Turkcell Iletisim Hizmetleri: First Quarter 2016 Results

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 March 31, 2016 refer to the same item as at March 31, 2015. For further details, please refer to our consolidated financial statements and notes as at and for March 31, 2016, which can be accessed via our website in the investor relations section (www.turkcell.com.tr).
• With effect from Q4 2015, our financial statements are presented in TRY only, the currency in which we recognize the majority of our revenues and expenses. We will no longer present financial statements in USD. This change allows us align our Turkish and US reporting.
• 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.

FIRST QUARTER SUMMARY

• Another all-time-high first quarter revenue and EBITDA¹ performance from Turkcell Turkey and the Group
• Turkcell Turkey’s revenues and EBITDA up 10.0% and 10.6%, respectively with an EBITDA margin of 31.3%; data and services revenues, comprising 42% of Turkcell Turkey revenues, up 31.1%
• Group revenues and EBITDA up 8.3% and 8.1%, respectively with an EBITDA margin of 31.1%
• Group net income as per IFRS up 298.8% to TRY563 million. Group proforma net income² up 15.1% to TRY544 million
• Turkcell International revenues up 2.1%, with positive growth after 7 quarters of decline, on an EBITDA margin of 27.2%
• 4.5G launch on April 1^st with over 70% population coverage in 81 cities; around 5.0 million³ customers
• First real converged offers in Turkey; single invoice, single call center and uninterrupted connection
• Full year guidance⁴ maintained; Turkcell Turkey and Group revenue growth targeted at 8% - 10%, Group EBITDA margin targeted at 31% - 33% and Group operational capex over sales targeted at ~20%

FINANCIAL HIGHLIGHTS

TRY million		Q115		Q415		Q116		y/y %		q/q %
Revenue		2,978.2		3,334.5		3,225.4		8.3%		(3.3%)
Turkcell Turkey		2,662.2		2,997.8		2,927.5		10.0%		(2.3%)
EBITDA1		926.8		1,058.2		1,001.5		8.1%		(5.4%)
Turkcell Turkey		828.2		955.8		916.1		10.6%		(4.2%)
EBITDA Margin		31.1%		31.7%		31.1%		-		(0.6pp)
Net Income		141.1		584.2		562.7		298.8%		(3.7%)
Proforma Net Income2		472.5		567.1		543.7		15.1%		(4.1%)

(1) EBITDA is a non-GAAP financial measure. See page 13 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 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, share of profit of equity accounted investees (Fintur), 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."
(3) Customers with 4.5G compatible devices and SIM cards
(4)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 March 31, 2016 which can be accessed via our web site in the investor relations section (www.turkcell.com.tr).

COMMENTS BY KAAN TERZIOGLU, CEO

Turkcell had a solid start to 2016, focused on data and digital services, following a customer centric approach with differentiation through 4.5G

We made a strong start to 2016, in line with our plans. We registered all-time-high first quarter revenue and EBITDA, both at the Turkcell Turkey and Turkcell Group level. Turkcell Turkey, comprising 91% of Group revenues, continued its double-digit growth at 10.0% year-on-year, recording an EBITDA margin of 31.3%. Group revenues rose 8.3% to TRY3.2 billion, while EBITDA increased 8.1% to TRY1.0 billion, achieving a 31.1% EBITDA margin. Proforma Group net income¹ rose by 15.1% to TRY544 million, while net income as per IFRS increased 298.8% to TRY563 million.

In the first quarter of 2016, our key agenda item was the launch of 4.5G services on April 1^st, which will underpin Turkey’s digital transformation. The Turkcell team has established a strong 4.5G network and made mobile broadband with 4.5G speed available in 81 cities with a population coverage of over 70%, within a short period of time. And since the launch, Turkcell customers have registered high demand for 4.5G. As of today 4.5G customers have reached 5.0 million², while 4.5G data traffic on our network reached 22%.

We have started to implement our action plans across the dealer network, at our call center and on digital channels to meet all our customers' needs through a single point of service with offers that bolster Turkcell’s positioning as a converged communications and technology services company. We are working to provide our customers a unique convergence experience on the back of our strength in mobile and fixed services. In this regard, having declared a list of ten principles, we are using every means to ensure customer satisfaction.

Turkcell Turkey: Continued growth in Postpaid, Fiber and TV

In the first quarter of 2016, the total number of subscribers in the five countries where we have direct operations reached 50.8 million, of which 35.2 million³ were in Turkey. Turkcell continued to gain postpaid, fiber and TV subscribers in the quarter. Postpaid customers rose by 1.2 million year on year, reaching 50% of our subscriber base. Fiber subscribers rose by 159 thousand year-on-year to 935 thousand, while total fixed subscribers amounted to 1.6 million. Turkcell TV+, which continues its rapid growth with 514 thousand yearly increase, reached 679 thousand total subscribers.

