turkcell en fr 2010

TURKCELLANNUAL REPORT 2010

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CoNTENTS PAGE

our Vision / our Values / our Strategic Priorities 4

Turkcell Group in Numbers 6

Turkcell: Leading Communication and Technology Company 8

Letter from the Chairman 10

Board Members 12

Letter from the CEo 14

Executive officers 16

Superior Technologies 22

More Advantages 32

Best Quality Service 40

More Social Responsibility 46

Awards 53

Managers of Turkcell Affiliates 54

Subsidiaries 56

human Resources 62

Mobile Telecommunication Sector 66

International Ratings 72

Investor Relations 74

Corporate Governance 78

Turkcell offices 95

Consolidated financial Statement and Independent Audit Report 96

Dematerialization of The Share Certificates of The Companies That Are Traded on The Stock Exchange 204

The Board’s Dividend Distribution Proposal 205

Turkcell Annual Report 2010 5

oUR VALUES

oUR VISIoN oUR STRATEGIC PRIoRITIESTo ease and enrich the lives of our customers with communication and

technology solutions.

• 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

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.

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Turkcell Annual Report 20106

TurkCeLL Group IN Numbers

Group revenue slightly improved to

TRY9.0 billion mainly due to increasing

mobile internet revenues and the higher

contribution of Group companies,

despite the negative impact of regulatory

decisions in Turkey.

Turkcell Turkey’s revenue was TRY8.0 billion, which included higher mobile

internet revenues, up 74% to TrY454

million and a higher postpaid subscriber

base, despite the negative impact of

significant regulatory changes. The share

of mobile internet and service revenues

in Turkcell Turkey’s revenues increased

by 4 percentage points to 20%.

Topline contribution of subsidiaries

increased to 11% in 2010, mainly due

to strong revenue growth of 33% to

TrY335.1 million at superonline.

ebITDA contribution of subsidiaries

improved to 9% in 2010 from 5% in

2009, mainly due to the significantly

improved operational performance of

superonline and Astelit.

Despite challenging market conditions

and regulatory changes, Group EBITDA margin was maintained at 33%, while

Group ebITDA was at TrY2.9 billion.

Group net income increased by 4% to

TRY1.8 billion.

Turkcell’s capital expenditures totaled TRY18 billion since inception and TrY1.7

billion in 2010.

TRY9.0

billion

Revenue

33%

ebITDA margin

60.4 million

Group subscribers

TRY2.9

billion

EBITDA*

TRY1.8

billion

Net Income

* 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.

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TurkCeLL: LeADING CommuNICATIoN AND TeCHNoLoGY CompANY

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.

3rd in Europe

60.4 million

subscribers

operatingin

9 countries14th in the

World

8 TRNC - KKTCellsubscribers (mn) 0.4

market share 69%

revenues (million $) 81

9 TURKCELL Europe- Germany

mVNo operations commenced in Q1 2011

Belarus - life :)

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Turkey - TURKCELL

Ukraine - life :)

Kazakhstan - Kcell

subscribers (mn) 33.5

market share 54%

revenues (million TrY) 7,991


market share 18%



market share 14%



market share 50%

revenues (million $) 1,013

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7 Moldova - Moldcell

Georgia - Geocell


market share 55%



market share 44%


Azerbaijan - Azercell


market share 32%


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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 subsidiari-es, 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 wit-nessed 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 develop-ments, 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 techno-logical 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 te-lecom solutions, and prepared for the future. Through this strategic focus, in the first year of 3G in Turkey we established one of the world’s leading 3G networks and I am proud to say that we are pro-viding 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 smart-phones and expanding 3G network. We strongly believe that Turk-cell is well-positioned to push the technological boundaries. For this purpose, we benefit from the increasing synergies with our fi-xed broadband business superonline and also Turkcell Technology, which contributes remarkably to the Group on research and deve-lopment activities. Going forward, we remain determined to capita-

lize on the considerable growth potential of mobile data which we perceive as the growth engine of our business, while building up on our strong voice revenues.

During the year, Turkcell Group’s success was also attributable to significant improvement in international subsidiaries, in which the management team focused on profitability. Gradual improvement in macroeconomic environment of our international subsidiaries also contributed to this outcome. In 2010, our subsidiaries’ contribution to consolidated revenues increased to 11% from 10% a year ago and ex-pected 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 agre-ement in Germany in 2010, which allows us to introduce the Turkcell brand, know-how and benefits to a Western european market.

All along, Turkcell’s long-term success has been built on three core values: responsibility, sensitivity, and service. our objective has been to enrich the country’s social and cultural life in different fi-elds, ranging from education to sports, from culture to employment through our corporate social responsibility projects.

based on our dividend policy, we have consistently distributed dividends for the last seven years. based on our dividend policy, our board of Directors proposed cash dividends of approximately TrY1.3 billion (about $0.9 billion) of Turkcell’s 2010 distributable net income to the approval of General Assembly.

managing the only Turkish company with a dual listing on the New York and Istanbul stock exchanges, Turkcell’s board of directors is determined to conduct all our business by ensuring the high stan-dards of corporate governance. our aim is to enhance our corporate governance practices and to generate long-term economic value for the company’s shareholders.

In conclusion, I would like to emphasize that Turkcell faces the fu-ture with confidence, supported by our strong, agile and dedicated team across the Group and our growing fixed and mobile broadband business. on behalf of the board, I take this opportunity to convey my gratitude to Turkcell’s management team, employees, retailers, suppliers, and associates and, most of all, to our loyal customers for their continued support which has made our success possible.

All along, Turkcell’s long-term success has been built on three core values:

responsibility, sensitivity, and service. Turkcell’s board of directors is determined

to conduct all our business by ensuring the high standards of corporate governance.


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Colin J. WilliamsChairman

Colin J. Williams, age 69, was appointed as the Chairman of the

board of Directors on February 25, 2010 and re-appointed on April

29, 2010. He also serves as a Voting member and Chairman of the

Audit Committee of Turkcell’s board of Directors. He is Chairman of

Clondalkin and Chair of the Audit and remuneration Committees of

Clondalkin, a consumer and industrial packaging company. From

January 2001 to December 2004, mr. Williams served as president

of sCA, North America, which is active in the packaging sector, per-

sonal 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 fo-

unding 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 Gene-

ral 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 physi-

cal chemistry and an honorary doctorate from Lund university in

sweden.

Alexey Khudyakovmember

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 pre-

sident of Altimo, a leading investor in telecoms, and also serves as

non-executive Chairman and Chair of the Audit Committees of High

river Gold mines, a gold mining company. prior to his appointment to

Altimo, mr. khudyakov held a Vice president position with Alfa bank,

managing the bank’s direct investments in the telecom sector. before

that, he was a management consultant with mckinsey & Co. mr. khud-

yakov holds a master of business Administration degree from INseAD

and a master’s degree in Applied mathematics and physics from the

moscow Institute of physics and Technology. He is a non-executive

board member of Turkcell. He is also an observer member of the Audit

Committee of Turkcell’s board of Directors. mr. khudyakov was named

to the Audit Committee in reliance on rule 10A-3(b)(1)(iv)(D) under

the securities exchange Act of 1934.

Tero Erkki Kivisaarimember

Tero erkki kivisaari, age 39, was appointed to the board of Direc-

tors 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 eura-

sia. 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 smart-

Trust Ab, a mobile software company owned by Carlyle Group, Ge

Capital, eqvitec and sonera Group. before that, mr. kivisaari held

the position of Vice president of sonera Group’s International op-

erations. 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 İletisim Hizmet-

leri 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 Communi-

cations.

oleg Malismember

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 se-

nior Vice president of Altimo. mr. malis began working for Altimo

as Chief of the Current project management unit in 2005. betwe-

en 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.

Karin Eliassonmember

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 sin-

ce 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.

Mehmet Bulent Erginmember

mehmet bulent ergin, age 63, was first appointed as a member of the

Turkcell board of Directors on April 29, 2005 and was re-appointed on

April 29, 2010. After having taken responsibility in Hochtief AG’s First

bosphorus project and Tekfen A.s.’s Iraq-Turkey pipeline project, mr. er-

gin 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 Nak-

liyati 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.

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* The term of office of board of Directors is three years upon selection.12

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LeTTer From THe CeosureYYA CILIV

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 ori-ented 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 inter-net usage in the remotest corners of the world. For this reason, we are very excited by the industry we operate in, and remain committed to our smart investments. In line with this technological revolution, as Turkey’s technology leader, we continued with investments whereby our 3G technology available in Turkey has been certified as one of the fastest in the world. As such, within a year we have reached population coverage of 82% in Turkey.

In 2010, time and results thoroughly justified our actions and invest-ments 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 plat-form to substantially impact our lives. our continued fiber-optic backbone investment through fixed broadband subsidiary, superonline reflects this belief. meanwhile, with superonline’s recently-signed regional Cable Network project, Istanbul will become the east’s internet gateway to eu-rope, and the world’s new internet hub due to its geostrategic position.

As Turkcell, we are both aware of our pioneering role in this new era with our new strategic responsibilities. Turkcell is well-positioned for this new era, deriving strength from its strategy, entitled “Turkcell 2.0”. our strategy may be summarized as sharpening our customer focus, offering superior solutions, delivering the best value propositions and increasing user experience in data usage. While our story over the past 17 years has been about “voice”, the next chapter is definitely about “data”. Accordingly, we have introduced our “mobile Constitution” ge-ared 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 super-lative services, we have continued to invest in our fiber-optic backbone

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 infrast-ructure.

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 invest-ments 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 bro-adband 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 decre-ased by 2 pp to 85%, mainly due to the continuing decline in multiple sIm card usage, while we maintained our leadership with a 54% subs-criber 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 ope-rating in line with the best-practice international standards and regu-lations 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” pro-ject, 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 He-arts project” carried out in conjunction with the ministry of National education. At the same time, Turkcell has continued to provide employ-ment opportunities for young people through its erzurum and Diyarba-kır 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 sharehol-ders for their continued support.


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104Sureyya CilivCeo

Emre Sayin Chief Consumer strategic projects officer

Ilker KuruozChief Information and Communication Technologies officer

Emre SehsuvarogluDivision Head Corporate risk management

Burak SevilengulChief Consumer business officer

Lale Saral DeveliogluChief Group marketing services officer

Cenk BayrakdarChief products and services management

Umit AkinChief Legal Affairs officer

Koray ozturklerChief Corporate Affairs officer

Selen KocabasChief Corporate business officer

Serkan okandanChief Financial officer

Ilter TerziogluChief Network operations officer

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Ekrem YenerChief International expansion officer

Meltem Kalender ozturkChief Human resources officer*

hulusi AcarChief Consumer sales officer

12 Tayfun CataltepeChief Corporate strategy & regulations officer

* As of march 14, 2011


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Sureyya CilivChief Executive officer sureyya Ciliv, age 53, was appointed the Chief executive officer of Turk-

cell on January 9, 2007. Having previously worked as microsoft Turkey

country manager between 1997-2000, he served in various manage-

ment 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 engineer-

ing from the university of michigan in 1981.

Serkan okandanChief financial officerserkan okandan, age 41, joined Turkcell in 2000. since January 1, 2006,

he has been the Chief Financial officer of Turkcell. prior to this appoint-

ment, he was the Financial Control and reporting Division Head of Turk-

cell. mr. okandan started his professional career at pricewaterhouse-

Coopers in 1992. He then worked for DHL and Frito Lay as a Financial

Controller. serkan okandan is a graduate in economics from bosphorus

university.

Burak SevilengulChief Consumer Business officer burak sevilengul, age 38, joined Turkcell in 2001 and has been Chief

Consumer business officer since August 2010. prior to this appoint-

ment, he was the Division Head for the Consumer business group and

had various other managerial responsibilities within the marketing

Department. burak sevilengül is a graduate of middle east Techni-

cal university’s Department of business Administration and holds an

mbA degree university of Georgia, Terry College of business.

Koray ozturklerChief 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 Divi-

sion and he received his mbA majoring in mIs from mercer university.

Ilter TerziogluChief Network operations officerIlter 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 As-

sistant 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 strate-

gies, regulation and risk Consolidation in Turkcell.

Tayfun CataltepeChief Corporate Strategy & Regulations officeTayfun Cataltepe, age 50, is the Chief Corporate strategy & regulations offic-

er. After graduating from the electronic engineering Department of bospho-

rus 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 Net-

work 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.

Emre SayinChief Consumer Strategic Projects officer emre sayin, age 44, is the Chief Consumer strategic projects officer of Turk-

cell. prior to his current position, he was performing as the Chief Corporate

business officer and Chief Consumer sales officer of Turkcell. sayin worked

for evyap pazarlama ve Tic. A.s. as the Deputy General manager in charge

of marketing in 2005-2006 and for kodak A.s. as the General manager in

2002-2005. prior to that emre sayin was the Chief marketing officer for

microsoft Turkey between 1999-2002. sayin worked as the marketing and

Category manager of unilever Turkey between 1992-1999. emre sayin is

a graduate of bosphorus university’s Department of Industrial engineering

and holds a master’s degree in systems and Industrial engineering from

rutgers university.

Ilker KuruozChief Information and Communication Technologies officer Ilker kuruoz, age 42, is Turkcell’s Chief Information and Communication Tech-

nologies officer as of september 2009. He joined Turkcell in 2006. kuruöz has

started his professional career in 1994 in AbT. He then worked in NCr as a

system Consultant, in Garanti Teknoloji as a business unit manager and in

Accenture as a senior manager. prior to his current position at Turkcell, he was

the Capability management Division Head of Turkcell. Ilker kuruoz graduated

from bilkent university Computer engineering in 1992 and holds a master’s

degree from the same department.

Emre SehsuvarogluDivision head of Corporate Risk Managementemre 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, in-

ternal audit, corporate risk management, business continuity program man-

agement 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.

Lale Saral DeveliogluChief Group Marketing Services officerLale saral Develioglu, age 43, joined Turkcell in 2003 and since August

2010 has been Chief Turkcell Group marketing services officer. prior to

this position, she was the Chief marketing officer from 2006 to 2010 and

the Individual marketing Division Head of Turkcell between December

2003 and June 2006. starting her career at unilever, Lale saral Develioglu

served as brand manager for 5 years and marketing manager for 7 years

in various product categories and markets between 1992 and 2003. she

is a graduate from the department of Industrial engineering of bogazici

university. she also holds a master’s degree in management engineering

from rensselaer polytechnic Institute, New York.

Cenk BayrakdarChief Products and Services Management officerCenk 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 of-

ficer, mr. bayrakdar acted as the Chief Information and Communication Tech-

nologies officer.

Umit AkinChief 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 Turkcell’s regulatory Legal Affairs department. mr. Akin be-

gan his professional life in 1996 at Ankara university’s Faculty of Law as a

research Assistant. He then worked as a Lawyer at ericsson. umit Akin gradu-

ated from Ankara university, Faculty of Law in 1995 and holds a master’s

degree in public Law.

Selen KocabasChief 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 master’s degree

in Human resources management from marmara university.

hulusi AcarChief Consumer Sales officer Hulusi Acar, age 40, joined Turkcell in 2000 and was appointed Chief Con-

sumer sales officer on December 10, 2009. He graduated from Istanbul uni-

versity’s business Administration department in 1995. mr. Acar worked in

sales positions in THY and koctas A.s. At Turkcell he worked as Area sales

manager, marmara region Coordinator and Turkey sales manager between

2000-2004. between march 2004 and November 2006 he was sales and

Customer relationship Chief executive officer of Astelit. prior to his current

position as Chief Consumer sales officer, he worked as the sales management

and Wholesale and Distribution management Division Head.

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Ekrem Yener Chief International Expansion officerekrem Yener, age 50, joined Turkcell in 2007, and has held positions as Chief

Corporate business officer and Chief special projects officer. Currently, he is

acting as Turkcell’s Chief International expansion officer. He worked for Aysu

Dis Tic. A.s. and Digital equipment A.s. as a sales manager from 1991-1998.

Yener worked as the Ankara regional manager of microsoft Turkey in 1998.

He was appointed microsoft’s Deputy General manager in Charge of market-

ing in 2002 and was the Deputy General manager in charge of business and

strategy Development between 2004-2007. He graduated from the Istanbul

Technical university’s Department of metallurgical engineering in 1982 and

received a master’s Degree in material sciences from the university of Califor-

nia at berkley in 1986 and in High Level marketing management from kellogg

university.

15

Meltem Kalender ozturkChief human Resources officer* meltem kalender ozturk, age 37, joined Turkcell in 1998. she was

assigned as Division Head of employee relations management between

2001 and 2011 in charge of training, performance and talent management,

remuneration, employee relations, organizational development and

quality management. mrs. ozturk, the Chief Human resources officer since

march 14, 2011, worked also in Human resources areas in Logo business

solutions and Işıklar Holding. meltem kalender ozturk is a graduate of

business Administration from marmara university.

16

11

18


Technology evolves and improves every day. Technologies that we

couldn’t have dreamed of just five years ago are today essential ele-

ments of our existence. We now carry our daily lives and our busi-

ness 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 res-

ponsibility projects, Turkcell strives to provide more – to its subscri-

bers 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 in-

novations, supported young athletes and national teams and held

the hands of the snowdrops who want an education; Turkcell has

become Turkey’s Turkcell.

And now, from the east to the West, it is time to bring more life right

across Turkey. because there is life in this nation, and we all have

dreams for the better.

For that reason, we need more well-being, more success, more

simplicity, more communication, more returns, more abundance,

more support, more hope, more options, more freedom, and more

education.

Now, get more out of life with Turkcell.

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 Turkey’s Turkcell. And now, from the

east to the West, it is time to bring more life across Turkey. because there is life in this nation and we all have dreams

for the better.

LIfE WIThTURKCELL

GET MoREoUT of


SUPERIoRTEChNoLoGIESGET MoREoUT of LIfE


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optic infrastructure of more than 22,000 km in 73 provinces. superonline now carries 69

percent of our network traffic.

We executed, together with superonline, one of the world’s longest marine crossover

projects in radio link connection of 95 km, to provide an alternative transmission method

to Northern Cyprus-Turkey fiber optic line.

In December 2009, superonline won the public tender for the fifteen-year lease of

boTAs’s fiber optic infrastructure of 11,280 km, with a bid of eur20.9 million. Thanks

to this tender, superonline was able to use these boTAs routes to access all geographi-

cal regions of Turkey. Along with the route provided by the tender, superonline added

new international exit points to the two existing ones, increasing their number to seven

by the end of 2010; its fiber optic infrastructure exceeded 22,000 km. superonline is

set to continue with selective investments in this infrastructure in 2011. It signed the

regional Cable Network (“rCN”) project, involving seven operators from five countries,

in December 2010. The project involves the establishment of the longest uninterrupted

land Internet infrastructure in the region, through the placement of a 7,750-km fiber

optic cable line from the city of Fujairah, in the united Arab emirates, to Istanbul. The

project is scheduled to commence operations in the second half of 2011, and to become

the internet gateway for 2 billion people. Consequently, Istanbul will become the east’s

internet gateway to europe, and the world’s new Internet base, due to its geostrategic

position.

superonline came together with Turkey’s six leading Internet service providers (borusan

Telekom, Dogan Telekom, Global Iletisim, Grid Telekom, koç.net, and TurkNet) to establish

the Turkish Network Infrastructure platform (“TNAp”), contributing to the Turkish compo-

nent of international investment into positioning Istanbul as the world’s new internet base.

We continued to increase mobile internet usage with devices and applications that deli-

ver 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 wire-

less Internet with 3G speed - anytime and anywhere.

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

Broadest Coverage

We continued to deliver the highest quality services to Turkey’s lar-

gest mobile subscriber base, with population coverage of 99.07 per-

cent, 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 populati-

on 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. Consequ-

ently, 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.).

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.

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 advan-

ces 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 the“Average mobile Internet speed” among fif-

teen european mobile operators in field tests conducted to com-

pare 3G mobile Internet speeds of mobile operators in Turkey and

europe. The tests were conducted in paris, berlin, and London;

and in Istanbul, Diyarbakir, and Trabzon, and are certified by IrIs

Telekom, an independent testing and evaluation organization. In

addition, two of Turkcell’s six radio Network Controllers (“rNC”)

ranked first and second in data speed among 657 rNCs to be eva-

luated 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 superonline’s fiber-

We have made greater investments into more advanced technologies towards broader, higher-quality and faster communication

Superior Technologies

Two of Turkcell’s six radio Network Controllers ranked first and second in data speed among 657 rNCs to be evaluated in the Global 3G performance Comparison report issued by ericsson in 2010.

42.2 Mbps speed with

3G

22,000+ km fiber-optic backbone

82% 3G

coverage


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 attenti-

on 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 cam-

paigns 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

to use the 3G enabled device of their choice, with a very advantage-

ous Turkcell offer.

on september 24, we also introduced Apple’s iphone 4, which has

generated huge interest worldwide, with special Turkcell offers. We

designed different Internet and voice packages for two models of the

iphone 4 - the 16 Gb and 32 Gb memory capacity models.

Nokia’s global music platform, Comes With music (“CWm”), was offered

to the Turkish market for the first time, by Turkcell and on the Turkcell

channels, with the launch of two new Nokia products, the X6 and 5235.

We provided free local and international music downloads to purchasers

of those Nokia phones for a period of one year with the CWm concept.

Turkcell also introduced to the Turkish market samsung’s 2010

flagship product: the Galaxy s.

We additionally offered our customers the Nokia e72, with affor-

dable 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 consu-

mers 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 ad-

dition 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 advantage-

ous call, messaging, and Internet offers.

As of year-end 2010, the number of smartphones on our network had

reached 2 million, representing 6% of total subscribers.

We increased the penetration of internet usage from handsets with applications we developed, and by facilitating easier mobile access to

social networking sites.

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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.

1.2 million daily

facebook users

Turkcell 3G VINN

with 43.2 Mbps

Wireless internet for

5 individuals with 3G

MultiVINN


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 loca-

tion.

Turkcell seyahat is a travel companion service, enabling users to buy tickets or make

reservations with major airline companies and view live flight information as well as

weather conditions at their destinations.

“Who Called me” is an information service that notifies users of any calls received – and

those numbers - while their mobile device was shut off and/or outside coverage area.

“Who Called me” retrieves callers and numbers when the user’s device is again in ser-

vice. 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 life-

long education.

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 advan-

ced mobile Internet experience. The stylishly-designed Turkcell T10

won kudos, providing mobile Internet service with 3G speed, mobile

TV service, a touch screen, Turkcell applications and access to the

most popular Internet sites with one click – at an affordable price.

With the T10, we continued to empower our subscribers’ internet

habits, increasing their mobile Internet use by 10 times, compared

with usage prior to purchasing the T10.

We continue to provide new products and services to further ease the lives of our customers

We closely follow global trends, both to meet local market needs

and to continue to provide creative and pioneering solutions in co-

operation 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 increa-

se the distinctiveness of its products and services. The Turkcell Appli-

cation 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 appli-

cations - including Compass, Travel, Goals on Your mobile, mobile

TV, Gezenzi, Footbo, and Click to Win - exceeded 3.8 million.

Music Services

Gncplay’s vision is to be the go-to place for unlimited online music

streaming. Although the platform can be used by everyone, the user

interface is particularly designed for the young segment. users can

create their own play lists and share them with friends. users can

listen to limitless music, follow specific radio stations, create song

lists and share them with their friends. The “ring back Tone” Turk-

cell service enables users to play music for their callers.

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.

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We introduced the Turkcell T10, the first Turkcell-branded device, with the slogan, “A smartphone for everyone”.

2 million smartphone in network

T10: first Turkcell branded

smartphoneIntroduced Samsung

Galaxy Tab in Turkey

19 million download

22 Turkcell branded

applications

3,000+ applications


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 eu-

rope and Yapı kredi bank.

other Services

With the “Click to Call” service, we offer our subscribers the op-

portunity 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 mo-

bile phone numbers, they may acquire a rumara number to call ot-

her 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 trac-

king, fleet management, pos terminals, security alarms, smart me-

tering and sales force automation applications.

Location and Authentication

A first in its area, the location-based survey application enables re-

searchers to display the location-based distribution of votes on a

map, adding a new dimension to their decision-making.

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 mar-

ket, representing industries as diverse as banking, e-government,

insurance, healthcare and e-commerce.

We made our mark on the world of R&D with TURKCELL TEKNoLoJİ

We conducted different projects with more than 200 leading tech-

nology companies and research centers from europe. In just one

year, we added a further 26 patented applications to our existing 31,

while increasing the number of our international applications to 18.

Already last year’s leader in patent applications in our sector, this

year we further overtook other applicants.

We developed unique products:

With our expertise in sIm card technology, we developed an inf-

rastructure 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 deve-

lopment 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 Fi-

eld 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.

The Turkcell Application store enables users to download more than

3,000 free or paid applications, with more than 1,000 compatible mobile

devices.

In just one year, we added 26 more patented applications to

our existing 31, while increasing the number of our international

applications to 18.

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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.

Compass

TravelMobileTV

Click to Win

IBB MobileTraffic

Goals on Your Mobile

Gezenzi


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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 Turk-

cell 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 Turk-

cell kuruçeşme Arena concerts with a guest; they could also attend - again with a guest

- special film previews and parties. In addition, platinum subscribers could participate in

Flugtag, the Yeşilçam Awards Ceremony and IF Festival.

Turkcell platinum subscribers were periodically presented with special discounts and gifts,

across more than 10 brands.

We continued to offer advantageous tariffs and packages to our corporate customers

We revamped our corporate tariff structure in January 2010, offering more advantageous

packages to our customers and simplifying the options, making it easier to choose the

optimal package for employees. We introduced plus packages in 2010; these allow our

corporate customers to meet all their local voice, data, and sms needs with a single, price-

predictive tariff package.

In July 2010, we launched easy packages to enable our corporate customers to easily allo-

cate 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 bri-

tain–Germany–France Daily Voice package met the international communication needs of

our corporate customers at more advantageous prices. We gradated our international data

tariffs to provide our heavy users with data service at more advantageous prices.

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 long-

term 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 far-

mers and public employees. The Turkcell Farmer package, designed

to aid Turkey’s farmers in increasing their production, attracted wi-

despread interest. We provided not only useful and informative com-

munication offers, but also mobile training programs to raise produc-

tivity, location-based daily weather forecasts, local and global news,

product-based information, and discounts through co-branded offers.

With local campaigns, we offered several advantages to our customers

in rural regions and priority provinces, further expanding our market

share in these regions.

In the world of Hazırkart (prepaid service), we provided our customers

with monthly “pomegranate packages”, which offer five free units for

each unit purchased that included both voice and sms services.

We made a difference in the transition from units to Turkish lira

We, together with Turkcell Technology, successfully completed the

unit-to-TrY transition period, an important IT transformation project.

Turkcell conducted the most transparent and seamless transition from

units to Turkish lira. one week before the transition date, we announ-

ced the Turkish lira fees of our tariffs to all of our Hazırkart customers,

through sms, as well as our websites, voice response system, dealers,

and call centers. We converted the units remaining on our customers’

lines at a higher unit price than the one they had paid to load them,

acting on the principle of customer satisfaction. The transition was

completely smooth and entirely flawless for 26 million customers.

As of April 1, our subscribers were able to view on their screens the

amount used, the total, and the remaining amount after each use. We

provided assistance for the Turkish lira transition through a dedicated

service line and answered all related questions.

We continued to offer more freedom to young subscribers

We introduced an advantageous postpaid tariff to the youth segment

and created an alternative to Hazırkart, also leading the sector in this

area. We diversified our sms packages, a very important communica-

tion tool for youth.

With gnçtrkcll club, we supported and encouraged youth

throughout the year, providing young people with platforms

where they could demonstrate their power

In 2010 Turkcell’s youth club, gnçtrkcll, provided total savings of

TrY20 million to millions of gnçtrkcll members, through 35 campa-

igns. We offered free meals at mcDonald’s and burger king in diffe-

rent periods, and a free ticket with each ticket purchased at movie the-

aters, 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 ad-

vantages to our customers through 65 campaigns that included 35

brands. Two million Turkcell customers gained a total value of app-

roximately TrY53 million in shopping benefits. Customers took ad-

We presented more varied offers, in more ranges, at affordable prices and with higher quality

More Advantages

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.

Counter to TRY

transition of 26 million customers

2 million subscribers

TRY53 million benefits

65 campaigns TRY20 million benefits with

gnçtrkcll


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We provided special advantages to different professional groups

With the objective of meeting the communication needs of craftsmen

within a single package, we introduced the İşTcell Craftsman packa-

ge, treating them as corporate customers and offering them corporate

advantages.

Following the 2009 launch of its first packages for self-employed in-

dividuals like physicians, lawyers, and pharmacists, İşTcell focused on

real estate agents in 2010. We addressed the needs of these leading

groups in the self-employment sector and accordingly enhanced offers

for these clubs. Family doctors who are affiliated with the İşTcell Doc-

tors Club benefit from discounts, with a mobile application specifically

designed for them, while all member doctors have free access to the

WAp portal that contains customized information and applications.

real estate agents affiliated with the İşTcell real estate Agents Club can

post discounted ads on the website at sahibinden.com, while attorneys

affiliated with the İşTcell Lawyers Club have discounted access to uYAp

(National Judicial Network project) using their mobile signature.

We provided total benefits of TRY18 Million to 30,000 corporate

customers with the İŞTEKAZAN program

We launched our corporate loyalty program, İŞTekAZAN, on march

1, 2010. The program provided our corporate customers with savings

of up to 50 percent on expenditures including food, fuel, cargo, office

materials, insurance, finance, security, transport, software, hardware,

meetings, hotel accommodation, training, advertising, Internet, and

technology.

30,000 companies gained total savings of TrY18 million through

discount contracts signed with more than 30 different brands across

different sectors; contracted brands recorded a total turnover of app-

roximately TrY219 million as of year-end 2010.

on November 23, 2010, we organized the first İŞTCeLL Technology

summit, with the theme of “opportunities to make a Difference in

your business with mobile Technologies.” Notable speakers included

world-renowned technology gurus Geoffrey moore and Don Tapscott,

as well as Turkey’s top brand managers, who met with our corporate

customers.

We provided more advantages to our customers through our corpo-

rate loyalty program, İŞTECEP

The corporate loyalty program with contracts, İŞTeCep, produced a

catalog with 26 alternatives in total, including 29 offers and 12 de-

With the objective of meeting the communication needs of craftsmen

within a single package, we introduced the İşTcell Craftsman

package, treating them as corporate customers and offering them

corporate advantages.

