in Turkcell. Acting on our tenet of people First in a pioneering Turkcell, we always prioritize our employees satisfaction and motivation. We follow the technologies that impact our industry both locally and globally, and strive to take the lead with exemplary applications. We continue to invest, adding value to the Company and creating a flexible, sensitive, and democratic work environment, which supports changes that motivate our employees. We define our work en-
social responsibility, environmental awareness, and respect for the rights of its customers, suppliers and employees. As a matter of joint responsibility, suppliers are also expected to act in accord with these principles, and improve their environment correspondingly. a. success in Accord Turkcell suppliers have a crucial role in providing our costumers with our products and services. We aim to establish with our suppliers a flexible and valueadded business partnership based on transparency, incorporating the principles of integrity, cooperation, and achievement. Turkcell believes that long-term success is possible only with dedicated suppliers. Correspondingly, the quality of our relationship with our suppliers is of ultimate importance. b. Legal obligations While fulfilling their obligations, suppliers must follow and respect the applicable laws and regulations and guarantee their compliance with the Labor Law in their conduct. Accordingly, suppliers are expected to observe the following matters and adhere to them in its working principles. forced Labor: suppliers must not force their employees to work in any way, shape, or form. This obligation covers forced labor in prison, debt bondage with high interest rates, or other forms of compulsory labor. Child Labor: suppliers must not employ child labor. unless a higher age limit is not specified in the local laws, children who are under 15 years old and have not completed their compulsory education (in the content of International Labor organization Convention 138) cannot be employed. employees who are under 18 years old should not work in risky jobs or in night jobs even if they want to work to meet their educational needs. harassment: The suppliers employees must not be exposed to corporal punishment or physical, sexual, psychological, or verbal harassment or abuse. Bribery: suppliers must not offer bribes to any Turkcell employee under any circumstances or for any reason whatsoever.
Compensation: The wages and profits of the suppliers employees, including overtime pay, must be equal to or higher than the minimum limit specified in the applicable laws and regulations. Nondiscrimination: suppliers must treat all employees based on their talents and qualifications, without any discrimination of race, ethnicity, language, religion, sexual choice, gender, and political or ideological views in all its employment decisions, including but not limited to recruitment, promotion, compensation, benefits, education, forced dismissal, and completion of work. health, Safety and Environment: suppliers must ensure a healthy and safe work environment for its employees, to prevent accidents and injuries, and also ensure healthy and safe residential facilities pursuant to local laws, where applicable. For this purpose, the suppliers must take systematic actions to reduce any risks that threaten employee safety and to guarantee the health and safety of its employees pursuant to the related standards and laws. The suppliers must also be able to prove full compliance with all the legal regulations on environmental protection in all their activities. c. our expectations from suppliers Turkcell requires all its suppliers to comply with general legal rules and with the Turkcell Common Values and Code of Conduct. Turkcell selects its suppliers based on the principle of trust. Turkcell will take into consideration those suppliers that have quality management and information security management certificates, are sensitive to the ecological balance, and conduct social responsibility projects and assess them accordingly, in addition to other supplier selection criteria. Quality and Information security management environmental and ecological Compliance social responsibility 3.5 Social Responsibility As Turkeys Turkcell, we continue to support not only technology, but also economic, environmental, and social development. We invest in the future of the next generations in the areas of education, sports, and employment, by developing or supporting sustainable, long-lasting and measurable projects that promote youth development.
88
89
Snowdrops We provide educational grants to 10,000 girls every year with the snowdrops project, which has grown from a drop into an avalanche. The snowdrops project was initiated in 2000 in cooperation with society for supporting modern Life and provided grants to 5000 girls who are decisive and determined to study. Turkcell extended the project in 2007 to increase the number of grants given every year to 10,000. The snowdrops project strives to provide equal educational opportunities to girls who could not continue their education due to the economic disadvantages of their families; and subsequently to develop them into open-minded individuals with a profession. Finishing its first decade in 2010, snowdrops is Turkeys pioneering education project and Turkcells first comprehensive social responsibility initiative. snowdrops grew into an avalanche over years with public support and became one of Turkeys most important social responsibility projects, providing educational opportunities to tens of thousands girls. A mentorship program was initiated in 2004 as a supporting process for the snowdrops project, to further contribute to the development of real-life skill sets for the snowdrops continuing their education at the university level. Volunteers were chosen from among Turkcell executives, leading female journalists and columnists in the media world, and successful businesswomen to assume a guiding role; they then joined the program as informed mentors, following long and meticulous study and training. The mentorship program began with 46 mentors and grew each year, with 160 mentors in total mentoring their snowdrops until now. The project recently opened up with different levels and gained international recognition. In 2008, the snowdrops project was filmed by National Geographic. prior to the documentary, a 11-person National Geographic team conducted interviews with snowdrop girls and their families, in Istanbul, kars, erzurum, and mardin, from september 2008 to April 2009. As a result, for the first time in Turkey, a social responsibility project was filmed as a documentary on the National Geographic Channel. A snowdrops photo exhibition,
displaying photographs taken during the shoots, toured cities across Turkey. In march 2010, the snowdrops project was selected by the united Nations as an exemplary project and introduced to the world through a series of activities. With this project growing from a drop into an avalanche, we now provide educational grants to 10,000 girls every year. since 2000, 20,000 girls have received scholarships; 9,634 students graduated from high school; 3,437 of them entered college; and 976 are college graduates. until now, the snowdrops project has garnered 16 national and international awards. Bridge of hearts Initiated in 2008 in partnership with the ministry of education, the bridge of Hearts project enables ten thousands of children from around Turkey to visit different provinces and to establish new longlasting friendships with other children, while also discovering the natural and cultural beauties of our country. Five-day tours are arranged as part of the bridge of Hearts project, to support students personal and social development, as well as to increase their awareness of social issues, diversity, and volunteering. students visit historical and touristic sites, plant trees, and participate in environmental activities during the first three days of the tour, according to the plan of the provincial Directorate of education. The remaining two days are scheduled by the family hosting each student. Having reached 130,000 students in three years, the bridge of Hearts project continues to grow every year. In 2010, special day activities were included in the project. students were taken to Antkabir on April 23 and to samsun on may 19, to experience the enthusiasm of national holidays. International tours were also included to expand students horizons. Within the bridge of Hearts project; in 3 years, 130,000 students from 81 provinces visited provinces they had never seen, and experienced new cultures, more than 5 million kilometers were covered,
3,250 administrators and 6,500 teachers were appointed to accompany the students. bridge of Hearts teams were formed in 81 provinces, thousands of students saw for the first time: planes, sea, metro, and train, hundreds of thousands of friendship were established.
Contribution to employment At Turkcell, we also prioritize investing in employment. Turkcell Group employs approximately 11,000 people. We established an eco-system of 50,000 people, including our dealers and business partners. In line with the importance we place on employment, we initiated an important project in partnership with kur (Turkish employment Agency). In 2010, we provided 1,600 unemployed young people with comprehensive training opportunities in retailing and call center sectors. more than 1,000 of them were employed in our eco-system. We will continue this partnership with kur in 2011 and will provide training and job opportunities to more than 2,000 people. We also focus on employing physically challenged individuals. Turkcell Group employs 285 physically challenged individuals, while Turkcell Global bilgi has 180 physically challenged employees. A project developed with the ministry of Transportation employs 7 physically challenged individuals, who are able to provide call center service from their homes. With our Turkcell Global bilgi call center, we employ 7,500 people in 12 locations in total, including nine in Turkey (Istanbul, Izmir, erzurum, eskiehir, Diyarbakir, Ankara, and karaman), two in ukraine, and one in belarus. Turkcell establishes base stations to provide mobile communication services which is Turkcells area of business. safety tests are conducted by the manufacturer and Turkcell on the base stations built. Nevertheless, 168 lawsuits were opened between January 1, 2010 and December 31, 2010, claiming that base stations had adverse effects on the environment and health, and violated neighborhood laws. A verdict was reached in 38 of the lawsuits in 2010 claiming violation of environmental and human health and neighborhood laws. of these, 14 were decided for and 24 against the Company.
Runners to the future Developed in cooperation with the General Directorate of Youth and sports, the runners to the Future project aims to support the training of athletes aged 12-18 who can achieve success in individual sports. Included in the national plan of the united Nations project, Alliance of Civilizations, the project selects young athletes based on their talent, and coaches them in sports, including weightlifting, skiing, swimming, tennis, athletics, along with cycling of the visuallyimpaired, across Turkey; they are trained to become national athletes who will represent Turkey abroad successfully. Within this project, Turkcell also sponsors marsel lhan, the firstranking tennis player in Turkey and 90th in the world ; as well as ala bykakay, another national tennis player. Turkcell is the main sponsor of the National Football and basketball Teams From its start as the official Communication sponsor in 2002, Turkcell has continued its support for the National Football Team since 2005, as the main sponsor. Turkcell intends to continue its support to the national team, recognizing the importance of the achievements of the team for enhancing national morale as well as our nations international reputation. Turkcell also supports the National basketball Team, encouraging and inspiring upcoming generations. starting off as the official Communication sponsor in 2002, we became the main sponsor in 2006. Turkcell was also the main sponsor of the World basketball Championship 2010, where our national team achieved great success with a silver medal.
90
91
SECTIoN 4 BoARD of DIRECToRS

4.1 Structure and Creation of the Board of Directors and Independent Members Information on the board of Directors is provided in the Investor relations section of Turkcells website (www.turkcell.com.tr). on our ordinary General Assembly dated April 29, 2010, the following members were selected as Turkcell board of Directors for a period of three years: Colin J. Williams Nazli karamehmet Williams mehmet bulent ergin karin eliasson Tero kivisaari oleg malis Alexey khudyakov Chairman (Independent member) member member member member member member
4.3 Vision and Strategic objectives of the Company The vision and strategic targets of Turkcell are on the Companys website (www.turkcell.com.tr) under About Turkcell and in the Annual report. 4.4 Risk Management and Internal Control Mechanisms Corporate risk management Department coordinates risk management, Internal Audit, business Continuity management, Information security management, and Internal Fraud management processes. by developing and applying a risk management methodology, the Company strengthens its focus on corporate risk management practices. Turkcell Corporate risk management Department, in compliance with the principle of independence and in line with Cmbs Communiqu series: X No.19 directly reports to the Chief executive officer, the Chief Financial officer, and the Audit Committee formed by independent members of the board of Directors. Internal Control / Internal Audit Activities: Turkcell management is responsible for ensuring the compliance with the provisions of Article 404 of the sarbanes oxley Act, as promulgated by the united states securities and exchange Commission (the seC). Thus, management is responsible for establishing and maintaining effective internal control structure in Turkcell and for the consolidated group companies that are in audit scope. Within this framework Turkcell Corporate risk management Department is responsible to provide support for the establishment of internal control system both in Turkcell and consolidated group companies in audit scope and to evaluate and report on the effectiveness of the internal control system for ensuring the compliance with the provisions of Article 404 of the sarbanes oxley Act. The deficiencies and corrective actions taken by process owners that are taken or planned to be taken are reported to Audit Committee and management on a regular basis. risk management is responsible for the following tasks: defining the risks that affect Turkcells performance towards its goals, coordinating risk analysis tasks, sharing results with Corporate executive Team and the risk management board, and reporting and following up on these results.
The motive behind determining risks is not to suspend business activities that create these risks but to decrease the likelihood of the risks occuring or to decrease their possible impacts. Here, the goal is to minimize unpleasent surprises, to enable Turkcell to run seamless operations, and to provide a reasonable level of assurance to the management for Turkcell to achieve its goals. every department in Turkcell defines the risks it faces on a regular basis and classifies them on the basis of priority. Also, the Company prepares detailed action plans for critical risks and applies these plans. These processes are coordinated by risk management and are reported on a regular basis. With this mechanism, Turkcell Corporate risk management Department ensures the reliability and accuracy of the financial statements of Turkcell and its consolidated group companies that are in audit scope. In addition, it monitors that Companys operations are in compliance with relevant regulations and in order to increase the efficiency of the Companys operations reviews processes, determines current and potential risks and coordinates actions either to mitigate or prevent these risks. Turkcell formulated its business continuity plans in 2000, involving its technical operations. In 2004, the scope of the business continuity plan has been broadened and positioned as business continuity management. The business continuity plan covers several subjects, including natural disasters, terrorist attacks, loss of critical staff or information, and its effects to our dealers and suppliers. The business Continuity plan aims to mitigate risks against disasters by means of geographical dispersion. by courtesy of our geographically widespread technical infrastructure, our plans to manage a disaster from a remote center have been structured. We have the ability to keep additional capacity on main switchboards or support them with mobile switchboards. base station maintenance teams are positioned on a regional basis throughout the country. In case of emergency, teams have action plans to back up each other. In cases when a damaged base station cannot be operational within a certain time, a mobile base station is sent to maintain urgent coverage.
In addition, regulations strategy Department monitors regulatory developments in the market as well as the developments in the competitive environment to mitigate potential risks that may be faced in these areas. 4.5 Authority and Responsibilities of the Members of the Board of Directors and Executives The pertinent section of the Companys Articles of Association is as follows: The board is fully authorized to carry out the affairs of the Company and management of Company assets and the activities relating to the Company purpose and subject matter other than those that have to be solely carried out by the General Assembly. In addition, within the context of enhancing the Companys corporate governance practices, the responsibilities and duties of the board of Directors are examined in the Corporate Governance Guidelines adopted by the board, and published on the Companys website (www.turkcell.com.tr) in the Investor relations section under Corporate Governance. 4.6 Activities of the Board of Directors The board of Directors held 11 ordinary meetings in 2010. It also met off calendar. The primary activities of the board of Directors are contained in the Corporate Governance Guidelines adopted by the board of Directors. An outline of them is published under Corporate Governance principles on the Companys website. In addition, a Corporate Governance secretariat has been created to coordinate information flow between the members of the board. No board of Director member has weighted voting rights or the power of veto. 4.7 Prohibition on Carrying out Transactions with the Company and Prohibition on Competition permission contained in articles 334 and 335 of the Turkish Commercial Code pertaining to the prohibition on having dealings with the Company and on competing with it have been given to the board of Director members at the ordinary General Assembly dated April 29, 2010. 4.8 Code of Ethics The Turkcell Common Values are defined as common concepts and values, which Turkcell employees are expected to observe in the-
All the members of the board of Directors are non-executives. Colin J. Williams, as the independent member of the board of Directors, fulfills the criteria of the Cmb Corporate Governance principles as well as the seCs independence criteria. 4.2 Qualifications of the Members of the Board of Directors The qualifications of the members of the board of Directors are specified in the Corporate Governance Guidelines as adopted by the Companys board of Directors. According to this, every year, the Corporate Governance Committee, together with the board of Directors, within the current structure of the board, reviews the skills and specialties required for its members. each board member is required to devote time to board activities, to enhance his/her knowledge of the global telecommunications industry and related industries and to annually attend at least 75% of scheduled board meetings. each board member is encouraged to limit the number of other public company boards on which he or she serves. This will ensure that such other directorships and commitments do not materially interfere with his or her service as an effective and active member of the Companys board. In addition, the Corporate Governance Committee develops and supervises an orientation program for newly elected members of the board of Directors.
92
93
ir work lives, to internalize and to integrate into their conduct. All Turkcell employees and management are responsible for compliance with these codes and regulations. each new Turkcell employee is introduced to these codes in the orientation program and signs a commitment letter stating his/her understanding that they will be considered an integral part of his/her employment contract. The signature date of the commitment letter is specified on the letter. Any subsequent revisions in the Turkcell Common Values and Code of ethics are published in the Turkcell intranet. employees are responsible for following these revisions. All related adjustments are determined by the ethics Committee, assigned by the Audit Committee operating within the Turkcell board of Directors. The ethics Committee revises, updates, and improves the Codes, checks them for inconsistencies and submits the final version to the Audit Committee. The defined adjustments enter into force after approval by the Audit Committee. each Turkcell employee is responsible for reporting, through existing reporting channels, all cases and rumors which may be contrary to the codes and regulations specified in the manual for Turkcell Common Values and Code of ethics or which may cause reasonable doubt or concern that such a contrariness may arise. While investigating such complaints/reports, the Audit and ethics Committees may receive guidance from managers, employees, or from external sources with expertise on the related issue, provided that the principle of confidentiality is observed. The Audit and ethics Committees are free to include the management team, internal audit team, independent auditors, consultants, or experts into the investigation phase or analysis of the results, provided that new participants comply with the principle of confidentiality. After the investigation phase has been completed, the Audit and ethics Committees independently work to make decisions and settle the issue. If the complaint/report investigated by the ethics Committee is a not critical case, action may be taken upon a decision by the chairman of the ethics Committee. For critical cases, the majority of the ethics Committee must agree on the decision. The committee imposes sanctions on the employee(s) involved in the case, taking into consideration the ramifications and consequences of the case.
Training programs and notifications are provided to employees through various channels during the year to increase their awareness and acknowledgement of the Common Values and Code of ethics. our Code of ethics is outlined on the companys website, in the Investor relations section under the Corporate Governance link. These codes of ethics are complementary to other related policies, codes of conducts, and guides that are published or will be published by the Company. 4.9 Number, Structure and Independence of the Committees Established on the Board of Directors Within the board of Directors, there is an Audit Committee and a Corporate Governance Committee. each committee advises and makes recommendations to the board of Directors. each committee also has charters specifying working principles. both the Audit Committees and the Corporate Governance Committees members consist of the non-executive members of the board of Directors. Information about the committees formed on the board of Directors is published on the Companys website (www.turkcell.com.tr) in the Investors relations section under Corporate Governance. At the board of Directors meeting on may 27, 2010, within the context of Turkcells Corporate Governance principles and applicable regulations, it was decided that mr. Colin J. Williams and mr. Alexey khudyakov will continue their Audit Committee memberships and that mr. Colin J. Williams will continue as Chairman of the Audit Committee. At the same meeting, it was decided that mr. Colin J Williams, ms. karin b. eliasson, mr. mehmet bulent ergin and mr. oleg A. malis are appointed as Corporate Governance Committee members of the Company and that mr. Colin J. Williams will serve as Chairman of the Corporate Governance Committee. 4.10 financial Rights Provided to the Board of Directors Attendance fees are paid to the members of the board of Directors. No loans have been granted to any members of the Companys board of Directors or managers nor have any other guaranties such as sureties been given.
Turkcell offices
office Name Tepeba Plaza Address Asmal mescit mh. merutiyet Caddesi No: 71 Asmal mescit beyolu - stanbul Yeni mh. pamukkale sk. No: 3, 34880 soanlk mevkii - kartal - stanbul sere kale sk. No: 2, Topkap - stanbul kartal plaza Topselvi Dipik sk. No: 31, kartal - stanbul 19 mays Cad. Dr. smet ztrk sokak ili plaza ofis bloklar e blok b2 ili-stanbul Turhan Cemal berikel bulv. No: 212, seyhan - Adana eskiehir Yolu 9. km No: 264, stz - Ankara kzltoprak mah. 915 sk. No: 3, Antalya organize san. blgesi krmz Cad. No: 4, Nilfer - bursa urfa Yolu 6. km Diyarbakr Ankara Asfalt No: 64, bornova - zmir mimar sinan mah. 60. sokak No: 18, pk 55200 Atakum - samsun 1. organize sanayi blgesi 1. cadde 4. sokak No:10 Aziziye-erzurum msrl mahallesi Hasan Turfanda Yolu No: 1, ukurayr Trabzon
Maltepe Plaza
Davutpaa Plaza
ili Plaza
Adana Plaza
Ankara Plaza
Antalya Plaza Bursa Plaza
Diyarbakr Plaza zmir Plaza Samsun Plaza
Erzurum Plaza
Trabzon Plaza
94
95
Turkcell office
CONTENTS