In accordance with our convergence strategy, the mobile triple play ratio, which includes voice, data and service users reached 17%⁴ while multiplay with TV service users increased to 30% of fiber residential customers.

Mobile ARPU rose by 8.8% to TRY24.7 and fixed residential ARPU rose 6.8% to TRY50.3 in the first quarter of 2016 due to a larger postpaid subscriber base, and increased data and services revenues.

Turkcell Consumer Financing solution to our customers’ technology needs

In March, our consumer financing company commenced operations across Turkey to facilitate the financing of our customers' technology needs, and to improve the Group balance sheet, which is among our strategic priorities. Within a short period of time, Turkcell Consumer Financing Company has provided more than 400 thousand loans of approximately TRY500 million worth and supported the penetration of smart devices. Indeed, smartphone penetration on our network rose by 13 percentage points to 55% year-on-year. With the increase in the number of smartphones, our data and service revenues grew 31% to TRY1.2 billion year-on-year, and accounted for 42% of Turkcell Turkey revenues.

Additionally, through our mobile payment platform, named Paycell, we provide our customers various alternative means of payment, including via Turkcell invoice. Over the past 12 months, this platform has seen 16 million transactions amounting to TRY440 million. Paycell, redefined with advanced technological capabilities, will serve both Turkcell and non-Turkcell customers.

We are opening services to all-access, providing globally competitive services

Our innovative services continued to expand rapidly during this quarter as well. We opened BiP, Turkcell TV+, Smart Storage, Goals on Your Mobile and our renamed music service fizy, to all-access.

Our new generation communication platform BiP has been downloaded 7.5 million times to date, and in 192 countries. BiP is one of the world's most innovative applications with 39% of its users being from other operators.

Smart Storage, the most widely used personal cloud service in Turkey, has been downloaded 2.6 million times, while downloads on Turkey's most popular music platform, fizy, have reached 5.7 million. Meanwhile, Goals on Your Mobile services has been downloaded 2.1 million times. As a result, our service revenues increased 57.2% year-on-year.

We are advancing in line with our plans in 2016

Having seen a solid start to the year, we believe that we can achieve our 2016 targets by providing a strong 4.5G network, along with our converged services. We would like to congratulate the Turkcell team and all of our stakeholders for their contribution to our success, and to thank our Board of Directors for their continued support. We would also like to express our gratitude towards our customers, who have shown their trust in us throughout our success story.

(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 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, share of profit of equity accounted investees (Fintur), 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."
(2) Customers with 4.5G compatible devices and SIM cards
(3) Total of mobile, fixed and IPTV subscribers
(4) Breakdown among mobile voice users which excludes subscribers who do not use their line in the last 3 months

FINANCIAL AND OPERATIONAL REVIEW OF THE FIRST QUARTER 2016

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

Selected financial information for the first and fourth quarters of 2015, and the first quarter of 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)		Q115		Q415		Q116		y/y %		q/q %
Total Revenue		2,978.2		3,334.5		3,225.4		8.3%		(3.3%)
Direct cost of revenues1		(1,828.6)		(2,054.8)		(2,018.8)		10.4%		(1.8%)
Direct cost of revenues1/revenues		(61.4%)		(61.6%)		(62.6%)		(1.2pp)		(1.0pp)
Depreciation and amortization		(394.3)		(437.0)		(454.8)		15.3%		4.1%
Gross Margin		38.6%		38.4%		37.4%		(1.2pp)		(1.0pp)
Administrative expenses		(140.8)		(165.9)		(178.7)		26.9%		7.7%
Administrative expenses/revenues		(4.7%)		(5.0%)		(5.5%)		(0.8pp)		(0.5pp)
Selling and marketing expenses		(476.3)		(492.6)		(481.2)		1.0%		(2.3%)
Selling and marketing expenses/revenues		(16.0%)		(14.8%)		(14.9%)		1.1pp		(0.1pp)
EBITDA2		926.8		1,058.2		1,001.5		8.1%		(5.4%)
EBITDA Margin		31.1%		31.7%		31.1%		-		(0.6pp)
EBIT3		532.5		621.2		546.7		2.7%		(12.0%)
Net finance income / (expense)		(483.4)		12.5		166.2		n.m.		n.m.
Finance expense		(735.7)		(141.0)		(55.0)		(92.5%)		(61.0%)
Finance income		252.3		153.5		221.2		(12.3%)		44.1%
Share of profit of associates		94.8		98.4		15.2		(84.0%)		(84.6%)
Other income / (expense)		(53.0)		(31.1)		(11.1)		(79.1%)		(64.3%)
Non-controlling interests		284.4		(7.6)		(10.9)		(103.8%)		43.4%
Income tax expense		(234.2)		(109.2)		(143.4)		(38.8%)		31.3%
Net Income		141.1		584.2		562.7		298.8%		(3.7%)
Proforma Net Income4		472.5		567.1		543.7		15.1%		(4.1%)

(1) Including depreciation and amortization expenses.
(2) EBITDA is a non-GAAP financial measure. See page 13 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 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, share of profit of equity accounted investees (Fintur), 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."

