Edgar Filing: TURKCELL ILETISIM HIZMETLERI A S

Form 20-F

As filed with the Securities and Exchange Commission on April 30, 2009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission File Number: 1-15092

TURKCELL ILETISIM HIZMETLERI A.S.

(Exact Name of Registrant as Specified in Its Charter)

TURKCELL

(Translation of Registrant’s Name Into English)

Republic of Turkey

(Jurisdiction of Incorporation or Organization)

Turkcell Plaza

Mesrutiyet Caddesi No: 71

34430 Tepebasi

Istanbul, Turkey

(Address of Principal Executive Offices)

Mr. Serkan Okandan

Telephone: +90 212 313 1201

Facsimile: +90 212 292 5390

Turkcell Plaza

Mesrutiyet Caddesi No: 71

34430 Tepebasi

Istanbul, Turkey

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
American Depositary Shares		New York Stock Exchange
Ordinary Shares, Nominal Value TRY 1.000*		New York Stock Exchange
		Istanbul Stock Exchange

*	Not for trading on the NYSE, but only in connection with the registration of ADSs representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares, Nominal Value TRY 1.000 2,200,000,000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board x Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Table of Contents


ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.	KEY INFORMATION	3
	3.A Selected Financial Data	3
	3.B Capitalization and Indebtedness	10
	3.C Reasons for the Offer and Use of Proceeds	10
	3.D Risk Factors	10
ITEM 4.	INFORMATION ON THE COMPANY	25
	4.A History and Development of the Company	25
	4.B Business Overview	25
	4.C Organizational Structure	71
	4.D Property, Plant and Equipment	71
ITEM 4A.	UNRESOLVED STAFF COMMENTS	72
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	72
	5.A Operating Results	77
	5.B Liquidity and Capital Resources	96
	5.C Research and Development, Patents and Licenses, etc.	100
	5.D Trend Information	101
	5.E Off-Balance Sheet Arrangements	101
	5.F Tabular Disclosure of Contractual Obligations	102
	5.G Safe Harbor	102
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	103
	6.A Directors and Senior Management	103
	6.B Compensation	106
	6.C Board Practices	107
	6.D Employees	109
	6.E Share Ownership	110
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	111
	7.A Major Shareholders	111
	7.B Related Party Transactions	113
	7.C Interests of Experts and Counsel	115
ITEM 8.	FINANCIAL INFORMATION	115
	8.A Consolidated Statements and Other Financial Information	115
	8.B Significant Changes	116
ITEM 9.	THE OFFER AND LISTING	117
	9.A Offer and Listing Details	117
	9.B Plan of Distribution	118
	9.C Markets	118
	9.D Selling Shareholders	118
	9.E Dilution	118
	9.F Expenses of the Issue	118
ITEM 10.	ADDITIONAL INFORMATION	118
	10.A Share Capital	118
	10.B Memorandum and Articles of Association	118
	10.C Material Contracts	125
	10.D Exchange Controls	125
	10.E Taxation	126
	10.F Dividends and Paying Agents	132
	10.G Statement by Experts	132
	10.H Documents on Display	132
	10.I Subsidiary Information	132


ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	132
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	134
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	134
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	134
ITEM 15.	CONTROLS AND PROCEDURES	134
ITEM 16.	AUDIT COMMITTEE FINANCIAL EXPERT	136
ITEM 16B.	CODE OF ETHICS	136
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	137
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	137
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	137
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	137
ITEM 16G.	CORPORATE GOVERNANCE	137
ITEM 17.	FINANCIAL STATEMENTS	140
ITEM 18.	FINANCIAL STATEMENTS	140
ITEM 19.	EXHIBITS	141

INTRODUCTION

This is the 2008 annual report for Turkcell Iletisim Hizmetleri A.S. (“Turkcell”), a joint stock company organized and existing under the laws of the Republic of Turkey. The terms “we”, “us”, “our”, and similar ones refer to Turkcell, its predecessors, and its consolidated subsidiaries except as the context otherwise requires.