PAGE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED INCOME STATEMENTS CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF CHANGES AND EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS
101 102 103 104 105 106-203 106 107 111 130 132 134 139 139 140 140 141 143 145 150 151 152 153 155 155 156 156 158 159 159 162 162 162 164 165 173 173 174 198 203
TuRkcEll lETm hZmETlER a.. aND iTs suBsiDiaRiEs CONSOLIDATED FINANCIAL STATEMENT AND INDEPENDENT AUDIT REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. REpORTiNg ENTiTy NOTE 2. Basis Of pREpaRaTiON NOTE 3. sigNificaNT accOuNTiNg pOliciEs NOTE 4. DETERmiNaTiON Of faiR valuEs NOTE 5. fiNaNcial Risk maNagEmENT NOTE 6. OpERaTiNg sEgmENTs NOTE 7. REvENuE NOTE 8. OThER ExpENsEs NOTE 9. pERsONNEl ExpENsEs NOTE 10. fiNaNcE iNcOmE aND cOsTs NOTE 11. iNcOmE Tax ExpENsE NOTE 12. pROpERTy, plaNT aND EquipmENT NOTE 13. iNTaNgiBlE assETs NOTE 14. EquiTy accOuNTED iNvEsTEEs NOTE 15. OThER iNvEsTmENTs NOTE 16. OThER NON-cuRRENT assETs NOTE 17. DEfERRED Tax assETs aND liaBiliTiEs NOTE 18. TRaDE REcEivaBlEs aND accRuED iNcOmE NOTE 19. OThER cuRRENT assETs NOTE 20. cash aND cash EquivalENTs NOTE 21. capiTal aND REsERvEs NOTE 22. EaRNiNgs pER shaRE NOTE 23. OThER NON-cuRRENT liaBiliTiEs NOTE 24. lOaNs aND BORROwiNgs NOTE 25. EmplOyEE BENEfiTs NOTE 26. DEfERRED iNcOmE NOTE 27. pROvisiONs NOTE 28. TRaDE aND OThER payaBlEs NOTE 29. fiNaNcial iNsTRumENTs NOTE 30. OpERaTiNg lEasEs NOTE 31. guaRaNTEEs aND puRchasE OBligaTiONs NOTE 32. cOmmiTmENTs aND cONTiNgENciEs NOTE 33. RElaTED paRTiEs NOTE 34. gROup ENTiTiEs NOTE 35. suBsEquENT EvENTs
96
97
DRT Bamsz Denetim ve serbest muhasebeci mali mavirlik a.. sun plaza, Bilim sok. No:5 maslak, ili 34398, stanbul, Trkiye Tel : (212) 336 60 00 fax : (212) 336 60 10 web : www.deloitte.com.tr
DRT Bamsz Denetim ve serbest muhasebeci mali mavirlik a.. sun plaza, Bilim sok. No:5 maslak, ili 34398, stanbul, Trkiye Tel : (212) 336 60 00 fax : (212) 336 60 10 web : www.deloitte.com.tr
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Turkcell letiim Hizmetleri A..
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Turkcell letiim Hizmetleri A..
we have audited the accompanying consolidated statement of financial position of Turkcell letiim hizmetleri a. (the company) and its subsidiaries (together the group) as of December 31, 2010 and the related consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year ended December 31, 2010. These consolidated financial statements are the responsibility of the groups management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. we did not audit the financial statements of fintur holdings B.v. (fintur); a 41.45 percent owned equity accounted investee of the group. The groups investment in fintur as of December 31, 2010 was $304 million and its share in profit of fintur was $153 million, for the year 2010. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for fintur, is based solely on the report of the other auditors. we conducted our audits in accordance with the standards of the public company accounting Oversight Board (united states). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. we believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. in our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the group as of December 31, 2010 and the results of their operations and their cash flows for the year ended December 31, 2010 in conformity with international financial Reporting standards as issued by the international accounting standards Board. we have also audited, in accordance with the standards of the public company accounting Oversight Board (united states), the groups internal control over financial reporting as of December 31, 2010 based on the criteria established in internal control-integrated framework issued by the committee of sponsoring Organizations of the Treadway commission and our report dated april 18, 2011 expressed an unqualified opinion on the effectiveness of groups internal control over financial reporting. istanbul, Turkey april 18, 2011
we have audited the internal control over financial reporting of Turkcell letiim hizmetleri a.. and its subsidiaries (together the group) as of December 31, 2010 based on criteria established in internal control-integrated framework issued by the committee of sponsoring Organizations of the Treadway commission. The groups management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying managements Report. Our responsibility is to express an opinion on the groups internal control over financial reporting based on our audit. we conducted our audit in accordance with the standards of the public company accounting Oversight Board (united states). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. we believe that our audit provide a reasonable basis for our opinion. a companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. a companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
DRT BaimsiZ DENETm vE sERBEsT muhasEBEc mal mavRlk a.. member of DElOiTTE TOuchE TOhmaTsu limiTED
98
99
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Consolidated Statement Of Financial Position As at 31 December 2010
(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. in our opinion, based on our audit, the group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in internal control-integrated framework issued by the committee of sponsoring Organizations of the Treadway commission. we have also audited, in accordance with the standards of the public company accounting Oversight Board (united states), the consolidated financial statements as of and for the year ended December 31, 2010 of the group and our report dated april 18, 2011 expressed an unqualified opinion on those financial statements based on our audit and the report of the other auditors. istanbul, Turkey april 18, 2011
Note Assets property, plant and equipment intangible assets gsm and other telecommunication operating licenses computer software Other intangible assets investments in equity accounted investees Other investments Due from related parties Other non-current assets Trade receivables Deferred tax assets Total non-current assets inventories Other investments Due from related parties Trade receivables and accrued income Other current assets cash and cash equivalents Total current assets Total assets Equity share capital share premium capital contributions Reserves Retained earnings Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS Non-controlling interests Total equity Liabilities loans and borrowings Employee benefits provisions Other non-current liabilities Deferred tax liabilities Total non-current liabilities Bank overdraft loans and borrowings income taxes payable Trade and other payables Due to related parties Deferred income provisions Total current liabilities Total liabilities Total equity and liabilities 12 13
2010 3,068,021 1,709,311 955,703 547,607 206,001 399,622 33,849 1,044 107,277 35,024 2,876 5,357,024 24,386 8,201 88,897 816,151 197,740 3,302,163 4,437,538 9,794,562
2009 2,652,222 1,897,981 1,058,098 595,218 244,665 383,490 34,755 21,039 75,120 2,058 5,066,665 28,205 62,398 108,843 783,752 175,417 3,095,486 4,254,101 9,320,766
14 15 33 16 18 17
15 33 18 19 20
DRT BaimsiZ DENETm vE sERBEsT muhasEBEc mal mavRlk a.. member of DElOiTTE TOuchE TOhmaTsu limiTED
21 21 21 21 21
1,636,204 434 22,772 (660,121) 5,258,327 6,257,616 (24,019) 6,233,597
1,636,204 434 22,772 (512,095) 4,712,254 5,859,569 36,632 5,896,201
21
24 25 27 23 17
1,407,316 29,742 57,055 160,832 93,105 1,748,050 5,896 430,205 96,080 951,976 10,760 164,186 153,812 1,812,915 3,560,965 9,794,562
821,179 27,776 5,676 154,991 118,432 1,128,054 5,244 690,780 93,260 1,038,762 14,780 248,518 205,167 2,296,511 3,424,565 9,320,766
20 24 11 28 33 26 27
100
101
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Consolidated Statement Of Income For the year ended 31 December 2010
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Consolidated Statement Of Comprehensive Income For the year ended 31 December 2010
Note Revenue Direct costs of revenue Gross profit Other income selling and marketing expenses administrative expenses Other expenses Results from operating activities 7
2010 5,982,093 (3,349,035) 2,633,058 14,668 (1,085,750) (347,290) (64,233) 1,150,453
2009 5,789,972 (3,097,097) 2,692,875 978 (1,085,081) (273,139) (111,220) 1,224,413
2008 6,970,408 (3,409,013) 3,561,395 14,136 (1,351,692) (309,349) (17,990) 1,896,500 Profit for the year
2010 1,126,961
2009 1,104,804
2008 1,755,062
Other comprehensive income/(expense): foreign currency translation differences Net change in fair value of available-for-sale securities income tax on other comprehensive (expense)/income Other comprehensive income/(expense) for the year, net of income tax
(184,352) (1,318) (754) (186,424)
53,046 1,197 (1,091) 53,152
(1,458,709) (6,385) 1,368 (1,463,726)
finance income finance costs Net finance income share of profit of equity accounted investees Profit before income tax income tax expense Profit for the year Profit attributable to: Owners of Turkcell iletisim hizmetleri as Non-controlling interest Profit for the year Basic and diluted earnings per share (in full usD)
10 10
277,130 (102,662) 174,468 122,839 1,447,760 (320,799) 1,126,961
329,550 (187,514) 142,036 78,448 1,444,897 (340,093) 1,104,804
442,099 (136,769) 305,330 102,990 2,304,820 (549,758) 1,755,062
Total comprehensive income for the year Total comprehensive income/(expense) attributable to: Owners of Turkcell iletisim hizmetleri as Non-controlling interest Total comprehensive income for the year
940,537
1,157,956
291,336
14
11
984,187 (43,650) 940,537
1,146,681 11,275 1,157,956
363,504 (72,168) 291,336
1,170,176 (43,215) 1,126,961 22 0.53
1,093,992 10,812 1,104,804 0.50
1,836,824 (81,762) 1,755,062 0.83
102
103
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Consolidated Statement Of Changes In Equity For the year ended 31 December 2010
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Consolidated Statement Of Cash Flows For the year ended 31 December 2010
Total Equity
(1,458,366)
(5,360)
(1,463,726)
(556,973)
(286,922)
(744,380)
(1,676)
(185,106)
(1,318)
5,931,205
1,755,062
5,443,643
5,443,643
1,104,804
1,157,956
5,896,201
5,896,201
1,126,961
(186,424)
291,336
46,795
18,202
51,955
1,197
53,152
36,088
4,570
940,537
(590,541)
89
(12,689)
6,233,597
Note Cash flows from operating activities Profit for the year Adjustments for: Depreciation and impairment of fixed assets amortization of intangible assets Net finance (income) income tax expense share of profit of equity accounted investees (gain)/loss on sale of property, plant and equipment gain on sale of subsidiary unrealized foreign exchange gain and loss on operating assets impairment losses on goodwill provision for impairment of trade receivables Deferred income
2010 1,126,961
2009 1,104,804 384,257 206,421 (254,582) 340,093 (115,240) 25,150 88,572 61,835 75,379 (2,966) 1,913,723 (269,360) (20,312) (8,662) (37,099) (21,272) (6,290) 180,469 (115,306) (82,893) 942 123,644 1,657,584 (29,497) (395,024) 83,543 1,316,606 (1,044,165) (723,507) 4,471 10,549 (1,150) (83,951) 32,015 320,697 (1,485,041)
2008 1,755,062 433,942 245,985 (393,671) 549,758 (151,629) (6,931) (4,727) (228,033) 68,550 (3,293) 2,265,013 (214,220) 2,124 (267) (27,208) (10,704) (6,541) 66,690 206,537 52,452 5,773 29,704 2,369,353 (25,050) (687,292) 89,235 1,746,246 (603,568) (193,219) 16,693 14,655 (4,970) (47,549) 78,542 (309,967) 354,211 (695,172)
NonControlling Interest
(54,639)
46,795
(81,762)
9,594
(72,168)
(31,083)
(1,676)
(43,215)
(435)
138,128
9,594
58,116
58,116
10,812
11,275
36,632
36,632
(435)
463
463
(43,650)
(17,090)
89
(24,019)
12 13 10 11
18 26
515,515 241,839 (237,628) 320,799 (154,457) 101 (5,847) 23,499 126,257 (77,854) 1,879,185 (204,403) 28,752 3,083 (29,389) (29,011) (3,775) 32,541 (96,118) (14,051) 2,690 (45,102) 1,524,402 (38,829) (322,754) 99,759 1,262,578 (912,097) (132,827) 8,506 12,147 (4,988) (16,762) 70,528 270,602 (704,891)
(502,334)
(5,360)
(286,922)
Total
5,793,077
363,504
18,202
5,385,527
51,492
1,197
52,689
36,088
(1,467,960)
(1,473,320)
(713,297)
4,570
(184,671)
(1,318)
1,836,824
5,385,527
1,093,992
1,146,681
5,859,569
5,859,569
1,170,176
(185,989)
(573,451)
(12,689) -
984,187
Retained Earnings
(121,945)
(502,334)
(105,512)
(713,297)
3,224,526
1,836,824
1,836,824
4,437,071
4,437,071
1,093,992
1,170,176
1,093,992
4,712,254
4,712,254
(50,652)
(573,451)
1,170,176
Translation Reserve
669,598
(1,467,960)
(798,362)
(798,362)
51,492
51,492
51,492
(1,467,960)
(1,467,960)
(746,870)
(746,870)
(184,210)
(184,210)
(184,210)
(931,080)
5,258,327
6,257,616
Attributable to equity holders of the Company
Fair Value Reserve
5,481
(5,360)
(5,360)
(5,360)
1,197
1,197
1,197
1,318
1,318
(1,318)
(1,318)
(1,318)
change in trade receivables change in due from related parties change in inventories change in other current assets change in other non-current assets change in due to related parties change in trade and other payables change in other current liabilities change in other non-current liabilities change in employee benefits change in provisions
18 33 19 16 33
(286,922)
Reserve for NonControlling Interest Put Option
(286,922)
(286,922)
36,088
(461)
(461)
(250,834)
(250,834)
(461)
(12,689)
(263,984)
23 25 27
121
121
1,636,204
1,636,204
1,636,204
1,636,204
1,636,204
Share Capital
1,636,204
interest paid income tax paid Dividends received Net cash generated by operating activities Cash flows from investing activities acquisition of property, plant and equipment acquisition of intangible assets proceeds from sale of property, plant and equipment proceeds from currency option contracts payment of currency option contracts premium acquisition of available-for-sale securities proceeds from sale of available-for-sale securities acquisition of subsidiary, net of cash acquired interest received Net cash used in investing activities Cash flows from financing activities proceeds from issuance of loans and borrowings loan transaction costs Repayment of borrowings change in non-controlling interest proceeds from capital contribution Dividends paid Net cash used in financing activities Net decrease/(increase) in cash and cash equivalents Cash and cash equivalents at 1 January Effects of foreign exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at 31 December
121,945
Legal Reserves
256,834
378,779
378,779
105,512
484,291
484,291
50,652
434
Share Premium
434
434
434
434
434
534,943
12 13
Capital Contribution
18,202
18,202
18,202
4,570
22,772
22,772
22,772
foreign currency translation differences, net of tax Net change in fair value of available-for-sale securities, net of tax
change in non-controlling interest change in reserve for non-controlling interest put option
Total other comprehensive income/(expense)
Other comprehensive income/(expense)
Total comprehensive income/(expense)
Balance at 31 December 2008
1,071,777 (12,100) (772,892) 89 (590,541) (303,667) 254,020 3,090,242 (47,995) 20 3,296,267
1,692,866 (14,357) (944,133) 4,570 (744,380) (5,434) (173,869) 3,255,420 8,691 3,090,242
601,000 (487,999) 72,199 18,202 (556,973) (353,571) 697,503 3,093,175 (535,258) 3,255,420
Total comprehensive income
capital contribution granted
capital contribution granted
Balance at 1 January 2008
increase in legal reserves
profit for the year
profit for the year
profit for the year
Dividends paid
Dividends paid
104
Dividends paid
105
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010
1. Reporting entity Turkcell iletisim hizmetleri anonim sirketi (the company) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The address of the companys registered office is Turkcell plaza, mesrutiyet caddesi No: 71, 34430 Tepebasi/istanbul. it is engaged in establishing and operating a global system for mobile communications (gsm) network in Turkey and regional states. in april 1998, the company signed a license agreement (the 2g license) with the ministry of Transportation and communications of Turkey (the Turkish ministry), under which it was granted a 25 year gsm license in exchange for a license fee of $500,000. The license permits the company to operate as a stand-alone gsm operator and releases it from some of the operating constraints in the Revenue sharing agreement, which was in effect prior to the 2g license. under the 2g license, the company collects all of the revenue generated from the operations of its gsm network and pays the undersecretariat of Treasury (the Turkish Treasury) a treasury share equal to 15% of its gross revenue from Turkish gsm operations. The company continues to build and operate its gsm network and is authorized to, among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscribers, collect payments and deal directly with subscribers. following the 3g tender held by the information Technologies and communications authority (icTa) regarding the authorization for providing imT-2000/umTs services and infrastructure, the company has been granted the a-Type license (the 3g license) providing the widest frequency band, at a consideration of EuR 358,000 (excluding value added Tax (vaT)). payment of the 3g license was made in cash, following the necessary approvals, on 30 april 2009. On 25 June 2005, the Turkish government declared that gsm operators are required to pay 10% of their existing monthly treasury share to the Turkish ministry as a universal service fund contribution in accordance with law No: 5369. as a result, starting from 30 June 2005, the company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish ministry as universal service fund. in July 2000, the company completed an initial public offering with the listing of its ordinary shares on the istanbul stock Exchange and american Depositary shares, or aDss, on the New york stock Exchange.
2. Basis of preparation (a) Statement of compliance The consolidated financial statements have been prepared in accordance with international financial Reporting standards (ifRss) as issued by the international accounting standards Board (iasB). The company selected the presentation form of function of expense for the statement of income in accordance with ias 1 presentation of financial statements. The company reports cash flows from operating activities by using the indirect method in accordance with ias 7 statement of cash flows, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. The consolidated financial statements as of and for the year ended 31 December 2010 were authorized for issue on 23 february 2011 by the Board of Directors and updated by the management for any subsequent events up until 18 april 2011. authority for restatement and approval of consolidated financial statements belongs to the same Board. consolidated financial statements are approved by the Board of Directors by the recommendation of audit committee of the company. (b) Basis of measurement The accompanying consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpose of fair presentation in accordance with ifRss as issued by the iasB. They are prepared on the historical cost basis adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005, except that the following assets and liabilities are stated at their fair value: put option liability, derivative financial instruments and financial instruments classified as available-for-sale. The methods used to measure fair value are further discussed in Note 4. (c) Functional and presentation currency The consolidated financial statements are presented in us Dollars (usD or $), rounded to the nearest thousand. moreover, all financial information expressed in Turkish lira (Tl), Euro (EuR), ukranian hryvnia (hRv) and swedish krona (sEk) has been rounded to the nearest thousand. The functional currency of the company and its consolidated subsidiaries located in Turkey and Turkish Republic of Northern cyprus is Tl. The functional currency of Euroasia Telecommunications holding Bv (Euroasia) and financell Bv (financell) is usD. The functional currency of East asian consortium Bv (Eastasia), Beltur Bv, surtur Bv and Turkcell Europe is EuR. The functional currency of llc astelit (astelit), llc global Bilgi (global llc) and ukrTower llc (ukrTower) is hRv. The functional currency of Belarusian Telecommunications Network (Belarusian Telecom) and fllc global Bilgi (global fllc) is Belarusian Roubles (ByR). The functional currency of azerinteltek qsc (azerinteltek) is azerbaijan manat. (d) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with ifRs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
as at 31 December 2010, two significant founding shareholders, sonera holding Bv and cukurova group, directly and indirectly, own approximately 37.1% and 13.8%, respectively of the companys share capital and are ultimate counterparties to a number of transactions that are discussed in the related parties footnote. On the basis of publicly available information, alfa group, which previously held, indirectly through cukurova Telecom holdings limited and Turkcell holding as, 13.2% of the companys shares, has reduced its stake to 4.99% following litigation with Telenor asa (Telenor group). On the basis of publicly available information, it is understood that alfa group sold 62.2% of its holdings in alfa Telecom Turkey limited (aTTl) to visor group affiliate Nadash international holdings inc. (Nadash) and alexander mamuts henri services limited (hsl) and in July 2010, redeemed these shares. The consolidated financial statements of the company as at and for the year ended 31 December 2010 comprise the company and its subsidiaries (together referred to as the group) and the groups interest in one associate and one joint venture. subsidiaries of the company, their locations and their business are given in Note 34. The companys and each of its subsidiaries, associates and joint ventures financial statements are prepared as at and for the year ended 31 December 2010.
106
107
2. Basis of preparation (continued) (d) Use of estimates and judgments (continued) information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are described in Notes 4 and 32 and detailed analysis with respect to accounting estimates and critical judgments of allowance for doubtful receivables, useful lives or expected patterns of consumption of the future economic benefits embodied in depreciable assets, commission fees, revenue recognition and income taxes are provided below: key sources of estimation uncertainty in Note 29, detailed analysis is provided for the foreign exchange exposure of the group and risks in relation to foreign exchange movements. critical accounting judgments in applying the groups accounting policies certain critical accounting judgments in applying the groups accounting policies are described below:
2. Basis of preparation (continued) (d) Use of estimates and judgments (continued) Critical accounting judgments in applying the Groups accounting policies (continued)
Useful lives of assets (continued) in accordance with ias 16 property, plant and Equipment and ias 38 intangible assets, the residual value and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with ias 8 accounting policies, changes in accounting Estimates and Errors. as part of yearly review of useful lives of assets, the group made necessary evaluation by considering current technologic and economic conditions and recent business plans. Based on the evaluation performed, changes in the useful lives caused the following prospective impacts on depreciation and amortization charges;
Previous accounting estimate Depreciation and amortization charge for the year ended 31 December 2010 765,280 Current accounting estimate 757,354
Allowance for doubtful receivables During the current year, the group has changed its accounting estimates regarding the determination of allowance for doubtful receivables. formerly, the allowance for doubtful receivables was based on managements evaluation of the volume of the receivables outstanding, historical collection trends and general economic conditions. with the new accounting estimate, the group maintains an allowance for doubtful receivables for estimated losses resulting from the inability of the groups subscribers and customers to make required payments. The group bases the allowance on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection trends and general economic conditions. The allowance is periodically reviewed. The allowance charged to expenses is determined in respect of receivable balances, calculated as a specified percentage of the outstanding balance in each aging group, with the percentage of the allowance increasing as the aging of the receivable becomes longer.
This change is accounted as a change in accounting estimates in accordance with ias 8 accounting policies, changes in accounting Estimates and Errors. Based on the evaluation performed, the change in the estimates regarding the determination of allowance for doubtful receivables caused the following impact on bad debt provision expense: Previous accounting estimate Bad debt expense for the year ended 31 December 2010 127,921 Current accounting estimate 126,257
Impact 7,926
Due to the impracticability, the group has not disclosed the effect of the change for the future periods.
Commission fees commission fees relate to services performed in relation to betting games where the group acts as an agent in the transaction rather than as a principal. in april 2009, the iasB issued amendments to the illustrative guidance in the appendix to ias 18 Revenue in respect of identifying an agent versus a principal in a revenue-generating transaction. Based on this guidance; management considered the following factors in distinguishing between an agent and a principal:
The group does not take the responsibility for fulfilment of the games. The group does not collect the proceeds from the final customer and it does not bear the credit risk. The group earns a pre-determined percentage of the total turnover.
Impact 1,664
Due to the impracticability, the group has not disclosed the effect of the change for the future periods.
Revenue recognition in arrangements which include multiple elements, the group considers the elements to be separate units of accounting in the arrangement. Total arrangement consideration relating to the bundled contracts is allocated among the different units according the following criteria:
the component has standalone value to the customer and the fair value of the component can be measured reliably. The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. if a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integrated part of the remaining components of the transaction.
Useful lives of assets The economic useful lives of the groups assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The group defines useful life of its assets in terms of the assets expected utility to the group. This judgment is based on the experience of the group with similar assets. in determining the useful life of an asset, the group also follows technical and/or commercial obsolescence arising on changes or improvements from a change in the market. The useful lives of the licenses are based on the duration of the license agreements.
108
109
2. Basis of preparation (continued) (d) Use of estimates and judgments (continued) Critical accounting judgments in applying the Groups accounting policies (continued)
2. Basis of preparation (continued) (d) Use of estimates and judgments (continued) Comparative information and revision of prior period financial statements (continued) The company has for 2010 revised the manner in which it accounts for the impact of changes in foreign exchange rates in its statement of cash flows and has revised its presentation of prior periods, resulting in a change in the allocation of the impact of foreign exchange rate changes among Operating activities, Effects of foreign exchange on statement of financial position items and Effect of foreign exchange rate changes on cash in the statement of cash flows. The change relates to the impact of re-translation of the underlying functional currency cash flows into the presentation currency, the us Dollar. The company believes that changes to prior periods are immaterial. The change in the statement of cash flows will not impact the companys 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 2009 As previously reported Revisions Net cash from operating activities Effects of foreign exchange on statement of financial position items Effects of foreign exchange rate changes on cash cash and cash equivalents 1,294,935 30,938 (576) 3,090,242 21,671 (30,938) 9,267 -
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. Changes in accounting policies changes to the accounting policies are applied retrospectively and the prior periods financial statements are restated accordingly. The group did not make any major changes to accounting policies during the current year. Changes in accounting estimates if the application of changes in the accounting estimates affects the financial results of a specific period, the changes in the accounting estimates are applied in that specific period, if they affect the financial results of current and following periods; the accounting estimate is applied prospectively in the period in which such change is made. a change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate. when it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate. The group did not have any major changes in the accounting estimates during the current year except for the allowance for doubtful receivables and the useful lives of property, plant and equipment and intangible assets. Comparative information and revision of prior period financial statements The consolidated financial statements of the group have been prepared with the prior periods on a comparable basis in order to give consistent information about the financial position and performance. if the presentation or classification of the financial statements is changed, in order to maintain consistency, the financial statements of the prior periods are also reclassified in line with the related changes.
As Revised 1,316,606 8,691 3,090,242
For the year ended 31 December 2008 As previously reported Revisions Net cash from operating activities Effects of foreign exchange on statement of financial position items Effects of foreign exchange rate changes on cash cash and cash equivalents 1,674,385 (418,945) (44,452) 3,255,420 71,861 418,945 (490,806) -
As Revised 1,746,246 (535,258) 3,255,420
3. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the group entities. (a) Basis of consolidation
(i) subsidiaries subsidiaries are entities controlled by the group. control exists when the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. in assessing control, potential voting rights that currently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are changed as necessary to align them with the policies adopted by the group. (ii) acquisition from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the group are excluded from the scope of ifRs 3 Business combinations. in business combinations under common control, assets and liabilities subject to business combination are accounted for at their carrying value in consolidated financial statements. statements of income are consolidated starting from the beginning of the financial year in which the business combination is realized. financial statements of previous financial years are restated in the same manner in order to maintain consistency and comparability. any positive or negative goodwill arising from
110
111
such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment in subsidiary and the share acquired in subsidiarys equity accounted for as equity transactions (i.e. transactions with owners in their capacity as owners).
3. Significant accounting policies (continued) (b) Foreign currency (continued)
(iii) associates and jointly controlled entities (equity accounted investees) associates are those entities in which the group has significant influence, but not control, over the financial and operating decisions. significant influence is presumed to exist when the group holds between 20 and 50 percent of the voting power of another entity. Joint ventures are those entities over whose activities the group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.
associates and jointly controlled entities (equity accounted investees) are accounted for using the equity method and are initially recognized at cost. The groups investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the groups share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. when the groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee. The groups equity accounted investees as at 31 December 2010 are fintur holdings Bv (fintur) and a-Tel pazarlama ve servis hizmetleri as (a-Tel).
(ii) oreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to usD from the functional currency of the foreign operation at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to usD at monthly average exchange rates.
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 groups date of transition to ifRss, such differences have been recognized in the foreign currency translation reserve. when a foreign operation is disposed of, partially or fully, the relevant amount in the foreign currency translation reserve is transferred to the statement of income. foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized directly in equity in the foreign currency translation reserve.
(iv) Transactions eliminated on consolidation intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the groups interest in the investee. unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. (v) Non-controlling interests where a put option is granted by the group to the non-controlling interests shareholders in existing subsidiaries that provides for settlement in cash or in another financial asset, the group recognizes a liability for the present value of the estimated exercise price of the option. The interests of the non-controlling shareholders that hold such put options are derecognized when the financial liability is recognized. The corresponding interests attributable to the holder of the puttable non-controlling interests are presented as attributable to the equity holders of the parent and not as attributable to those non-controlling interests shareholders. The difference between the put option liability recognized and the amount of non-controlling interests shareholders derecognized is recorded under equity. subsequent changes in the fair value of the put options granted to the non-controlling shareholders in existing subsidiaries are also recognized in equity, except the imputed interest on the liability is recognized in the consolidated statement of income.
(b) Foreign currency
(iii) Translation from functional to presentation currency items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the entities operate, normally under their local currencies.
The consolidated financial statements are presented in usD, which is the presentation currency of the group. The group uses usD as the presentation currency for the convenience of investor and analyst community. assets and liabilities for each statement of financial position presented (including comparatives) are translated to usD at exchange rates at the statement of financial position date. income and expenses for each statement of income (including comparatives) are translated to usD at monthly average exchange rates. foreign currency differences arising on retranslation are recognized directly in a separate component of equity.
(iv) Net investment in foreign operations foreign currency differences arising from the translation of the net investment in foreign operations are recognized in the foreign currency translation reserve. They are transferred to the statement of income upon disposal of the foreign operations.
(i) foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of group entities at exchange rates at the dates of the transactions. monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. foreign currency differences arising on translation of foreign currency transactions are recognized in the statement of income. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. foreign currency differences arising on retranslation are recognized in the statement of income, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized directly in equity.
112
113
3. Significant accounting policies (continued) (c) Financial instruments
3. Significant accounting policies (continued) (c) Financial instruments (continued)
(i) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments which are not recognized or designated as financial instruments at fair value through profit or loss are recognized initially at fair value plus any directly attributable transaction costs. subsequent to initial recognition, non-derivative financial instruments are measured as described below: cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the groups cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. accounting for finance income and costs is discussed in Note 3(m).
(i) Non-derivative financial instruments (continued) available-for-sale financial assets available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.
The groups investments in equity securities and certain debt securities are classified as available-for-sale financial assets. subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(h)(i)), and foreign exchange gains and losses on available-for-sale monetary items (see note 3(b)(i)), are recognized directly in equity. when an investment is derecognized, the cumulative gain or loss in equity is transferred to the statement of income.
Estimated exercise price of put options under the terms of certain agreements, the group is committed to acquire the interests owned by non-controlling shareholders in consolidated subsidiaries, if these non-controlling interests wish to sell their share of interests.
as the group has unconditional obligations to fulfil its liabilities under these agreements, ias 32 financial instruments: Disclosure and presentation, requires the value of such put option to be presented as a financial liability on the statement of financial position for the present value of the estimated option redemption amount. The group accounts for such transactions under the anticipated acquisition method and the interests of non-controlling shareholders that hold such put option are derecognized when the financial liability is recognized. The group accounts for the difference between the amount recognized for the exercise price of the put option and the carrying amount of non-controlling interests in equity.
financial assets at fair value through profit or loss an instrument is classified as financial asset at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. financial instruments are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the groups risk management or investment strategy. upon initial recognition, attributable transaction costs are recognized in the statement of income when incurred. financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in the statement of income. held-to-maturity financial assets if the group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. held-to-maturity financial assets are heldto-maturity investments that are measured at amortized cost using the effective interest method, less any impairment losses.
any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the group from classifying investment securities as held-to-maturity for the current and the following two financial years.
Other Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses. (ii) Derivative financial instruments The group holds derivative financial instruments to hedge its foreign currency risk exposures arising from operational, financing and investing activities. in accordance with its treasury policy, the group engages in forward and option contracts. however, these derivatives do not qualify for hedge accounting and are accounted for as trading derivatives.
Embedded derivatives are separated from the host contract and accounted for separately if a) the economic characteristics and risks of the host contract and the embedded derivative are not closely related, b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and c) the combined instrument is not measured at fair value through profit or loss. Derivatives are recognized initially at fair value; attributable transaction costs are recognized in the statement of income when incurred. subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognized in the statement of income.
114
115
3. Significant accounting policies (continued) (d) Property, plant and equipment
3. Significant accounting policies (continued) (d) Property, plant and equipment (continued)
(i) Recognition and measurement items of property, plant and equipment are stated at cost adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005 less accumulated depreciation (see below) and accumulated impairment losses (see note 3(h)(ii)).
cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located, if any. Borrowing costs related to the acquisition or constructions of qualifying assets are capitalized as part of the cost of that asset. purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. when parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. gains/losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within other income or other expenses in the statement of income. changes in the obligation to dismantle, remove assets on sites and to restore sites on which they are located, other than changes deriving from the passing of time, are added or deducted from the cost of the assets in the period in which they occur. The amount deducted from the cost of the asset shall not exceed the balance of the carrying amount on the date of change, and any excess balance is recognized immediately in the statement of income.
(iii) Depreciation (continued) Depreciation methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.
(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 lasted by 31 December 2005 less accumulated amortization (see below).
Amortization amortization is recognized in the statement of income on a straight line basis primarily by reference to the unexpired license period. The useful lives for the gsm and other telecommunication operating licenses are as follows: gsm and other telecommunications licenses 3 25 years
in accordance with the new legislation issued by icTa, the infrastructure operator authorization right of the companys subsidiary, superonline iletisim hizmetleri as (superonline), has become infinite. as a result, superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years.
(ii) subsequent costs The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the group and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of income as incurred. (iii) Depreciation Depreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. leased assets are depreciated over the shorter of the lease term or their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows: Buildings mobile network infrastructure fixed network infrastructure call center equipment Equipment, fixtures and fittings motor vehicles central betting terminals leasehold improvements
(ii) computer software costs associated with maintaining computer software programs are recognized as an expense as incurred. costs that are directly associated with the development of identifiable and unique software products controlled by the group, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. costs include the software development employee costs and an appropriate portion of relevant overheads. amortization amortization is recognized in the statement of income on a straight-line basis over the estimated useful lives from the date the software is available for use. The useful lives for computer software are as follows:
computer software 3 8 years
21 50 years 6 8 years 3 25 years 5 8 years 4 5 years 4 5 years 10 years 5 years
(iii) Other intangible assets intangible assets that are acquired by the group which have finite useful lives are measured at cost adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)).
indefeasible Rights of use (iRu) correspond to the right to use a portion of the capacity of an asset granted for a fixed period of time. iRus are recognized as an intangible asset when the group has specific indefeasible right to use an identified portion of the underlying asset and the duration of the right is the major part of the underlying assets economic life. iRus are amortized over the shorter of the expected period of use and the life of the contract.
116
117
3. Significant accounting policies (continued) (e) Intangible assets (continued)
3. Significant accounting policies (continued) (e) Intangible assets (continued)
(iii) Other intangible assets (continued) subsequent expenditure subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset (that is purchased from independent third parties) to which it relates. all other expenditure, including expenditure on internally generated goodwill and brands, is recognized in the statement of income as incurred. capitalized costs generally relate to the application of development stage; any other costs incurred during the pre and post-implementation stages, such as repair, maintenance or training, are expensed as incurred. amortization amortization is recognized in the statement of income on a straight line basis over the estimated useful lives of intangible assets unless such useful lives are indefinite from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:
Transmission lines central betting system operating right customer base Brand name customs duty and vaT exemption right amortization methods, useful lives and residual values are reviewed at least annually unless there is a triggering event. 10 years 10 years 2 8 years 10 years 4.4 years
(iv) internally generated intangible assets research and development expenditure Expenditure on research activities is recognized as an expense in the period in which it is incurred.
an internally generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated: The technical feasibility of completing the intangible asset so that it will be available for use or sale; The intention to complete the intangible asset and use or sell it; The ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognized for internally generated intangible assets is the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. where no internally-generated intangible asset can be recognized, de velopment expenditure is charged to the statement of income in the period in which it is incurred. subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets acquired separately. (f) Leased assets leases in terms of which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognized on the groups statement of financial position. (g) Inventories inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses. The cost of inventory is determined using the weighted average method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. as at 31 December 2010, inventories mainly consist of simcards, scratch cards, handsets and modems. (h) Impairment
goodwill from 1 January 2010 the group has applied ifRs 3 (2008) Business combinations in accounting for business combinations. The change in accounting policy has been applied prospectively and had no effect as there is no business combination in the current period.
for acquisitions on or after 1 January 2010, the group measures goodwill as the fair value of the consideration transferred (including the fair value of any previously-held equity interest in the acquiree) and the recognized amount of any non-controlling interests in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. when the excess is negative, a bargain purchase gain is recognized immediately in the statement of income.
subsequent measurement goodwill is measured at cost less accumulated impairment losses. in respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset including goodwill, that forms part of the carrying amount of the equity accounted investees.
(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.
118
119
3. Significant accounting policies (continued) (h) Impairment (continued)
3. Significant accounting policies (continued) (h) Impairment (continued)
(i) financial assets (continued) an impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. an impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. all impairment losses are recognized in the statement of income. any cumulative loss in respect of an available-for-sale financial asset recognized previously in equity is transferred to the statement of income. an impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. for financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of income. for available-for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehensive income.
(ii) Non-financial assets (continued) an impairment loss is reversed only to the extent that the assets 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. (i) Employee benefits
(ii) Non-financial assets The carrying amounts of the groups 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 assets recoverable amount is estimated. for goodwill, the recoverable amount is estimated each year at the same time.
for the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets (the cash-generating unit). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. in assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate adjusted for the effects of tax cash outflows that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. The groups corporate assets do not generate separate cash inflows. if there is an indication that a corporate asset may be impaired, then the recoverable amount is determined from the cash-generating unit to which corporate asset belongs. an impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. impairment losses are recognized in the statement of income. impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. an impairment loss in respect of goodwill is not reversed. in respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
(i) Retirement pay liability in accordance with existing labor law in Turkey, the company and its subsidiaries in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military service or die. such payments are calculated on the basis of 30 days pay maximum full Tl 2,623 as at 31 December 2010 (equivalent to full $1,697 as at 31 December 2010), which is effective from 1 January 2011, per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the consolidated financial statements on a current basis. The reserve has been calculated by estimating the present value of future probable obligation of the company and its subsidiaries in Turkey arising from the retirement of the employees. (ii) Defined contribution plans a defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in the statement of income when they are due.
The assets of the plan are held separately from the consolidated financial statements of the group. The company and other consolidated companies that initiated defined contribution retirement plan are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the group with respect to the retirement plan is to make the specified contributions. (j) Provisions a provision is recognized if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Onerous contracts present obligations arising under onerous contracts are recognized and measured as a provision. an onerous contract is considered to exist where the group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The group did not recognize any provision for onerous contracts as at 31 December 2010 (31 December 2009: nil).
120
121
3. Significant accounting policies (continued) (j) Provisions (continued)
3. Significant accounting policies (continued) (k) Revenue (continued) commission fees mainly comprised of net takings earned to a maximum of 1.4% of gross takings, as a head agent of fixed odds betting games starting from 1 march 2009 (between 15 march 2007 and 1 march 2009, commission rate was 7% of gross takings and 4.3% commission was recognized based on the para-mutual and fixed odds betting games operated on central Betting system). commission revenues are recognized at the time all the services related with the games are fully rendered. under the agreement signed with spor Toto Teskilat mudurlugu as (spor Toto), inteltek internet Teknoloji yatirim ve Danismanlik as (inteltek) is obliged to undertake any excess payout, which is presented on net basis with the commission fees. simcard sales are recognized upfront upon delivery to distributors, net of returns, discounts and rebates. simcard costs are also recognized upfront upon sale of the simcard to the distributors. call center revenues are recognized at the time services are rendered. The revenue recognition policy for other revenues is to recognize revenue as services are provided. volume rebates or discounts and other contractual changes in the prices of roaming and other services are anticipated, as both the payer and the recipient, if it is probable that they have been earned or will take effect. Thus, contractual rebates and discounts are anticipated, but discretionary rebates and discounts are not anticipated because the definitions of asset and liability would not be met. (l) Lease payments payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease. lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease. minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Dismantling, removal and restoring sites obligation The group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. Bonus provision for bonus is provided when the bonus is a legal obligation, or past practice would make the bonus a constructive obligation and the group makes a reliable estimate of the obligation.
(k) Revenue Revenues are recognized as the fair value of the consideration received or receivable, net of returns, trade discounts and rebates. communication fees include postpaid revenues from incoming and outgoing calls, additional services, prepaid revenues, interconnect revenues and roaming revenues. communication fees are recognized at the time the services are rendered. with respect to prepaid revenues, the group generally collects cash in advance by selling scratch cards to distributors. in such cases, the group does not recognize revenue until the subscribers use the telecommunications services. Deferred income is recorded under current liabilitiesThe group offers free right of use to its subscribers, and recognizes any unused portion of these free granted right of use as at the balance sheet date as deferred revenue. The group does not have any other customer loyalty program in the scope of ifRic 13 customer loyalty programmes. in connection with campaigns, both postpaid and prepaid services may be bundled with handset or other goods/services and these bundled services and products involve consideration in the form of fixed fee or a fixed fee coupled with continuing payment stream. loyalty programs for both postpaid and prepaid services may be bundled with other services. Total arrangement considerations relating to the bundled contract are allocated among the different units according the following criteria: the component has standalone value to the customer and the fair value of the component can be measured reliably. The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. if a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integral part of the remaining components of the transactions. Revenues allocated to handsets given in connection with campaigns, which is included in other revenue, is recognized when the significant risks and rewards of ownership have been transferred to the buyer, collection is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. monthly fixed fees represent a fixed amount charged to postpaid subscribers on a monthly basis without regard to the level of usage. fixed fees are recognized on a monthly basis when billed.
Determining whether an arrangement contains a lease at inception of an arrangement, the group determines whether such an arrangement is or contains a lease. a specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. an arrangement conveys the right to use the asset if the arrangement conveys to the group the right to control the use of the underlying asset. at inception or upon reassessment of the arrangement, the group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values.
(m) Finance income and costs finance income comprises interest income on funds invested (including available-for-sale financial assets), late payment interest income, interest income on contracted receivables, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss and gains on derivative instruments that are recognized in the statement of income. interest income is recognized as it accrues, using the effective interest method. finance costs comprise interest expense on borrowings, litigation late payment interest expense, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or option premium expense. foreign currency gains and losses are reported on a net basis.
122
123
3. Significant accounting policies (continued) (m) Finance income and costs (continued)
3. Significant accounting policies (continued) (p) Earnings per share The group presents basic and diluted earnings per share (Eps) data for its ordinary shares. Basic Eps is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted Eps is equal to basic Eps because the group does not have any convertible notes or share options granted to employees. (q) Operating segment an operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the groups other components. all operating segments operating results are regularly reviewed by the group management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The group identified Turkcell, Euroasia and Belarusian Telecom as operating segments. (r) Subscriber acquisition costs The group capitalizes directly attributable subscriber acquisition costs when the following conditions are met: the capitalized costs can be measured reliably; there is a contract binding the customer for a specific period of time; and it is probable that the amount of the capitalized costs will be recovered through the revenues generated by the service contract, or, where the customer withdraws from the contract in advance, through the collection of the penalty. capitalized subscriber acquisition costs are amortized on a straight-line basis over the minimum period of the underlying contract. in all other cases, subscriber acquisition costs are expensed when incurred. (s) Government grants grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. government grants relating to costs are deferred and recognized in the statement of income over the period necessary to match them with the costs that they are intended to compensate. government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the statement of income on a straight-line basis over the expected useful lives of the related assets. (t) New standards and interpretations The following new and revised standards and interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in this section.
Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. investment income earned by the temporary investment of the part of the borrowing not yet used is deducted against the borrowing costs eligible for capitalization.
all other borrowing costs are recognized in the statement of income in the period in which they are incurred. (n) Transactions with related parties a related party is essentially any party that controls or can significantly influence the financial or operating decisions of the group to the extent that the group may be prevented from fully pursuing its own interests. for reporting purposes, investee companies and their shareholders, non-controlling shareholders at subsidiaries, key management personnel, shareholders of the group and the companies that the shareholders have a relationship with are considered to be related parties. (o) Income taxes income tax expense comprises current and deferred tax. income tax expense is recognized in the statement of income except to the extent that it relates to items recognized directly in equity or in other comprehensive income. current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. a deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. interest and penalties assessed on income tax deficiencies are presented based on their nature.
124
125
3. Significant accounting policies (continued) (t) New standards and interpretations (continued) a) New and Revised IFRSs do not affect presentation and disclosures
3. Significant accounting policies (continued) (t) New standards and interpretations (continued) (b) New and Revised IFRSs affecting the reported financial performance and / or financial position (continued)
amendments to iFRS 5, Non-current Assets Held for Sale and Discontinued Operations (as part of improvements to ifRss issued in 2009) The amendments to ifRs 5 clarify that the disclosure requirements in ifRss other than ifRs 5 do not apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations unless those ifRss require
(i) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations, or (ii) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of ifRs 5 and the disclosures are not already provided in the consolidated financial statements. since the group does not have any assets in this context, disclosures in these consolidated financial statements have not been modified to reflect the above clarification.
IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements (continued) The application of ias 27 (2008) has resulted in changes in the groups accounting policies for changes in ownership interests in subsidiaries. specifically, the revised standard has brought clarification to the groups accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. under ias 27 (2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.
when control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised standard requires the group to derecognize all assets, liabilities and non-controlling interests at their carrying amount and to recognize the fair value of the consideration received. any retained interest in the former subsidiary is recognized at its fair value at the date control is lost. The resulting difference is recognized as a gain or loss in profit or loss. These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions. since the non-controlling interests have a deficit balance, net loss amounting to $46,705 is accounted in non-controlling interests in accordance with ias 27 (revised) in the current period. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity; there have been no transactions with non-controlling interests.
amendments to ias 7, statement of cash flows (as part of improvements to ifRss issued in 2009)
The amendments to ias 7 specify that only expenditures that result in a recognized asset in the statement of financial position can be classified as investing activities in the statement of cash flows. The application of the amendments to ias 7 has resulted in a change in the presentation of cash outflows in respect of development costs that do not meet the criteria in ias 38, intangible assets for capitalization as part of an internally generated intangible asset. This change has been applied retrospectively. since, the development costs, which do not meet the criteria for capitalization, were included in cash flows from operating activities in the consolidated statement of cash flows of the previous periods, this amendment does not affect the consolidated financial statements. New and Revised IFRSs affecting the reported financial performance and / or financial position
IAS 28 (revised in 2008), Investments in Associates The principle adopted under ias 27 (2008) that a loss of control is recognized as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to ias 28. Therefore, when significant influence over an associate is lost, the investor measures any investment retained in the former associate at fair value, with any consequential gain or loss recognized in profit or loss.
as part of improvements to ifRss issued in 2010, ias 28 (2008) has been amended to clarify that the amendments to ias 28 regarding transactions where the investor loses significant influence over an associate should be applied prospectively. The group has applied the amendments to ias 28 (2008) as part of improvements to ifRss issued in 2010 in advance of their effective dates (annual periods beginning on or after 1 July 2010). There have been no transactions whereby an interest in an entity is retained after the loss of significant influence in that entity; there have been no transactions to acquire or dispose of shares in associates. ifRic 18, Transfers of assets from customers, is effective for transfer of assets received on or after 1 July 2009. This interpretation is applied by the group for the revenue recognition of assets transferred to its customers.
IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements
ifRs 3 (revised), Business combinations and consequential amendments to ias 27, consolidated and separate financial statements, ias 28, investments in associates and ias 31, interests in Joint ventures are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The main impact of the adoption is as follows: (a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as minority interests) either at fair value or at the non-controlling interests share of the fair value of the identifiable net assets of the acquiree, (b) to change the recognition and subsequent accounting requirements for contingent consideration, (c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being recognized as an expense in the statement of income as incurred, (d) in step acquisitions, previously held interests are to be remeasured to fair value at the date of the subsequent acquisition with the value included in goodwill calculation. gain or loss arising from the re-measurement shall be recognized as part of statement of income.
126
127
3. Significant accounting policies (continued) (t) New standards and interpretations (continued) (c) New and Revised IFRSs applied with no material effect on the consolidated financial statements The following new and revised ifRss have also been adopted in these consolidated financial statements. The application of these new and revised ifRss has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. ifRic 17, Distributions of non-cash assets to owners, is effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the group, as it has not made any non-cash distributions.
3. Significant accounting policies (continued) (t) New standards and interpretations (continued) (d) New and Revised IFRSs in issue but not yet effective (continued)
additional exemptions for first-time adopters (amendment to ifRs 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the group, as it is an existing ifRs preparer. ifRs 2, share-based payments - group cash-settled share payment arrangements is effective for annual periods beginning on or after 1 January 2010. This is not currently applicable to the group, as the group does not have share-based payment plans. amendments to ifRs 5, Non-current assets held for sale and Discontinued Operations (as part of improvements to ifRss issued in 2008) clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the group will retain a non-controlling interest in the subsidiary after the sale.
improvements to international financial Reporting standards 2009 were issued in april 2009. The improvements cover 12 main standards/ interpretations as follows: ifRs 2, share-based payments, ifRs 5, Non-current assets held for sale and Discontinued Operations, ifRs 8, Operating segments, ias 1, presentation of financial statements, ias 7, statement of cash flows, ias 17, leases, ias 18, Revenue, ias 36, impairment of assets, ias 38, intangible assets, ias 39, financial instruments: Recognition and measurement, ifRic 9, Reassessment of Embedded Derivatives, ifRic 16, hedges of Net investment in a foreign Operation. The effective dates vary standard by standard but most are effective 1 January 2010. (d) New and Revised IFRSs in issue but not yet effective
IFRS 7, Financial Instruments: Disclosures in October 2010, ifRs 7, financial instruments: Disclosures is amended by iasB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. IFRS 9, Financial Instruments: Classification and Measurement in November 2009, the first part of ifRs 9 relating to the classification and measurement of financial assets was issued. ifRs 9 will ultimately replace ias 39, financial instruments: Recognition and measurement. The standard requires an entity to classify its financial assets on the basis of the entitys business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The group has not had an opportunity to consider the potential impact of the adoption of this standard. IAS 24 (Revised 2009), Related Party Disclosures in November 2009, ias 24 Related party Disclosures was revised. The revision to the standard provides government related entities with a partial exemption from the disclosure requirements of ias 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011. The group does not expect any impact of the adoption of this amendment on the financial statements. IAS 32 (Amendments), Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements The amendments to ias 32 and ias 1 are effective for annual periods beginning on or after 1 february 2010. The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. previously, such rights issues were accounted for as derivative liabilities. however, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard. IFRIC 14 (Amendments), Pre-payment of a Minimum Funding Requirement amendments to ifRic 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment requires an asset to be recognized for any surplus arising from voluntary pre-payments made. The group does not expect any impact of the adoption of this amendment on the financial statements.
IFRS 1 (amendments), First-time Adoption of IFRS - Additional Exemptions