Revenues of the Group rose by 8.3% year-on-year.

Turkcell Turkey revenues, comprising 91% of Group revenues, grew by 10.0% to TRY2,928 million (TRY2,662 million) due to a 10.0% rise in consumer segment revenues to TRY2,338 million (TRY2,124 million) and an 8.7% increase in corporate segment revenues to TRY525 million (TRY483 million).

• Consumer and corporate segment revenues of Turkcell Turkey in total rose by 9.8%:
  • Voice revenues fell 4.1% to TRY1,398 million (TRY1,459 million) in line with the global trend.
  • Data & services revenues, at 42% of Turkcell Turkey revenues, rose by 31.1% to TRY1,229 million (TRY937 million).
    
    Data revenues grew by 26.4% to TRY1,003 million (TRY794 million). This was driven by a 25.8% rise in mobile broadband and 28.4% increase in fixed broadband revenues with higher smartphone penetration, more data users and a rise in data consumption.
    
    Services and solutions revenues rose by 57.2% to TRY226 million (TRY144 million) mainly due to increased usage of Turkcell TV and fizy, along with other mobile services.
  • SMS revenues fell 2.9% to TRY132 million (TRY136 million). The slowdown in SMS revenue decline was driven by higher bundle offer penetration.
  • Other revenues comprising mainly hardware and software sales rose by 37.0% to TRY103 million (TRY75 million).

• Wholesale revenues grew by 13.9% to TRY81 million (TRY71 million).

Turkcell International revenues, constituting 6% of Group revenues, rose by 2.1% to TRY197 million (TRY193 million), turning to positive growth after 7 quarters of year-on-year decline.

Other subsidiaries' revenues, comprising 3% of Group revenues, which includes information and entertainment services in Turkey and Azerbaijan, call center revenues and revenues from financial services declined by 18.0% to TRY101 million (TRY123 million), due to lower revenues from Azerbaijan, partly driven by currency devaluation.

Direct cost of revenues rose to 62.6% (61.4%) as a percentage of revenues, mainly due to the rise in depreciation and amortization expenses (0.9pp) along with increase in various other cost items (0.3pp).

Administrative expenses rose to 5.5% (4.7%) as a percentage of revenues, mainly due to various cost items including new headquarters rental expense and performance related payments to personnel.

Selling and marketing expenses fell by 1.1pp to 14.9% (16.0%) as a percentage of revenues, driven by the decline in selling expenses (0.9pp) with our value focused customer acquisition strategy and other costs items (1.1pp). This was despite the rise in marketing expenses (0.9pp), mainly due to 4.5G launch costs.

EBITDA^*rose by 8.1% year-on-year, while the EBITDA margin was at 31.1% (31.1%). The decline in selling and marketing expenses of 1.1pp was offset by the increase in direct cost of revenues (excluding depreciation and amortization) of 0.3pp and administrative expenses of 0.8pp.

• Turkcell Turkey’s EBITDA rose by 10.6% to TRY916 million (TRY828 million), while the EBITDA margin improved by 0.2pp to 31.3% (31.1%).
• Turkcell International EBITDA grew 0.9% to TRY54 million (TRY53 million), despite the impact of year-on-year devaluation in Ukraine and Belarus, while the EBITDA margin was at 27.2% (27.5%).
• The EBITDA of other subsidiaries declined by 30.0% to TRY32 million (TRY46 million), mainly on lower revenues in Azerbaijan.

Net finance income of TRY166 million (net finance expense of TRY483 million) was recorded in Q116. This was mainly driven by lower translation losses of TRY5 million (TRY698 million) registered in Q116. This positive impact more than offset the decline in interest income from time deposits, due to a lower cash balance, and the rise in interest expense in relation to loans and 4.5G payables. Please see Appendix A for translation gain and loss details.

Income tax expense declined 38.8% year-on-year. Please see Appendix A for details.

(*)EBITDA is a non-GAAP financial measure. See page 13 for the reconciliation of an explanation of how we calculate Adjusted EBITDA to net income.

Net income of the Group as per IFRS rose 298.8% to TRY563 million (TRY141 million) in Q116 year-on-year. This was mainly driven by higher EBITDA, lower translation losses and tax expense, despite the decline in interest income on time deposits, a lower contribution from Fintur and increased interest expense on loans and 4.5G payables. Proforma net income^* rose 15.1% to TRY544 million (TRY473 million) in Q116. Please see Appendix A for a reconciliation of Group proforma net income to net income per IFRS.

Total debt as of March 31, 2016 declined to TRY4,028 million from TRY4,214 million as of December 31, 2015, in consolidated terms. The decrease in debt balance was mainly due to Turkcell Turkey’s loan payments.

