Turkcell Iletisim Hizmetleri: Fourth Quarter and Full Year 2016 Results

“4.5G Investment Generated the Highest Growth of the Past 10 Years”

ISTANBUL--()--Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) (BIST:TCELL):

  • Please note that all financial data is consolidated and comprises that of Turkcell Iletisim Hizmetleri A.S. (the “Company”, or “Turkcell”) and its subsidiaries and associates (together referred to as the “Group”), unless otherwise stated.
  • As previously announced, starting from Q115, we now have three reporting segments:
    • "Turkcell Turkey" which comprises all of our telecom related businesses in Turkey (as used in our previous releases, this term covered only mobile businesses). All non-financial data presented in this press release is unconsolidated and comprises Turkcell Turkey only figures, unless otherwise stated. The terms "we", "us", and "our" in this press release refer only to Turkcell Turkey, except in discussions of financial data, where such terms refer to the Group, and except where context otherwise requires.
    • “Turkcell International” which comprises all of our telecom related businesses outside of Turkey.
    • “Other subsidiaries” which is mainly comprised of our information and entertainment services, call center business revenues, financial services revenues and inter-business eliminations. Call centers were previously included in Turkcell Turkey but are, with effect from the fourth quarter of 2015, now included in “Other subsidiaries”. We have made this change because we believe that our third party call center revenues are not telecom related. All figures presented in this document for prior periods have been restated to reflect this change.
  • In this press release, a year-on-year comparison of our key indicators is provided and figures in parentheses following the operational and financial results for December 31, 2016 refer to the same item as at December 31, 2015. For further details, please refer to our consolidated financial statements and notes as at and for December 31, 2016, which can be accessed via our website in the investor relations section (www.turkcell.com.tr).
  • Selected financial information presented in this press release for the fourth quarters and for the full year 2015 and 2016 is based on IFRS figures.
  • In accordance with our strategic approach and IFRS requirements, Fintur is classified as ‘held for sale’ and reported as discontinued operations as of October 2016. Certain operating data that we previously presented with Fintur included has been restated without Fintur.
  • In the tables used in this press release totals may not foot due to rounding differences. The same applies for the calculations in the text.
  • Year-on-year and quarter-on-quarter percentage comparisons appearing in this press release reflect mathematical calculation.

FOURTH QUARTER FINANCIAL HIGHLIGHTS

  • Highest revenue and EBITDA growth of the past ten years, plus all time high quarterly revenue and EBITDA, both at Group and Turkcell Turkey level
  • Group revenues and EBITDA1 up 21.3% and 29.6%, respectively with an EBITDA margin of 33.9% up 2.2pp year-on-year
  • Turkcell Turkey’s revenues and EBITDA up 19.3% and 28.3%, respectively with an EBITDA margin improvement of 2.4pp to 34.3%; data and digital services revenues, comprising 62% of Turkcell Turkey revenues, up 94.1%
  • Turkcell International revenues up 12.4% with an EBITDA margin of 27.2%
  • Group net income as per IFRS at TRY351 million (TRY584 million). Group proforma net income2 up 15.7% to TRY706 million (TRY610 million)
  • Fintur classified as ‘held for sale’ and reported as discontinued operations as of October 2016

FULL YEAR FINANCIAL SUMMARY

  • Full year guidance for 2016 delivered
  • All-time-high full year revenue and EBITDA, both at Group and Turkcell Turkey level
  • Group revenues and EBITDA1 up 11.9% and 11.6%, respectively with an EBITDA margin of 32.3%
  • Turkcell Turkey revenues and EBITDA up 11.4% and 10.7%, respectively with an EBITDA margin of 32.5%
  • Group net income as per IFRS of TRY1,492 million (TRY2,068 million). Group proforma net income2 up 7.4% to TRY2,522 million (TRY2,348 million)
  • 2017 Group guidance3; revenue growth target of 13% - 15%, EBITDA margin target of 32% - 34% and operational capex over sales ratio target of ~20%

    Group midterm target3 for the period 2017-2019; revenue growth target of 12% - 14%, EBITDA margin target of 33% - 35% and operational capex over sales ratio targeted to decline to ~16% as of 2019

FINANCIAL HIGHLIGHTS

                         
TRY million   Q415   Q416   y/y %   FY15   FY16   y/y %
Revenue   3,334   4,044   21.3%   12,769   14,286   11.9%
Turkcell Turkey 2,998 3,576 19.3% 11,481 12,788 11.4%
EBITDA1 1,058 1,371 29.6% 4,141 4,620 11.6%
Turkcell Turkey 956 1,227 28.3% 3,760 4,161 10.7%
EBITDA Margin 31.7% 33.9% 2.2pp 32.4% 32.3% (0.1pp)
Net Income 584 351 (40.0%) 2,068 1,492 (27.8%)
Proforma Net Income2   610   706   15.7%   2,348   2,522   7.4%

(1) EBITDA is a non-GAAP financial measure. See page 14 for the reconciliation and the explanation of how we calculate Adjusted EBITDA to net income.
(2) We use "proforma net income" as a means of presenting our net income net of certain non-operating items and items that we believe are non-recurring. We believe “proforma net income” facilitates performance comparisons from period to period and management decision making. We define "proforma net income" in this document as net income excluding FX gain / (loss) (including tax and minority impact), interest Income on time deposits of Turkcell Iletisim Hizmetleri, interest expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at "proforma net income." Please see Appendix A for a reconciliation of Group and Turkcell Turkey proforma net income to net income as per IFRS.
(3) Please note that this paragraph contains forward looking statements based on our current estimates and expectations regarding market conditions for each of our different businesses. No assurance can be given that actual results will be consistent with such estimates and expectations. For a discussion of factors that may affect our results, see our Annual Report on Form 20-F for 2015 filed with U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.
For further details, please refer to our consolidated financial statements and notes as at and for December 31, 2016 which can be accessed via our web site in the investor relations section (www.turkcell.com.tr).

COMMENTS BY KAAN TERZIOGLU, CEO

4.5G investment generated the highest growth of the past 10 years

We concluded the year of 2016 having met all of our targets with outstanding performance. In 2016, as Turkcell Group our investments amounted to TRY3.5 billion. These investments, which we made in full confidence in both our country and its economy, have notably resulted in positive returns in all our areas of operation. In the fourth quarter of 2016, Turkcell Group and Turkcell Turkey registered the highest revenue and EBITDA growth since 2007.

With our 4.5G investment, one of the key developments of 2016, we achieved population coverage of around 82.5% in 81 cities across Turkey, while the average data consumption of our 4.5G customers reached 5GB in December. We have registered our highest customer retention level in mobile since 2007, and in the last quarter we saw 291 thousand net additions, which is the highest level since 2013. On the fixed side, the quarterly gain of 147 thousand subscribers was the highest ever, while fiber subscribers exceeded 1 million. The great interest in our digital services continued to increase in this quarter as well. Our TV subscribers exceeded 1 million, and at the same time customers who downloaded BiP, Turkcell TV+, Lifebox, Goller Cepte (Goals on Mobile), fizy, Hesabım (My Account), Dergilik (Digital Publishing) and Turkcell Academy applications reached 44.2 million from 21.4 million in the previous year. In 2016, we made digital services all access, once again in line with our vision. Meanwhile, our consumer finance company Financell, which started its operations in 2016, provided TRY2.9 billion of loans to 1 million 850 thousand customers.

In addition to operational progress, we actively managed our balance sheet and risks. In the last quarter, we reduced our foreign exchange position to US$125 million1 from US$2 billion in 2015, mitigating the foreign exchange risk.