amendments to ifRs 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative ifRs 7 fair value disclosures. On 20 December, ifRs 1 is amended to provide relief for first-time adopters of ifRss from having to reconstruct transactions that occurred before their date of transition to ifRss and to provide guidance for entities emerging from severe hyperinflation either to resume presenting ifRs financial statements or to present ifRs financial statements for the first time. These amendments are not relevant to the group, as it is an existing ifRs preparer.
128
129
3. Significant accounting policies (continued) (t) New standards and interpretations (continued) (d) New and Revised IFRSs in issue but not yet effective (continued)
4. Determination of fair values (continued) (ii) Intangible assets The fair value of the brand acquired in the superonline uluslararas Elektronik Bilgilendirme Telekomunikasyon ve haberlesme hizmetleri as business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned. The fair value of customer base acquired in the superonline business combination are valued using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The fair value of the custom duty and vaT exemption agreement in the Belarusian Telecom business combination is based on the incremental cash flows method (cost saving approach) and this was used for the valuation analysis. The fair value of mobile telephony licenses (gsm&umTs) in the Belarusian Telecom business combination is based on the greenfield (buildout) method, which is estimated to be appropriate and commonly used for the valuation of licenses, and this was used for the valuation analysis. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. (iii) Investments in equity and debt securities The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price or over the counter market price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only. (iv) Trade and other receivables / due from related parties The fair values of trade and other receivables and due from related parties are estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. (v) Derivatives The fair value of forward exchange contracts and option contracts are based on their listed market price, if available. if a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models. (vi) Non-derivative financial liabilities fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. for finance leases, the market rate of interest is determined by reference to similar lease agreements. (vii) Exercise price of financial liability related to non-controlling share put option The group measures the estimated exercise price of the financial liability originating from put options granted to non-controlling interests as the present value of estimated option redemption amount. present value of the estimated option redemption amount is based on the fair value of estimation for the company subject to the put option. The group has estimated a value based on multiple approaches in grant to share purchase agreement including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 august 2013, which is the exercise date of the put option, is then discounted back to 31 December 2010.
IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

ifRic 19 is effective for annual periods beginning on or after 1 July 2010. ifRic 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability. The group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.
IAS 12, Income Taxes in December 2010, ias 12 is amended. ias 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. it can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in ias 40, investment property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. Annual Improvements, May 2010 further to the above amendments and revised standards, the iasB has issued annual improvements to ifRss in may 2010 that cover 7 main standards/interpretations as follow: ifRs 1, first-time adoption of international financial Reporting standards, ifRs 3, Business combinations, ifRs 7, financial instruments: Disclosures, ias 1, presentation of financial statements, ias 27, consolidated and separate financial statements, ias 34, interim financial Reporting and ifRic 13, customer loyalty programmes. with the exception of amendments to ifRs 3 and ias 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011. Early adoption of these amendments is allowed. The group has not yet had an opportunity to consider the potential impact of the adoption of these amendments to the standards.
4. Determination of fair values a number of the groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. fair values have been determined for measurement and/or disclosure purposes based on the following methods. when applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (i) Property, plant and equipment The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, willingly. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.
130
131
5. Financial risk management 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 groups exposure to each of the above risks, the groups objectives, policies and processes for measuring and managing risk, and the groups management of capital. further quantitative disclosures are included throughout these consolidated financial statements. Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the groups risk management framework. The groups 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 groups activities. The group audit committee oversees how management monitors compliance with the groups risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group. The audit committee is assisted in its oversight role by internal audit. The exchange rates were very volatile in 2009 but with a generally positive trend due to developments in the global markets as well as Turkish politics. The improved perception of global risk helped emerging market currencies appreciate in the second half of 2009. Tl appreciated against usD by 0.4% and depreciated against EuR by 0.9%, hRv depreciated against usD by 3.7% and ByR depreciated against usD by 30.1% as at 31 December 2009 when compared to the exchange rates as at 31 December 2008. as at 31 December 2010, Tl depreciated against usD by 2.7% and appreciated against EuR by 5.1%, hRv appreciated against usD by 0.3% and ByR depreciated against usD by 4.8% when compared to the exchange rates as at 31 December 2009. please refer to Note 29 for additional information on the groups exposure to this turmoil. Credit risk credit risk is the risk of a financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the groups receivables from customers and investment securities. management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The group may require collateral in respect of financial assets. also, the group may demand letters of guarantee from third parties related to certain projects or contracts. The group may also demand certain pledges from counterparties if necessary in return for the credit support it gives related to certain financings. in monitoring customer credit risk, customers are grouped according to whether they are an individual or legal entity, aging profile, maturity and existence of previous financial difficulties. Trade receivables and accrued service income are mainly related to the groups subscribers. The groups exposure to credit risk on trade receivables is influenced mainly by the individual payment characteristics of postpaid subscribers. The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables.
5. Financial risk management (continued) Credit risk (continued) investments are preferred to be in liquid securities and mostly with counterparties that have a credit rating equal or better than the group. some of the collection banks have credit ratings that are lower than the groups, or they may not be rated at all, however, policies are in place to review the paid-in capital and rating of counterparties periodically to ensure credit worthiness. 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 establishes an allowance for doubtful receivables that represents its estimate of incurred losses in respect of trade and other receivables. This allowance includes the specific loss component that relates to individual subscribers exposures, and adjusted for a general provision which is determined based on the age of the balances and historical collection trends. The groups policy is to provide financial guarantees only to wholly-owned subsidiaries. at 31 December 2010, $1,324,604 guarantees were outstanding (31 December 2009: $1,102,672). Liquidity risk liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The groups 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 groups reputation. Typically, the group ensures that it has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations. Market risk market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the groups income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The group buys and sells derivatives in order to manage market risks. all such transactions are carried at within the guidelines set by the group treasury management.
Currency risk The group is exposed to currency risk on certain revenues such as roaming revenues, purchases and certain operating costs such as roaming expenses and network related costs and resulting receivables and payables, borrowings, deferred payments related to the acquisition of Belarusian Telecom and financial liability in relation to put option for the acquisition of non-controlling shares of Belarusian Telecom that are denominated in a currency other than the respective functional currencies of group entities, primarily Tl for operations conducted in Turkey. The currencies in which these transactions are primarily denominated are EuR, usD and sEk.
132
133
5. Financial risk management (continued)