• Turkcell Turkey’s debt balance was TRY3,630 million, of which TRY1,610 million (US$568 million) was denominated in US$, TRY1,651 (EUR515 million) in EUR and the remaining TRY369 million in TRY.
• The debt balance of lifecell was TRY393 million, denominated in UAH.
• BeST had a debt balance of TRY5 million, denominated in BYR.

TRY1,795 million of our consolidated debt is set at a floating rate, while TRY655 million will mature within less than a year. (Please note that the figures in parentheses refer to US$ or EUR equivalents).

Cash flow analysis: Capital expenditures, including non-operational items, amounted to TRY738 million in Q116. The net change in debt mainly relates to Turkcell Turkey loan payments. The cash flow item noted as “other” includes regulatory fee payments (TRY491 million) and the negative impact of the change in working capital (TRY195 million).

In Q116, operational capital expenditures at the Group level stood at 20%^** of total revenues.

Consolidated Cash Flow (million TRY)		Q115		Q415		Q116
EBITDA1		926.8		1,058.2		1,001.5
LESS:
Capex and License		(755.5)		(6,188.9)		(738.4)
Turkcell Turkey		(343.9)		(6,218.1)		(675.4)
Turkcell International2		(408.4)		28.1		(61.7)
Other Subsidiaries2		(3.2)		1.1		(1.3)
Net interest Income/ (expense)		214.9		(32.8)		171.5
Other		(1,290.6)		3,220.9		(685.8)
Net Change in Debt		46.3		958.9		(145.2)
Cash generated		(858.0)		(983.7)		(396.4)
Cash balance		8,173.8		2,918.8		2,522.4

(1) EBITDA is a non-GAAP financial measure. See page 13 for the reconciliation of 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.

(*)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 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, share of profit of equity accounted investees (Fintur), 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."

(**) Excluding license fees

Operational Review in Turkey

Summary of Operational data		Q115		Q415		Q116		y/y %		q/q %
Number of subscribers		35.6		35.8		35.2		(1.1%)		(1.7%)
Mobile Postpaid (million)		15.5		16.6		16.7		7.7%		0.6%
Mobile M2M (million)		1.6		1.9		2.0		25.0%		5.3%
Mobile Prepaid (million)		18.7		17.4		16.6		(11.2%)		(4.6%)
Fiber (thousand)		776.1		899.4		935.4		20.5%		4.0%
ADSL (thousand)		495.5		620.8		646.2		30.4%		4.1%
IPTV (thousand)		98.7		223.7		268.1		171.6%		19.8%
Churn (%)
Mobile Churn (%)1		7.7%		7.9%		7.5%		(0.2pp)		(0.4pp)
Fixed churn (%)		4.0%		5.2%		5.0%		1.0pp		(0.2pp)
ARPU (Average Monthly Revenue per User)
Mobile ARPU, blended (TRY)		22.7		25.1		24.7		8.8%		(1.6%)
Postpaid		36.9		38.5		37.3		1.1%		(3.1%)
Postpaid (excluding M2M)		40.8		42.8		41.7		2.2%		(2.6%)
Prepaid		11.3		12.8		12.4		9.7%		(3.1%)
Fixed Residential ARPU, blended (TRY)		47.1		50.3		50.3		6.8%		-
Mobile MOU (Avg. Monthly Minutes of usage per subs) blended		275.7		299.3		298.1		8.1%		(0.4%)

(1) As per our churn policy, prepaid subscribers are disconnected from the system if they do not top-up above TRY10 during a nine month period. Additionally, in the first quarter of 2016, 196 thousand subscriptions which had not topped-up at all within the stipulated period were also disconnected.

Mobile customers in Turkey declined by 673 thousand during the quarter to 33.3 million in total, mainly on losses in the more price-sensitive prepaid segment. We continued to disconnect subscriptions that had not topped-up at all within the stipulated period, which amounted to 196 thousand during the first quarter and reached 575 thousand in total in the last two quarters. Meanwhile, the postpaid customer base continued to expand by 124 thousand quarterly net additions to 16.7 million, to 50.1% (45.3%) of the total.

The fixed customer base reached 1.6 million supported by a strong fiber network, dedicated sales force and customer care. We recorded 61 thousand quarterly net additions, of which 36 thousand were fiber and 25 thousand were ADSL subscribers. The Turkcell TV platform reached 268 thousand customers on 44 thousand quarterly net additions. Including mobile TV and web TV users, Turkcell TV customers amounted to 679 thousand.

Mobile churn improved by 0.2pp year-on-year on the back of value focused customer acquisitions and targeted retention actions.

Mobile ARPU rose by 8.8% year-on-year with the continued favorable change in subscriber mix, our upsell strategy and a focus on high value customer groups, as well as increased package penetration. Fixed ARPU increased by 6.8% year-on-year with growth of multiplay customers with TV¹, comprising 30% of total residential fiber customers.

