Turkcell Iletisim Hizmetleri: Fourth Quarter and Full Year 2021 Results

“STRONG PERFORMANCE WITH A DIVERSIFIED BUSINESS MODEL”

Contents

HIGHLIGHTS
QUARTER HIGHLIGHTS, 3
COMMENTS BY CEO, MURAT ERKAN, 5

FINANCIAL AND OPERATIONAL REVIEW
FINANCIAL REVIEW OF TURKCELL GROUP, 8
OPERATIONAL REVIEW OF TURKCELL TURKEY, 12

TURKCELL INTERNATIONAL
lifecell, 14
BeST, 15
Kuzey Kibris Turkcell, 15

TECHFIN
Paycell, 16
Financell, 16

TURKCELL GROUP SUBSCRIBERS, 17

OVERVIEW OF THE MACROECONOMIC ENVIRONMENT, 17

RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS, 18

Appendix A – Tables, 20

• Please note that all financial data is consolidated and comprises that of Turkcell Iletisim Hizmetleri A.S. (the “Company”, or “Turkcell”) (NYSE:TKC) (BIST:TCELL) and its subsidiaries and associates (together referred to as the “Group”), unless otherwise stated.

• We have four reporting segments:
  • "Turkcell Turkey" which comprises our telecom, digital services and digital business services related businesses in Turkey (as used in our previous releases in periods prior to Q115, this term covered only the 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 and digital services related businesses outside of Turkey.
  • “Techfin” which comprises all of our financial services businesses.
  • “Other” which mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.

• 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, 2021 refer to the same item as at December 31, 2020. For further details, please refer to our consolidated financial statements and notes as at and for December 31, 2021, 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 quarter and for the full year of 2020 and 2021 is based on IFRS figures in TRY terms unless otherwise stated.

• In the tables used in this press release totals may not foot due to rounding differences. The same applies to the calculations in the text.

• Year-on-year and quarter-on-quarter percentage comparisons appearing in this press release reflect mathematical calculation.

FINANCIAL HIGHLIGHTS

FULL YEAR HIGHLIGHTS

• Robust financial performance:

  • Group revenues up 23.4% supported by upsell efforts, price adjustments and subscriber growth as well as the contribution of the techfin business, international operations and equipment sales.

  • EBITDA up 22.4% leading to an EBITDA margin of 41.8%; EBIT up 22.7% resulting in an EBIT margin of 21.5%
  • Net income up 18.7% mainly on the back of robust operational performance and prudent financial risk management as well as the deferred tax income impact that resulted from revaluation of assets
  • TRY2.6 billion dividends distributed
  • Free cash flow 3 generation of TRY1.1 billion; leverage 4 at 1.1x, despite FX fluctuations
  • Short FX position of US$191 million (in line with our FX neutral definition, which is between -US$200 million and +US$200 million)

• Strong operational momentum continued:
  • Turkcell Turkey subscriber base up by 2.7 million net additions; the highest performance since 2007
  • 1.7 million mobile postpaid net additions; 0.5 million mobile prepaid net additions
  • 258 thousand fixed subscriber net additions, highest since 2017; 223 thousand fiber net additions
  • 653 thousand new fiber homepasses
  • Mobile ARPU 5 growth of 13.4%; residential fiber ARPU growth of 10.6%

• 2022 guidance6; revenue growth target of around 30%, EBITDA target of around TRY19 billion, and operational capex over sales ratio7 target of between 20% - 21% -

FOURTH QUARTER HIGHLIGHTS

• Strong financial results:
  • Group revenues up 29.5% year-on-year on the back of strong performance of Turkcell Turkey, the robust contribution from international operations and boost in techfin segment revenues

  • EBITDA up 29.9% year-on-year resulting in an EBITDA margin of 41.3%; EBIT up 32.8% year-on-year leading to an EBIT margin of 21.0%

  • Group net income at TRY1.4 billion, which resulted from sustained operational performance, disciplined financial risk management in a volatile currency environment and the positive impact of deferred tax income relating to the revaluation of assets

• Robust operational performance maintained:

  • Quarterly mobile postpaid subscriber net additions of 330 thousand; postpaid subscriber share at 66.4% of mobile subscriber base

  • Quarterly fixed subscriber net additions of 84 thousand; all-time high quarterly fiber net additions of 74 thousand

  • Year-on-year mobile ARPU5 growth accelerated to 17.8% mainly driven by upsell to higher tariffs, price adjustments and higher postpaid share

  • Residential fiber ARPU growth of 12.8% year-on-year mainly on upsell efforts

  • Average monthly data usage of 4.5G subscribers at 14.7 GB in Q421; smartphone penetration at 86%