2009 5,789,972 328,011 1,946,071 383,608 (263,348) (596,802) 78,448 1,834,880 61,835 2008 2,592,114 755,185 (440,883) (681,258) 336,226 6,970,408 102,990 1,388,590 277,251 291,020 550,926 87,938 155,762 216,445 404,651 1,239,477 capital expenditure 1,834,880
Market risk (continued)
5,789,972
1,946,071
(263,348)
328,011
383,608
(596,802)
5,982,093
406,401
1,996,640
317,146
(173,213)
(767,970)
122,839
1,111,683
Currency risk (continued) Derivative financial instruments such as forward contracts and options are used to hedge exposure to fluctuations in foreign exchange rates. The group uses forward exchange contracts to hedge its currency risk.
The groups investments in its equity accounted investee fintur and its subsidiaries in ukraine, Republic of Belarus, azerbaijan and germany are not hedged with respect to the currency risk arising from the net assets as those net investments are considered to be long-term in nature.
Total
Total
2009
78,448
23,499
181,671
81,423
(76,006)
2008
(42,885)
362,893
292,303
102,990
2009
246,466
304,118
144,989
75,783
(32,975)
(67,920)
78,448
291,020
(32,975)
144,989
(67,920)
246,466
304,118
305,065
386,404
213,655
(66,143)
(92,034)
122,839
386,119
Interest rate risk The groups exposure to interest rate risk is related to its financial assets and liabilities. The groups financial liabilities mostly consist of floating interest rate borrowings. The use of financial derivatives is governed by the groups policies approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with the groups risk management strategy. in this respect, the group has not entered into any type of derivative instrument in order to hedge interest rate risk as at 31 December 2010.
6. Operating segments The group has three reportable segments, as described below, which are based on the dominant source and nature of the groups risk and returns as well as the groups internal reporting structure. These strategic segments offer the same types of services, however they are managed separately because they operate in different geographical locations and are affected by different economical conditions. The group comprises the following main operating segments: Turkcell, Euroasia and Belarusian Telecom, all of which are gsm operators in their countries. Other operations mainly include companies operating in telecommunication and betting businesses and companies provide internet and broadband services, call center and value added services.
Other
Other
2009
75,783
78,448
2010
60,213
(5,827)
(1,250)
2008
(8,922)
380
100
2009
17,356
76
(38,318)
1,411
(12,513)
(52,749)
87,938
61,835
Belarusian Telecom
Belarusian Telecom
(38,318)
(12,513)
2009
1,411
(52,749)
17,356
76
48,918
(32,564)
(28,527)
(80,826)
120,061
23,499
(262,917)
2008
436,716
32,330
6,344
(100,986)
1,977
2009
350,045
1,033
20,150
2,093
(54,921)
(79,874)
216,445
Euroasia
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. The accounting policies of operating segments are the same as those described in the summary of significant accounting policies.
Euroasia
(54,921)
2009
2,093
(79,874)
350,045
20,150
1,033
2010
334,006
5,252
64,455
763
(43,974)
(120,407)
66,727
2009
5,176,105
22,784
1,819,250
304,321
(162,939)
(396,259)
1,239,477
2008
6,170,419
2,383,940
667,318
41,944
(100,710)
(528,465)
Turkcell
2010
5,294,104
14,682
1,751,094
255,417
(34,569)
(474,703)
538,776
Turkcell
2009
5,176,105
1,819,250
304,321
(162,939)
22,784
(396,259)
Operating segments (continued)
Other material non-cash items: impairment on goodwill
134
Other material non-cash items: impairment on goodwill
Depreciation and amortization
Depreciation and amortization
Reportable segment adjusted EBiTDa
Reportable segment adjusted EBiTDa
share of profit of equity accounted investees
share of profit of equity accounted investees
Total external revenues
Total external revenues
intersegment revenue
intersegment revenue
capital expenditure
finance income
finance income
finance costs
finance cost
61,835
2010
63
753
61,835
2010
135
5,724,088
1,695,670
383,490
2009
Operating segments (continued) Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:
Total
6,039,395
1,528,364
399,622
2010
2010 Revenues Total revenue for reportable segments Other revenue Elimination of inter-segment revenue consolidated revenue 5,697,025 691,469 (406,401) 5,982,093 2010 Adjusted EBITDA Total adjusted EBiTDa for reportable segments Other adjusted EBiTDa Elimination of inter-segment adjusted EBiTDa consolidated adjusted EBiTDa finance income finance costs Other income Other expense share of profit of equity accounted investees Depreciation and amortization consolidated profit before income tax 1,782,985 213,655 (39,268) 1,957,372 277,130 (102,662) 14,668 (64,233) 122,839 (757,354) 1,447,760 2010 Finance income Total finance income for reportable segments Other finance income Elimination of inter-segment finance income consolidated finance income 256,933 60,213 (40,016) 277,130
2009 5,567,399 550,584 (328,011) 5,789,972 2009 1,801,082 144,989 (20,738) 1,925,333 329,550 (187,514) 978 (111,220) 78,448 (590,678) 1,444,897 2009 307,825 75,783 (54,058) 329,550
2008 6,651,438 655,196 (336,226) 6,970,408 2008 2,410,443 181,671 (11,833) 2,580,281 442,099 (136,769) 14,136 (17,990) 102,990 (679,927) 2,304,820 2008 673,762 81,423 (313,086) 442,099
383,490
Other
773,103
399,622
As at 31 December 2010 and 2009
1,045,535
Belarusian Telecom
517,718
517,312
Euroasia
702,847
616,375
Turkcell
3,730,420
6. Operating segments (continued)
3,860,173
Reportable segment assets
136
investment in associates
Reportable segment liabilities
1,092,496
2010
1,305,206
2009
153,927
2010
189,875
2009
83,161
2010
56,982
2009
198,780
2010
143,607
2009
137
Operating segments (continued) 2010 Finance costs Total finance costs for reportable segments Other finance costs Elimination of inter-segment finance costs consolidated finance costs 107,070 66,143 (70,551) 102,662 2009 230,373 32,975 (75,834) 187,514 2008 364,877 76,006 (304,114) 136,769
6. Operating Segments (continued) Geographical information in presenting the information on the basis of geographical segments, segment revenue is based on the geographical location of operations and segment assets are based on the geographical location of the assets. Revenues Turkey ukraine Belarus Turkish Republic of Northern cyprus 2010 5,522,387 334,006 48,918 76,782 5,982,093 2009 5,348,500 350,045 17,356 74,071 5,789,972 2010 Non-current assets Turkey ukraine Belarus Turkish Republic of Northern cyprus unallocated non-current assets 3,746,557 607,704 497,798 65,222 439,743 5,357,024 2008 6,456,165 436,716 380 77,147 6,970,408 2009 3,437,909 634,068 507,729 66,656 420,303 5,066,665
2010 Depreciation and amortization Total depreciation and amortization for reportable segments Other depreciation and amortization Elimination of inter-segment depreciation and amortization consolidated depreciation and amortization 675,936 92,034 (10,616) 757,354 2010 Capital expenditure Total capital expenditure for reportable segments Other capital expenditure Elimination of inter-segment capital expenditure consolidated capital expenditure 725,564 386,119 (33,101) 1,078,582
2009 528,882 67,920 (6,124) 590,678 2009 1,543,860 291,020 (65,606) 1,769,274
2008 638,373 42,885 (1,331) 679,927 2008 1,111,339 277,251 (24,012) 1,364,578
7. Revenue communication fees monthly fixed fees commission fees on betting business call center revenues simcard sales Other revenues 2010 5,670,215 75,420 31,195 25,199 22,900 157,164 5,982,093 2009 5,557,335 42,493 42,652 17,426 22,855 107,211 5,789,972 2008 6,576,857 65,081 176,237 16,604 28,189 107,440 6,970,408
2010 Assets Total assets for reportable segments Other assets investments in equity accounted investees Other unallocated assets consolidated total assets 4,993,860 1,045,535 399,622 3,355,545 9,794,562
2009 4,950,985 773,103 383,490 3,213,188 9,320,766
8. Other Expenses Other expenses amount to $64,233, $111,220 and $17,990 for the years ended 31 December 2010, 2009 and 2008, respectively. Other expenses comprises impairment change recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to $23,499, penalty imposed as a result of investigation of icTa on tariff plans, vas service subscriptions and charging applications of the company amounting to $13,987, $4,957 and $2,090, respectively, special communication Tax (scT) and vaT calculated on roaming services that had to be collected from subscribers as a result of tax settlement amounting to $12,900 and provision set for scT on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007 amounting to $5,825 based on the previous settlement gains. Besides, provision set for the scT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $14,539 as of 31 December 2009. however, it has been settled at $2,765 and the difference is reflected to other expense as income.
2010 Liabilities Total liabilities for reportable segments Other liabilities Other unallocated liabilities consolidated total liabilities 1,329,584 198,780 2,032,601 3,560,965
2009 1,552,063 143,607 1,728,895 3,424,565
138
139
9. Personnel expenses 2010 wages and salaries (*) increase in employee benefits contributions to defined contribution plans 485,214 10,879 5,243 2009 400,880 7,884 3,694 412,458 2008 501,327 8,083 4,182 513,592
11. Income tax expense 2010 Current tax expense current period Deferred tax benefit Origination and reversal of temporary differences Benefit of investment incentives recognized utilization of previously unrecognized tax losses Total income tax expense (336,914) (336,914) 13,321 1,187 1,607 16,115 (320,799) 2009 (353,389) (353,389) 9,574 1,892 1,830 13,296 (340,093) 2008 (567,169) (567,169) 14,893 2,518 17,411 (549,758)
501,336 (*) wages and salaries include compulsory social security contributions and bonuses. 10. Finance income and costs Recognized in the statement of income: interest income on bank deposits late payment interest income interest income on contracted receivables premium income on option contracts interest income on available-for-sale financial assets Net gain on disposal of available-for-sale financial assets transferred from equity Discount interest income Other interest income finance income 2010 196,418 42,064 12,345 12,147 1,121 1,318 886 10,831 277,130 (258) litigation late payment interest expense interest expense on financial liabilities measured at amortized cost Option premium expense Net foreign exchange loss Other finance cost Net finance income (66,086) (4,988) (13,778) (17,552) (102,662) 174,468
2009 224,160 49,037 31,178 10,549 6,308 2,084 1,052 5,182 329,550 (97,016) (76,763) (1,150) (576) (12,009) (187,514) 142,036
2008 359,408 43,479 14,655 8,328 6,494 5,053 4,682 442,099 (30,501) (51,448) (4,970) (44,452) (5,398) (136,769) 305,330
Income tax recognized directly in equity 2010 foreign currency translation differences Net change in fair value of available-for-sale securities 2009 foreign currency translation differences Net change in fair value of available-for-sale securities 2008 foreign currency translation differences Net change in fair value of available-for-sale securities (1,458,709) (6,385) (1,465,094) 343 1,025 1,368 (1,458,366) (5,360) (1,463,726) 53,046 1,197 54,243 (1,091) (1,091) 51,955 1,197 53,152 Before tax (184,352) (1,318) (185,670) Tax (expense)/ benefit (754) (754) Net of tax (185,106) (1,318) (186,424)
late payment interest income is interest received from subscribers who pay monthly invoices after the due date specified on the invoices. interest income on contracted receivables is recognized over the amount related to the handset campaigns throughout the contract period. litigation late payment interest expense is recognized in relation to legal disputes. litigation late payment interest expense comprises accrued interest amounting to $10,235 calculated over scT and vaT from roaming services that had to be collected from subscribers as a result of tax settlement and accrued interest amounting to $8,428 calculated over scT on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007 which is calculated based on the previous settlement gains. Besides, accrued interests calculated over scT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $28,400 as of 31 December 2009. however, after settlement, it has been calculated as $5,671 and the difference is reflected to litigation late payment interest expense as income. Detailed explanations are given in Note 32. Borrowings costs capitalized on fixed assets are $11,127, $1,602 and $11,375 for the year ended 31 December 2010, 2009 and 2008, respectively. interest capitalization ratio is 17.6%, 5.6% and 26.1% for the year ended 31 December 2010, 2009 and 2008 respectively.
140
141
Balance at 31 December 2009 5,234,540 272,744 311,390 14,905 134,743 451,050 6,419,372
3,273,403 99,405 266,360 12,027 115,955 3,767,150 38,013 587 (724) 8 507 38,391 39,298 39,298 (316,821) (9,031) (1,029) (3,047) (329,928) 310,051 16,518 15,243 956 2,191 344,959 3,202,862 82,300 260,872 12,092 116,304 3,674,430 Network infrastructure (all Operational) land and buildings Equipment, fixtures and fittings motor vehicles leasehold improvements Total Accumulated depreciation
Reconciliation of effective tax rate The reported income tax expense for the years ended 31 December 2010, 2009 and 2008 are different than the amounts computed by applying the statutory tax rate to profit before income tax of the company, as shown in the following reconciliation: 2010 1,126,961 320,799 1,447,760 20% (1)% 1% 3% (2)% (289,552) 12,367 676 (19,300) 1,187 1,607 (47,623) 22,893 (3,054) (320,799) 20% (1)% 2% 3% (1)% 2009 1,104,804 340,093 1,444,897 (288,979) 10,041 1,041 (29,444) 1,892 1,830 (48,963) 17,602 (5,113) (340,093) 20% (1)% 2% 4% (1)% 1% 2008 1,755,062 549,758 2,304,820 (460,964) 17,909 6,178 (42,206) 2,518 (83,841) 22,937 (12,289) (549,758)
Effect of movements in exchange rates 17,901 (6,342) 713 (334) 490 (50,153) (37,725)
profit for the year Total income tax expense profit before income tax income tax using the companys domestic tax rate Effect of tax rates in foreign jurisdictions Tax exempt income Non-deductible expenses Tax incentives utilization of previously unrecognized tax losses unrecognized deferred tax assets Difference in effective tax rate of equity accounted investees Other Total income tax expense
Impairment -
Transfers 704,608 1,765 31,637 1,138 (739,148) -
Disposals (344,581) (9,777) (1,067) (3,745) (359,170)
Balance at 1 January 2009 4,636,948 269,094 280,986 14,737 132,628 436,107 5,770,500
corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting tax exempt income. 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 communiqu 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 arms 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.
142
12. Property, plant and equipment
Total property, plant and equipment equipment
Cost or deemed cost Network infrastructure (all Operational) land and buildings Equipment, fixtures and fittings motor vehicles leasehold improvements construction in progress Total
2,096,070
11. Income tax expense (continued) The income taxes payable of $96,080 and $93,260 as at 31 December 2010 and 2009, respectively, represents the amount of income taxes payable in respect of related taxable profit for the years ended 31 December 2010 and 2009, respectively netted off with advance tax payments. The Turkish entities within the group are subject to corporate tax at the rate of 20%. in Turkey, there is no procedure for a final and definitive agreement on tax assessments. companies file their tax returns at the end of april following the close of the accounting year to which they relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. advance tax returns are filed on a quarterly basis.
Additions 219,664 8,227 7,831 1,569 4,232 804,244 1,045,767
700,808
(29,242)
(39,298)
(76,116)
2,652,222
11. Income tax expense (continued)
143
Depreciation expenses for the years ended 31 December 2010, 2009 and 2008 are $515,515, $384,257 and $433,942, respectively including impairment losses and recognized in direct cost of revenues.
The impairment losses on property, plant and equipment for the years ended 31 December 2010, 2009 and 2008 are $64,847, $39,298 and $7,688, respectively and recognized in depreciation expense.
5,638,149
281,610
278,709
16,341
136,506
6,553,715
202,400
2,999,861
106,750
252,184
11,827
3,485,694
3,068,021
115,072
12. Property, plant and equipment (continued) Leased assets The group leases equipment under a number of finance lease agreements. at the end of each of the lease period, the group has the option to purchase the equipment at a beneficial price. as at 31 December 2010, net carrying amount of fixed assets acquired under finance leases amounted to $82,944 (31 December 2009: $65,844). Property, plant and equipment under construction construction in progress mainly consisted of capital expenditures in gsm network of the company, astelit, kibris mobile Telekomunikasyon limited sirketi (kibris Telekom) and Belarusian Telecom and non-operational items as at 31 December 2010 and 2009. as at 31 December 2010, a mortgage is placed on izmir building in favour of yap ve kredi Bankas a.s., interbank a.s. and pamukbank T.a.s founded at 25 august 1992 amounting to $970 (31 December 2009: $996) and also on Davutpasa building in favour of pamukbank T.a.s founded at 11 December 1997 amounting to $323 (31 December 2009: $332) due to previous debts of Bmc sanayi ve Ticaret a.s. Those buildings were sold to the company with their mortgages. since the debts of Bmc sanayi ve Ticaret a.s. were paid and the company has no liability to savings Deposit insurance fund (sDif) related to interbank a.s. and pamukbank T.a.s., the company asked for the release of mortgage on izmir building on 13 march 2006. however, the mortgage is still valid due to the outstanding debts of cukurova group to sDif. 13. Intangible assets in april 1998, the company signed the license with the Turkish ministry, under which it was granted a gsm license, which is amortized over 25 years with a carrying amount of $364,349 as at 31 December 2010 (31 December 2009: $404,636). The amortization period of the license will end in 2023. On 30 april 2009, the company signed a license agreement with icTa which provides authorization for providing imT 2000/umTs services and infrastructure. The company acquired the a type license providing the widest frequency band for a consideration of EuR 358,000 (excluding vaT). The license is effective for duration of 20 years starting from 30 april 2009. The carrying amount is $456,221 as at 31 December 2010 (31 December 2009: $493,982). Impairment testing for long-lived assets The carrying amounts of the groups 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 assets recoverable amount is estimated. long-lived assets are tested for impairment as at 31 December 2010. as the recoverable amounts of the assets or cash-generating unit are greater than the value in use, no impairment is recognized. for the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets, cash generating units. as at 31 December 2010, impairment test for long-lived assets of astelit and a-Tel, is made on the assumption that astelit and a-Tel are the cash generating unit. as the recoverable amounts based on the value in use of cash generating units is higher than the carrying amount of cash-generating units of astelit and a-Tel, no impairment is recognized. The assumptions used in value in use calculation of astelit and a-Tel as at 31 December 2010 are: Astelit: a 15.7% post-tax wacc rate and a 2.5% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. independent appraisal is obtained for fair value to determine recoverable amounts for astelit. The pre-tax rate for disclosure purposes is 18.9% A-Tel: a 14.2% post-tax wacc rate and a 4.0% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. independent appraisal is obtained for fair value to determine recoverable amounts for a-Tel. The pre-tax rate for disclosure purposes is 14.2%.
Effect of movements in exchange rates
(121,879)
(6,845)
(6,755)
(426)
(3,436)
(149,424)
(10,083)
(85,994)
(2,779)
(10,742)
(355)
(102,938) 63,673 (694,167) 450,668 3,767,150 Total 1,308
Impairment
(1,174)
(1,174)
63,673
Transfers
986,357
(35,347)
(936,992)
18,229
14,018
(16,921)
Disposals
(694,108)
(2,205)
(1,901)
(968)
(3,592)
(690,051)
(702,774)
(1,709)
(1,686)
(721)
Additions
233,239
15,711
11,626
3,763
6,167
703,191
973,697
420,601
10,124
15,196
1,841
2,906
5,234,540
272,744
311,390
14,905
134,743
451,050
3,273,403
6,419,372
99,405
266,360
12,027
115,955
12. Property, plant and equipment (continued)
Network infrastructure (all operational) Operational)
144
Total property, plant and equipment equipment
Network infrastructure (all operational)
Equipment, fixtures and fittings
Equipment, fixtures and fittings
Accumulated depreciation
leasehold improvements
leasehold improvements
construction in progress
Cost or deemed cost
land and buildings
land and buildings
motor vehicles
motor vehicles
Total
2,652,222
523,029
(8,607)
12,710
(64,847)
(46,486)
(3,068)
145
146
13. Intangible assets (continued)
Cost gsm and other telecommunication operating licenses computer software Transmission lines central betting system operating right Brand name customer base customs duty and vaT exemption right goodwill Other construction in progress Total Accumulated amortization gsm and other telecommunication operating licenses computer software Transmission lines central betting system operating right Brand name customer base customs duty and vaT exemption right Other Total Total intangible assets 1,452,895 517,086 (379) 1,644,715 206,421 (21,711) 360 84 3,871 11,416 1,337 639 116 458 3,826 170 23,585 2,301 1,212,943 140,964 (1,940) 398,677 50,389 (19,771) (61,835) (21,495) 3,875 154 20 10 20 266 33 (17,117) (9,786) 407,800 1,355,842 26,040 4,016 584 1,996 15,553 477 1,812,308 1,897,981 3,097,610 723,507 (22,090) (61,835) 22,506 680,510 (693,312) 1,718 1,062 244,642 (61,835) 51,101 6,370 28 224 1,549 (482) (4,142) (26,903) 4,655 21 5,476 28 23 31,431 1,350 408 1,743,264 23,530 (2,319) 185,000 1,585 986,447 17,027 (19,771) 508,312 (26,117) 1,465,898 1,951,060 33,189 5,527 4,676 6,398 51,325 184,356 2,298 5,562 3,710,289

Balance at 1 January 2009 Additions Disposals Transfers Impairment Effects of movements in exchange rates Balance at 31 December 2009
13. Intangible assets (continued)
Cost gsm and other telecommunication operating licenses computer software Transmission lines central betting system operating right indefeasible right of usage Brand name customer base customs duty and vaT exemption right goodwill Other construction in progress Total Accumulated amortization gsm and other telecommunication operating licenses computer software Transmission lines central betting system operating right indefeasible right of usage Brand name customer base customs duty and vaT exemption right Other Total Total intangible assets
Balance at 1 January 2010 1,465,898 1,951,060 33,189 5,527 4,676 6,398 51,325 184,356 2,298 5,562 3,710,289
Additions 400 36,831 284 339 22,531 532 94,441 155,358
Disposals -
Transfers 2,815 79,617 (96,449) (14,017)
Impairment (23,499) (23,499)
Effects of movements in exchange rates (47,678) (47,792) (858) (144) (122) (167) (1,338) (19,600) (48) (928) (118,675)
Balance at 31 December 2010 1,421,435 2,019,716 32,615 5,722 22,531 4,554 6,231 49,987 141,257 2,782 2,626 3,709,456
407,800 1,355,842 26,040 4,016 584 1,996 15,553 477 1,812,308 1,897,981
70,847 155,714 1,734 210 1,543 468 654 10,595 74 241,839 (86,481)
(1,307) (1,307) (12,710)
(23,499)
(12,915) (38,140) (767) (110) (28) (69) (686) 20 (52,695) (65,980)
465,732 1,472,109 27,007 4,116 1,543 1,024 2,581 25,462 571 2,000,145 1,709,311
amortization expenses on intangible assets other than goodwill for the years ended 31 December 2010, 2009 and 2008 are $241,839, $206,421 and $245,985 respectively including impairment losses and recognized in direct cost of revenues. The impairment losses on goodwill for the year ended 31 December 2010, 2009 and 2008 are $23,499, $61,835 and nil respectively recognized in other expenses in the consolidated statement of income. computer software includes internally generated capitalized software development costs that meet the definition of an intangible asset. The amount of internally generated capitalized costs is $29,142 for the year ended 31 December 2010 (31 December 2009: $24,987).
147
13. Intangible assets (continued) superonline, a wholly owned subsidiary of the group, won the tender of BOTas for indefeasible right to use the capacity of the fiber optic cables already installed by BOTas for 15 years, including the right to install additional fiber optic cables and the right to use the capacity of these fiber optic cables for the same period. superonline will pay EuR 20,900 to BOTas for the right and this transaction has been considered as a finance lease as the lease term is for the major part of the remaining useful life of the fiber optic cables already installed by BOTas and superonline will make significant investment during the initial period of the lease agreement which is an indicator that the transaction is a finance lease. The group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to be made to BOTas till the year 2024. Impairment testing for cash-generating unit containing goodwill goodwill allocated to cash generating units and carrying values of all cash generating units are annually tested for impairment. The recoverable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculation. independent appraisals were obtained for fair values to determine recoverable amounts for Belarusian Telecom and superonline as at 31 December 2010. in calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including managements expectations of growth in EBiTDa, calculated as results from operating activities before depreciation and amortization and other income/(expenses), timing and quantum of future capital expenditure, long term growth rates, and the selection of discount rates to reflect the risks involved. Belarusian Telecom as at 31 December 2010, the aggregate carrying amount of goodwill allocated to Belarusian Telecom is $120,112 and goodwill arising from the acquisition of Belarusian Telecom was impaired by $23,499 following the adverse movements in the discount and growth rates and adverse performance against previous plans. The impairment loss was allocated fully to goodwill and is included in other expense. value in use was determined by discounting the future cash flows generated from the continuing use of the unit. The calculation of the value in use was based on the following key assumptions: The projection period for the purposes of goodwill impairment testing is taken as 7 years between 1 January 2011 and 31 December 2017. cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 3.0% which does not exceed the estimated average growth rate for the country. a post-tax discount rate wacc of 14.4% was applied in determining the recoverable amount of the unit. The post-tax rate was adjusted considering the tax cash outflows and other future tax cash flows and discrepancies between the cost of the assets and their tax bases. The pre-tax rate for disclosure purposes is 17.2%.
13. Intangible assets (continued) Impairment testing for cash-generating unit containing goodwill (continued) Superonline as at 31 December 2010, the aggregate carrying amount of goodwill allocated to superonline is $21,145. as the recoverable values based on the value in use of the cash generating units is estimated to be higher than carrying amount, no impairment was required for goodwill arising from the acquisition of superonline as at 31 December 2010. The calculation of the value in use was based on the following key assumptions: values assigned to EBiTDa for the periods forecasted include the expected synergies to be achieved from operating as a part of the group. values assigned to this key assumption reflect past experience except for efficiency improvements and synergies. management believes that any reasonably possible change in the key assumptions on which superonline recoverable amount is based would not cause superonlines carrying amount to exceed its recoverable amount. The projection period for the purposes of goodwill impairment testing is taken as 8 years between 1 January 2011 and 31 December 2018. cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 2.5%. This growth rate does not exceed the long-term average growth rate for the market in which superonline operates. a post-tax discount rate wacc of 15.8% was applied in determining the recoverable amount of the unit. Discounting post-tax cash flows at a post-tax discount rate and discounting pre tax cash flows at pre-tax discount rate give same results, since the pre-tax discount rate is the post-tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows. for disclosure purposes pre-tax discount rate is 18.3%. after the acquisition of superonline uluslararasi Elektronik Bilgilendirme Telekomunikasyon ve haberlesme hizmetleri as (superonline uluslararasi) in 2008, management merged superonline uluslararasis operations with its wholly owned subsidiary, Tellcom iletisim hizmetleri as (Tellcom) in may 2009. with the merger, superonline uluslararasi and Tellcom seized to be separate cash generating units and merged as one cash generating unit under the brand name of superonline. Therefore, the business plans used for the purpose of the impairment testing represents the merged entities operations. The registered name of the entity was changed from Tellcom iletisim hizmetleri as to superonline iletisim hizmetleri as with general assembly meeting note dated 20 December 2010.
148
149
14. Equity accounted investees The groups share of profit in its equity accounted investees for the years ended 31 December 2010, 2009 and 2008 are $122,839, $78,448 and $102,990, respectively. summary financial information for equity accounted investees adjusted for the accounting policy differences for the same events under similar circumstances and not adjusted for the percentage ownership held by the group is as follows:
Total liabilities and equity
2,030,267 230,302 2,260,569
1,915,125 242,593 2,157,718
Equity attributable to parent
489,238 192,008 681,246
454,875 196,578 651,453
14. Equity accounted investees (continued) The companys investment in fintur and a-Tel amounts to $303,618 and $96,004 respectively as at 31 December 2010 (31 December 2009: $285,597 and $97,893). During 2009, fintur distributed a total dividend of $200,000. The group received its share of dividend in December 2009 at the amount of $82,900 and decreased its investment in fintur by $82,900. in 2010, fintur has decided to distribute two dividends amounting to $70,000 and $190,000. The company reduced the carrying value of its investments in fintur by the cash collected dividend of $29,015 and $78,755 on 5 may 2010 and 7 December 2010, respectively. in april 2008, the privatization of the Republic of azerbaijans 35.7% ownership in azercell Telecom B.m. (azercell), a 51% owned consolidated subsidiary of fintur, was completed. The non-controlling shareholders in azercell acquired the 35.7% shares of Republic of azerbaijan increasing their effective ownership in azercell to 49%. One of the non-controlling shareholders was also granted a put option, giving the shareholder the right to sell its 42.2% stake to fintur at fair value in certain deadlock situations regarding significant decisions at the general assembly. fintur has initially accounted for the present value of the estimated option redemption amount as a provision and derecognized the non-controlling interest. The difference between the present value of the estimated option redemption amount and the derecognized noncontrolling interest amounting to $715,126 is accounted under equity, in accordance with the groups accounting policy. * figures mentioned in the above table includes fair value adjustments that arose during acquisition of a-Tel. During april 2010 and December 2009 at the general assembly meeting of a-Tel, it has been decided to distribute dividends and accordingly the company reduced the carrying value of its investments in a-Tel by the dividends declared of Tl 1,241 (equivalent to $803 as at 31 December 2010) and Tl 7,248 (equivalent to $4,688 as at 31 December 2010) as at 31 December 2010 and 2009, respectively. 15. Other investments Non-current investments: 2010 Country of incorporation Turkey Ownership (%) 6.24 Carrying Amount 21,905 2009 Ownership (%) 6.24 Carrying Amount 22,492
Noncontrolling interest
439,495 439,495
Non-current liabilities
811,749 37,216 848,965
Current liabilities
289,785 1,078 290,863
250,133 6,539 256,672
804,271 39,476 843,747
405,846 405,846
310,945
(8,529)
302,416
364,545 (739,410)
1,888 (83,128)
369,516
2,030,267 230,302 2,260,569
Non-current assets
1,578,669 181,414 1,760,083
1,491,371 196,524 1,687,895
1,915,125 242,593 2,157,718
Profit/Loss
372,439
(665,749)
(77,625)
(743,374)
(692,757)
Direct cost of revenues
(749,440)
(822,538)
(56,683)
366,433
Total assets
2,923
aks Televizyon Reklamcilik ve filmcilik sanayi ve Ticaret as (aks Tv) T medya yatirim sanayi ve Ticaret as (T-medya)
451,598 48,888 500,486
423,754 46,069 469,823
Current assets
Turkey
4.52
11,944 33,849
10.03
12,263 34,755
73,897
1,678,919
1,823,095
98,129
1,736,576
1,799,811
Ownership
41.45% 50.00%
41.45% 50.00%
Revenues
1,605,022
1,921,224
63,235
On 2 february 2010, sDif notified that lien was laid on priority right to purchase back regarding the shares of aks Tv of which 6.24% were held by Turktell Biliim hizmetleri as. in case that, those shares are sold to third parties other than cukurova group, sDif has the right to exercise its priority right to purchase back and the purchase price will be determined within the context of the past agreements signed between previous owners and cukurova group. On 19 July 2010, at T-medyas general assembly meeting, it has been decided to increase the share capital of T-medya. however, the group did not participate in the capital contribution, accordingly the ownership of the group in T-medya decreased to 4.52%. There is no active market available for investments aks Tv and T medya. The company measured these investments at cost. Based on the impairment analysis performed by considering the lower end limits of fair value calculations performed by an independent valuation firm, no impairment has been identified.
31 December 2010 fintur (associate) a-Tel (joint venture)*
31 December 2009 fintur (associate) a-Tel (joint venture)*
fintur
fintur
fintur
a-Tel
a-Tel
2010
150
2009
a-Tel
2008
151
15. Other investments (continued) Current investments: 2010 Available-for-sale financial assets 2009 62,398 62,398
17. Deferred tax assets and liabilities (continued) Unrecognized deferred tax assets (continued) as at 31 December 2010, expiration of tax losses is as follows: Year Originated 2006 2007 2008 2009 2010
government bonds, treasury bills Time deposits Deposits maturing after 3 months or more
There are no government bonds as at 31 December 2010 (31 December 2009: $62,398).
8,201 8,201
as at 31 December 2010, ByR denominated time deposits maturing after 3 months or more amounting to $201 have stated interest rate of 10.5% and usD denominated time deposits maturing after 3 months or more amounting to $8,000 have stated interest rate of 7.0% The groups exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 29. 16. Other non-current assets 2010 vaT receivable 62,167 prepaid expenses 29,717 Deposits and guarantees given 9,560 advances given for fixed assets 4,654 prepayment for subscriber acquisition cost Others 1,179 107,277 subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a consideration. 2009 37,628 22,406 9,597 2,867 2,622 75,120 minimum
Amount 3,207 10,785 78,819 35,784 48,197 176,792
Expiration Date 2011 2012 2013 2014 2015 thereafter
as at 31 December 2010, tax losses which will be carried indefinitely are as follows: Year Originated 2004 2005 2006 2007 2008 2009 2010 Amount 15,910 38,621 63,408 55,382 239,575 44,625 12,150
17. Deferred tax assets and liabilities Unrecognized deferred tax liabilities at 31 December 2010, a deferred tax liability of $15,687 (31 December 2009: $18,669) for temporary differences of $78,433 (31 December 2009: $93,345) related to investments in subsidiaries was not recognized because the company controls whether the liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future.
Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following items:
2010 Deductible temporary differences Tax losses Total unrecognized deferred tax assets 67,086 152,776 219,862 2009 39,186 140,493 179,679
Recognized deferred tax assets and liabilities Deferred tax assets and liabilities as at 31 December 2010 and 2009 are attributable to the following: Assets Liabilities 2010 2009 2010 2009 property, plant & equipment and intangible assets 347 84 (152,193) (170,397) investment (15,096) (13,833) provisions 28,423 27,474 Trade and other payables 23,460 39,271 (16) (38) Other items 25,940 2,104 (1,094) (1,039) Tax assets / (liabilities) 78,170 68,933 (168,399) (185,307) Net off of tax (75,294) (66,875) 75,294 66,875 Net tax assets / (liabilities) 2,876 2,058 (93,105) (118,432)
Net 2010 2009
(151,846) (15,096) 28,423 23,444 24,846 (90,229) (90,229)
(170,313) (13,833) 27,474 39,233 1,065 (116,374) (116,374)
The deductible temporary differences do not expire under current tax legislation. Turkish tax legislation does not allow companies to file tax returns on a consolidated basis. Therefore, deferred tax assets have not been recognized in respect of these items resulting from certain consolidated subsidiaries because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.
152
153
18. Trade receivables and accrued income Receivables from subscribers accrued service income accounts and checks receivable Receivables from Turk Telekomunikasyon as (Turk Telekom) 2010 414,606 348,135 52,111 1,299 816,151 2009 392,328 318,526 57,867 15,031 783,752
(170,313) (13,833) 27,474 39,233 1,065 (116,374)
(151,846) (15,096) 28,423 23,444 24,846 (90,229)
12,336 373 (740) (805) (380) 10,784
(770) (122) 602 27 1,031 768
Trade receivables are shown net of allowance for doubtful debts amounting to $367,913 as at 31 December 2010 (31 December 2009: $268,157). The impairment loss recognized for the years ended 31 December 2010, 2009 and 2008 are $117,362, $75,379 and $65,678, respectively. letters of guarantee received with respect to the accounts and checks receivable are amounted to $181,366 and $164,958 as at 31 December 2010 and 2009, respectively.
Recognized in Recognized in other the statement comprehensive of income income
Recognized in Recognized in other the statement comprehensive of income income
(1,091) (1,091)
(754) (754)
The accrued service income represents revenues accrued for subscriber calls (air-time) and contracted receivables related to handset campaigns, which have not been billed and will be billed within one year. Due to the volume of subscribers, there are different billing cycles; accordingly, an accrual is made at each period end to accrue revenues for rendered but not yet billed. contracted receivables related to handset campaigns, which will be invoiced after one year is presented under non-current trade receivables amounting to $35,024. Receivables from Turk Telekom represent net amounts that are due from Turk Telekom under the interconnection agreement. The interconnection agreement provides that Turk Telekom will pay to the company for Turk Telekoms fixed-line subscribers calls to gsm subscribers. The groups exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 29. 19. Other current assets prepaid expenses Receivables from icTa vaT receivable Receivables from Tax Office advances to suppliers interest income accruals 2010 83,680 25,938 25,702 15,736 12,131 8,311 2009 69,559 48,760 12,351 17,727
(168,636) (10,267) 10,070 44,239 (4,759) 6 (129,347)
17. Deferred tax assets and liabilities (continued) movement in temporary differences as at 31 December 2010 and 2009
property, plant & equipment and intangible assets investment provisions Trade and other payables Other items Tax credit carry forwards Total
property, plant & equipment and intangible assets investment provisions Trade and other payables Other items Total
(170,313) (13,833) 27,474 39,233 1,065 (116,374)
6,131 (882) 1,689 (14,984) 24,161 16,115
(907) (2,353) 16,802 (5,033) 4,793 (6) 13,296
Restricted cash Receivables from personnel prepayment for subscriber acquisition cost Other
6,150 3,262 1,777 15,053 197,740
2,767 12,527 11,726 175,417
Receivables from icTa is related to the fine applied on tariffs above upper limits as a result of court suspension of the execution decision. icTa paid the related amount on 27 January 2011. in Note 32, under legal proceedings section, detailed explanations are given with respect to the receivable. as at 31 December 2010, restricted cash represents amounts deposited at banks as guarantees in connection with the loan utilized by azerinteltek and mature in 12 months. subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum consideration.
154
155
20. Cash and cash equivalents cash in hand cheques received Banks -Demand deposits -Time deposits Bonds and bills cash and cash equivalents Bank overdrafts cash and cash equivalents in the statement of cash flows 2010 7,957 172 3,293,257 193,358 3,099,899 777 3,302,163 (5,896) 3,296,267 2009 157 1,154 3,093,889 199,764 2,894,125 286 3,095,486 (5,244) 3,090,242
21. Capital and reserves (continued)
Capital contribution capital contribution comprises the contributed assets and certain liabilities that the government settled on behalf of the group that do not meet the definition of a government grant which the government is acting in its capacity as a shareholder. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign and domestic operations from their functional currencies to presentation currency of usD. Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or the asset is impaired. Legal reserve under the Turkish commercial code, Turkish companies are required to set aside first and second level legal reserves out of their profits. first level legal reserves are set aside 5% of the distributable income per statutory accounts each year. The ceiling on the first legal reserves is 20% of the paid-up capital. The reserve requirement ends when the 20% of paid-up capital level has been reached. second legal reserves correspond to 10% of profits actually distributed after the deduction of the first legal reserves and the minimum obligatory dividend pay-out (5% of the paid-up capital). There is no ceiling for second legal reserves and they are accumulated every year. Reserve for non-controlling interest put option liability The reserve for non-controlling interest put option liability includes the difference between the put option liability granted to the noncontrolling shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. subsequent changes in the fair value of the put option liability are also recognized in this reserve. Dividends The company has adopted a dividend policy, which is set out in its corporate governance guidance. as adopted, the companys general dividend policy is to pay dividends to shareholders with due regard to trends in the companys operating performance, financial condition and other factors.
The Board of Directors intends to distribute cash dividends in an amount of not less than 50% of the companys lower of distributable profit based on the financial statements prepared in accordance with the accounting principles accepted by the cmB or statutory records, for each fiscal year starting with profits for fiscal year 2004. however, the payment of dividends will still be subject to cash flow requirements of the company, compliance with Turkish law and the approval of and amendment by the Board of Directors and the general assembly of shareholders.
as at 31 December 2010, cash and cash equivalents deposited in banks that are owned and/or controlled by cukurova group, a significant shareholder of the company is amounting to $90,000 (31 December 2009: nil). as at 31 December 2010, average maturity of time deposits is 60 days (31 December 2009: 69 days) The groups exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 29. 21. Capital and reserves
Share capital as at 31 December 2010, common stock represented 2,200,000,000 (31 December 2009: 2,200,000,000) authorized, issued and fully paid shares with a par value of Tl 1 each. in accordance with the law No. 5083 with respect to Tl, on 9 may 2005, par value of each share is registered to be one Tl.
in connection with the redenomination of the Tl and as per the related amendments of Turkish commercial code, in order to increase the nominal value of the shares to Tl 1, 1,000 units of shares, each having a nominal value of Tl 0.001 shall be merged and each unit of share having a nominal value of Tl 1 shall be issued to represent such shares. The company is still in the process of merging 1,000 existing ordinary shares, each having a nominal value of Tl 0.001 to one ordinary share having a nominal value of Tl 1 each. after the share merger which appears as a provisional article in the articles of association to convert the value of each share with a nominal value of Tl 0.001 to Tl 1, all shares will have a value of Tl 1. although the merger process has not been finalized, the practical application is to state each share having a nominal value of Tl 1 which is consented by capital markets Board of Turkey (cmB). accordingly, number of shares data is adjusted for the effect of this merger. The holders of shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the company. as at 31 December 2010, total number of pledged shares hold by various institutions is 137,200 (31 December 2009: 137,200).
156
157
21. Capital and reserves (continued)
23. Other non-current liabilities 2010 78,402 53,435 16,310 7,391 5,294 160,832 2009 75,319 63,152 13,951 2,569 154,991
Dividends (continued) On 10 march 2010, the companys Board of Directors has proposed a dividend distribution for the year ended 31 December 2009 amounting to Tl 859,259 (equivalent to $555,795 and $573,451 as at 31 December 2010 and 29 april 2010, respectively), which represented 50% of distributable income. This represents a net cash dividend of full Tl 0.3905723 (equivalent to full $0.2526341 and $0.2606596 as at 31 December 2010 and 29 april 2010, respectively) per share. This dividend proposal was discussed and approved at the Ordinary general assembly of shareholders held on 29 april 2010. Dividend distribution started on 17 may 2010 and completed as at 31 December 20
2010 TL cash dividends 859,259 USD* 573,451 TL 1,098,193 2009 USD* 713,297 TL 648,714 2008 USD* 502,334
consideration payable in relation to acquisition of BesT financial liability in relation to put option Deposits and guarantees taken from agents payables to other suppliers Other
consideration payable in relation to acquisition of Belarusian Telecom represents the present value of long-term deferred payment to the seller. payment of $100,000 is contingent on financial performance of Belarusian Telecom, and based on managements estimations, expected to be paid during the first quarter of 2016. The present value of the contingent consideration is $78,402 as at 31 December 2010 (31 December 2009: $75,319). Non-controlling shareholders in Belarusian Telecom were granted a put option, giving the shareholders the right to sell their entire stake to Beltel Telekomunikasyon hizmetleri as (Beltel) at fair value during a specified period. The group accounted for the present value of the estimated option redemption amount as a provision and derecognized the non-controlling interest. The company has estimated a value based on multiple approaches including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 august 2013, which is the exercise date of the put option, is then discounted to 31 December 2010. The difference between the present value of the estimated option redemption and derecognized non-controlling interests amounting to $32,382 has been presented as reserve for non-controlling interest put option under equity. 24. Loans and borrowings This note provides information about the contractual terms of the groups interest-bearing loans and borrowings, which are measured at amortized cost. for more information about the groups exposure to interest rate, foreign currency and liquidity risk and payment schedule for interest bearing loans, see Note 29. 2010 2009 Non-current liabilities unsecured bank loans 1,366,207 793,210 secured bank loans 21,850 25,253 finance lease liabilities 19,259 2,716 1,407,316 821,179 Current liabilities current portion of unsecured bank loans 357,637 226,463 current portion of secured bank loans 4,378 unsecured bank facility 57,355 461,788 secured bank facility 6,399 current portion of finance lease liabilities 4,436 2,529 430,205 690,780
* usD equivalents of dividends are computed by using the central Bank of the Republic of Turkeys Tl/usD exchange rate on 29 april 2010, 8 may 2009 and 25 april 2008 which are the dates that the general assembly of shareholders approved the dividend distribution. in the Ordinary general assembly of shareholders meeting of inteltek held on 15 april 2010, it has been decided to distribute dividends amounting to Tl 55,980 (equivalent to $36,210 as at 31 December 2010). The dividend was paid on 29 april 2010. 22. Earnings per share The calculations of basic and diluted earnings per share as at 31 December 2010 were based on the profit attributable to ordinary shareholders for the years ended 31 December 2010, 2009 and 2008 of $1,170,176, $1,093,992 and $1,836,824 respectively and a weighted average number of shares outstanding during the years ended 31 December 2010, 2009 and 2008 of 2,200,000,000 calculated as follows: 2010 Numerator: Net profit for the period attributed to owners 1,170,176 2009 1,093,992 2008 1,836,824
Denominator: weighted average number of shares Basic and diluted earnings per share 2,200,000,000 0.53 2,200,000,000 0.50 2,200,000,000 0.83
158
159
160
less than one year more than one year 24. Loans and borrowings (continued) finance lease liabilities are payable as follows:
superonline, a wholly owned subsidiary of the group, acquired indefeasible right of use with BOTas and will pay EuR 20,900 to BOTas for the right. The group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to be made to BOTas till the year 2024. as of 31 December 2010, the carrying amount of lease liability related to BOTas agreement is $20,962.
some of the groups borrowings are subject to covenant clauses, whereby the group is required to meet certain key performance indicators. as of 31 December 2010, the group is in compliance with all borrowing covenants.