Our audited consolidated financial statements as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008 included in this annual report have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The SEC has adopted rules accepting filings from foreign private issuers that include financial statements prepared in accordance with IFRS as issued by the IASB without reconciliation to accounting principles generally accepted in the United States, or U.S. GAAP, as was previously required. As we believe that we meet the relevant criteria to avail ourselves of this SEC rule, we have ceased providing such reconciliation as part of our consolidated financial statements.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly, and figures shown as totals in certain tables may not total exactly. In this annual report, references to “TRY” and “Turkish Lira” are to the Turkish Lira, previously called the “New Turkish Lira” from 2005 through 2008; and references to “$”, “U.S. Dollars”, “USD” and “cents” are to U.S. Dollars and, except as otherwise noted, all interest rates are on a per annum basis. In this annual report, references to “Turkey” or the “Republic” are to the Republic of Turkey. “Counters” are the units we use with our subscribers to measure airtime.

FORWARD-LOOKING STATEMENTS

This annual report includes forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this annual report, 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 “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue”, or similar statements.

Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this annual report, including, without limitation, in conjunction with the forward-looking statements listed below.

While we believe that the expectations reflected in these and other forward-looking statements are reasonable, actual results may differ materially from the expectations reflected in those statements due to a variety of factors, including, among others, the following:

•

competition in our main market;

•

regulations imposed by the Telecommunications Authority of Turkey, which, as of November 10, 2008, is called the Information and Communication Technologies Authority (hereinafter, the “ICTA”), that may require us to maintain certain minimum prices for our services, notably with respect to retail and interconnection pricing;

•

increased competition and/or the entrance of new direct and indirect competitors in the market due to regulatory changes in Turkey with respect to certain technologies;

•

legal and regulatory restrictions imposed by regulatory authorities in Turkey, in particular following the enactment of the new Electronic Communications Law, which broadens the power of the ICTA;

•

economic recession and political developments in Turkey and internationally;

•

failure of the Turkish mobile telecommunications market to continue to develop, as a result of the current economic climate;

•

failure to successfully integrate and manage the opportunities we pursue, particularly related to our current mobile communications business and new 3G business, new business models, new technologies and international activities;

•

technological changes in the telecommunications market;

•

adverse effects on our competitiveness due to our designation by the ICTA as an “operator holding significant market power” in the “mobile call termination services market” and as an “operator holding significant market power” in “access to GSM mobile networks and the call origination market”;

•

failure to abide by the requirements of our licenses or applicable regulations;

•

our current legal action against the Turkish Capital Markets Board (“CMB”);

•

legal actions and claims to which we are a party;

•

foreign exchange rate risks;

•

the influence of our controlling shareholders and disputes between them;

•

exposure to certain risks through our interests in associated companies;

•

our ability to deal with spectrum limitations;

•

potential liability and possible reduced usage of mobile phones as a result of alleged health risks related to base transmitter stations (“BTSs”) and the use of handsets;

•

our dependence on certain suppliers for network equipment and the provision of data services;

•

our dependence on certain systems and suppliers for IT services and our exposure to potential natural disasters, regular or severe IT failures, human error, hacking and IT migration risk;

•

our ability to retain key personnel;

•

financial risks in the event that our majority owned subsidiaries fail to meet some of their obligations set forth in the agreements related to their financing arrangements;

•

the current issuance and cancellation halt of American Depositary Shares (“ADSs”) by depositories in Turkey; and

•

effective internal control over financial reporting.

All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

3.A Selected Financial Data

The following information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects,” our audited consolidated financial statements as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008, and the related notes appearing elsewhere in this annual report.

The following table presents our selected consolidated statement of operations, balance sheet and cash flow data as of and for each of the years in the four-year period ended December 31, 2008, presented in accordance with IFRS as issued by the IASB which has been derived from our audited consolidated financial statements as of and for the years ended December 31, 2008, 2007 and 2006. The information appearing under the caption “Other Financial Data” is not derived from the audited financial statements. The selected financial information as of and for the year ended December 31, 2004 is based on financial statements prepared in conformity with U.S. GAAP and should be read in conjunction with such consolidated financial statements including the notes, included in our previous Annual Report for the fiscal year ended December 31, 2005 filed with the U.S SEC on April 13, 2006.


