Turkcell Iletisim Hizmetleri Fırst Quarter 2013 Results "Growth Momentum Sustained" PR Newswire ISTANBUL, April 17, 2013 ISTANBUL, April 17, 2013 /PRNewswire/ -- Content HIGHLIGHTS COMMENTS FROM THE CEO, SUREYYA CILIV FINANCIAL AND OPERATIONAL REVIEW OF THE FIRST QUARTER 2013 FINANCIAL REVIEW OF TURKCELL GROUP OPERATIONAL REVIEW IN TURKEY OTHER DOMESTIC AND INTERNATIONAL OPERATIONS ASTELIT TURKCELL SUPERONLINE FINTUR TURKCELL GROUP SUBSCRIBERS OVERVIEW OF THE MACROECONOMIC ENVIRONMENT RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS oPlease 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"). All non-financial data is unconsolidated and comprises Turkcell only figures. The terms "we", "us", and "our" in this press release refer only to the Company, except in discussions of financial data, where such terms refer to the Group, and where context otherwise requires. oIn 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 March 31, 2013 refer to the same item as at March 31, 2012. For further details, please refer to our consolidated financial statements and notes as at and for March 31, 2013 which can be accessed via our web site in the investor relations section (http://www.turkcell.com.tr). oIn the tables used in this press release totals may not foot due to rounding differences. HIGLIGHTS OF THE FIRST QUARTER OF 2013 oTurkcell Group sustained its growth momentum, registering double-digit revenue and EBITDA growth year-on-year oGroup revenues rose by 13% to TRY2,688 million (TRY2,382 million) oGroup EBITDA^[^1^] increased by 15% to TRY808 million (TRY703 million), while Group EBITDA margin improved 0.5pp to 30.0% (29.5%) oTurkcell Turkey grew by 11% posting revenues of TRY2,201 million (TRY1,984 million): oVoice revenues^[^2^] increased by 9% to TRY1,585 million (TRY1,455 million) oMobile broadband & services revenues rose by 16% to TRY616 million (TRY529 million), and as a percentage of revenues climbed 1pp to 28% (27%) +Mobile broadband revenues rose by 39% to TRY319 million (TRY229 million) oTurkcell Turkey's EBITDA increased by 11% to TRY647 million (TRY581 million), while EBITDA margin was at 29.4% oSubsidiaries maintained their growth momentum, while increasing operational profitability oRevenues of subsidiaries^[^3^] grew by 23% to TRY488 million (TRY398 million) oEBITDA of subsidiaries^[^3^] improved by 33% to TRY161 million (TRY121 million) oTurkcell Group net income increased by 10% to TRY566 million (TRY515 million) (Logo: http://photos.prnewswire.com/prnh/20120614/537932-b ) COMMENTS FROM CEO, SUREYYA CILIV In the first quarter of 2013, Turkcell Group sustained its double-digit growth momentum achieved in 2012. Consolidated revenues grew by 13% to TRY2.7 billion, and EBITDA reached TRY808 million on 15% growth, while net income rose to TRY566 million. Turkcell Turkey registered an 11% rise in revenue stemming from 9% growth in the voice and 39% rise in mobile broadband business, along with increasing smartphone penetration. Turkcell Superonline, increasing the minimum fiber broadband speed in Turkey to 25Mbps, grew by 40%, while increasing its EBITDA margin to 27%. Meanwhile, our Ukraine operation increased its revenues by 9% in US$ terms to post an EBITDA margin of 28%, reflecting the successful implementation of its regional growth strategy. Competition in the Turkish mobile market continued in 2013 at an accelerated pace. In this environment, we believe that creating value for our customers through innovative solutions is worth more than the incremental gain of price discounts. Accordingly, we have continued to focus on innovation and operational excellence for superior customer experience so that our customers continue to see Turkcell as the only choice. On the strength of this vision, Turkcell has been voted "The Most Admired Company of Turkey" for the sixth consecutive quarter. We thank all of our customers, employees, business partners and shareholders, who together underpin the ongoing success of Turkcell. (1) EBITDA is a non-GAAP financial measure. See page 12 for the reconciliation of EBITDA to net cash from operating activities. (2) Voice revenues include outgoing, incoming, roaming and other (comprising almost 2% of Turkcell Turkey) revenues. (3) Including eliminations. OVERVIEW OF TURKCELL TURKEY In the first quarter of 2013, competition in the Turkish mobile market accelerated further. While we witnessed upward price movements in the second half of last year, the lower pricing environment prevailed as signaled mainly by the sub-brand offers of one of our competitors, starting in late 2012. The competitors overall continued to pursue market share