We provided total benefits of TrY18 million to 30,000 corporate customers with the İŞTekAZAN program. Contracted brands recorded a total turnover of approximately TrY219 million as of year-end 2010.

TRY18 million

benefit for 30K corporate

customers

İşTcell CraftsmanPackage

İşTcell Doctors

Club


vice options from all manufacturers, with the launch of 11 new offers

introduced in september and November 2010. İŞTeCep provided more

advantages to our corporate customers with an increased number of

gifts.

We made a difference to the special needs of our customers through

corporate solutions and increased their efficiency

As the leading communication and technology company in Turkey,

we endeavor to fully understand the needs of our corporate custo-

mers, and maximize their efficiency in terms of business-team, as-

sets 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 hel-

ped 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 cli-

ents and employees through approximately three billion messages,

• The Turkcell Vehicle Tracking service, used in 150,000 vehicles ac-

ross 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 cooperati-

on 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

provider (“TTsp”), and will provide our total solutions from a single

source. our product and service catalogue, expanded with our tran-

sition project, will provide our customers with faster and more global

solutions, with more advantageous total costs and higher service qua-

lity. 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 cata-

logue.

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 supe-

ronline 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 communi-

cation. We drew up a service Level Agreement (sLA) for the infrastruc-

ture 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 throug-

hout 2010. We provided VINN owners with cost control options,

with packages that discontinued when the first limit was reac-

mor

e A

dvan

tage

s

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 de-

mos, including micro-websites with video productions, demos on our services, and appli-

cations 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 plat-

form for the sharing of the movie, music and entertainment content of gnctrkcll, and the

communication of gnctrkcll campaigns. This page has the highest subscriber number of

350,000 among Turkish brands.

With www.turkcellliningucu.com website, we created a platform for our subscribers to

enable them to create their own videos interpreting our coverage theme song. We then

broadcast our selected submissions on TV as an advertisement.

Gnctrkcll club designed an engaging micro-site, www.iliskininadinikoy.com, for Valentine’s

Day, using Facebook Connect. A micro-site directed towards the gnçtrkcll audience, www.

gnctrkccsessizsinema.com, which is an entertaining micro-site with a video-based online

charades game, was launched in march 2010.

We also completed the design of the home and sub-page for Gezenzi, Turkcell’s location-

based mobile micro-blogging service, and launched www.gezenzi.com in 2010.

We offered Turkcell subscribers who wished to participate in the “Turkey’s Got Talent”

television show an opportunity to post their videos online. A jury evaluated videos posted

on the www.turkcellleyeteneksizsiniz.com website that met predetermined criteria; those

selected by the jury showcased their talent on the television show.

We provided more advantages with Mobile Marketing

In 2010, we developed 1,600 projects with 353 different companies across 50 assorted

sectors within our mobile marketing service, which always provides more advantages. In

europe’s largest permission-based database, 11.4 million people received various benefits.

With 700 million advertisement impressions realized in the year, sponsored free packages

benefited 4.4 million people. mobile marketing team qualified to the finals in six categories

of the Global mobile marketing Awards; and published the first mobile marketing book in

Turkey in cooperation with mcGraw Hill.

We made a difference to the special needs of our customers through

corporate solutions and increased their efficiency.

Within the Total Telecom solutions provider, we designed a first joint offer by Turkcell and superonline.

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


BEST QUALITYSERVICEGET MoREoUT of LIfE


bes

t Qua

lity

serv

ice

other Channels

We have been providing service to our customers through electronic Chain stores since

2008; we can offer the Turkcell advantages at any point where our customers come

together with technology. our customers can meet both their subscription and device

needs through the partnerships with eight brands and in approximately 100 stores. We

also provide our customers with other channels for their routine needs, including bank

ATms and online branches, call centers, kiosks, post office (“pTT”) and the Turkcell

website.

We maintained our focus on customer satisfaction in our Call Center and remained the acknowledged leader; our success was recognized with awards

Turkcell Global bilgi formed special service teams in 2010 as part of the service segmen-

tation efforts carried out in Turkcell Consumer operations; thus enabling those users

with different service needs to obtain these services from trained expert customer repre-

sentatives. Designed under the leadership of Turkcell Global bilgi Customer relationship

management, and with the efforts of the IT department, the system differentiates itself

from other practices in the sector with its technological features and process for the

maintenance of satisfied customers. protected by “Tasdix”, the first digital time stamp

introduced to the end-user in Turkey, this program was entered into TÜbİTAk registers,

and its usage rights are under proprietary protection.

In 2010, Turkcell Global bilgi ranked first in the world and the emeA region in the

“2010 Top ranking performers” assessment by ContactCenterWorld.com; for the

“Gaining New Customers - soHo*” project, designed for professional groups in Turk-

cell 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

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 frequ-

ented and accessible locations (81 cities, 222 districts), and provide

standard and solution-oriented services. At the Turkcell Communi-

cation 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 appro-

ach 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 communi-

cation 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 experti-

se in communication technologies.

Technology experts, who have been providing service in our stores

since 2008, present our customers with a variety of devices equip-

ped 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 impro-

vement 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 thro-

ugh the distinctive applications in our stores, two of which draw the

greatest attention; fast battery charger and telephone backup:

• Fast battery Charger: a feature unique to Turkcell among global

operators, these devices quickly complete charging in 15 minutes.

In 2010, the device was used 1.1 million times.

• Telephone backup Device: a feature unique to Turkcell in Turkey,

this device is used both for telephone backup and the downloading

of various applications, to make life easier. In 2010, approximately 1

million applications were downloaded.

We provide our customers with efficient product supply, and fast and efficient information at 17,000 Turkcell Sales Points and 50 Turkcell Distribution Centers

Turkcell Sales Points

There are approximately 17,000 Turkcell sales points, offering the

products of all operators in Turkey and providing service even in

the most outlying locations. With this figure, Turkcell is one of the

most prominent examples of a telecom supply chain in europe. It is

essential for us that our customers can easily access Turkcell pro-

ducts 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 po-

ints win points for their performance and use them in shopping. This

system ensures the creation of a one-to-one communication plat-

form 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.

With our expanded, widespread and trained service Team, we produce more innovative and practical solutions to better meet your needs.

Best Quality Service

*small office home office

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.

50 Turkcell Distribution

Centers

Telephone Backup Device

17,000 Turkcell

Sales Points

fast Battery Charger


bes

t Qua

lity

serv

ice

of the related professional group; bulk sms packages; web assis-

tant 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 Glo-

bal bilgi contacted 230 million customers in 2010. It responded to

15,000 video calls through mobile internet technology with 3G spe-

ed, and provided for the first time a video call center for the hearing-

impaired. Turkcell Global bilgi has won 25 national and internati-

onal awards over the past five years as a result of its differentiating

service approach.

We both increased customer satisfaction and reduced costs, by implementing voice recognition for our customers

We introduced voice signature on February 9, implementing voice

recognition so that our customers are no longer obliged to answer

security questions before speaking to a service representative.

We eased the lives of company executives with refinements to Corporate online Transaction

New features were added to Corporate online Transaction, which

enables company executives to manage corporate lines through

approximately 200 transaction options; companies were provided

with 24/7 online transaction capability. With the addition of new

reports, customers can produce any report they need from this chan-

nel.

We provide corporate customer services customized to company

employee profiles

With “İşTcell business Class Customer services” for company exe-

cutives and decision makers; “Technical support service” for IT

executives; and “İşTcell Corporate Customer services” for company

employees, we provide exclusive services with tailor-made solutions

for the varying requirements of different profiles.

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.

25 awards in 5 years to Global Bilgi

15,000 video calls

Voice signature

Turkcell Annul Report 201046

MoRE SoCIALRESPoNSIBILITY

GET MoREoUT of LIfE


mor

e so

cial

res

pons

ibili

ty

We invest in the future of future generations in the areas of edu-

cation, sports, and employment, by developing or supporting sus-

tainable, long-lasting and measurable projects that promote youth

development.

Snowdrops

We provide educational grants to 10,000 girls every year with the

Snowdrops project, which has grown from a drop into an avalanche

The snowdrops project was initiated in 2000 in cooperation with the

society for supporting modern Life and provided grants to 5,000 girls

who are decisive and determined to study. Turkcell extended the project

in 2007 to increase the number of grants given every year to 10,000.

The snowdrops project strives to provide equal educational opportu-

nities to girls unable to continue their education due to the economic

disadvantages of their families; and subsequently to develop them

into open-minded individuals with a profession.

Concluding its first decade in 2010, snowdrops is Turkey’s pionee-

ring education project, also marking Turkcell’s first comprehensive

social responsibility initiative. snowdrops has grown into an ava-

lanche over the years with public support to become one of Turkey’s

most important social responsibility projects, providing educational

opportunities to tens of thousands of girls.

A mentorship program was initiated in 2004 as a supporting process

for the snowdrops project, to further contribute to the development

of real-life skill sets for the “snowdrops” continuing their educati-

on 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

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 internati-

onal recognition. In 2008, the snowdrops project was filmed by Na-

tional Geographic. prior to the documentary, an 11-person National

Geographic team conducted interviews with snowdrop girls and the-

ir 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 ima-

ges 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 thro-

ugh 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 gradu-

ated from high school; 3,437 of them have entered college; and 976

are college graduates. Thus far, the snowdrops project has garnered

16 national and international awards.

Bridge of hearts

Initiated in 2008 in partnership with the ministry of education, the

“bridge of Hearts” project enables ten thousands of children from

around Turkey to visit different provinces and establish new and

long-lasting friendships with other children, while also discovering

the natural and cultural beauties of our country.

Five-day tours are arranged as part of the bridge of Hearts project,

to support students’ personal and social development, as well as to

As Turkey’s Turkcell, we continue to support not only technology, but also economic, environmental, and social development.

More Social Responsibility

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.

Scholarships to 20,000

girls

16 national and

international awards to Snowdrops

976 college

graduates


mor

e so

cial

res

pons

ibili

ty

Turkcell is the main sponsor of the National football and Basketball Teams

From its start as the official Communication sponsor in 2002, Turkcell has continued its

support for the National Football Team since 2005, as the main sponsor. Turkcell intends

to continue its support of the national team, recognizing the importance of the team’s ac-

hievements in enhancing national morale, as well as our nation’s international prestige.

Turkcell also supports the National basketball Team, encouraging and inspiring upco-

ming generations. starting off as the official Communication sponsor in 2002, we beca-

me the main sponsor in 2006. Turkcell was also the main sponsor of the World basketball

Championship 2010, where our national team achieved great success by picking up a

silver medal.

Contribution to employment

At Turkcell, we also prioritize investing in employment. Turkcell Group employs appro-

ximately 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 pro-

ject in partnership with İŞkur (Turkish employment Agency). In 2010, we provided 1,600

unemployed young people with comprehensive training opportunities in the retailing

and call center sectors. more than 1,000 of them were employed in our eco-system. We

will continue this partnership with İŞkur in 2011, and provide training and job opportu-

nities to more than 2,000 people.

We also focus on employing physically challenged individuals. Accordingly, Turkcell Gro-

up employs 285 physically challenged individuals, while Turkcell Global bilgi has 180

physically challenged employees. A project developed with the ministry of Transportation

employs 7 such individuals, who are able to provide call center service from their homes.

With our Turkcell Global bilgi call center, we employ 7,500 people in 12 locations in total,

including nine in Turkey (Istanbul, Izmir, erzurum, eskişehir, Diyarbakir, Ankara, and

karaman), two in ukraine, and one in belarus.

We offer Job opportunities to Thousands of Young People through the Turkcell Academy - İŞKUR Cooperation

As retail and call center sectors prosper in Turkey, the need for human resources trained

in technology and communication, and in marketing, sales, and customer-centric servi-

ces 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

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 edu-

cation. The remaining two days are scheduled by the family hosting

each student.

Having reached 130,000 students in three years, the bridge of He-

arts project continues to grow each year. In 2010, special day activi-

ties were included in the project. students were taken to the Anıtka-

bir 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 ac-

company the students.

• bridge of Hearts teams were formed in 81 provinces,

• Thousands of students for the first time experienced: planes, the

sea, the metro and trains,

• Hundreds of thousands of friendship were established.

Runners to the future

Developed in cooperation with the General Directorate of Youth and

sports, the “runners to the Future” project aims to support the tra-

ining of athletes aged 12-18 who can achieve success in individual

sports.

Included in the national plan of the united Nations’ project, Alli-

ance 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 na-

tional athletes who will successfully represent Turkey in the inter-

national arena.

Within this project, Turkcell also sponsors marsel İlhan, the number

one-ranking tennis player in Turkey and 90th in the world; as well as

Cagla buyukakcay, another national tennis player.

At Turkcell, we also prioritize investing in employment. Turkcell

Group employs approximately 11,000 people.

Turkcell was also the main sponsor of the World basketball Championship 2010, where our national team achieved great success by picking up a silver medal.

The main sponsor of the

National football and Basketball

Teams

Employs approximately 11,000 people

An eco-system of 50,000

people

Support the training of athletes aged 12-18


Aw

ards

İŞkur, the employment agency affiliated with the Turkish ministry of

Labor and social security, to both introduce qualified labor to these

sectors and offer employment opportunities to this qualified labor.

The primary function of the Turkish employment agency is defined

in its articles of incorporation: to meet the personnel needs of emp-

loyers with qualified labor.

In this cooperative effort, we brought together the nationwide hu-

man resources of İŞkur, the academic knowledge of the universities

and the Turkcell Group’s corporate knowledge and experience under

the expertise of the Turkcell Academy; we designed two programs:

the “Turkcell retail sales Development program” and the “Custo-

mer relations Development program.” From the young people re-

gistered with İŞkur, those with qualifications defined according to

business criteria passed through a three-stage selection procedure,

including a telephone interview, general examination, and face-to-

face interview, for an opportunity to attend these programs.

In these programs, instructors from ege university, erzurum Ata-

türk 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 conti-

nue this cooperation in 2011 and will hold new, augmented training

programs designed for the call center and retail sectors; offering job

opportunities for 2,000 unemployed young and talented individuals

in twelve cities.

Turkcell Volunteers

The Turkcell Volunteers group, composed of Turkcell employees,

identifies people in need and related projects in cooperation with

non-governmental organizations, and ensures the individual sup-

port of Turkcell employees through in-house organizations.

Turkcell Volunteers projects to date have included “Would You share

Your Toy?”; “Let’s Heat the Yukarı Tandır Village”; “my First Holi-

day”; “A book for every Child”; “We regenerate the Fatih elemen-

tary school in Şırnak”; “recreational Area Arrangement for the ka-

pıkaya elementary school in siverek”; and “Curiosity room.”

Turkcell Volunteers were granted the “excellence in public relati-

ons – 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.

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 Informa-

tion 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 pro-

jects.

We saved energy

A new generation feature recently integrated into our network enab-

led 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.

• Turkcell was presented with an “Alliance Excellence Awards” in 2009, in the “Growth Company: Alliance-Management 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 in-

house 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 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.

• 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 International Public Relations Association (IPRA) in the “Best Service Launch” category for the 3G launch.

• Turkcell Global Bilgi ranked first in the “Call Centers” list in the bilisim 500.

• We won the grand award in the bilisim 500 competition for

our “Mobile Application”.

• Turkcell Global Bilgi won the Grand prize in the “Best Telemarketing” category for the emeA (europe, middle-

east and Africa region).

• 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 honorary awards in seven different categories. Turkcell’s Ceo süreyya Ciliv was presented with an honorary

award in the “executive of the Year in europe” category, while

the snowdrops and bridge of Hearts projects each received

honorary awards in the “social responsibility projects of the

Year” category. The Turkcell management Team was recognized

in the “management Team of the Year” category; the Turkcell

Corporate Communications Team was recognized in the

“Communication Team of the Year” category; Turkcell VINN in

the “marketing Campaign of the Year” category; Tıklakonuş and

Turkcell konuşanİlan in the “New services of the Year” category;

and Turkcell mobile Learning and Turkcell-NTV News package in

the “New Telecommunication services of the Year” category.

• Digital Age Awards:

most Creative Viral Campaign: Certificate of Achievement:

Gezenzi Lost

most Creative Digital Centered, Integrated Digital Campaigns

First: 100 Things To Do When You Are Young

most Creative Video: First Award: Gezenzi Internet Video

• We won the Grand prize at the Golden Drum in the “Best PR Event” category with the First Year Event of 3G.

• We were awarded Capital Magazine’s Most Admired Company in 2010 Award.

Turkcell Continued To Win Awards in 2010

Turkcell Volunteers were granted the “The best social responsibility

project Created by employees”, by the united states-based e2e, in 2010.

mor

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man

ager

s of

Tur

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l Affi

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s

Astelit – Alexander BarinovAlexander 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 ma-nager 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 Erkanmurat erkan joined the Turkcell family as the General manager of Tellcom in June 2008. After launching his career at Toshiba, mr. erkan became Turkey’s first systems engineer at Cisco. prior to joining Tell-com, 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 gradu-ated from the Department of electronics and Communications engineering at Yıldız Technical university in 1992.

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

Global Tower - Ismet YaziciIsmet Yazici joined Global Tower on February 2, 2009 as Assistant General manager for business Develop-ment & sales and became Deputy General manager on February 18, 2010. He became General manager at Global Tower on November 8, 2010. He joined Nortel Netas in 1993 as an r&D engineer. He received a master’s degree in political science at marmara university (1998) and an mbA degree at the university of Texas (2000). mr. Yazici worked in the International sales & marketing Department at Nortel Netas bet-ween1995 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 mar-keting, 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.

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

BeST – ozcan Ermisozcan 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.

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

KKTCell - Daghan fellahogluDaghan 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 de-sign. between 1996 and 2007, mr. Fellahoglu served in various senior management positions at erics-son 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.


besT was able to achieve 76.2% geographical coverage and 96.3%

population coverage in just two years, while increasing its subscriber

market share to 14% in a market with a penetration rate of 110%

as of 2010. besT’s subscriber base rose by 25% year-on-year to 1.5

million. As the first mobile operator in belarus to launch 3G services

in November 2009, besT continued its investments, with a TrY185.4

million capital expenditure in 2010, which rendered the Company the

leader in the belarusian market in 3G rollout, increasing its brand

awareness to 88% with its own brand, namely life:).

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.

Fintur’s subscriber base continued to grow in 2010. The overall subscri-

ber number rose by 16.9% to 15.9 million, mainly as a result of strong

growth in kazakhstan. Fintur’s consolidated revenue increased by 8.2%

to us$1,737 million in 2010, mainly driven by a 17.4% increase in the

revenues of our kazakhstan operation, along with strong subscriber ac-

quisitions and an improved macroeconomic environment. We account

for our investment in Fintur using the equity method. Fintur’s contribu-

tion to income was us$153.0 million in 2010.

Azerbaijan: Azercell

established in 1996, Azercell was a joint venture between Azertel

and the Azerbaijani ministry of Communications. Currently, Fintur

owns approximately 51% of Azercell through direct and indirect

holdings. Despite incessant and intensifying price competition, the

Company has managed to maintain its market leadership since its

first year of operation.

Deriving its strength mainly from its wide coverage area, strong net-

work 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 com-

pany in December 1999.

International Subsidiaries

Ukraine: Astelit

by the beginning of February 2005, Turkcell’s 55% indirect subsi-

diary Astelit had launched its Gsm operations in ukraine under the

“life:)” brand name. of the company’s shares, 45% belong to the

system Capital management Group. Astelit covers 96% of ukraine’s

population and 88% of the country’s territory.

In 2010, Astelit’s ebITDA tripled compared to 2009 within the con-

text 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, Astelit’s number of registered and three-month active subs-

cribers 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 year-

on-year.

Belarus: BeST

Turkcell purchased 80% of belarusian Telecommunications Network

(besT) for us$500 million from the state Assets Committee of the re-

public of belarus in July 2008 as part of the Company’s strategy to

capitalize on the emerging investment potential in neighboring co-

untries. The purchased amount is scheduled to be paid in three ins-

tallments: 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 mar-

ket 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.

In 2010 Turkcell, continued its operations in a wide geography spanning from Germany to kazakhstan

Subsidiaries

Summary Data for Astelit 2009 2010 y/y % chg

Number of subscribers (million) Total 12.2 9.1 (25.4%)Active (3 months) 1 7.8 6.1 (21.8%)MoU (minutes) 158.7 171.9 8.3%

Average Revenue per User (ARPU) in US$Total 2.5 2.6 4.0%Active (3 months) 3.7 3.9 5.4%Revenue (UAH million) 2,740 2,691 (1.8%)Revenue (US$ million) 351.1 339.3 (3.4%)EBITDA2 (US$ million) 20.2 64.5 219.3%EBITDA margin 5.7% 19.0% 13.3ppNet Loss (US$ million) (111.8) (101.0) (9.7%)

Capex (US$ million) 216.0 66.5 (69.2%)

1 Active subscribers are those who in the past three months made a transaction which brought

revenue to the Company.2 ebITDA is a non-GAAp financial measure. see page 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.

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fINTUR 2009 2010 y/y % chg

Subscriber (million)

Kazakhstan 7.2 8.9 23.6%

Azerbaijan 3.8 4.0 5.3%

Moldova 0.7 0.9 28.6%

Georgia 1.9 2.0 5.3%

TOTAL 13.6 15.9 16.9%

Revenue (US$ million)

Kazakhstan 863 1,013 17.4%

Azerbaijan 501 504 0.6%

Moldova 63 67 6.3%

Georgia 175 152 (13.1%)

Other* 3 1 (66.7%)

TOTAL 1,605 1,737 8.2%

(*) Includes intersegment eliminations

(US$ million) 2009 2010 y/y % chg

Fintur’s contribution to Turkcell Group’s net income 119.6 153.0 27.9%


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Moldova: Moldcell

moldcell was granted its Gsm 900 license in November 1999 and

commenced operations in moldova in April 2000. The Company is

fully-owned by Fintur Holdings b.V.

moldcell was the first operator in moldova to provide services ranging

from sms to roaming for prepaid subscribers, WAp/Internet Access,

Gprs/eDGe, 3.5G and blackberry enterprise solution.moldcell’s subs-

criber number had increased to 0.9 million by the end of 2010.

Georgia: Geocell

Geocell was founded in 1996 as a joint venture between the Geor-

gian ministry of Telecommunications and Turkish company Gürtel

Telekomunikasyon Yatırım ve Dış Ticaret Anonim Şirketi (Gürtel) as

the first Gsm operator in Georgia.

Geocell began commercial operations in march 1997 and was gran-

ted 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.

Kazakhstan: Kcell

kcell commenced its activities in 1999 as a joint venture between

Fintur Holdings b.V. and kazakhstan’s national telecommunications

operator kazakhtelecom. The Company operates on a renewable 15-

year licensing agreement that provides the right to run a standard

Gsm 900 cellular network.

As the undisputed market leader in kazakhstan, based on subscrip-

tions, growth rate, investment volume and variety of services, and

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 Al-

maty, based on temporary permission. on December 25, 2010, the

competent authority signed an addendum to the existing Gsm licen-

se, which provides kcell with the rights to operate a 3G network. The

addendum requires kcell to provide all locations with a population

exceeding 10,000 people with mobile services using umTs/WCDmA

standards until January 1, 2015.

Turkish Republic of Northern Cyprus: KKTCell

established in 1999, kkTCell is a subsidiary of Turkcell that operated

under a revenue-sharing agreement with the government of the Tur-

kish 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 subscri-

bers 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 techno-

logy to Northern Cyprus and began offering 3G services and pro-

ducts to the people of Northern Cyprus on october 14, 2008. In 2010,

through its radio link project, kkTCell had the only international ga-

teway other than that of the TrNC Telecommunication board.

Domestic Subsidiaries

SuperonlineTellcom İletişim Hizmetleri A.Ş., founded in 2004, merged its strength

and brands with those of Turkey’s leading Internet provider, supe-

ronline uluslararası elektronik bilgilendirme, Telekomünikasyon ve

Haberleşme Hizmetleri A.Ş. in may 2009, to operate under the brand

name “superonline”. Turkey’s innovative telecom operator superon-

line is continuing its investments in order to become a complete so-

lution and service provider for its corporate and individual customers.

Following its establishment, superonline obtained the license for

long distance telephone services (LDTs), which allows it to provi-

de 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 Feb-

ruary 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 Tur-

kish 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. su-

peronline provides its customers with affordable packages for fiber

Internet, the most advanced Internet-access technology in the world.

With its fiber-optic-infrastructure investments completed within a

relatively short timeframe, superonline introduced its customers to

100 mbps Internet connections in 2007.

on December 2009, superonline won the public tender for the 15-year

lease of boTAs’s fiber optic infrastructure, with a bid of eur20.9 milli-

on, and has been granted the right to use boTAs’s 11,280 km of routes.

These routes enable superonline to access all of Turkey’s regions.

In 2010, superonline’s fiber-optic network reached 580,000 home

passes. In 2010, its contribution to Turkcell’s financials continued

to improve with a 32.8% revenue growth and an ebITDA margin of

9.8%. Throughout the year, the focus on the higher-margin residen-

tial segment increased, resulting in year-on-year segment revenue

growth of 70%. Corporate segment revenues grew by 30%, levera-

ging the strengths of the Turkcell Group, while wholesale revenues

grew by 26%, in line with increasing Group synergies.

Global TowerGlobal 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 communica-

tion/monitoring corporations in wireless communication with instal-

lation, leasing, and maintenance services at international standards

for tower, roof and on-premises infrastructural facilities.

serving its customers in more than 5,500 tower fields across Turkey,

Global Tower stands out as one of europe’s leading infrastructure

operators, with its tower field portfolio.

The services provided by Global Tower enable its customers to focus

their investments on the efficient use of their human resources and

energies in their main business areas, rather than on dealing with

exhaustive field operations, the high costs of tower and energy inf-

rastructure, ever-increasing leasing expenditures and its procedures.

Turkey’s first and only tower service provider, Global Tower aims to ex-

tend its rapid growth in Turkey to international markets. Accordingly,

in 2009 it began operations in ukraine under the name of ukrToWer.

InteltekInteltek 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 estab-

lishment and operation of the central betting system for sports ga-

Summary data for Superonline 2009 2010 y/y % chg

Revenue (TRY million) 252.4 335.1 32.8%

EBITDA1 (TRY million) 3.6 32.9 813.9%

EBITDA margin 1.4% 9.8% 8.4pp

Capex (TRY million) 259.5 480.3 85.1%

1ebITDA 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 Teknoloji

established to develop competitive services and products in informa-

tion and communication technology, Turkcell Teknoloji stands out as

one of Turkey’s leading r&D and innovation companies. In 2007, the

decision was made to establish a techno-park company and enable

r&D staff specialized in information and communication technologi-

es 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; de-

signed with a 500-person capacity, the goal was to establish the most

favorable living and working environment for those engineers respon-

sible 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 relati-

ons and channel management, mobile marketing, business intelligen-

ce solutions, sIm assets and services management, roaming soluti-

ons, 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 chan-

ging, transforming and simplifying people’s lives through its innova-

tive and customer-oriented approach. products under development

on in-house platforms incorporate the creative ideas of our employe-

es. 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, Af-

rica, and europe, and aims to become a world brand in its area.

mes based fixed-odds and paramutual betting. It has also establis-

hed and operates the risk-management system and services of the

main dealership, using Intralot’s technology and know-how, and the

strong Gsm infrastructure of Turkcell.

Inteltek is now one of the world’s largest operators in the state-

controlled 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 sig-

ned with the Turkish Football Federation and spor Toto organiza-

tion, 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 euro-

pean 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 in-

dustry 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 eco-

nomy with tax income generated for the state amounting to TrY1

billion, as well as contributions to Turkish sports of TrY496 million

in 2010. As part of Inteltek’s strategy of capitalizing on the emer-

ging investment potential in neighboring countries, it received the

authorization to organize, operate, manage and develop the fixed-

odds and paramutual sports betting business in Azerbaijan from

Azerbaycan Azeridmanservis Limited Company in January 2010. In-

teltek 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 trans-

form Global bilgi into a “Customer relations management Center.”

It now has the best technology system in its sector in Turkey, as well

as in europe.

operating within Turkcell Group, one of Turkey’s most valuable com-

panies, and with a firm position on the world’s prestigious techno-

logy 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 Istan-

bul, 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 erzu-

rum Call Center, established in 2006, employs 880 people, 45%

of whom are female and 55% are male. The average age of emp-

loyees is 26. of the employees, 0.14% of those at the erzurum

Call Center hold a doctoral degree, 0.71% hold a master’s deg-

ree, 34.61% hold a bachelor’s degree, 36.31% hold an associate’s

degree, 28.09% are high school graduates, and 0.14% are secon-

dary school graduates.

Following the success and increase in business volume achieved in erzu-

rum, the Company established the Diyarbakir Call Center in 2008. There

are 650 employees in Diyarbakir, of whom 56% are female, and 44%

are male. With an average age of 26, 0.49% of the Diyarbakir Call Center

holds a master’s degree, 16.37% a bachelor’s degree, and 41.57% an

associate’s degree, while 41.57% are high school graduates.

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.

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Hum

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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 be-

lieve 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 advanta-

ges 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 develop-

ment. In 2010, employee turnover rate in our company was 4.66%.

More Sharing

We offer “more sharing” opportunities to our team through social

channels like Habercell and paylas Turkcell’li / Turkcell blog. We

distribute news related to developments in the Company through

Habercell (News-cell); we offer our services to customers through

our employees with the paylas Turkcell’li application, a practice

used by all Group companies.

More Convenience

We offer more of Convenience to our team with additional bene-

fits 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 ne-

eds 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 cont-

ribution model. Female employees with child(ren) aged 2-5 years

are offered a monthly child care allowance.

There is more for me in Turkcellhuman Resources

The demographics of Turkcell employees are provided in the

following table:

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 conti-

nue to reward ideas generated through the “I Have a Great Idea!”

program, and to date Turkcell has recognized 612 employees under

this scheme. Their total contribution to the company has amounted

to us$236 million.

Turkcell is Turkey’s Most Admired Company

our priority is to recruit and retain the best talent. our distinctive

human resources practices continue “to create dedicated people who

yield successful results”. our employees, in turn, say “There Is more

for me at Turkcell” and reward Turkcell with the highest rates in both

the industry and in Turkey, in employee retention studies conducted

by independent research companies.