Mobile MoU rose by 8.1% driven by our increased postpaid base and upsell strategy.

Smartphone penetration on our network reached 55% as we registered 514² thousand quarterly net additions. Accordingly, there were 16.6 million smartphones on our network at the end of the quarter, where 42% are 4.5G enabled.

(1) Multiplay customers with TV: Internet + TV users & internet + TV + voice users
(2)Approximately 80 thousand of these smartphone net additions were due to an adjustment in relation to devices which were not previously classified as smartphones.

TURKCELL INTERNATIONAL

lifecell*		Q115		Q415		Q116		y/y%		q/q %
Number of subscribers (million)1		13.7		13.5		13.3		(2.9%)		(1.5%)
Active (3 months)2		10.3		10.6		10.4		1.0%		(1.9%)
MOU (minutes) (12 months)		155.9		146.0		141.4		(9.3%)		(3.2%)
ARPU (Average Monthly Revenue per User), blended (UAH)		25.5		28.4		28.2		10.6%		(0.7%)
Active (3 months) (UAH)		34.3		36.2		36.1		5.2%		(0.3%)
Revenue (million UAH)		1,059.0		1,158.9		1,132.6		6.9%		(2.3%)
EBITDA (million UAH)		327.5		421.0		356.1		8.7%		(15.4%)
EBITDA margin (UAH)		30.9%		36.3%		31.4%		0.5pp		(4.9pp)
Net loss (million UAH)		(5,630.0)		(130.2)		(67.6)		n.m		n.m
Capex (million UAH)		3,621.6		490.3		456.9		(87.4%)		(6.8%)
Revenue (million TRY)		126.1		146.9		128.5		1.9%		(12.5%)
EBITDA (million TRY)		39.0		53.3		40.4		3.6%		(24.2%)
EBITDA margin (TRY)		31.0%		36.3%		31.4%		0.4pp		(4.9pp)
Net loss (million TRY)		(675.2)		(16.8)		(8.4)		n.m		n.m

(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 revenues grew by 6.9% in local currency terms reflecting rising mobile broadband revenues on the back of 3G+ services and increased smartphone tariff subscriptions with higher ARPU. lifecell’s EBITDA rose by 8.7% in local currency terms leading to an EBITDA margin improvement of 0.5pp to 31.4%, driven by effective cost management efforts and an increased share of mobile broadband in the revenue mix of lifecell. Meanwhile, the 4.9pp quarter-on-quarter decline in EBITDA margin was due to increased network related costs and marketing expenses.

In Q116, lifecell’s revenues in TRY terms rose by 1.9% year-on-year turning to positive growth following a series of quarters of declining revenue trend. Meanwhile, lifecell’s EBITDA in TRY terms grew by 3.6%.

lifecell has continued its 3G+ network roll-out, reaching 16 regional cities and smaller towns in 49 districts. 3G+ adoption momentum continued, reaching 2.3 million three-month active data users. Meanwhile, with a smartphone penetration of 48%, lifecell has almost doubled data usage per user post introduction of 3G+. lifecell’s investment in 3-carrier technology allows it to provide the fastest 3G speed of 63.3 Mbps in Ukraine.

In Q116, lifecell’s three-month active subscriber base declined to 10.4 million on 199 thousand quarterly net losses. This was mainly due to increased competition and tension in the eastern part of the country, which led to temporary interruptions to the lifecell network.

Blended ARPU (3-month active) rose by 5.2% driven by increased mobile broadband usage. MoU (12-month active) fell by 9.3% due to changing consumer behavior.

BeST*		Q115		Q415		Q116		y/y%		q/q %
Number of subscribers (million)1		1.5		1.5		1.6		6.7%		6.7%
Active (3 months)		1.0		1.1		1.1		10.0%		-
Revenue (billion BYR)		176.6		232.3		230.9		30.7%		(0.6%)
EBITDA (billion BYR)		0.4		8.7		3.9		875.0%		(55.2%)
EBITDA margin (BYR)		0.2%		3.7%		1.7%		1.5pp		(2.0pp)
Net loss (billion BYR)		(2,163.5)		(123.7)		(97.2)		n.m		n.m
Capex (billion BYR)		20.2		53.4		33.9		67.8%		(36.5%)
Revenue (million TRY)		30.0		38.1		32.8		9.3%		(13.9%)
EBITDA (million TRY)		0.1		1.4		0.5		400.0%		(64.3%)
EBITDA margin (TRY)		0.3%		3.7%		1.7%		1.4pp		(2.0pp)
Net loss (million TRY)		(378.5)		(20.3)		(13.7)		n.m		n.m
Capex (million TRY)		3.6		7.3		4.8		33.3%		(34.2%)

(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.