gains by further decreasing the prices of mobile number portability ("MNP") offers in a climate where prices were already low. As a result of this approach of acquiring customers from other operators, the MNP market expanded significantly, which we believe for some time has limited market growth through new subscriptions, and also pressured profitability. Consequently, there has been no major change in mobile line penetration, which remained at around the 90% level. As Turkcell Turkey, we have continued to focus on innovation and operational excellence to deliver a superior customer experience and create value for our customers, as opposed to offering the incremental gain of price discounts. Indeed, our approach has expanded the postpaid subscriber base by 285 thousand quarterly net additions to 13.5 million, generating 66% of our revenues. Overall, our total subscriber base decreased by 268 thousand to 34.9 million, driven by losses in the prepaid segment. Growth momentum in the smartphone market continued, where we maintained our leadership with the contribution of our T-series and other affordable devices. The number of smartphones on our network reached 6.9 million with 0.7 million quarterly additions, whereby penetration reached 22%. Meanwhile, the "Turkcell Tablet" further widened access to mobile broadband, offering a superior customer experience in the growing tablet market. We also promoted speed-based and shared data plans to further improve customer experience, thereby highlighting our profitable growth strategy and superior network capabilities. On the regulatory front, an Information and Communication Technologies Authority (ICTA) board resolution dated March 13, 2013, raised the lower limit to be applied on our on-net voice tariffs to 0.0535 TRY/min (previously set at 0.0313 TRY/min), effective as of July 2013. The ICTA also set a lower limit of 0.0291 TRY/SMS on our on-net SMS tariffs. However, regarding these SMS tariffs, the ICTA, with a further decision dated April 12, 2013, revised the lower limit to 0.0073 TRY/SMS, effective as of July 2013. In addition, the ICTA decreased the SMS termination rates for all operators, and accordingly, Turkcell's SMS termination rate decreased from 0.0170 TRY/SMS to 0.0043 TRY/SMS. However, certain points regarding the implementation of these decisions remain unclear at the date of this press release. In any case, our understanding at this time is that these decisions are very likely to have an adverse impact on our overall business in 2013. Upon obtaining further clarification regarding these points, we will evaluate and communicate the resulting material impact, if any, on our 2013 outlook. As Turkcell Turkey, our business operations are based on providing excellent service and best customer experience by developing cutting edge technologies. We have achieved this on the strength of our innovative approach and substantial, ongoing investment in the technology and service arena. Our leadership of these efforts has clearly triggered other investments in Turkey, thus helping to develop local businesses, while contributing to the lives of our people, and our economy. Consequently, Turkey is now the number one country in the world in terms population coverage, and one of the leading providers of the highest speed broadband access through mobile and fiber technologies. Therefore, in light of this, we believe that in the long run, the ICTA will introduce the necessary rules and regulations to support equal access to products and services, as well as investments and a fair competitive environment. FINANCIAL AND OPERATIONAL REVIEW OF THE FIRST QUARTER 2013 The following discussion focuses principally on the developments and trends in our business in the first quarter of 2013 in TRY terms. Selected financial information for the first and fourth quarters of 2012, and the first quarter of 2013, both in TRY and US$ prepared in accordance with IFRS and in TRY prepared in accordance with the Capital Markets Board of Turkey's standards are also included at the end of this press release. Financial Review of Turkcell Group Profit & Loss Statement (million TRY) Q112 Q412 Q113 y/y % q/q % Total Revenue 2,381.8 2,807.3 2,688.4 12.9% (4.2%) Direct cost of revenues (1,491.3) (1,760.1) (1,687.3) 13.1% (4.1%) Direct cost of revenues/revenues (62.6%) (62.7%) (62.8%) (0.2pp) (0.1pp) Depreciation and amortization (333.1) (395.5) (360.4) 8.2% (8.9%) Gross Margin 37.4% 37.3% 37.2% (0.2pp) (0.1pp) Administrative expenses (118.1) (125.9) (128.9) 9.1% 2.4% Administrative expenses/revenues (5.0%) (4.5%) (4.8%) 0.2pp (0.3pp) Selling and marketing expenses (402.8) (469.0) (425.0) 5.5% (9.4%) Selling and marketing expenses/revenues (16.9%) (16.7%) (15.8%) 1.1pp 0.9pp EBITDA 702.7 847.8 807.6 14.9% (4.7%) EBITDA Margin 29.5% 30.2% 30.0% 0.5pp (0.2pp) Net finance income / (expense) 161.8 79.4 129.3 (20.1%) 62.8% Finance expense (58.3) (79.5) (37.4) (35.8%) (53.0%) Finance income 220.1 158.9 166.7 (24.3%) 4.9% Share of profit of associates 49.5 42.5 68.6 38.6% 61.4% Other income / (expense) (6.5) (23.9) (0.3) (95.4%) (98.7%) Monetary gains / (losses) 40.5 42.6 53.5 32.1% 25.6% Non-controlling interests 4.7 3.2 4.4 (6.4%) 37.5% Income tax expense (104.8) (136.9) (137.1) 30.8% 0.1% Net Income 514.8 459.2 565.6 9.9% 23.2% (1) Including depreciation and amortization expenses. (2) EBITDA is a non-GAAP financial measure. See page 12 for the reconciliation of EBITDA to net cash from operating activities. Revenue grew by 13% year-on-year to TRY2,688.4 million (TRY2,381.8 million) mainly due to an 11% increase in Turkcell Turkey's revenues and a 23% rise in the contribution of subsidiaries. oTurkcell Turkey posted voice revenue growth of 9% to TRY1,585 million (TRY1,455 million), while mobile broadband and services revenues grew by 16% to TRY616 million (TRY529 million). oMobile broadband revenues reached TRY319 million (TRY229 million) on solid growth of 39%. oMobile broadband and services revenues constituted 28% (27%) of Turkcell Turkey revenues. oThe contribution of subsidiaries to the topline increased to 18% (17%). In particular, Turkcell Superonline grew its revenues by 40% to TRY203 million (TRY145 million), while Astelit's revenues rose by 9% to US$99 million (US$91 million). Compared to the previous quarter, revenues fell by 4%, mainly due to the lower voice revenues of Turkcell Turkey and a lower contribution from group companies, driven mainly by seasonality. Direct cost of revenues grew by 13.1% to TRY1,687.3 million (TRY1,491.3 million), while as a percentage of revenues rising to 62.8% (62.6%) on a consolidated basis. This was driven mainly by the increase in interconnect costs (1.3pp) and other cost items (0.1pp), as opposed to the decrease in network related costs (0.6pp) and depreciation&amortization (0.6pp). On September, 26^th 2012, the ICTA took the decision enabling users of mobile lines without subscription to register those lines under their names at no charge until October 1^st, 2013. Taxes and other fees relevant to the registration process should be compensated by the user's own mobile operator. The decision also grants former holders of those mobile lines the right to appeal the registration process until October 1^st, 2014. Direct cost of revenues included tax expense of TRY16 million in relation to the registration of such GSM lines in Q113. We expect a similar impact in the following quarters until October 1^st, 2013. Compared to the previous quarter, direct costs as a percentage of revenues rose by 0.1pp to 62.8% (62.7%), mainly due to increased wages&salaries (0.3pp) and other cost items (0.5pp), as opposed to the decrease in depreciation&amortization (0.7pp). The table below presents the interconnect revenues and costs of Turkcell Turkey: Million TRY Q112 Q412 Q113 y/y % q/q % Interconnect revenues 221.1 314.1 305.6 38.2% (2.7%) as a % of revenues 11.1% 13.7% 13.9% 2.8pp 0.2pp Interconnect costs (235.0) (308.6) (299.4) 27.4% (3.0%) as a % of revenues (11.8%) (13.5%) (13.6%) (1.8pp) (0.1pp) Administrative expenses as a percentage of revenues declined 0.2pp to 4.8% (5.0%) in Q113. This was driven mainly by the decrease in various cost items. Compared to the previous quarter, administrative expenses as a percentage of revenues rose by 0.3pp, driven by increased legal follow up expenses (0.2pp) and other cost items (0.1pp). Selling and marketing expenses as a percentage of revenues decreased 1.1pp to 15.8% (16.9%) in Q113 due to the decline in selling expenses (0.9pp) and marketing expenses (0.5pp), as opposed to the rise in other cost items (0.3pp). On a quarter-on-quarter basis, selling and marketing expenses as a percentage of revenues decreased by 0.9pp to 15.8% from 16.7% in Q412, mainly due to lower marketing expenses (0.6pp) and, selling expenses (0.4pp) as opposed to the rise in the frequency usage fee (0.1pp). EBITDA rose by 14.9% to TRY807.6 million (TRY702.7 million) in Q113, while the EBITDA margin increased to 30.0% (29.5%). The 0.8pp increase in direct cost of revenues (excluding depreciation and amortization) as a percentage of revenues was offset by a 1.1pp decrease in selling and marketing expenses, and 0.2pp fall in administrative expenses. EBITDA margin declined by 0.2pp compared to the previous quarter