All of these developments reflected positively in our financials. Turkcell Group revenues rose 21.3% year-on-year to TRY4.0 billion in the quarter, with EBITDA2 reaching TRY1.4 billion on a 29.6% rise, and with an EBITDA margin of 33.9%. In 2016, Turkcell Group revenues grew 11.9% exceeding TRY14 billion, while EBITDA2 rose 11.6% to TRY4.6 billion and the EBITDA margin was at 32.3%. Thus, we delivered on our 2016 guidance. In 2016, net income as per IFRS realized at TRY1.5 billion, while proforma net income3 rose 7.4% to TRY2.5 billion.

Previously we had stated that we were evaluating various strategic alternatives for Fintur, in which we own a 41.45% stake, including its sale. In parallel to our strategy, and due to IFRS rules, we have decided to classify Fintur as ‘held for sale’.

Consumption of data and digital services is increasing…

In the last quarter of 2016, our data revenues grew 74% year-on-year and our digital service revenues grew 200% on increased data users, 2.8GB average monthly data usage per user, 64% smartphone penetration and strong demand. Our 4.5G subscribers4 reached 23 million.

In the last quarter, our customer acquisition continued in postpaid, fiber and digital services. The postpaid subscriber base grew by 797 thousand annually, comprising 52.5% of the total subscriber base. Our fiber customer base rose by 144 thousand, exceeding 1 million, while our total number of fixed customers reached 1.9 million with 342 thousand annual net additions.

In line with our convergence strategy, the mobile triple play ratio5, which includes customers of voice, data and digital services combined, reached 42% with a 25pp increase, while multiplay with TV service users6 ratio grew 10pp to 36% year-on-year.

Thanks to our value focused acquisition strategy, as well as increasing package penetration, a growing postpaid base, rising data consumption and triple play customers, mobile ARPU posted a record increase of 18% in the fourth quarter to TRY30.97, while fixed residential ARPU reached TRY51.1.

Pioneers in the sector….

In 2016, our consumer finance company, launched under the Financell brand, and operating in areas of finance and technology known collectively as "Fintech", made great progress within a short period of time. Financell, saw excess demand in the issuance of its commercial paper, expects to continue to raise funds using capital market instruments in the upcoming periods, and aims to continue to contribute to Group balance sheet efficiency. In this respect, the necessary approval for the issuance of asset-backed securities was applied for in January 2017. Turkcell Ödeme Hizmetleri A.Ş. (Turkcell Payment Services), which offers payment solutions to customers, and operating under the Paycell brand, received BRSA authorization in August 2016, to become the first licensed operator brand.

Responding to strong data demand, and in step with technological developments in the sector, Turkcell enabled data based communication with ‘lifecell’, the digital brand of Kuzey Kıbrıs Turkcell, marking a first for Turkey and the world. With lifecell, through which communication needs such as voice and messaging are met via data packages, calls are made through BiP, while digital services such as Lifebox, Fizy and Turkcell TV+ also enhance our customers’ lives.

Due to the responsibility we bear as a technological leader, we have played a key role in the global development of 5G technologies through our national and international collaborations made over the past 1.5 years. Our cooperation with Ericsson in the 15GHz band enabled us to achieve a speed of 24.7Gbit in Turkey’s first 5G test. As Turkcell, our goal is to be one of the first 5G operators in the world, while at the same time developing homegrown technology in 5G, thereby ensuring that Turkey produces technology rather than merely consuming it.

In 2016, to meet Turkey's digital data management need, we built the nation’s largest data center in Gebze, which has a closed area of 33 thousand square meters meeting the highest standards. In addition, we started discussions with sector players towards establishing common infrastructure for efficient use of resources and ensuring fair competition within the scope of Turkey's fiber mobilization.

We continue to grow in 2017

Despite the macroeconomic and geopolitical headwinds in 2016, we reached our year-end targets both operationally and financially with record prints. We introduced our customers to 4.5G technology swiftly and seamlessly. Going forward, we aim to continue to deliver the most advanced communication technology to our customers and enrich their lives through digital services.

In this respect in 2017, we target increasing our Group revenues by 13-15%, an EBITDA margin of 32-34%, and an operational capex to sales ratio of 20%. In the medium term, between 2017-2019, we are targeting to have our Group revenues grow by 12-14%, with an EBITDA margin target of 33-35% and the operational capex to sales ratio to decline to 16% by 20198.

I take this opportunity to once again thank our investors, employees and Board of Directors, as well as all stakeholders, who have continuously supported the realization of Turkcell’s targeted performance.

(1) This figure takes into account advance payments and the impact of hedging, and assumes utilizing the option of paying the last instalment of the 4.5G licence in TRY.
(2) EBITDA is a non-GAAP financial measure. See page 14 for the reconciliation and the explanation of how we calculate Adjusted EBITDA to net income.
(3) We use "proforma net income" as a means of presenting our net income net of certain non-operating items and items that we believe are non-recurring. We believe “proforma net income” facilitates performance comparisons from period to period and management decision making. We define "proforma net income" in this document as net income excluding FX gain / (loss) (including tax and minority impact), interest income on time deposits of Turkcell Iletisim Hizmetleri, interest expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at "proforma net income." Please see Appendix A for a reconciliation of Group and Turkcell Turkey proforma net income to net income as per IFRS.
(4) Customers registered to 4.5G services through SMS confirmation
(5) Breakdown among mobile voice users which excludes subscribers who do not use their line in the last 3 months
(6) Multiplay customers with TV: Internet + TV users & internet + TV + voice users
(7) Blended mobile ARPU excluding M2M users
(8) Please note that this paragraph contains forward looking statements based on our current estimates and expectations regarding market conditions for each of our different businesses. No assurance can be given that actual results will be consistent with such estimates and expectations. For a discussion of factors that may affect our results, see our Annual Report on Form 20-F for 2015 filed with U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.

FINANCIAL AND OPERATIONAL REVIEW

The following discussion focuses principally on the developments and trends in our business in the fourth quarter and full year 2016 in TRY terms. Selected financial information presented in this press release for the fourth quarters and for the full year 2015 and 2016 is based on IFRS figures.

Selected financial information for the fourth quarter of 2015, third and fourth quarters of 2016 and full year 2015 and 2016, prepared in accordance with IFRS and Turkish Accounting standards, is also included at the end of this press release.

Financial Review of Turkcell Group

Profit & Loss Statement

(million TRY)

  Quarter   Year
Q415   Q416   y/y %   FY15   FY16   y/y %
Total Revenue 3,334.5 4,043.6 21.3% 12,769.4 14,285.6 11.9%
Direct cost of revenues1 (2,054.8) (2,608.3) 26.9% (7,769.5) (9,236.6) 18.9%
Direct cost of revenues1/revenues (61.6%) (64.5%) (2.9pp) (60.8%) (64.7%) (3.9pp)
Depreciation and amortization (437.0) (604.3) 38.3% (1,667.8) (2,203.2) 32.1%
Gross Margin 38.4% 35.5% (2.9pp) 39.2% 35.3% (3.9pp)
Administrative expenses (165.9) (190.0) 14.5% (625.3) (721.8) 15.4%
Administrative expenses/revenues (5.0%) (4.7%) 0.3pp (4.9%) (5.1%) (0.2pp)
Selling and marketing expenses (492.6) (478.5) (2.9%) (1,901.9) (1,910.9) 0.5%
Selling and marketing expenses/revenues (14.8%) (11.8%) 3.0pp (14.9%) (13.4%) 1.5pp
EBITDA2 1,058.2 1,371.1 29.6% 4,140.5 4,619.5 11.6%
EBITDA Margin 31.7% 33.9% 2.2pp 32.4% 32.3% (0.1pp)
EBIT3 621.2 766.8 23.4% 2,472.7 2,416.3 (2.3%)
Net finance income / (expense) 12.5 (198.3) n.m (43.4) (172.8) 298.2%
Finance expense (141.0) (692.2) 390.9% (799.5) (1,237.6) 54.8%
Finance income 153.5 493.9 221.8% 756.1 1,064.8 40.8%
Other income / (expense) (31.1) (44.4) 42.8% (225.9) (234.3) 3.7%
Non-controlling interests (7.6) (17.7) 132.9% 164.1 (51.7) (131.5%)
Income tax expense (109.2) (111.3) 1.9% (667.1) (423.2) (36.6%)
Discontinued operations 98.4 (44.4) (145.1%) 367.3 (42.2) (111.5%)
Net Income 584.2 350.7 (40.0%) 2,067.7 1,492.1 (27.8%)
 