  • Digital channels’ share 8 in sales at 22.1%

(1) EBITDA is a non-GAAP financial measure. See page 18 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.
(2) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.
(3) Free cash flow calculation includes EBITDA and the following items as per IFRS cash flow statement; acquisition of property, plant and equipment, acquisition of intangible assets, change in operating assets/liabilities, payment of lease liabilities and income tax paid.
(4) We have revised the definition of our net debt calculation to include "financial assets at fair value through other comprehensive income” reported under current and non-current assets, and “financial assets at amortized cost”. We believe that these assets are highly liquid and can be easily converted to cash without significant change in value.
(5) Excluding M2M
(6) 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 2020 filed with U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.
(7) Excluding license fee
(8) Share of all sales from digital channels (including voice, data, services & smart devices) in Turkcell Turkey consumer sales (excluding fixed business) and equipment related revenues in other segment. Beginning from this quarter, the data has been revised to include the revenues from postpaid subscriber acquisitions, switches, tariff revisions from digital channels.

For further details, please refer to our consolidated financial statements and notes as at December 31, 2021 via our website in the investor relations section (www.turkcell.com.tr).

COMMENTS BY CEO, MURAT ERKAN

With an accelerated robust performance, we again exceeded our guidance

2021 was a year of recovery for the whole world after 2020 when social and economic challenges arising from the COVID-19 pandemic prevailed. The first half of the year, overshadowed by variants of COVID-19 and the measures taken against them continued to impact social life and business activities. Thanks to widespread vaccination programs in the second half of the year, rapid normalization has begun in our country, as in most parts of the world. Those changes throughout the year have re-shaped our lives and consumer behavior alike. Meanwhile, two prevailing basic needs, which do not change but rise in importance, were namely “communication” and “digitalization”. As Turkcell, we believe that we are the leading brand that addresses these needs with our competencies and comprehensive ecosystem realizing a well-positioned strategy.

Thanks to the robust operational performance in all of our services that meet changing customer needs, we achieved strong financial results in 2021 and exceeded our guidance, which we have upgraded each quarter. Rising 23.4% year-on-year, consolidated revenues reached TRY35.9 billion and EBITDA1 rose by 22.4% to TRY15.0 billion. Thanks to our solid balance sheet, prudent risk management approach and robust performance in all of our operations, net income reached TRY5.0 billion rising 18.7% year-on-year. Despite the depreciation of the Turkish lira, we managed to keep our operational capex2 to sales ratio at 21.2% as planned.

Record net additions of the past 14 years

The consumer habits that changed during the pandemic period have strengthened in 2021. The first half of the year that saw pandemic restrictions, including a 3-week full lockdown, increased remote education and working practices, which highlighted the need for high speed and capacity in fixed broadband services. In the second half of the year, increased mobility and tourist activity, especially over the summer months, boosted the demand for our mobile services. The smart investments we made in our network by thinking ahead of our peers over many years have enabled us to continue delivering the fastest high-quality communication services. As part of our customer-focused approach, we have taken actions at the right time by analyzing customer behavior using AI, that has allowed us to manage churn at a reasonable level. Changing consumer habits have revealed the need for higher capacity and greater internet speed, which in turn have enabled us to upsell to higher tariffs. Thanks to these factors, we recorded 2.7 million yearly net additions, marking a record high of the past 14 years. We recorded 1.7 million postpaid and 503 thousand prepaid subscribers, making for a net of 2.2 million mobile subscribers. The share of our postpaid subscribers in the total mobile base rose to 66.4%. Accelerating towards the end of the year, mobile blended ARPU (excluding M2M) increased 17.8% in the fourth quarter and 13.4% in 2021 overall mainly on upsell to higher packages, an expanding postpaid subscriber base and rising data and digital services usage.

Fiber penetration in Turkey lags that of the OECD countries and fixed broadband services provided by outdated technology solutions of low capacity and speed fail to meet user needs. This also interrupts the development of new generation communication technologies that will pave the way for the future of Turkey. Keeping this in mind, at the end of 2020 we announced our aim of increasing our national fiber roll out. Exceeding our target, we have reached 653 new homes with our fiber infrastructure, adding 5 cities to our service area in 2021. Accordingly, the fiber subscriber base expanded by 223 thousand net additions to 1.9 million in total. We have added a net 258 thousand fixed broadband subscribers, reaching 2.7 million. We also delivered a robust performance in IPTV services, which plays a significant role in keeping the fiber churn rate low. Our IPTV subscriber base reached 1.1 million with a net 211 thousand additions. The residential fiber ARPU rose 10.6% and 12.8% year-on-year in 2021 and Q421, respectively.

The mobility restrictions of 2021 once again underlined the significance of our digital channels, where a customer can top-up, purchase additional packages, subscribe to a digital service, or even purchase electronic devices from a wide product range. The digital channel’s share3 in sales reached 22% at the year-end.