	2008		2007		2006		2005
	(Million $, except share data and other certain data)
Selected Financial Data Prepared in Accordance with IFRS as Issued by the IASB
Consolidated Statement of Operations Data
Revenues
Communication fees	6,576.9		5,976.9		4,406.7		4,295.9
Commission fees on betting business	176.2		181.3		172.4		112.5
Monthly fixed fees	65.1		54.8		57.6		54.9
Simcard sales	28.2		20.8		21.0		50.3
Call center revenues	16.6		12.9		10.2		10.1
Other revenues	107.4		81.9		32.4		4.3
Total revenues	6,970.4		6,328.6		4,700.3		4,528.0
Direct cost of revenues(1)	(3,409.0	)	(3,103.4	)	(2,627.9	)	(2,701.6	)
Gross profit	3,561.4		3,225.2		2,072.4		1,826.4
Other income	14.1		7.8		8.1		15.4
Administrative expenses	(309.3	)	(252.8	)	(154.9	)	(154.0	)
Selling and marketing expenses	(1,351.7	)	(1,138.2	)	(827.5	)	(700.5	)
Other expenses	(18.0	)	(22.5	)	(6.5	)	(4.9	)
Results from operating activities	1,896.5		1,819.5		1,091.6		982.4
Financial income	442.1		308.4		184.0		167.5
Financial expense	(136.8	)	(551.1	)	(108.0	)	(191.2	)
Net financial income/(expense)	305.3		(242.7	)	76.0		(23.7	)
Share of profit of equity accounted investees(2)	103.0		64.9		78.6		68.2
Profit before gain on net monetary position, net	2,304.8		1,641.7		1,246.2		1,026.9
Gain on net monetary position, net	—		—		—		11.0
Profit before income taxes	2,304.8		1,641.7		1,246.2		1,037.9
Income tax expense	(549.8	)	(322.4	)	(413.2	)	(290.5	)
Profit for the period	1,755.0		1,319.3		833.0		747.4
Attributable to:
Equity holders of the Company	1,836.8		1,350.2		875.5		772.2
Minority interest	81.8		(30.9	)	(42.5	)	(24.8	)
Profit for the period	1,755.0		1,319.3		833.0		747.4
Basic and diluted earnings per share(3)	0.834920		0.613710		0.397951		0.351021
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents	3,259.8		3,095.3		1,598.6		808.2
Total assets	8,067.9		8,469.0		6,089.7		5,215.1
Long-term debt(7)	130.0		140.4		113.5		79.2
Total debt(8)	785.9		760.0		639.6		657.3
Total liabilities	2,624.3		2,537.8		1,971.8		1,524.8
Share capital	1,636.2		1,636.2		1,636.2		1,439.0
Total equity/net assets	5,443.6		5,931.2		4,117.9		3,690.3
Weighted average number of shares(3)	2,200,000,000		2,200,000,000		2,200,000,000		2,200,000,000
Consolidated Cash Flow Data
Net cash from operating activities	1,674.4		2,156.2		1,854.9		1,072.6
Net cash used for investing activities	(695.2	)	(440.5	)	(632.5	)	(659.2	)
Net cash used for financing activities	(353.6	)	(255.0	)	(395.8	)	(347.6	)
Other Financial Data
Dividends declared or proposed(4)(10)	726.2		502.3		411.9		342.2
Dividends per share (declared or proposed)(9)(10)	0.330079		0.228334		0.187227		0.155545
Gross margin(5)	51	%	51	%	44	%	40	%
Adjusted EBITDA(6)	2,580.3		2,627.1		1,820.0		1,722.2
Capital expenditures	808.2		783.1		604.8		772.6

(1)

Direct cost of revenues includes payments for our current license fee and universal service fund, transmission fees, base station rents, billing costs, depreciation and amortization charges, technical, repair and maintenance expenses, roaming charges, interconnection fees, costs of Simcards sold, handset costs offered as part of our loyalty programs and personnel expenses related to our technicians.

(2)

Share of profit of equity accounted investees primarily includes the income (loss) related to our stake in Fintur Holdings B.V. (“Fintur”) and A-Tel Pazarlama ve Servis Hizmetleri A.S. (“A-Tel”), which is 41.45% and 50.00%, respectively. A-Tel’s operating results have been included in our consolidated financial statements since August 2006. Fintur currently holds all of our International mobile communications investments other than those related to our operations in Northern Cyprus, Ukraine and Belarus.

(3)	Net income per share figures and the weighted average number of shares reflected in our historical financial statements have been restated retrospectively for stock splits and stock dividends as explained in Note 22 to our audited consolidated financial statements.

(4)

Our Board of Directors has proposed a dividend for the year ended December 31, 2008 of approximately TRY 1.098.2 million ($726.2 million computed using the Central Bank of Turkey’s TRY/U.S. Dollar exchange rate on December 31, 2008), which corresponds to 50% of our distibutable net income for the current year. This dividend proposal will be discussed and decided upon at our Ordinary General Assembly of Shareholders expected to be held on May 8, 2009.