Proforma Net Income4   610.1   706.0   15.7%   2,348.4   2,521.6   7.4%

(1) Including depreciation and amortization expenses.
(2) EBITDA is a non-GAAP financial measure. See page 14 for the reconciliation and an explanation of how we calculate Adjusted EBITDA to net income.
(3) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.
(4) We use "proforma net income" as a means of presenting our net income net of certain non-operating items and items that we believe are non-recurring. We believe “proforma net income” facilitates performance comparisons from period to period and management decision making. We define "proforma net income" in this document as net income excluding FX gain / (loss) (including tax and minority impact), interest Income on time deposits of Turkcell Iletisim Hizmetleri, interest expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at "proforma net income." Please see Appendix A for a reconciliation of Group and Turkcell Turkey proforma net income to net income as per IFRS.

Revenues of the Group grew by 21.3% year-on-year in Q416.

Turkcell Turkey revenues, comprising 88% of Group revenues, rose by 19.3% to TRY3,576 million (TRY2,998 million).

  • Consumer segment revenues increased by 19.9% to TRY2,867 million (TRY2,391 million), while corporate segment revenues grew by 11.7% to TRY591 million (TRY529 million).

    Mobile data revenues rose by 89.1% to TRY1,400 million (TRY740 million) mainly with higher smartphone penetration, increased data users and higher data consumption. Fixed data revenues increased by 26.8% to TRY289 million (TRY228 million) with increased customers and higher usage. Digital services revenues grew by 200.5% to TRY537 million (TRY179 million) mainly driven by increased usage of Turkcell TV+, Turkcell’s digital publishing service Dergilik, our music platform fizy, personal cloud service and other mobile services. Consequently, our overall data and digital services revenues, comprising 62% of Turkcell Turkey revenues, rose by 94.1% to TRY2,226 million (TRY1,147 million) in Q416.
  • Wholesale revenues grew by 47.7% to TRY137 million (TRY93 million) driven by the rise in carrier traffic.

Turkcell International revenues, comprising 6% of Group revenues, grew by 12.4% to TRY252 million (TRY224 million) driven mainly by the 12.7% rise in lifecell revenues.
Other subsidiaries' revenues, at 5% of Group revenues, which includes information and entertainment services, call center revenues and revenues from financial services rose by 91.1% to TRY216 million (TRY113 million). This was mainly driven by the contribution of our consumer finance company, which commenced operations in March 2016, and which registered revenues of TRY90 million in Q416.
For the full year, Group revenues grew by 11.9%.
Turkcell Turkey revenues rose by 11.4% to TRY12,788 million (TRY11,481 million). Excluding emergency packages Turkcell Turkey revenue growth would be 11.9%, EBITDA margin would be 32.9%.

  • Consumer segment revenues increased by 11.9% to TRY10,216 million (TRY9,127 million), while corporate segment revenues grew by 7.9% to TRY2,192 million (TRY2,032 million).

    Our mobile data revenues rose by 65.1% to TRY4,478 million (TRY2,712 million), while fixed data revenues increased by 27.4% to TRY1,054 million (TRY828 million). Digital services revenues grew by 94.6% to TRY1,282 million (TRY659 million). Overall, data and digital services revenues rose by 62.3% to TRY6,814 million (TRY4,198 million).
  • Wholesale revenues grew by 17.4% to TRY453 million (TRY386 million).

Turkcell International revenues increased by 2.2% to TRY875 million (TRY856 million).

Other subsidiaries' revenues rose by 44.2% to TRY623 million (TRY432 million). The consumer finance company recorded revenues of TRY185 million for the full year.

Direct cost of revenues rose to 64.5% (61.6%) as a percentage of revenues in Q416. This was mainly due to the rise in depreciation and amortization expenses (1.8pp) reflecting the 4.5G license cost and investments, retail sales related device costs (2.7pp) and consumer finance company funding costs (1.0pp), despite the fall in radio expenses (1.1pp), treasury share (1.1pp) and other cost items (0.4pp).

For the full year, direct cost of revenues as a percentage of revenues rose to 64.7% (60.8%), mainly due to the rise in depreciation and amortization expenses (2.4pp) and retail sales related device costs (1.5pp).

Administrative expenses declined to 4.7% (5.0%) as a percentage of revenues in Q416, while for the full year increasing to 5.1% (4.9%).

Selling and marketing expenses fell to 11.8% (14.8%) as a percentage of revenues in Q416, driven by the decline in selling expenses (1.0pp) with our value focused customer acquisition strategy, in marketing expenses (0.8pp) and in other cost items (1.2pp).

For the full year, selling and marketing expenses as a percentage of revenues declined to 13.4% (14.9%) on the back of the decrease in selling expenses (0.8pp), and in other cost items (1.0pp), despite the increase in marketing expenses (0.3pp).

EBITDA1 rose by 29.6% year-on-year in Q416 with a 2.2pp improvement in EBITDA margin to 33.9% (31.7%). Direct cost of revenues (excluding depreciation and amortization) increased by 1.1pp, while administrative expenses and selling and marketing expenses declined by 0.3pp and 3.0pp, respectively.

(1) EBITDA is a non-GAAP financial measure. See page 14 for the reconciliation and an explanation of how we calculate Adjusted EBITDA to net income.

  • Turkcell Turkey’s EBITDA grew by 28.3% to TRY1,227 million (TRY956 million), while the EBITDA margin improved 2.4pp to 34.3% (31.9%).
  • Turkcell International EBITDA was at TRY68 million (TRY68 million), while the EBITDA margin was at 27.2% (30.2%).
  • The EBITDA of other subsidiaries rose by 119.2% to TRY76 million (TRY35 million) with the increasing contribution of our consumer finance company.

For the full year, EBITDA grew by 11.6% year-on-year with an EBITDA margin of 32.3% (32.4%). Direct cost of revenues (excluding depreciation and amortization) and administrative expenses rose by 1.4pp and 0.2pp, respectively, while selling and marketing expenses fell by 1.5pp.

  • Turkcell Turkey’s EBITDA rose by 10.7% to TRY4,161 million (TRY3,760 million), while the EBITDA margin was at 32.5% (32.7%).
  • Turkcell International EBITDA was at TRY235 million (TRY246 million), while the EBITDA margin was at 26.9% (28.7%).
  • The EBITDA of other subsidiaries rose by 65.4% to TRY223 million (TRY135 million).

Net finance expense of TRY198 million (net finance income of TRY12 million) was recorded in Q416. This was mainly due to the translation losses reported in Q416 compared to a translation gain registered in Q415. Increased interest expenses in relation to loans and 4.5G payables also contributed to this outcome.

For the full year net finance expense rose to TRY173 million (TRY43 million), mainly due to higher translation losses and interest expenses in relation to loans and 4.5G payables, as well as the decline in interest income from time deposits. Please see Appendix A for translation gain and loss details.