We continue to create value for our customers and meet their needs with our strategic focus areas

The users of our digital services, which add value to our customers’ lives with a wide product portfolio, continue to increase day by day. The total downloads of BiP, Turkey’s communication platform, exceeded 90 million in 2021. 3-month active users of BiP are 2.5 times that of the previous year, at 26 million. Having rapidly increased its worldwide recognition, BiP has continued to attract attention, especially in densely populated countries such as Indonesia, Bangladesh, India, Pakistan and Malaysia. As of the year end, one in four active BiP users were from abroad. Considering our customers' needs, we've continued to add new features to BiP throughout the year to improve the user experience. We aim to make BiP a widely used global application with international operator cooperation that we plan to realize in the upcoming periods.

TV+ has been the only TV service provider to have continued to grow its market share steadily each quarter since 2017. With its rich content, TV+'s IPTV customer base increased by 24% to 1.1 million, while OTT TV users exceeded 800 thousand users, rising 40% year-on-year. Meanwhile, by surpassing its 1 million milestone in June, our cloud storage service lifebox’s paid users rose 45% to 1.3 million. Aiming to reach more users in 2021, we offer BiP Meet, lifebox business and YaaniMail to our corporate customers in the B2B business model. All in all, the stand-alone revenues of our digital services increased by 31% to TRY1.7 billion in 2021.

Offering tailored services to meet the needs of the enterprises, Turkcell Digital Business Services, has contributed to the digital transformation of its customers with new generation technologies such as data center, cloud, cyber security, systems integration, managed services, artificial intelligence, IoT, big data and business applications, in addition to traditional fixed broadband services. With its various business partners and strong infrastructure, we have achieved leadership in the IT service market two years ahead of schedule. In this period, we signed over 2,700 projects with a total contract value of TRY1.7 billion. The total revenues of Digital Business Services rose 29% to TRY2.3 billion. We have a contract value (backlog) from system integration projects of TRY1.4 billion to be realized beyond 2022.

Our techfin business grew by 27% with the contribution of Financell and Paycell. Financell, providing financial solutions not only for consumers but also for the technological needs of corporates, has increased its revenues by 32% in the fourth quarter of 2021, as its loan portfolio reached TRY2.1 billion. Turkey’s leading payment platform Paycell, continued to stand by our customers in a period of rapid change in payment habits. Reaching 6.6 million users with an annual increase of 41%, Paycell's transaction volume across all services rose 49% to TRY14 billion. Pay Later, is the main revenue generator of Paycell with a 72% share, has reached 4.1 million active users, rising 81%, while its transaction volume almost doubled on a year-on-year basis. At the same time, the transaction volume over Paycell card has increased to sixfold of last year. Paycell Android POS, offering a cost advantage by eliminating the need for corporates to make several agreements with banks, reached 6 thousand devices and thereby we had exceeded 17 thousand merchants at the end of the year. Thanks to the strong performance in all verticals, Paycell has managed to increase its revenues by 64% in 2021. This year we have also initiated a partial stake sale in Paycell. We aim to work with a strategic partner who will contribute to the growth of Paycell in existing and new markets with its know-how in techfin, and help us elevate Paycell to the next level.

We are taking bold steps towards our sustainability goals

As Turkcell, we are developing our technology for a better world with our human-oriented and environmentally friendly business approach. Considering the importance of digitalization that enables us to reduce carbon emissions and use energy efficiently, we offer digital services that contribute to the environment. An important sustainability initiative of 2021 was the acquisition of the Izmir Karadag Wind Power Plant. By acquiring this plant, which has the capacity to meet the electricity needs of 2,500 base stations with its 18 MW installed capacity, we took an important step towards becoming a company not only generating 100% renewable energy but also aiming to produce renewable energy. Indeed, we once again underlined our commitment to become carbon neutral by 2050. By turning the competition element of the “Women Developers of the Future” project into a “Climathon,” we supported the equal presence of women in technology and nurtured ideas that seek solutions to climate change through technology. With our “Recycle into Education” project, we have ensured the efficient use of resources by recycling electronic waste. Our steady performance within the framework of these initiatives has also increased our access to sustainable financing sources. Thanks to the agreement we signed with BNP Paribas in December, we increased the amount of the sustainability linked loan we received in 2019 to EUR70 million, extending its term to 5 years.

As Turkcell, we attach great importance to making our technology accessible and thereby ensuring the equal participation of everyone in daily life. We strive for the equal participation of all segments of society through technology with our digital inclusivity projects such as Whiz Kids, Digital Spring, and No Barriers. By signing the GSMA’s Principles for Driving the Digital Inclusion of Persons with Disabilities, we have become the first company in Turkey, and among the first eight in the world.

With a focus on being a good corporate citizen, we announced the Principles of Sustainable Governance in June, a guide to the way we undertake social and environmental work in all business processes. Our company, which has been listed on Borsa Istanbul and the NYSE since 2000, adopted the corporate governance regulations applicable to it according to the legislation of both countries within the framework of best practices. We are among the companies with the strongest corporate governance structure in Turkey. The fact that the Board of Directors evaluates its own performance on an annual basis in line with specified criteria has begun to be discussed this year in terms of improving corporate governance in our Company.