(5)	Gross margin is calculated as gross profit divided by total revenues.

(6)

(7)	Long-term debt consists of long-term loans and borrowings as well as long-term lease obligations.

(8)	Total debt consists of long-term and short-term loans and borrowings as well as lease obligations.

(9)

For the year ended December 31, 2005, we declared dividends of $342.2 million when 1,854,887,341 of our shares were outstanding; however, dividends per share for 2005 were computed over 2,200,000,000 shares to reflect the effects of certain stock splits and stock dividends. Dividends per share for the years ended December 31, 2006, 2007 and 2008 were computed over 2,200,000,000 shares. For the year ended December 31, 2008, proposed dividend per share in TRY was TRY 0.4991787. For the years ended December 31, 2007, 2006 and 2005, dividend per share in TRY was TRY 0.2948699, TRY 0.257745 and TRY 0.231398, respectively.

(10)

U.S. Dollar equivalent of dividend for the year ended December 31, 2008 is computed by using the Central Bank of Turkey’s TRY/USD exchange rate on December 31, 2008 whereas U.S. Dollar equivalents of dividends for the years ended December 31, 2007, 2006 and 2005 are computed by using the Central Bank of Turkey’s TRY/USD exchange rate on the dates that the General Assembly of Shareholders approved the dividend distribution.


	2004
	(U.S. $ million, except share data and other certain data)
Selected Financial Data Prepared in Accordance with U.S. GAAP Consolidated Statement of Operations Data
Revenues
Communication fees	3,088.1
Commission fees on betting business	20.3
Monthly fixed fees	51.9
Simcard sales	28.3
Call center revenues and other revenues	12.2
Total revenues	3,200.8
Direct cost of revenues(1)	(2,001.2	)
Gross profit	1,199.6
Administrative expenses	(137.3	)
Selling and marketing expenses	(349.2	)
Income from operations	713.1
Income from related parties, net	1.9
Interest income, net	31.3
Other income, net	7.1
Equity in net income of unconsolidated investees(2)	43.6
Minority interest in income of consolidated subsidiaries	7.5
Translation loss	(11.3	)
Income before taxes	793.2
Income tax expense	(281.4	)
Net income	511.8
Basic and diluted earnings per share(5)	0.232636
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents	763.8
Total assets	4,361.5
Long-term debt(3)	269.7
Total debt(4)	832.6
Total liabilities	2,376.0
Share capital	636.1
Total equity/net assets	1,985.5
Weighted average number of shares(5)	2,200,000,000
Consolidated Cash Flow Data
Net cash from operating activities	603.9
Net cash used for investing activities	(542.3	)
Net cash used for financing activities	119.5
Other Financial Data
Dividends declared(6)	182.2
Dividends per share (declared)(7)	0.082818
Gross margin(8)	37.5	%
Capital expenditures	486.7

(1)

Direct cost of revenues includes payments for our current license fee, transmission fees, base station rents, billing costs, depreciation and amortization charges, technical, repair and maintenance expenses, roaming charges, interconnection fees, costs of Simcards sold and personnel expenses for our technicians.

(2)	Equity in net income of consolidated investees primarily includes income related to our 41.45% stake in Fintur Holdings B.V. (“Fintur”). Fintur currently holds all of our international mobile communications investments other than our operations in Northern Cyprus, Ukraine and Belarus.

(3)	Long-term debt consists of long-term loans and borrowings and long-term lease obligations.

(4)	Total debt consists of long-term and short-term loans and borrowings and lease obligations.

(5)	Net income per share figures and weighted average number of shares reflected in our historical financial statements have been retrospectively restated for stock splits and stock dividends.

(6)	In 2005, we paid dividends of $182.2 million for the year ended December 31, 2004, when 1,854,887,341 of our shares were outstanding.

(7)	Dividends per share for the year ended December 31, 2004 was computed over 2,200,000,000 shares in order to reflect the effect of certain stock splits.

(8)	Gross margin is calculated as gross profit divided by total revenues.