BeST registered solid year-on-year revenue growth of 30.7% in Q116 in local currency terms with the increasing active subscriber base and increased voice and terminal revenues. EBITDA margin improved by 1.5pp to 1.7% (0.2%), mainly driven by top-line growth and strict cost management.

In TRY terms, its performance remained impacted by yearly devaluation of the local currency. Revenues rose by 9.3% to TRY33 million (TRY30 million), while EBITDA improved to TRY0.5 million (TRY0.1 million).

KKTCELL (million TRY)*		Q115		Q415		Q116		y/y%		q/q%
Number of subscribers (million)1		0.5		0.5		0.5		-		-
Revenue		31.4		33.4		32.4		3.2%		(3.0%)
EBITDA		12.2		12.4		11.3		(7.4%)		(8.9%)
EBITDA margin		38.9%		37.1%		34.8%		(4.1pp)		(2.3pp)
Net income		6.8		7.9		6.1		(10.3%)		(22.8%)
Capex		1.2		14.1		2.8		133.3%		(80.1%)

(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.

KKTCELL’s revenues increased by 3.2% year-on-year to TRY32 million (TRY31 million), reflecting strong mobile broadband growth driven by higher data demand. EBITDA declined by 7.4% to TRY11 million (TRY12 million) leading to an EBITDA margin of 34.8% (38.9%). This was driven by regulatory amendment regarding the termination rates and additional frequency fees.

Fintur’s consolidated revenues declined by 50.1% year-on-year, mainly due to tough competitive environment especially in Kazakhstan and pressure on currencies due to macroeconomic challenges. Fintur’s subscribers declined to 16.8 million during the quarter driven by the decrease in Kcell subscribers due to the competitive environment. The contribution of Fintur to Group’s net income decreased to US$5 million (US$38 million) year-on-year mainly driven by significant negative currency effects in reported figures and lower earnings impacted by negative revenue development in the several markets.

Fintur*		Q115		Q415		Q116		y/y %		q/q %
Subscribers (million) 1		17.8		17.3		16.8		(5.6%)		(2.9%)
Kazakhstan		10.8		10.4		9.9		(8.3%)		(4.8%)
Azerbaijan		4.2		4.1		4.1		(2.4%)		-
Moldova		0.9		0.9		0.9		-		-
Georgia		1.9		1.9		1.9		-		-
Revenue (million US$)		387		219		193		(50.1%)		(11.9%)
Kazakhstan		233		92		100		(57.1%)		8.7%
Azerbaijan		113		90		59		(47.8%)		(34.4%)
Moldova		15		15		14		(6.7%)		(6.7%)
Georgia		25		22		21		(16.0%)		(4.5%)
Fintur’s contribution to Group’s net income (million US$)		38		34		5		(86.8%)		(85.3%)

(1) Telia Company disclosed a change to the definition of prepaid mobile subscription for all countries of operations in its Q115 results announcement on April 21, 2015. Prepaid subscriptions are counted if the subscriber has been active during the last three months. In line with Telia Company’s reporting, we disclose Fintur operations’ subscriber numbers as three-month active. Prior periods are restated accordingly.

(*) We hold a 41.45% stake In Fintur, which has interests in Kazakhstan, Azerbaijan, Moldova and Georgia.

Turkcell Group Subscribers

Turkcell Group subscribers amounted to approximately 67.6 million as of March 31, 2016. This figure is calculated by taking the number of subscribers of Turkcell Turkey and each of our subsidiaries and unconsolidated investees. It includes the total number of mobile, fiber, ADSL and IPTV subscribers of Turkcell Turkey, the mobile subscribers of lifecell and BeST, as well as KKTCELL, Turkcell Europe and Fintur.

Turkcell Group Subscribers		Q115		Q415		Q116		y/y %		q/q %
Mobile Postpaid (million)		15.5		16.6		16.7		7.7%		0.6%
Mobile Prepaid (million)		18.7		17.4		16.6		(11.2%)		(4.6%)
Fiber (thousand)		776.1		899.4		935.4		20.5%		4.0%
ADSL (thousand)		495.5		620.8		646.2		30.4%		4.1%
IPTV (thousand)		98.7		223.7		268.1		171.6%		19.8%
Turkcell Turkey subscribers (million)1		35.6		35.8		35.2		(1.1%)		(1.7%)
Ukraine		13.7		13.5		13.3		(2.9%)		(1.5%)
Belarus2		1.5		1.5		1.6		6.7%		6.7%
KKTCELL3		0.5		0.5		0.5		-		-
Turkcell Europe4		0.3		0.3		0.3		-		-
Consolidated Subscribers (million)		51.6		51.6		50.8		(1.6%)		(1.6%)
Fintur5		17.8		17.3		16.8		(5.6%)		(2.9%)
Turkcell Group Subscribers* (million)		69.5		68.9		67.6		(2.7%)		(1.9%)

(*) Turkcell Group subscribers figure includes the subscriber figures of our non-consolidated subsidiaries.