Future minimum lease payments Interest 763 4,848 5,611 4,436 19,259 23,695 2,768 2,815 5,583 239 99 338 2,529 2,716 5,245 Present value of minimum lease payments Future minimum lease payments Interest Present value of minimum lease payments 31 December 2009 31 December 2010 5,199 24,107 29,306 24. Loans and borrowings (continued) Terms and conditions of outstanding loans are as follows:
2010 Currency unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans unsecured bank loans secured bank loans** unsecured bank loans unsecured bank loans unsecured bank loans secured bank loans unsecured bank loans unsecured bank loans secured bank loans unsecured bank loans unsecured bank loans unsecured bank loans finance lease liabilities finance lease liabilities usD usD usD usD usD usD usD usD usD usD usD ByR usD EuR usD usD usD aZN aZN usD usD ByR EuR usD Year of maturity 2012 2011-2012 2015 2011-2015 2013 2009-2014 2013 2011 2010-2016 2011 2009-2014 2020 2010-2012 2013 2011-2013 2011 2011 2011 2011 2010 2010 2010 2011-2024 2010-2011 Interest rate type floating floating floating fixed floating fixed fixed fixed fixed floating floating floating fixed floating fixed fixed fixed fixed floating fixed floating fixed fixed Nominal interest rate libor+2.25%-3.75% libor+2.1% libor+2.9%-3.0% 2.37% libor+2.24%-2.45% 2.24% 4.10%-8% %2.25-2.80% 2.81% libor+1.75% libor+%1.35 RR*+2% 2.97% libor+3.465% 2.97% 5.00% 18.00% 18.00% libor+2.0%-3.5% 3.35% 4.64% Face value 491,000 263,250 188,500 184,044 159,200 148,726 86,442 95,193 59,654 24,500 50,236 21,389 17,505 13,280 9,811 6,150 744 250 150 26,487 2,819 1,849,330 Carrying amount 488,965 264,674 188,730 178,603 159,406 144,078 86,464 96,998 57,581 24,602 48,672 26,228 17,754 13,627 9,985 6,210 744 316 189 20,962 2,733 1,837,521 Nominal interest rate libor+2.3%-3.75% 2.24% 2.80% 2.81% libor+%1.35 RR*+2% 2.97% libor+2.0%-3.5% 2.80%
1/2
2009 Face value 491,000 191,219 63,500 69,856 64,589 22,487 25,958 476,000 113,387 RR* 5.7% 1,971 5,583 1,525,550 Carrying amount 487,563 183,710 63,505 66,051 62,162 25,253 26,236 476,754 113,395 2,085 5,245 1,511,959
* Refinancing rate of the National Bank of the Republic of Belarus. ** secured by Rebuplic of Belarus government.
161
25. Employee benefits international accounting standard No. 19 (ias 19) Employee Benefits requires actuarial valuation methods to be developed to estimate the enterprises obligation under defined benefit plans. The liability for this retirement pay obligation is recorded in the accompanying consolidated financial statements at its present value using a discount rate of 4.7%. movement in the reserve for employee termination benefits as at 31 December 2010 and 2009 are as follows: 2010 27,776 9,990 (8,114) 889 (799) 29,742 2009 26,717 6,350 (5,410) 1,534 (1,415) 27,776
27. Provisions (continued) Non-current provisions: (continued) Obligations for dismantling, removing and site restoration 5,114 50,473 266 (210) 55,643
Opening balance provision set/reversed during the period payments made during the period unwind of discount Effect of change in foreign exchange rate closing balance
Balance at 1 January 2010 provision made/used during the year unwind of discount Effect of change in foreign exchange rate Balance at 31 December 2010
Legal 95 627 722
Other 467 223 690
Total 5,676 51,323 266 (210) 57,055
legal provisions are set for the probable cash outflows related to legal disputes. The group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The above mentioned additions to obligations for dismantling, removing and site restoration during the period are non-cash transactions recorded against property, plant and equipment.
Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of income as incurred. The group incurred $5,243, $3,694 and $4,182 in relation to defined contribution retirement plan for the years ended 31 December 2010, 2009 and 2008 respectively. Total charge for the employee termination benefits is included in the statement of income. The liability is not funded, as there is no funding requirement. 26. Deferred income Deferred income primarily consists of right of use sold but not used by prepaid subscribers and it is classified as current as at 31 December 2010. The amount of deferred income is $164,186 and $248,518 as at 31 December 2010 and 2009, respectively. 27. Provisions Non-current provisions: Obligations for dismantling, removing and site restoration 4,490 590 34 5,114
current provisions:
Balance at 1 January 2009 provision made during the year provisions used during the year unwind of discount Effect of change in foreign exchange rate Balance at 31 December 2009 Legal 44,258 158,580 (40,018) 5,098 167,918 Legal 167,918 59,303 (115,004) 1,885 (2,949) 111,153 Bonus 38,091 36,784 (37,996) 235 135 37,249 Bonus 37,249 45,617 (39,056) (53) (1,098) 42,659 Total 82,349 195,364 (78,014) 235 5,233 205,167 Total 205,167 104,920 (154,060) 1,832 (4,047) 153,812
Balance at 1 January 2009 provision made/used during the year unwind of discount Effect of change in foreign exchange rate Balance at 31 December 2009
Legal 95 95
Other 467 467
Total 4,490 1,152 34 5,676
Balance at 1 January 2010 provision made/(reversed) during the year provisions used during the year unwind of discount Effect of change in foreign exchange rate Balance at 31 December 2010
legal provisions are set for the probable cash outflows related to legal disputes. in Note 32, under legal proceedings section, detailed explanations are given with respect to legal provisions. The bonus provision totalling to $42,659 comprises mainly the provision for the year ended 31 December 2010 and is planned to be paid in march 2011.
162
163
28. Trade and other payables The breakdown of trade and other payables as at 31 December 2010 and 2009 is as follows: 2010 payables to other suppliers Taxes and withholdings payable payables to Ericsson companies selling and marketing expense accrual license fee accrual Roaming expense accrual icTa share accrual interconnection payables interconnection accrual payables to kkTc Tax Office consideration payable in relation to acquisition of Belarusian Telecom Other 414,911 221,872 98,415 61,209 53,474 21,032 17,319 11,992 4,415 789 46,548 951,976 Balances due to other suppliers are arising in the ordinary course of business. Taxes and withholdings include vaT payable, special communications tax, frequency usage fees payable to icTa and personnel income taxes. payables to Ericsson companies comprise due to Ericsson Turkey, Ericsson sweden and Ericsson aB arising from fixed asset purchases, site preparation and other services. Turkcell is one of parties of two different signed agreements with Ericsson Turkey, namely supply and maintenance and support service agreements. in fact, hardware and software responsibility within the scope of supply agreement belongs to Ericsson aB. since, Turkcell signed the agreement with Ericsson Turkey, Ericsson Turkey transfer its supply responsibility to Ericsson aB with the signed protocol between Ericsson Turkey, Turkcell and Ericsson aB. Based on the supply agreement, Ericsson Turkey committed Turkcell to provide gsm network in operating condition, spare part, installation, training and documentation. Besides, this agreement provides Turkcell to non-exclusive, untransferable and perpetual software license for gsm software. according to maintenance and support service agreement, Ericsson Turkey provides Turkcell problem report processing service, consultancy service and emergency state service. Based on these two agreements, Ericsson aB is the guarantor for commitments of Ericsson Turkey to Turkcell. for agreements signed between Turkcell and Ericsson Turkey, of which Ericsson sweden is the guarantor, parties signed a supplementary agreement on 1 January 2010 and extended the period of gsm service agreement until 31 December 2010. Tender process for the agreement of year 2011 has not been finalized yet. 2009 354,057 215,375 115,980 62,783 38,289 61,783 18,543 31,957 5,343 1,046 97,605 36,001 1,038,762
28. Trade and other payables (continued) selling and marketing expense accrual is mainly resulted from services received from third parties related to marketing activities of the group which are not yet invoiced. in accordance with the license agreement, Turkcell pays 90% of the treasury share, which equals 15% of its gross revenue, to the Turkish Treasury and 10% as universal service fund to the Turkish ministry. payables to interconnection suppliers arise from voice and sms termination services rendered by other gsm operators. interconnection accrual represents net balance of uninvoiced call termination services received from other operators and interconnection services rendered to other operators. consideration payable in relation to acquisition of Belarusian Telecom represents present value of short-term deferred payments to the seller. Deferred payment amounting to $100,000 was paid as of 31 December 2010. The remaining consideration is classified under other noncurrent liabilities section (Note 23). The groups exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 29. 29. Financial instruments Credit risk Exposure to credit risk: The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was Note 33 16 15 33 18 19 20 15 2010 1,044 15,258 88,897 851,175 56,170 3,294,206 8,201 4,314,951 2009 21,039 11,996 62,398 108,843 783,752 29,284 3,095,329 4,112,641
Due from related parties-non current Other non-current assets* available-for-sale financial assets Due from related parties-current Trade receivables and accrued income Other current assets* cash and cash equivalents** Time deposits maturing in 3 months or more
* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets. ** cash on hand is excluded from cash and cash equivalents. The maximum exposure to credit risk for trade receivables arising from sales transactions including those classified as due from related parties at the reporting date by type of customer is: 2010 798,404 71,044 3,199 872,647 2009 710,747 85,949 1,312 798,008
Receivable from subscribers Receivables from distributors and other operators Other
164
165
more than 5
years
(24,472)
(20,671)
(100,000)
29. Financial instruments (continued) Credit risk (continued) Exposure to credit risk: (continued) The aging of trade receivables and due from related parties as at 31 December 2010 and 2009: Not past due 1-30 days past due 1-3 months past due 3-12 months past due 1-5 years past due 2010 738,697 74,665 56,004 71,750 941,116 2009 746,545 38,406 47,031 81,310 342 913,634
31 December 2009
(16,767)
(695,681)
(26)
(75,155)
(5,420)
(166,987)
(2,789)
(432,251)
(1,385)
(100,000)
(267,683)
(1,383)
(728,795)
(5,244)
(14,884)
contractual
cash flows
(1,583,273)
Carrying
Amount
25,253
1,481,461
5,245
723,222
5,244
14,780
172,924
63,152
Opening balance impairment loss recognized write-off Effect of change in foreign exchange rate closing balance
268,157 126,257 (9,976) (7,630) 376,808
196,637 75,379 (7,978) 4,119 268,157
29. Financial instruments (continued) Liquidity risk (continued) The following are the contractual maturities of financial liabilities, including estimated interest payments:
2010
2009
more than 5
years
(17,887)
(10,155)
(16,622)
(100,000)
(144,664) TOTAL 2,662,201 (2,854,730) (912,194) (229,158) (530,085) (1,038,629)
2,491,281
(2,659,593)
Impairment losses The movement in the allowance for impairment in respect of trade receivables and due from related parties as at 31 December 2010 and 2009 is as follows:
(46,659)
(5,583)
(728,795)
(5,244)
(14,884)
(200,000)
(75,155)
(1,017,989)
6 months
or less
(533,636)
6-12
months
(175,196)
1-2
years
(787,629)
2-5
years
(145,143)
1-2
years
(5,150)
(523,026)
(1,909)
The impairment loss recognized of $126,257 for the period ended 31 December 2010 relates to its estimate of incurred losses in respect of trade receivables and due from related parties. The allowance accounts in respect of trade receivables and due from related parties is used to record impairment losses unless the group is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable and is written off against the trade receivables and due from related parties directly. Liquidity risk current cash debt coverage ratio as at 31 December 2010 and 2009 is as follows: 2010 cash and cash equivalents current liabilities current cash debt coverage ratio 3,302,163 1,812,915 182% 2009 3,095,486 2,296,511 135%
166
* advances taken, taxes and withholding payable are excluded from trade and other payables.
2-5
years
(13,852)
(960,660)
(5,576)
31 December 2010
6-12
months
(9,165)
(218,000)
(1,993)
6 months
or less
(2,273)
(208,363)
(3,206)
(681,669)
(5,896)
(10,787)
contractual
cash flows
(48,327)
(1,920,204)
(29,306)
(681,669)
(5,896)
(10,787)
(100,000)
Carrying
Amount
32,627
1,781,199
23,695
676,187
5,896
10,760
78,402
unsecured bank loans
Due to related parties
financial liability in relation to put option
consideration payable in relation to acquisition of Belarusian Telecom
secured bank loans
Trade and other payables*
Non-derivative financial
Bank overdraft
finance lease liabilities
Liabilities
53,435
(58,541)
(58,541)
167
29. Financial instruments (continued) Exposure to currency risk The groups exposure to foreign currency risk based on notional amounts is as follows: USD Foreign currency denominated assets Due from related parties-non current Other non-current assets Other investments 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 Other non-current liabilities loans and borrowings-current Trade and other payables Due to related parties Net exposure 20,605 1 22,295 31,121 2,372 1,324,795 1,401,189 (830,434) (189,105) (514,439) (366,279) (4,199) (1,904,456) (503,267) 31 December 2009 EUR 201 825 18,605 71 99,734 119,436 (65,562) (1,194) (66,756) 52,680 31 December 2010 EUR 148 20,482 1,086 52,842 74,558 (28,132) (1,872) (42,849) (808) (73,661) 897 SEK 10 1 11 (722) (722) (711)
29. Financial instruments (continued) Exposure to currency risk (continued) The following significant exchange rates are applied during the period: Average Rate 31 December 31 December 2010 2009 Tl/usD Tl/EuR Tl/sEk ByR/usD hRv/usD 1.5050 1.9931 0.2074 2,978.8 7.9325 1.5495 2.1527 0.2016 2,780.9 7.7975
Reporting Date 31 December 2010 1.5460 2.0491 0.2262 3,000.0 7.9617
Closing Rate 31 December 2009 1.5057 2.1603 0.2082 2,863.0 7.9850
Sensitivity analysis The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate foreign exchange exposure is composed of all assets and liabilities denominated in foreign currencies. The analysis excludes net foreign currency investments. 10% strengthening of the Tl, hRv, ByR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. Profit or loss 2010 2009 usD EuR sEk 53,974 (119) 50,327 (7,558) 10
USD Foreign currency denominated assets Due from related parties-non current Other non-current assets Other investments 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 Other non-current liabilities loans and borrowings-current Trade and other payables Due to related parties Net exposure 1 8,000 17,969 33,566 4,579 1,494,743 1,558,858 (1,405,907) (179,865) (350,172) (161,901) (754) (2,098,599) (539,741)
SEK 10 1 11 11
10% weakening of the Tl, hRv, ByR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. Profit or loss 2010 2009 usD EuR sEk (53,974) 119 (50,327) 7,558 (10)
168
169
29. Financial instruments (continued) Interest rate risk as at 31 December 2010 and 2009 the interest rate profile of the groups interest-bearing financial instruments was: 31 December 2010 Effective Interest Rate Carrying Amount 31 December 2009 Effective interest Carrying rate Amount
29. Financial instruments (continued) Interest rate risk (continued) Sensitivity analysis (continued) Cash flow sensitivity analysis for variable rate instruments: a change of 100 basis points in interest rates as at 31 December 2010 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is performed on the same basis as at 31 December 2010 and 2009.
Profit or loss 100 bp increase 100 bp decrease 9,262 9,262 4,912 4,912 100 bp increase 31 December 2010 Equity 100 bp decrease
Note Fixed rate instruments Time deposits usD EuR Tl Other available-for-sale securities government bonds, treasury bills Tl Time deposits maturing after 3 months or more usD ByR finance lease obligations usD EuR unsecured bank loans usD fixed rate loans secured bank loans usD fixed rate loans aZN fixed rate loans Variable rate instruments available-for-sale securities government bonds, treasury bills EuR secured bank loans ByR floating rate loans unsecured bank loans usD floating rate loans EuR floating rate loans ByR floating rate loans aZN fixed rate loans 20
3.5% 3.9% 9.1% 8.7% 15 15 7.0% 10.5% 24 4.6% 3.4% 24 4.2% 24 5.2% 22.5%
1,469,797 68,640 1,561,282 180
3.6% 2.3% 10.1% 17.6%
1,425,695 146,183 1,318,614 3,633
variable rate instruments cash flow sensitivity (net) 31 December 2009 variable rate instruments cash flow sensitivity (net)
(9,262) (9,262) (4,912) (4,912)
14.8%
62,109
Fair values The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows:
31 December 2010 Carrying Fair Amount Value 1,044 15,258 88,897 851,175 56,170 3,302,163 8,201 4,322,908 1,044 15,258 88,897 851,175 56,170 3,302,163 8,201 4,322,908 31 December 2009 Carrying Fair Amount Value 62,398 62,398 21,039 11,996 108,843 783,752 29,284 3,095,486 4,050,400 62,398 62,398 21,039 11,996 108,843 783,752 29,284 3,095,486 4,050,400
8,000 201 (2,733) (20,962) (591,463) (6,210) (189)
5.7% 3.7% -
(5,245) (452,897) Assets carried at fair value available for sale securities Assets carried at amortized cost Due from related parties-long term Other non-current assets* Due from related parties-short term Trade receivables and accrued income*** Other current assets* cash and cash equivalents Time deposits maturing after 3 months or more
Note 15
15 24 10.9% 24 3.6% 7.8% 22.5% (1,175,049) (13,627) (316) 3.8% 2.1% (1,026,479) (2,085) (26,228) 12.3% (25,253) 5.1% 289
33 16 33 18 19 20 15
Liabilities carried at fair value put option for Best acquisition Liabilities carried at amortized cost loans and borrowings-long term Bank overdrafts loans and borrowings-short term Trade and other payables** Due to related parties Deferred payments
23
(53,435) (53,435) (1,407,316) (5,896) (430,205) (676,187) (10,760) (78,402) (2,608,766)
(53,435) (53,435) (1,407,316) (5,896) (430,205) (676,187) (10,760) (78,402) (2,608,766)
(63,152) (63,152) (821,179) (5,244) (690,780) (723,222) (14,780) (172,924) (2,428,129)
(63,152) (63,152) (821,179) (5,244) (690,780) (723,222) (14,780) (172,924) (2,428,129)
24 20 24 28 33 23-28
Sensitivity analysis Fair value sensitivity analysis for fixed rate instruments: a change of 1% in interest rates for available for sale financial assets would have increased/(decreased) equity by nil (31 December 2009: $186). a change of 1% in interest rates for time deposits maturing after 3 months or more would have increased/(decreased) profit or loss by $65 (31 December 2009: nil).
* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets. ** advances taken, taxes and withholdings payable are excluded from trade and other payables. *** includes non-current trade receivables amounting to $35,024. The methods used in determining the fair values of financial instruments are discussed in Note 4.
170
171
29. Financial instruments (continued) Fair values (continued) Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method: The different levels have been identified as follows: level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. level 2: inputs other than quoted prices included within level 1 that are observable for the assets and liability, either directly or indirectly. level 3: inputs for the asset or liability that are not based on observable market. Level 1 31 December 2010 financial liability in relation to put option Level 2 Level 3 53,435 53,435 Total 53,435 53,435
29. Financial instruments (continued) Fair values (continued) Fair value hierarchy (continued) Total gains or losses included in profit or loss for the period in the following table are presented in the statement of comprehensive income as follows: Available-for sale financial assets Total gains or losses included in profit or loss for the period: Net financing costs Total gains or losses for the period included in profit or loss for asset and liabilities held at the end of the reporting period: Net financing costs (5,447) (5,447) Financial liability in relation to put option (5,447)
Total (5,447)
30. Operating leases The company entered into various operating lease agreements. for the years ended 31 December 2010 2009 and 2008, total rent expenses for operating leases were $301,309, $287,259 and $263,805 respectively. The future minimum lease payments under non-cancellable leases are as follows: less than one year Between one and five years more than five years 2010 18,024 16,107 7,221 41,352 2009 5,804 19,167 8,453 33,424
Level 1 31 December 2009 available-for sale financial assets 62,109 62,109 -
Level 2 -
Level 3 289 289 63,152 63,152
Total 62,398 62,398 63,152 63,152
financial liability in relation to put option
Balance as at 1 January 2010 Total gains or losses: in profit or loss in other comprehensive income Total recognition in equity Balance as at 31 December 2010
Available-for sale financial assets 289 (289) -
Financial liability in relation to put option (63,152) (5,447) 15,164 (53,435)
Total (62,863) (5,447) (289) 15,164 (53,435)
31. Guarantees and purchase obligations as at 31 December 2010, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and purchase of sponsorship and advertisement services amount to $594,910 (31 December 2009: $245,088). as at 31 December 2010, the group is contingently liable in respect of bank letters of guarantee obtained from banks given to customs authorities, private companies and other public organizations and provided financial guarantees to subsidiaries totalling to Tl 2,413,062 (equivalent to $1,560,842 as at 31 December 2010) (31 December 2009: Tl 1,986,052 equivalent to $1,319,023 as at 31 December 2009).
The table above shows a reconciliation from the beginning balances to the ending balances for fair value measurements in level 3 of the fair value hierarchy.
172
173
32. Commitments and Contingencies License Agreements
32. Commitments and Contingencies (continued) License Agreements (continued)
Turkcell: On 27 april 1998, the company signed the license agreement with the Turkish ministry. in accordance with the license agreement, the company was granted a 25 year gsm license for a license fee of $500,000. The license agreement permits the company to operate as a standalone gsm operator. under the license, the company collects all of the revenue generated from the operations of its gsm network and pays the Turkish Treasury and Turkish ministry an treasury share and universal service fund, respectively, equal to 15% of its gross revenues from Turkish gsm operations. On 25 June 2005, the Turkish government declared that gsm operators are required to pay 10% of their existing monthly treasury share to the Turkish ministry as a universal service fund contribution in accordance with law No: 5369. as a result, starting from 30 June 2005, the company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish ministry as universal service fund. moreover, the company is obliged to pay 0.35% of its yearly gross revenue once a year as icTa fee. The company is authorized to, among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscribers, collect payments and deal directly with subscribers.
in february 2002, the company renewed its license with the icTa, and became subject to a number of new requirements, including those regarding the build-out, operation, quality and coverage of the companys gsm network, prohibitions on anti-competitive behaviour and compliance with national and international gsm standards. failure to meet any requirement in the renewed license, or the occurrence of extraordinary unforeseen circumstances, can also result in revocation of the renewed license, including the surrender of the gsm network without compensation, or limitation of the companys rights thereunder, or could otherwise adversely affect the companys regulatory status. certain conditions of the renewed license agreement include the following: Coverage: The company had to attain geographical coverage of 50% and 90% of the population of Turkey with certain exceptions within three years and five years, respectively, of the licenses effective date. Service offerings: The company must provide certain services in addition to general gsm services, including free emergency calls and technical assistance for subscribers, free call forwarding to police and other public emergency services, receiver-optional short messages, video text access, fax capability, calling and connected number identification and restrictions, call forwarding, call waiting, call hold, multi-party and third-party conference calls, billing information and barring of a range of outgoing and incoming calls. Service quality: in general, the company must meet all the technical standards determined and updated by the European Telecommunications standards institute and secretariat of the gsm mou. service quality requirements include that call blockage cannot exceed 5% and unsuccessful calls cannot exceed 2%. Tariffs: icTa sets the initial maximum tariffs in Tl and usD. Thereafter, the revised license provides that the icTa will adjust the maximum tariffs at most every nine months or, if necessary, more frequently. The company is free to set its own tariffs up to the maximum tariffs. Rights of the ICTA, Suspension and Termination: The revised license is not transferable without the approval of the icTa. in addition, the license agreement gives the icTa certain monitoring rights and access to the companys technical and financial information and allows for inspection rights, and gives certain rights to suspend operations under certain circumstances. also, the company is obliged to submit financial statements, contracts and investment plans to the icTa. The icTa may suspend the companys operations for a limited or an unlimited period if necessary for the purpose of public security and national defence. During period of suspension, the icTa may operate the companys gsm network.
Turkcell (continued):
The company is entitled to any revenues collected during such period and the licensees term will be extended by the period of any suspension. The revised license may also be terminated upon a bankruptcy ruling against the company or for other license violations, such as operating outside of its allocated frequency ranges, and the penalties for such violations can include fines, loss of frequency rights, revocation of the license and confiscation of the network management centre, the gateway exchanges and central subscription system, including related technical equipment, immovables and installations essential for the operation of the network. Based on the enacted law on 3 July 2005 with respect to the regulation of privatization, gross revenue description based for the calculation of treasury share and universal service fund has been changed. according to this new regulation, interest charges for late collections, and indirect taxes such as vaT, and other expenses are excluded from the description of gross revenue. calculation of gross revenue for treasury share and universal service fund according to the new regulation is effective after council of states approval on 10 march 2006. 3G License On 30 april 2009, the company signed a license agreement with icTa which provides authorization for providing imT 2000/umTs services and infrastructure. Turkcell acquired the a type license providing the widest frequency band for a consideration of EuR 358,000 (excluding vaT). The license is effective for duration of 20 years starting from 30 april 2009. according to the agreement, operators have provided imT 2000/ umTs services starting from 30 July 2009. in accordance with the 3g license agreement, the company had to cover 100% of the population within the borders of all metropolitan municipalities and borders of all cities and municipalities in three and six years, respectively. moreover, the company had to cover 100% of the population in all settlement areas with a population higher than 5,000 and 1,000 within eight and ten years, respectively following the effective date of the agreement.
Belarusian Telecom: Belarusian Telecom owns a license issued on 28 august 2008 for a period of 10 years and is valid till 28 august 2018. according to the sale and purchase agreement signed, the state property committee of the Republic of Belarus committed to grant the license from the acquisition date of 26 august 2008 for a period of 10 years and such license shall be extended for an additional 10 years for an insignificant consideration. state property committee of the Republic of Belarus has fulfilled its obligations stated in sale and purchase agreement and submitted the related official documents in December 2009. according to the current legislation of the Republic of Belarus, the license extension will be made upon the expiration of its validity period. Therefore, Belarusian Telecom shall apply for extension in august 2018. in the consolidated financial statements, amortization charge is recorded on the assumption that the license will be extended. under its license, Belarusian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the date of the license until 2018. however, Belarusian Telecoms period of execution in relation to coverage requirements are extended for three years starting from the acquisition date.
174
175
Astelit: astelit owns two gsm activity licenses, one is for gsm900, the other is for Dcs1800. as at 31 December 2010, astelit owns twenty four gsm900, Dcs 1800, D-amps and microwave Radiorelay frequency licenses which are regional or national. in addition to the above gsm licenses, astelit owns three licenses for local fixed line phone connection with wireless access using D-amps standard, one license for international and long distance calls and eight psTN licenses for seven regions of ukraine. also, astelit holds number range two NDc codes for mobile network and local ranges for psTN and D-amps licenses.
according to licenses, astelit should adhere to state sanitary regulations to ensure that equipment used does not injure the population by means of harmful electro-magnetic emissions. licenses require astelit to inform authorities about start/end of operations in three months; about changes in incorporation address in 30 days. also, astelit must present all the required documents for inspection by ukrainian Telecommunications authority at their request. The ukrainian Telecommunications authority may suspend the operations of astelit for a limited or an unlimited period if necessary because of the expiration of licenses, upon mutual consent, or in case of violation of terms of radio frequencies use. if such a violation is determined, ukrainian Telecommunications authority notifies astelit of provisions violated and sets deadline for recovery. if the deadline is not met, licenses may be terminated.
Kibris Telekom: On 27 april 2007, kibris Telekom signed the license agreement for installation and Operation of a Digital, cellular, mobile Telecommunication system (mobile communication license agreement) with the ministry of communications and works of the Turkish Republic of Northern cyprus which is effective from 1 august 2007, replacing the existing gsm-mobile Telephony system agreement dated 25 march 1999. in accordance with the mobile communication license agreement, kibris Telekom was granted an 18 year gsm 900, gsm 1800 and imT 2000/ umTs license for gsm 900, gsm 1800 frequencies while the usage of imT 2000/umTs frequency bands is subject to the fulfilment of certain conditions.
On 14 march 2008, kibris Telekom was awarded a 3g infrastructure license at a cost of $10,000 including vaT, which was paid at the end of march 2008. under the terms of the license, the system had to be operational by mid-October 2008. in 2010, kibris Telekom has completed the radio transmision (airlink) project providing direct international voice and data connection with mainland and started using it from the third quarter of 2010. The project is the only direct connection in Turkish Republic of Northern cyprus besides Telecommunication authority. under the mobile communication license agreement, kibris Telekom also pays the tax authorities of Turkish Republic of Northern cyprus a treasury share on monthly basis equal to 15% of gross revenues excluding accrued interest charges for the late payments, indirect taxes and accrued revenues for reporting purposes, payments made to third parties for value added services, interconnection revenues, roaming income from own subscribers after the related payment made to other operators.
Inteltek: inteltek signed a contract on 30 July 2002 which provides for the installation, support and operation of an on-line central betting system as well as maintenance and support for the provision of sport betting games. The central Betting system contract was scheduled to expire on 30 march 2008.
inteltek signed another contract with general Directorate of youth and sports (gDys) on 2 October 2003 which authorized inteltek to establish and operate a risk management center and become head agent for fixed odds betting. The fixed Odds Betting contract was scheduled to expire in October 2011. however, in relation to the lawsuits related to the operations of inteltek, gDys ceased the implementation of the fixed Odds Betting contract starting from march 2007. following this annulment decision, spor Toto and inteltek signed a new fixed Odds Betting contract on 15 march 2007, with less-advantageous conditions compared to previous contract signed in 2003, which expired on 1 march 2008. inteltek signed a new fixed Odds Betting contract with spor Toto, which took effect on 1 march 2008. at the same time, inteltek signed a new central Betting system contract with spor Toto, which took effect on 31 march 2008 as having the same conditions with the current contract and both contracts were to be valid for one year atmost until the operation started as a result of the new tender. On 12 august 2008, spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting in sports games. inteltek gave the best offer for the tender. On 29 august 2008, inteltek signed a contract with spor Toto, receiving the rights to run the sport betting business for the next ten years. New commission rate, which is 1.4% of gross takings (until 1 march 2009, commission rate was 7% of gross takings), is applicable starting from march 2009. under the terms of this contract, inteltek guaranteed TRy 1,500,000 (equivalent to $970,246 as of 31 December 2010) turnover for the first year of the contract, and has given similar guarantees for future years. at 31 December 2010, the total amount of guarantee obtained from banks and provided to spor Toto amounted to TRy 161,298 (equivalent to $63,353 as at 31 December 2010) (31 December 2009: TRy 159,752 equivalent to $106,098 as at 31 December 2009). The targeted payout is 50% of the turnover balance. The fact that the company is obliged to pay the difference between the realized and the targeted payout balances, whenever the pool balance falls negative, creates an excess payment risk.
Superonline: superonline was authorized to fixed Telephony, satellite communication service, infrastructure, wired and wireless internet service provider and mobile virtual Network Operator.
authorization By-law for Telecommunication services and infrastructure published in Official gazette on dated 26 august 2004 has been abrogated By-law on authorization for Electronic communications sector dated 28 may 2009. according to this abrogation, superonlines license on fixed authority services, infrastructure Operating service, internet service provision, satellite communication service has been changed to authority on fixed authority services, infrastructure Operating service, internet service provision, satellite communication service, cable Broadcast service and superonlines license on long Distance Traffic carrying services license has been changed to authority relevant to the fixed Telephony services. in accordance with the new legislation issued by icTa, the infrastructure operator authorization right of superonline has become infinite. as a result, superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years.
Azerinteltek: azerinteltek, in which intelteks shareholding is 51%, was established on 19 January 2010, and authorized to organize, operate, manage and develop the fixed-odds and para-mutual sports betting games by the ministry of youth and sports of azerbaijan for a period of 10 years. The agreement signed with azeridmanservis which is founded by the ministry of youth and sports of azerbaijan is renewed with the same terms and conditions in accordance with the new legislation enforced in azerbaijan regarding the betting games based on sports on 30 september 2010.
azerinteltek officially commenced to conduct sports betting games on 18 January 2011.
176
177
32. Commitments and Contingencies (continued) License Agreements (continued) Interconnection Agreements The company has entered into interconnection agreements with a number of operators in Turkey and overseas including Turk Telekom, Telsim mobil Telekomunikasyon hizmetleri as (Telsim), vodafone Telekomunikasyon as (vodafone), avea iletisim hizmetleri as (avea), milleni.com gmbh and globalstar avrasya uydu ses ve Data iletisim as (globalstar). The access and interconnection Regulation (the Regulation) became effective when it was issued by the icTa on 23 may 2003. The Regulation is driven largely by a goal to improve the competitive environment. under the Regulation, the icTa may compel all telecommunications operators to accept another operators request for use of and access to its network. all telecommunications operators in Turkey may be required to provide access to other operators on the same terms and qualifications provided to their shareholders, subsidiaries and affiliates. in accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) were obliged to renew their interconnection agreements within two months following the issuance of the Regulation. as a result of intervention by the icTa, the company entered into supplemental agreements with Turk Telekom on 10 November 2003, Telsim on 21 November 2003, and globalstar on 11 December 2003, with amended tariffs and tariff adoption procedures. The interconnection agreement with avea (formerly TT&Tim) was last renewed on 20 January 2006. On 24 may 2006, shares of Telsim were transferred to vodafone and a new interconnection agreement was signed between the company and vodafone at the end of July 2006. On 21 february 2005, superonline and milleni.com gmbh have signed an agreement to provide telecommunications services to each other whereby milleni.com gmbh may convey calls to the companys switch and the company may convey calls to milleni.com gmbhs switch, in both cases, for onward transmission to their destinations. in addition, the icTa has required operators holding significant market power, as well as Turk Telekom, to share certain facilities with other operators under certain conditions and to provide co-location on their premises for the equipment of other operators at a reasonable price. The icTa has also required telecommunications operators to provide number portability, which means allowing users to keep the same phone numbers even after they switch from one network to another starting from 9 November 2008. under a typical interconnection agreement, each party agrees, among other things to permit the interconnection of its network with the companys network to enable calls to be transmitted to, and received from, the gsm system operated by each party in accordance with technical specifications set out in the interconnection agreement. Typical interconnection agreements also establish understandings between the parties relating to a number of key operational areas, including call traffic management, quality and performance standards, interconnection interfaces and other technical, operational and procedural aspects of interconnection. The companys interconnection agreements usually provide that each party will assume responsibility for the safe operation of its own network. Each party is also typically responsible for ensuring that its network does not endanger the safety or health of employees, contractors, agents or customers of the other party or damage interfere with or cause any deterioration in the operation of the other partys network. interconnection agreements also specify the amount of the payments that each party will make to the other for traffic originated on one network but switched to the other. These payments vary by contract, and in some cases, may require the company to pay the counterparty less, the same amount, or a greater amount per minute, for traffic originating on the companys network but switching to the counterpartys network, than it receives for a similar call originating on another network and switched to the companys network.
32. Commitments and Contingencies (continued) Interconnection Agreements (continued) There are no minimum payment obligations under the interconnection agreements; however, failure to carry the counterpartys traffic may expose the company to financial and other penalties or loss of interconnection privileges for its own traffic. On 10 february 2010, icTa decreased standard interconnection Tariffs for the company from full Tl 0.0655 (equivalent to $0.0424 as at 31 December 2010) to full Tl 0.0313 (equivalent to $0.0202 as at 31 December 2010) for voice calls and left the tariff unchanged at full Tl 0.0775 (equivalent to full $0.0501 as at 31 December 2010) for video calls, effective from 1 april 2010. The company started to recognize interconnection revenues and cost in accordance with standard interconnection Reference Tariffs starting from 1 april 2010. as at 31 December 2010, the management believes that the group is in compliance with the above mentioned license and interconnection agreements conditions and requirements in all material respects. Legal Proceedings The group is involved in various claims and legal actions arising in the ordinary course of business described below.
Dispute with Turk Telekom with respect to call termination fees upon application of Turk Telekom, the icTa has set temporary (and after final) call termination fees for calls to be applied between Turk Telekom and the company starting from 10 august 2005. however, Turk Telekom did not apply these termination fees for the international calls. Therefore, on 22 December 2005, the company filed a lawsuit against Turk Telekom to cease this practice and requested collection of its damages totalling to Tl 11,970 (equivalent to $7,743 as at 31 December 2010) including principal, interest and penalty on late payment covering the period from august 2005 until October 2005. Expert reports and supplementary expert reports which are obtained for the lawsuit, affirm justification of the company. The lawsuit is still pending.
On 19 December 2006, the company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by icTa for the period between November 2005 and October 2006 amounting to Tl 23,726 (equivalent to $15,347 as at 31 December 2010) including principal, interest and penalty on late payment. The court decided to consolidate this lawsuit with the first lawsuit dated 22 December 2005. On 2 November 2007, the company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by icTa for the period between November 2006 and 1 march 2007 amounting to Tl 6,836 (equivalent to $4,422 as at 31 December 2010) including principal, interest and penalty on late payment. The court also decided to consolidate this lawsuit with the first lawsuit dated 22 December 2005. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
178
179
32. Commitments and Contingencies (continued)
32. Commitments and Contingencies (continued) Legal Proceedings (continued)
Dispute on Turk Telekom Transmission Lines Leases Effective from 1 July 2000, Turk Telekom annulled the discount of 60% that it provided to the company based on its regular ratio, which had been provided for several years, and, at the same time, Turk Telekom started to provide a discount of 25% being subject to certain conditions. The company filed a lawsuit against Turk Telekom for the application of the agreed 60% discount. however, on 30 July 2001, the company had been notified that the court of appeal upheld the decision made by the commercial court allowing Turk Telekom to terminate the 60% discount. accordingly, the company paid and continues to pay transmission fees to Turk Telekom based on the 25% discount. although Turk Telekom did not charge any interest on late payments at the time of such payments, the company recorded an accrual amounting to a nominal amount of Tl 3,023 (equivalent to $1,955 as at 31 December 2010) for possible interest charges as at 31 December 2000. On 9 may 2002, Turk Telekom requested an interest amounting to a nominal amount of Tl 30,068 (equivalent to $19,449 as at 31 December 2010).
The company did not agree with Turk Telekoms interest calculation and, accordingly, obtained an injunction from the commercial court to prevent Turk Telekom from collecting any amounts relating to this interest charge. also, the company initiated a lawsuit against Turk Telekom on the legality of such interest. On 25 December 2008, the court rejected the case. The company appealed the decision. The supreme court rejected the appeal. The company applied for the correction of the decision. The supreme court rejected the correction of the decision request and the decision is finalised. Based on the management opinion, the company accrued provision of Tl 91,864 (equivalent to $59,420 as at 31 December 2010) and the company netted off the whole amount from the receivables from Turk Telekom as at 31 December 2010. additionally, a lawsuit is commenced against Turk Telekom on 28 October 2010 to collect the receivable amounting to principal of Tl 23,378 (equivalent to $15,122 as at 31 December 2010), overdue interest of Tl 3,092 (equivalent to $2,000 as at 31 December 2010) and delay fee of Tl 1,925 (equivalent to $1,245 as at 31 December 2010), with the contractual default interest until payment date on the ground that the above mentioned exercise is contrary to the term of the contract which is effective for the year 2000, Turk Telekom has already collected the whole amount which is subjected to the related court decision as of 31 October 2009 and Turk Telekom collected additional receivable.
Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing Activities The competition Board decided to initiate an investigation in order to identify whether the company maintains exclusive activities on mobile marketing and their appropriateness with respect to competition rules. On 23 December 2009, competition Board decided that the company violates competition rules in gsm and mobile marketing services and fined the company amounting to Tl 36,072 (equivalent to $23,332 as at 31 December 2010). The payment was made within 1 month following the notification of the decision of the competition Board. Therefore, 25% discount was applied and Tl 27,054 (equivalent to $17,499 as at 31 December 2010) is paid as the monetary fine on 25 may 2010. The company filed a legal case on 25 June 2010 for the suspension of execution and cancellation of the aforementioned decision. The court rejected the companys suspension of execution request. The company objected to the decision. The lawsuit is still pending.
avea, depending on the competition Board decision, initiated a lawsuit against the company claiming a compensation from the company for its damages amounting to Tl 1,000 (equivalent to $647 as at 31 December 2010), with reservation of further claims, on the ground that the company violated the competition. The lawsuit is still pending. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognised in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute regarding the Fine Applied by the Competition Board The competition Board commenced an investigation of business dealings between the company and the mobile phone distributors in October 1999. The competition Board decided that the company disrupted the competitive environment through an abuse of a dominant position in the Turkish mobile market and infringements of certain provisions of the law on the protection of competition. as a result, the company was fined a nominal amount of approximately Tl 6,973 (equivalent to $4,510 as at 31 December 2010) and was enjoined to cease these infringements. The company initiated a lawsuit before council of state for the injunction and cancellation of the decision. On 15 November 2005, the court cancelled the competition Boards decision.
after the cancellation of the competition Boards decision, the competition Board has given the same decision again on 29 December 2005. On 10 march 2006, the company initiated a lawsuit before council of state for the injunction and cancellation of the competition Boards decision dated 29 December 2005. On 13 may 2008, council of state dismissed the lawsuit. The company appealed the decision. appeal process is still pending. Based on the decision of competition Board, ankara Tax Office requested the company to pay Tl 6,973 (equivalent to $4,510 as at 31 December 2010) through the payment order dated 4 august 2006. On 25 september 2006, the company made the related payment and initiated a lawsuit for the cancellation of this payment order. The court dismissed the lawsuit, and the company appealed this decision. On 17 march 2009, council of state reversed the judgement of the local court. local court decided in line with the decision of council of state. On 18 December 2009, the court rejected the case and the company also appealed this decision. council of state reversed the judgement of the instance court. The lawsuit is still pending. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute on National Roaming Agreement The company conducted roaming negotiations in 2001 with s-Tim Telekomunikasyon hizmetleri a.s. (s-Tim) which is a gsm operator, performing since march 2001. On 19 October 2001, upon unsuccessful negotiations, icTa granted time for the company until 15 November 2005 to sign the roaming agreement with the determined conditions and requested parties to come to an agreement until 15 November 2001. The company initiated a lawsuit on the ground that icTa has no power of intervention; its proposals are impossible from technical aspects and unacceptable from economic reasons. council of state gave a decision on nonneccessity of a new decision on the ground that action which is subjected to the lawsuit is cancelled by another state council decision. This decision appealed by icTa. council of state, plenary session of the chamber for administrative Divisions decided to uphold the court decision.
in a letter dated 14 march 2002, the icTa subjected is-Tims request for national roaming to the condition that it is reasonable, economically proportional and technically possible. Nevertheless, the icTa declared that the company is under an obligation to enter a national roaming agreement with is-Tim within a 30 day period. The company initiated a lawsuit against icTa. On 14 march 2006, council of state decided to cancel the process dated 14 march 2002 but rejected the companys request for cancellation of the regulation on procedures and policies with respect to national roaming. icTa appealed the decision. plenary session of administrative law Divisions of the council of state has decided to approve the decision of the council of state. The icTa decided that the company has not complied with its responsibility under Turkish regulations to provide national roaming and fined the company by nominal amount of approximately Tl 21,822 (equivalent to $14,115 as at 31 December 2010). On 7 april 2004, the company made the related payment with its accrued interest. On 27 may 2004, the company filed a lawsuit. On 3 January 2005, with respect to the council of states injunction, icTa paid back nominal amount of Tl 21,822 (equivalent to $14,115 as at 31 December 2010). On 13 December 2005, council of state decided the cancellation of the administrative fine but rejected the companys request for cancellation of the regulation on procedures and policies with respect to national roaming. icTa appealed the decision. The appeal process is still pending. plenary session of administrative law Divisions of the council of state has decided to approve the decision of the council of state. On 22 July 2010, the company initiated a lawsuit against icTa for the compensation of Tl 7,111 (equivalent to $4,600 as at 31 December 2010), the total amount of the damage of the company accrued interest between the period when the company made the payment and icTa returned the same to the company as the result of the stay of order decision.
180
181
32. Commitments and Contingencies (continued) Legal Proceedings (continued) Dispute on Deposits at Banks The company has disputes in connection with some accounts at two banks which are deemed to be raised as a result of irregularities in such banks and parties initiated lawsuits to each other regarding such disputes. it has been informed that a nominal of 3,814 Tl (equivalent to $2,467 as at 31 December 2010) was blocked as of 31 December 2001. The company has recorded that amount as expense to its consolidated financial statements. The bank claims a nominal amount of 3,785 Tl (equivalent to $2,448 as at 31 December 2010), excluding interest, in addition to the aforementioned amount. The company initiated a lawsuit in the total of the above mentioned amounts against the other bank. in the end of the jurisdiction, the court, on 27 april 2004, decided the company to pay $2,629 as principal and 40% of such amount as rejection of the execution compensation. such decision became final on 11 October 2004. The company made a payment of 7,615 Tl (equivalent to $4,926 as at 31 December 2010) on 10 December 2004 to 14th Execution Office of istanbul. in the lawsuit initiated against the other bank, the court decided in favour of the company on 1 march 2005. The bank appealed the decision and the company replied the same. On 3 april 2006, supreme court of appeals decided the reversal of the courts decision in favour of the defendant. The court abided by the decision of the supreme court of appeals. The lawsuit is pending. The company has not reflected any amount in connection with this matter in its consolidated financial statements prepared as at and for the year ended 31 December 2010.
Dispute on National Roaming Agreement (continued)