More Development: Turkcell Academy

We Develop our Leaders, our Employees, our Business Partners and

our Entire Eco-system, with our Development Solutions

As a leading technology company, Turkcell endeavors to commu-

nicate to our team the latest content and the most current issues

in development programs, through the most effective technological

solutions and infrastructures, due to its evolving working conditions

and Turkcell’s own dynamic structure. We systematically follow the

performance and potential of all individuals within our eco-system,

in particular the Turkcell Group and field teams, and develop them in

line with a dynamic business environment and our corporate strategy

of being “ready” for the competition.

With these perspectives in mind, the Turkcell Academy offers dif-

ferent development solutions for topics that include “Customer”,

“Technology” and “Leadership”. In 2010, Turkcell Academy pro-

vided 1,026,579 hours of training to 48,685 people in the Turk-

cell Group eco-system. our distinctive development solutions in

2010:

• “Turkcell Group sales program”: covering all Turkcell Group emp-

loyees - 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 soluti-

ons 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 “Custo-

mer 2.0”, a customer-focused conversion program.

Employee 2007 2008 2009 2010

Male 1,854 1,798 1,728 1,778

Female 1,021 1,011 981 1,011

Average Age 32 33 33 33

Education Level

Post-graduate Degree 484 500 535 569

University Degre 2,066 2,025 1,918 1,986

High School Graduate 316 277 248 226

Secondary School Graduate 9 7 8 8

At Least One Foreign Language 2,064 1,910 1,819 2,046

Two or More Foreign Language 799 855 789 743

This chart does not include part-time employees and interns.

62


innovative ideas in Turkcell’s focus areas into sustainable business

models that will add value to our society and support entreprene-

urship 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 ende-

avor 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 so-

lutions through distant learning methods, using education techno-

logy. 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 Turkcell’s lea-

ding vision in technology.

Virtual Classroom

The Turkcell Academy Virtual Classroom enables people from diffe-

rent locations to attend web-based training activities or conferen-

ces (webinars) independent of their locations. The virtual classroom

platform, accessible to large audiences through interactive presen-

tations, makes information sharing highly effective.

Web-Based Development Platforms

With the growth of the Internet and social media, web-based self-

learning 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 (Ge-

tabstract), virtual dictionary (Information Dictionary), video learning

(Academy Instructor TV), electronic database Ieee; “Harvard manage

mentor” offered to our executives (created by Harvard business pub-

lishing and acknowledged as the world’s 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 Gro-

up, has been recognized with many awards in recent years. Turkcell

Academy won the honorary award in the “best New Corporate univer-

sity” category of the Cubic Awards (Corporate university best in Class)

and was presented the “excellence” award in the “Learning Technolo-

gies” 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 Ame-

rican society for Training & Development (AsTD), the world’s largest

organization engaged in learning and performance at work. In paral-

lel 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 dis-

tinctive 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, foot-

ball, carting, table tennis, volleyball, sailing, and swimming. We

take unique pride in the achievements of our corporate sports te-

ams, representing Turkcell in various leagues.

• We offered specialized training opportunities in “mobile Commu-

nication and knowledge Technologies”, with 300 different training

programs in the Technological Development program. We supported

corporate progress with development programs specifically desig-

ned for 45 different technical profiles, as well as 500 different class-

room 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 fi-

gures 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 professiona-

lism (pAF) program, which it initiated to enable successful young

talents to begin their professional life one step ahead and in the

right direction. The pAF program encompasses the internship–part-

time employment–new graduate recruitment phases, and aims to

improve the awareness of these young people of professional life,

business fields, companies, and jobs, while widening their perspec-

tive. We seek to offer them part-time and then full-time job oppor-

tunities 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 prog-

rams, the “Turkcell mobile Communication and Technology Deve-

lopment program”, the “Turkcell Customer relations Development

program,” and the “Turkcell mobile marketing Development prog-

ram” to, share our knowledge and experience with university stu-

dents, 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, co-

ming into contact with more than 22,000 university students at 75

universities in 25 cities, with seminars on “mobile Innovation”,

“New Technologies”, “entrepreneurship”, and “Careers”.

Turkcell Academy supports, in addition to many of Turkey’s most

prestigious universities, selected academic research and projects on

technology, innovation, entrepreneurship, and leadership at world-

renowned universities such as Harvard business school and the

massachusetts Institute of Technology (mIT), facilitating their coor-

dination with its businesses units. ranked among the business part-

ners of bahçeşehir Co-op (Cooperative education) and sabancı CAp

(Company Action project) programs, the Turkcell Academy continues

to carry out joint projects and programs with these universities.

We Support Technologically Promising Young Talent!

We have maintained the “Turkcell Academy postgraduate scholars-

hip program”, supporting the development of technologically pro-

mising 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 postgradua-

te and doctoral students with whom we will conduct joint projects in

focus areas of the Turkcell Group, and we facilitate their collaborati-

on with our business units.

The m.I.T. enterprise Forum, established under the leadership of

the massachusetts Institute of Technology, one of the world’s most

prestigious universities, was held for the second time in a european

country – Turkey - with the cooperation of Turkcell. A significant

part of our social responsibility vision is the investment in qualified

human resources and good ideas, and support of value-added pro-

jects in Turkey. With this collaboration, our aim is to transform the

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.

TsAG organized approximately 500 activities in 2010 alone, in which

more than 30,000 employees and their families participated.

64

Hum

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Penetration

The increased importance of operational profitability is in part due

to the change in partnership structures in the Turkish telecommu-

nications sector. This change came about with the sale of Telsim,

the privatization of Türk Telekom, the sale of Telecom Italia mobile’s

shares in Avea to Türk Telekom, and the purchase of Telsim by Vo-

dafone. 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 potenti-

al 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.

With its young and dynamic population and the current penetration levels Turkish market still has a growth potential in the mid-term.

Mobile Telecommunication Sector

Europe DevelopingCountries

Turkey

127%101%

85%

Mobile Line Penetration Source: bofA merrill Lynch, the ICTA

2008 2009 2010

65.8

65.8 62.8

7.1

3G 2G

61.8

55.742.4

Mobile Subscriber Number (millions)

Source: the ICTA

19.4


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Direct cost of revenues: In 2010, direct cost of revenues including

depreciation and amortization increased by 5.7% to TrY5,039.2 mil-

lion. 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 inc-

rease in the postpaid subscriber base together with higher wages

and salaries.

Selling and marketing expenses: For the full year, selling and mar-

keting 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

the ebITDA margin was at 32.7%. 1.1 pp higher general and admi-

nistrative expenses together with 0.2 pp higher direct cost of reve-

nues 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 in-

terest income in 2010 arising from the absence of legal provisions in

2009, partially netted off by the decrease in interest income on de-

posits due to lower interest rates and the increase in interest expen-

se 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/(ex-

pense) impact of Fintur and A-Tel, increased by 55.5% to TrY184.7

million for the full year, mainly due to the higher net income contri-

bution 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 cur-

rent tax charges while the deferred tax income totaled TrY24.6 million.

Net Income: Net income increased by 3.7% to TrY1,764.3 million.

Total Debt – Cash Position:

our Company has a significantly high net working capital and a

strong balance sheet. Turkcell has a net cash position of TrY2.3 bil-

lion 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 Turkcell’s ukrainian

operations. TrY1,878 million of our consolidated debt is at a floa-

ting rate and TrY665 million will mature in less than a year. During

2010, our debt/annual ebITDA ratio increased to 96.4%.

Competition

Competitive offers in the market have remained aggressive. All ope-

rators focused on increasing their postpaid subscriber base by pro-

viding 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 mar-

ket share.

Regulation

The Turkish mobile market witnessed some radical changes in 2010.

The significant decrease in interconnection rates by 52% and ma-

ximum 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 unit-

based pricing for prepaid subscribers, and the change in the defini-

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 an-

nual report are prepared in accordance with International Financial

reporting standards (“IFrs”) and expressed in Turkish liras and/or

Dollars unless otherwise stated. .

Revenue: For the year 2010, consolidated revenue slightly improved

to TrY9,003.6 million, mainly due to the 26.4% increase in mobi-

le 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

revenues by 32.8% to TrY335.1 million from TrY252.4 million),

despite the adverse effects of mTr and price cap cuts.

Subscriber Market Share19%

27%

54%

19%

27%

54%

19%

27%

54%

Turkcell

Vadafone

Avea

Source: the ICTA

Consolidated Balance Sheet Data (million TRY) (at period end) 2009 2010 y/y % chg

Cash and cash equivalents 4,660.9 5,105.1 9.5%

Total assets 14,034.3 15,142.4 7.9%

Long term debt 1,236.4 2,175.7 76.0%

Total debt 2,276.6 2,840.8 24.8%

Total liabilities 5,156.4 5,505.3 6.8%

Total shareholders’

equity / Net Assets 8,877.9 9,637.1 8.6%

Competitive offers in the market have remained aggressive. Turkcell

maintained its leading position with a 54% subscriber market share.

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.

Financial Review (Consolidated)

Profit & Loss Statement

(million TRY) 2009 2010 y/y % chgTotal Revenue 8,936.4 9,003.6 0.8%Direct cost of revenues1 (4,769.3) (5,039.2) 5.7%Depreciation and amortization (908.7) (1,139.7) 25.4%Gross Margin 46.6% 44.0% (2.6pp)Administrative expenses (421.2) (521.9) 23.9%Selling and marketing expenses (1,676.2) (1,633.9) (2.5%)EBITDA2 2,978.4 2,948.3 (1.0%)EBITDA Margin 33.3% 32.7% (0.6pp)Net finance income / (expense) 223.8 264.0 18.0% Finance expense (287.1) (153.4) (46.6%) Finance income 510.9 417.4 (18.3%)Share of profit of associates 118.8 184.7 55.5%Income tax expense (529.1) (483.5) (8.6%)Net Income 1,701.6 1,764.3 3.7%

1 including depreciation and amortization expenses.2 EBITDA 2 ebITDA is a non-GAAp financial measure. see page 14-15 of 2010 press release at 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.


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varied capital market tools in order to maintain capital diversity. All

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 share-

holders’ equity.

Donations Made in 2010:

A total of TrY8,556,709 in cash donations was made in 2010 consis-

ting of TrY8,469,952 cash donations to various associations, foun-

dations and institutions; and TrY86,757 donations in kind to schools

and projects approved by the ministry of Culture and Tourism.

operational Review (Turkcell Turkey)

Subscribers: our subscriber base in Turkey totaled 33.5 million as

of December 31, 2010, down by 5.4% year-on-year. In 2010, we

maintained our focus on the postpaid segment with newly launched

campaigns and offers, increased data lines and promoted switches

from the prepaid to the postpaid segment. This resulted in a 7.4%

increase in our postpaid subscriber base to 10.1 million, from 9.4

million a year earlier. Demonstrating the success of our value focu-

sed 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 disconnec-

ted 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 of-

fers.

In 2011, we expect healthy growth in usage as our successful incen-

tives 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

interconnection rates. The rise was mainly attributable to rising mo-

bile internet revenues and postpaid subscriber base.

postpaid Arpu in TrY terms fell by 2.4% to TrY40.0, while prepa-

id 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 subsidi-

aries’ contribution as an important growth driver. We will continue

to invest in our network quality. We will keep our value focus, maxi-

mizing 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 contri-

butions from our subsidiaries.

In 2010, major cash outflows were the capital expenditures and divi-

dend payment. In 2010, our capital expenditures totaled TrY1,667.5

million, of which TrY782.4 million was related to Turkcell Turkey,

TrY102.7 million to our ukrainian operations, TrY185.4 million to

our belarusian operations, and TrY480.3 million to superonline. In

2010, we also paid a cash dividend of TrY859.3 million to our sha-

reholders.

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 ex-

penditures 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 deduc-

ted 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 busi-

ness plans and approved by their board of Directors through cre-

dit 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

Profitability and Solvency Ratios 2009 2010 y/y % chg

Gross Profit Margin 46.6% 44.0% (2.6pp)EBITDA Margin 33.3% 32.7% (0.6pp)Net Profit Margin 19.0% 19.6% 0.6ppTotal Liability/Equity Ratio 58.1% 57.1% (1.0pp)Total Debt/EBITDA Ratio 76.4% 96.4% 20.0pp

Operational Summary (Turkcell Turkey)

Turkcell Turkey 2009 2010 y/y % chgNumber of total subscribers (mn) 35.4 33.5 (5.4%)Number of postpaid subscribers (mn) 9.4 10.1 7.4%Number of prepaid subscribers (mn) 26.0 23.3 (10.4%) ARPU (Average Monthly Revenue per User), blended (US$) 12.0 13.0 8.3% ARPU, postpaid (US$) 26.6 26.6 - ARPU, prepaid (US$) 7.5 7.6 1.3% ARPU, blended (TRY) 18.5 19.5 5.4% ARPU, postpaid (TRY) 41.0 40.0 (2.4%) ARPU, prepaid (TRY) 11.6 11.4 (1.7%) Churn (%) 32.6% 33.9% 1.3 pp MOU (Average Monthly Minutes of usage per subscriber), blended 134.3 179.1 33.4%

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.

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.

Consolidated Cash Flow (million TRY) 2009 2010EBITDA1 2,978.4 2,948.3LESS: Capex and License (2,664.0) (1,667.5)Turkcell (1,823.1) (782.4)Ukraine2 (325.2) (102.7)Investment & Marketable Securities (232.1) (64.3)Net Interest Income/Expense 223.5 283.8Other (595.7) (662.6)Net Change in Debt 1,119.0 465.9Dividends paid (1,098.0) (859.3)Cash Generated (268.9) 444.3Cash Balance 4,660.9 5,105.1

1 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.


february 22, 2011on November 5, 2010, we have announced that on september 22,

20101, Turkey’s Information and Communication Technologies Aut-

hority (“ICTA”) has decided Turkcell to reimburse its subscribers in

regards to a change in one of its tariff options (namely, bizbize Her

Yöne kamu 1500) following the ICTA’s decision of march 25, 20092

and fined Turkcell an amount equal to 0.33% of Turkcell’s 2009

stand-alone revenues. our company filed a lawsuit for the suspensi-

on of execution, then annulment of the mentioned decision and that

regional Ankara Administrative Court suspended the execution of

the Authority’s decision.

(1) reference number 2010/Dk-10/543

(2) reference number 2009/Dk-07/149

March 1, 2011on 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 cam-

paigns relating to some of its subscription packages that offered free

minutes to its customers under certain conditions. Turkcell also ad-

ded that the Company would take the necessary legal steps to dis-

pute this claim. Turkcell filed a lawsuit requesting the annulment of

this decision immediately after the payment of TrY24 million with a

25% discount on August 1, 2008. The Court has rejected our claim,

and Turkcell is to appeal against this Court’s decision accordingly.

March 9, 2011In line with our strategic priorities, we have made changes to our

management team to be effective from march 14, 2011. selen koca-

bas 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 be-

comes the Chief Human resources officer.

March 11, 2011As per the announcement on December 17, 2010, we had stated that

our Company was conducting research and analysis regarding the

sale process of 51% of serbia Telecom’s shares. Following the eva-

luation process, we have decided not to bid in the tender for the 51%

of serbia Telecom’s shares. In the event of any material development

which needs to be publically disclosed, our Company will make the

necessary announcements according to the Circular VIII, No: 54 of

Turkey’s Capital markets board.

March 23, 2011Announcement regarding Turkcell ‘s board of Directors’ decision on

the ordinary General Assembly. (Detailed information is on page 84)

March 23, 2011Announcement regarding Turkcell ‘s board of Directors’ proposal on

dividend distribution. (Detailed information is on page 179)

March 24, 2011some 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 regar-

ding this issue, we cannot share any development at this stage.

March 31, 2011As 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 licen-

se tender held by the syrian Arab republic.

March 31, 2011Today; Capital markets board has requested an explanation from

our Company, after sonera Holding bV’s announcement to the Is-

tanbul stock exchange in regards to the lawsuit initiated against our

Company’s Chairman of board; Colin J. Williams. As per our announ-

cement following media reports on march 24, 2011, since Turkcell

has received no information regarding this issue, we cannot share

any developments at this stage.

public Announcements from December 31, 2010 to April 4, 2011other Information About our operations

Moody’s

Local currency rating Ba2

Foreign currency rating Ba2

outlook Positive

on January 8, 2010, moody’s affirmed Turkcell’s ba2 foreign

and local currency ratings and upgraded the Company’s

outlook from “stable” to “positive.” moody’s attributed this

revision to the Company’s robust operational and financial

performance, as well to as its profitability, sustainable cash-

flow generation capacity, and the positive momentum in its

ukraine business.

fitch Ratings

Local currency rating BBB-

Foreign currency rating BBB-

outlook Stable

on march 18, 2010, Fitch ratings affirmed Turkcell’s long-

term foreign and local currency Issuer Default ratings

(IDr) at “bbb-”, respectively. The outlook on both IDrs is

“stable”.

Fitch ratings claim that the ratings reflect Turkcell’s leading

market share in Turkey’s mobile telecom sector, despite

increased competition, as well as strong credit metrics

compared with peers in the neighboring region.

Standard & Poor’s

Local currency rating BB+

Foreign currency rating BB+

outlook Positive

on January 26, 2011, s&p upgraded the outlook on

Turkcell’s long-term foreign currency rating from “stable”

to “positive” and affirmed both Turkcell’s long-term foreign

currency and local currency ratings as “bb+”. With this

rating evaluation, Turkcell remains s&p’s highest rated

company in Turkey.

The revision primarily reflects Turkcell’s improving

profitability and the increasing profitability of Turkcell

subsidiaries, particularly superonline in Turkey and Astelit

in ukraine, as well as the Company’s improving cash

generation ability.

International ratings For Turkcell As of march 2011 International Ratings

72 73


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Turkcell had the fourth highest market capitalization among all those listed on the İmkb as of December 31, 2010, with a market capitalization of us$15.01 billion.

Investor Relations

Shareholder Value of Stake (TRY) Share Capital (%)

Turkcell holding A.Ş. 1,122,000,000.238 51.00%

Sonera holding B.V. 287,632,179.557 13.07%

MV holding A.Ş. 26,021,712.590 1.18%

Çukurova holding A.Ş. 995,509.429 0.05%

Müflis Bilka Bilgi Kaynak 137,199.575 0.01%

ve Iletisim San. Ve Tic. A.Ş.

free float 763,213,398.611 34.69%*

ToTAL 2,200,000,000.000 100.00%

(*) Although our company’s free float is 34.69%, according to the “Active Circulation share report” announced by the Central registry Agency, pursuant to Capital mar-kets board’s (Cmb) decision no. 21/655 of 23.07.2010, modified with its decision no. 24/729 of 18.08.2010, our company has 557,614,008.03 shares in active circulation as of 31.12.2010, its ratio being 25.34%. The difference results from the exclusion of “shares that i. are owned by public corporate entities, ii. are owned by corporations associated with the company’s founders (companies subject to consolidation), iii. are owned by real and legal partners who own 5% or more of the company’s capital, iv. are owned by a) members of the Company’s boards of Directors and of supervisors, b) the Director-General or his/her equivalents or superiors in terms of authorities and roles, and c) top managers who report directly to the Director-General or his/her equi-valents 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 colla-teral, in addition to collateralized shares for clearing bank markets, vii. are legally rest-ricted 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.

Investor Information

Shareholder Structure

Turkcell’s free float was initially 10.5 percent, and over time it rose

to 34.7 percent as of year-end 2010, as a result of the stake sales of

shareholders.

As of December 31, 2010, Turkcell’s shareholder structure is as fol-

lows:

five-year share performance and market capitalization

Turkcell shares were simultaneously listed on the Istanbul stock

exchange (İmkb) and in the u.s., on the New York stock exchan-

ge (NYse) on July 11, 2000. The shares are traded with the TCeLL

symbol at the Imkb, and the TkC symbol on the NYse, in the form of

American Depositary shares (ADs). Currently, two ADss represent

five tradable shares. The nominal value of Turkcell’s issued share

capital is TrY2,200,000,000, consisting of 2,200,000,000 shares

with a nominal value of TrY1 each.

As the only Turkish company listed on both the İmkb and NYse,

Turkcell had the fourth highest market capitalization among all tho-

se listed on the İmkb as of December 31, 2010, with a market capi-

talization of us$15.01 billion.

1 3Pınar oz [email protected]

2 ozge [email protected]

Nihat [email protected]

4 6Yesim [email protected]

5 Esra [email protected]

Contact Information for Investor and International Media RelationsPhone: +90 (212) 313 18 88 fax: +90 (212) 292 93 22 E-mail: [email protected] URL: http://www.turkcell.com.tr/en/investorrelations

Banu [email protected]

1 2 3 4 5 6

30.00

0.002006 2007 2008 2009 2010

5.00

10.00 20.00

10.00

0.00

13.21

market Cap(billion TrY)

share price*

(TrY)

24.49

17.2722.28 23.21

*based on closing prices source: bloomberg

15.00

TCELL (TRY) 2006 2007 2008 2009 2010

Lowest 4.46 5.59 6.19 6.86 7.80

Highest 6.95 12.09 11.30 10.32 11.18

TKC (US$) 2006 2007 2008 2009 2010

Lowest 8.21 10.73 8.74 10.04 12.34

Highest 13.17 25.97 24.99 17.91 19.59

source: bloomberg


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and on rules and regulations to which we are bound to investors

and analysts through regular meetings, local and international con-

ferences, analyst days, and teleconferences. Accordingly, we met

approximately 550 investors in 2010, by attending 15 local and in-

ternational 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.

We reinforced the difference we created in Investor Relations with awards in 2010

In February 2010, with World finance Magazine’s combi-

ned 175 years of business journalism and research, our Company

won the “Best Corporate Governance in Turkey” award

at World Finance magazine’s first global Corporate Governance

Awards ceremony in London.

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 Re-lations Global Rankings (“IRGR”) Awards ceremony. A

total of 503 companies participated in 2010 IrGr awards, including

a number of the world’s leading corporate names such as micro-

soft, 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 maximi-

ze our Investor relations website to communicate with shareholders,

investors, analysts, and other related parties. The Investor relations

website received the “excellence” award in both the “Telecommuni-

cation” and “Investor relations” categories, from Interactive media

Awards (ImA), recognized as one of the world’s most prominent In-

ternet organizations.

Contact Information for Investor and International media Relations

Turkcell’s financial information and Company news is available on

its website, or may alternatively be obtained from the Investor re-

lations Department.

Trading volume and foreign ownership

Compared with 2009, Turkcell’s trading volume declined by 20 per-

cent to 9.4 billion in 2010. 2 percent of the total trading volume

of İmkb-100 index was realized with Turkcell shares. The foreign

ownership in Turkcell’s free float had reached 93 percent as of the

end of 2010.

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 Com-

pany shares remain a favored investment tool for domestic and over-

seas institutional investors and shareholders in order to create value

for the Company and all its stakeholders. The Department also seeks

to translate the Company’s operational performance into market va-

lue and to promote the company in the most effective way possible.

since its shares are traded on both the u.s. and Turkish stock exc-

hanges, Turkcell has shaped its corporate governance model in ac-

cordance with the requirements of both markets.

In line with these requirements, the Turkcell Investor relations de-

partment strives to provide both our company and our shareholders

with maximum value, without compromising our corporate policy ba-

sed 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,

foreign ownership (%)

5060708090

100

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.

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.

1.40

1.30

1.20

1.10

1.00

0.90

0.80

0.70

0.60

Jan-

10

Feb-

10

mar

-10

Apr-

10

may

-10

Jun-

10

Jul-

10

Aug-

10

sep-

10

oct-

10

Nov

-10

Dec-

10

kaynak: bloomberg

Relative share performance in 2010 (TCELL)

1.20

0.60

0.70

0.80

0.90

1.00

1.10

Jan-

10

Feb-

10

mar

-10

Apr-

10

may

-10

Jun-

10

Jul-

10

Aug-

10

sep-

10

oct-

10

Nov

-10

Dec-

10

kaynak: bloomberg

Relative share performance in 2010 (TKC)

Jan-

10

Feb-

10

mar

-10

Apr-

10

may

-10

Jun-

10

Jul-

10

Aug-

10

sep-

10

oct-

10

Nov

-10

Dec-

10


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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 di-

rection 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 inter-

national business strategies and determining short- and long-

term goals;

• Approving the Company’s annual budget and business plans

and its revisions;

• monitoring the strategic and financial performance of the Com-

pany 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 prepara-

tion of the annual report and finalizing this report for presenta-

tion at the General Assembly of shareholders;

• Consistent with applicable regulations, approving quarterly finan-

cial results, the audit report and amendments to the accounting

policies previously adopted by the Company or any material chan-

ge in the method or timing of reporting of the financial results.

Structure of the Board of Directors

The board of Directors consists of at least seven members chosen

for a maximum three-year term. As per Turkcell’s Corporate Gover-

nance Guidelines, the board, taking into consideration the sugges-

tions 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 te-

lecommunications industry and related industries, and attend annu-

ally at least 75% of board meetings. each board member is encou-

raged to limit the number of other public company boards on which

he or she serves and to be mindful of his or her other existing and

planned future commitments, so that such other directorships and

commitments do not materially interfere with his or her service as

an effective and active member of the Company’s board. In addition,

the Corporate Governance Committee is to develop and supervise an

orientation program for new elected board members.

on our ordinary General Assembly dated April 29, 2010, Colin J.

Williams, Nazli karamehmet Williams, mehmet bülent ergin, karin

eliasson, Tero kivisaari, oleg malis, Alexey khudyakov were selected

as Turkcell board of Directors for a period of three years.

operations of the Board of Directors

As per Turkcell’s Corporate Governance Guidelines, the board of Di-

rectors 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 add-

ress specific needs of the Company. The first board meeting of the year

should convene within one month of the Annual General Assembly.

Framework of Turkcell Corporate Governance Corporate Governance


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General Assembly of shareholders whether board members will be

remunerated and if such is the case, the form and amount of com-

pensation to be paid to the board members.

Evaluation of the Board of Directors and Management, and Manage-

ment Succession and Development

As per Turkcell’s Corporate Governance Guidelines, the board sho-

uld conduct a self-evaluation on an annual basis. The board of Di-

rectors 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 bo-

ard 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 Corpo-

rate Governance Guidelines.

As adopted, our general dividend policy is to pay dividends to sha-

reholders with due regard to trends in our operating performance,

financial condition and other factors. since 2004, the board of Direc-

tors 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 corres-

pond to 75% of Turkcell’s distributable income to be paid in cash to

our shareholders.

Changes in the Articles of Association

At the ordinary General Assembly held on April 29, 2010, Article 3

entitled purpose and subject matter of Turkcell’s Articles of Associa-

tion was amended in line with Turkey’s Capital markets board’s ar-

rangement 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 busi-

ness operationsonly if such third parties are fully consolidated in the

company’s financial statements.

Capital Markets and Corporate Governance Compliance Unit

At Turkcell, in compliance with Article 8 of series: IV, No. 41

“Communiqué regarding the principles that apply to public Com-

panies” issued by the Capital markets board, a Capital markets and

Corporate Governance Compliance officer was appointed in Febru-

ary 2009 pursuant to a board of Directors decision and Capital mar-

ket Corporate Governance Compliance unit was established in may

2009, for the purposes of:

• ensuring company compliance with capital market regulations

and

• Coordinating corporate governance practices of the Company.

Within the framework of ensuring compliance with capital market

regulations, rules and regulations pertaining inside information

were provided to management and employees on regular basis.

pursuant to Cmb regulations, a list of those having access to insi-

de information is maintained. Furthermore, information regarding

rules and regulations pertaining inside information is published on

Turkcell’s internal intranet pages and provided to every new Turkcell

employee through the orientation program and reminded via regu-

lar 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.

The Chief executive officer should take the utmost care to ensure an

equal flow of information to all board members prior to board of Di-

rectors meetings. It is the Chief executive officer’s responsibility to

establish a system through which the board of Directors access to the

work of the management and other employees of the company in or-

der 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 Gover-

nance Committee. If necessary, experts outside the board may be

eligible to be commissioned on a committee. The board of Direc-

tors 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 con-

text of Turkcell’s Corporate Governance principles and applicable

regulations, it was decided that mr. Colin J. Williams and mr. Alexey

khudyakov will continue their Audit Committee memberships and

that mr. Colin J. Williams will continue as Chairman of the Audit

Committee. At the same meeting, it was decided that mr. Colin J

Williams, ms. karin b. eliasson, mr. mehmet bülent ergin and mr.

oleg A. malis are appointed as Corporate Governance Committee

members of the Company and that mr. Colin J. Williams will serve as

Chairman of the Corporate Governance Committee.

Corporate Governance Committee

As per Turkcell’s Corporate Governance Guidelines, the fundamental

role of the Corporate Governance Committee is to assist the board

with the development and implementation of the Company’s cor-

porate governance principles, and presents to the board remedi-

al proposals to that end. As per Turkcell’s Corporate Governance

Guidelines, the committee is to establish a transparent system for

the determination, evaluation and training of board member can-

didates. The Committee also makes recommendations to the board,

where appropriate, regarding the Company’s compensation strategy

both for the board members and the Chief executive officer and Chi-

ef Financial officer and the Chief executive officer and Chief Financi-

al officer succession plan.

Furthermore, in the relations between the Company and its share-

holders, 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 Commit-

tees, the chief duties of the Committee are:

• To assist in determining the quality and integrity of the

Company’s financial statements and related disclosure;

• To oversee the implementation and efficiency of the Company’s

accounting system;

• To pre-approve the appointment of and services to be provided

by the independent audit company;

• To approve and monitor the agreement between the indepen-

dent auditor and the Company;

• To oversee performance and efficiency of the independent audi-

ting system;

• To oversee performance and efficiency of the internal auditing

mechanism.

The board of Directors is to assess the independence and qualifica-

tions of every member of the Audit Committee to ensure that he or

she is qualified to be a Committee member, and, if necessary utilize

outside consultants or advisors.

Remuneration of the Board of Directors

The remuneration of the members of the board of Directors is to

be determined by shareholders at the General Assembly. Currently

plans regarding profit sharing, retirement and other similar subjects

are not in effect.

As per Turkcell’s Corporate Governance Guidelines, the board, upon

the recommendation of the Corporate Governance Committee toget-

her with its own determinations, is to decide on a proposal to the

Cash Dividend (TRY) Cash Dividend Bonus Share per Share

2004 250,127,565 380,247,980 0.16962

2005 509,075,181 345,112,659 0.27445

2006 567,039,784 - 0.25775

2007 648,713,951 - 0.29487

2008 1,098,193,226 - 0.49918

2009 859,259,101 - 0.39057

Turkcell Code of ethichs reflects the values and principles of Turkcell and applies to all employess, officers and

board members.