Income tax expense increased 1.9% year-on-year in Q416. For the full year the income tax expense declined by 36.6%. Please see Appendix A for details.

Net income of the Group as per IFRS declined to TRY351 million (TRY584 million) in Q416. This was mainly due to translation losses recorded in the quarter, the negative Fintur impact, higher interest expense on loans and 4.5G payables, and increased amortization expense due to the 4.5G license. Proforma net income1 rose 15.7% to TRY706 million (TRY610 million) in Q416.

The net income of Turkcell Turkey as per IFRS declined to TRY386 million (TRY518 million) in Q416, mainly due to the reasons explained above with respect to the decline in Group net income. Proforma net income1 increased by 12.5% to TRY656 million (TRY584 million) in Q416.

For the full year, Group net income as per IFRS declined to TRY1,492 million (TRY2,068 million). This was mainly due to higher translation losses, increased interest expenses in relation to loans and 4.5G payables, the negative Fintur impact, a higher amortization expense due to the 4.5G license, the decline in interest income from time deposits and the expenses incurred to benefit from tax amnesty based on Article 6736. Proforma net income1 grew by 7.4% to TRY2,522 million (TRY2,348 million).

The net income of Turkcell Turkey as per IFRS declined to TRY1,480 million (TRY2,484 million) for the full year, mainly due to the reasons explained above with respect to the decline in Group net income. Proforma net income1 increased by 4.1% to TRY2,384 million (TRY2,291 million).

Please see Appendix A for a reconciliation of Group and Turkcell Turkey proforma net income to net income as per IFRS.

(1) We use "proforma net income" as a means of presenting our net income net of certain non-operating items and items that we believe are non-recurring. We believe “proforma net income” facilitates performance comparisons from period to period and management decision making. We define "proforma net income" in this document as net income excluding FX gain / (loss) (including tax and minority impact), interest Income on time deposits of Turkcell Iletisim Hizmetleri, interest expense on loans & borrowings, Fintur impact, 4.5G license amortization and one-off items. Please note that this is a non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at "proforma net income." Please see Appendix A for a reconciliation of Group and Turkcell Turkey proforma net income to net income as per IFRS.

Total cash & debt: Consolidated cash as of December 31, 2016 increased to TRY6,052 million, of which TRY2,841 million (US$807 million) was denominated in US$, TRY1,403 million (EUR378 million) in EUR and TRY1,700 million in TRY, despite the TRY1.4 billion third instalment payment of the 4.5G license in Q416.

Consolidated debt as of December 31, 2016 rose to TRY9,781 million from TRY8,132 million as of September 30, 2016. This was mainly due to the higher debt portfolio of our consumer finance company through utilization of loans, as well as commercial paper issuance with a nominal amount of TRY250 million. Meanwhile, the translation increase in the FX denominated debt portfolio of Turkcell Turkey, due to depreciation of TRY against US$ and EUR, also led to a rise in our total consolidated debt.

  • Turkcell Turkey’s debt was TRY7,605 million, of which TRY3,668 million (US$1,042 million) was denominated in US$, TRY3,548 million (EUR956 million) in EUR and the remaining TRY388 million in TRY.
  • The debt balance of lifecell was TRY407 million, denominated in UAH.
  • Our consumer finance company had a debt balance of TRY1,763 million, of which TRY93 million (EUR25 million) was denominated in EUR.

TRY5,578 million of our consolidated debt is set at a floating rate, while TRY2,846 million will mature within less than a year. (Please note that the figures in parentheses refer to US$ or EUR equivalents).

Net debt as of December 31, 2016 increased to TRY3,729 million from TRY2,486 million as of September 30, 2016. Turkcell Group’s short position was at US$125 million as at the end of Q416 (Please note that this figure takes into account advance payments and the impact of hedging, and assumes utilizing the option of paying the last instalment of the 4.5G licence in TRY).

Cash flow analysis: Capital expenditures, including non-operational items amounted to TRY1,133.5 million in Q416. The cash flow item noted as “other” included payment of the third instalment of the 4.5G license (TRY1,384 million), payment to benefit from the tax amnesty based on Article 6736 (TRY130 million) and the positive impact of decreased advances given for fixed asset purchases (TRY233 million), prepaid expenses (TRY148 million) and other working capital (TRY193 million).

For the full year, capital expenditures, including non-operational items were at TRY3,494.7 million. The cash flow item noted as “other” included payment of the second and third instalments of the 4.5G license (TRY2,704 million), payment to benefit from the tax amnesty based on Article 6736 (TRY130 million) and the negative impact of increased advances given for fixed asset purchases (TRY210 million), prepaid expenses (TRY35 million) and the positive impact of the change in other working capital (TRY59 million).

In Q416 and FY16, operational capital expenditures (excluding license fees) at the Group level were at 26.9% and 23.0% of total revenues, respectively.

Consolidated Cash Flow (million TRY)   Quarter   Year
Q415   Q416   FY15   FY16
EBITDA1 1,058.2 1,371.1 4,140.5 4,619.5
LESS:
Capex and License (6,188.9) (1,133.5) (8,536.2) (3,494.7)
Turkcell Turkey (6,218.1) (980.7) (7,751.7) (3,144.4)
Turkcell International2 28.1 (149.7) (770.2) (336.7)
Other Subsidiaries2 1.1 (3.1) (14.3) (13.6)
Net interest Income (32.8) 324.1 445.8 616.9
Other 3,220.9 (939.6) 1,987.0 (3,020.0)
Net Change in Debt 958.9 784.0 (225.3) 4,411.9
Cash generated / (used) (983.7) 406.1 (2,188.1) 3,133.6
Cash balance before dividend payment 2,918.8 6,052.4 6,843.8 6,052.4
Dividend paid - - (3,925.0) -
Cash balance after dividend payment   2,918.8   6,052.4   2,918.8   6,052.4

(1) EBITDA is a non-GAAP financial measure. See page 14 for the reconciliation and an explanation of how we calculate Adjusted EBITDA to net income.
(2) The impact from the movement of reporting currency (TRY) against local currencies of subsidiaries in other countries is included in these lines.

Operational Review in Turkey

Summary of Operational Data   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Number of subscribers (million) 35.8 35.3 (1.4%) 35.8 35.3 (1.4%)
Mobile Postpaid (million) 16.6 17.4 4.8% 16.6 17.4 4.8%
Mobile M2M (million) 1.9 2.1 10.5% 1.9 2.1 10.5%
Mobile Prepaid (million) 17.4 15.7 (9.8%) 17.4 15.7 (9.8%)
Fiber (thousand) 899.4 1,043.9 16.1% 899.4 1,043.9 16.1%
ADSL (thousand) 620.8 818.0 31.8% 620.8 818.0 31.8%
IPTV (thousand) 223.7 359.7 60.8% 223.7 359.7 60.8%
Churn (%)
Mobile Churn (%) 7.9% 5.6% (2.3pp) 27.3% 24.6% (2.7pp)
Fixed churn (%) 5.2% 5.3% 0.1pp 16.7% 18.9% 2.2pp
ARPU (Average Monthly Revenue per User)
Mobile ARPU, blended (TRY) 25.1 29.2 16.3% 24.5 26.8 9.4%
Postpaid 38.5 41.6 8.1% 38.5 39.2 1.8%
Postpaid (excluding M2M) 42.8 46.8 9.3% 42.7 44.0 3.0%
Prepaid 12.8 15.6 21.9% 12.4 13.9 12.1%
Fixed Residential ARPU, blended (TRY) 50.3 51.1 1.6% 48.7 51.1 4.9%
Average mobile data usage per user (GB/user) 1.7 2.8 68.4% 1.4 2.4 64.7%
Mobile MOU (Average Monthly Minutes of usage per subs)blended   299.3   331.3   10.7%   296.6   323.9   9.2%

On the mobile front, we registered the highest quarterly net customer additions of 291 thousand since 2013, reaching 33 million in total. This was driven by 333 thousand quarterly net additions to postpaid customers, comprising 52.5% (48.7%) of our total mobile customer base. For the full year, our postpaid customers expanded by 797 thousand net additions, while prepaid customers declined by 1.8 million in line with our strategy of focusing on valuable customers.