due to the increase in direct cost of revenues (excluding depreciation and amortization) by 0.8pp and rise in administrative expenses of 0.3pp, which was offset by the 0.9pp decrease in selling and marketing expenses. The contribution of subsidiaries to Group EBITDA improved by 33% to TRY161 million (TRY121 million) with the improved EBITDA of Turkcell Superonline and Astelit in Q113 year-on-year. Please also note that in the first quarter of 2013, we achieved positive EBITDA in our Belarusian operations. Compared to the previous quarter, subsidiaries contribution to Group EBITDA rose by 10%. Net finance income decreased to TRY129.3 million in Q113 compared to TRY161.8 million in Q112 due to the decline in interest income resulting from lower interest rates, as well as a translation loss of TRY1 million as opposed to the translation gain of TRY37 million of Q112. Compared to the previous quarter, net finance income increased from TRY79.4 million to TRY129.3 million. In Q412, we incurred higher interest charges related to legal disputes. (*) EBITDA is a non-GAAP financial measure. See page 12 for the reconciliation of EBITDA to net cash from operating activities. Share of profit of equity accounted investees comprising our share in the net income of unconsolidated investees Fintur and A-Tel, rose by 38.6% year-on-year to TRY68.6 million (TRY49.5 million) mainly due to the increase in Fintur's net income. Compared to the previous quarter, our share in the net income of unconsolidated investees increased 61.4 % to TRY68.6 million (TRY42.5 million) driven mainly by the increase in Fintur's net income. Income tax expense stood at TRY137.1 million in Q113 on an increase of 30.8% compared to the Q112. The taxation charge rose 0.1% compared to Q412. Of the total tax charge, TRY138.7 million comprised the current tax charges, while TRY1.6 million of deferred tax was recorded. Million TRY Q112 Q412 Q113 y/y % q/q % Current Tax expense (119.1) (172.3) (138.7) 16.5% (19.5%) Deferred Tax Income/expense 14.3 35.4 1.6 (88.8%) (95.5%) Income Tax expense (104.8) (136.9) (137.1) 30.8% 0.1% Net income rose by 9.9% to TRY565.6 million in Q113 (TRY514.8 million) driven by higher EBITDA of TRY807.6 million (TRY702.7 million), as opposed to the decrease in net finance income to TRY129.3 million (TRY161.8 million) and the increase in depreciation and amortization expenses to TRY360.4 million (TRY333.1 million). Net income increased by 23.2% to TRY565.6 million (TRY 459.2 million), mainly due to higher net finance income of TRY129.3 (TRY79.4 million) and lower depreciation and amortization expenses of TRY360.4 million (TRY395.5 million), as opposed to the lower EBITDA of TRY807.6 million (TRY847.8 million). Total debt as of March 31, 2013, stood at TRY3,015 million (US$1,667 million) in consolidated terms. The debt balance of Ukraine was TRY1,256 million (US$694 million), Belarus was TRY911 million (US$504 million) and Turkcell Superonline was TRY568 million (US$314 million). TRY2,113 million (US$1,168 million) of our consolidated debt is at a floating rate, while TRY1,613 million (US$892 million) will mature within less than a year. As of March 31, 2013, our debt/annual EBITDA ratio in TRY terms decreased to 90%. (Please note that the figures in parentheses refer to US$ equivalents). Cash flow analysis: Capital expenditures including non-operational items amounted to TRY199.5 million in Q113, of which TRY117.1 million was related to Turkcell Turkey, TRY6.1 million to Astelit, TRY59.2 million to Turkcell Superonline and TRY7.6 million to BeST. The other cash flow item mainly related to change in working capital, corporate tax payment and frequency usage fee payment. Consolidated Cash Flow (million TRY) Q112 Q412 Q113 EBITDA 702.7 847.8 807.6 LESS: Capex and License (252.9) (713.4) (199.5) Turkcell (160.0) (399.8) (117.1) Ukraine (9.3) (60.6) (6.1) Investment & Marketable Securities 1,585.8 (32.6) (2.4) Net interest Income/ (expense) 125.3 85.5 129.9 Other (905.6) 391.2 (1,063.2) Net Change in Debt 53.8 (90.4) (60.4) Cash generated 1,309.1 488.1 (388.0) Cash balance 6,047.5 6,998.9 6,610.9 (1) EBITDA is a non-GAAP financial measurement. See page 12 for the reconciliation of EBITDA to net cash from operating activities. (2) The appreciation of reporting currency (TRY) against US$ is included in this line. Operational Review in Turkey Summary of Operational data Q112 Q412 Q113 y/y % q/q % Number of total subscribers (million) 34.5 35.1 34.9 1.2% (0.6%) Postpaid 12.0 13.2 13.5 12.5% 2.3% Prepaid 22.5 21.9 21.4 (4.9%) (2.3%) ARPU, blended (TRY) 19.2 21.7 21.0 9.4% (3.2%) Postpaid 36.5 38.1 36.4 (0.3%) (4.5%) Prepaid 