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oxley”), and the rules issued by the us securities and exchange

Commission (“seC”) there under, require an seC reporting company

to disclose whether or not it has adopted a written code of ethics

applicable to the Company’s senior financial officers, including the

Company’s principal executive officer. The following rules have been

adopted by Turkcell in accordance with these provisions and are

applicable to Turkcell’s senior executive and financial officers.

The Chief executive officer, Chief Financial officer and other execu-

tive officers and financial officers hold important roles in corporate

governance. Turkcell, according to the laws and regulations app-

licable 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 ac-

cordance 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 fi-

nancial officers:

1. Will act with honesty and integrity, including ethically handling

actual or apparent conflicts of interest between their personal rela-

tionships or financial or commercial interests and their responsibi-

lities to Turkcell;

2. make full, fair, accurate, timely and understandable disclosure in

all reports and documents that the Turkcell files with, or submits to,

the Turkcell’s capital markets regulators or otherwise makes public;

3. Comply with all governmental laws, rules and regulations appli-

cable 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 Turkcell’s policies is at the core of Turkcell’s activities.

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 Direc-

tors 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 sup-

port 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 exchan-

ge. Accordingly, Turkcell has formulated an internal control mecha-

nism 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 manage-

ment, Internal Audit, business Continuity management, Information

security management, and Internal Fraud management processes.

by developing and applying a risk management methodology, the

The Code reflects the values and principles of Turkcell and applies to

all employees, officers and board members of Turkcell.

Conflicts of Interest

employees, officers and directors are prohibited from (a) taking for

themselves personally opportunities that are properly within the

scope of Turkcell’s activities, (b) using corporate property, informa-

tion or position for personal gain, and (c) competing with Turkcell.

A “conflict of interest” exists when a person’s private interest inter-

feres 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. Conf-

licts of interest also arise when an employee, officer or director, or a

member of his or her family, receives improper personal benefits as

result of his or her position in Turkcell.

Conflicts of interest are prohibited as a matter of Turkcell policy.

each employee, officer or director is expected to avoid any outside

activity, financial interest or relationship that may present a possible

conflict of interest or appearance of a conflict.

Turkcell employees, officers and directors may give presents to or

receive presents from, persons, institutions and corporations with

whom they have business relations only in compliance within the

internally defined rules.

Protection and Proper Use of the Company Assets

Turkcell’s employees should protect the Company’s assets and en-

sure 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

customers of Turkcell. All employees are required to comply with

“Turkcell Information security and Disclosure” policies and proce-

dures, which is published in Turkcell’s internal intranet pages.

Principles for Public Disclosure

All communications with investors, financial analysts, press and si-

milar bodies shall be performed in accordance with the “Turkcell

Disclosure policy” which is published on Turkcell’s website.

No employee other than those specifically authorized to perform this

duty can make oral or written announcements on behalf of Turkcell.

Compliance with Laws, Rules and Regulations

Turkcell actively promotes compliance with all applicable laws, rules

and regulations.

Working Principles

Turkcell is committed to providing a safe, secure and efficient working

environment to its employees. Therefore Turkcell expects all of its emplo-

yees 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, suppli-

ers or fellow employees. Turkcell employees are prohibited from

promoting religious or political views in the workplace.

• All Turkcell employees must not fraudulently alter official docu-

ments they issue for the performance of their duties. The emplo-

yees are responsible timely and accurate preparation and delivery

of reports to regulatory authorities and other similar bodies.

The full text of the Code is published in Turkcell’s internal intranet

pages. The Code is explained to each new Turkcell employee via the

orientation program and the new employee is made to sign a cont-

ract proving that these rules shall constitute an inseparable part of

the employee’s 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 Sarbanes-

oxley Act

section 406 of the us sarbanes-oxley Act of 2002 (“sarbanes-

All communications with investors, financial analysts, press and

similar bodies shall be performed in accordance with the” Turkcell

Disclosure policy”

Turkcell has been involved in alternative capital markets to fund

and sup port changing financial structures during the process of

operational growth.


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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, Turk-

cell management regularly holds meetings with media representati-

ves to share publicly available information and to answer questions.

An Investor relations Department has existed since Turkcell’s ini-

tial public offering. The Investor and International media relations

Department functions under the executive officer in charge of Cor-

porate Affairs. It monitors all disclosures to the public in accordance

with Turkcell’s Disclosure policy that seeks to provide information to

the public in a timely, accurate, complete, understandable and equal

manner. Detailed contact information of the Investor and Internati-

onal media relations Department can be found on our Company’s

website (www.turkcell.com.tr) and under the Investor relations he-

ading in the Annual report.

Verbal and written questions submitted to this department are ans-

wered within the context of publicly disclosed information as quickly

as possible.

The Company, in accordance with best practices, has a Disclosure

Committee responsible for the Company’s disclosures in accordance

with applicable regulations, and a Disclosure Team charged with

ensuring that material information is shared within the Company.

In compliance with Article 8 of series: IV, No. 41 “Communiqué re-

garding the principles that apply to public Companies” issued by the

Capital markets board, at Turkcell a Capital markets and Corpora-

te Governance Compliance officer was appointed in February 2009

pursuant to a board of Directors decision and Capital market Corpo-

rate Governance Compliance unit was established in may 2009, for

the purposes of:

• ensuring company compliance with capital market regulations and

• Coordinating corporate governance practices of the Company.

1.2 Use of Right of Gaining Information of the Shareholders

In order for shareholders to obtain information concerning the

Company easily and without discrimination, all publicly disclosed

information is available on our website (www.turkcell.com.tr) in

Turkish and english in the Investor relations section for the use by

Turkish and foreign shareholders equally. In addition, all public an-

nouncements are distributed by e-mail to addresses registered in

the Company’s database. Inquiries, verbal or written, made to the

Investor and International media relations Department are replied

to as quickly as possible within the scope of publicly disclosed in-

formation.

provisions for appointment of a special auditor have not been inclu-

ded in the Company’s Articles of Association. During this reporting

period, no requests for appointment of a special auditor were sub-

mitted.

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 As-

sembly met on April 29, 2010 with a quorum of 74.18%. The partici-

pants of the General Assembly included shareholders and their rep-

resentatives 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 ow-

ners 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 an-

nounced 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

Company strengthens its focus on corporate risk management prac-

tices.

Turkcell Corporate risk management Department, in compliance with

the “principle of independence” directly reports to the Audit Commit-

tee, the Chief executive officer and the Chief Financial officer.

Independent Auditor

In accordance with the Audit Committee’s recommendations, our

Company’s board of Directors resolved on December 18, 2009, that

DrT bağımsız Denetim ve serbest muhasebeci mali müşavirlik A.Ş.

shall be appointed as Turkcell’s Independent Auditor (as referred to

in Article 16 of our Company’s Articles of Association) for a period of

two years regarding the audit of our Company’s consolidated finan-

cial statements and that this appointment was approved at the ordi-

nary General Assembly meeting of our Company on April 29, 2010.

DRT BAĞIMSIZ DENETİM VE SERBEST MUhASEBECİ MALİ MÜŞAVİRLİK A.Ş.

sun plaza, maslak mahallesi, bilim sokak No.: 5, Şişli, 34398 Istan-

bul, Turkey

Tel: +90 (212) 366 60 00

Fax: +90 (212) 366 61 65

www.deloitte.com.tr

ordinary General Assembly

Turkcell’s board of Directors has decided that the ordinary General

Assembly for the year 2010 is to be held at Turkcell plaza, Confe-

rence room, mesrutiyet Cad. No:71 Tepebasi, Istanbul on April 21,

2011, at 3.00 pm to resolve the following agenda.

TURKCELL İLETİŞİM hİZMETLERİ A.Ş. AGENDA of ThE oRDINARY GENERAL ASSEMBLY MEETING Dated 21 April 2011

1. opening and election of the presidency board;

2. Authorizing the presidency board to sign the minutes of the me-

eting;

3. reading the Annual reports of the board of Directors relating to

fiscal year 2010;

4. reading the Annual reports of the Auditors relating to fiscal year

2010;

5. reading the summary of the Independent Audit Firm’s report re-

lating to fiscal year 2010;

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 Com-

pany in year 2010;

9. election of auditors for a period of one year and determination of

their remuneration;

10. Discussion of and decision on the board of Directors’ proposal

concerning the distribution of profit for year 2010;

11. Informing the General Assembly regarding the donations made

in year 2010;

12. Informing the General Assembly regarding the guarantees,

pledges and mortgages provided by the Company to third parties

or the derived income thereof, in accordance with the Decision of

the Capital markets board dated 09/09/2009 and numbered 28/780;

13. Wishes and hopes;

14. Closing.

2010 CoMPLIANCE WITh CoRPoRATE GoVERNANCE PRINCIPLES REPoRT:

Turkcell believes that high standards of corporate governance are im-

portant for perpetuating successful business practices and generating

long-term economic value for the Company’s shareholders. Accor-

dingly, we have paid full attention to applying the principles laid out

in the Corporate Governance principles published by the Cmb. Taking

into consideration relevant Cmb regulations and best practices and

with the aim of meeting the obligations of our Company brought by

the capital market regulations and to ensure coordination in corporate

governance practices, pursuant to Cmb Communiqué serial: IV, No.:

41, in 2009, we have formed a Capital markets & Corporate Gover-

nance Compliance unit. Accordingly, the board of Directors within the

responsibilities enumerated in Turkcell’s Corporate Governance Gui-

delines, has provided the necessary oversight for preparation of this

Annual report which contains the Compliance report.

SECTIoN 1ShAREhoLDERS

1.1 Shareholders Relations Department

representatives of the Investor and International media relations De-

partment within the Turkcell organization, pursuant to existing regu-


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Disclosure (series: VIII, No. 54), which regulates the postponement

of public disclosure of inside information.

2.3 Corporate Website and its Contents

Turkcell’s website is www.turkcell.com.tr. Information for share-

holders is provided under the following headings in the Investment

relations section:

a. market Information

b. shareholder structure

c. 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

d. Announcements

presentations

e. Financial and operational Information

i. key Financial Data

ii. key Financial Data TrY

iii. Historical us GAAp key Financial Data

iv. key operational Data

v. Debt and Credit rating

vi. International operations

vii. Investor kit

viii. outlook & strategy

ix. Annual report

f. Financial Calendar

g. share Information

i. Interactive share Charts

ii. Investment Calculator

iii. Ticker symbols

iv. Analyst Coverage

h FAQ

i. Contact us

2.4 Announcement of Real Person final Dominant Shareholder /

Shareholders

The shareholder structure of our Company is as follows:

2.5 Disclosure on Insider Traders

Turkcell’s Disclosure policy contains guidelines concerning the blac-

kout period practice relating to insider trading issues. In accordan-

ce 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 purcha-

sing 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

represented, while minority shareholders are not. With regard to

the Company’s capital, there is no mutual participation. The Cmb

Communiqué concerning the right to exercise cumulative voting is

optional for the publicly Traded Companies and this voting method

has not been used as yet.

1.5 Dividend Distribution Policy and Time of Dividend DistributionWe have adopted a dividend policy, which is included in our Corpo-

rate 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. sin-

ce 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 privile-

ged shares and no privileges for dividend distribution. Dividend dist-

ributions are made within the periods and in line with the principles

stipulated by Cmb regulations.

1.6 Transfer of SharesWhile 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 sub-

ject, makes states that the written approval of the Information and

Communication Technologies Authority is required for “actions of

gaining or transferring or movement of shares which shall result in

change of control.”

SECTIoN 2PUBLIC DISCLoSURE AND TRANSPARENCY

2.1 Company Disclosure Policy

The Disclosure policy Framework Document, regarding public an-

nouncements in accordance with the domestic and international ca-

pital 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 secti-

on of the Company’s website, www.turkcell.com.tr, under Corpora-

te Governance heading. Turkcell’s Disclosure policy was revised in

2009 and published on the website.

Turkcell makes public disclosures in compliance with the Cmb, Ise,

seC and NYse regulations to which it is subject. The purpose of

Turkcell’s Disclosure policy is to ensure an active and transparent

communication which is complete, fair, correct, timely, clear, and

cost effectively and equally accessible for all stakeholders including

shareholders, investors, employees and customers in accordan-

ce with the regulations to which the Company is subject. Turkcell

follows-up news and rumors about the Company and in accordance

with the Company’s procedure on Follow-up of News and rumors

public disclosures may be made if deemed appropriate or necessary.

The responsibility to maintain and monitor this Disclosure policy is

incumbent on the Company’s Investor and International media re-

lations Division.

2.2 Public Disclosures

In 2010, Turkcell made a total of 45 public disclosures to the domes-

tic and foreign capital markets to which it is subject. since Turkcell

shares are quoted on the New York stock exchange, these disclo-

sures 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 ad-

vice of the Capital markets and Corporate Governance Compliance

unit in accordance with the local and the international capital mar-

ket 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 postpo-

nement of the public disclosure of inside information, within the fra-

mework of Article 15 of the Capital markets board Communiqué on

Shareholder Value of Stake (TRY) % of Share

Turkcell holding A.Ş. 1,122,000,000.238 51.00%

Sonera holding B.V. 287,632,179.557 13.07%

MV holding A.Ş. 26,021,712.590 1.18%

Çukurova holding A.Ş. 995,509.429 0.05%

Müflis Bilka Bilgi Kaynak

ve İletişim San. Ve Tic. A.Ş. 137,199.575 0.01%

Public Share* 763,213,398.611 34.69%*

ToTAL 2,200,000,000.000 100.00%

(*) While 34.69% of our company is listed in the stock exchange, the number of our Company’s free floating shares on 31.12.2010 was 557,614,008.03 according to a “report on Free Float ratios” released by the Central registry Agency in accordance with Capital markets board’s decision 21/655 of 23.07.2010 as amended by its deci-sion 24/729 of 18.08.2010 and its free float ratio is 25.34%. The difference between those rates results from the exclusion of shares which are “ i. held by a public entity, ii. Held by the company’s incorporators and its affiliates (companies subject to con-solidation), iii. Held by shareholders who may be a natural person or a corporate body and control at least 5% of the Company’s capital, iv. Held by a) the members of the Company’s board of Directors and the board of Auditors, b) General manager or executives who are equal to or superior to a general manager in terms of their powers and functions, c) senior executives who report to General manager or executives who are equal to or superior to a general manager in terms of their powers and functions, v. owned by the savings funds or foundations of companies, vi. provided as equity capital pursuant to regulations applicable to the capital markets legislation or as a collateral in respect of a margin trading or as a collateral except the ones which are given as a collateral only for Central Depository bank markets, vii. Which are legally restricted and cannot be subject to purchase and sale, viii) prohibited , ix. seized “ in the definition of free float ratio. The difference may result from one or more situations described in the decision and it is not possible for our Company to know.


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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 value-

added business partnership based on transparency, incorpora-

ting the principles of integrity, cooperation, and achievement.

• Turkcell believes that long-term success is possible only with

dedicated suppliers. Correspondingly, the quality of our relati-

onship with our suppliers is of ultimate importance.

b. Legal obligations

• While fulfilling their obligations, suppliers must follow and res-

pect 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 ad-

here 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 pri-

son, debt bondage with high interest rates, or other forms of com-

pulsory 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 cor-

poral punishment or physical, sexual, psychological, or verbal ha-

rassment or abuse.

Bribery: suppliers must not offer bribes to any Turkcell employee

under any circumstances or for any reason whatsoever.

Compensation: The wages and profits of the supplier’s employees,

including overtime pay, must be equal to or higher than the mini-

mum 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, educati-

on, 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 faciliti-

es pursuant to local laws, where applicable. For this purpose, the

suppliers must take systematic actions to reduce any risks that thre-

aten employee safety and to guarantee the health and safety of its

employees pursuant to the related standards and laws. The supp-

liers 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 eco-

logical balance, and conduct social responsibility projects and assess

them accordingly, in addition to other supplier selection criteria.

• Quality and Information security management

• environmental and ecological Compliance

• social responsibility

3.5 Social Responsibility

As Turkey’s Turkcell, we continue to support not only technology, but

also economic, environmental, and social development.

We invest in the future of the next generations in the areas of edu-

cation, sports, and employment, by developing or supporting sus-

tainable, long-lasting and measurable projects that promote youth

development.

required to sign an affirmation stating that these regulations are an

indispensible part of their employment contracts.

SECTIoN 3STAKEhoLDERS

3.1 Informing Stakeholders

In addition to the legislation that is currently in effect, company po-

licies and procedures have been created to inform Company emplo-

yees and stakeholders.

3.2 Participation of Stakeholders in Management

While there is no special provision concerning the participation of

stakeholders in management, relevant information is shared with

Turkcell’s business partners, staff and other stakeholders through

defined and regular meetings, such as staff communication mee-

tings, 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 con-

duct, 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 sup-

ports changes that motivate our employees. We define our work en-

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 dis-

tinctive human resources practices, we continue “to develop dedi-

cated 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 emp-

loyee 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 where-

ver the Company has contact with and/or provides services to its cus-

tomers. The Company has a holistic view over all products and services

to understand the experience from a customer’s perspective in order

to improve the system, the processes, and human resources; and, if

necessary, to make timely corrective adjustments to systems or proces-

ses 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 high-

quality service, but also plans and implements activities in line with


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• 3,250 administrators and 6,500 teachers were appointed to ac-

company the students.

• bridge of Hearts teams were formed in 81 provinces,

• thousands of students saw for the first time: planes, sea, metro,

and train,

• hundreds of thousands of friendship were established.

Runners to the future

Developed in cooperation with the General Directorate of Youth and

sports, the “runners to the Future” project aims to support the tra-

ining of athletes aged 12-18 who can achieve success in individual

sports.

Included in the national plan of the united Nations’ project, Allian-

ce 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 visually-

impaired, across Turkey; they are trained to become national athle-

tes who will represent Turkey abroad successfully.

Within this project, Turkcell also sponsors marsel İlhan, the first-

ranking tennis player in Turkey and 90th in the world ; as well as

Çağla büyükakçay, another national tennis player.

Turkcell is the main sponsor of the National Football and basketball

Teams

From its start as the official Communication sponsor in 2002, Turk-

cell 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, recog-

nizing the importance of the achievements of the team for enhancing

national morale as well as our nation’s international reputation.

Turkcell also supports the National basketball Team, encouraging

and inspiring upcoming generations. starting off as the official Com-

munication sponsor in 2002, we became the main sponsor in 2006.

Turkcell was also the main sponsor of the World basketball Champi-

onship 2010, where our national team achieved great success with

a silver medal.

Contribution to employment

At Turkcell, we also prioritize investing in employment. Turkcell

Group employs approximately 11,000 people. We established an

eco-system of 50,000 people, including our dealers and business

partners.

In line with the importance we place on employment, we initiated

an important project in partnership with İŞkur (Turkish employment

Agency). In 2010, we provided 1,600 unemployed young people with

comprehensive training opportunities in retailing and call center sec-

tors. more than 1,000 of them were employed in our eco-system. We

will continue this partnership with İŞkur in 2011 and will provide

training and job opportunities to more than 2,000 people.

We also focus on employing physically challenged individuals. Turk-

cell 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 cen-

ter 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, erzu-

rum, eskişehir, Diyarbakir, Ankara, and karaman), two in ukraine,

and one in belarus.

Turkcell establishes base stations to provide mobile communication

services which is Turkcell’s area of business. safety tests are conduc-

ted by the manufacturer and Turkcell on the base stations built. Ne-

vertheless, 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 the-

se, 14 were decided for and 24 against the Company.

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 opportu-

nities to girls who could not continue their education due to the eco-

nomic disadvantages of their families; and subsequently to develop

them into open-minded individuals with a profession.

Finishing its first decade in 2010, snowdrops is Turkey’s pioneering

education project and Turkcell’s first comprehensive social respon-

sibility initiative. snowdrops grew into an avalanche over years with

public support and became one of Turkey’s most important social

responsibility projects, providing educational opportunities to tens

of thousands girls.

A mentorship program was initiated in 2004 as a supporting process

for the snowdrops project, to further contribute to the development

of real-life skill sets for the “snowdrops” continuing their education

at the university level. Volunteers were chosen from among Turkcell

executives, leading female journalists and columnists in the media

world, and successful businesswomen to assume a “guiding” role;

they then joined the program as informed mentors, following long

and meticulous study and training. The mentorship program began

with 46 mentors and grew each year, with 160 mentors in total

mentoring their snowdrops until now.

The project recently opened up with different levels and gained in-

ternational recognition. In 2008, the snowdrops project was filmed

by National Geographic. prior to the documentary, a 11-person Na-

tional 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 Tur-

key, 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 thro-

ugh 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 col-

lege 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 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 increase their awareness of social issues, diversity, and volun-

teering. 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 edu-

cation. The remaining two days are scheduled by the family hosting

each student.

Having reached 130,000 students in three years, the bridge of He-

arts project continues to grow every year. In 2010, special day acti-

vities were included in the project. students were taken to Anıtkabir

on April 23 and to samsun on may 19, to experience the enthusiasm

of national holidays. International tours were also included to ex-

pand 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,


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The motive behind determining risks is not to suspend business ac-

tivities 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 additi-

on, it monitors that Company’s operations are in compliance with rele-

vant regulations and in order to increase the efficiency of the Company’s

operations reviews processes, determines current and potential risks and

coordinates actions either to mitigate or prevent these risks.

Turkcell formulated its business continuity plans in 2000, involving

its technical operations. In 2004, the scope of the business continu-

ity 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 geograp-

hically 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 com-

petitive environment to mitigate potential risks that may be faced in

these areas.

4.5 Authority and Responsibilities of the Members of the Board of

Directors and Executives

The pertinent section of the Company’s Articles of Association is as

follows: “The board is fully authorized to carry out the affairs of the

Company and management of Company assets and the activities re-

lating to the Company purpose and subject matter other than those

that have to be solely carried out by the General Assembly”.

In addition, within the context of enhancing the Company’s corpora-

te governance practices, the responsibilities and duties of the board

of Directors are examined in the Corporate Governance Guidelines

adopted by the board, and published on the Company’s website

(www.turkcell.com.tr) in the Investor relations section under Cor-

porate 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 “Corpo-

rate Governance principles” on the Company’s website. In addition,

a Corporate Governance secretariat has been created to coordinate

information flow between the members of the board. No board of

Director member has weighted voting rights or the power of veto.

4.7 Prohibition on Carrying out Transactions with the Company and

Prohibition on Competition

permission contained in articles 334 and 335 of the Turkish Com-

mercial 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-

SECTIoN 4BoARD of DIRECToRS

4.1 Structure and Creation of the Board of Directors and Indepen-

dent Members

Information on the board of Directors is provided in the Investor

relations section of Turkcell’s website (www.turkcell.com.tr).

on our ordinary General Assembly dated April 29, 2010, the follo-

wing members were selected as Turkcell board of Directors for a

period of three years:

Colin J. Williams Chairman (Independent member)

Nazli karamehmet Williams member

mehmet bulent ergin member

karin eliasson member

Tero kivisaari member

oleg malis member

Alexey khudyakov member

All the members of the board of Directors are non-executives. Colin

J. Williams, as the independent member of the board of Directors,

fulfills the criteria of the Cmb Corporate Governance principles as

well as the seC’s independence criteria.

4.2 Qualifications of the Members of the Board of Directors

The qualifications of the members of the board of Directors are spe-

cified in the Corporate Governance Guidelines as adopted by the

Company’s board of Directors. According to this, every year, the Cor-

porate Governance Committee, together with the board of Directors,

within the current structure of the board, reviews the skills and spe-

cialties 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 inter-

fere with his or her service as an effective and active member of the

Company’s board. In addition, the Corporate Governance Committee

develops and supervises an orientation program for newly elected

members of the board of Directors.

4.3 Vision and Strategic objectives of the Company

The vision and strategic targets of Turkcell are on the Company’s

website (www.turkcell.com.tr) under “About Turkcell” and in the

Annual report.

4.4 Risk Management and Internal Control Mechanisms

Corporate risk management Department coordinates risk manage-

ment, Internal Audit, business Continuity management, Information

security management, and Internal Fraud management processes. by

developing and applying a risk management methodology, the Com-

pany strengthens its focus on corporate risk management practices.

Turkcell Corporate risk management Department, in complian-

ce with the “principle of independence” and in line with Cmb’s

Communiqué series: X No.19 directly reports to the Chief executive

officer, the Chief Financial officer, and the Audit Committee formed

by independent members of the board of Directors.

Internal Control / Internal Audit Activities: Turkcell management is

responsible for ensuring the compliance with the provisions of Ar-

ticle 404 of the sarbanes oxley Act, as promulgated by the united

states securities and exchange Commission (the “seC”). Thus, ma-

nagement 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 Depart-

ment is responsible to provide support for the establishment of in-

ternal control system both in Turkcell and consolidated group com-

panies 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 manage-

ment on a regular basis.

risk management is responsible for the following tasks: defining the

risks that affect Turkcell’s performance towards its goals, coordi-

nating risk analysis tasks, sharing results with Corporate executive

Team and the risk management board, and reporting and following

up on these results.


Corp

orat

e G

over

nanc

e

Turk

cell

offi

ce

ir work lives, to internalize and to integrate into their conduct. All

Turkcell employees and management are responsible for complian-

ce with these codes and regulations.

each new Turkcell employee is introduced to these codes in the ori-

entation program and signs a commitment letter stating his/her un-

derstanding 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, as-

signed 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 exis-

ting 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 et-

hics Committees are free to include the management team, inter-

nal 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 Com-

mittees 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 thro-

ugh various channels during the year to increase their awareness

and acknowledgement of the Common Values and Code of ethics.

our Code of ethics is outlined on the company’s website, in the In-

vestor 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 Estab-

lished 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 commit-

tee also has charters specifying working principles. both the Audit

Committee’s and the Corporate Governance Committee’s members

consist of the non-executive members of the board of Directors. In-

formation about the committees formed on the board of Directors is

published on the Company’s website (www.turkcell.com.tr) in the

Investors relations section under Corporate Governance.

At the board of Directors meeting on may 27, 2010, within the con-

text of Turkcell’s Corporate Governance principles and applicable

regulations, it was decided that mr. Colin J. Williams and mr. Alexey

khudyakov will continue their Audit Committee memberships and

that mr. Colin J. Williams will continue as Chairman of the Audit

Committee. At the same meeting, it was decided that mr. Colin J

Williams, ms. karin b. eliasson, mr. mehmet bulent ergin and mr.

oleg A. malis are appointed as Corporate Governance Committee

members of the Company and that mr. Colin J. Williams will serve as

Chairman of the Corporate Governance Committee.

4.10 financial Rights Provided to the Board of Directors

Attendance fees are paid to the members of the board of Directors.