We are extending the accelerated momentum of our financial performance to 2022

2022 bears many social and economic uncertainties. Although COVID-19 variants seem to have been brought under control with widespread vaccination programs, they remain on our watch-list. Increasing raw material and labor costs, the energy and chip crisis, disruptions in the supply chain, and inflation, which has become a global threat, make it difficult for us to clearly see the path ahead. Therefore, we are required to stress that we may update our financial and operational targets throughout the year in light of prevailing macroeconomic fluctuations. At this stage, we target4 revenue growth of around 30% and EBITDA of around TRY19 billion for 2022. For this year, in which we aim to add a million subscribers, we forecast an operational capex over revenues ratio2 in the range of 20% - 21%.

We are planning to share our strategy and 3-year targets with you at the Turkcell Investor & Analyst Day, which we will hold in Istanbul on April 12.

In short, we have left a challenging year behind us where, as a society, we have again seen clearly that communication and digitalization are unwavering, but transforming needs. I would like to extend my thanks to all our employees for their dedicated efforts that cement our achievements, despite the weather and burden of the pandemic. Additionally, I thank our management team for making our success permanent, and our Board of Directors for their confidence and support. I also express my gratitude towards our customers and business partners who honor us with their trust.

(1) EBITDA is a non-GAAP financial measure. See page 18 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.
(2) Excluding license fee
(3) Share of all sales from digital channels (including voice, data, services & smart devices) in Turkcell Turkey consumer sales (excluding fixed business) and equipment related revenues in other segment. Beginning from this quarter, the data has been revised to include the revenues from postpaid subscriber acquisitions, switches, tariff revisions from digital channels.
(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 2020 filed with U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.

FINANCIAL AND OPERATIONAL REVIEW

Financial Review of Turkcell Group

(1) Excluding depreciation and amortization expenses.
(2) EBITDA is a non-GAAP financial measure. See page 18 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.
(3) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

Revenue of the Group grew by 29.5% year-on-year in Q421. This was driven mainly by the robust performance of Turkcell Turkey supported by improved ARPU performance with the impact of price adjustments to reflect inflationary impacts and upsell efforts, and a larger subscriber base. The strong topline performance of Turkcell International as well as the solid momentum in techfin revenues also contributed to Group revenue growth.

Turkcell Turkey revenues, comprising 75% of Group revenues, rose 26.9% year-on-year in Q421 to TRY7,689 million (TRY6,059 million).

- Consumer segment revenues grew 21.2% year-on-year on the back of price adjustments to reflect inflationary impacts, upsell efforts and growing subscriber base.
- Corporate segment revenues rose 27.5% year-on-year driven mainly by the robust performance of digital business services, which grew 52.4% with increased number of projects leading to all time high quarterly contract value.
- Standalone digital services revenues registered as part of the consumer and corporate businesses grew 32.4% year-on-year as the number of standalone paid users increased 35% year-on-year to 4 million.
- Wholesale revenues rose 89.3% year-on-year to TRY687 million (TRY363 million), mainly on the traffic increase and data capacity upgrades of customers, as well as the positive impact of currency movements.

Turkcell International revenues, comprising 13% of Group revenues, rose 72.1% year-on-year to TRY1,286 million (TRY747 million). lifecell was the main driver of this robust performance with strong subscriber and ARPU growth. Turkcell International revenues were also positively impacted by currency movements.

Techfin segment revenues, comprising 3% of Group revenues, rose 46.4% to TRY330 million (TRY225 million). This was driven by a 74.9% rise in Paycell revenues and 31.6% growth in those of the Finance company. Please refer to the Techfin section for details.

Other subsidiaries' revenues, at 9% of Group revenues, including mainly non-group call center and energy business revenues, and consumer electronics sales revenues, increased 5.4% to TRY886 million (TRY841 million).

For the full year, Turkcell Group revenues rose 23.4%.

Turkcell Turkey revenues grew 19.3% to TRY27,224 million (TRY22,823 million).

- Consumer business rose 16.8% mainly driven by strong subscriber net additions both in mobile and fixed segments, price adjustments and upsell efforts.
- Corporate revenues rose 21.1% mainly supported by digital business services revenue growth of 28.9%.
- Standalone digital services revenues from consumer and corporate segments grew 31.0% mainly driven by larger standalone paid user base.
- Wholesale revenues grew 47.2% to TRY1,903 million (TRY1,293 million).

Turkcell International revenues rose 47.5% to TRY3,750 million (TRY2,542 million).

Techfin segment revenues rose 27.3% to TRY1,076 million (TRY845 million).