We registered solid customer growth on the fixed front with all time high quarterly net additions of 147 thousand, of which 52 thousand were fiber and 95 thousand were ADSL. Accordingly, our fixed customers reached 1.9 million, while our fiber customers exceeded 1 million. Annually, we reported 342 thousand net additions to our fixed customer base; 144 thousand were fiber and 197 thousand were ADSL customers. IPTV customers reached 360 thousand on 36 thousand quarterly, and 136 thousand annual net additions. Mobile TV has been downloaded by 2.5 million users to date.

Mobile churn declined 2.3pp in Q416 year-on-year and 2.7pp for the full year on the back of our value focused customer strategy, and value propositions that meet our customers’ needs. On the fixed side, the churn rate was at 5.3% (5.2%) in Q416 and at 18.9% (16.7%) for the full year.

We reached all time high quarterly mobile ARPU of TRY29.2 registering record high growth of 16.3% in Q416 year-on-year. For the full year mobile ARPU reached a record high of TRY26.8 on 9.4% growth. Mobile ARPU growth was mainly driven by our upsell strategy, favourable change in customer mix, focus on high value customer groups, and increased package penetration. The triple play ratio, which includes customers of voice, data and digital services combined reached 42%1 and contributed to the ARPU rise.

Fixed residential ARPU rose 1.6% in Q416 and 4.9% for the full year with the increase in multiplay customers with TV2 to 36% of total residential fiber customers, along with upsell efforts.

We saw solid demand for our mobile data offerings with the introduction of 4.5G, which led to 68.4% growth in average mobile data usage per user in Q416 and 64.7% for the full year. Average mobile data usage of 4.5G users increased to 5GB in December 2016.

Mobile MoU rose 10.7% in Q416 and 9.2% for the full year with an increased postpaid base and upsell efforts.

Smartphone penetration on our network reached 64% with 759 thousand quarterly and 3.1 million annual net additions. Accordingly, there were 19.2 million smartphones on our network at quarter end, with 55% being 4.5G enabled.

(1) Breakdown among mobile voice users which excludes subscribers who do not use their line in the last 3 months
(2) Multiplay customers with TV: Internet + TV users & internet + TV + voice users

TURKCELL INTERNATIONAL

lifecell* Financial Data   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Revenue (million UAH) 1,158.9   1,313.7   13.4%   4,476.5   4,837.5   8.1%
EBITDA (million UAH) 421.0 362.8 (13.8%) 1,485.2 1,356.4 (8.7%)
EBITDA margin (UAH) 36.3% 27.6% (8.7pp) 33.2% 28.0% (5.2pp)
Net income / (loss) (million UAH)** (130.2) (62.5) (52.0%) (4,438.7) 928.3 n.m
Capex (million UAH)   490.3   847.0   72.8%   5,959.1   2,255.8   (62.1%)
Revenue (million TRY) 146.9 165.6 12.7% 564.3 570.7 1.1%
EBITDA (million TRY) 53.3 45.8 (14.1%) 187.7 159.9 (14.8%)
EBITDA margin (TRY) 36.3% 27.6% (8.7pp) 33.3% 28.0% (5.3pp)
Net income / (loss) (million TRY)**   (16.8)   (7.9)   (53.0%)   (541.3)   98.3   n.m

(*) Since July 10, 2015, we hold a 100% stake in lifecell.

(**)During 3rd quarter of 2015, foreign exchange gains and losses arising from receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely occur in the foreseeable future, were considered to form part of a net investment in a foreign operation and were recognized directly in equity in the foreign currency translation differences in the consolidated financial statements. Exchange differences arising in the foreign operations’ individual financial statements which were recognized directly in equity in the foreign currency translation differences in the consolidated financial statements were eliminated from the individual financial statements above for reporting purposes.

lifecell, registering solid year-on-year growth of 13.4% in local currency terms, reached record high quarterly revenues of UAH1,314 million (UAH1,159 million) in Q416. This was mainly driven by the rise in mobile data revenues on the back of higher data usage on the 3G+ network and the increased contribution of terminal sales. lifecell’s EBITDA fell by 13.8% in local currency terms leading to an EBITDA margin of 27.6% (36.3%). This was due to higher network related costs resulting from the 3G+ roll-out and operational leasing expense post tower related sale and leaseback transactions, as well as higher marketing expenses. lifecell’s revenues in TRY terms grew by 12.7%, while EBITDA declined 14.1% year-on-year in Q416.

For the full year, lifecell revenues in local currency terms rose by 8.1%, while the EBITDA margin was at 28.0%. Impacted by annual devaluation, lifecell registered limited revenue growth of 1.1% in TRY terms, while EBITDA declined by 14.8%.

lifecell* Operational Data   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Number of subscribers (million)1 13.5   12.4   (8.1%)   13.5   12.4   (8.1%)
Active (3 months)2 10.6 9.2 (13.2%) 10.6 9.2 (13.2%)
MOU (minutes) (12 months) 146.0 141.3 (3.2%) 150.0 140.5 (6.3%)
ARPU (Average Monthly Revenue per User),

blended (UAH)

28.4 35.2 23.9% 27.0 31.3 15.9%
Active (3 months) (UAH)   36.2   46.0   27.1%   35.5   40.6   14.4%

(1) We may occasionally offer campaigns and tariff schemes that have an active subscriber life differing from the one that we normally use to deactivate subscribers and calculate churn.

(2) Active subscribers are those who in the past three months made a revenue generating activity.

(*) Since July 10, 2015, we hold a 100% stake in lifecell.

lifecell continued its focus on expanding the 3G+ network in Q416, offering the largest geographical coverage in Ukraine. The adoption of customers to 3G+ services continued as the number of three-month active 3G data users reached 3.3 million. This led to increased overall data usage on the lifecell network, as data consumption per data user more than doubled since the introduction of 3G+. lifecell remained the market leader in terms of smartphone penetration, which rose to 57% in Q416.

lifecell’s three-month active subscriber base declined to 9.2 million, mainly due to decreasing multiple SIM card usage. Blended ARPU (3-month active) rose by 27.1% in Q416 and 14.4% for the full year, mainly driven by increased mobile data usage as well as smartphone tariffs with higher ARPU. MoU (12-month active) fell 3.2% in Q416 and 6.3% for the full year, due to changing consumer behaviour.

BeST*   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Number of subscribers (million)1 1.5   1.6   6.7%   1.5   1.6   6.7%
Active (3 months)   1.1   1.2   9.1%   1.1   1.2   9.1%
Revenue (million BYN) 23.2 26.5 14.2% 82.6 98.6 19.4%
EBITDA (million BYN) 0.9 1.6 77.8% 1.8 3.9 116.7%
EBITDA margin (BYN) 3.7% 6.1% 2.4pp 2.2% 4.0% 1.8pp
Net loss (million BYN)** (12.4) (9.9) (20.2%) (303.5) (43.5) (85.7%)
Capex (million BYN)   5.3   3.3   (37.7%)   11.7   11.1   (5.1%)
Revenue (million TRY) 38.1 44.5 16.8% 141.6 150.0 5.9%
EBITDA (million TRY) 1.4 2.8 100.0% 3.1 6.2 100.0%
EBITDA margin (TRY) 3.7% 6.2% 2.5pp 2.2% 4.1% 1.9pp
Net loss (million TRY)** (20.3) (16.5) (18.7%) (531.3) (65.6) (87.7%)
Capex (million TRY)   7.3   7.8   6.8%   18.2   19.9   9.3%

(1) Starting from Q116, subscriber figure for BeST includes suspended subscriptions whose contracts are still in place. All figures presented in this document for prior periods have been restated to reflect this change.