(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.
(5)Telia Company disclosed a change to the definition of prepaid mobile subscription for all countries of operations in its Q115 results announcement on April 21, 2015. Prepaid subscriptions are counted if the subscriber has been active during the last three months. In line with Telia Company’s reporting, we disclose Fintur operations’ subscriber numbers as three-month active. Prior periods are restated accordingly.

OVERVIEW OF THE MACROECONOMIC ENVIRONMENT

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

		Q115		Q415		Q116		y/y %		q/q %
US$ / TRY rate
Closing Rate		2.6102		2.9076		2.8334		8.6%		(2.6%)
Average Rate		2.4633		2.9366		2.9202		18.5%		(0.6%)
EUR / TRY rate
Closing Rate		2.8309		3.1776		3.2081		13.3%		1.0%
Average Rate		2.7934		3.2000		3.2172		15.2%		0.5%
Consumer Price Index (Turkey)		3.0%		2.5%		1.8%		(1.2pp)		(0.7pp)
GDP Growth (Turkey)		2.5%		5.7%		n.a		n.a		n.a
US$ / UAH rate
Closing Rate		23.44		24.00		26.22		11.9%		9.3%
Average Rate		21.18		23.18		25.77		21.7%		11.2%
US$ / BYR rate
Closing Rate		14,740		18,569		20,133		36.6%		8.4%
Average Rate		14,528		17,909		20,552		41.5%		14.8%

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)		Q115		Q415		Q116		y/y %		q/q %
Adjusted EBITDA		926.8		1,058.2		1,001.5		8.1%		(5.4%)
Finance income		252.3		153.5		221.2		(12.3%)		44.1%
Finance costs		(735.7)		(141.0)		(55.0)		(92.5%)		(61.0%)
Other income / (expense)		(53.0)		(31.1)		(11.1)		(79.1%)		(64.3%)
Share of profit of equity accounted investees		94.8		98.4		15.2		(84.0%)		(84.6%)
Depreciation and amortization		(394.3)		(437.0)		(454.8)		15.3%		4.1%
Consolidated profit before income tax & minority interest		90.9		701.0		717.0		688.8%		2.3%
Income tax expense		(234.2)		(109.2)		(143.4)		(38.8%)		31.3%
Consolidated profit before minority interest		(143.3)		591.8		573.6		n.m.		(3.1%)

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 2016 and our 4.5G development in Turkey. 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.

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 1^st, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. In 2G and 3G, Turkcell’s population coverage is at 99.85% and 95.05%, respectively, as of March 2016. It offers up to 1 Gbps fiber internet speed with its FTTH services. Turkcell Group companies serve 67.6 million subscribers in 9 countries – Turkey, Ukraine, Belarus, Northern Cyprus, Germany, Azerbaijan, Kazakhstan, Georgia, Moldova – as of March 31, 2016. Turkcell Group reported a TRY3.2 billion revenue with total assets of TRY26.2 billion as of March 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		Q115	Q415		Q116
Turkcell Turkey		308.2	45.9		(6.9)
Turkcell International		(1,008.2)	2.2		3.2
Other Subsidiaries		1.7	(2.9)		(1.6)
Turkcell Group		(698.3)	45.2		(5.3)

Table: Income tax expense details

Million TRY		Q115		Q415		Q116		y/y %		q/q %
Current Tax expense		(251.9)		(46.3)		(113.6)		(54.9%)		145.4%
Deferred Tax income/expense		17.7		(62.9)		(29.8)		(268.4%)		(52.6%)
Income Tax expense		(234.2)		(109.2)		(143.4)		(38.8%)		31.3%

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

Net income impacts (million TRY)				Q115				Net income impacts (million TRY)				Q116
Proforma net income				473				Proforma net income				544
FX impact				(467)				FX impact				(3)
Interest income (net off tax)				106				Interest income (net off tax)				14
One-off impacts								One-off impacts
Provision for commercial agreements				(46)
Fintur contribution				95				Fintur contribution				15
Other impacts				(20)				Other impacts				(7)
Net income - IFRS				141				Net income -IFRS				563