Other subsidiaries’ revenues were at TRY3,871 million (TRY2,893 million) indicating to a 33.8% growth.

Cost of revenue (excluding depreciation and amortization) decreased to 49.3% (50.0%) as a percentage of revenues in Q421. This was driven mainly by the decline in cost of goods sold (1.1pp) and other cost items (0.2pp), despite the increase in radio expenses (0.6pp) as a percentage of revenues.

For the full year, cost of revenue (excluding depreciation and amortization) rose to 49.9% (49.3%) as a percentage of revenues. This was due mainly to the rise in cost of goods sold (0.8pp), radio expense (0.3 pp) and other cost items (0.5pp), despite the decline in the treasury share (0.5pp) and interconnection expenses (0.5pp) as a percentage of revenues.

Administrative Expenses were at 2.7% (2.7%) as a percentage of revenues in Q421.

For the full year, administrative expenses were at 2.6% (2.6%) as a percentage of revenues.

Selling and Marketing Expenses increased to 5.7% (5.1%) as a percentage of revenues in Q421. This was driven mainly by the rise in marketing expenses (0.7pp) and other cost items (0.2pp), despite the decline in selling expenses (0.3pp) as a percentage of revenues.

For the full year, selling and marketing expenses increased to 5.0% (4.7%) as a percentage of revenues due mainly to the rise in marketing expenses (0.3pp).

Net impairment losses on financial and contract assets was at 1.0% (1.0%) as a percentage of revenues in Q421.

For the full year, net impairment losses on financial and contract assets was at 0.8% (1.2%) as a percentage of revenues.

EBITDA1 rose by 29.9% year-on-year in Q421 leading to an EBITDA margin of 41.3% (41.2%).

- Turkcell Turkey’s EBITDA rose 23.7% to TRY3,252 million (TRY2,629 million) leading to an EBITDA margin of 42.3% (43.4%).

(1) EBITDA is a non-GAAP financial measure. See page 18 for the explanation of how we calculate adjusted EBITDA and its reconciliation to net income

- Turkcell International EBITDA increased 79.2% to TRY628 million (TRY350 million) driving an EBITDA margin of 48.8% (46.9%) on 1.9pp improvement.
- Techfin segment EBITDA rose 55.0% to TRY192 million (TRY124 million) with an EBITDA margin of 58.2% (55.0%), indicating to 3.2pp expansion.
- The EBITDA of other subsidiaries was at TRY140 million (TRY140 million).

For the full year, EBITDA grew by 22.4% resulting in an EBITDA margin of 41.8% (42.2%).

- Turkcell Turkey’s EBITDA rose 18.3% to TRY12,168 million (TRY10,283 million) leading to an EBITDA margin of 44.7% (45.1%).
- Turkcell International EBITDA increased 56.3% to TRY1,828 million (TRY1,169 million) driving an EBITDA margin of 48.8% (46.0%) on 2.8pp improvement.
- Techfin segment EBITDA rose 26.0% to TRY639 million (TRY507 million) with an EBITDA margin of 59.4% (60.0%).
- The EBITDA of other subsidiaries was at TRY379 million (TRY310 million).

Depreciation and amortization expenses increased 27.0% year-on-year in Q421. For the full year depreciation and amortization expenses increased 22.0%.

Net finance expense increased to TRY1,769 million (TRY382 million) in Q421. The higher net finance expense was due mainly to higher net FX loss after hedging led by quarterly Turkish Lira depreciation.

For the full year net finance expense increased to TRY2,901 million (TRY1,132 million) for the same reason.

See Appendix A for details of net foreign exchange gain and loss.

Income tax expense: The current tax expense of TRY107 million was more than offset by TRY1,106 million deferred tax income in Q421.

For the full year, deferred tax income of TRY1,172 million and current tax expense of TRY682 million was reported, leading to an income tax gain of TRY490 million.

Please note that in Q221 and Q421, we made use of the right introduced by Article 11 of the Law No. 7326, that allows the revaluation of properties and depreciable economic assets under certain conditions. As per the law, the respective assets can be revalued according to PPI until the year-end and a 2% tax is applied for the revaluation difference. For revalued assets, the valuation difference can be depreciated and written-off as an expense. This resulted in a positive impact on the deferred tax asset reported in the respective quarters. Please refer to our consolidated financial statements and notes as at December 31, 2021 for details.

Net income of the Group increased by 6.3% to TRY1,385 million (TRY1,302 million) in Q421. Despite higher net FX losses after hedging in a volatile currency environment, this resulted mainly from strong operational performance and the positive impact of deferred tax income relating to the revaluation of assets as explained above.

For the full year, group net income rose 18.7% to TRY5,031 million (TRY4,237 million) on the back of strong operational performance and the deferred tax income impact, despite a higher net finance expense due to FX volatility.