10.1 12.1 11.5 13.9% (5.0%) ARPU (Average Monthly Revenue per User), blended (US$) 10.7 12.2 11.7 9.3% (4.1%) Postpaid 20.4 21.3 20.4 - (4.2%) Prepaid 5.7 6.8 6.4 12.3% (5.9%) Churn (%) 7.8% 7.2% 8.5% 0.7pp 1.3pp MOU (Average Monthly Minutes of usage per subscriber), blended 221.5 244.1 238.8 7.8% (2.2%) Subscribers of Turkcell Turkey decreased by 268 thousand to 34.9 million, driven mainly by losses in the prepaid segment. Meanwhile, with our continued focus on value creation through innovative solutions, we have expanded our postpaid subscriber base by 285 thousand to 13.5 million on a quarterly basis. Consequently, our postpaid subscriber share in the total subscriber base has further improved to 38.6% (34.8%). Churn Rate refers to voluntarily and involuntarily disconnected subscribers. Our churn rate increased to 8.5% in Q113 from 7.8% a year ago, driven mainly by the ICTA decision discussed under the direct cost of revenues section (page 6). Each GSM line registered due to this decision had to be recorded as a churn and also as an acquisition in operators' records. Excluding the impact of this decision, our churn rate would have been standing at 7.9%, a similar rate compared to the previous year. MoU increased 7.8% to 238.8 minutes year-on-year driven by higher incentives and higher package utilizations. ARPU in TRY terms increased 9.4% to TRY21.0 year-on-year with the rise in the share of postpaid subscribers, higher voice and mobile data usage. Postpaid ARPU fell by a slight 0.3% to TRY36.4 (TRY36.5), driven mainly by the dilutive impact of switches from the prepaid segment. Meanwhile, prepaid ARPU increased from TRY10.1 in Q112 to TRY11.5 in Q113, due to upward price movements seen in the last quarter of 2012, as well as to higher package penetration and increased data usage. OTHER DOMESTIC AND INTERNATIONAL OPERATIONS Astelit maintained its solid financial performance in Q113 registering revenue growth of 9% to US$99.2 million (US$91.4 million) accompanied by double-digit EBITDA growth of 12.4% to US$28.0 million (US$24.9 million). Revenue growth was driven mainly by subscriber base growth, along with increase in mobile data and other value-added services revenue. Meanwhile, operational profitability improved by 1.0pp to 28.2% (27.2%). Compared to the previous quarter revenues decreased by 3.7% mainly driven by seasonality. Astelit increased its registered subscribers by 1.2 million to 11.1 million year-on-year. Three month active subscribers increased by 1.1 million to 8.2 million (7.1 million) year-on-year with the contribution of the regional growth strategy, targeting new subscriber acquisitions. ARPU decreased by 4.7% to US$4.1 (US$4.3) in Q113, driven mainly by price competition in the market, especially in voice offers. On the other hand, MOU decreased to 185.4 minutes (195.6 minutes) due to lower usage of new subscribers. Astelit Q112 Q412 Q113 y/y % q/q % Number of subscribers (million) 9.9 11.1 11.1 12.1% - Active (3 months) 7.1 8.0 8.2 15.5% 2.5% MOU (minutes) 195.6 184.5 185.4 (5.2%) 0.5% ARPU (Average Monthly Revenue per User), blended (US$) 3.1 3.1 3.0 (3.2%) (3.2%) Active (3 months) 4.3 4.3 4.1 (4.7%) (4.7%) Revenue (million UAH) 729.9 823.4 792.5 8.6% (3.8%) Revenue (million US$) 91.4 103.0 99.2 8.5% (3.7%) EBITDA (million US$) 24.9 27.6 28.0 12.4% 1.4% EBITDA margin 27.2% 26.8% 28.2% 1.0pp 1.4pp Net loss (million US$) (15.7) (18.5) (14.9) (5.1%) (19.5%) Capex (million US$) 5.3 34.1 3.4 (35.8%) (90.0%) (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 transaction which brought revenue to the Company. (3) EBITDA is a non-GAAP financial measurement. See page 12 for the reconciliation of Euroasia's EBITDA to net cash from operating activities. Euroasia holds a 100% stake in Astelit. (*) Astelit, in which we hold a 55% stake through Euroasia, has operated in Ukraine since February 2005. Turkcell Superonline maintained its solid performance in the first quarter of 2013 registering revenue growth of 40.2% and a nominal EBITDA increase of 91.1%. EBITDA margin improved 7.2pp to 27.3% stimulated by more profitable data revenues. Turkcell Superonline continued investments in its fiber network, reaching approximately 1.4 million home passes in Q113, while fiber subscribers rose by 51.7% to 464 thousand. In 2013, we will continue to focus on increasing our incity coverage and improving our take-up rate. In Q113, residential segment revenues grew by 68.9%, driven mainly by increased FTTX subscriber number. The corporate segment registered 26.1% growth on rising synergies achieved at the Group level, and the integrated solutions offered in consequence. The share