				TURKCELL ILETISIM HIZMETLERI A.S. IFRS SELECTED FINANCIALS (TRY Million)
				Quarter Ended		Quarter Ended		Year Ended		Quarter Ended
				March 31,		December 31,		December 31,		March 31,
				2015		2015		2015		2016
Consolidated Statement of Operations Data
Turkcell Turkey				2,662.2		2,997.8		11,480.9		2,927.5
Consumer				2,124.4		2,391.0		9,127.3		2,337.9
Corporate				482.7		529.2		2,031.7		524.5
Other				55.1		77.6		321.9		65.1
Turkcell International				192.9		223.8		856.1		196.9
Other				123.1		112.9		432.4		101.0
Total revenues				2,978.2		3,334.5		12,769.4		3,225.4
Direct cost of revenues				(1,828.6)		(2,054.8)		(7,769.5)		(2,018.8)
Gross profit				1,149.6		1,279.7		4,999.9		1,206.6
Administrative expenses				(140.8)		(165.9)		(625.3)		(178.7)
Selling & marketing expenses				(476.3)		(492.6)		(1,901.9)		(481.2)
Other Operating Income / (Expense)				(53.0)		(31.1)		(225.9)		(11.1)
Operating profit before financing costs				479.5		590.1		2,246.8		535.6
Finance costs				(735.7)		(141.0)		(799.5)		(55.0)
Finance income				252.3		153.5		756.1		221.2
Share of profit of equity accounted investees				94.8		98.4		367.3		15.2
Income before taxes and minority interest				90.9		701.0		2,570.7		717.0
Income tax expense				(234.2)		(109.2)		(667.1)		(143.4)
Income before minority interest				(143.3)		591.8		1,903.6		573.6
Non-controlling interests				284.4		(7.6)		164.1		(10.9)
Net income				141.1		584.2		2,067.7		562.7
Net income per share				0.06		0.27		0.94		0.26
Other Financial Data
Gross margin				38.6%		38.4%		39.2%		37.4%
EBITDA(*)				926.8		1,058.2		4,140.5		1,001.5
Capital expenditures				755.5		6,188.9		8,536.2		738.4
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents				8,173.8		2,918.8		2,918.8		2,522.4
Total assets				23,977.7		26,207.3		26,207.3		26,175.2
Long term debt				549.7		3,487.8		3,487.8		3,373.2
Total debt				4,127.3		4,214.2		4,214.2		4,028.3
Total liabilities				11,050.4		11,788.4		11,788.4		11,273.4
Total shareholders’ equity / Net Assets				12,927.3		14,418.9		14,418.9		14,901.8

* Please refer to the notes on reconciliation of Non-GAAP Financial measures on page 13
** For further details, please refer to our consolidated financial statements and notes as at 31 March 2016 on our web site.

				TURKCELL ILETISIM HIZMETLERI A.S. TURKISH ACCOUNTING STANDARDS SELECTED FINANCIALS (TRY Million)
				Quarter Ended		Quarter Ended		Year Ended		Quarter Ended
				March 31,		December 31,		December 31,		March 31,
				2015		2015		2015		2016
Consolidated Statement of Operations Data
Turkcell Turkey				2,662.2		2,997.8		11,480.9		2,927.5
Consumer				2,124.4		2,391.0		9,127.3		2,337.9
Corporate				482.7		529.2		2,031.7		524.5
Other				55.1		77.6		321.9		65.1
Turkcell International				192.9		223.8		856.1		196.9
Other				123.1		112.9		432.4		101.0
Total revenues				2,978.2		3,334.5		12,769.4		3,225.4
Direct cost of revenues				(1,828.0)		(2,054.2)		(7,766.5)		(2,018.3)
Gross profit				1,150.2		1,280.3		5,002.9		1,207.1
Administrative expenses				(140.8)		(165.9)		(625.3)		(178.7)
Selling & marketing expenses				(476.3)		(492.6)		(1,901.9)		(481.2)
Other Operating Income / (Expense)				569.9		(15.9)		925.0		220.4
Operating profit before financing and investing costs				1,103.0		605.9		3,400.7		767.6
Income from investing activities				3.6		6.2		14.9		9.3
Expense from investing activities				(22.4)		(27.5)		(74.3)		(7.0)
Share of profit of equity accounted investees				94.8		98.4		367.3		15.2
Income before financing costs				1,179.0		683.0		3,708.6		785.1
Finance expense				(1,087.5)		18.6		(1,135.1)		(67.6)
Income before tax and non-controlling interest				91.5		701.6		2,573.5		717.5
Income tax expense				(234.3)		(109.4)		(667.7)		(143.5)
Income before non-controlling interest				(142.8)		592.2		1,905.8		574.0
Non-controlling interest				284.4		(7.6)		164.1		(10.9)
Net income				141.6		584.6		2,069.9		563.1
Net income per share				0.06		0.27		0.94		0.26
Other Financial Data
Gross margin				38.6%		38.4%		39.2%		37.4%
EBITDA(*)				926.8		1,058.2		4,140.5		1,001.5
Capital expenditures				755.5		6,188.9		8,536.2		738.4
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents				8,173.8		2,918.8		2,918.8		2,522.4
Total assets				23,952.5		26,184.2		26,184.2		26,152.6
Long term debt				549.7		3,487.8		3,487.8		3,373.2
Total debt				4,127.3		4,214.2		4,214.2		4,028.3
Total liabilities				11,046.5		11,784.9		11,784.9		11,270.1
Total shareholders’ equity / Net Assets				12,906.0		14,399.3		14,399.3		14,882.5

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