Total cash & debt: Consolidated cash as of December 31, 2021 increased to TRY18,629 million from TRY12,322 million as of September 30, 2021. This was driven mainly by the positive impact of currency movements. The third instalment payment of the dividend distribution was also made during the quarter. Excluding FX swap transactions, 76% of our cash is in US$, 12% in EUR, and 12% in TRY.

Consolidated debt as of December 31, 2021 increased to TRY36,778 million from TRY24,805 million as of September 30, 2021 due mainly to the impact of currency movements. Please note that TRY2,906 million of our consolidated debt is comprised of lease obligations.

Consolidated debt breakdown excluding lease obligations:

- Turkcell Turkey’s debt was at TRY30,609 million, of which TRY18,018 million (US$1,352 million) was denominated in US$, TRY9,188 million (EUR609 million) in EUR, TRY930 million (CNY446 million) in CNY, and the remaining TRY2,472 million in TRY.
- The finance company had a debt balance of TRY1,321 million, of which TRY284 million (US$21 million) was denominated in US$, and TRY362 million (EUR24 million) in EUR with the remaining TRY675 million in TRY.
- The debt balance of lifecell was TRY1,713 million, fully denominated in UAH.
- Under the Other segment we had a debt balance of TRY229 million (US$17 million), fully denominated in US$.

TRY1,262 million of lease obligations is denominated in TRY, TRY81 million (US$6 million) in US$, TRY303 million (EUR20 million) in EUR, and the remaining balance in other local currencies (Please note that the figures in parentheses refer to US$ or EUR equivalents).

Net debt1 as of December 31, 2021 was at TRY16,717 million with a net debt to EBITDA ratio of 1.1 times. Excluding finance company consumer loans, our telco only net debt was at TRY14,622 million with a leverage of 1.0 times.

Turkcell Group had a short FX position of US$191 million as at the end of the fourth quarter (Please note that this figure takes advance payments into account). Due to significant currency depreciation during the quarter, the strike levels of call options as part of some of participating cross currency swaps were exceeded. This had a negative impact on our FX position during the quarter. The short FX position of US$191 million is in line with our FX neutral definition, which is between -US$200 million and +US$200 million.

Capital expenditures: Capital expenditures, including non-operational items, amounted to TRY4,297 million in

Q421. For the full year, capital expenditures including non-operational items were at TRY11,479 million.

For Q421 and the full year, operational capital expenditures (excluding license fees) at the Group level were at 26.4% and 21.2% of total revenues, respectively.

(1) We have revised the definition of our net debt calculation to include "financial assets at fair value through other comprehensive income” reported under current and non-current assets, and “financial assets at amortized cost”. We believe that these assets are highly liquid and can be easily converted to cash without significant change in value.

(1) Superbox subscribers are included in mobile subscribers.
(2) Churn figures represent average monthly churn figures for the respective quarters.
(3) In Q117, our churn policy was revised to extend from 9 months to 12 months (the period at the end of which we disconnect prepaid subscribers who have not topped up above TRY10). Additionally, under our revised policy, prepaid customers who last topped up before March is disconnected at the latest by year-end. As a regulatory requirement, we started to disconnect prepaid lines in accordance with the new ICTA regulation, which requires deactivation of prepaid lines which lack residency documents by the 6th month of subscription starting from 2019. Furthermore, as required by the ICTA, the line of a deceased customer should either be transferred to a successor/another user or terminated. Lines, which are not transferred or terminated, are to be disconnected at the end of seven months.
(4) Starting from Q121, as a consequence of the change in reportable segments, commission revenues resulting from devices and accessories sales have been excluded from the mobile ARPU of Turkcell Turkey since these commissions are now reported under the Other segment.

Turkcell Turkey subscriber base grew by 2.7 million net additions in FY21 to 39.4 million, thanks to our customer-centric approach, and retention focus supported by our data analytics capabilities. Also, we believe that our broad range of offerings serving the needs of customers through a strong omnichannel structure, and our superior network quality contributed to our robust net additions performance in FY21. This net addition performance was the highest since 2007.

On the mobile front, our subscriber base reached 35.6 million on 2.2 million net additions in FY21. This was mainly driven by 1.7 million net additions to the postpaid subscriber base, which reached 66.4% (65.7%) of total mobile subscribers. We had 330 thousand quarterly postpaid net additions in Q421. Our prepaid subscriber base also expanded by 503 thousand net additions in FY21, which was supported mainly by the robust tourism activity in Q321 and supported by our retention efforts. In Q421, we had a net 358 thousand decline in our prepaid subscribers, due mainly to the disconnection of 480 thousand inactive prepaid subscribers during the quarter in line with our churn policy.