Adjusted EBITDA is a non-GAAP financial measure that equals net income before financial income, financial expense, income tax benefit (expense), other income, other expense, minority interest, share of profit of equity accounted investees, gain on net monetary position and depreciation and amortization. Our management reviews Adjusted EBITDA as a key indicator each month to monitor our cash generation ability and liquidity position. Net income is generally considered by our management as the main indicator for our operating performance. Adjusted EBITDA is not a measurement of liquidity under IFRS as issued by the IASB and should not be construed as a substitute for net income (loss) as a measure of performance or cash flow from operations as a measure of liquidity.

We believe Adjusted EBITDA, among other measures, facilitates liquidity comparisons from period to period and management decision making. It also facilitates liquidity comparisons from company to company. Adjusted EBITDA as a liquidity 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 liquidity of other mobile operators in the telecommunications industry in Europe, many of which present Adjusted EBITDA when reporting their results.

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 as issued by the IASB.

Some of these limitations are:

•

it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

•

it does not reflect changes in, or cash requirements for, our working capital needs;

•

it does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

•

it is not adjusted for all non-cash income or expense items that are reflected in our consolidated statement of cash flows; and

•

other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

We compensate for these limitations by relying primarily on our results under IFRS as issued by the IASB and using Adjusted EBITDA measures only supplementally. See “Item 5—Operating and Financial Review and Prospects” and the consolidated financial statements contained elsewhere in this annual report.

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 cash from operating activities, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS as issued by the IASB.


	Year ended December 31,
	2008		2007		2006		2005
	(Million $)
Adjusted EBITDA	2,580.3		2,627.1		1,820.0		1,722.2
Income tax expense	(549.8	)	(322.4	)	(413.2	)	(290.5	)
Other operating income/(expense)	(15.6	)	(10.8	)	0.3		10.5
Financial income	11.2		1.6		(46.4	)	(187.6	)
Financial expense	(80.2	)	(264.4	)	19.9		76.8
Net decrease in assets and liabilities	(271.5	)	125.1		474.3		(258.8	)
Net cash from operating activities	1,674.4		2,156.2		1,854.9		1,072.6

The following table presents selected operational data:

Operating Results


	Year ended December 31,
	2008		2007		2006
Industry Data
Estimated population of Turkey (in millions)(1)	71.5		70.6		74.4

Turkcell Data
Number of postpaid subscribers at end of period (in millions)(2)	7.5		6.4		5.8
Number of prepaid subscribers at end of period (in millions)(2)	29.5		29.0		26.0
Total subscribers at end of period (in millions)(2)(7)	37.0		35.4		31.8
Average monthly revenue per user (in $)(3)(7)	14.5		14.3		12.1
Postpaid	36.8		37.6		31.0
Prepaid	9.1		9.2		7.8
Average monthly minutes of use per subscriber(4)	95.9		76.3		70.3
Churn(5)	23.8	%	19.9	%	14.7	%
Number of Turkcell employees at end of period	2,809		2,875		2,751
Number of employees of consolidated subsidiaries at end of period(6)	7,566		6,782		5,257

(1)

The Turkish population for 2008 and 2007 is based on data derived from the address-based population registration system announced in January 2008 and January 2007, respectively. The Turkish population for 2006 has been estimated based upon the 1996 and 2000 censuses prepared by the Turkish Statistical Institute, applying a projected monthly growth rate of 0.13%.

(2)	Subscriber numbers do not include subscribers in Ukraine, Belarus and Northern Cyprus.

(3)	We calculate average revenue per user, ARPU, using the weighted average number of our subscribers during the period. ARPU does not include the results of our operations in Ukraine, Belarus and Northern Cyprus.

(4)

Average monthly minutes of use per subscriber is calculated by dividing the total number of incoming and outgoing airtime minutes of use by the average monthly sum of postpaid and prepaid subscribers for the year divided by twelve. Our Minutes of Usage (“MoU”) calculation does not include our operations in Ukraine, Belarus and Northern Cyprus.

(5)

Churn rate is the percentage calculated by dividing the total number of subscriber disconnections during a certain period by the average number of subscribers for the same period. For these purposes, we define “average number of subscribers” as the number of subscribers at the beginning of the period plus one half of

the total number of gross subscribers acquired during the period. Churn refers to subscribers that are both voluntarily and involuntarily disconnected from our network. Our churn calculations do not include our operations in Ukraine, Belarus and Northern Cyprus.

(6)	See “Item 6.D. Employees” for information concerning our consolidated subsidiaries.

(7)	See “Item 4.B. Business Overview” for information concerning the operational figures of Astelit.