(*)BeST, in which we hold an 80% stake, has operated in Belarus since July 2008.

(**)During 3rd quarter of 2015, foreign exchange gains and losses arising from receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely occur in the foreseeable future, were considered to form part of a net investment in a foreign operation and were recognized directly in equity in the foreign currency translation differences in the consolidated financial statements. Exchange differences arising in the foreign operations’ individual financial statements which were recognized directly in equity in the foreign currency translation differences in the consolidated financial statements were eliminated from the individual financial statements above for reporting purposes.

BeST revenues rose by 14.2% year-on-year in Q416 in local currency terms driven by subscriber base expansion along with increased voice and terminal revenues on higher smartphone sales. BeST registered an EBITDA margin improvement of 2.4pp to 6.1% (3.7%), mainly driven by top-line growth and better operational expense management. BeST’s revenues in TRY terms grew by 16.8% year-on-year, while EBITDA in TRY terms doubled.

For the full year, revenues in local currency terms rose by 19.4% with EBITDA ramping up 116.7% leading to an EBITDA margin of 4.0% (2.2%). Revenues in TRY terms increased by 5.9%, limited by annual devaluation, while EBITDA rose by 100%.

BeST continued to offer 4G services to its customers in Minsk city centre in partnership with beCloud. From September 2016 onwards, a wide range of commercial product portfolio covering 4G packages have been offered. As part of Turkcell’s global digital services strategy, BeST is committed to offering new mobile services.

KKTCELL (million TRY)*   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Number of subscribers (million)1 0.4   0.5   25.0%   0.4   0.5   25.0%
Revenue 33.4 35.7 6.9% 130.9 135.9 3.8%
EBITDA 12.4 12.3 (0.8%) 50.3 50.0 (0.6%)
EBITDA margin 37.1% 34.4% (2.7pp) 38.4% 36.8% (1.6pp)
Net income 7.9 3.6 (54.4%) 30.1 28.6 (5.0%)
Capex   14.1   11.4   (19.1%)   29.6   24.4   (17.6%)

(1) Starting from Q116, subscriber figure for KKTCELL includes M2M subscriptions as well. All figures presented in this document for prior periods have been restated to reflect this change.

(*) KKTCELL, in which we hold a 100% stake, has operated in Northern Cyprus since 1999.

Kuzey Kıbrıs Turkcell revenues rose by 6.9% year-on-year in Q416, reflecting mobile data growth on the back of higher data demand. EBITDA declined by 0.8% leading to an EBITDA margin of 34.4% (37.1%), mainly due to increased marketing expenses in relation to the launch of our digital brand lifecell.

For the full year, revenues grew by 3.8%, while EBITDA declined by 0.6%, leading to an EBITDA margin of 36.8% (38.4%). The decline in EBITDA margin was driven by higher marketing expenses.

Fintur has operations in Azerbaijan, Kazakhstan, Moldova and Georgia, and we hold a 41.45% stake in the company. In accordance with our strategic approach and IFRS requirements, Fintur is classified as ‘held for sale’ and reported as discontinued operations as of October 2016*. Going forward, during discontinued operation classification period, our profit & loss statement will not be impacted by Fintur results.

Turkcell Group Subscribers

Turkcell Group subscribers amounted to approximately 50.1 million as of December 31, 2016. This figure is calculated by taking the number of subscribers of Turkcell Turkey and each of our subsidiaries. It includes the total number of mobile, fiber, ADSL and IPTV subscribers of Turkcell Turkey, and the mobile subscribers of lifecell and BeST, as well as those of Kuzey Kıbrıs Turkcell and Turkcell Europe.

             
Turkcell Group Subscribers   Q415   Q416   y/y %
Mobile Postpaid (million)   16.6   17.4   4.8%
Mobile Prepaid (million) 17.4 15.7 (9.8%)
Fiber (thousand) 899.4 1,043.9 16.1%
ADSL (thousand) 620.8 818.0 31.8%
IPTV (thousand) 223.7 359.7 60.8%
Turkcell Turkey subscribers (million)1 35.8 35.3 (1.4%)
Ukraine 13.5 12.4 (8.1%)
Belarus2 1.5 1.6 6.7%
KKTCELL3 0.5 0.5 -
Turkcell Europe4 0.3 0.3 -
Turkcell Group Subscribers (million)   51.6   50.1   (2.9%)

(1) Subscribers to more than one service are counted separately for each service.
(2) Starting from Q116, subscriber figure for BeST includes suspended subscriptions whose contracts are still in place. All figures presented in this document for prior periods have been restated to reflect this change.
(3) Starting from Q116, subscriber figure for KKTCELL includes M2M subscriptions as well. All figures presented in this document for prior periods have been restated to reflect this change.
(4) The “wholesale traffic purchase” agreement, signed between Turkcell Europe GmbH operating in Germany and Deutsche Telekom for five years in 2010, had been modified to reflect the shift in business model to a “marketing partnership”. The new agreement between Turkcell and a subsidiary of Deutsche Telekom was signed on August 27, 2014. The transfer of Turkcell Europe operations to Deutsche Telekom’s subsidiary was completed on January 15, 2015. Subscribers are still included in the Turkcell Group Subscriber figure.

(*)For further details, please refer to our consolidated financial statements and notes as at and for December 31, 2016 which can be accessed via our web site in the investor relations section (www.turkcell.com.tr).

OVERVIEW OF THE MACROECONOMIC ENVIRONMENT

The foreign exchange rates used in our financial reporting, along with certain macroeconomic indicators, are set out below.

  Quarter   Year
Q415   Q316   Q416   y/y%   q/q%   FY15   FY16   y/y%
GDP Growth (Turkey) 7.4% (1.8%) n.a n.a n.a 6.1% n.a n.a
Consumer Price Index (Turkey) 2.4% 1.1% 3.6% 1.2pp 2.5pp 8.8% 8.5% (0.3pp)
US$ / TRY rate
Closing Rate 2.9076 2.9959 3.5192 21.0% 17.5% 2.9076 3.5192 21.0%
Average Rate 2.9366 2.9706 3.2591 11.0% 9.7% 2.7271 3.0059 10.2%
EUR / TRY rate
Closing Rate 3.1776 3.3608 3.7099 16.8% 10.4% 3.1776 3.7099 16.8%
Average Rate 3.2000 3.3104 3.5147 9.8% 6.2% 3.0219 3.3179 9.8%
US$ / UAH rate
Closing Rate 24.00 25.91 27.19 13.3% 4.9% 24.00 27.19 13.3%
Average Rate 23.18 25.28 25.88 11.6% 2.4% 21.79 25.56 17.3%
US$ / BYN rate*
Closing Rate 1.8569 1.9264 1.9585 5.5% 1.7% 1.8569 1.9585 5.5%
Average Rate   1.7909   1.9732   1.9403   8.3%   (1.7%)   1.5917   1.9846   24.7%

* The official currency of the Republic of Belarus has been redenominated on July 1, 2016. As a result, BYR10,000 has become BYN1 starting from 1 July 2016. Prior periods have been adjusted accordingly for presentation purposes.

RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS: We believe Adjusted EBITDA, among other measures, facilitates performance comparisons from period to period and management decision making. It also facilitates performance comparisons from company to company. Adjusted EBITDA as a performance measure eliminates potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact of changes in effective tax rates on periods or companies) and the age and book depreciation of tangible assets (affecting relative depreciation expense). We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties in evaluating the performance of other mobile operators in the telecommunications industry in Europe, many of which present Adjusted EBITDA when reporting their results.

Our Adjusted EBITDA definition includes Revenue, Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses and Administrative expenses, but excludes translation gain/(loss), finance income, share of profit of equity accounted investees, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense).

Nevertheless, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations, as reported under IFRS. The following table provides a reconciliation of Adjusted EBITDA, as calculated using financial data prepared in accordance with IFRS as issued by the IASB, to net profit, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS as issued by the IASB.

Turkcell Group (million TRY)   Quarter   Year
Q415   Q416   y/y%   FY15   FY16   y/y%
Adjusted EBITDA 1,058.2 1,371.1 29.6% 4,140.5 4,619.5 11.6%
Finance income 153.5 493.9 221.8% 756.1 1,064.8 40.8%
Finance costs (141.0) (692.2) 390.9% (799.5) (1,237.6) 54.8%
Other income / (expense) (31.1) (44.4) 42.8% (225.9) (234.3) 3.7%
Depreciation and amortization (437.0) (604.3) 38.3% (1,667.8) (2,203.2) 32.1%
Consolidated profit from continued operations before income tax & minority interest 602.6 524.1 (13.0%) 2,203.3 2,009.2 (8.8%)
Income tax expense (109.2) (111.3) 1.9% (667.1) (423.2) (36.6%)
Consolidated profit from continued operations before minority interest 493.3 412.8 (16.3%) 1,536.2 1,586.0 3.2%
Discontinued operations 98.4 (44.4) (145.1%) 367.3 (42.2) (111.5%)
Consolidated profit before minority interest   591.8   368.4   (37.7%)   1,903.6   1,543.8   (18.9%)

NOTICE: This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. This includes, in particular, our targets for revenue, EBITDA and capex in 2017 and for the medium term 2017 to 2019. More generally, all statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, "will," "expect," "intend," "estimate," "believe", "continue" and “guidance”.

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 2015 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

The Company makes no representation as to the accuracy or completeness of the information contained in this press release, which remains subject to verification, completion and change. No responsibility or liability is or will be accepted by the Company or any of its subsidiaries, board members, officers, employees or agents as to or in relation to the accuracy or completeness of the information contained in this press release or any other written or oral information made available to any interested party or its advisers.

ABOUT TURKCELL: Turkcell is a converged telecommunication and technology services provider, founded and headquartered in Turkey. It serves its customers with voice, data, TV and value-added consumer and enterprise services on mobile and fixed networks. Turkcell launched LTE services in its home country on April 1st, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. In 2G and 3G, Turkcell’s population coverage is at 99.67% and 96.04%, respectively, as of December 2016. It offers up to 1 Gbps fiber internet speed with its FTTH services. Turkcell Group companies operate in 6 countries – Turkey, Ukraine, Belarus, Northern Cyprus, Germany, Azerbaijan – as of December 31, 2016. Turkcell Group reported a TRY14.3 billion revenue in FY16 with total assets of TRY31.6 billion as of December 31, 2016. It has been listed on the NYSE and the BIST since July 2000, and is the only NYSE-listed company in Turkey. Read more at www.turkcell.com.tr

This press release can also be viewed using the Turkcell Investor Relation app, which can be downloaded here for iOS, and here for Android mobile devices.

Appendix A – Tables

Table: Translation gain and loss details

Million TRY   Quarter   Year
Q415   Q416   y/y %   FY15   FY16   y/y %
Turkcell Turkey 45.9   (499.1)   n.m   402.1   (759.5)   (288.9%)
Turkcell International 2.2 (29.6) n.m (892.3) (37.4) (95.8%)
Other Subsidiaries (2.9) 6.3 n.m 0.9 7.2 700.0%
Turkcell Group   45.2   (522.4)   n.m   (489.3)   (789.7)   61.4%

Table: Income tax expense details

Million TRY   Quarter   Year
Q415   Q416   y/y %   FY15   FY16   y/y %
Current Tax expense (46.3)   (12.4)   (73.2%)   (591.3)   (200.7)   (66.1%)
Deferred Tax Income/expense (62.9) (98.9) 57.2% (75.8) (222.5) 193.5%
Income Tax expense   (109.2)   (111.3)   1.9%   (667.1)   (423.2)   (36.6%)

Table: Reconciliation of proforma net income to net income per IFRS

Group net income:

             
Net income impacts (million TRY)   Q415 Net income impacts (million TRY)   Q416
   
Proforma net income 610 Proforma net income 706
FX impact (net of tax and minority interest) 38 FX impact (net of tax) (427)
Interest income (net of tax) 16 Interest income (net of tax) 332
Interest expense (net of tax) (43) Interest expense (net of tax) (134)
 
One-off impacts (net of tax) One-off impacts (net of tax)
 
Commercial Agreement Termination (6)
Turk Telekom Settlement (51)
4.5G VAT receivables discount (30) 4.5G VAT receivables discount 1
4.5G license amortization (6) 4.5G license amortization (81)
Fintur impact 93 Fintur impact (42)
Other impacts (37) Other impacts (4)
Net income - IFRS   584 Net income -IFRS   351
             
Net income impacts (million TRY)   FY15 Net income impacts (million TRY)   FY16
   
Proforma net income 2,348 Proforma net income 2,522
FX impact (net of tax and minority interest) (404) FX impact (net of tax) (643)
Interest income (net of tax) 181 Interest income (net of tax) 403
Interest expense (net of tax) (118) Interest expense (net of tax) (342)
 
One-off impacts (net of tax) One-off impacts (net of tax)
 
Commercial Agreement Termination (118) Coup attempt emergency

communication packages

(48)
Turk Telekom Settlement (51) Expenses incurred in relation to tax amnesty (136)
4.5G VAT receivables discount (30) 4.5G VAT receivables discount 30
4.5G license amortization (6) 4.5G license amortization (260)
Fintur impact 349 Fintur impact (40)
Other impacts (83) Other impacts 6
Net income - IFRS   2,068 Net income - IFRS   1,492

Turkcell Turkey net income:

             
Net income impacts (million TRY)   Q415 Net income impacts (million TRY)   Q416
   
Proforma net income 584 Proforma net income 656
FX impact (net of tax) 37 FX impact (net of tax) (399)
Interest income (net of tax) 16 Interest income (net of tax) 332
Interest expense (net of tax) (19) Interest expense (net of tax) (127)
 
One-off impacts (net of tax) One-off impacts (net of tax)
 
Commercial Agreement Termination (6)
Turk Telekom Settlement (51)
4.5G VAT receivables discount (30) 4.5G VAT receivables discount 1
4.5G license amortization (6) 4.5G license amortization (81)
Other impacts (7) Other impacts 4
Net income - IFRS   518 Net income -IFRS   386
             
Net income impacts (million TRY)   FY15 Net income impacts (million TRY)   FY16
   
Proforma net income 2,291 Proforma net income 2,384
FX impact (net of tax) 302 FX impact (net of tax) (608)
Interest income (net of tax) 181 Interest income (net of tax) 403
Interest expense (net of tax) (39) Interest expense (net of tax) (301)
 
One-off impacts (net of tax) One-off impacts (net of tax)
 
Commercial Agreement Termination (118) Coup attempt emergency

communication packages

(48)
Turk Telekom Settlement (51) Expenses incurred in relation to tax amnesty (136)
4.5G VAT receivables discount (30) 4.5G VAT receivables discount 30
4.5G license amortization (6) 4.5G license amortization (260)
Other impacts (46) Other impacts 16
Net income - IFRS   2,484 Net income - IFRS   1,480
 
TURKCELL ILETISIM HIZMETLERI A.S.