On the fixed front, our fiber subscriber base grew by all-time high quarterly net additions of 74 thousand supported by our accelerated fiber infrastructure investments and the continued demand for high speed household broadband connections. We had 223 thousand net additions to our fiber subscriber base for the full year. Total fixed subscribers reached 2.7 million on 84 thousand quarterly and 258 thousand annual net additions. Meanwhile, IPTV customers reached 1.1 million on 70 thousand quarterly and 211 thousand annual net additions.

The average monthly mobile churn rate was at 2.5% in Q421, and 2.0% in FY21, lowest level for last 4 years. Meanwhile the average monthly fixed churn rate was at 1.6% in Q421 and 1.5% in FY21. Our customer-oriented and proactive approach, as well as our analytical capabilities, which enable us to make the right offer to the right customer at the right time, led to a better customer retention performance in both mobile and fixed segments on a year-on-year basis.

Our mobile ARPU (excluding M2M) rose 17.8% year-on-year in Q421 driven mainly by price adjustments to reflect inflationary impacts and upsell to higher tariffs, as well as larger postpaid subscriber base. Mobile ARPU (excluding M2M) grew 13.4% for the full year mainly on the same drivers.

Our residential fiber ARPU growth was 12.8% year-on-year in Q421. This was driven by upsell to higher tariffs and increased IPTV penetration. Fiber residential ARPU increased 10.6% for the full year.

Average monthly mobile data usage per user rose 13.7% in FY21 to 13.3 GB with the rising number and data consumption of 4.5G users in FY21. Accordingly, the average mobile data usage of 4.5G users reached 14.9 GB in FY21.

Total smartphone penetration on our network reached 86% in Q421 on a 5.0pp year-on-year increase. 92% of those smartphones were 4.5G compatible.

TURKCELL INTERNATIONAL

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

lifecell (Ukraine) had another quarter of solid revenue growth performance. Accordingly, lifecellrevenues rose 25.7% year-on-year in Q421 in local currency terms on the back of subscriber base expansion, as well as ARPU growth supported by price adjustments, increased data usage and messaging revenues. lifecell’s EBITDA grew 26.5% year-on-year leading to an EBITDA margin of 54.8%. This resulted from strong topline performance and effective cost management initiatives.

lifecell revenues in TRY terms grew 87.5% year-on-year in Q421 with strong operational performance and the positive impact of currency movements. lifecell’s EBITDA in TRY terms grew by 88.0%, leading to an EBITDA margin of 54.6%.

For the full year, lifecell revenues in local currency terms rose 24.1%, while its EBITDA increased 30.9% resulting in an EBITDA margin of 56.0%. lifecell also reported positive net income in 2021. In TRY terms, lifecell registered revenue growth of 58.0% with an EBITDA margin of 55.8%.

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

Three-month active subscriber base of lifecell rose to 9.2 million in Q421 thanks to its innovative and regional offers. Meanwhile, lifecell’s 3-month active ARPU rose 10.8% year-on-year on the back of higher data usage and price adjustments. Moreover, we deem the simplified MNP procedure, which came into effect as of December 1, 2021, as a positive step towards further strengthening of a fair competitive environment in the market.

The penetration of 4.5G users in lifecell’s customer base continued to increase. Accordingly, 3-month active 4.5G users rose 32% year-on-year to 73% of total mobile data users as at year end. Consequently, average data consumption per user rose by 13% in Q421, driven mainly by the higher data usage of 4.5G users. lifecell sustained its leadership of the Ukrainian market in smartphone penetration, which was at 83% as at the end of Q421.

lifecell continued to expand its digital services users in Q421. Thanks to continuous efforts to enrich its customer experience, lifecell’s digital services 3-month active users grew 33% year-on-year in Q421.

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

BeST revenues decreased by 5.8% year-on-year in local currency terms. This was due mainly to the contraction in handset sales despite the continued rise in voice, data and messaging revenues. Excluding the handset revenues, service revenue growth was at 15.4%. BeST registered an EBITDA of BYN10.1 million in Q421, which led to an EBITDA margin of 28.5%. BeST’s revenues in TRY terms grew by 37.9% year-on-year in Q421 with an EBITDA margin of 28.4%.

For the full year, BeST revenues in local currency terms grew by 5.0% mainly on the back of data revenues. BeST’s EBITDA rose 10.4%, resulting in a 26.1% EBITDA margin on 1.3pp improvement. In TRY terms, BeST revenues rose 28.4% with an EBITDA margin of 26.4%.

BeST continued to lead the market in terms of 4G geographical coverage. At the end of Q421, BeST provides LTE service to customers in 6 regions through over 3.4 thousand sites, which grew by over 100 additions during the quarter. The expanding LTE coverage allows BeST to increase the penetration of its 4G subscribers. Accordingly, 4G users comprised 71% of the 3-month active subscriber base as of Q421. Meanwhile, the average monthly data consumption of subscribers rose 20% year-on-year to 14.7 GB.