Exchange Rate Data

The Federal Reserve Bank of New York does not report, and historically has not reported, a noon buying rate for the Turkish Lira, which was previously called the “New Turkish Lira” from 2005 through 2008. For the convenience of the reader, this annual report presents translations of certain Turkish Lira amounts into U.S. Dollars at the relevant Turkish Lira exchange rate for purchases of U.S. Dollars at the TRY/$ Exchange Rate announced by the Central Bank of Turkey. Prior to January 1, 2006, unless otherwise stated, any balance sheet data in U.S. Dollars derived from our consolidated financial statements were translated from Turkish Lira into U.S. Dollars at rates announced by the Central Bank of Turkey on the date of such balance sheet for monetary assets and liabilities and at historical rates for equity and non-monetary assets and liabilities. As of January 1, 2006, any balance sheet data (monetary or non-monetary), except for equity items in U.S Dollars derived from our consolidated financial statements, are translated from Turkish Lira into U.S Dollars at exchange rates at the balance sheet date. Income and expenses for each income statement (including comparatives) are translated to U.S. Dollars at monthly average exchange rates. Unless otherwise indicated, the TRY/$ exchange rate used in this annual report is the TRY/$ exchange rate in respect of the date of the financial information being referred to. As stated in the annual monetary and exchange rate policy announcements of the Central Bank of Turkey, which have been published since 2002, the foreign exchange rate is not a policy tool or target; it is determined by the supply and demand conditions in the market. Along with inflation targeting, the Central Bank of Turkey announced that it will continue the implementation of the floating exchange rate regime in 2009.

The following table sets forth, for the periods and the dates indicated, the Central Bank of Turkey’s buying rates for U.S. Dollars. These rates may differ from the actual rates used in preparation of our consolidated financial statements and other information appearing herein. The TRY/$ exchange rate on April 1, 2009 was TRY 1.668= $1.00.


	Year ended December 31, (1)
	2009(2)(3)	2008(2)	2007(2)	2006(2)	2005	2004
High	1.796	1.696	1.450	1.693	1.400	1,550,710
Low	1.512	1.145	1.163	1.297	1.254	1,301,340
Average(1)	1.650	1.293	1.303	1.431	1.344	1,422,514
Period End	1.668	1.512	1.165	1.406	1.342	1,342,100

Source: Central Bank of Turkey

(1)	Calculated based on the average of the exchange rates on the last day of each month during the relevant period.

(2)	These columns set forth the Central Bank of Turkey’s buying rates for U.S. Dollars expressed in Turkish Lira.

(3)	Through April 1, 2009.


	April 2009(1)	March 2009	February 2009	January 2009	December 2008	November 2008	October 2008
High	1.688	1.796	1.698	1.667	1.594	1.696	1.695
Low	1.668	1.647	1.606	1.512	1.497	1.500	1.232

Source: Central Bank of Turkey

(1)	Through April 1, 2009.

No representation is made that Turkish Lira or the U.S. Dollar amounts as presented in this annual report could have been or could be converted into U.S. Dollars or Turkish Lira, as the case may be, at any particular rate. Changes in the exchange rate between Turkish Lira and U.S. Dollars could affect our financial results. For a discussion of the effects of fluctuating exchange rates on our business, see “Item 5A. Operating Results.”

3.B Capitalization and Indebtedness

Not applicable.

3.C Reasons for the Offer and Use of Proceeds

Not applicable.

3.D Risk Factors

Competition in our main Turkish telecommunications market has increased in recent years and may continue to increase in the future.

We face intensifying competition in our main Turkish telecommunications market from other GSM providers and other telecommunications companies offering competing services, which could affect our ability to add new customers at current rates and lead to a decrease in the size of our market share. In the Turkish market, we currently face competition from two other GSM providers, Vodafone Telekomunikasyon A.S. (“Vodafone”) and Avea Iletisim Hizmetleri A.S. (“Avea”), and from Turk Telekomunikasyon A.S. (“Turk Telekom”), the fixed-line telecommunications operator in Turkey. Competition has increased in recent years due, in part, to structural changes in the competitive environment. The Vodafone Group, a large multinational GSM operator, acquired all the shares of Telsim Mobil Telekomunikasyon Hizmetleri A.S. (“Telsim”), one of our Turkish GSM competitors, on May 24, 2006, establishing Vodafone as the new operating company for Telsim and rebranding Telsim as Vodafone. In addition, Turk Telekom increased its stake in Avea from approximately 40.5% to 81% in September 2006. Turk Telekom is 55% owned by Oger Telecom, a multinational GSM operator in which Saudi Telecom Company in turn owns a 35% stake. On May 14, 2008, 15% of Turk Telekom’s shares were sold to the public.