since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). On 27 October 2006, Telecom italia spa and Tim international N.v. initiated a lawsuit against the company claiming that the company violated competition law since demand of roaming has not been met. Telecom italia spa and Tim international N.v. requested $2,000 with respect to this claim. The court rejected the case. such decision has been appealed by Telecom italia spa and Tim international N.v. The appeal process is still pending. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute regarding of the Fine Applied by ICTA on pricing applications of the Company On 7 april 2010, icTa decided to impose administrative fine to the company amounting to Tl 4,008 (equivalent to $2,592 as at 31 December 2010) for misinforming the authority and Tl 374 (equivalent to $242 as at 31 December 2010) for making some subscribers suffer. The payment was made within 1 month following the notification of the decision of the icTa. Therefore, 25% discount was applied and Tl 3,287 (equivalent to $2,126 as at 31 December 2010) is paid in total as the administrative fine on 9 June 2010. The company filed two lawsuits on 9 July 2010 for the suspension of execution and cancellation of the aforementioned decision. The court rejected the companys suspension of execution requests and the company objected to the decisions but the objections are rejected. The lawsuits are still pending.
since it is not virtually certain that an inflow of economic benefits will arise, no contingent asset is recognized in the consolidated financial statements as at and for the year ended 31 December 2010.
Dispute on Special Communication Taxation Regarding Prepaid Card Sales Tax Office imposed tax penalty in the total amount of Tl 47,130 (equivalent to $30,485 as at 31 December 2010) and Tl 89,694 (equivalent to $58,017 as at 31 December 2010) based on the ground that the company had to pay special communication tax over the discounts applied to the distributors for the wholesales for the years 2003 and 2004, respectively. On 31 December 2008 and 18 December 2009, the company initiated lawsuits before the court. The company requested to await until the completion of settlement procedure in the lawsuit initiated on 31 December 2008. since the company and the ministry of finance settlement commission have settled on the amounts subjected to the lawsuits as explained in the following paragraph, the company has withdrawn from the lawsuits.
according to the settlement made with the ministry of finance settlement commission on 1 June 2010, special communication tax and penalty was settled at Tl 1,489 (equivalent to $963 as at 31 December 2010) and Tl 2,834 (equivalent to $1,833 as at 31 December 2010) for the years 2003 and 2004, respectively. in addition, late payment interest was settled at Tl 3,570 (equivalent to $2,309 as at 31 December 2010) and Tl 5,295 (equivalent to $3,425 as at 31 December 2010) for the years 2003 and 2004, respectively. The aforementioned amounts were paid on 27 July 2010. provision set for the above mentioned special communication taxes, penalty and late payment interest was Tl 64,653 (equivalent to $41,820 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2009 and the difference between the provision amount and settled amount was recognized as income in the consolidated financial statements as at and for the year ended 31 December 2010. Tax Office imposed tax penalty, including actual tax and penalty for loss of tax, in the total amount of Tl 133,617 (equivalent to $86,428 as at 31 December 2010) and Tl 139,101 (equivalent to $89,975 as at 31 December 2010) based on the ground that the company had to pay special communication tax over the discounts applied to the distributors for the wholesales for the years 2005 and 2006, respectively. The company initiated lawsuits for the cancellation of assessments and penalties mentioned above. lawsuits are still pending. company management decided to set provision for the special communication tax for the discounts applied to distributors for the wholesales between January 2005 and January 2007 amounting to Tl 9,087 (equivalent to $5,878 as at 31 December 2010) and accrued interest amounting to Tl 12,655 (equivalent to $8,186 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2010 in line with the settlement gains with respect to same issue in June 2010.
Dispute regarding the Fine applied by ICTA on tariffs above upper limits On 15 October 2009, icTa decided to initiate an investigation stating that the company applied tariffs above upper limits announced by icTa. On 21 December 2009, the company initiated a lawsuit for the cancellation of icTas decision. The case is still pending.
On 21 april 2010, icTa decided to impose administrative fine to the company amounting to Tl 53,467 (equivalent to $34,584 as at 31 December 2010) by claiming that the company applied tariffs above the upper limits of gsm-gsm in gsm upper limits Table approved by icTa. The payment was made within 1 month following the notification of the decision of the icTa. Therefore, 25% discount was applied and Tl 40,100 (equivalent to $25,938 as at 31 December 2010) is paid as the administrative fine on 3 June 2010. The company filed a lawsuit on 28 June 2010, for the cancellation of the aforementioned decision. The court overruled the suspension of execution claim, the company objected to the decision and the court accepted this objection and decided for the suspension of the execution. accordingly, icTa paid back Tl 40,100 (equivalent to $25,938 as at 31 December 2010) on 27 January 2011. an income accrual of the same amount has been recognized in the consolidated financial statements as of 31 December 2010 (31 December 2009: None). amount to be reimbursed to the subscribers is calculated as Tl 46,228 (equivalent to $29,902 as at 31 December 2010) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010.
182
183
Dispute on Special Communication Taxation Regarding Prepaid Card Sales (continued)