IFRS SELECTED FINANCIALS (TRY Million)

       
                 
Quarter Ended Quarter Ended Quarter Ended Year Ended Year Ended
December 31, September 30, December 31, December 31, December 31,

2015

2016

2016

2015

2016

 
 
Consolidated Statement of Operations Data
Turkcell Turkey 2,997.8 3,275.7 3,576.2 11,480.9 12,787.6
Consumer 2,391.0 2,625.8 2,867.3 9,127.3 10,216.0
Corporate 529.2 536.4 591.1 2,031.7 2,191.5
Other 77.6 113.5 117.8 321.9 380.1
Turkcell International 223.8 222.4 251.6 856.1 874.7
Other 112.9 160.4 215.8 432.4 623.3
Total revenues 3,334.5 3,658.5 4,043.6 12,769.4 14,285.6
Direct cost of revenues (2,054.8)   (2,372.6)   (2,608)   (7,769.5)   (9,236.6)
Gross profit 1,279.7 1,285.9 1,435.3 4,999.9 5,049.0
Administrative expenses (165.9) (177.3) (190.0) (625.3) (721.8)
Selling & marketing expenses (492.6) (468.0) (478.5) (1,901.9) (1,910.9)
Other Operating Income / (Expense) (31.1)   (192.6)   (44.4)   (225.9)   (234.3)
Operating profit before financing costs 590.1 448.0 722.4 2,246.8 2,182.0
Finance costs (141.0) (349.7) (692.2) (799.5) (1,237.6)
Finance income 153.5 187.2 493.9 756.1 1,064.8
Discontinued operations 98.4   (5.1)   (44.4)   367.3   (42.2)
Income before tax and non-controlling interest 701.0 280.4 479.7 2,570.7 1,967.0
Income tax expense (109.2)   (106.3)   (111.3)   (667.1)   (423.2)
Income before non-controlling interest 591.8 174.1 368.4 1,903.6 1,543.8
Non-controlling interests (7.6)   (11.5)   (17.7)   164.1   (51.7)
Net income 584.2   162.6   350.7   2,067.7   1,492.1
 
Net income per share 0.27 0.07 0.16 0.94 0.68
 
Other Financial Data
 
Gross margin 38.4% 35.1% 35.5% 39.2% 35.3%
EBITDA(*) 1,058.2 1,217.6 1,371.1 4,140.5 4,619.5
Capital expenditures 6,188.9 743.2 1,133.5 8,536.2 3,494.7
 
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents 2,918.8 5,646.2 6,052.4 2,918.8 6,052.4
Total assets 26,207.3 30,230.3 31,600.2 26,207.3 31,600.2
Long term debt 3,487.8 6,445.2 6,935.1 3,487.8 6,935.1
Total debt 4,214.2 8,131.5 9,781.2 4,214.2 9,781.2
Total liabilities 11,788.4 14,785.1 15,531.8 11,788.4 15,531.8
Total shareholders’ equity / Net Assets 14,418.9 15,445.3 16,068.4 14,418.9 16,068.4
 
 
(*) Please refer to the notes on reconciliation of Non-GAAP Financial measures on page 14
(**) For further details, please refer to our consolidated financial statements and notes as at 31 December 2016 on our web site
 
TURKCELL ILETISIM HIZMETLERI A.S.

TURKISH ACCOUNTING STANDARDS SELECTED FINANCIALS (TRY Million)

       
                 
Quarter Ended Quarter Ended Quarter Ended Year Ended Year Ended
December 31, September 30, December 31, December 31, December 31,

2015

2016

2016

2015

2016

 
 
Consolidated Statement of Operations Data
Turkcell Turkey 2,997.8 3,275.7 3,576.2 11,480.9 12,787.6
Consumer 2,391.0 2,625.8 2,867.3 9,127.3 10,216.0
Corporate 529.2 536.4 591.1 2,031.7 2,191.5
Other 77.6 113.5 117.8 321.9 380.1
Turkcell International 223.8 222.4 251.6 856.1 874.7
Other 112.9 160.4 215.8 432.4 623.3
Total revenues 3,334.5 3,658.5 4,043.6 12,769.4 14,285.6
Direct cost of revenues (2,054.2)   (2,356.3)   (2,608.4)   (7,766.5)   (9,219.1)
Gross profit 1,280.3 1,302.2 1,435.2 5,002.9 5,066.5
Administrative expenses (165.9) (177.3) (190.0) (625.3) (721.8)
Selling & marketing expenses (492.6) (468.0) (478.5) (1,901.9) (1,910.9)
Other Operating Income / (Expense) (15.9)   105.9   545.4   925.0   1,016.9
Operating profit before financing and investing costs 605.9 762.8 1,312.1 3,400.7 3,450.7
Income from investing activities 6.2 7.6 8.3 14.9 24.6
Expense from investing activities (27.5) (6.5) (40.3) (74.3) (59.9)
Discontinued operations 98.4   (5.1)   (44.4)   367.3   (42.2)
Income before financing costs 683.0 758.8 1,235.7 3,708.6 3,373.2
Finance income - - 385.6 - 385.6
Finance expense 18.6   (456.1)   (1,141.7)   (1,135.1)   (1,768.8)
Income before tax and non-controlling interest 701.6 302.7 479.6 2,573.5 1,990.0
Income tax expense (109.4)   (109.4)   (111.3)   (667.7)   (426.6)
Income before non-controlling interest 592.2 193.3 368.3 1,905.8 1,563.4
Non-controlling interest (7.6)   (11.5)   (17.7)   164.1   (51.7)
Net income 584.6 181.8 350.6 2,069.9 1,511.7
 
Net income per share 0.27 0.08 0.16 0.94 0.69
 
Other Financial Data
 
Gross margin 38.4% 35.6% 35.5% 39.2% 35.5%
EBITDA(*) 1,058.2 1,217.6 1,371.1 4,140.5 4,619.5
Capital expenditures 6,188.9 743.2 1,133.5 8,536.2 3,494.7
 
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents 2,918.8 5,646.2 6,052.4 2,918.8 6,052.4
Total assets 26,184.2 30,230.3 31,600.2 26,184.2 31,600.2
Long term debt 3,487.8 6,445.2 6,935.1 3,487.8 6,935.1
Total debt 4,214.2 8,131.5 9,781.2 4,214.2 9,781.2
Total liabilities 11,784.9 14,785.1 15,531.8 11,785.4 15,531.8
Total shareholders’ equity / Net Assets 14,399.3 15,445.3 16,068.4 14,399.3 16,068.4

Contacts

Turkcell
Investor Relations

Korhan Bilek, +90-212-313 1888
Director
investor.relations@turkcell.com.tr
or
Corporate Communications:
Tel: + 90 212 313 2321
Turkcell-Kurumsal-Iletisim@turkcell.com.tr

Release Summary

Turkcell releases FY2016 and Q4 results, announcing the highest growth of the past 10 years on the back of 4.5G.

Contacts

Turkcell
Investor Relations

Korhan Bilek, +90-212-313 1888
Director
investor.relations@turkcell.com.tr
or
Corporate Communications:
Tel: + 90 212 313 2321
Turkcell-Kurumsal-Iletisim@turkcell.com.tr