This competition has been increasingly focused on price, notably with flat rate offerings, bundled offers, as well as other factors such as quality of network and customer service and marketing initiatives. Furthermore, Turk Telekom’s use of new technologies such as Internet Protocol Television (“IPTV”) and Voice over Internet Protocol (“VoIP”) and fixed line products, which may be bundled with Avea mobile line products and those of such other providers, may provide an alternative to GSM for customers’ communications needs for both voice and data transmission.

The intensifying competition from GSM operators and potentially from Turk Telekom’s fixed line business and other telecommunications service providers may make it more difficult to attract and retain our high value customers, causing higher churn rates as customers switch carriers to take advantage of lower offers, while pressuring us to lower prices. The introduction of mobile number portability (MNP) in Turkey in the fourth quarter of 2008 has further increased the pressure on GSM operators and has made it more difficult to retain customers. MNP has and may continue to lead to increased churn rates, subscriber retention and acquisition costs, and may have a significant impact on both Turkcell and the market.

In addition, the development of long distance licensing, as well as Wireless Interoperability for Microwave Access (“WIMAX”) and Mobile Virtual Network Operator (“MVNO”) licenses, which are not currently available, and other technologies, such as wi-fi, could increase the competition we face in the Turkish communications market, in part by making it easier and/or more attractive for new direct and indirect competitors to enter the market.

The issuance of 3G licenses and the introduction of 3G services in Turkey could also lead to significant changes in the competitive environment. On November 28, 2008, the Information and Communication Technologies Authority (the “ICTA”) conducted a 3G tender process to issue four separate licenses to provide IMT 2000/UMTS services and infrastructure. We were granted an A type license, which provides the widest frequency band, at a consideration of EUR 358 million (excluding VAT). Were we to fail to implement 3G, our competitive position could be adversely affected. Since the ICTA granted three out of four licenses to existing operators, there is a possibility that there may be one entrant into the current market.

Our activity is concentrated in the Turkish telecommunications market and thus developments in this market are likely to affect the growth of our business and our results of operations.

The majority of our revenue comes from our operations in Turkey and thus the growth and development of our business is dependent to a large extent on the development of the Turkish mobile telecommunications market. If the Turkish mobile telecommunications market slows in growth or develops in unexpected ways, this could harm our business and results of operations.

The subscriber mobile line penetration rate in Turkey is relatively low in comparison to the average EU penetration rate. In the next year, the development of our business will depend, in large part, on the level of demand for mobile telecommunications in Turkey, a highly competitive market, with slow growth prospects projected during this economic downturn. We are responding to our competitive environment in this economic downturn with a focus on increasing average monthly minutes of use per subscriber while maintaining average monthly revenue per user in TRY despite slow growth in the market. These indicators, however, may be negatively affected by an increasing prepaid subscriber base, which has a dilutive impact on our average monthly minutes of use per subscriber and on our average monthly revenue per user, which may also negatively affect our operational and financial performance.

In addition, the size and usage patterns of our future subscriber base will be affected by a number of factors outside of our control. Such factors include general economic conditions, a consumption tax on mobile phone usage, changes in the regulatory environment, the development of and changes to the GSM market, further intensifying competition with aggressive price offers, the availability, quality and cost to the subscriber of competing mobile services and improvements in the quality and availability of fixed line telephone services in Turkey. Additionally, offers which combine fixed and mobile products, in the context of convergence, may increase competition and may create value for the fixed business against mobile, which may also provide a competitive advantage to our competitors.

Regulatory actions such as the ICTA’s regulation of our retail pricing and their ongoing pressure on interconnection rates have also been and will likely continue to be a significant factor in shaping the development of the Turkish market and in our ability to respond to changes in the market. After a 33% reduction for Turkcell in 2008, the interconnection rates issued by the ICTA on March 25, 2009 for all GSM operators in Turkey provides for a further 29% decrease on average, which may reflect on retail prices and impact our operational results, depending on the pricing trends and marketing strategies in the mobile communications market in Turkey. The global economic downturn is also adversely affecting our domestic and international vendors, leading to a contraction in their business, which in turn may lead to a decrease in the quality of the services that they render to us and adversely affect timely delivery of such services, negatively impacting our business and operations.