of the residential and corporate segment increased to 62.3% (59.3%), while the share of non-group revenues increased to 74% (69%). Turkcell Superonline (million TRY) Q112 Q412 Q113 y/y % q/q % Revenue 145.0 190.3 203.3 40.2% 6.8% Residential 42.7 65.7 72.1 68.9% 9.7% Corporate 43.3 51.4 54.6 26.1% 6.2% Wholesale 58.9 73.2 76.6 30.1% 4.6% EBITDA  29.1 39.2 55.6 91.1% 41.8% EBITDA Margin 20.1% 20.6% 27.3% 7.2pp 6.7pp Capex 63.7 159.6 59.2 (7.1%) (62.9%) (1)EBITDA is a non-GAAP financial measure. See page 12 for the reconciliation of EBITDA to net cash from operating activities. (*)Turkcell Superonline is our wholly-owned subsidiary, providing fiber broadband. Fintur continued to improve its market position in Q113, adding approximately 2.8 million net subscribers year-on-year, thereby increasing its total subscriber base to 21.4 million, driven mainly by growth in Kazakhstan. Fintur's consolidated revenue increased by 1.3% year-on-year to US$473 million (US$467 million) in Q113, while revenues decreased by 12.6% quarter-on-quarter from US$541 million in Q412 mainly due to the impact of seasonality. We account for our investment in Fintur using the equity method. Fintur's contribution to net income increased from TRY54.6 million to TRY68.9 million, while its contribution in US$ terms increased from US$30.3 million to US$38.4 million in Q113. Fintur's contribution to Turkcell's net income was US$27 million in Q412. Fintur Q112 Q412 Q113 y/y % q/q % Subscribers (million) 18.6 21.2 21.4 15.1% 0.9% Kazakhstan 11.2 13.5 13.8 23.2% 2.2% Azerbaijan 4.2 4.4 4.4 4.8% - Moldova 1.1 1.3 1.3 18.2% - Georgia 2.1 2.1 1.9 (9.5%) (9.5%) Revenue (million US$) 467 541 473 1.3% (12.6%) Kazakhstan 280 331 286 2.1% (13.6%) Azerbaijan 137 151 136 (0.7%) (9.9%) Moldova 17 21 18 5.9% (14.3%) Georgia 33 38 33 - (13.2%) Other - - - - - Fintur's contribution to Group's net income 30 27 38 26.7% 40.7% (1) Includes intersegment eliminations (*) We hold a 41.45% stake In Fintur which has interests in Kazakhstan, Azerbaijan, Moldova, and Georgia. Turkcell Group Subscribers amounted to approximately 69.2 million as of March 31, 2013. This figure is calculated by taking the number of subscribers in Turkcell and each of our subsidiaries and unconsolidated investees. It includes the total number of mobile subscribers in Turkcell Turkey, Astelit and BeST, as well as in our operations in the Turkish Republic of Northern Cyprus ("Northern Cyprus"), Fintur and Turkcell Europe. Turkcell Group subscribers rose by 3.9 million year-on-year, due to Fintur's increased subscriber base, and the contribution of Astelit. Please note that BeST's subscribers base declined by 0.7 million year-on-year in line with BeST's churn policy and value focus approach. Turkcell Group Subscribers (million) Q112 Q412 Q113 y/y % q/q % Turkcell 34.5 35.1 34.9 1.2% (0.6%) Ukraine 9.9 11.1 11.1 12.1% 0.0% Fintur 18.6 21.2 21.4 15.1% 0.9% Northern Cyprus 0.4 0.4 0.4 - - Belarus 1.7 1.1 1.0 (41.2%) (9.1%) Turkcell Europe 0.2 0.3 0.4 100.0% 33.3% TURKCELL GROUP 65.3 69.2 69.2 6.0% - OVERVIEW OF THE MACROECONOMIC ENVIRONMENT The foreign exchange rates used in our financial reporting, along with certain macroeconomic indicators, are set out below. Q112 Q412 Q113 y/y % q/q % TRY / US$ rate Closing Rate 1.7729 1.7826 1.8087 2.0% 1.5% Average Rate 1.7871 1.7854 1.7865 0.0% 0.1% Consumer Price Index (Turkey) 1.5% 2.7% 2.6% 1.1pp (0.1pp) GDP Growth (Turkey) 3.2% 1.4% n.a. n.a. n.a. UAH/ US$ rate Closing Rate 7.99 7.99 7.99 - - Average Rate 7.99 7.99 7.99 - - BYR/ US$ rate Closing Rate 8.020 8.570 8.670 8.1% 1.2% Average Rate 8.208 8.548 8.627 5.1% 0.9% RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS:Webelieve that EBITDA is a measurement commonly used by companies, analysts and investors in the telecommunications industry that enhances the understanding of our cash generation ability and liquidity position, and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool, and accordingly, we believe that its presentation provides useful and relevant information to analysts and investors. Our 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). EBITDA is not a measure of financial performance under IFRS, and should not be construed as a substitute for net earnings (loss) as a measure of performance, or cash flow from operations as a measure of liquidity. The following table provides a reconciliation of EBITDA, which is a non-GAAP financial measurement, to net cash from operating activities, which we believe is the most directly comparable financial measurement calculated and presented in accordance with IFRS. Turkcell (million US$) Q112 Q412 Q113 y/y % q/q % EBITDA 393.1 474.8 452.1 15.0% (4.8%) Income tax expense (58.7) (76.6) (76.7) 30.7% 0.1% Other operating income / (expense) (4.9) 25.0 (0.6) (87.8%) - Financial income 3.8 (2.6) 4.3 13.2% - Financial expense (33.0) (44.3) (20.6) (37.6%) (53.5%) Net increase / (decrease) in assets and liabilities (404.5) 274.0 (540.8) 33.7% - Net cash from operating activities (104.2) 650.3 (182.3) 75.0% - Turkcell Superonline (million TRY) Q112 Q412 Q113 y/y % q/q % EBITDA 29.1 39.2 55.6 91.1% 41.8% Income tax expense - - (0.4) - - Other operating income / (expense) 0.1 2.4 0.5 400.0% (79.2%) Financial income 40.1 (0.3) 1.7 (95.8%) - Financial expense (41.0) (14.6) (16.1) (60.7%) 10.3% Net increase / (decrease) in assets and liabilities (35.4) (37.7) (84.8) 139.5% 124.9% Net cash from operating activities (7.1) (11.0) (43.5) 512.7% 295.5% Euroasia (million US$) Q112 Q412 Q113 y/y % q/q % EBITDA 24.9 27.6 28.0 12.4% 1.4% Other operating income / (expense) 0.2 0.5 0.9 350.0% 80.0% Financial income 0.2 1.2 1.3 550.0% 8.3% Financial expense (12.1) (16.1) (15.4) 27.3% (4.3%) Net increase / (decrease) in assets and liabilities 15.8 45.7 (13.6) - - Net cash from operating activities 29.0 58.9 1.2 (95.9%) (98.0%) FORWARD-LOOKING STATEMENTS:This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. This includes in particular our targets for revenue, EBITDA and capex in 2013. 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" 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 2012 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. ABOUT TURKCELL:Turkcell is the leading communications and technology company inTurkey, with 34.9 million subscribers as of March 31, 2013. Turkcell is a leading regional player, with market leadership in five of the nine countries in which it operates with its approximately 69.2 million subscribers as of March 31, 2013. It has become one of the first among the global operators to have implemented HSPA+. It has achieved up to 43.2 Mbps speed using the Dual Carrier technology, and is continuously working to provide the latest technology to its customers, e.g. 84 Mbps in the near future. Turkcell Superonline, a wholly owned subsidiary of Turkcell, is the one and only telecom operator to offer households fiber broadband connection at speeds of up to 1,000 Mbps inTurkey. As of February 28, 2013, Turkcell population coverage is at 99.19% in 2G and 84.26% in 3G. Turkcell reported a TRY2.7 billion (US$1.5 billion) revenue with total assets of TRY18.9 billion (US$10.4 billion) as of March 31, 2013. It has been listed on the NYSE and the ISE since July 2000, and is the only NYSE-listed company inTurkey. Read more athttp://www.turkcell.com.tr TURKCELL ILETISIM HIZMETLERI A.S. CMB SELECTED FINANCIALS (TRY Million) Quarter Ended Quarter Ended 12 Months Ended 3 Months Ended March 31, December 31, December 31, March 31, 2012 2012 2012 2013 Consolidated Statement of Operations Data Revenues Communication fees 2,180.9 2,534.5 9,626.7 2,430.6 Commission fees and revenue on betting business 35.2 63.0 159.1 54.3 Monthly fixed fees 24.5 21.7 90.7 20.2 Simcard sales 6.1 6.4 32.9 6.4 Call center revenues and other revenues 135.1 181.7 597.6 176.9 Total revenues 2,381.8 2,807.3 10,507.0 2,688.4 Direct cost of revenues (1,489.8) (1,759.5) (6,482.1) (1,685.7) Gross profit 892.0 1,047.8 4,024.9 1,002.7 Administrative expenses (118.1) (125.9) (484.2) (128.9) Selling & marketing expenses (402.8) (469.0) (1,705.7) (425.0) Other Operating Income / (Expense) (6.5) (23.6) (105.3) (0.3) Operating profit before financing costs 364.6 429.3 1,729.7 448.5 Finance costs (58.3) (79.5) (224.2) (37.4) Finance income 220.1 158.9 691.7 166.7 Monetary gain 40.5 42.6 169.9 53.5 Share of profit of equity accounted investees 49.5 42.5 218.5 68.6 Income before taxes and minority interest 616.4 593.8 2,585.6 699.9 Income tax expense (105.6) (136.8) (523.6) (137.4) Income before minority interest 510.8 457.0 2,062.0 562.5 Non-controlling interests 4.7 3.2 21.0 4.4 Net income 515.5 460.2 2,083.0 566.9 Net income per share 0.23 0.21 0.95 0.26 Other Financial Data Gross margin 37.5% 37.3% 38.3% 37.3% EBITDA(*) 702.7 847.8 3,241.5 807.6 Capital expenditures 252.9 713.4 1,738.8 199.5 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 6,047.5 6,998.9 6,998.9 6,610.9 Total assets 17,119.0 18,653.0 18,653.0 18,829.8 Long term debt 769.8 1,103.8 1,103.8 1,401.5 Total debt 3,359.3 3,039.6 3,039.6 3,014.6 Total liabilities 5,825.9 5,918.1 5,918.1 5,573.2 Total shareholders' equity / Net Assets 11,293.1 12,734.9 12,734.9 13,256.6 ** For further details, please refer to our consolidated financial statements and notes as at 31 