No loans have been granted to any members of the Company’s bo-

ard of Directors or managers nor have any other guaranties such as

sureties been given.

office Name Address

Tepebaşı Plaza Asmalı mescit mh. meşrutiyet Caddesi No: 71

Asmalı mescit beyoğlu - İstanbul

Maltepe Plaza Yeni mh. pamukkale sk. No: 3, 34880 soğanlık

mevkii - kartal - İstanbul

Davutpaşa Plaza serçe kale sk. No: 2, Topkapı - İstanbul

kartal plaza Topselvi Dipçik sk. No: 31,

kartal - İstanbul

Şişli Plaza 19 mayıs Cad. Dr. İsmet Öztürk sokak Şişli plaza

ofis blokları e blok b2 Şişli-İstanbul

Adana Plaza Turhan Cemal berikel bulv. No: 212,

seyhan - Adana

Ankara Plaza eskişehir Yolu 9. km No: 264,

söğütözü - Ankara

Antalya Plaza kızıltoprak mah. 915 sk. No: 3, Antalya

Bursa Plaza organize san. bölgesi kırmızı Cad. No: 4,

Nilüfer - bursa

Diyarbakır Plaza urfa Yolu 6. km Diyarbakır

İzmir Plaza Ankara Asfaltı No: 64, bornova - İzmir

Samsun Plaza mimar sinan mah. 60. sokak No: 18, pk 55200

Atakum - samsun

Erzurum Plaza 1. organize sanayi bölgesi 1. cadde 4. sokak

No:10 Aziziye-erzurum

Trabzon Plaza mısırlı mahallesi Hasan Turfanda Yolu No: 1,

Çukurçayır – Trabzon

Turkcell offices


CONTENTS PAGE

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 101

CONSOLIDATED INCOME STATEMENTS 102

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 103

CONSOLIDATED STATEMENTS OF CHANGES AND EQUITY 104

CONSOLIDATED STATEMENT OF CASH FLOWS 105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 106-203

NOTE 1. REpORTiNg ENTiTy 106NOTE 2. Basis Of pREpaRaTiON 107NOTE 3. sigNificaNT accOuNTiNg pOliciEs 111NOTE 4. DETERmiNaTiON Of faiR valuEs 130NOTE 5. fiNaNcial Risk maNagEmENT 132NOTE 6. OpERaTiNg sEgmENTs 134NOTE 7. REvENuE 139NOTE 8. OThER ExpENsEs 139NOTE 9. pERsONNEl ExpENsEs 140NOTE 10. fiNaNcE iNcOmE aND cOsTs 140NOTE 11. iNcOmE Tax ExpENsE 141NOTE 12. pROpERTy, plaNT aND EquipmENT 143NOTE 13. iNTaNgiBlE assETs 145NOTE 14. EquiTy accOuNTED iNvEsTEEs 150NOTE 15. OThER iNvEsTmENTs 151NOTE 16. OThER NON-cuRRENT assETs 152NOTE 17. DEfERRED Tax assETs aND liaBiliTiEs 153NOTE 18. TRaDE REcEivaBlEs aND accRuED iNcOmE 155NOTE 19. OThER cuRRENT assETs 155NOTE 20. cash aND cash EquivalENTs 156NOTE 21. capiTal aND REsERvEs 156NOTE 22. EaRNiNgs pER shaRE 158NOTE 23. OThER NON-cuRRENT liaBiliTiEs 159NOTE 24. lOaNs aND BORROwiNgs 159NOTE 25. EmplOyEE BENEfiTs 162NOTE 26. DEfERRED iNcOmE 162NOTE 27. pROvisiONs 162NOTE 28. TRaDE aND OThER payaBlEs 164NOTE 29. fiNaNcial iNsTRumENTs 165NOTE 30. OpERaTiNg lEasEs 173NOTE 31. guaRaNTEEs aND puRchasE OBligaTiONs 173NOTE 32. cOmmiTmENTs aND cONTiNgENciEs 174NOTE 33. RElaTED paRTiEs 198NOTE 34. gROup ENTiTiEs 203NOTE 35. suBsEquENT EvENTs

TuRkcEll İlETİŞİm hİZmETlERİ a.Ş.

aND iTs suBsiDiaRiEs

CONSOLIDATED FINANCIAL STATEMENT

AND INDEPENDENT AUDIT REPORT


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders ofTurkcell İletişim Hizmetleri A.Ş.

we have audited the accompanying consolidated statement of financial position of Turkcell İletişim hizmetleri a.Ş (“the company”) and its subsidiaries (together “the group”) as of December 31, 2010 and the related consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year ended December 31, 2010. These consolidated financial statements are the responsibility of the group’s management. Our responsibility is to express an opini-on on these consolidated financial statements based on our audits. we did not audit the financial statements of fintur holdings B.v. (“fintur”); a 41.45 percent owned equity accounted investee of the group. The group’s investment in fintur as of December 31, 2010 was $304 million and its share in profit of fintur was $153 million, for the year 2010. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for fintur, is based solely on the report of the other auditors.

we conducted our audits in accordance with the standards of the public company accounting Oversight Board (united states). Those stan-dards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. we believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

in our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the group as of December 31, 2010 and the results of their operations and their cash flows for the year ended December 31, 2010 in conformity with international financial Reporting standards as issued by the international accounting standards Board.

we have also audited, in accordance with the standards of the public company accounting Oversight Board (united states), the group’s in-ternal 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 unqu-alified opinion on the effectiveness of group’s internal control over financial reporting.

istanbul, Turkey

april 18, 2011

DRT BaĞimsiZ DENETİm vE sERBEsT muhasEBEcİ malİ mÜŞavİRlİk a.Ş.member of DElOiTTE TOuchE TOhmaTsu limiTED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders ofTurkcell İletişim Hizmetleri A.Ş.

we have audited the internal control over financial reporting of Turkcell İletişim hizmetleri a.Ş. and its subsidiaries (together “the group”) as of December 31, 2010 based on criteria established in internal control-integrated framework issued by the committee of sponsoring Organizations of the Treadway commission. The group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s Report. Our responsibility is to express an opinion on the group’s internal control over financial reporting based on our audit.

we conducted our 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 perfor-ming such other procedures as we considered necessary in the circumstances. we believe that our audit provide a reasonable basis for our opinion.

a company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. a company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposi-tions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

DRT Bağımsız Denetim ve

serbest muhasebeci

mali müşavirlik a.Ş.

sun plaza, Bilim sok. No:5

maslak, Şişli 34398, İstanbul,

Türkiye

Tel : (212) 336 60 00

fax : (212) 336 60 10

web : www.deloitte.com.tr

DRT Bağımsız Denetim ve

serbest muhasebeci

mali müşavirlik a.Ş.

sun plaza, Bilim sok. No:5

maslak, Şişli 34398, İstanbul,

Türkiye

Tel : (212) 336 60 00

fax : (212) 336 60 10

web : www.deloitte.com.tr

100 101Turkcell Annual Report 2010

Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesConsolidated Statement Of Financial Position As at 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Note 2010 2009Assets

property, plant and equipment 12 3,068,021 2,652,222intangible assets 13 1,709,311 1,897,981

gsm and other telecommunication operating licenses 955,703 1,058,098computer software 547,607 595,218Other intangible assets 206,001 244,665

investments in equity accounted investees 14 399,622 383,490Other investments 15 33,849 34,755Due from related parties 33 1,044 21,039Other non-current assets 16 107,277 75,120Trade receivables 18 35,024 -Deferred tax assets 17 2,876 2,058

Total non-current assets 5,357,024 5,066,665

inventories 24,386 28,205Other investments 15 8,201 62,398Due from related parties 33 88,897 108,843Trade receivables and accrued income 18 816,151 783,752Other current assets 19 197,740 175,417cash and cash equivalents 20 3,302,163 3,095,486

Total current assets 4,437,538 4,254,101

Total assets 9,794,562 9,320,766

Equityshare capital 21 1,636,204 1,636,204share premium 21 434 434capital contributions 21 22,772 22,772Reserves 21 (660,121) (512,095)Retained earnings 21 5,258,327 4,712,254

Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS 6,257,616 5,859,569

Non-controlling interests 21 (24,019) 36,632

Total equity 6,233,597 5,896,201

Liabilitiesloans and borrowings 24 1,407,316 821,179Employee benefits 25 29,742 27,776provisions 27 57,055 5,676Other non-current liabilities 23 160,832 154,991Deferred tax liabilities 17 93,105 118,432

Total non-current liabilities 1,748,050 1,128,054

Bank overdraft 20 5,896 5,244loans and borrowings 24 430,205 690,780income taxes payable 11 96,080 93,260Trade and other payables 28 951,976 1,038,762Due to related parties 33 10,760 14,780Deferred income 26 164,186 248,518provisions 27 153,812 205,167

Total current liabilities 1,812,915 2,296,511

Total liabilities 3,560,965 3,424,565

Total equity and liabilities 9,794,562 9,320,766

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management over-ride 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 finan-cial 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

DRT BaĞimsiZ DENETİm vE sERBEsT muhasEBEcİ malİ mÜŞavİRlİk a.Ş.member of DElOiTTE TOuchE TOhmaTsu limiTED


Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesConsolidated Statement Of Comprehensive Income For the year ended 31 December 2010(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesConsolidated Statement Of Income For the year ended 31 December 2010(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2010 2009 2008

Profit for the year 1,126,961 1,104,804 1,755,062

Other comprehensive income/(expense):

foreign currency translation differences (184,352) 53,046 (1,458,709)

Net change in fair value of available-for-sale securities (1,318) 1,197 (6,385)

income tax on other comprehensive (expense)/income (754) (1,091) 1,368

Other comprehensive income/(expense) for the year, net of income tax (186,424) 53,152 (1,463,726)

Total comprehensive income for the year 940,537 1,157,956 291,336

Total comprehensive income/(expense)attributable to:

Owners of Turkcell iletisim hizmetleri as 984,187 1,146,681 363,504

Non-controlling interest (43,650) 11,275 (72,168)

Total comprehensive income for the year 940,537 1,157,956 291,336

Note 2010 2009 2008

Revenue 7 5,982,093 5,789,972 6,970,408Direct costs of revenue (3,349,035) (3,097,097) (3,409,013)Gross profit 2,633,058 2,692,875 3,561,395

Other income 14,668 978 14,136selling and marketing expenses (1,085,750) (1,085,081) (1,351,692)administrative expenses (347,290) (273,139) (309,349)Other expenses 8 (64,233) (111,220) (17,990)Results from operating activities 1,150,453 1,224,413 1,896,500

finance income 10 277,130 329,550 442,099finance costs 10 (102,662) (187,514) (136,769)Net finance income 174,468 142,036 305,330

share of profit of equity accounted investees 14 122,839 78,448 102,990Profit before income tax 1,447,760 1,444,897 2,304,820

income tax expense 11 (320,799) (340,093) (549,758)Profit for the year 1,126,961 1,104,804 1,755,062

Profit attributable to: Owners of Turkcell iletisim hizmetleri as 1,170,176 1,093,992 1,836,824Non-controlling interest (43,215) 10,812 (81,762)Profit for the year 1,126,961 1,104,804 1,755,062

Basic and diluted earnings per share (in full usD) 22 0.53 0.50 0.83


Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesConsolidated Statement Of Cash Flows For the year ended 31 December 2010(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesConsolidated Statement Of Changes In Equity For the year ended 31 December 2010(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Note 2010 2009 2008Cash flows from operating activitiesProfit for the year 1,126,961 1,104,804 1,755,062Adjustments for:Depreciation and impairment of fixed assets 12 515,515 384,257 433,942amortization of intangible assets 13 241,839 206,421 245,985Net finance (income) 10 (237,628) (254,582) (393,671)income tax expense 11 320,799 340,093 549,758share of profit of equity accounted investees (154,457) (115,240) (151,629)(gain)/loss on sale of property, plant and equipment 101 25,150 (6,931)gain on sale of subsidiary - - (4,727)unrealized foreign exchange gain and loss on operating assets (5,847) 88,572 (228,033)impairment losses on goodwill 23,499 61,835 -provision for impairment of trade receivables 18 126,257 75,379 68,550Deferred income 26 (77,854) (2,966) (3,293)

1,879,185 1,913,723 2,265,013

change in trade receivables 18 (204,403) (269,360) (214,220)change in due from related parties 33 28,752 (20,312) 2,124change in inventories 3,083 (8,662) (267)change in other current assets 19 (29,389) (37,099) (27,208)change in other non-current assets 16 (29,011) (21,272) (10,704)change in due to related parties 33 (3,775) (6,290) (6,541)change in trade and other payables 32,541 180,469 66,690change in other current liabilities (96,118) (115,306) 206,537change in other non-current liabilities 23 (14,051) (82,893) 52,452change in employee benefits 25 2,690 942 5,773change in provisions 27 (45,102) 123,644 29,704

1,524,402 1,657,584 2,369,353

interest paid (38,829) (29,497) (25,050)income tax paid (322,754) (395,024) (687,292)Dividends received 99,759 83,543 89,235Net cash generated by operating activities 1,262,578 1,316,606 1,746,246Cash flows from investing activitiesacquisition of property, plant and equipment (912,097) (1,044,165) (603,568)acquisition of intangible assets 12 (132,827) (723,507) (193,219)proceeds from sale of property, plant and equipment 13 8,506 4,471 16,693proceeds from currency option contracts 12,147 10,549 14,655payment of currency option contracts premium (4,988) (1,150) (4,970)acquisition of available-for-sale securities (16,762) (83,951) (47,549)proceeds from sale of available-for-sale securities 70,528 32,015 78,542acquisition of subsidiary, net of cash acquired - - (309,967)interest received 270,602 320,697 354,211Net cash used in investing activities (704,891) (1,485,041) (695,172)

Cash flows from financing activitiesproceeds from issuance of loans and borrowings 1,071,777 1,692,866 601,000loan transaction costs (12,100) (14,357) -Repayment of borrowings (772,892) (944,133) (487,999)change in non-controlling interest 89 - 72,199proceeds from capital contribution - 4,570 18,202Dividends paid (590,541) (744,380) (556,973)Net cash used in financing activities (303,667) (5,434) (353,571)

Net decrease/(increase) in cash and cash equivalents 254,020 (173,869) 697,503

Cash and cash equivalents at 1 January 3,090,242 3,255,420 3,093,175Effects of foreign exchange rate fluctuations on cash and cash equivalents (47,995) 8,691 (535,258)

Cash and cash equivalents at 31 December 20 3,296,267 3,090,242 3,255,420

Attr

ibut

able

to e

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ders

of t

he C

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ny

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Bala

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2008

1,63

6,20

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256,

834

5,48

1-

669,

598

3,22

4,52

65,

793,

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138,

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5,93

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f tax

--

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(1,4

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-(1

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363,

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1 De

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1,63

6,20

418

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434

378,

779

121

(286

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4,43

7,07

15,

385,

527

58,1

165,

443,

643

Bala

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2009

1,63

6,20

418

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434

378,

779

121

(286

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4,43

7,07

15,

385,

527

58,1

165,

443,

643

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--

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51,4

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351

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111

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5,85

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597


Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesNotes To The Consolidated Financial Statements As at and for the year ended 31 December 2010(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

107


2. Basis of preparation

(a) Statement of complianceThe 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 measurementThe accompanying consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpo-se 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 currencyThe 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 Nort-hern 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 Telecom-munications 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 judgmentsThe 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.

1. Reporting entityTurkcell iletisim hizmetleri anonim sirketi (the “company”) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The address of the company’s registered office is Turkcell plaza, mesrutiyet caddesi No: 71, 34430 Tepebasi/istanbul. it is engaged in establishing and operating a global system for mobile communications (“gsm”) network in Turkey and regional states.

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 subscri-bers, 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 ame-rican Depositary shares, or aDss, on the New york stock Exchange.

as at 31 December 2010, two significant founding shareholders, sonera holding Bv and cukurova group, directly and indirectly, own appro-ximately 37.1% and 13.8%, respectively of the company’s share capital and are ultimate counterparties to a number of transactions that are discussed in the related parties footnote. On the basis of publicly available information, alfa group, which previously held, indirectly through cukurova Telecom holdings limited and Turkcell holding as, 13.2% of the company’s shares, has reduced its stake to 4.99% following litigation with Telenor asa (“Telenor group”). On the basis of publicly available information, it is understood that alfa group sold 62.2% of its holdings in alfa Telecom Turkey limited (“aTTl”) to visor group affiliate Nadash international holdings inc. (“Nadash”) and alexander mamut’s henri services limited (“hsl”) and in July 2010, redeemed these shares.

The consolidated financial statements of the company as at and for the year ended 31 December 2010 comprise the company and its subsi-diaries (together referred to as the “group”) and the group’s interest in one associate and one joint venture. subsidiaries of the company, their locations and their business are given in Note 34. The company’s and each of its subsidiaries’, associate’s and joint venture’s financial statements are prepared as at and for the year ended 31 December 2010.



109


2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued)

Useful lives of assets (continued)in accordance with ias 16 “property, plant and Equipment” and ias 38 “intangible assets”, the residual value and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with ias 8 “accounting policies, changes in accounting Estimates and Errors”. as part of yearly review of useful lives of assets, the group made necessary evaluation by considering current technologic and economic conditions and recent business plans. Based on the evaluation performed, changes in the useful lives caused the following prospective impacts on dep-reciation and amortization charges;

Previousaccounting

estimate

Current accounting

estimate Impact

Depreciation and amortization charge for the year ended 31 December 2010

765,280 757,354 7,926

Due to the impracticability, the group has not disclosed the effect of the change for the future periods.

Commission feescommission fees relate to services performed in relation to betting games where the group acts as an agent in the transaction rather than as a principal. in april 2009, the iasB issued amendments to the illustrative guidance in the appendix to ias 18 “Revenue” in respect of identifying an agent versus a principal in a revenue-generating transaction. Based on this guidance; management considered the following factors in distinguishing between an agent and a principal:

• The group does not take the responsibility for fulfilment of the games.• The group does not collect the proceeds from the final customer and it does not bear the credit risk.• The group earns a pre-determined percentage of the total turnover.

Revenue recognitionin 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.


(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 sig-nificant effect on the amounts recognized in the consolidated financial statements are described in Notes 4 and 32 and detailed analysis with respect to accounting estimates and critical judgments of allowance for doubtful receivables, useful lives or expected patterns of consumption of the future economic benefits embodied in depreciable assets, commission fees, revenue recognition and income taxes are provided below:key sources of estimation uncertainty

in Note 29, detailed analysis is provided for the foreign exchange exposure of the group and risks in relation to foreign exchange movements.critical accounting judgments in applying the group’s accounting policies

certain critical accounting judgments in applying the group’s accounting policies are described below:

Allowance for doubtful receivablesDuring the current year, the group has changed its accounting estimates regarding the determination of allowance for doubtful receivables. formerly, the allowance for doubtful receivables was based on management’s evaluation of the volume of the receivables outstanding, his-torical collection trends and general economic conditions. with the new accounting estimate, the group maintains an allowance for doubtful receivables for estimated losses resulting from the inability of the group’s subscribers and customers to make required payments. The group bases the allowance on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection trends and general economic conditions. The allowance is periodically reviewed. The allowance charged to expenses is determined in respect of receivable balances, calculated as a specified percentage of the outstanding balance in each aging group, with the percentage of the allo-wance 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 receivab-les caused the following impact on bad debt provision expense:

Previousaccounting

estimate

Current accounting

estimate Impact

Bad debt expense for the year ended 31 December 2010 127,921 126,257 1,664

Due to the impracticability, the group has not disclosed the effect of the change for the future periods.

Useful lives of assetsThe economic useful lives of the group’s assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The group defines useful life of its assets in terms of the assets’ expected utility to the group. This judgment is based on the experience of the group with similar assets. in determining the useful life of an asset, the group also follows technical and/or commercial obsolescence arising on changes or improvements from a change in the market. The useful lives of the licenses are based on the duration of the license agreements.



111




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 company’s previously reported statement of income, statement of comprehensive income, statement of financial positions or “cash and cash equivalents” at the end of any period. The effect of the change on the statement of cash flows is as follows:

For the year ended 31 December 2009As previously reported Revisions As Revised

Net cash from operating activities 1,294,935 21,671 1,316,606

Effects of foreign exchange on statement of financial position items 30,938 (30,938) -

Effects of foreign exchange rate changes on cash (576) 9,267 8,691

cash and cash equivalents 3,090,242 - 3,090,242

For the year ended 31 December 2008As previously reported Revisions As Revised

Net cash from operating activities 1,674,385 71,861 1,746,246

Effects of foreign exchange on statement of financial position items (418,945) 418,945 -

Effects of foreign exchange rate changes on cash (44,452) (490,806) (535,258)

cash and cash equivalents 3,255,420 - 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) subsidiariessubsidiaries 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



Critical accounting judgments in applying the Group’s accounting policies (continued)

Income taxesThe 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 policieschanges to the accounting policies are applied retrospectively and the prior period’s financial statements are restated accordingly. The group did not make any major changes to accounting policies during the current year.

Changes in accounting estimatesif the application of changes in the accounting estimates affects the financial results of a specific period, the changes in the accounting esti-mates 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 recei-vables and the useful lives of property, plant and equipment and intangible assets.

Comparative information and revision of prior period financial statementsThe consolidated financial statements of the group have been prepared with the prior periods on a comparable basis in order to give consis-tent 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.



113


3. Significant accounting policies (continued)

(b) Foreign currency (continued)

(ii) oreign operationsThe 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 com-ponent of equity. since 1 January 2005, the group’s date of transition to ifRss, such differences have been recognized in the foreign currency translation reserve. when a foreign operation is disposed of, partially or fully, the relevant amount in the foreign currency translation reserve is transferred to the statement of income.

foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized directly in equity in the foreign currency translation reserve.

(iii) Translation from functional to presentation currency items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the entities operate, normally under their local currencies.

The consolidated financial statements are presented in usD, which is the presentation currency of the group. The group uses usD as the presentation currency for the convenience of investor and analyst community.

assets and liabilities for each statement of financial position presented (including comparatives) are translated to usD at exchange rates at the statement of financial position date. income and expenses for each statement of income (including comparatives) are translated to usD at monthly average exchange rates.

foreign currency differences arising on retranslation are recognized directly in a separate component of equity.

(iv) Net investment in foreign operationsforeign 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.

such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment in subsidiary and the share acquired in subsidiary’s equity accounted for as equity transactions (i.e. transactions with owners in their capacity as owners).

(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. signifi-cant 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 group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated finan-cial statements include the group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. when the group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee. The group’s equity accounted investees as at 31 December 2010 are fintur holdings Bv (“fintur”) and a-Tel pazarlama ve servis hizmetleri as (“a-Tel”).

(iv) Transactions eliminated on consolidationintragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions are eliminated in prepa-ring the consolidated financial statements. unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the group’s interest in the investee. unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(v) Non-controlling interestswhere 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 cor-responding 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

(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 cur-rency 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.



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(c) Financial instruments (continued)

(i) Non-derivative financial instruments (continued)

• available-for-sale financial assetsavailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.

The group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(h)(i)), and foreign exchange gains and losses on available-for-sale monetary items (see note 3(b)(i)), are recognized directly in equity. when an investment is derecogni-zed, the cumulative gain or loss in equity is transferred to the statement of income.

• Estimated exercise price of put optionsunder the terms of certain agreements, the group is committed to acquire the interests owned by non-controlling shareholders in consolida-ted 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 pre-sentation”, 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.

• OtherOther non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.

(ii) Derivative financial instrumentsThe 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. sub-sequent to initial recognition, derivatives are measured at fair value and changes therein are recognized in the statement of income.


(c) Financial instruments

(i) Non-derivative financial instrumentsNon-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equiva-lents, 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 group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.accounting for finance income and costs is discussed in Note 3(m).

• financial assets at fair value through profit or lossan instrument is classified as financial asset at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. financial instruments are designated at fair value through profit or loss if the group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the group’s risk management or investment strategy. upon initial recognition, attributable transaction costs are recognized in the statement of income when incurred. financial instruments at fair value thro-ugh profit or loss are measured at fair value, and changes therein are recognized in the statement of income.

• held-to-maturity financial assetsif the group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. held-to-maturity financial assets are held-to-maturity investments that are measured at amortized cost using the effective interest method, less any impairment losses.

any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the group from classifying investment securities as held-to-maturity for the current and the following two financial years.



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3. Significant accounting policies (continued) (d) Property, plant and equipment (continued)

(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 licensesgsm 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).

Amortizationamortization 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 company’s subsidiary, superon-line iletisim hizmetleri as (“superonline”), has become infinite. as a result, superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years.

(ii) computer softwarecosts 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 be-nefits exceeding costs beyond one year, are recognized as intangible assets. costs include the software development employee costs and an appropriate portion of relevant overheads.

amortizationamortization is recognized in the statement of income on a straight-line basis over the estimated useful lives from the date the software is available for use. The useful lives for computer software are as follows:

computer software 3 – 8 years

(iii) Other intangible assetsintangible assets that are acquired by the group which have finite useful lives are measured at cost adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)).

indefeasible Rights of use (“iRu”) correspond to the right to use a portion of the capacity of an asset granted for a fixed period of time. iRus are recognized as an intangible asset when the group has specific indefeasible right to use an identified portion of the underlying asset and the duration of the right is the major part of the underlying asset’s economic life. iRus are amortized over the shorter of the expected period of use and the life of the contract.


(d) Property, plant and equipment

(i) Recognition and measurementitems 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.

(ii) subsequent costsThe 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) DepreciationDepreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of an item of pro-perty, 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 21 – 50 years mobile network infrastructure 6 – 8 years fixed network infrastructure 3 – 25 years call center equipment 5 – 8 years Equipment, fixtures and fittings 4 – 5 years motor vehicles 4 – 5 years central betting terminals 10 years leasehold improvements 5 years



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3. Significant accounting policies (continued) (e) Intangible assets (continued)

(iv) internally generated intangible assets – research and development expenditure Expenditure on research activities is recognized as an expense in the period in which it is incurred.

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 assetsleases 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 pay-ments. subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognized on the group’s statement of financial position.

(g) Inventoriesinventories 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

(i) financial assetsa 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 recog-nition 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.


(e) Intangible assets (continued)

(iii) Other intangible assets (continued)

subsequent expendituresubsequent 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.

amortizationamortization 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 10 years central betting system operating right 10 years customer base 2 – 8 years Brand name 10 years customs duty and vaT exemption right 4.4 years

amortization methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.

goodwillfrom 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.



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(h) Impairment (continued)

(ii) Non-financial assets (continued)an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, therefore, is not tested for impairment separately. instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

(i) Employee benefits

(i) Retirement pay liabilityin accordance with existing labor law in Turkey, the company and its subsidiaries in Turkey are required to make lump-sum payments to emp-loyees 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 plansa 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 com-panies 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) Provisionsa 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 contractspresent 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).


(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 collecti-vely 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 recog-nized 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 comprehen-sive income.

(ii) Non-financial assetsThe carrying amounts of the group’s non-financial assets, other than inventories, and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. if any such indication exists, then the asset’s recoverable amount is estimated. for goodwill, the recoverable amount is estimated each year at the same time.

for the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from con-tinuing use that are largely independent of the cash inflows of other assets or group of assets (the “cash-generating unit”). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. in assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate adjusted for the effects of tax cash outflows that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The group’s corporate assets do not generate separate cash inflows. if there is an indication that a corporate asset may be impaired, then the recoverable amount is determined from the cash-generating unit to which corporate asset belongs.

an impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. impairment losses are recognized in the statement of income. impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

an impairment loss in respect of goodwill is not reversed. in respect of other assets, impairment losses recognized in prior periods are asses-sed at each reporting date for any indications that the loss has decreased or no longer exists. an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.



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(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.

Determining whether an arrangement contains a leaseat 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 costsfinance 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.


(j) Provisions (continued)

Dismantling, removal and restoring sites obligationThe 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.

Bonusprovision 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. commu-nication 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.



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(p) Earnings per shareThe 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 segmentan operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the group’s other components. all operating segments’ operating results are regularly reviewed by the group management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

The group identified Turkcell, Euroasia and Belarusian Telecom as operating segments.

(r) Subscriber acquisition costsThe 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 grantsgrants 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.


(m) Finance income and costs (continued)

Borrowing costsBorrowing 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 substan-tially 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 sharehol-ders 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 diffe-rence 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.



127



(t) New standards and interpretations (continued)

(b) New and Revised IFRSs affecting the reported financial performance and / or financial position (continued)

IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements (continued)The application of ias 27 (2008) has resulted in changes in the group’s accounting policies for changes in ownership interests in subsidiaries.specifically, the revised standard has brought clarification to the group’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. under ias 27 (2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.

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 pro-visions.

since the non-controlling interests have a deficit balance, net loss amounting to $46,705 is accounted in non-controlling interests in accor-dance with ias 27 (revised) in the current period. There have been no transactions whereby an interest in an entity is retained after the loss of control of that entity; there have been no transactions with non-controlling interests.

IAS 28 (revised in 2008), “Investments in Associates”The principle adopted under ias 27 (2008) that a loss of control is recognized as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to ias 28. Therefore, when significant influence over an associate is lost, the investor measu-res 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 transac-tions 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.


(t) New standards and interpretations (continued) a) New and Revised IFRSs do not affect presentation and disclosures

amendments to iFRS 5, Non-current Assets Held for Sale and Discontinued Operations (as part of improvements to ifRss issued in 2009)The amendments to ifRs 5 clarify that the disclosure requirements in ifRss other than ifRs 5 do not apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations unless those ifRss require

(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 requi-rement of ifRs 5 and the disclosures are not already provided in the consolidated financial statements.

since the group does not have any assets in this context, disclosures in these consolidated financial statements have not been modified to reflect the above clarification.

amendments to ias 7, statement of cash flows (as part of improvements to ifRss issued in 2009)

The amendments to ias 7 specify that only expenditures that result in a recognized asset in the statement of financial position can be classified as investing activities in the statement of cash flows. The application of the amendments to ias 7 has resulted in a change in the presentation of cash outflows in respect of development costs that do not meet the criteria in ias 38, “intangible assets” for capitalization as part of an internally generated intangible asset. This change has been applied retrospectively.

since, the development costs, which do not meet the criteria for capitalization, were included in cash flows from operating activities in the consolidated statement of cash flows of the previous periods, this amendment does not affect the consolidated financial statements.

New and Revised IFRSs affecting the reported financial performance and / or financial position

IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements

ifRs 3 (revised), “Business combinations” and consequential amendments to ias 27, “consolidated and separate financial statements”, ias 28, “investments in associates” and ias 31, “interests in Joint ventures” are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The main impact of the adoption is as follows:

(a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as “mi-nority 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.



129




(d) New and Revised IFRSs in issue but not yet effective (continued)

IFRS 7, “Financial Instruments: Disclosures”in October 2010, ifRs 7, “financial instruments: Disclosures” is amended by iasB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 9, “Financial Instruments: Classification and Measurement”in November 2009, the first part of ifRs 9 relating to the classification and measurement of financial assets was issued. ifRs 9 will ultimately replace ias 39, “financial instruments: Recognition and measurement”. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The group has not had an opportunity to consider the potential impact of the adoption of this standard.

IAS 24 (Revised 2009), “Related Party Disclosures”in November 2009, ias 24 Related party Disclosures was revised. The revision to the standard provides government related entities with a partial exemption from the disclosure requirements of ias 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011. The group does not expect any impact of the adoption of this amendment on the financial statements.

IAS 32 (Amendments), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements”The amendments to ias 32 and ias 1 are effective for annual periods beginning on or after 1 february 2010. The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. previously, such rights issues were accounted for as derivative liabilities. however, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.

IFRIC 14 (Amendments), “Pre-payment of a Minimum Funding Requirement”amendments to ifRic 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are requ-ired 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.



(c) New and Revised IFRSs applied with no material effect on the consolidated financial statementsThe 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.

“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 invol-ving 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, “Reve-nue”, ias 36, “impairment of assets”, ias 38, “intangible assets”, ias 39, “financial instruments: Recognition and measurement”, ifRic 9, “Reassessment of Embedded

Derivatives”, ifRic 16, “hedges of Net investment in a foreign Operation”. The effective dates vary standard by standard but most are effective 1 January 2010.

(d) New and Revised IFRSs in issue but not yet effective

IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions”

amendments to ifRs 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative ifRs 7 fair value disclosures.

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.



131


4. Determination of fair values (continued)

(ii) Intangible assets

The fair value of the brand acquired in the superonline uluslararası Elektronik Bilgilendirme Telekomunikasyon ve haberlesme hizmetleri as business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned. The fair value of customer base acquired in the superonline business combination are valued using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

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 (build-out) 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 securitiesThe 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) DerivativesThe 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 liabilitiesfair 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 optionThe 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.



(d) New and Revised IFRSs in issue but not yet effective (continued)

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 2010further 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 com-binations,” 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 amend-ments 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 valuesa number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. fair values have been determined for measurement and/or disclosure purposes based on the following methods. when applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or lia-bility.

(i) Property, plant and equipmentThe fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, willingly. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.



133


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 group’s, or they may not be rated at all, however, policies are in place to review the paid-in capital and rating of counterparties periodically to ensure credit worthiness.

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 carr-ying 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 group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. at 31 December 2010, $1,324,604 guarantees were outstanding (31 December 2009: $1,102,672).

Liquidity risk liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation. Typically, the group ensures that it has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations.

Market risk market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The group buys and sells derivatives in order to manage market risks. all such transactions are carried at within the guidelines set by the group treasury management.

Currency riskThe 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 Be-larusian 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.

5. Financial risk managementThe group has exposure to the following risks from its use of financial instruments:

• credit risk • liquidity risk• market risk

This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. further quantitative disclosures are included throughout these con-solidated financial statements.

Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the group’s risk management framework.

The group’s risk management policies are established to identify and analyze the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities.

The group audit committee oversees how management monitors compliance with the group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group. The audit committee is assisted in its oversight role by internal audit.