BeST sustained its efforts to increase the penetration of its digital services, which supports ARPU growth and customer retention. Accordingly, 38% of 3-month active subscribers use at least one digital service as of Q421. This quarter BeST introduced cloud gaming and digital book services to its customers. Moreover, digital subscription solution introduced in Q320 continued to increase its share in the total subscriptions.

(2) Kuzey Kibris Turkcell, in which we hold a 100% stake, has operated in Northern Cyprus since 1999

Kuzey Kibris Turkcell revenues increased by 37.3% year-on-year in Q421 on the back of the rise in mobile data, voice and handset sales revenues. The EBITDA of Kuzey Kibris Turkcell rose 61.9% yielding a 39.2% EBITDA margin.

For the full year, Kuzey Kibris Turkcell revenues rose by 28.1% with the same drivers. The EBITDA grew 40.3% leading to an EBITDA margin of 39.5%.

TECHFIN

Paycell saw another quarter of remarkable performance. Accordingly, its revenues grew 74.9% year-on-year in Q421. The demand for digital payment services remained solid with changing consumer behavior. Paycell continued to capture the increased demand with its diverse product portfolio including mobile payment services, as well as Paycell card and payment facilitation solutions. Paycell’s EBITDA rose 73.8% year-on-year leading to an EBITDA margin of 46.1% in Q421.

The transaction volume of the Pay Later service grew 93% year-on-year to TRY585 million. This was driven mainly by an 81% increase in 3-month active users of Pay Later to 4.1 million, as well as higher merchant penetration supported by the dual growth strategy of Paycell. Meanwhile, the Paycell Card transaction volume increased to TRY1.2 billion in Q421. Paycell also started to see a ramping up of the volume of its payment facilitation business. Accordingly, the transaction volume over physical and virtual POS services reached TRY1.1 billion in Q421. Overall, the total transaction volume reached TRY4.9 billion in Q421 doubling year-on-year, driven mainly by the rise in 3-month active users to 6.6 million and their increased usage.

For the full year, Paycell registered 64.4% revenue growth and a total transaction volume of TRY13.7 billion. Meanwhile, Paycell’s EBITDA grew 50.9% in FY21, indicating a 4.2pp EBITDA margin contraction. The decline in the EBITDA margin was due mainly to the increased share of non-group revenues.

Financell’s revenues grew by 31.6% year-on-year in Q421. This strong performance resulted mainly from higher loan portfolio and average interest rate on the loan portfolio compared to the same period of the last year and increase in insurance revenues. Meanwhile, Financell reported EBITDA growth of 34.3% year-on-year, resulting in an EBITDA margin of 67.7% in Q421. The EBITDA margin was positively impacted by the sale of doubtful receivables. The 78.6% year-on-year rise in net income was impacted mainly by strong operational performance and fair valuation of derivative instruments.

Financell’s revenues rose by 8.5% for the full year and EBITDA climbed 14.6% yielding an EBITDA margin of 68.4%.

Financell’s loan portfolio increased to TRY2.1 billion in Q421, from TRY1.9 billion in Q420, driven by higher lending to the corporate segment and higher mobility. Moreover, due to a strong collection performance and customer portfolio improvement, Financell’s cost of risk has remained healthy throughout the year. Accordingly, average cost of risk declined to 0.4% in Q421 from 2.3% in Q420. Financell’s market share for loans granted in Turkey under TRY5 thousand was 22%.

Turkcell Group Subscribers

Turkcell Group registered subscribers amounted to approximately 51.6 million as of December 31, 2021. This figure is calculated by taking the number of subscribers of Turkcell Turkey, and of each of our subsidiaries. It includes the total number of mobile, fiber, ADSL, cable and IPTV subscribers of Turkcell Turkey, and the mobile subscribers of lifecell and BeST, as well as those of Kuzey Kibris Turkcell.

(1) Superbox subscribers are included in mobile subscribers.
(2) Subscribers to more than one service are counted separately for each service.

OVERVIEW OF THE MACROECONOMIC ENVIRONMENT

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

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, Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses, Administrative expenses and Net impairment losses on financial and contract assets, but excludes translation gain/(loss), finance income, finance expense, share of profit of equity accounted investees, gain on sale of investments, 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.

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 for 2022. More generally, all statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding the launch of new businesses, 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 2020 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 digital operator headquartered in Turkey, serving its customers with its unique portfolio of digital services along with voice, messaging, data and IPTV services on its mobile and fixed networks. Turkcell Group companies operate in 4 countries – Turkey, Ukraine, Belarus, and Northern Cyprus. Turkcell launched LTE services in its home country on April 1st, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. Turkcell offers up to 10 Gbps fiber internet speed with its FTTH services. Turkcell Group reported TRY35.9 billion revenue in FY21 with total assets of TRY70.7 billion as of December 31, 2021. 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.

Appendix A – Tables

Table: Net foreign exchange gain and loss details

Table: Income tax expense details

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