March 2013 on our web site. TURKCELL ILETISIM HIZMETLERI A.S. IFRS SELECTED FINANCIALS (TRY Million) Quarter Ended Quarter Ended 12 Months Ended 3 Months Ended March 31, December 31, December 31, March 31, 2012 2012 2012 2013 Consolidated Statement of Operations Data Revenues Communication fees 2,180.9 2,534.5 9,626.7 2,430.6 Commission fees and revenue on betting business 35.2 63.0 159.1 54.3 Monthly fixed fees 24.5 21.7 90.7 20.2 Simcard sales 6.1 6.4 32.9 6.4 Call center revenues and other revenues 135.1 181.7 597.6 176.9 Total revenues 2,381.8 2,807.3 10,507.0 2,688.4 Direct cost of revenues (1,491.3) (1,760.1) (6,487.3) (1,687.3) Gross profit 890.5 1,047.2 4,019.7 1,001.1 Administrative expenses (118.1) (125.9) (484.2) (128.9) Selling & marketing expenses (402.8) (469.0) (1,705.7) (425.0) Other Operating Income / (Expense) (6.5) (23.9) (105.2) (0.3) Operating profit before financing costs 363.1 428.4 1,724.6 446.9 Finance costs (58.3) (79.5) (224.2) (37.4) Finance income 220.1 158.9 691.7 166.7 Monetary gain 40.5 42.6 169.9 53.5 Share of profit of equity accounted investees 49.5 42.5 218.5 68.6 Income before taxes and minority interest 614.9 592.9 2,580.5 698.3 Income tax expense (104.8) (136.9) (522.5) (137.1) Income before minority interest 510.1 456.0 2,058.0 561.2 Non-controlling interests 4.7 3.2 21.0 4.4 Net income 514.8 459.2 2,079.0 565.6 Net income per share 0.23 0.21 0.95 0.26 Other Financial Data Gross margin 37.4% 37.3% 38.3% 37.2% EBITDA(*) 702.7 847.8 3,241.5 807.6 Capital expenditures 252.9 713.4 1,738.8 199.5 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 6,047.5 6,998.9 6,998.9 6,610.9 Total assets 17,157.1 18,687.4 18,687.4 18,862.5 Long term debt 769.8 1,103.8 1,103.8 1,401.5 Total debt 3,359.3 3,039.6 3,039.6 3,014.6 Total liabilities 5,832.0 5,923.7 5,923.7 5,578.5 Total shareholders' equity / Net Assets 11,325.1 12,763.7 12,763.7 13,284.0 ** For further details, please refer to our consolidated financial statements and notes as at 31 March 2013 on our web site. TURKCELL ILETISIM HIZMETLERI A.S. IFRS SELECTED FINANCIALS (US$ MILLION) Quarter Ended Quarter Ended 12 Months Ended 3 Months Ended March 31, December 31, December 31, March 31, 2012 2012 2012 2013 Consolidated Statement of Operations Data Revenues Communication fees 1,220.9 1,419.6 5,374.0 1,360.3 Commission fees and revenue on betting business 19.7 35.3 89.0 30.4 Monthly fixed fees 13.7 12.1 50.6 11.3 Simcard sales 3.4 3.6 18.3 3.6 Call center revenues and other revenues 75.6 101.9 333.9 98.9 Total revenues 1,333.3 1,572.5 5,865.8 1,504.5 Direct cost of revenues (835.0) (986.1) (3,622.3) (944.2) Gross profit 498.3 586.4 2,243.5 560.3 Administrative expenses (66.2) (70.5) (270.5) (72.1) Selling & marketing expenses (225.8) (262.8) (953.2) (237.7) Other Operating Income / (Expense) (3.6) (13.4) (58.8) (0.2) Operating profit before financing costs 202.7 239.7 961.0 250.3 Finance costs (33.0) (44.4) (125.5) (20.8) Finance income 123.6 88.7 386.1 93.3 Monetary gain 22.9 24.0 95.3 29.6 Share of profit of equity accounted investees 27.5 23.7 121.7 38.3 Income before taxes and minority interest 343.7 331.7 1,438.6 390.7 Income tax expense (58.7) (76.6) (291.5) (76.7) Income before minority interest 285.0 255.1 1,147.1 314.0 Non-controlling interests 2.6 1.8 11.7 2.5 Net income 287.6 256.9 1,158.8 316.5 Net income per share 0.13 0.12 0.53 0.14 Other Financial Data Gross margin 37.4% 37.3% 38.2% 37.2% EBITDA(*) 393.1 474.8 1,808.4 452.1 Capital expenditures 142.7 401.0 975.5 110.3 Consolidated Balance Sheet Data (at period end) Cash and cash equivalents 3,411.1 3,926.2 3,926.2 3,655.0 Total assets 9,677.4 10,483.2 10,483.2 10,428.8 Long term debt 434.2 619.2 619.2 774.9 Total debt 1,894.8 1,705.2 1,705.2 1,666.7 Total liabilities 3,289.5 3,323.1 3,323.1 3,084.3 Total equity 6,387.9 7,160.1 7,160.1 7,344.5 * Please refer to the notes on reconciliation of Non-GAAP Financial measures on page 12 ** For further details, please refer to our consolidated financial statements and notes as at 31 March 2013 on our web site. For further information please contact Turkcell CorporateAffairs: KorayOzturkler,Chief Corporate AffairsOfficer Tel:+90-212-313-1500 Email:email@example.com Investors: Nihat Narin, Director Investor and International Media Relations Tel: + 90-212-313-1244 Email:firstname.lastname@example.org email@example.com Media: Filiz Karagul Tuzun, Director Corporate Communications Tel: + 90-212-313-2304 Email:firstname.lastname@example.org Turkcell-Kurumsal-Iletisim@turkcell.com SOURCE Turkcell
Turkcell Iletisim Hizmetleri Fırst Quarter 2013 Results
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