The exchange rates were very volatile in 2009 but with a generally positive trend due to developments in the global markets as well as Turkish politics. The improved perception of global risk helped emerging market currencies appreciate in the second half of 2009. Tl appreciated aga-inst 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 compa-red to the exchange rates as at 31 December 2009. please refer to Note 29 for additional information on the group’s exposure to this turmoil.

Credit risk credit risk is the risk of a financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obli-gations, and arises principally from the group’s receivables from customers and investment securities.

management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The group may require collateral in respect of financial assets. also, the group may demand letters of guarantee from third parties related to certain projects or contracts. The group may also demand certain pledges from counterparties if necessary in return for the credit support it gives related to certain financings.in monitoring customer credit risk, customers are grouped according to whether they are an individual or legal entity, aging profile, maturity and existence of previous financial difficulties. Trade receivables and accrued service income are mainly related to the group’s subscribers. The group’s exposure to credit risk on trade receivables is influenced mainly by the individual payment characteristics of postpaid subscribers. The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables.



135


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5. Financial risk management (continued)

Market risk (continued)

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 group’s investments in its equity accounted investee fintur and its subsidiaries in ukraine, Republic of Belarus, azerbaijan and germany are not hedged with respect to the currency risk arising from the net assets as those net investments are considered to be long-term in nature.

Interest rate riskThe group’s exposure to interest rate risk is related to its financial assets and liabilities. The group’s financial liabilities mostly consist of flo-ating interest rate borrowings. The use of financial derivatives is governed by the group’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with the group’s risk management strategy. in this respect, the group has not entered into any type of derivative instrument in order to hedge interest rate risk as at 31 December 2010.

6. Operating segmentsThe group has three reportable segments, as described below, which are based on the dominant source and nature of the group’s risk and returns as well as the group’s internal reporting structure. These strategic segments offer the same types of services, however they are ma-naged 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.

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.



137


Operating segments (continued)

Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:

2010 2009 2008Revenues

Total revenue for reportable segments 5,697,025 5,567,399 6,651,438

Other revenue 691,469 550,584 655,196

Elimination of inter-segment revenue (406,401) (328,011) (336,226)

consolidated revenue 5,982,093 5,789,972 6,970,408

2010 2009 2008Adjusted EBITDATotal adjusted EBiTDa for reportable segments 1,782,985 1,801,082 2,410,443Other adjusted EBiTDa 213,655 144,989 181,671Elimination of inter-segment adjusted EBiTDa (39,268) (20,738) (11,833)consolidated adjusted EBiTDa 1,957,372 1,925,333 2,580,281finance income 277,130 329,550 442,099finance costs (102,662) (187,514) (136,769)Other income 14,668 978 14,136Other expense (64,233) (111,220) (17,990)share of profit of equity accounted investees 122,839 78,448 102,990Depreciation and amortization (757,354) (590,678) (679,927)consolidated profit before income tax 1,447,760 1,444,897 2,304,820

2010 2009 2008Finance incomeTotal finance income for reportable segments 256,933 307,825 673,762Other finance income 60,213 75,783 81,423 Elimination of inter-segment finance income (40,016) (54,058) (313,086)consolidated finance income 277,130 329,550 442,099

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139


6. Operating Segments (continued)

Geographical informationin 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 2010 2009 2008

Turkey 5,522,387 5,348,500 6,456,165ukraine 334,006 350,045 436,716Belarus 48,918 17,356 380Turkish Republic of Northern cyprus 76,782 74,071 77,147

5,982,093 5,789,972 6,970,408

2010 2009Non-current assetsTurkey 3,746,557 3,437,909ukraine 607,704 634,068Belarus 497,798 507,729Turkish Republic of Northern cyprus 65,222 66,656unallocated non-current assets 439,743 420,303

5,357,024 5,066,665

7. Revenue

2010 2009 2008communication fees 5,670,215 5,557,335 6,576,857 monthly fixed fees 75,420 42,493 65,081 commission fees on betting business 31,195 42,652 176,237call center revenues 25,199 17,426 16,604 simcard sales 22,900 22,855 28,189 Other revenues 157,164 107,211 107,440

5,982,093 5,789,972 6,970,408

8. Other ExpensesOther 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 com-pany 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.

Operating segments (continued)

2010 2009 2008Finance costsTotal finance costs for reportable segments 107,070 230,373 364,877 Other finance costs 66,143 32,975 76,006 Elimination of inter-segment finance costs (70,551) (75,834) (304,114)consolidated finance costs 102,662 187,514 136,769

2010 2009 2008Depreciation and amortizationTotal depreciation and amortization for reportable segments 675,936 528,882 638,373

Other depreciation and amortization 92,034 67,920 42,885

Elimination of inter-segment depreciation and amortization (10,616) (6,124) (1,331)

consolidated depreciation and amortization 757,354 590,678 679,927

2010 2009 2008Capital expenditureTotal capital expenditure for reportable segments 725,564 1,543,860 1,111,339Other capital expenditure 386,119 291,020 277,251Elimination of inter-segment capital expenditure (33,101) (65,606) (24,012)consolidated capital expenditure 1,078,582 1,769,274 1,364,578

2010 2009AssetsTotal assets for reportable segments 4,993,860 4,950,985Other assets 1,045,535 773,103 investments in equity accounted investees 399,622 383,490 Other unallocated assets 3,355,545 3,213,188 consolidated total assets 9,794,562 9,320,766

2010 2009LiabilitiesTotal liabilities for reportable segments 1,329,584 1,552,063Other liabilities 198,780 143,607 Other unallocated liabilities 2,032,601 1,728,895 consolidated total liabilities 3,560,965 3,424,565



141


11. Income tax expense

2010 2009 2008Current tax expense

current period (336,914) (353,389) (567,169)

Deferred tax benefit(336,914) (353,389) (567,169)

Origination and reversal of temporary differences 13,321 9,574 14,893Benefit of investment incentives recognized 1,187 1,892 2,518utilization of previously unrecognized tax losses 1,607 1,830 -

16,115 13,296 17,411Total income tax expense (320,799) (340,093) (549,758)

Income tax recognized directly in equity

2010 Before taxTax (expense)/

benefit Net of taxforeign currency translation differences (184,352) (754) (185,106)

Net change in fair value of available-for-sale securities (1,318) - (1,318)

(185,670) (754) (186,424)

2009

foreign currency translation differences 53,046 (1,091) 51,955

Net change in fair value of available-for-sale securities 1,197 - 1,197

54,243 (1,091) 53,152

2008

foreign currency translation differences (1,458,709) 343 (1,458,366)

Net change in fair value of available-for-sale securities (6,385) 1,025 (5,360)

(1,465,094) 1,368 (1,463,726)

9. Personnel expenses

2010 2009 2008

wages and salaries (*) 485,214 400,880 501,327

increase in employee benefits 10,879 7,884 8,083

contributions to defined contribution plans 5,243 3,694 4,182

501,336 412,458 513,592

(*) wages and salaries include compulsory social security contributions and bonuses.

10. Finance income and costs

Recognized in the statement of income:

2010 2009 2008interest income on bank deposits 196,418 224,160 359,408 late payment interest income 42,064 49,037 43,479 interest income on contracted receivables 12,345 31,178 - premium income on option contracts 12,147 10,549 14,655 interest income on available-for-sale financial assets 1,121 6,308 8,328Net gain on disposal of available-for-sale financial assets transferred from equity

1,318 2,084 6,494

Discount interest income 886 1,052 5,053

Other interest income 10,831 5,182 4,682 finance income 277,130 329,550 442,099

litigation late payment interest expense(258) (97,016) (30,501)

interest expense on financial liabilities measured at amortized cost (66,086) (76,763) (51,448)Option premium expense (4,988) (1,150) (4,970)Net foreign exchange loss (13,778) (576) (44,452)Other (17,552) (12,009) (5,398)finance cost (102,662) (187,514) (136,769)Net finance income 174,468 142,036 305,330

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 acc-rued 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, respec-tively. interest capitalization ratio is 17.6%, 5.6% and 26.1% for the year ended 31 December 2010, 2009 and 2008 respectively.



143


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22211. Income tax expense (continued)

Reconciliation of effective tax rateThe reported income tax expense for the years ended 31 December 2010, 2009 and 2008 are different than the amounts computed by app-lying the statutory tax rate to profit before income tax of the company, as shown in the following reconciliation:

2010 2009 2008profit for the year 1,126,961 1,104,804 1,755,062

Total income tax expense 320,799 340,093 549,758

profit before income tax 1,447,760 1,444,897 2,304,820

income tax using the company’s domestic tax rate 20% (289,552) 20% (288,979) 20% (460,964)

Effect of tax rates in foreign jurisdictions (1)% 12,367 (1)% 10,041 (1)% 17,909

Tax exempt income - 676 - 1,041 - 6,178

Non-deductible expenses 1% (19,300) 2% (29,444) 2% (42,206)

Tax incentives - 1,187 - 1,892 - 2,518

utilization of previously unrecognized tax losses - 1,607 - 1,830 - -

unrecognized deferred tax assets 3% (47,623) 3% (48,963) 4% (83,841)

Difference in effective tax rate of equity accounted investees

(2)% 22,893 (1)% 17,602 (1)% 22,937

Other - (3,054) - (5,113) 1% (12,289)

Total income tax expense (320,799) (340,093) (549,758)

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 pa-yable 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.

corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting tax exempt income.

in Turkey, the transfer pricing provisions have been stated under the article 13 of corporate Tax law with the heading of “disguised profit distribution via transfer pricing”. The general communiqué on disguised profit distribution via Transfer pricing, dated 18 November 2007 sets details about implementation.

if a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.



145


12. Property, plant and equipment (continued)

Leased assetsThe 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 constructionconstruction in progress mainly consisted of capital expenditures in gsm network of the company, astelit, kibris mobile Telekomunikasyon limited sirketi (“kibris Telekom”) and Belarusian Telecom and non-operational items as at 31 December 2010 and 2009.

as at 31 December 2010, a mortgage is placed on izmir building in favour of yapı ve kredi Bankası a.s., interbank a.s. and pamukbank T.a.s founded at 25 august 1992 amounting to $970 (31 December 2009: $996) and also on Davutpasa building in favour of pamukbank T.a.s foun-ded 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 assetsin april 1998, the company signed the license with the Turkish ministry, under which it was granted a gsm license, which is amortized over 25 years with a carrying amount of $364,349 as at 31 December 2010 (31 December 2009: $404,636). The amortization period of the license will end in 2023.

On 30 april 2009, the company signed a license agreement with icTa which provides authorization for providing imT 2000/umTs services and infrastructure. The company acquired the a type license providing the widest frequency band for a consideration of EuR 358,000 (excluding vaT). The license is effective for duration of 20 years starting from 30 april 2009. The carrying amount is $456,221 as at 31 December 2010 (31 December 2009: $493,982).

Impairment testing for long-lived assets The carrying amounts of the group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. if any such indication exists, then the asset’s recoverable amount is estimated. long-lived assets are tested for impairment as at 31 December 2010. as the recoverable amounts of the assets or cash-generating unit are greater than the value in use, no impairment is recognized. for the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets, cash generating units. as at 31 December 2010, impairment test for long-lived assets of astelit and a-Tel, is made on the assumption that astelit and a-Tel are the cash generating unit. as the recoverable amounts based on the value in use of cash generating units is higher than the carrying amount of cash-generating units of astelit and a-Tel, no impairment is recognized. The assumptions used in value in use calculation of astelit and a-Tel as at 31 December 2010 are:

Astelit: a 15.7% post-tax wacc rate and a 2.5% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. independent appraisal is obtained for fair value to determine recoverable amounts for astelit. The pre-tax rate for disclosure purposes is 18.9%

A-Tel: a 14.2% post-tax wacc rate and a 4.0% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. independent appraisal is obtained for fair value to determine recoverable amounts for a-Tel. The pre-tax rate for disclosure purposes is 14.2%.

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147


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l int

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ble

asse

ts1,

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ortiz

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n ex

pens

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n in

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ets

othe

r th

an g

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r th

e ye

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d 31

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r 20

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are

$24

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and

$245

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res

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ing

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ent l

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d re

cogn

ized

in d

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t cos

t of r

even

ues.

The

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irm

ent l

osse

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goo

dwill

for

the

year

end

ed 3

1 D

ecem

ber

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, 200

9 an

d 20

08 a

re $

23,4

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61,8

35 a

nd n

il

resp

ectiv

ely

reco

gniz

ed in

oth

er e

xpen

ses

in th

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nsol

idat

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tate

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ncom

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n in

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italiz

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the

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(31

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ntan

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(con

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Cost

Bala

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at

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nuar

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Tran

sfer

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rate

s

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nce

at

31 D

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ber

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gsm

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ses

986,

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(17,

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ts1,

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1

13. I

ntan

gibl

e as

sets

(con

tinue

d)



149


13. Intangible assets (continued)

Impairment testing for cash-generating unit containing goodwill (continued)Superonlineas at 31 December 2010, the aggregate carrying amount of goodwill allocated to superonline is $21,145. as the recoverable values based on the value in use of the cash generating units is estimated to be higher than carrying amount, no impairment was required for goodwill arising from the acquisition of superonline as at 31 December 2010. The calculation of the value in use was based on the following key assumptions:values assigned to EBiTDa for the periods forecasted include the expected synergies to be achieved from operating as a part of the group. values assigned to this key assumption reflect past experience except for efficiency improvements and synergies. management believes that any reasonably possible change in the key assumptions on which superonline recoverable amount is based would not cause superonline’s carrying amount to exceed its recoverable amount.

The projection period for the purposes of goodwill impairment testing is taken as 8 years between 1 January 2011 and 31 December 2018.cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 2.5%. This growth rate does not exceed the long-term average growth rate for the market in which superonline operates.

a post-tax discount rate wacc of 15.8% was applied in determining the recoverable amount of the unit. Discounting post-tax cash flows at a post-tax discount rate and discounting pre tax cash flows at pre-tax discount rate give same results, since the pre-tax discount rate is the post-tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows. for disclosure purposes pre-tax discount rate is 18.3%.

after the acquisition of superonline uluslararasi Elektronik Bilgilendirme Telekomunikasyon ve haberlesme hizmetleri as (“superonline uluslararasi”) in 2008, management merged superonline uluslararasi’s operations with its wholly owned subsidiary, Tellcom iletisim hiz-metleri 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 impa-irment 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.

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 goodwillgoodwill allocated to cash generating units and carrying values of all cash generating units are annually tested for impairment. The recove-rable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculation. independent appraisals were obtained for fair values to determine recoverable amounts for Belarusian Telecom and superonline as at 31 December 2010.

in calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management’s expectations of growth in EBiTDa, calculated as results from operating activities before depreciation and amortization and other income/(expenses), timing and quantum of future capital expenditure, long term growth rates, and the selection of discount rates to reflect the risks involved.

Belarusian Telecomas 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 ad-verse 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%.



151


14. Equity accounted investees (continued)The company’s investment in fintur and a-Tel amounts to $303,618 and $96,004 respectively as at 31 December 2010 (31 December 2009: $285,597 and $97,893).

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 azerbaijan’s 35.7% ownership in azercell Telecom B.m. (“azercell”), a 51% owned consoli-dated 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 non-controlling interest amounting to $715,126 is accounted under equity, in accordance with the group’s accounting policy.

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 Decem-ber 2010) and Tl 7,248 (equivalent to $4,688 as at 31 December 2010) as at 31 December 2010 and 2009, respectively.

15. Other investmentsNon-current investments:

2010 2009

Country of incorporation

Ownership (%)

Carrying Amount

Ownership (%)

Carrying Amount

aks Televizyon Reklamcilik ve filmcilik sanayi ve Ticaret as (“aks Tv”)

Turkey 6.24 21,905 6.24 22,492

T medya yatirim sanayi ve Ticaret as (“T-medya”)

Turkey 4.52 11,944 10.03 12,263

33,849 34,755

On 2 february 2010, sDif notified that lien was laid on “priority right to purchase back” regarding the shares of aks Tv of which 6.24% were held by Turktell Bilişim hizmetleri as. in case that, those shares are sold to third parties other than cukurova group, sDif has the right to exercise its priority right to purchase back and the purchase price will be determined within the context of the past agreements signed bet-ween previous owners and cukurova group.

On 19 July 2010, at T-medya’s general assembly meeting, it has been decided to increase the share capital of T-medya. however, the group did not participate in the capital contribution, accordingly the ownership of the group in T-medya decreased to 4.52%.

There is no active market available for investments aks Tv and T medya. The company measured these investments at cost. Based on the impairment analysis performed by considering the lower end limits of fair value calculations performed by an independent valuation firm, no impairment has been identified.

14. E

quity

acc

ount

ed in

vest

ees

The

gro

up’s

sha

re o

f pro

fit in

its

equi

ty a

ccou

nted

inve

stee

s fo

r th

e ye

ars

ende

d 31

Dec

embe

r 20

10, 2

009

and

2008

are

$12

2,83

9, $

78,4

48 a

nd $

102,

990,

res

pect

ivel

y. s

umm

ary

finan

cial

inf

orm

atio

n fo

r eq

uity

acc

ount

ed i

nves

tees

adj

uste

d fo

r th

e ac

coun

ting

polic

y di

ffere

nces

for

the

sam

e ev

ents

und

er s

imila

r ci

rcum

stan

ces

and

not

adju

sted

for

the

pe

rcen

tage

ow

ners

hip

held

by

the

gro

up is

as

follo

ws:

Owne

rshi

pCu

rren

t as

sets

Non

-cur

rent

as

sets

Tota

l as

sets

Curr

ent

liabi

litie

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on-c

urre

nt

liabi

litie

s

Non

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ntro

lling

in

tere

st

Eq

uity

at

trib

utab

le

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aren

t

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l lia

bilit

ies

and

equi

ty31

Dec

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r 20

10fi

ntur

(ass

ocia

te)

41.4

5%45

1,59

81,

578,

669

2,03

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9,78

581

1,74

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9,49

548

9,23

82,

030,

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a-T

el (j

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ture

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230,

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9

31 D

ecem

ber

2009

fint

ur (a

ssoc

iate

)41

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423,

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250,

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405,

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454,

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5

a-T

el (j

oint

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ture

)*50

.00%

46,0

6919

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424

2,59

36,

539

39,4

76-

196,

578

242,

593

469,

823

1,68

7,89

52,

157,

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256,

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843,

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405,

846

651,

453

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8

Reve

nues

Dire

ct c

ost

of r

even

ues

Prof

it/Lo

ss20

10

fint

ur1,

736,

576

(692

,757

)36

9,51

6

a-T

el63

,235

(56,

683)

2,92

3

1,79

9,81

1(7

49,4

40)

372,

439

2009

fint

ur1,

605,

022

(6

65,7

49)

31

0,94

5

a-T

el73

,897

(77,

625)

(8,5

29)

1,67

8,91

9(7

43,3

74)

302,

416

2008

fint

ur1,

823,

095

(739

,410

)36

4,54

5

a-T

el98

,129

(83,

128)

1,88

8

1,92

1,22

4(8

22,5

38)

366,

433

* fi

gure

s m

entio

ned

in th

e ab

ove

tabl

e in

clud

es fa

ir v

alue

adj

ustm

ents

that

aro

se d

urin

g ac

quis

ition

of a

-Tel

.



153


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 Amount Expiration Date

2006 3,207 2011

2007 10,785 2012

2008 78,819 2013

2009 35,784 2014

2010 48,197 2015 thereafter

176,792

as at 31 December 2010, tax losses which will be carried indefinitely are as follows:

Year Originated Amount

200415,910

2005 38,6212006 63,4082007 55,3822008 239,575

2009 44,625

2010 12,150

Recognized deferred tax assets and liabilitiesDeferred tax assets and liabilities as at 31 December 2010 and 2009 are attributable to the following:

Assets Liabilities Net2010 2009 2010 2009 2010 2009

property, plant & equipment and intangible assets 347 84 (152,193) (170,397) (151,846) (170,313)investment - - (15,096) (13,833) (15,096) (13,833)provisions 28,423 27,474 - - 28,423 27,474Trade and other payables 23,460 39,271 (16) (38) 23,444 39,233Other items 25,940 2,104 (1,094) (1,039) 24,846 1,065Tax assets / (liabilities) 78,170 68,933 (168,399) (185,307) (90,229) (116,374)Net off of tax (75,294) (66,875) 75,294 66,875 - -Net tax assets / (liabilities) 2,876 2,058 (93,105) (118,432) (90,229) (116,374)

15. Other investments (continued)Current investments:

2010 2009

Available-for-sale financial assets

government bonds, treasury bills - 62,398

Time deposits

Deposits maturing after 3 months or more 8,201 -

8,201 62,398

There are no government bonds as at 31 December 2010 (31 December 2009: $62,398).

as at 31 December 2010, ByR denominated time deposits maturing after 3 months or more amounting to $201 have stated interest rate of 10.5% and usD denominated time deposits maturing after 3 months or more amounting to $8,000 have stated interest rate of 7.0%

The group’s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 29.

16. Other non-current assets

2010 2009

vaT receivable 62,167 37,628

prepaid expenses 29,717 22,406

Deposits and guarantees given 9,560 9,597

advances given for fixed assets 4,654 -

prepayment for subscriber acquisition cost - 2,867

Others 1,179 2,622

107,277 75,120 subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum consideration.

17. Deferred tax assets and liabilitiesUnrecognized deferred tax liabilitiesat 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 assetsDeferred tax assets have not been recognized in respect of the following items:

2010 2009

Deductible temporary differences 67,086 39,186

Tax losses 152,776 140,493

Total unrecognized deferred tax assets 219,862 179,679

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.



155


18. Trade receivables and accrued income

2010 2009Receivables from subscribers 414,606 392,328 accrued service income 348,135 318,526 accounts and checks receivable 52,111 57,867 Receivables from Turk Telekomunikasyon as (“Turk Telekom”) 1,299 15,031

816,151 783,752

Trade receivables are shown net of allowance for doubtful debts amounting to $367,913 as at 31 December 2010 (31 December 2009: $268,157). The impairment loss recognized for the years ended 31 December 2010, 2009 and 2008 are $117,362, $75,379 and $65,678, respectively.

letters of guarantee received with respect to the accounts and checks receivable are amounted to $181,366 and $164,958 as at 31 December 2010 and 2009, respectively.

The accrued service income represents revenues accrued for subscriber calls (air-time) and contracted receivables related to handset cam-paigns, which have not been billed and will be billed within one year. Due to the volume of subscribers, there are different billing cycles; ac-cordingly, 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 intercon-nection agreement provides that Turk Telekom will pay to the company for Turk Telekom’s fixed-line subscribers’ calls to gsm subscribers.The group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 29.

19. Other current assets

2010 2009prepaid expenses 83,680 69,559 Receivables from icTa 25,938 -vaT receivable 25,702 48,760 Receivables from Tax Office 15,736 -

advances to suppliers 12,131 12,351

interest income accruals 8,311 17,727

Restricted cash 6,150 -Receivables from personnel 3,262 2,767 prepayment for subscriber acquisition cost 1,777 12,527 Other 15,053 11,726

197,740 175,417

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 aze-rinteltek 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.

17. D

efer

red

tax

asse

ts a

nd li

abili

ties

(con

tinue

d)m

ovem

ent i

n te

mpo

rary

diff

eren

ces

as a

t 31

Dec

embe

r 20

10 a

nd 2

009

Bala

nce

at

1 Ja

nuar

y 20

09

Reco

gniz

ed in

th

e st

atem

ent

of in

com

e

Reco

gniz

ed in

oth

er

com

preh

ensi

ve

inco

me

Effe

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157


21. Capital and reserves (continued)

Capital contributioncapital 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 reserveThe translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign and do-mestic operations from their functional currencies to presentation currency of usD.

Fair value reserveThe 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 reserveunder 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 liabilityThe reserve for non-controlling interest put option liability includes the difference between the put option liability granted to the non-controlling shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. subsequent changes in the fair value of the put option liability are also recognized in this reserve.

DividendsThe company has adopted a dividend policy, which is set out in its corporate governance guidance. as adopted, the company’s general divi-dend policy is to pay dividends to shareholders with due regard to trends in the company’s operating performance, financial condition and other factors.

The Board of Directors intends to distribute cash dividends in an amount of not less than 50% of the company’s lower of distributable profit based on the financial statements prepared in accordance with the accounting principles accepted by the cmB or statutory records, for each fiscal year starting with profits for fiscal year 2004. however, the payment of dividends will still be subject to cash flow requirements of the company, compliance with Turkish law and the approval of and amendment by the Board of Directors and the general assembly of share-holders.

20. Cash and cash equivalents

2010 2009cash in hand 7,957 157

cheques received 172 1,154

Banks 3,293,257 3,093,889

-Demand deposits 193,358 199,764

-Time deposits 3,099,899 2,894,125

Bonds and bills 777 286

cash and cash equivalents 3,302,163 3,095,486

Bank overdrafts (5,896) (5,244)

cash and cash equivalents in the statement of cash flows 3,296,267 3,090,242

as at 31 December 2010, cash and cash equivalents deposited in banks that are owned and/or controlled by cukurova group, a significant shareholder of the company is amounting to $90,000 (31 December 2009: nil).

as at 31 December 2010, average maturity of time deposits is 60 days (31 December 2009: 69 days)

The group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 29.

21. Capital and reserves

Share capitalas 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).



159


23. Other non-current liabilities

2010 2009consideration payable in relation to acquisition of BesT 78,402 75,319

financial liability in relation to put option 53,435 63,152

Deposits and guarantees taken from agents 16,310 13,951

payables to other suppliers 7,391 -

Other 5,294 2,569

160,832 154,991

consideration payable in relation to acquisition of Belarusian Telecom represents the present value of long-term deferred payment to the seller. payment of $100,000 is contingent on financial performance of Belarusian Telecom, and based on management’s estimations, expected to be paid during the first quarter of 2016. The present value of the contingent consideration is $78,402 as at 31 December 2010 (31 December 2009: $75,319).

Non-controlling shareholders in Belarusian Telecom were granted a put option, giving the shareholders the right to sell their entire stake to Beltel Telekomunikasyon hizmetleri as (“Beltel”) at fair value during a specified period. The group accounted for the present value of the estimated option redemption amount as a provision and derecognized the non-controlling interest. The company has estimated a value based on multiple approaches including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 august 2013, which is the exercise date of the put option, is then discounted to 31 December 2010. The difference between the present value of the estimated option redemption and derecognized non-controlling interests amounting to $32,382 has been presented as reserve for non-controlling interest put option under equity.

24. Loans and borrowingsThis note provides information about the contractual terms of the group’s interest-bearing loans and borrowings, which are measured at amortized cost. for more information about the group’s exposure to interest rate, foreign currency and liquidity risk and payment schedule for interest bearing loans, see Note 29.

2010 2009 Non-current liabilities

unsecured bank loans 1,366,207 793,210

secured bank loans 21,850 25,253

finance lease liabilities 19,259 2,716

1,407,316 821,179

Current liabilitiescurrent 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

21. Capital and reserves (continued)

Dividends (continued)On 10 march 2010, the company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2009 amounting to Tl 859,259 (equivalent to $555,795 and $573,451 as at 31 December 2010 and 29 april 2010, respectively), which represented 50% of distributable income. This represents a net cash dividend of full Tl 0.3905723 (equivalent to full $0.2526341 and $0.2606596 as at 31 Decem-ber 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 2009 2008

TL USD* TL USD* TL USD*

cash dividends 859,259 573,451 1,098,193 713,297 648,714 502,334

* usD equivalents of dividends are computed by using the central Bank of the Republic of Turkey’s Tl/usD exchange rate on 29 april 2010, 8 may 2009 and 25 april 2008 which are the dates that the general assembly of shareholders approved the dividend distribution.

in the Ordinary general assembly of shareholders meeting of inteltek held on 15 april 2010, it has been decided to distribute dividends amo-unting to Tl 55,980 (equivalent to $36,210 as at 31 December 2010). The dividend was paid on 29 april 2010.

22. Earnings per shareThe calculations of basic and diluted earnings per share as at 31 December 2010 were based on the profit attributable to ordinary sharehol-ders for the years ended 31 December 2010, 2009 and 2008 of $1,170,176, $1,093,992 and $1,836,824 respectively and a weighted average number of shares outstanding during the years ended 31 December 2010, 2009 and 2008 of 2,200,000,000 calculated as follows:

2010 2009 2008

Numerator:

Net profit for the period attributed to owners 1,170,176 1,093,992 1,836,824

Denominator:

weighted average number of shares 2,200,000,000 2,200,000,000 2,200,000,000

Basic and diluted earnings per share 0.53 0.50 0.83



161


24. Loans and borrowings (continued)

finance lease liabilities are payable as follows:

31 December 2010 31 December 2009

Future minimum lease payments Interest

Present value of minimum lease

paymentsFuture minimum lease payments Interest

Present value of minimum lease

payments

less than one year 5,199 763 4,436 2,768 239 2,529more than one year 24,107 4,848 19,259 2,815 99 2,716

29,306 5,611 23,695 5,583 338 5,245

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 group’s borrowings are subject to covenant clauses, whereby the group is required to meet certain key performance indicators. as of 31 December 2010, the group is in compliance with all borrowing covenants.

24. L

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163


27. Provisions (continued) Non-current provisions: (continued)

Legal

Obligations for dismantling, removing

and site restoration Other TotalBalance at 1 January 2010 95 5,114 467 5,676

provision made/used during the year 627 50,473 223 51,323

unwind of discount - 266 - 266

Effect of change in foreign exchange rate - (210) - (210)

Balance at 31 December 2010 722 55,643 690 57,055

legal provisions are set for the probable cash outflows related to legal disputes.

The group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability.

The above mentioned additions to obligations for dismantling, removing and site restoration during the period are non-cash transactions recorded against property, plant and equipment.

current provisions:

Legal Bonus TotalBalance at 1 January 2009 44,258 38,091 82,349provision made during the year 158,580 36,784 195,364provisions used during the year (40,018) (37,996) (78,014)unwind of discount - 235 235Effect of change in foreign exchange rate 5,098 135 5,233Balance at 31 December 2009 167,918 37,249 205,167

Legal Bonus TotalBalance at 1 January 2010 167,918 37,249 205,167provision made/(reversed) during the year 59,303 45,617 104,920provisions used during the year (115,004) (39,056) (154,060)unwind of discount 1,885 (53) 1,832Effect of change in foreign exchange rate (2,949) (1,098) (4,047)Balance at 31 December 2010 111,153 42,659 153,812

legal provisions are set for the probable cash outflows related to legal disputes. in Note 32, under legal proceedings section, detailed expla-nations 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.