On 28 february 2011, Tax amnesty law has been approved by the president of Republic of Turkey and; if applied until 2 may 2011, Turkish companies gained an alternative method for the settlement of previous disputes with the Tax authorities related to the years prior to 2009. On 23 march 2011, Board of Directors of the company convened and decided to authorize the management to apply to the Turkish ministry of finance in order to restructure the special communication tax imposition pertaining years 2005-2006 and to pursue related negotiations. as of the date of this report, the company has not applied to the Tax authorities related to the Tax amnesty law.
Dispute with Spor Toto On 9 November 2005, spor Toto sent a notification letter to inteltek claiming that inteltek is obliged to pay nominal amount of Tl 3,292 (equivalent to $2,129 as at 31 December 2010) due to the difference in the reconciliation methods. spor Toto claims that the reconciliation periods should be six-month independent periods whereas inteltek management believes that those periods should be cumulative as stated in the agreement. inteltek did not pay the requested amount.
spor Toto, on behalf of gDys, initiated a declaratory lawsuit against inteltek. On 22 february 2007, the court rejected the case and decided that the collection risk is with gDys and inteltek is not responsible for the uncollected amount of Tl 1,527 (equivalent to $988 as at 31 December 2010) and also rejected the demand that the reconciliation period should be six-month independent periods. gDys appealed the courts decision. supreme court rejected the appeal request of gDys. following the supreme courts decision, gDys applied for the correction of the decision. gDyss correction of decision request was rejected by the court and the decision was finalized. Based on the decision of supreme court, inteltek reversed the previously accrued principal amount of Tl 3,292 (equivalent to $2,129 as at 31 December 2010) and its overdue interest accrual amount of Tl 1,894 (equivalent to $1,225 as at 31 December 2010). furthermore, inteltek reclaimed Tl 2,345 (equivalent to $1,517 as at 31 December 2010) principal and Tl 977 (equivalent to $632 as at 31 December 2010) accrued interest which was paid in the 1st and 3rd reconciliation periods. inteltek has initiated a lawsuit on 21 february 2008 to collect this amount. On 19 march 2009, the court decided in favour of inteltek. spor Toto appealed the decision. The supreme court ruled to reverse the judgement of the local court. inteltek applied for the correction of the decision. The correction of the decision process is still pending. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Carrying International Voice Traffic in may 2003, the company was informed that the icTa had initiated an investigation against the company claiming that the company has violated Turkish laws by carrying some of its international voice traffic through an operator other than Turk Telekom. The company is disputing whether Turk Telekom should be the sole carrier of international voice traffic. On 5 march 2004, icTa fined the company a nominal amount of approximately Tl 31,731 (equivalent to $20,525 as at 31 December 2010).
The company has initiated a lawsuit with the claim of annulment of the related processes and decisions of icTa, however, paid the administrative fine on 9 april 2004. On 5 November 2004, council of state gave a decision, which is served to the company, for stay of execution. with respect to that decision, icTa paid back Tl 18,000 (equivalent to $11,643 as at 31 December 2010) on 26 January 2005 and deduct a sum of Tl 13,731 (equivalent to $8,882 as at 31 December 2010) from the December frequency usage fee payment. On 26 December 2006, council of state decided to accept the companys claim and annul the decision of and the fine imposed by the icTa. icTa appealed the decision. appeal process is still pending. Turk Telekom initiated a lawsuit against the company with respect to the same issue requesting an amount of Tl 450,931 (equivalent to $291,676 as at 31 December 2010) of which Tl 219,149 (equivalent to $141,752 as at 31 December 2010) is principal and Tl 231,782 (equivalent to $149,924 as at 31 December 2010) is interest charged until 30 June 2005 and requesting a temporary injunction. considering the progresses at the court case, provision is set for the principal amounting to Tl 51,942 (equivalent to $33,598 as at 31 December 2010) and accrued interest amounting to a nominal amount of Tl 84,567 (equivalent to $54,701 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2010. in deciding upon the amount of the provision taking, the company has taken the Turkish law into consideration, not the amounts requested by Turk Telekom and reflected in the expert report. specifically, under Turkish law, a person who is alleging that he has suffered a loss cannot claim the whole of his possible revenues but only the damages may only be sought in respect of lost profit. for this reason, the provision set by the company is calculated by taking Turk Telekoms estimated loss of profit into consideration rather than the amounts requested by Turk Telekom and amounts reflected in the expert report. moreover, the company obtained an independent opinion dated 23 October 2007 which supports the management opinion from an expert who is not designated by the court. On 5 November 2009, the court rejected the Turk Telekoms request amounting to Tl 171,704 (equivalent to $111,063 as at 31 December 2010) and accepted the request amounting to Tl 279,227 (equivalent to $180,613 as at 31 December 2010). The company appealed the decision. also Turk Telekom appealed the decision. appeal process is still pending.
Dispute on over assessment following the settlement on VAT fine pertaining to International Roaming Agreements On 9 february 2009, the company initiated a lawsuit claiming cancellation of interest charges amounting Tl 6,609 (equivalent to $4,275 as at 31 December 2010) which are erroneously calculated after settlement with the Tax Office regarding the vaT and tax penalties accrued due to roaming agreement for years 2000, 2001 and 2002. The court rejected the companys injunction request. The company objected to the decision. The court rejected the objection of the company. The lawsuit is pending.
since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
184
185
Dispute on Iranian GSM tender process The company has initiated an arbitration case against islamic Republic of iran for not abiding by the provisions of the agreement on Reciprocal promotion and protection of investments and demanded its sustained loss, on 11 January 2008 at the arbitration court which is established pursuant to the uNciTRal arbitration rules. The arbitration process is still pending.
Besides, related with gsm tender process, Eastasia one of the partners of the consortium established to participate the tender and a wholly owned subsidiary of the company, initiated an arbitration process against iEDc, another partner of the consortium, on 29 april 2008 claiming that iEDc violated the shareholders agreement and seeking compensation for damages for the aforementioned breach. The arbitration process is still pending.
Dispute on Mobile Number Portability On 29 march 2007, the company initiated a lawsuit against the icTa claiming stay of order for and the annulment of the Regulation on mobile Number portability issued by the icTa on 1 february 2007 on the ground that vested rights of the company arising out the concession agreement were violated by the said regulation. On 1 June 2009, the court rejected the case. The company appealed the decision. The appeal process is still pending. Dispute on Turk Telekom Interconnection Costs On 8 april 2009, Turk Telekom initiated a lawsuit for damages against the company claiming that the company is violating the legislation by applying higher call termination fees to operators than the fees applied to the companys subscribers for on-net calls and requesting for the time being Tl 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from 2001 and Tl 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from the lawsuit date for the sustained loss as a result of decreasing traffic volume of Turk Telekom and subscriber lost derived from this action. The case is still pending.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute on Turk Telekom Transmission Tariffs On 19 January 2007, the company initiated a lawsuit against Turk Telekom claiming that Turk Telekom charged transmission on erroneous tariffs between 1 June 2004 and 1 July 2005. The company requested a nominal amount of Tl 8,136 (equivalent to $5,263 as at 31 December 2010) including interest. The expert report given to court is in favor of the company. The court ruled to obtain supplementary expert report. The case is still pending.
since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute on the decision of CMB regarding Audit Committee Member On 21 July 2006, alexey khudyakov was appointed to the audit committee as an observer member. On 26 January 2007 the cmB informed the company that alexey khudyakovs current status, as an observer member on the audit committee does not satisfy the requirements under article 25 committees Responsible for auditing of the cmB. The cmB has stated that steps must be taken urgently in order to comply with article 25. On 21 march 2007, the company commenced a lawsuit to suspend the execution and to annul the decision of the cmB.
On 18 January 2008, ankara 14th administrative court rejected the case. The company appealed the decision with an injunction request. however council of state rejected the appeal request. The company applied for the correction of the decision. The correction of the decision process is still pending. On 15 October 2008, the cmB decided on an administrative fine amounting to Tl 12 (equivalent to $8 as at 31 December 2010) since the company did not fulfill the decision of cmB dated 26 January 2007 and required the company to inform its shareholders at the next general assembly meeting. The company commenced a lawsuit before the administrative court. The court rejected the companys suspension request and the companys objection to this decision has been rejected. The case is still pending.
Dispute on Avea Interconnection Costs On 4 November 2010, avea initiated a lawsuit on the ground that on-net tariffs of the company are under the interconnection fees notwithstanding icTas decision regarding, on-net tariffs of the company cannot be under the interconnection fees which are applied by the company to other operators and demanded Tl 1,000 (equivalent to $647 as at 31 December 2010) material compensation by reserving its right for surpluses. The lawsuit is pending.
The company has accrued provision amounting to Tl 1,000 (equivalent to $647 as at 31 December 2010) which is the total amount of the legal case.
Dispute on Campaigns On 21 may 2008, icTa decided that the company damaged the subscribers financial interests related to the campaigns in which free minutes or counters are given and requested Tl 32,088 (equivalent to $20,755 as at 31 December 2010). On 10 July 2008, the company filed a lawsuit for the injunction and cancellation of the icTas decision. The lawsuit is still pending. however, the company benefited from the early payment option and deserved a 25% discount and paid Tl 24,066 (equivalent to $15,567 as at 31 December 2010) on 1 august 2008. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
186
187
Dispute on Payment Request of Savings Deposits Insurance Fund On 26 July 2007, savings Deposits insurance fund (sDif) requested Tl 15,149 (equivalent to $9,799 as at 31 December 2010) to be paid in one month period on the ground that the stated amount is recorded as receivable from the company in the accounting records of Telsim, which is taken over by sDif. On 20 september 2007, the company filed a lawsuit for the injunction and cancellation of the sDifs request. council of state accepted the injunction request of the company. On 19 January 2010, the court accepted the companys claim and cancelled the aforementioned request of sDif. sDif appealed the decision. appeal process is still pending.
sDif issued payment orders for the above mentioned amount and, on 19 October 2007, the company initiated a lawsuit for the cancellation of the payment request of sDif. On 6 february 2008, the court accepted the companys injunction request. On 29 march 2010, the court decided on the cancellation of the payment order. sDif appealed such decision. The appeal process is pending. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee (continued) according to the 51st article which is headed applicable law and settlement of Disputes, of the concession agreement of the company, parties agreed on settling disputes by arbitration and three arbitrator which are selected within the scope of icc. pursuant to mentioned article, disputes on the scope, application or termination of the agreement, shall primarily resolved by negotiations at the license coordination commission; in case the dispute cannot be resolved within 30 days, one of the party shall notify other party regarding the arising dispute, structure and reasons of the dispute and intention for applying to the arbitration; if the dispute cannot be resolved within 15 days as from notification date, dispute shall be resolved by arbitration.
The company filed two lawsuits before icc claiming that the company is not obliged to pay treasury share and icTa fee in accordance with the 8th and 9th articles of the concession agreement, respectively, on discounts granted to distributors. On the both lawsuits, icc have decided in favour of the company. as stated in both of the final awards, the company is not under obligation of paying Treasury share and the contribution to the expenses of authority pursuant to article of 8 and 9 of the concession agreement dated march 10, 2006. icTa filed lawsuits for cancellation of these final awards. Both cases are still pending.
Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee at the end of 2006, Tax auditors of the company claimed that gross revenue in the statutory accounts should include discounts granted to distributors although the company recorded these discounts in a separate line item as sales discounts.
starting from 1 January 2007, the company started to deduct discounts granted to distributors from gross revenue and present them on a net basis. accordingly, the company decided that, it has paid excess treasury share and universal service fund for the year 2006 totalling Tl 51,254 (equivalent to $33,153 as at 31 December 2010). Through the letter dated 23 february 2007, the company requested treasury share amounting to Tl 46,129 (equivalent to $29,838 as at 31 December 2010) and interest accrued amounting to Tl 5,020 (equivalent to $3,247 as at 31 December 2010) from Turkish Treasury and universal service fund amounting to Tl 5,125 (equivalent to $3,315 as at 31 December 2010) and interest accrued amounting to Tl 558 (equivalent to $361 as at 31 December 2010) from Turkish ministry to be paid in 10 days. since Turkish Treasury and Turkish ministry have not made any payment, the company started to deduct these amounts from ongoing monthly payments. as at 31 December 2007, the company deducted Tl 51,254 (equivalent to $33,153 as at 31 December 2010) from monthly treasury share and universal service fund payments. Turkish Treasury sent a letter to the company dated 17 July 2007 and objected the deduction of the discounts granted to the distributors from the treasury share payments. accordingly, the company is asked to return Tl 2,960 (equivalent to $1,915 as at 31 December 2010) that is deducted from treasury share payment for may 2007. The company has not made the related payment and continued to deduct such discounts treasury share and universal service fee amount related to discounts granted to distributors for the year 2006. management believes that the company has the legal right to make deductions with respect to this issue. accordingly, the company has not recorded any provisions with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010.
Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006 Turkish Treasury, through a letter which is based on the Report of the Treasury controllers Board following the examinations covering the period between 1 June 2004 and 9 march 2006, requested additional treasury share payment regarding the mentioned period. The company initiated a lawsuit before icc on 18 December 2009 in order to obtain a declaratory judgment on the company is not obliged to pay Tl 3,320 (equivalent to $2,147 as at 31 December 2010) of the requested amount and treasury share over the exchange differences arising from roaming revenue. The case is still pending.
icTa, through a letter dated 14 may 2010 which is based on the Report of the Treasury controllers Board following the examinations covering the period between 1 June 2004 to 9 march 2006, requested additional treasury share payment of Tl 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary fine of Tl 12,171 (equivalent to $7,873 as at 31 December 2010) on the ground that the treasury share and treasury share over the exchange differences arising from roaming revenue are not paid entirely. On 26 may 2010, the company, in order to provide the suspension of the payment, requested a preliminary injunction from the civil court of first instance based on the grounds that the payment of additional treasury share payment of Tl 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary fine of Tl 12,171 (equivalent to $7,873 as at 31 December 2010) is a pending case before icc arbitration court. The civil court of first instance accepted the companys request. icTa raised an objection to the preliminary injunction and this objection has been rejected.icTa, through a letter dated 19 October 2010 which is based on the Report of the Treasury controllers Board following the examinations covering the period between 10 march 2010 and 31 December 2010, requested treasury share of Tl 72,527 (equivalent to $46,913 as at 31 December 2010) and conventional penalty of Tl 205,594 (equivalent to $132,984 as at 31 December 2010). The company paid Tl 1,535 (equivalent to $993 as at 31 December 2010) of the aforementioned amount. On 13 December 2010, the company, in order to provide the suspension of the payment, requested a preliminary injunction from the civil court of first instance based on the grounds that the payment of treasury share of Tl 70,992 (equivalent to $45,920 as at 31 December 2010) and conventional penalty of Tl 205,594 (equivalent to $132,984 as at 31 December 2010) is a pending case before icc arbitration court. The court accepted the companys request. icTas objection against the decision has been rejected.
188
189
Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006 (continued) Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
The company filed a lawsuit before icc on 12 January 2011 regarding the part of treasury share which is not covered in the lawsuits previously finalized in favor of the company and the conventional penalty of Tl 205,594 (equivalent to $132,984 as at 31 December 2010). The lawsuit is still pending
Penalty of ICTA on Value Added Services On 1 march 2010, icTa decided to initiate an investigation against the company upon administrative fine of 31,822 Tl (equivalent to $20,583 as at 31 December 2010) is revoked by The ministry of industry and Trade on the ground that the company did not refund the subscribers who are unsubscribed in the period and did not demand content and this is contrary to the article 11/a of the law numbered 4077. The investigation report has been sent to the company and the company has submitted its written defence to icTa.
On 13 January 2011, icTa decided to apply administrative fine of Tl 748 (equivalent to $484 as at 31 December 2010). since the administrative fine was paid within 1 month following the notification of the decision of icTa, 25% discount was applied and provision amounting to Tl 555 (equivalent to $359 as at 31 December 2010) is set in the consolidated financial statements as at and for the year ended 31 December 2010.
Dispute on treasury share amounts which are absorbed due to retrospective board decisions taken by ICTA in consequence of collection of treasury share from the company without considering its payments to the other operators and some subscribers due to the retrospective procedure amendments of icTa on both interconnection fees and some tariffs; the company commenced a lawsuit on 5 august 2010 before icc on the ground that treasury share which collected from diminishing returns are unlawful and deductions committed by the company between the years 2006 - 2010 from the treasury share are rightful and claimed payment of Tl 1,600 (equivalent to $1,035 as at 31 December 2010) and its interest to the overpayment amount which is paid under the name of treasury share, against icTa due to its administrative act leading to this case and against Turkish Treasury and Turkish ministry due to making benefit from aforementioned amount. The lawsuit is still pending.
since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements prepared as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute of Astelit with its Distributor astelit and one of its distributors had an agreement for the sale of astelits inventory to third parties. under this agreement, the sale of products had to be performed within 30 days after delivery and proceeds from such sale had to be transferred to astelit excluding commissions due to the distributor for performing the assignment. at a certain stage of the relationship under this agreement, the distributor began to violate its obligations for indebtedness for received, due but unpaid products.
Despite the distributor is factually a debtor under the agreement, the distributor filed a lawsuit against astelit on recovery of hRv 106,443 (equivalent to $13,369 as at 31 December 2010), which is allegedly the sum of advance payment for undelivered goods. in the course of court proceedings, astelit made a counterclaim on recovery of indebtedness in the amount of hRv 35,292 (equivalent to $4,433 as at 31 December 2010). as a result of consideration of two claims, the court of first instance in kiev dismissed the claim of the distributor and sustained the counterclaim of astelit. subsequently, The kiev Economic court of appeal repealed the decision of the court of first instance and dismissed the claim of astelit and sustained the claim of the distributor on recovery of hRv 106,443 (equivalent to $13,369 as at 31 December 2010). The resolution of The higher Economic court of ukraine dated 20 October 2009 remained unaltered the appellate courts ruling. Thereafter, astelit management has filed a lawsuit against this conclusion in the supreme court of ukraine, which is the supreme and final degree of jurisdiction against the resolution of the higher Economic court of ukraine. in December 2009 the supreme court of ukraine has revoked the previous court decisions and forwarded the court file to the court of first instance in kiev to other judges for new legal proceedings. New legal proceedings have started in february 2010. it was decided by the court to conduct judicial expertise by specially authorized kiev research institute of judicial expertise in order to define real indebtedness. The expertise was initiated in april 2010 and still is in process. management believes that such conclusion of the courts has no proper legal basis and does not conform to the facts of the case and evidences. accordingly, the company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010.
Dispute with the Ministry of Industry and Trade ministry of industry and Trade notified the company that the company is not informing the subscribers properly before service subscriptions and content sales and charged administrative fine of Tl 68,201 (equivalent to $44,114 as at 31 December 2010). On 24 august 2009, the company initiated a lawsuit for the cancellation of the payment order and related decision of the ministry of industry and Trade. The court rejected the companys injunction request. The court cancelled the payment order on 8 June 2010. ministry of industry and Trade appealed the decision. appeal process is still pending.
On 14 December 2009, the company filed a lawsuit for the injunction and cancellation of the payment order of Tl 68,201 (equivalent to $44,114 as at 31 December 2010) with respect to the decision of ministry of industry and Trade. The court rejected the appeal request of the company. The company objected to the decision and istanbul Regional administrative court accepted the objection of the company and decided to suspend the order of payment. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
190
191
Dispute of Astelit related to Withholding Tax on Interest Expense ukranian Tax administration sent a tax notice to astelit stating that witholding tax rate on interest expense for the loan agrrement with Euroasia should be 10% for the year 2009. according to ukrainian legislation and convention on avoiding double taxation, astelit paid witholding tax at 2%. astelit filed the suit to cancel tax notice, which imposed astelit to pay additional hRv 11,651 (equivalent to $1,463 as at 31 December 2010). administrative court of first instance decided in favour of astelit on 30 November 2010. Tax inspection appealed the case on 27 December 2010. Based on the management opinion, provision amounting to $2,635 is set for the risks belonging to years 2009 and 2010 in the consolidated financial statements as at and for the year ended 31 December 2010. Dispute on VAT and SCT on Roaming Services On 21 October 2009, based on the Tax investigation Reports dated 2 October 2009, presidency of large Taxpayers Office, audit group management notified the company that vaT and scT should be calculated on charges paid to international gsm operators for the calls initiated by the companys subscribers abroad and collect from the subscribers and requested Tl 255,298 (equivalent to $165,135 as at 31 December 2010) for the period from april 2005 to July 2009, and for an interest to be calculated until the payment date. The company filed a lawsuit for the cancellation of the aforementioned request. Based on the settlement between the company and ministry of finance, the company has withdrawn from the lawsuits.
as a result of the settlement made with ministry of finance settlement commission on 1 June 2010, penalty fee has been settled at Tl 20,163 (equivalent to $13,042 as at 31 December 2010) and late payment interest expense was settled at Tl 15,998 (equivalent to $10,348 as at 31 December 2010) and related payment was made on 27 July 2010.
Lawsuit initiated by Mep Iletisim AS On 31 December 2008, mep iletisim as, which is former distributor of the company and whose agreement is no longer valid, initiated a lawsuit against the company claiming that it has a loss of Tl 64,000 (equivalent to $41,397 as at 31 December 2010) due to the applications of the company and requested Tl 1,000 (equivalent to $647 as at 31 December 2010) and remaining amount to be reserved. The case is still pending.
Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Investigation of ICTA on the wrongful declarations of the Company and the Companys refrain from signing the minutes icTa decided to initiate an investigation based on the reason that the information provided by the company within the frame of another investigation of icTa is inconsistent and wrong, the company is not in a helpful approach regarding the conduction of the investigation and refraining from signing the minutes drafted by the audit committee of icTa. investigation report has been sent to the company. The company submitted its defence within the due time. in accordance with the decision of icTa dated 10 february 2011, no penalty has been charged for the company. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute on VAT and SCT regarding Shell & Turcas Petrol A.S Campaign Turkcell and shell&Turcas petrol a.s. signed an agreement on 27 November 2007 where eligible subscribers can get free counters and minutes from the company or free oil from shell&Turcas petrol as.
as a result of the tax investigation, Tax controllers notified that vaT and special communication tax are not calculated over the free counters and minutes and imposed special communication tax amounting to Tl 1,214 (equivalent to $785 as at 31 December 2010) and tax penalty of Tl 1,822 (equivalent to $1,179 as at 31 December 2010) and vaT amounting to Tl 874 (equivalent to $565 as at 31 December 2010) and tax penalty of Tl 1,315 (equivalent to $851 as at 31 December 2010). On 16 september 2009, the company filed lawsuits for the cancellation of the tax penalty. The court decided to accept the case. Tax administration appealed the decisions. Based on the management opinion, the company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010.
Decisions of ICTA on tariff plans On 15 November 2009, icTa notified that the company has changed the conditions of a tariff plan after the launch and shall reimburse overcharged amounts to the subscribers. On 1 february 2010, the company initiated a lawsuit for the cancellation of the decision of icTa. The court rejected the companys stay of execution request. The case is still pending.
amount to be reimbursed to the subscribers is calculated as Tl 15,660 (equivalent to $10,129 as at 31 December 2010) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010. On 17 may 2010, icTa decided to impose Tl 802 (equivalent to $519 as at 31 December 2010) administrative fine against Turkcell on the ground that one of the tariff option of Turkcell contradicts the board decision which sets lower limit to the on-net tariffs. The payment was made within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 601 (equivalent to $389 as at 31 December 2010) as fine on 21 June 2010. Besides, the company filed a lawsuit on 21 July 2010 in request for the cancellation of fine. The court overruled the suspension of execution request and the company objected to this decision. The court rejected the objection request of the company. The lawsuit is still pending.
192
193
Decisions of ICTA on tariff plans (continued) On 8 march 2010, icTa informed the company that an investigation took place on another tariff plan. as a result of the investigation, icTa decided to apply administrative penalty amounted Tl 26,483 (equivalent to $17,130 as at 31 December 2010) to the company on 22 september 2010. administrative fine was paid within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 19,862 (equivalent to $12,847 as at 31 December 2010) is paid as a fine on 7 December 2010. The company initiated a lawsuit to suspend the execution of administrative fine and cancellation, on 10 December 2010. The court overruled the suspension of execution request and the company objected to this decision. On 17 february 2011, the court decided to suspend the execution. On 1 march 2011, the court accepted the companys request for full refund of the amount paid to icTa. icTa reimbursed the related amount on 30 march 2011.
amount to be reimbursed to the subscribers is calculated as Tl 13,432 (equivalent to $8,688 as at 31 December 2010) for the year 2010 and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2010. Reimbursement to subscribers was made in february 2011.
Investigation of ICTA based on the complaint of a subscriber icTa decided to initiate an investigation through its decision dated 12 may 2010 based on the complaint of Ozalp insaat pazarlama Tic. ltd. sti., and requested certain information and documents from the company. The company provided its response related to the matter to icTa. investigation report is notified to the Turkcell and Turkcell has submitted its defence statement to icTa within the due date.
On 13 January 2011, icTa decided to impose administrative fine to the company amounting to Tl 8,020 (equivalent to $ 5,188 as at 31 December 2010) for making some subscribers suffer and Tl 2,005 (equivalent to $ 1,297 as at 31 December 2010) for misinforming the authority. since the administrative fine was paid within 1 month following the notification of the decision of icTa, 25% discount was applied and provision totalling to Tl 7,430 (equivalent to $4,806 as at 31 December 2010) is set in the consolidated financial statements as at and for the year ended 31 December 2010. The company filed two lawsuits on 21 march 2011 for the suspension of execution and cancellation of the administrative fine.
Decision of ICTA regarding telephone directory and unknown numbers service On 7 July 2010, icTa decided to fine the company by Tl 401 (equivalent to $259 as at 31 December 2010) and transfer back all kinds of software, hardware, infrastructure and equipment which make available the telephone directory and unknown numbers service to the ownership of the company from its wholly owned subsidiary on the ground that ownership of the whole system related to telephone directory and unknown number service is not pertain to the company. administrative fine was paid within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 301 (equivalent to $195 as at 31 December 2010) as fine on 7 september 2010.
The company filed a lawsuit on 22 september 2010 for the suspension and cancellation of the execution. The court overruled the suspension of execution request of the company and the company objected to this decision however the court rejected the companys objection. The lawsuit is still pending. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Investigation on breaching confidentiality of personal data and relevant legislation which is launched by ICTA icTa decided to launch preliminary investigation on breaching confidentiality of personal data and relevant legislation, within the context of the news in the press regarding unlawful wiretapping. icTa authorities made an on-site inspection in July 2010. On 22 september 2010, icTa decided to launch an investigation against the company for detailed examination of the matter. information and documents demanded by icTa were submitted to the icTa. in January 2011, investigation report was sent to the company. The company submitted its written defence within due date. Dispute on treasury share in accordance with the amended license agreement Based on the law enacted on 3 July 2005 with respect to the regulation of privatization, gross revenue description used for the calculation of treasury share has been changed. according to this new regulation, accrued interest charges for the late payments, taxes such as indirect taxes, and accrued revenues are excluded from the description of gross revenue. calculation method of gross revenue for treasury share stipulated in the law according to the new regulation shall be valid as of the application date of the company with the claim of amendment of its license agreement in compliance with the said law. in the meanwhile, the company realized the payments including above-mentioned items between 21 July 2005 and 10 march 2006, when the amendment in license agreement was effective.
On 9 June 2008, the company filed a lawsuit before administrative court for the difference between the aforementioned period amounting to Tl 102,649 (equivalent to $66,397 as at 31 December 2010) and interest amounting to Tl 68,276 (equivalent to $ 44,163 as at 31 December 2010) till to the date the case is filed. The administrative court rejected the case and the company appealed the decision. The appeal process is still pending. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None)
Investigation of the Competition Board regarding applications to the distributors On 11 November 2009, competition Board decided to initiate an investigation against the company on the ground that the company, through its applications to its distributors, violates the related clauses of the competition act numbered 4054. within the context of the investigation, the company submitted its statement of defence. The investigation took place as an on-site examination and inspection in march 2010. The competition Board decided to examine the claims of vodafone regarding this investigation within the context of this file. Besides, the companys action concerning abuse of dominant position in the wholesale or retail market of sim card, unit card, digital unit, activation and other subscriber services by obstructing the activity of avea is examined in the context of this investigation and avea is accepted as a complainant. investigation report is submitted to the company in august 2010 and the company submitted its defence statement to competition Board. additional written Opinion is submitted to the company in february 2011 and the company will submit its written defence to additional written Opinion within due date.
194
195
Dispute on ongoing license fee in accordance with the amended license agreement (continued) Based on the 9th article of the license agreement dated 10 march 2006, the company has been obliged to pay 0.35% of its yearly gross revenue once a year as icTa fee. however, in the previous license agreement, the company was obliged to pay 0.35% of its yearly gross revenue after deducting treasury share, universal service fund and other indirect taxes from the calculation base whereas in the new agreement, these aforementioned payments are not deducted from the base of the calculation. Therefore, on 12 april 2006, the company has initiated a lawsuit for the cancellation of the 9th article of the new license agreement. On 10 march 2009, the court rejected the case. The company appealed the decision. appeal process is still pending. Dispute on ICTA fee payment based on the amended license agreement On 21 June 2006, icTa notified the company that the icTa fee for the year 2005 which had been already paid in april 2006 should have been calculated according to the new license agreement dated 10 march 2006 instead of the previous license agreement which was effective in the year 2005. Therefore, icTa requested the company to pay additional Tl 4,011 (equivalent to $2,594 as at 31 December 2010) and its accrued interest. The company made the payment and initiated a lawsuit for the injunction and cancellation of the aforesaid decision of icTa on 28 august 2006. On 24 July 2009, the court decided in favor of the company and annulled additional payment request of icTa. The icTa appealed the decision. appeal process is still pending. The company received the related principal amount of Tl 4,011 (equivalent to $2,594 as at 31 December 2010) on 8 february 2010 and recorded income in the consolidated financial statements as at and for the year ended 31 December 2009. On 17 march 2010, the company initiated a lawsuit for the accrued interest amounting to Tl 3,942 (equivalent to $2,550 as at 31 December 2010). The case is still pending.
since it is not virtually certain that an inflow of economic benefits will arise concerning the accrued interests, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
Dispute with T-Medya arbitration procedures regarding three real estates which are in the ownership of the company in izmir, adana and ankara, are commenced with the letter dated 13 august 2010 against T-medya who is the lessee of the real estates and delinquent for the period between 2003-2010 rental period, to collect the unpaid rentals and its accrued interest in the amount of Tl 8,914 (equivalent to $5,766 as at 31 December 2010). The arbitration processes are still pending.
a bad debt reserve for the receivable amount of 8,755 Tl (equivalent to $5,663 as at 31 December 2010) for T-medya has been recognized in the consolidated financial statements as at and for the year ended 31 December 2010 in accordance with the bad debt policy of the company.
Investigation initiated by ICTA upon complaint of subscriber on international roaming campaigns On 30 December 2010, icTa decided to initiate an investigation against Turkcell upon a complaint of a consumer regarding the companys billing and pricing applications in order to investigate the billing and pricing problems arising from the international roaming campaigns within 2009 and 2010. icTa requested some information about campaigns and the company submitted its explanations on the issue to icTa. Investigation initiated by ICTA regarding Number Portability On 26 January 2011 icTa decided to initiate an investigation against the company regarding refusal of number portability requests and reason of such refusal. icTa carried out an inspection in the company between 28 february and 2 march 2011. Investigation initiated by ICTA upon complaint of subscriber of data tariffs charging On 9 march 2011, icTa decided to initiate an investigation against the company upon a complaint of a consumer regarding the companys miss charging about data tariffs. an inspection was carried between 30 march and 1 april in the company by icTa. Investigation initiated by ICTA regarding the Companys compatibility to ICTAs regulations and decisions On 26 January 2011, icTa decided to initiate an investigation against the company about its compatibility of Terms and conditions about updating subscribers Records and subscription processes of End users and icTas decision about limitation of numbers of the subscriptions. On 23 march 2011, icTa carried out an inspection in the company. Dispute with Turk Telekom with respect to numbers beginning with 444 The company filed a lawsuit on 25 april 2008 against Trk Telekom to collect Tl 1,777 (equivalent to $1,149 as at 31 December 2010) including principal, overdue interest and delay fee which has been collected by Turk Telekom within the period of march 2007-february 2008 by pricing the calls started from the companys network and terminated at the numbers in form of 444 xx xx which are assigned to the companys subscribers in accordance with special service call termination tariff. The court decided in favor of the company on 23 march 2011. The court has not prepared the written decision yet.
Investigation of ICTA related with application of an article of the Regulation on Consumer Rights in the Electronic Communications Sector The icTa decided to initiate an investigation related with application of an article of the Regulation on consumer Rights in the Electronic communications sector through its decision dated 22 february 2011 and prepared an investigation report. The decision and investigation report is notified to the company and the company will submit its defense statement to icTa within the due date.
Penalty issued to Superonline regarding trenching activities On 13 January 2011 ankara municipality issued a penalty of Tl 8,863 (equivalent to $5,733 as at 31 December 2010) to superonline related to superonlines trenching activities. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is less than probable, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010. Dispute with Avea on SMS interconnection termination fees On 22 December 2006, avea initiated a lawsuit against the company claiming that although there was an agreement between the company and avea stating that both parties would not charge any sms interconnection termination fees, the company has charged sms interconnection fees for the messages terminating on its own network and also assumed liabilities for the sms terminating on aveas network and made interconnection payments to avea after deducting the net balance of those sms charges and accruals. avea requested provisions of interconnection agreement regarding sms pricing to be applied and requested collection of its losses amounting to nominal amount of Tl 6,480 (equivalent to $4,191 as at 31 December 2010) for the period between January 2006 and august 2006 with its accrued interest till payment. On 25 November 2008, the court decided in favor of avea. The company has appealed the decision. appeal process is still pending. The company has paid the principal of Tl 6,480 (equivalent to $4,191 as at 31 December 2010), late payment interest of Tl 5,103 (equivalent to $3,301 as at 31 December 2010) and related fees of Tl 524 (equivalent to $339 as at 31 December 2010) on 30 march 2009.
in line with the court decision stating that charging sms interconnection termination fees violates the agreement between the company and avea, neither sms interconnection revenue nor sms interconnection expense has been recognized from february 2005 to 23 march 2007. moreover, the company applied to icTa for the determination sms interconnection termination fees and starting from 23 march 2007, the company has applied the sms interconnection termination fees announced by icTa until January 2009. icTa determined new sms termination rate in January 2009 upon the application of avea. since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).
196
197
33. Related parties Transactions with key management personnel: key management personnel comprise the groups directors and key management executive officers.
33. Related parties (continued) Other related party transactions (continued) 31 December 2010 2,766 910 909 473 44 5,658 10,760 31 December 2009 7,069 519 81 2,457 4,654 14,780
Due to related parties short term as at 31 December 2010 and 2009, none of the groups directors and executive officers has outstanding personnel loans from the group. in addition to their salaries, the group also provides non-cash benefits to directors and executive officers and contributes to a post-employment defined plan on their behalf. The group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. Total compensation provided to key management personnel is $11,395, $8,044 and $7,912 for the years ended 31 December 2010, 2009 and 2008, respectively. The company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders. hobim Bilgi islem hizmetleri as (hobim) intralot sa (intralot) kvk Teknoloji urunleri as (kvk Teknoloji) mapfre genel yasam sigorta as (mapfre) kyisvstar gsm Jsc (kyivstar) Other
substantially, all of the significant due from related party balances is from cukurova group companies. Due from scm, non-controlling shareholder of Euroasia, resulted from the loan that scm utilized from financell with maturity of 30 December 2011.
Other related party transactions

Due from related parties long term T-medya Digital platform iletisim hizmetleri as (Digital platform) Other 31 December 2010 1,044 1,044 31 December 2009 5,539 15,306 194 21,039
Due from Digital platform, a company whose majority shares are owned by cukurova group, mainly resulted from receivables from call center revenues, financial support for borrowing repayments and advances given for current and planned sponsorships. Due from a-Tel, a 50-50 joint venture of the company and sDif mainly, resulted from simcard and scratch card sales to this company. Due from kvk Teknoloji, a company whose majority shares are owned by cukurova group, mainly resulted from simcard and scratch card sales to this company. Due from aDD, a company whose majority shares are owned by cukurova group, resulted from advances given for advertising and sponsorship services. Due from kyivstar, whose shares are owned by one of the shareholders of the company, mainly resulted from call termination and international traffic carriage services rendered to this company. Due to hobim, a company whose majority shares are owned by cukurova group, resulted from the invoice printing services rendered by this company. Due to intralot, a company incorporated under the laws of greece and is the shareholder of inteltek, a subsidiary of the group. The group purchases game software and maintenance services. Due to kvk, a company whose majority shares are owned by cukurova group, resulted from the payables for sales commissions and terminal purchases. Due to mapfre, a company owned by one of the shareholders of the group, provides insurance services to the group. Due to kyivstar, whose shares are owned by one of the shareholders of the company, mainly resulted from call termination and international traffic carriage services received. The groups exposure to currency and liquidity risk related to due from/(due to) related parties is disclosed in Note 29.
Receivables from T-medya consists of receivables based on rent agreements, accrued interests for outstanding balance and unpaid building expenses. Due from related parties long term is shown net of allowance for doubtful debts amounting to $5,897 as at 31 December 2010 (31 December 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $5,897 (31 December 2009 and 2008: nil).
Due from related parties short term system capital management (scm) Digital platform a-Tel kvk Teknoloji urunleri as (kvk Teknoloji) aDD production media as. (aDD) kyisvstar gsm Jsc (kyivstar) Other
31 December 2010 38,202 21,307 13,260 8,212 1,796 1,225 4,895 88,897
31 December 2009 63,311 25,563 8,786 5,470 226 5,487 108,843
Due from related parties short term is shown net of allowance for doubtful debts amounting to $2,998 as at 31 December 2010 (31 December 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $2,998 (31 December 2009 and 2008: nil).
198
199
33. Related parties (continued) Transactions with related parties all intragroup transactions have been eliminated and are not presented as related party transactions in the following table: Income from related parties sales to kvk Teknoloji simcard and prepaid card sales sales to kyivstar Telecommunications services sales to a-Tel simcard and prepaid card sales sales to Digital platform call center revenues and interest charges finance income from scm interest income sales to Teliasonera international Telecommunications services sales to millenicom Telekomunikasyon as (millenicom) Telecommunications services sales to cJsc ukrainian Radiosystems Telecommunications services 2010 507,963 42,413 30,838 22,223 14,863 4,793 2,979 2,321 2009 640,312 44,195 67,558 18,766 5,213 8,328 5,497 3,388 2008 860,711 63,581 132,594 20,281 7,151 12,996 8,390
33. Related parties (continued) Transactions with related parties (continued) The significant agreements are as follows:
Agreements with KVK Teknoloji: kvk Teknoloji, incorporated on 23 October 2002, one of the companys principal simcard distributors, is a Turkish company, which is affiliated with some of the companys shareholders. in addition to sales of simcards and scratch cards, the company has entered into several agreements with kvk Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which kvk Teknoloji must place advertisements for the companys services in newspapers. The objective of these agreements is to promote and increase handset sales with the companys prepaid and postpaid brand simcards, thereby supporting the protection of the companys market share in the prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for kvk Teknoloji and the total advertisement benefit received, reflected in the companys market share in new subscriber acquisitions. Distributors campaign projects and market share also contributed to the budget allocation.
The amount of handset sales to the subscribers of the company performed by kvk Teknoloji for the period ended 31 December 2010 is Tl 180,922 (equivalent to $117,026 as at 31 December 2010) which is paid to kvk Teknoloji in advance in accordance with certain commitment arrangements and collected from the subscribers throughout the campaign period.
Agreements with Kyivstar: alfa group, a minor shareholder of the company, holds the majority shares of kyivstar. astelit is receiving call termination and international traffic carriage services from kyivstar. Agreements with A-Tel: a-Tel is involved in the marketing, selling and distributing the companys prepaid systems. a-Tel is a 50-50 joint venture of the company and sDif. a-Tel acts as the only dealer of the company for muhabbet kart (a prepaid card), and receives dealer activation fees and simcard subsidies for the sale of muhabbet kart. in addition to the sales of simcards and scratch cards through an extensive network of newspaper kiosks located throughout Turkey, the company has entered into several agreements with a-Tel for sales campaigns and subscriber activations. Agreements with Digital Platform: Digital platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the companys principal shareholders, cukurova group. Digital platform acquired the broadcasting rights for Turkish super football league by the tender held on 15 July 2004, until 31 may 2008 and the broadcasting rights were extended until 31 may 2010 with a new agreement dated 5 may 2005.
On 23 December 2005, Restructuring framework agreement and supplemental sponsorship agreements was signed between Digital platform and the company. within the framework of the agreement, Digital platform will pay its liabilities to company including interest accrued partially in cash and partially by providing sponsorship services until 15 July 2011. On 4 June 2010, Digital platform notified the company to annul lig Tv sponsorship agreement, one of the supplemental agreements within the framework of Restructuring framework agreement and declared that Digital platform will pay its debt to the company only in cash according to the payment schedule in Restructuring framework agreement. with the protocol dated 31 January 2011, the agreement dated 23 December 2005 is cancelled with the mutual agreement of the parties. The remaining receivable balance from Digital platform will be paid in 2 equal installments in february 2011 and march 2011. 33. Related parties (continued)
Related party expenses charges from aDD advertisement and sponsorship services charges from kyivstar Telecommunications services charges from a-Tel (*) Dealer activation fees and others charges from kvk Teknoloji Dealer activation fees and others charges from hobim invoicing and archieving services charges from Teliasonera international Telecommunications services charges from millenicom Telecommunications services charges from cJsc ukrainian Radiosystems Telecommunications services
2010 65,957 36,039 31,618 27,706 19,446 9,162 3,194 2,211
2009 127,014 53,466 36,971 41,360 21,985 12,261 5,171 4,208
2008 165,250 63,799 49,065 103,386 20,865 11,300 8,501 6,491
* charges from a-Tel have been eliminated to the extent of the companys interest in a-Tel for the years ended 31 December 2010, 2009 and 2008 amounting to $31,618, $36,971 and $49,065, respectively.
Transactions with related parties (continued) Agreements with Digital Platform: (continued) The company also has an agreement related to the corporate group sms services that the company offers to Digital platform, and an agreement for call center services provided by the companys subsidiary global Bilgi pazarlama Danisma ve cagri servisi hizmetleri as (global).
200
201
Agreements with SCM: scm, non-controlling shareholder of Euroasia, obtained loan from financell. Agreements with Teliasonera International: Teliasonera international is the mobile operator that provides telecommunication services in the Nordic and Baltic countries. Teliasonera international is rendering and receiving call termination and international traffic carriage services to and from the astelit. Agreements with Millenicom: European Telecommunications holding ag (ETh), a subsidiary of cukurova group, holds the majority shares of millenicom. millenicom is rendering and receiving call termination and international traffic carriage services to and from the company. Agreements with CJSC Ukrainian Radiosystem: cJsc ukrainian Radiosystems owned by vimpelcom provides mobile communications services is rendering and receiving call termination and international traffic carriage services to and from the astelit. Agreements with ADD: aDD, a media planning and marketing company, is a Turkish company owned by one of the companys principal shareholders, cukurova group. The company was operating a media purchasing agreement with aDD, which was revised on 1 september 2009 and was effective until 31 august 2010. The purpose of this agreement was to benefit from the expertise and bargaining power of aDD against third parties, regarding the formation of media purchasing strategies for both postpaid and prepaid brands. however, the agreement was annulled effective from 2 august 2010 as a result of the notification dated 28 may 2010. Agreements with Hobim: hobim, one of the leading data processing and application service provider companies in Turkey, is owned by cukurova group. The company has entered into invoice printing and archiving agreements with hobim under which hobim provides the company with scratch card printing services, monthly invoice printing services, manages archiving of invoices and subscription documents for an indefinite period of time. prices of the agreements are determined as per unit cost plus profit margin.
34. Group entities The groups ultimate parent company is Turkcell. subsidiaries of the company as at 31 December 2010 and 2009 are as follows: subsidiaries
Effective Ownership Interest Country of incorporation Turkish Republic of Northern cyprus Turkey Turkey Turkey Turkey Turkey Netherlands Turkey Turkey Turkey Netherlands Turkey Netherlands Netherlands Turkey Turkey ukraine Republic of Belarus ukraine Turkey germany Turkey Republic of Belarus Turkey Netherlands ukraine azerbaijan 31 December 2010 (%) 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 99 80 55 55 55 28 31 December 2009 (%) 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 99 80 55 55 55 -
Name kibris Telekom global Turktell Bilisim servisleri as superonline Turktell uluslararasi yatrm holding as Turkcell kurumsal sats ve Dagtm hizmetleri as Eastasia Turkcell Teknoloji arastirma ve gelistirme as kule hizmet ve isletmecilik as* sans Oyunlari yatirim holding as financell Rehberlik hizmetleri as Beltur Bv surtur Bv Beltel Turkcell gayrimenkul hizmetleri as llc global fllc global ukrTower Talih kusu altyapi hizmetleri as Turkcell Europe gmbh corbuss kurumsal Telekom servis hizmetleri as Belarusian Telecom inteltek Euroasia astelit azerinteltek *Brandname of kule hizmet ve isletmecilik as is global Tower.
Business Telecommunications customer relations management information technology, value added gsm services investments Telecommunications Telecommunications investments Telecommunications Telecommunications investments Research and Development Telecommunications infrastructure business Betting business investments financing business Telecommunications Telecommunications investments Telecommunications investments Telecommunications investments property investments customer relations management customer relations management Telecommunications infrastructure business Telecommunications investments Telecommunications gsm services Telecommunications Betting business Telecommunications Telecommunications Betting Business
35. Subsequent events On 23 march 2011, the companys Board of Directors has proposed a dividend distribution for the year ended 31 December 2010 amounting to Tl 1,328,697 (equivalent to $859,442 as at 31 December 2010, respectively), which represented 75% of distributable income. This represents a net cash dividend of full Tl 0.6039532 (equivalent to full $0.39 as at 31 December 2010) per share. This dividend proposal will be discussed at Ordinary general assembly of shareholders to be held on 21 april 2011. in the Ordinary general assembly of shareholders meeting of inteltek held on 6 april 2011, it has been decided to distribute dividends amounting to Tl 16,744 (equivalent to $10,831 as at 31 December 2010). in march 2011, fintur decided to distribute dividend amounting to $50,000. The company has received its portion on 7 april 2011. in march 2011, a-Tel decided to distribute dividend amounting to Tl 26,982 (equivalent to $17,453 as at 31 December 2010). The company will receive its portion on 11 april 2011. according to contract which was signed between fizy medya nternet ve Biliim Teknolojileri limited sirketi (fizy) on 28 January 2011, the company acquired 70% of the shares. fizys operations consists of providing all kind of advertising and promotion services upon internet and e-trading, acquiring copyrights, broadcasting, music and video accessing as well as downloading from the internet. fizy restarted its operations on 1 april 2011 which was previously held in 2010.
202
203
Turkcell letiim Hizmetleri A.. And Its Subsidiaries Dematerialization Of The Share Certificates Of The Companes That Are Traded On The Stock Exchange
Turkcell letiim Hizmetleri A.. And Its Subsidiaries The Boards Dividend Distribution Proposal
it was decided by the capital markets Board (the Board) as per article 10/a included in the capital markets act (cma) No. 2499 to commence the dematerialization system. as per the Temporary article 2 of the Boards communiqu series: iv No.: 28 on the procedures and principles of keeping the Records of Dematerialized capital market instruments, it is set forth that all of the share certificates of the companies that are traded in isE shall be collectively dematerialized and the related procedures and principles are regulated in the said communiqu. legal and actual dematerialization of the share certificates has commenced on November 28, 2005. Beginning from November 28, 2005, it is prohibited for the companies listed in isE to issue new share certificates as a result of capital increases. The new share certificates arising out of capital increases shall be transferred to the accounts of the rightful owners by registration of securities. it is obligatory for the share certificates that are not dematerialized and that are kept physically by their rightful owners to be delivered to our company (issuer) or an authorized broker for their registration with central Registry agency that is under supervision and control of the Board until the end of December 31, 2007. in addition, as per the Temporary article 6 of the capital markets act the financial rights attached to the share certificates, which are not dematerialized until the end of 31 December 2007, shall be monitored in a dematerialized manner at the central Registry agency from that day on and in case the share certificates are dematerialized, their financial rights shall be transferred to the accounts of the rightful owners. any financial rights related to management for the share certificates that are not dematerialized after December 31, 2007 shall be exercised by central Registry agency until the dematerialization process of existing shares completed. implementation principles for the aforementioned article shall be found in the letter of the central Registry agency dated January 30, 2008 and numbered 294. The share certificate records of our company shall be kept by central Registry agency and the issuer in electronic form, which is formed by the central Registry agency. Accommodation Of The Share Capital Of The Company And Nominal Values Of The Share Certificates To The New Turkish Lira as per article 6 titled share capital of the articles of association of the company, the code numbered 5083 Regarding the currency unit of Turkish Republic government and the code numbered 5274 Regarding the amendment of Turkish commercial code, the share capital of the company has been made compatible with the New Turkish lira and such resolution was approved at the Ordinary general assembly meeting on april 29, 2005. provisions regarding making nominal values of the share certificates of the company compatible with the New Turkish lira are regulated in the temporary article of the companys articles of association and such article was approved at the Ordinary general assembly meeting on april 29,2005. The temporary article reads as follows: as per the code numbered 5274 Regarding the amendment of Turkish commercial code, in order to increase the nominal value of the shares to 1.- (One) New Turkish liras, 1,000 (One thousand) units of shares, each having a nominal value of 1,000.- (One thousand) Turkish liras shall be merged and 1.- (One) unit of share having a nominal value of 1.- (One) New Turkish liras shall be issued to represent such shares. fraction receipt shall be issued for the shares that could not be complemented up to TRy 1. in relation to such change, the shareholders rights arising out of their shares are reserved. concerning such transaction, the 1st, 2nd, 3rd and 4th series of share certificates, which represent the existing share capital, shall be merged in the 5th series. in connection with the transactions of share change and merger of series, the shareholders rights arising out of their shares are reserved. The transactions regarding the change in share certificates shall be commenced by the Board of Directors of the company after the dematerialization of capital markets instruments is put into practice and within the framework of related regulations.
in accordance with the capital markets Board (cmB) communiqu serial: iv, No: 27 on principles Regarding Distribution of Dividends and interim Dividends To Be followed by the publicly held Joint stock corporations subject to capital market law, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our company, pursuant to the corporate governance principles by the Board of Directors resolution dated November 24, 2004 and numbered 366; the Board of Directors of our company presents the following dividend distribution proposal, to be evaluated and determined at the Ordinary general assembly meeting of our company which will be held on 21 april 2011. 1- as a result of the activities of our company, pertaining to the period between January 1, 2010 and December 31, 2010, our companys profit, calculated according to the consolidated financial statements, which were audited independently in accordance with the capital markets Board communiqu serial: xi numbered 29, named communiqu Regarding the financial Reporting in capital markets is TRy 2.256.966.571- and the commercial profit calculated according to the provisions of Turkish commercial code is TRy 2.540.278.988-, 2- TRy 1.771.595.963 - after tax profit calculated according to the consolidated financial statements shall be taken as the basis for dividend distribution in accordance with guide Of preparation Dividend Distribution Table which was published on 27 January 2010. 3- as the ceiling designated in the Turkish commercial code (Tcc) for first legal reserve has been reached by our company; no first legal reserve set aside, 4- TRy 1.771.595.963- is the distributable dividend of the company, pertaining to year 2010 and TRy 1.780.152.672- calculated by adding TRy 8.556.709- which is the aggregate amount of the donations made during the year, to the above mentioned amount shall be taken as the first dividend basis, 5- in accordance with the provisions declared in capital markets Board (cmB) communiqu serial: iv, No: 27 on principles Regarding Distribution of Dividends and interim Dividends To Be followed by the publicly held Joint stock corporations subject to capital market law, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our company with the Board of Directors resolution dated November 24, 2004 and declared to public; TRy 356.030.534-, which is 20%, of the first dividend basis, amounting to TRy 1.780.152.672- shall be distributed as the first cash dividend and the secondary reserve amounting to TRy 121.869.697- shall be separated from the rest of the net distributable current year profit, a. The total amount of TRy 1.328.696.972-, which shall be distributed in cash, shall be distributed from extraordinary reserves, b. The withholding tax deductions shall be applicable on the amount to be distributed in cash, TRy 1.328.696.972- as mentioned hereinabove, c. in this respect, gross amount of TRy 0,6039532- shall be paid in cash to our shareholders for each share, having a nominal value of TRy 1.- (One Turkish lira), The aggregate gross amount of cash dividend payment shall be TRy 1.328.696.972-, 6- TRy 1.649.726.266- which is the remaining of the current year distributable profit after the cash dividend distribution shall be : a. Regarded as extraordinary reserves and set aside within the company, b. The withholding tax deductions shall be applicable on the amount, which shall be transferred to 2011 financial year as extraordinary reserves, in case such amount shall be subject to redistribution 7- cash dividend payment to our companys shareholders shall commence on 16 may 2011 and shall continue for 15 days in stanbul head Office, iftehavuzlar, zmir and ankara branches of finans yatrm menkul Deerler a.. and also in central Registry agency located at szer plaza askeroca cad. No: 15 k: 2 34367 Elmada - ili stanbul and shall be made in exchange of the dividend share denominations for year 2008, provided that the physical shares held by the shareholders are registered by the central Registry agency and brokerage house authorized for keeping the shares.
204
205
Abstract Of Auditors Report To General Assembly Of Turkcell letiim Hizmetleri A..

Name of the company headquarters issued share capital Names, surnames term of duty of auditors whether they are company shareholder and/or employees Number of Board of Directors meetings attended, Board of Directors meetings held : TuRkcEll lETm hZmETlER a.. : stanbul : TRy 2,200,000,000 : brahim alpay DEmRTa, hamit sedat ERaTalaR : 1 (One) year : Neither is a company shareholder or employee
: hamit sedat Eratalar attended 10 ordinary Board of Directors meetings. moreover, extraordinary Board of Directors meetings were held 17 times. brahim alpay Demirta attended 3 ordinary Board of Directors meetings. Board of auditors meetings were held four times.
Forward-Looking Statements
This document includes forward-looking statements within the meaning of section 27a of the securities act of 1933, section 21E of the securities Exchange act of 1934 and the safe harbor provisions of the us private securities litigation Reform act of 1995. all statements other than statements of historical facts included in this document, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. in addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, will, expect, intend, estimate, believe or continue. although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. all subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. for a discussion of certain factors that may affect the outcome of such forward looking statements, see our annual Report on form 20-f for 2009 filed with the u.s. securities and Exchange commission, and in particular the risk factor section therein. we undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
The scope of the examination performed on the partnership accounts, books and records, the dates of such examination and the conclusions drawn there from The number of counts performed on the Treasury as Required under article 353.paragraph 1, sub clause 3 o The Turkish commercial code and the results thereof Dates of examinations performed pursuant to article 353 paragraph 1, sub clause 4 of the Turkish commercial code and the results thereof complaints filed in regards to irregularities and proceedings undertaken in respect thereof.
: The quarterly examinations performed on the statutory books and records revealed that they were kept and maintained in an orderly and accurate manner. : The Treasury was counted four times and it was noted that actual assets and the records were in coherence.
: The monthly examinations revealed that securities were complete and coherent with the books and records. : There were no complaints filed in regards to irregularities.
we have examined the accounts and transactions of Turkcell letiim hizmetleri a.. for the period 01.01.2010 - 31.12.2010 pursuant to Turkish commercial code, the companys articles of association and other legislation and in accordance with the generally accepted accounting principles and standards. in our opinion the accompanying Balance sheet as of December 31, 2010 reflects the actual financial position of Turkcell letiim hizmetleri a.. where as the income statement for the 01.01.2010 - 31.12.2010 period fairly and accurately reflect operational results of the company, and that the proposal for dividend distribution is in line with the pertinent law and the companys articles of association. we respectfully submit the Balance sheet and income statement for approval and the release of Board of Directors. sincerely, auditor BRahm alpay DEmRTa auditor hamT sEDaT ERaTalaR
206
207
TURKCELL
Turkcell letiim Hizmetleri A.. Turkcell Plaza Merutiyet Cad. No: 71 Tepeba, 34430 stanbul Tel: +90 (212) 313 1000 Fax: +90 (212) 313 0099 www.turkcell.com.tr

Turkcell en FR 2010

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Turkcell en FR 2010

Uploaded by

Copyright:

Available Formats

TURKCELL

ANNUAL REPORT 2010

GET MoRE oUT of LIfE WITh TURKCELL

PAGE 4 6 8 10 12 14 16 22 32 40 46 53 54 56 62 66 72 74 78 95 96 204 205

oUR STRATEGIC PRIoRITIES

Turkcell Annual Report 2010

TurkCeLL Group IN Numbers

TRY 9.0 billion

TRY 2.9 billion

Turkcell Annual Report 2010

TurkCeLL: LeADING CommuNICATIoN AND TeCHNoLoGY CompANY

TURKCELL Europe- Germany

Turkcell Annual Report 2010

LeTTer From THe CHAIrmAN

Turkcell Annual Report 2010

Mehmet Bulent Ergin

Tero Erkki Kivisaari

Gulsun Nazli Karamehmet Williams

Turkcell Annual Report 2010

* The term of office of board of Directors is three years upon selection.

LeTTer From THe Ceo

Turkcell Annual Report 2010

Sureyya Ciliv Ceo

Chief Legal Affairs officer

Tayfun Cataltepe Chief Corporate strategy & regulations officer

Emre Sayin Chief Consumer strategic projects officer

Chief products and services management

16 Meltem Kalender ozturk

Turkcell Annual Report 2010

Lale Saral Develioglu

Meltem Kalender ozturk

Turkcell Annual Report 2010

Get More out of Life With Turkcell

LIfE WITh TURKCELL

Turkcell Annual Report 2010

Turkcell Group made a TRY1.7 billion investment in 2010. Broadest Coverage

42.2 Mbps speed with 3G

22,000+ km fiber-optic backbone

Broad International Coverage

The Latest Technology

Turkcell Annual Report 2010

Wireless internet for 5 individuals with 3G MultiVINN

Turkcell 3G VINN with 43.2 Mbps

1.2 million daily facebook users

Turkcell Annual Report 2010

2 million smartphone in network

Introduced Samsung Galaxy Tab in Turkey

T10: first Turkcell branded smartphone

Turkcell Annual Report 2010

Goals on Your Mobile

IBB Mobile Traffic

Turkcell Annual Report 2010

Counter to TRY transition of 26 million customers

2 million subscribers TRY53 million benefits

65 campaigns TRY20 million benefits with gntrkcll

Turkcell Annual Report 2010

Tcell Doctors Club

Tcell Craftsman Package

TRY18 million benefit for 30K corporate customers

Turkcell Annual Report 2010

1,600 mobile marketing project

Sponsored free packages for 4.4 million people

Turkcell Annual Report 2010