25. Employee benefitsinternational accounting standard No. 19 (“ias 19”) “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. The liability for this retirement pay obligation is recorded in the accompanying con-solidated 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 2009Opening balance 27,776 26,717

provision set/reversed during the period 9,990 6,350

payments made during the period (8,114) (5,410)

unwind of discount 889 1,534

Effect of change in foreign exchange rate (799) (1,415)

closing balance 29,742 27,776

Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of income as incurred. The group incurred $5,243, $3,694 and $4,182 in relation to defined contribution retirement plan for the years ended 31 December 2010, 2009 and 2008 respectively.

Total charge for the employee termination benefits is included in the statement of income.

The liability is not funded, as there is no funding requirement.

26. Deferred incomeDeferred 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:

Legal

Obligations for dismantling, removing

and site restoration Other TotalBalance at 1 January 2009 - 4,490 - 4,490

provision made/used during the year 95 590 467 1,152

unwind of discount - - - -

Effect of change in foreign exchange rate - 34 - 34

Balance at 31 December 2009 95 5,114 467 5,676



165


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 non-current liabilities section (Note 23).

The group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 29.

29. Financial instruments

Credit risk Exposure to credit risk:The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was

Note 2010 2009

Due from related parties-non current 33 1,044 21,039

Other non-current assets* 16 15,258 11,996

available-for-sale financial assets 15 - 62,398

Due from related parties-current 33 88,897 108,843

Trade receivables and accrued income 18 851,175 783,752

Other current assets* 19 56,170 29,284

cash and cash equivalents** 20 3,294,206 3,095,329

Time deposits maturing in 3 months or more 15 8,201 -

4,314,951 4,112,641

* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.** cash on hand is excluded from cash and cash equivalents.The maximum exposure to credit risk for trade receivables arising from sales transactions including those classified as due from related par-ties at the reporting date by type of customer is:

2010 2009Receivable from subscribers 798,404 710,747

Receivables from distributors and other operators 71,044 85,949

Other 3,199 1,312

872,647 798,008

28. Trade and other payablesThe breakdown of trade and other payables as at 31 December 2010 and 2009 is as follows:

2010 2009

payables to other suppliers 414,911 354,057

Taxes and withholdings payable 221,872 215,375

payables to Ericsson companies 98,415 115,980

selling and marketing expense accrual 61,209 62,783

license fee accrual 53,474 38,289

Roaming expense accrual 21,032 61,783

icTa share accrual 17,319 18,543

interconnection payables 11,992 31,957

interconnection accrual 4,415 5,343

payables to kkTc Tax Office 789 1,046

consideration payable in relation to acquisition of Belarusian Telecom - 97,605

Other 46,548 36,001

951,976 1,038,762

Balances due to other suppliers are arising in the ordinary course of business.

Taxes and withholdings include vaT payable, special communications tax, frequency usage fees payable to icTa and personnel income taxes. payables to Ericsson companies comprise due to Ericsson Turkey, Ericsson sweden and Ericsson aB arising from fixed asset purchases, site preparation and other services.

Turkcell is one of parties of two different signed agreements with Ericsson Turkey, namely supply and maintenance and support service agre-ements. 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 Turk-cell 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.



167


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:

2010 2009

Not past due 738,697 746,545

1-30 days past due 74,665 38,406

1-3 months past due 56,004 47,031

3-12 months past due 71,750 81,310

1-5 years past due - 342

941,116 913,634

Impairment lossesThe 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:

2010 2009

Opening balance 268,157 196,637

impairment loss recognized 126,257 75,379

write-off (9,976) (7,978)

Effect of change in foreign exchange rate (7,630) 4,119

closing balance 376,808 268,157

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 2009

cash and cash equivalents 3,302,163 3,095,486

current liabilities 1,812,915 2,296,511

current cash debt coverage ratio 182% 135%

29. F

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inst

rum

ents

(con

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isk

(con

tinue

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are

the

cont

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ual m

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ities

of f

inan

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ing

estim

ated

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rest

pay

men

ts:

31 D

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ber

2010

31 D

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2009

Carr

ying

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ual

6 m

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169


29. Financial instruments (continued)Exposure to currency risk (continued)

The following significant exchange rates are applied during the period:

Average Rate Reporting Date Closing Rate

31 December 31 December 31 December 31 December

2010 2009 2010 2009

Tl/usD 1.5050 1.5495 1.5460 1.5057

Tl/EuR 1.9931 2.1527 2.0491 2.1603

Tl/sEk 0.2074 0.2016 0.2262 0.2082

ByR/usD 2,978.8 2,780.9 3,000.0 2,863.0

hRv/usD 7.9325 7.7975 7.9617 7.9850

Sensitivity analysisThe basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate fore-ign 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/(decrea-sed) 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 53,974 50,327

EuR (119) (7,558)

sEk - 10

10% weakening of the Tl, hRv, ByR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Profit or loss

2010 2009

usD (53,974) (50,327)

EuR 119 7,558

sEk - (10)

29. Financial instruments (continued)Exposure to currency risk

The group’s exposure to foreign currency risk based on notional amounts is as follows:

31 December 2009USD EUR SEK

Foreign currency denominated assetsDue from related parties-non current 20,605 - -

Other non-current assets 1 - -

Other investments - 201 -

Due from related parties-current 22,295 825 -

Trade receivables and accrued income 31,121 18,605 10

Other current assets 2,372 71 -

cash and cash equivalents 1,324,795 99,734 1

1,401,189 119,436 11

Foreign currency denominated liabilitiesloans and borrowings-non current (830,434) - -

Other non-current liabilities (189,105) - -

loans and borrowings-current (514,439) - -

Trade and other payables (366,279) (65,562) (722)

Due to related parties (4,199) (1,194) -

(1,904,456) (66,756) (722)

Net exposure (503,267) 52,680 (711)

31 December 2010USD EUR SEK

Foreign currency denominated assetsDue from related parties-non current - - -

Other non-current assets 1 - -

Other investments 8,000 - -

Due from related parties-current 17,969 148 -

Trade receivables and accrued income 33,566 20,482 -

Other current assets 4,579 1,086 10

cash and cash equivalents 1,494,743 52,842 1

1,558,858 74,558 11

Foreign currency denominated liabilitiesloans and borrowings-non current (1,405,907) (28,132) -

Other non-current liabilities (179,865) - -

loans and borrowings-current (350,172) (1,872) -

Trade and other payables (161,901) (42,849) -

Due to related parties (754) (808) -

(2,098,599) (73,661) -

Net exposure (539,741) 897 11



171


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 Equity

100 bp increase 100 bp decrease 100 bp increase 100 bp decrease

31 December 2010

variable rate instruments (9,262) 9,262

cash flow sensitivity (net) (9,262) 9,262

31 December 2009

variable rate instruments (4,912) 4,912 - -

cash flow sensitivity (net) (4,912) 4,912 - -

Fair values The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows:

31 December 2010 31 December 2009Carrying Fair Carrying Fair

Note Amount Value Amount ValueAssets carried at fair valueavailable for sale securities 15 - - 62,398 62,398

- - 62,398 62,398

Assets carried at amortized costDue from related parties-long term 33 1,044 1,044 21,039 21,039

Other non-current assets* 16 15,258 15,258 11,996 11,996

Due from related parties-short term 33 88,897 88,897 108,843 108,843

Trade receivables and accrued income*** 18 851,175 851,175 783,752 783,752

Other current assets* 19 56,170 56,170 29,284 29,284

cash and cash equivalents 20 3,302,163 3,302,163 3,095,486 3,095,486

Time deposits maturing after 3 months or more 15 8,201 8,201 - -

4,322,908 4,322,908 4,050,400 4,050,400

Liabilities carried at fair valueput option for Best acquisition 23 (53,435) (53,435) (63,152) (63,152)

(53,435) (53,435) (63,152) (63,152)

Liabilities carried at amortized costloans and borrowings-long term 24 (1,407,316) (1,407,316) (821,179) (821,179)

Bank overdrafts 20 (5,896) (5,896) (5,244) (5,244)

loans and borrowings-short term 24 (430,205) (430,205) (690,780) (690,780)

Trade and other payables** 28 (676,187) (676,187) (723,222) (723,222)

Due to related parties 33 (10,760) (10,760) (14,780) (14,780)

Deferred payments 23-28 (78,402) (78,402) (172,924) (172,924)

(2,608,766) (2,608,766) (2,428,129) (2,428,129)

* 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.

29. Financial instruments (continued)Interest rate risk

as at 31 December 2010 and 2009 the interest rate profile of the group’s interest-bearing financial instruments was:

31 December 2010 31 December 2009Effective

Carrying Effective

Carrying Interest interestNote Rate Amount rate Amount

Fixed rate instrumentsTime deposits 20 usD 3.5% 1,469,797 3.6% 1,425,695 EuR 3.9% 68,640 2.3% 146,183 Tl 9.1% 1,561,282 10.1% 1,318,614 Other 8.7% 180 17.6% 3,633available-for-sale securities 15 government bonds, treasury bills Tl - - 14.8% 62,109Time deposits maturing after 3 months or more

15

usD 7.0% 8,000 - - ByR 10.5% 201 - -finance lease obligations 24 usD 4.6% (2,733) 5.7% (5,245) EuR 3.4% (20,962) - -unsecured bank loans 24 usD fixed rate loans 4.2% (591,463) 3.7% (452,897)secured bank loans 24 usD fixed rate loans 5.2% (6,210) - - aZN fixed rate loans 22.5% (189) - -

Variable rate instrumentsavailable-for-sale securities 15 government bonds, treasury bills EuR - - 5.1% 289secured bank loans 24 ByR floating rate loans 10.9% (26,228) 12.3% (25,253)unsecured bank loans 24 usD floating rate loans 3.6% (1,175,049) 3.8% (1,026,479) EuR floating rate loans 7.8% (13,627) - - ByR floating rate loans - - 2.1% (2,085) aZN fixed rate loans 22.5% (316) - -

Sensitivity analysisFair 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).



173


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

Financial liability in relation to put

option TotalTotal gains or losses included in profit or loss for the period:

Net financing costs - (5,447) (5,447)

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)

30. Operating leasesThe 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:

2010 2009less than one year 18,024 5,804 Between one and five years 16,107 19,167 more than five years 7,221 8,453

41,352 33,424

31. Guarantees and purchase obligations as at 31 December 2010, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and purchase of sponsorship and advertisement services amount to $594,910 (31 December 2009: $245,088).

as at 31 December 2010, the group is contingently liable in respect of bank letters of guarantee obtained from banks given to customs authori-ties, 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).

29. Financial instruments (continued)Fair values (continued)Fair value hierarchyThe 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 Level 2 Level 3 Total31 December 2010financial liability in relation to put option - - 53,435 53,435

- - 53,435 53,435

Level 1 Level 2 Level 3 Total31 December 2009available-for sale financial assets 62,109 - 289 62,398

62,109 - 289 62,398

financial liability in relation to put option - - 63,152 63,152- - 63,152 63,152

Available-for sale financial assets

Financial liability in relation to put option

Total

Balance as at 1 January 2010 289 (63,152) (62,863)Total gains or losses: in profit or loss - (5,447) (5,447) in other comprehensive income (289) - (289)Total recognition in equity - 15,164 15,164Balance as at 31 December 2010 - (53,435) (53,435)

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.



175


32. Commitments and Contingencies (continued)

License Agreements (continued)

Turkcell (continued):

The company is entitled to any revenues collected during such period and the licensee’s term will be extended by the period of any sus-pension. The revised license may also be terminated upon a bankruptcy ruling against the company or for other license violations, such as operating outside of its allocated frequency ranges, and the penalties for such violations can include fines, loss of frequency rights, revocation of the license and confiscation of the network management centre, the gateway exchanges and central subscription system, including related technical equipment, immovables and installations essential for the operation of the network.

Based on the enacted law on 3 July 2005 with respect to the regulation of privatization, gross revenue description based for the calculation of treasury share and universal service fund has been changed. according to this new regulation, interest charges for late collections, and indirect taxes such as vaT, and other expenses are excluded from the description of gross revenue. calculation of gross revenue for treasury share and universal service fund according to the new regulation is effective after council of state’s approval on 10 march 2006.

3G LicenseOn 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 considera-tion. state property committee of the Republic of Belarus has fulfilled its obligations stated in sale and purchase agreement and submitted the related official documents in December 2009. according to the current legislation of the Republic of Belarus, the license extension will be made upon the expiration of its validity period. Therefore, Belarusian Telecom shall apply for extension in august 2018. in the consolidated financial statements, amortization charge is recorded on the assumption that the license will be extended.under its license, Belarusian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the date of the license until 2018. however, Belarusian Telecom’s period of execution in relation to coverage requirements are extended for three years starting from the acquisition date.

32. Commitments and Contingencies

License Agreements

Turkcell:On 27 april 1998, the company signed the license agreement with the Turkish ministry. in accordance with the license agreement, the com-pany was granted a 25 year gsm license for a license fee of $500,000. The license agreement permits the company to operate as a stand-alone 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 company’s gsm network, prohibitions on anti-competitive behaviour and compliance with national and international gsm standards. failure to meet any requirement in the renewed license, or the occurrence of extraordinary unforeseen circumstances, can also result in revocation of the renewed license, including the surrender of the gsm network without compensation, or limitation of the company’s rights thereunder, or could otherwise adversely affect the company’s regulatory status. certain conditions of the renewed license agreement include the following:

Coverage: The company had to attain geographical coverage of 50% and 90% of the population of Turkey with certain exceptions within three years and five years, respectively, of the license’s effective date.

Service offerings: The company must provide certain services in addition to general gsm services, including free emergency calls and tech-nical 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 unsuc-cessful calls cannot exceed 2%.

Tariffs: icTa sets the initial maximum tariffs in Tl and usD. Thereafter, the revised license provides that the icTa will adjust the maximum tariffs at most every nine months or, if necessary, more frequently. The company is free to set its own tariffs up to the maximum tariffs.

Rights of the ICTA, Suspension and Termination:The revised license is not transferable without the approval of the icTa. in addition, the license agreement gives the icTa certain monitoring rights and access to the company’s technical and financial information and allows for inspection rights, and gives certain rights to suspend operations under certain circumstances. also, the company is obliged to submit financial statements, contracts and investment plans to the icTa.

The icTa may suspend the company’s operations for a limited or an unlimited period if necessary for the purpose of public security and nati-onal defence. During period of suspension, the icTa may operate the company’s gsm network.



177




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.

Superonline:superonline was authorized to fixed Telephony, satellite communication service, infrastructure, wired and wireless internet service provider and mobile virtual Network Operator.

authorization By-law for Telecommunication services and infrastructure published in Official gazette on dated 26 august 2004 has been abrogated By-law on authorization for Electronic communications sector dated 28 may 2009. according to this abrogation, superonline’s “license” on fixed authority services, infrastructure Operating service, internet service provision, satellite communication service has been changed to “authority” on fixed authority services, infrastructure Operating service, internet service provision, satellite communication ser-vice, cable Broadcast service and superonline’s “license” on long Distance Traffic carrying services license has been changed to “authority” relevant to the fixed Telephony services.

in accordance with the new legislation issued by icTa, the infrastructure operator authorization right of superonline has become infinite. as a result, superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years.

Azerinteltek:azerinteltek, in which inteltek’s shareholding is 51%, was established on 19 January 2010, and authorized to organize, operate, manage and develop the fixed-odds and para-mutual sports betting games by the ministry of youth and sports of azerbaijan for a period of 10 years. The agreement signed with azeridmanservis which is founded by the ministry of youth and sports of azerbaijan is renewed with the same terms and conditions in accordance with the new legislation enforced in azerbaijan regarding the betting games based on sports on 30 september 2010.

azerinteltek officially commenced to conduct sports betting games on 18 January 2011.



Astelit:astelit owns two gsm activity licenses, one is for gsm–900, the other is for Dcs–1800. as at 31 December 2010, astelit owns twenty four gsm–900, Dcs 1800, D-amps and microwave Radiorelay frequency licenses which are regional or national. in addition to the above gsm licenses, astelit owns three licenses for local fixed line phone connection with wireless access using D-amps standard, one license for inter-national 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 Telecom-munications authority at their request. The ukrainian Telecommunications authority may suspend the operations of astelit for a limited or an unlimited period if necessary because of the expiration of licenses, upon mutual consent, or in case of violation of terms of radio frequencies use. if such a violation is determined, ukrainian Telecommunications authority notifies astelit of provisions violated and sets deadline for recovery. if the deadline is not met, licenses may be terminated.

Inteltek:inteltek signed a contract on 30 July 2002 which provides for the installation, support and operation of an on-line central betting system as well as maintenance and support for the provision of sport betting games. The central Betting system contract was scheduled to expire on 30 march 2008.

inteltek signed another contract with general Directorate of youth and sports (“gDys”) on 2 October 2003 which authorized inteltek to es-tablish 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 balan-ces, whenever the pool balance falls negative, creates an excess payment risk.



179



Interconnection Agreements (continued)

There are no minimum payment obligations under the interconnection agreements; however, failure to carry the counterparty’s traffic may expose the company to financial and other penalties or loss of interconnection privileges for its own traffic. On 10 february 2010, icTa decre-ased “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 Tele-kom 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 da-mages 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 termi-nation 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 termina-tion 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).



Interconnection AgreementsThe company has entered into interconnection agreements with a number of operators in Turkey and overseas including Turk Telekom, Tel-sim 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 operator’s request for use of and access to its network. all telecommunications operators in Turkey may be required to provide access to other operators on the same terms and qualifications provided to their shareholders, subsidiaries and affiliates.

in accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) were obliged to renew their inter-connection agreements within two months following the issuance of the Regulation. as a result of intervention by the icTa, the company en-tered into supplemental agreements with Turk Telekom on 10 November 2003, Telsim on 21 November 2003, and globalstar on 11 December 2003, with amended tariffs and tariff adoption procedures. The interconnection agreement with avea (formerly TT&Tim) was last renewed on 20 January 2006. On 24 may 2006, shares of Telsim were transferred to vodafone and a new interconnection agreement was signed between the company and vodafone at the end of July 2006.

On 21 february 2005, superonline and milleni.com gmbh have signed an agreement to provide telecommunications services to each other whereby milleni.com gmbh may convey calls to the company’s switch and the company may convey calls to milleni.com gmbh’s switch, in both cases, for onward transmission to their destinations.

in addition, the icTa has required operators holding significant market power, as well as Turk Telekom, to share certain facilities with other operators under certain conditions and to provide co-location on their premises for the equipment of other operators at a reasonable price. The icTa has also required telecommunications operators to provide number portability, which means allowing users to keep the same phone numbers even after they switch from one network to another starting from 9 November 2008.

under a typical interconnection agreement, each party agrees, among other things to permit the interconnection of its network with the company’s network to enable calls to be transmitted to, and received from, the gsm system operated by each party in accordance with tech-nical 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 company’s interconnection agreements usually provide that each party will assume responsibility for the safe operation of its own net-work. Each party is also typically responsible for ensuring that its network does not endanger the safety or health of employees, contractors, agents or customers of the other party or damage interfere with or cause any deterioration in the operation of the other party’s network.

interconnection agreements also specify the amount of the payments that each party will make to the other for traffic originated on one network but switched to the other. These payments vary by contract, and in some cases, may require the company to pay the counterparty less, the same amount, or a greater amount per minute, for traffic originating on the company’s network but switching to the counterparty’s network, than it receives for a similar call originating on another network and switched to the company’s network.



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Legal Proceedings (continued)

Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing ActivitiesThe 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 rejec-ted the company’s suspension of execution request. The company objected to the decision. The lawsuit is still pending.

avea, depending on the competition Board decision, initiated a lawsuit against the company claiming a compensation from the company for its damages amounting to Tl 1,000 (equivalent to $647 as at 31 December 2010), with reservation of further claims, on the ground that the company violated the competition. The lawsuit is still pending.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer-tain, thus, no provision is recognised in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).

Dispute on National Roaming AgreementThe company conducted roaming negotiations in 2001 with İs-Tim Telekomunikasyon hizmetleri a.s. (“İs-Tim”) which is a gsm operator, performing since march 2001. On 19 October 2001, upon unsuccessful negotiations, icTa granted time for the company until 15 November 2005 to sign the roaming agreement with the determined conditions and requested parties to come to an agreement until 15 November 2001. The company initiated a lawsuit on the ground that icTa has no power of intervention; its proposals are impossible from technical aspects and unacceptable from economic reasons. council of state gave a decision on nonneccessity of a new decision on the ground that action which is subjected to the lawsuit is cancelled by another state council decision. This decision appealed by icTa. council of state, plenary session of the chamber for administrative Divisions decided to uphold the court decision.

in a letter dated 14 march 2002, the icTa subjected is-Tim’s request for national roaming to the condition that it is reasonable, economically proportional and technically possible. Nevertheless, the icTa declared that the company is under an obligation to enter a national roaming agreement with is-Tim within a 30 day period. The company initiated a lawsuit against icTa. On 14 march 2006, council of state decided to cancel the process dated 14 march 2002 but rejected the company’s request for cancellation of the regulation on procedures and policies with respect to national roaming. icTa appealed the decision. plenary session of administrative law Divisions of the council of state has decided to approve the decision of the council of state.

The icTa decided that the company has not complied with its responsibility under Turkish regulations to provide national roaming and fined the company by nominal amount of approximately Tl 21,822 (equivalent to $14,115 as at 31 December 2010). On 7 april 2004, the company made the related payment with its accrued interest. On 27 may 2004, the company filed a lawsuit. On 3 January 2005, with respect to the council of state’s injunction, icTa paid back nominal amount of Tl 21,822 (equivalent to $14,115 as at 31 December 2010).

On 13 December 2005, council of state decided the cancellation of the administrative fine but rejected the company’s request for cancellation of the regulation on procedures and policies with respect to national roaming. icTa appealed the decision. The appeal process is still pending. plenary session of administrative law Divisions of the council of state has decided to approve the decision of the council of state. On 22 July 2010, the company initiated a lawsuit against icTa for the compensation of Tl 7,111 (equivalent to $4,600 as at 31 December 2010), the total amount of the damage of the company accrued interest between the period when the company made the payment and icTa returned the same to the company as the result of the stay of order decision.


Dispute on Turk Telekom Transmission Lines LeasesEffective 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 Telekom’s interest calculation and, accordingly, obtained an injunction from the commercial court to prevent Turk Telekom from collecting any amounts relating to this interest charge. also, the company initiated a lawsuit against Turk Telekom on the legality of such interest. On 25 December 2008, the court rejected the case. The company appealed the decision. The supreme court rejected the appeal. The company applied for the correction of the decision. The supreme court rejected the correction of the decision request and the decision is finalised.

Based on the management opinion, the company accrued provision of Tl 91,864 (equivalent to $59,420 as at 31 December 2010) and the company netted off the whole amount from the receivables from Turk Telekom as at 31 December 2010.

additionally, a lawsuit is commenced against Turk Telekom on 28 October 2010 to collect the receivable amounting to principal of Tl 23,378 (equivalent to $15,122 as at 31 December 2010), overdue interest of Tl 3,092 (equivalent to $2,000 as at 31 December 2010) and delay fee of Tl 1,925 (equivalent to $1,245 as at 31 December 2010), with the contractual default interest until payment date on the ground that the above mentioned exercise is contrary to the term of the contract which is effective for the year 2000, Turk Telekom has already collected the whole amount which is subjected to the related court decision as of 31 October 2009 and Turk Telekom collected additional receivable.

Dispute regarding the Fine Applied by the Competition BoardThe 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 infringe-ments. The company initiated a lawsuit before council of state for the injunction and cancellation of the decision. On 15 November 2005, the court cancelled the competition Board’s decision.

after the cancellation of the competition Board’s decision, the competition Board has given the same decision again on 29 December 2005. On 10 march 2006, the company initiated a lawsuit before council of state for the injunction and cancellation of the competition Board’s decision dated 29 December 2005. On 13 may 2008, council of state dismissed the lawsuit. The company appealed the decision. appeal process is still pending.

Based on the decision of competition Board, ankara Tax Office requested the company to pay Tl 6,973 (equivalent to $4,510 as at 31 December 2010) through the payment order dated 4 august 2006. On 25 september 2006, the company made the related payment and initiated a lawsuit for the cancellation of this payment order. The court dismissed the lawsuit, and the company appealed this decision. On 17 march 2009, council of state reversed the judgement of the local court. local court decided in line with the decision of council of state. On 18 December 2009, the court rejected the case and the company also appealed this decision. council of state reversed the judgement of the instance court. The lawsuit is still pending.




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Dispute on Deposits at BanksThe 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 rejec-tion 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 court’s decision in favour of the defendant. The court abided by the decision of the supreme court of appeals. The lawsuit is pending. The company has not reflected any amount in connection with this matter in its consolidated financial statements prepared as at and for the year ended 31 December 2010.

Dispute on Special Communication Taxation Regarding Prepaid Card SalesTax 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 amo-unting 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 on National Roaming Agreement (continued)


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 uncer-tain, 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 CompanyOn 7 april 2010, icTa decided to impose administrative fine to the company amounting to Tl 4,008 (equivalent to $2,592 as at 31 Decem-ber 2010) for misinforming the authority and Tl 374 (equivalent to $242 as at 31 December 2010) for making some subscribers suffer. The payment was made within 1 month following the notification of the decision of the icTa. Therefore, 25% discount was applied and Tl 3,287 (equivalent to $2,126 as at 31 December 2010) is paid in total as the administrative fine on 9 June 2010. The company filed two lawsuits on 9 July 2010 for the suspension of execution and cancellation of the aforementioned decision. The court rejected the company’s suspension of execution requests and the company objected to the decisions but the objections are rejected. The lawsuits are still pending.

since it is not virtually certain that an inflow of economic benefits will arise, no contingent asset is recognized in the consolidated financial statements as at and for the year ended 31 December 2010.

Dispute regarding the Fine applied by ICTA on tariffs above upper limitsOn 15 October 2009, icTa decided to initiate an investigation stating that the company applied tariffs above upper limits announced by icTa. On 21 December 2009, the company initiated a lawsuit for the cancellation of icTa’s decision. The case is still pending.

On 21 april 2010, icTa decided to impose administrative fine to the company amounting to Tl 53,467 (equivalent to $34,584 as at 31 De-cember 2010) by claiming that the company applied tariffs above the upper limits of gsm-gsm in gsm upper limits Table approved by icTa. The payment was made within 1 month following the notification of the decision of the icTa. Therefore, 25% discount was applied and Tl 40,100 (equivalent to $25,938 as at 31 December 2010) is paid as the administrative fine on 3 June 2010. The company filed a lawsuit on 28 June 2010, for the cancellation of the aforementioned decision. The court overruled the suspension of execution claim, the company objected to the decision and the court accepted this objection and decided for the suspension of the execution. accordingly, icTa paid back Tl 40,100 (equivalent to $25,938 as at 31 December 2010) on 27 January 2011. an income accrual of the same amount has been recognized in the consolidated financial statements as of 31 December 2010 (31 December 2009: None).

amount to be reimbursed to the subscribers is calculated as Tl 46,228 (equivalent to $29,902 as at 31 December 2010) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010.



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Dispute with Spor TotoOn 9 November 2005, spor Toto sent a notification letter to inteltek claiming that inteltek is obliged to pay nominal amount of Tl 3,292 (equi-valent 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 Decem-ber 2010) and also rejected the demand that the reconciliation period should be six-month independent periods. gDys appealed the court’s decision. supreme court rejected the appeal request of gDys. following the supreme court’s decision, gDys applied for the correction of the decision. gDys’s correction of decision request was rejected by the court and the decision was finalized.

Based on the decision of supreme court, inteltek reversed the previously accrued principal amount of Tl 3,292 (equivalent to $2,129 as at 31 December 2010) and its overdue interest accrual amount of Tl 1,894 (equivalent to $1,225 as at 31 December 2010). furthermore, inteltek reclaimed Tl 2,345 (equivalent to $1,517 as at 31 December 2010) principal and Tl 977 (equivalent to $632 as at 31 December 2010) accrued interest which was paid in the 1st and 3rd reconciliation periods. inteltek has initiated a lawsuit on 21 february 2008 to collect this amount. On 19 march 2009, the court decided in favour of inteltek. spor Toto appealed the decision. The supreme court ruled to reverse the judgement of the local court. inteltek applied for the correction of the decision. The correction of the decision process is still pending.


Dispute on over assessment following the settlement on VAT fine pertaining to International Roaming AgreementsOn 9 february 2009, the company initiated a lawsuit claiming cancellation of interest charges amounting Tl 6,609 (equivalent to $4,275 as at 31 December 2010) which are erroneously calculated after settlement with the Tax Office regarding the vaT and tax penalties accrued due to roaming agreement for years 2000, 2001 and 2002. The court rejected the company’s injunction request. The company objected to the decision. The court rejected the objection of the company. The lawsuit is pending.




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.

Carrying International Voice Trafficin 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 administ-rative fine on 9 april 2004. On 5 November 2004, council of state gave a decision, which is served to the company, for stay of execution. with respect to that decision, icTa paid back Tl 18,000 (equivalent to $11,643 as at 31 December 2010) on 26 January 2005 and deduct a sum of Tl 13,731 (equivalent to $8,882 as at 31 December 2010) from the December frequency usage fee payment. On 26 December 2006, council of state decided to accept the company’s claim and annul the decision of and the fine imposed by the icTa. icTa appealed the decision. appeal 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 (equi-valent 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 De-cember 2010) and accrued interest amounting to a nominal amount of Tl 84,567 (equivalent to $54,701 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2010.

in deciding upon the amount of the provision taking, the company has taken the Turkish law into consideration, not the amounts requested by Turk Telekom and reflected in the expert report. specifically, under Turkish law, a person who is alleging that he has suffered a loss cannot claim the whole of his possible revenues but only the damages may only be sought in respect of lost profit. for this reason, the provision set by the company is calculated by taking Turk Telekom’s estimated loss of profit into consideration rather than the amounts requested by Turk Telekom and amounts reflected in the expert report. moreover, the company obtained an independent opinion dated 23 October 2007 which supports the management opinion from an expert who is not designated by the court.

On 5 November 2009, the court rejected the Turk Telekom’s request amounting to Tl 171,704 (equivalent to $111,063 as at 31 December 2010) and accepted the request amounting to Tl 279,227 (equivalent to $180,613 as at 31 December 2010). The company appealed the de-cision. also Turk Telekom appealed the decision. appeal process is still pending.



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Dispute on Mobile Number PortabilityOn 29 march 2007, the company initiated a lawsuit against the icTa claiming stay of order for and the annulment of the Regulation on mo-bile 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 CostsOn 8 april 2009, Turk Telekom initiated a lawsuit for damages against the company claiming that the company is violating the legislation by applying higher call termination fees to operators than the fees applied to the company’s subscribers for on-net calls and requesting for the time being Tl 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from 2001 and Tl 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from the lawsuit date for the sustained loss as a result of decreasing traffic volume of Turk Telekom and subscriber lost derived from this action. The case is still pending.


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 notwith-standing icTa’s decision regarding, on-net tariffs of the company cannot be under the interconnection fees which are applied by the company to other operators and demanded Tl 1,000 (equivalent to $647 as at 31 December 2010) material compensation by reserving its right for surpluses. The lawsuit is pending.

The company has accrued provision amounting to Tl 1,000 (equivalent to $647 as at 31 December 2010) which is the total amount of the legal case.

Dispute on CampaignsOn 21 may 2008, icTa decided that the company damaged the subscribers’ financial interests related to the campaigns in which free minutes or counters are given and requested Tl 32,088 (equivalent to $20,755 as at 31 December 2010). On 10 July 2008, the company filed a lawsuit for the injunction and cancellation of the icTa’s decision. The lawsuit is still pending. however, the company benefited from the early payment option and deserved a 25% discount and paid Tl 24,066 (equivalent to $15,567 as at 31 December 2010) on 1 august 2008. 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 Iranian GSM tender processThe company has initiated an arbitration case against islamic Republic of iran for not abiding by the provisions of the agreement on Recipro-cal 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 shareholder’s agreement and seeking compensation for damages for the aforementioned breach. The arbitration pro-cess is still pending.

Dispute on Turk Telekom Transmission TariffsOn 19 January 2007, the company initiated a lawsuit against Turk Telekom claiming that Turk Telekom charged transmission on erroneous tariffs between 1 June 2004 and 1 July 2005. The company requested a nominal amount of Tl 8,136 (equivalent to $5,263 as at 31 December 2010) including interest. The expert report given to court is in favor of the company. The court ruled to obtain supplementary expert report. The case is still pending.


Dispute on the decision of CMB regarding Audit Committee MemberOn 21 July 2006, alexey khudyakov was appointed to the audit committee as an observer member. On 26 January 2007 the cmB informed the company that alexey khudyakov’s current status, as an observer member on the audit committee does not satisfy the requirements under article 25 “committees Responsible for auditing” of the cmB. The cmB has stated that steps must be taken urgently in order to comply with article 25. On 21 march 2007, the company commenced a lawsuit to suspend the execution and to annul the decision of the cmB.

On 18 January 2008, ankara 14th administrative court rejected the case. The company appealed the decision with an injunction request. however council of state rejected the appeal request. The company applied for the correction of the decision. The correction of the decision 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 company’s suspension request and the company’s objection to this decision has been rejected. The case is still pending.



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Dispute on 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 ar-ticle, 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 contri-bution to the expenses of authority pursuant to article of 8 and 9 of the concession agreement dated march 10, 2006. icTa filed lawsuits for cancellation of these final awards. Both cases are still pending.

Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006Turkish Treasury, through a letter which is based on the Report of the Treasury controller’s Board following the examinations covering the period between 1 June 2004 and 9 march 2006, requested additional treasury share payment regarding the mentioned period. The company initiated a lawsuit before icc on 18 December 2009 in order to obtain a declaratory judgment on the company is not obliged to pay Tl 3,320 (equivalent to $2,147 as at 31 December 2010) of the requested amount and treasury share over the exchange differences arising from ro-aming revenue. The case is still pending.

icTa, through a letter dated 14 may 2010 which is based on the Report of the Treasury controller’s Board following the examinations covering the period between 1 June 2004 to 9 march 2006, requested additional treasury share payment of Tl 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary fine of Tl 12,171 (equivalent to $7,873 as at 31 December 2010) on the ground that the treasury share and treasury share over the exchange differences arising from roaming revenue are not paid entirely. On 26 may 2010, the company, in order to provide the suspension of the payment, requested a preliminary injunction from the civil court of first instance based on the grounds that the payment of additional treasury share payment of Tl 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary fine of Tl 12,171 (equivalent to $7,873 as at 31 December 2010) is a pending case before icc arbitration court. The civil court of first instance accepted the company’s request. icTa raised an objection to the preliminary injunction and this objection has been rejected.icTa, through a letter dated 19 October 2010 which is based on the Report of the Treasury controller’s Board following the examinations covering the period between 10 march 2010 and 31 December 2010, requested treasury share of Tl 72,527 (equivalent to $46,913 as at 31 December 2010) and conventional penalty of Tl 205,594 (equivalent to $132,984 as at 31 December 2010). The company paid Tl 1,535 (equivalent to $993 as at 31 December 2010) of the aforementioned amount.

On 13 December 2010, the company, in order to provide the suspension of the payment, requested a preliminary injunction from the civil court of first instance based on the grounds that the payment of treasury share of Tl 70,992 (equivalent to $45,920 as at 31 December 2010) and conventional penalty of Tl 205,594 (equivalent to $132,984 as at 31 December 2010) is a pending case before icc arbitration court. The court accepted the company’s request. icTa’s objection against the decision has been rejected.



Dispute on Payment Request of Savings Deposits Insurance Fund On 26 July 2007, savings Deposits insurance fund (“sDif”) requested Tl 15,149 (equivalent to $9,799 as at 31 December 2010) to be paid in one month period on the ground that the stated amount is recorded as receivable from the company in the accounting records of Telsim, which is taken over by sDif. On 20 september 2007, the company filed a lawsuit for the injunction and cancellation of the sDif’s request. council of state accepted the injunction request of the company. On 19 January 2010, the court accepted the company’s claim and cancelled the aforementioned request of sDif. sDif appealed the decision. appeal process is still pending.

sDif issued payment orders for the above mentioned amount and, on 19 October 2007, the company initiated a lawsuit for the cancellation of the payment request of sDif. On 6 february 2008, the court accepted the company’s injunction request. On 29 march 2010, the court decided on the cancellation of the payment order. sDif appealed such decision. The appeal process is pending.


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 De-cember 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.



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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 investiga-tion 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 of Astelit with its Distributorastelit and one of its distributors had an agreement for the sale of astelit’s inventory to third parties. under this agreement, the sale of pro-ducts 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 coun-terclaim of astelit. subsequently, The kiev Economic court of appeal repealed the decision of the court of first instance and dismissed the claim of astelit and sustained the claim of the distributor on recovery of hRv 106,443 (equivalent to $13,369 as at 31 December 2010). The resolution of The higher Economic court of ukraine dated 20 October 2009 remained unaltered the appellate court’s ruling. Thereafter, astelit management has filed a lawsuit against this conclusion in the supreme court of ukraine, which is the supreme and final degree of jurisdiction against the resolution of the higher Economic court of ukraine.

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 ex-pertise 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 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 uncer-tain, 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

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 subs-cribers 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 with the Ministry of Industry and Trade ministry of industry and Trade notified the company that the company is not informing the subscribers properly before service subscriptions and content sales and charged administrative fine of Tl 68,201 (equivalent to $44,114 as at 31 December 2010). On 24 august 2009, the company initiated a lawsuit for the cancellation of the payment order and related decision of the ministry of industry and Trade. The court rejected the company’s injunction request. The court cancelled the payment order on 8 June 2010. ministry of industry and Trade appealed the decision. appeal process is still pending.

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.




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Lawsuit initiated by Mep Iletisim ASOn 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.


Investigation of ICTA on the wrongful declarations of the Company and the Company’s refrain from signing the minutesicTa 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.


Decisions of ICTA on tariff plansOn 15 November 2009, icTa notified that the company has changed the conditions of a tariff plan after the launch and shall reimburse overc-harged amounts to the subscribers. On 1 february 2010, the company initiated a lawsuit for the cancellation of the decision of icTa. The court rejected the company’s stay of execution request. The case is still pending.

amount to be reimbursed to the subscribers is calculated as Tl 15,660 (equivalent to $10,129 as at 31 December 2010) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010.

On 17 may 2010, icTa decided to impose Tl 802 (equivalent to $519 as at 31 December 2010) administrative fine against Turkcell on the ground that one of the tariff option of Turkcell contradicts the board decision which sets lower limit to the on-net tariffs. The payment was made within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 601 (equivalent to $389 as at 31 December 2010) as fine on 21 June 2010. Besides, the company filed a lawsuit on 21 July 2010 in request for the cancellation of fine. The court overruled the suspension of execution request and the company objected to this decision. The court rejected the objection request of the company. The lawsuit is still pending.



Dispute of Astelit related to Withholding Tax on Interest Expenseukranian Tax administration sent a tax notice to astelit stating that witholding tax rate on interest expense for the loan agrrement with Euro-asia 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 Decem-ber 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 ServicesOn 21 October 2009, based on the Tax investigation Reports dated 2 October 2009, presidency of large Taxpayers Office, audit group ma-nagement notified the company that vaT and scT should be calculated on charges paid to international gsm operators for the calls initiated by the company’s subscribers abroad and collect from the subscribers and requested Tl 255,298 (equivalent to $165,135 as at 31 December 2010) for the period from april 2005 to July 2009, and for an interest to be calculated until the payment date. The company filed a lawsuit for the cancellation of the aforementioned request. Based on the settlement between the company and ministry of finance, the company has withdrawn from the lawsuits.

as a result of the settlement made with ministry of finance settlement commission on 1 June 2010, penalty fee has been settled at Tl 20,163 (equivalent to $13,042 as at 31 December 2010) and late payment interest expense was settled at Tl 15,998 (equivalent to $10,348 as at 31 December 2010) and related payment was made on 27 July 2010.

Dispute on VAT and SCT regarding Shell & Turcas Petrol A.S CampaignTurkcell and shell&Turcas petrol a.s. signed an agreement on 27 November 2007 where eligible subscribers can get free counters and mi-nutes 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.



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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 De-cember 2010) for making some subscribers suffer and Tl 2,005 (equivalent to $ 1,297 as at 31 December 2010) for misinforming the autho-rity. since the administrative fine was paid within 1 month following the notification of the decision of icTa, 25% discount was applied and provision totalling to Tl 7,430 (equivalent to $4,806 as at 31 December 2010) is set in the consolidated financial statements as at and for the year ended 31 December 2010. The company filed two lawsuits on 21 march 2011 for the suspension of execution and cancellation of the administrative fine.

Investigation on breaching confidentiality of personal data and relevant legislation which is launched by ICTAicTa 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 agreementBased 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 sti-pulated 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)



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 de-cided to apply administrative penalty amounted Tl 26,483 (equivalent to $17,130 as at 31 December 2010) to the company on 22 september 2010. administrative fine was paid within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 19,862 (equivalent to $12,847 as at 31 December 2010) is paid as a fine on 7 December 2010. The company initiated a lawsuit to suspend the execution of administrative fine and cancellation, on 10 December 2010. The court overruled the suspension of execution request and the company objected to this decision. On 17 february 2011, the court decided to suspend the execution. On 1 march 2011, the court accepted the company’s request for full refund of the amount paid to icTa. icTa reimbursed the related amount on 30 march 2011.

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 subs-cribers was made in february 2011.

Decision of ICTA regarding telephone directory and unknown numbers serviceOn 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 softwa-re, hardware, infrastructure and equipment which make available the telephone directory and unknown numbers service to the ownership of the company from its wholly owned subsidiary on the ground that ownership of the whole system related to telephone directory and unknown number service is not pertain to the company. administrative fine was paid within 1 month following the notification of the decision of icTa. Therefore, 25% discount was applied and Tl 301 (equivalent to $195 as at 31 December 2010) as fine on 7 september 2010.

The company filed a lawsuit on 22 september 2010 for the suspension and cancellation of the execution. The court overruled the suspension of execution request of the company and the company objected to this decision however the court rejected the company’s objection. The lawsuit is still pending.


Investigation of the Competition Board regarding applications to the distributorsOn 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 investigati-on, the company submitted its statement of defence. The investigation took place as an on-site examination and inspection in march 2010. The competition Board decided to examine the claims of vodafone regarding this investigation within the context of this file. Besides, the company’s action concerning abuse of dominant position in the wholesale or retail market of sim card, unit card, digital unit, activation and other subscriber services by obstructing the activity of avea is examined in the context of this investigation and avea is accepted as a comp-lainant. 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 additi-onal written Opinion within due date.



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Dispute with T-Medyaarbitration 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 company’s billing and pricing applications in order to investigate the billing and pricing problems arising from the international roaming campaigns within 2009 and 2010. icTa requested some information about campaigns and the company submitted its explanations on the issue to icTa.

Investigation initiated by ICTA regarding Number Portability On 26 January 2011 icTa decided to initiate an investigation against the company regarding refusal of number portability requests and reason of such refusal. icTa carried out an inspection in the company between 28 february and 2 march 2011.

Investigation initiated by ICTA upon complaint of subscriber of data tariffs’ chargingOn 9 march 2011, icTa decided to initiate an investigation against the company upon a complaint of a consumer regarding the company’s miss charging about data tariffs. an inspection was carried between 30 march and 1 april in the company by icTa.

Investigation initiated by ICTA regarding the Company’s compatibility to ICTA’s regulations and decisionsOn 26 January 2011, icTa decided to initiate an investigation against the company about its compatibility of “Terms and conditions about updating subscribers Records and subscription processes of End users” and icTa’s decision about limitation of numbers of the subscriptions. On 23 march 2011, icTa carried out an inspection in the company.

Dispute with Turk Telekom with respect to numbers beginning with 444The company filed a lawsuit on 25 april 2008 against Türk Telekom to collect Tl 1,777 (equivalent to $1,149 as at 31 December 2010) inc-luding principal, overdue interest and delay fee which has been collected by Turk Telekom within the period of march 2007-february 2008 by pricing the calls started from the company’s network and terminated at the numbers in form of “444 xx xx” which are assigned to the company’s subscribers in accordance with special service call termination tariff. The court decided in favor of the company on 23 march 2011. The court has not prepared the written decision yet.

Investigation of ICTA related with application of an article of the Regulation on Consumer Rights in the Electronic Communications SectorThe icTa decided to initiate an investigation related with application of an article of the Regulation on consumer Rights in the Electronic com-munications 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.



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 reve-nue 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).

Penalty issued to Superonline regarding trenching activitiesOn 13 January 2011 ankara municipality issued a penalty of Tl 8,863 (equivalent to $5,733 as at 31 December 2010) to superonline related to superonline’s trenching activities. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is less than probable, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010.

Dispute with Avea on SMS interconnection termination fees On 22 December 2006, avea initiated a lawsuit against the company claiming that although there was an agreement between the company and avea stating that both parties would not charge any sms interconnection termination fees, the company has charged sms interconnection fees for the messages terminating on its own network and also assumed liabilities for the sms terminating on avea’s network and made inter-connection 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.




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33. Related parties (continued)Other related party transactions (continued)

Due to related parties – short term31 December 31 December

2010 2009hobim Bilgi islem hizmetleri as (“hobim”) 2,766 7,069intralot sa (“intralot”) 910 -kvk Teknoloji urunleri as (“kvk Teknoloji”) 909 519 mapfre genel yasam sigorta as (“mapfre”) 473 81kyisvstar gsm Jsc (“kyivstar”) 44 2,457Other 5,658 4,654

10,760 14,780

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.

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 sponsors-hip services.

Due from kyivstar, whose shares are owned by one of the shareholders of the company, mainly resulted from call termination and internati-onal traffic carriage services rendered to this company.

Due to hobim, a company whose majority shares are owned by cukurova group, resulted from the invoice printing services rendered by this company.

Due to intralot, a company incorporated under the laws of greece and is the shareholder of inteltek, a subsidiary of the group. The group purchases game software and maintenance services.

Due to kvk, a company whose majority shares are owned by cukurova group, resulted from the payables for sales commissions and terminal purchases.

Due to mapfre, a company owned by one of the shareholders of the group, provides insurance services to the group.

Due to kyivstar, whose shares are owned by one of the shareholders of the company, mainly resulted from call termination and international traffic carriage services received.

The group’s exposure to currency and liquidity risk related to due from/(due to) related parties is disclosed in Note 29.

33. Related parties

Transactions with key management personnel:key management personnel comprise the group’s directors and key management executive officers.

as at 31 December 2010 and 2009, none of the group’s directors and executive officers has outstanding personnel loans from the group. in addition to their salaries, the group also provides non-cash benefits to directors and executive officers and contributes to a post-employment defined plan on their behalf. The group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.

Total compensation provided to key management personnel is $11,395, $8,044 and $7,912 for the years ended 31 December 2010, 2009 and 2008, respectively.

The company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders.

Other related party transactions

Due from related parties – long term 31 December 31 December

2010 2009

T-medya 1,044 5,539

Digital platform iletisim hizmetleri as (“Digital platform”) - 15,306

Other - 194

1,044 21,039

Receivables from T-medya consists of receivables based on rent agreements, accrued interests for outstanding balance and unpaid building expenses. Due from related parties long term is shown net of allowance for doubtful debts amounting to $5,897 as at 31 December 2010 (31 December 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $5,897 (31 December 2009 and 2008: nil).

Due from related parties – short term31 December 31 December

2010 2009system capital management (“scm”) 38,202 63,311

Digital platform 21,307 25,563

a-Tel 13,260 8,786

kvk Teknoloji urunleri as (“kvk Teknoloji”) 8,212 5,470

aDD production media as. (“aDD”) 1,796 -

kyisvstar gsm Jsc (“kyivstar”) 1,225 226

Other 4,895 5,487

88,897 108,843

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).



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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 company’s principal simcard distributors, is a Turkish company, which is affiliated with some of the company’s shareholders. in addition to sales of simcards and scratch cards, the company has entered into several agree-ments with kvk Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which kvk Teknoloji must place advertisements for the company’s services in newspapers. The objective of these agreements is to promote and increase handset sales with the company’s prepaid and postpaid brand simcards, thereby supporting the protection of the company’s market share in the prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for kvk Teknoloji and the total advertisement benefit received, reflected in the company’s market share in new subscriber acquisitions. Distributors’ campaign projects and market share also contributed to the budget allocation.

The amount of handset sales to the subscribers of the company performed by kvk Teknoloji for the period ended 31 December 2010 is Tl 180,922 (equivalent to $117,026 as at 31 December 2010) which is paid to kvk Teknoloji in advance in accordance with certain commitment arrangements and collected from the subscribers throughout the campaign period.

Agreements with Kyivstar:alfa group, a minor shareholder of the company, holds the majority shares of kyivstar. astelit is receiving call termination and international traffic carriage services from kyivstar.

Agreements with A-Tel:a-Tel is involved in the marketing, selling and distributing the company’s prepaid systems. a-Tel is a 50-50 joint venture of the company and sDif. a-Tel acts as the only dealer of the company for muhabbet kart (a prepaid card), and receives dealer activation fees and simcard subsidies for the sale of muhabbet kart. in addition to the sales of simcards and scratch cards through an extensive network of newspaper ki-osks located throughout Turkey, the company has entered into several agreements with a-Tel for sales campaigns and subscriber activations.

Agreements with Digital Platform:Digital platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the company’s principal shareholders, cukurova group. Digital platform acquired the broadcasting rights for Turkish super football league by the tender held on 15 July 2004, until 31 may 2008 and the broadcasting rights were extended until 31 may 2010 with a new agreement dated 5 may 2005.

On 23 December 2005, “Restructuring framework agreement” and supplemental sponsorship agreements was signed between Digital plat-form 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 frame-work 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)

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 agree-ment for call center services provided by the company’s subsidiary global Bilgi pazarlama Danisma ve cagri servisi hizmetleri as (“global”).

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 2010 2009 2008sales to kvk Teknolojisimcard and prepaid card sales 507,963 640,312 860,711sales to kyivstarTelecommunications services 42,413 44,195 63,581sales to a-Tel simcard and prepaid card sales 30,838 67,558 132,594sales to Digital platform call center revenues and interest charges 22,223 18,766 20,281finance income from scm interest income 14,863 5,213 -sales to Teliasonera international Telecommunications services 4,793 8,328 7,151sales to millenicom Telekomunikasyon as (“millenicom”)Telecommunications services 2,979 5,497 12,996sales to cJsc ukrainian RadiosystemsTelecommunications services

2,321 3,388 8,390

Related party expenses 2010 2009 2008charges from aDDadvertisement and sponsorship services 65,957 127,014 165,250charges from kyivstarTelecommunications services 36,039 53,466 63,799charges from a-Tel (*)Dealer activation fees and others 31,618 36,971 49,065charges from kvk TeknolojiDealer activation fees and others 27,706 41,360 103,386charges from hobiminvoicing and archieving services 19,446 21,985 20,865charges from Teliasonera internationalTelecommunications services 9,162 12,261 11,300charges from millenicomTelecommunications services 3,194 5,171 8,501charges from cJsc ukrainian RadiosystemsTelecommunications services 2,211 4,208 6,491

* charges from a-Tel have been eliminated to the extent of the company’s interest in a-Tel for the years ended 31 December 2010, 2009 and 2008 amounting to $31,618, $36,971 and $49,065, respectively.




34. Group entitiesThe group’s 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 31 December

31 DecemberName incorporation Business 2010 (%) 2009 (%)

kibris TelekomTurkish Republic of Northern cyprus Telecommunications 100 100

global Turkey customer relations management 100 100

Turktell Bilisim servisleri as Turkey information technology, value added gsm services investments 100 100

superonline Turkey Telecommunications 100 100Turktell uluslararasi yatırım holding as Turkey Telecommunications investments 100 100Turkcell kurumsal satıs ve Dagıtım hizmetleri as Turkey Telecommunications 100 100Eastasia Netherlands Telecommunications investments 100 100Turkcell Teknoloji arastirma ve gelistirme as Turkey Research and Development 100 100

kule hizmet ve isletmecilik as* TurkeyTelecommunications infrastructure business 100 100

sans Oyunlari yatirim holding as Turkey Betting business investments 100 100financell Netherlands financing business 100 100Rehberlik hizmetleri as Turkey Telecommunications 100 100Beltur Bv Netherlands Telecommunications investments 100 100surtur Bv Netherlands Telecommunications investments 100 100Beltel Turkey Telecommunications investments 100 100Turkcell gayrimenkul hizmetleri as Turkey property investments 100 100llc global ukraine customer relations management 100 100fllc global Republic of Belarus customer relations management 100 100

ukrTower ukraineTelecommunications infrastructure business 100 100

Talih kusu altyapi hizmetleri as Turkey Telecommunications investments 100 100Turkcell Europe gmbh germany Telecommunications 100 -corbuss kurumsal Telekom servis hizmetleri as Turkey gsm services 99 99Belarusian Telecom Republic of Belarus Telecommunications 80 80inteltek Turkey Betting business 55 55Euroasia Netherlands Telecommunications 55 55astelit ukraine Telecommunications 55 55azerinteltek azerbaijan Betting Business 28 -

*Brandname of kule hizmet ve isletmecilik as is global Tower.

35. Subsequent eventsOn 23 march 2011, the company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2010 amounting to Tl 1,328,697 (equivalent to $859,442 as at 31 December 2010, respectively), which represented 75% of distributable income. This rep-resents 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 amo-unting to Tl 16,744 (equivalent to $10,831 as at 31 December 2010).

in march 2011, fintur decided to distribute dividend amounting to $50,000. The company has received its portion on 7 april 2011. in march 2011, a-Tel decided to distribute dividend amounting to Tl 26,982 (equivalent to $17,453 as at 31 December 2010). The company will receive its portion on 11 april 2011.

according to contract which was signed between fizy medya İnternet ve Bilişim Teknolojileri limited sirketi (“fizy”) on 28 January 2011, the company acquired 70% of the shares. fizy’s operations consists of providing all kind of advertising and promotion services upon internet and e-trading, acquiring copyrights, broadcasting, music and video accessing as well as downloading from the internet. fizy restarted its opera-tions on 1 april 2011 which was previously held in 2010.

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 company’s principal shareholders, cukurova gro-up. 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.


Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesDematerialization Of The Share Certificates Of The Companıes That Are Traded On The Stock Exchange

it was decided by the capital markets Board (“the Board”) as per article 10/a included in the capital markets act (cma) No. 2499 to commence the dematerialization system.

as per the Temporary article 2 of the Board’s communiqué series: iv No.: 28 on the “procedures and principles of keeping the Records of Dematerialized capital market instruments”, it is set forth that all of the share certificates of the companies that are traded in isE shall be col-lectively dematerialized and the related procedures and principles are regulated in the said communiqué. legal and actual dematerialization of the share certificates has commenced on November 28, 2005.

Beginning from November 28, 2005, it is prohibited for the companies listed in isE to issue new share certificates as a result of capital inc-reases. 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 de-materialized 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 Liraas per article 6 titled “share capital” of the articles of association of the company, the code numbered 5083 Regarding the currency unit of Turkish Republic government and the code numbered 5274 Regarding the amendment of Turkish commercial code, the share capital of the company has been made compatible with the New Turkish lira and such resolution was approved at the Ordinary general assembly meeting on april 29, 2005.

provisions regarding making nominal values of the share certificates of the company compatible with the New Turkish lira are regulated in the temporary article of the company’s articles of association and such article was approved at the Ordinary general assembly meeting on april 29,2005. The temporary article reads as follows:

“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.”

Turkcell İletişim Hizmetleri A.Ş. And Its SubsidiariesThe Board’s Dividend Distribution Proposal

in accordance with the capital markets Board (“cmB”) communiqué serial: iv, No: 27 on “principles Regarding Distribution of Dividends and interim Dividends To Be followed by the publicly held Joint stock corporations subject to capital market law”, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our company, pursuant to the corporate governance principles by the Board of Directors resolution dated November 24, 2004 and numbered 366; the Board of Directors of our company presents the following dividend distribution proposal, to be evaluated and determined at the Ordinary general assembly meeting of our company which will be held on 21 april 2011.

1- as a result of the activities of our company, pertaining to the period between January 1, 2010 and December 31, 2010, our company’s profit, calculated according to the consolidated financial statements, which were audited independently in accordance with the capital markets Board communiqué serial: xi numbered 29, named “communiqué Regarding the financial Reporting in capital markets” is TRy 2.256.966.571- and the commercial profit calculated according to the provisions of Turkish commercial code is TRy 2.540.278.988-,

2- TRy 1.771.595.963 - after tax profit calculated according to the consolidated financial statements shall be taken as the basis for dividend distribution in accordance with “guide Of preparation Dividend Distribution Table” which was published on 27 January 2010.

3- as the ceiling designated in the Turkish commercial code (Tcc) for first legal reserve has been reached by our company; no first legal reserve set aside,

4- TRy 1.771.595.963- is the distributable dividend of the company, pertaining to year 2010 and TRy 1.780.152.672- calculated by adding TRy 8.556.709- which is the aggregate amount of the donations made during the year, to the above mentioned amount shall be taken as the first dividend basis,

5- in accordance with the provisions declared in capital markets Board (“cmB”) communiqué serial: iv, No: 27 on “principles Regarding Distribution of Dividends and interim Dividends To Be followed by the publicly held Joint stock corporations subject to capital market law”, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our company with the Board of Directors resolution dated November 24, 2004 and declared to public; TRy 356.030.534-, which is 20%, of the first divi-dend 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 company’s shareholders shall commence on 16 may 2011 and shall continue for 15 days in İstanbul head Office, Çiftehavuzlar, İzmir and ankara branches of finans yatırım menkul Değerler a.Ş. and also in central Registry agency located at süzer plaza askerocağı cad. No: 15 k: 2 34367 Elmadağ - Şişli İstanbul and shall be made in exchange of the dividend share denominations for year 2008, provided that the physical shares held by the shareholders are registered by the central Registry agency and brokerage house authorized for keeping the shares.


Abstract Of Auditor’s Report To General Assembly Of Turkcell İletişim Hizmetleri A.Ş.

Name of the company : TuRkcEll İlETİŞİm hİZmETlERİ a.Ş.

headquarters : İstanbul

issued share capital : TRy 2,200,000,000

Names, surnames : İbrahim alpay DEmİRTaŞ, hamit sedat ERaTalaRterm of duty of auditors : 1 (One) yearwhether they are company shareholder : Neither is a company shareholder or employeeand/or employees

Number of Board of Directors meetings : hamit sedat Eratalar attended 10 ordinary Board of attended, Board of Directors meetings Directors meetings.held moreover, extraordinary Board of Directors meetings were held 17 times. İbrahim alpay Demirtaş attended 3 ordinary Board of Directors meetings. Board of auditors meetings were held four times.

The scope of the examination performed : The quarterly examinations performed on the on the partnership accounts, books and statutory books and records revealed that theyrecords, the dates of such examination were kept and maintained in an orderly and accurateand the conclusions drawn there from manner.

The number of counts performed on the : The Treasury was counted four times and it wasTreasury as Required under article noted that actual assets and the records were in353.paragraph 1, sub clause 3 o The coherence.Turkish commercial code and the results thereof

Dates of examinations performed pursuant : The monthly examinations revealed that securitiesto article 353 paragraph 1, sub clause 4 of were complete and coherent with the books andthe Turkish commercial code and the results thereof records.

complaints filed in regards to irregularities : There were no complaints filed in regards to and proceedings undertaken in respect thereof. irregularities.

we have examined the accounts and transactions of Turkcell İletişim hizmetleri a.Ş. for the period 01.01.2010 - 31.12.2010 pursuant to Tur-kish commercial code, the company’s articles of association and other legislation and in accordance with the generally accepted accounting principles and standards.

in our opinion the accompanying Balance sheet as of December 31, 2010 reflects the actual financial position of Turkcell İletişim hizmetleri a.Ş. where as the income statement for the 01.01.2010 - 31.12.2010 period fairly and accurately reflect operational results of the company, and that the proposal for dividend distribution is in line with the pertinent law and the company’s articles of association.

we respectfully submit the Balance sheet and income statement for approval and the release of Board of Directors.

sincerely, auditor auditor İBRahİm alpay DEmİRTaŞ hamİT sEDaT ERaTalaR

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 state-ments. 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.

Forward-Looking Statements

Turkcell İletişim Hizmetleri A.Ş.Turkcell Plaza Meşrutiyet Cad. No: 71 Tepebaşı, 34430 İstanbul

Tel: +90 (212) 313 1000 Fax: +90 (212) 313 0099 www.turkcell.com.tr

TURKCELL

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