With the ICTA Board Resolution dated March 25, 2009, ICTA has set a lower limit to on-net retail tariffs of Turkcell only, and decreases the level of price cap for all GSM operators. The lower limit applies to each retail tariff package of Turkcell by mandating the weighted average on-net price of a tariff package shall not be less than Turkcell’s weighted average call termination rate. The Board Resolution also reduces the current price cap from 0.80 TRY/min (VAT, SCT incl.), which pertains to general subscription packages, to 0.64 TRY/min. The Resolution has also set such price as an upper limit for special subscription packages. To comply with the Board Resolution, Turkcell is likely to have to adjust on-net and off-net prices of some tariff packages. The Board Resolution may have adverse effects on Turkcell’s pricing ability in the short/mid-term.

Given these factors, it is difficult to predict with any degree of certainty the growth and usage patterns of our subscribers and our ability to maintain or increase revenues or profitability.

Our strategy for growth is partly dependent on new investment opportunities. These new investment opportunities could affect our business and results of operations, and the return on our investments cannot be guaranteed.

In addition to growing our existing business as a leading communications and technology company, our strategy for growth is to selectively seek and evaluate new investment opportunities. We are open to launching

greenfield operations as well as forming potential alliances and conducting mergers and/or acquisitions that will contribute to our economies of scale and create synergies. We may also evaluate new business opportunities such as the National Lottery.

In pursuit of our growth strategy, our management may divert undue attention and/or cash resources away from other ongoing business concerns, which could harm our business and result of operations. We may miss entering new businesses by underestimating opportunities/overestimating threats in convergence, or may enter businesses that cause high value erosion in our core business by overestimating opportunities/threats in convergence.

In addition, investments may not provide expected returns or returns that are in line with those of our core business. In many of the markets and businesses in which we have invested or may invest, it may take several years and significant investments to achieve desired profitability, if at all.

The success of any new investment we make will depend upon a number of factors, including:

•

our ability to manage differences between the management and accounting systems and standards of the acquired business and our own (both those differences that are known and those that we may discover) and to successfully integrate these systems and standards;

•

our ability to manage technical differences between the network and operating systems of the acquired business and our own (both those differences that are known and those that we may discover) and to successfully integrate such systems;

•

our ability to manage and develop new technologies in the acquired business that are outside the scope of our traditional business;

•

the reaction of local subscribers and potential subscribers to our acquisition and to the new commercial strategies that we would introduce;

•

our ability to identify key trends in the local market and to respond to these in a timely and successful manner;

•

currency exchange rate fluctuations, notably between the Turkish Lira, the local currency and other relevant currencies of the acquired business;

•

the availability of financing for investments in the given country or business; and

•

the competitive and regulatory environment in the local telecommunications market, including the actions of current and future competitors, the dominant role often exercised by local governments and authorities and any actions taken by the regulators that may affect costs, pricing and competition levels.

Furthermore, for acquisitions outside of Turkey, current and future U.S. and international laws and regulations, as well as legal and regulatory actions, targeting the country and local companies and individuals that may curtail our ability to do business in that country and may impede our exercise of control. Turkcell itself, as well as certain of its key employees (notably those who are U.S. citizens), could be subject to sanctions under such laws and regulations. Some of the countries and companies in which we have contemplated making investments and in which we may from time to time consider opportunities, such as Iran and Syria, and certain individuals involved in such companies, have been the specific targets of such laws and regulations.

Furthermore, investors may be reticent to invest in a company doing business in such countries. These factors could have an adverse effect on the demand for our shares.

Regulatory changes in Turkey could have a material adverse effect on our business and results of operations.

Risks arising from the Electronic Communications Law.

Electronic Communications Law No. 5809 (the “Electronic Communications Law”), which came into force on November 10, 2008 and replaced Laws No. 406 and 2813, has significantly expanded the regulatory powers of the Telecommunications Authority, now renamed the Information and Communication Technologies Authority (the “ICTA”). This new law has expanded the ICTA’s duties and authority, effectively authorizing the ICTA to intervene in, and to audit, our activities more strictly, thereby limiting our ability to challenge such actions on the basis of lack of authority.

With the telecommunications industry changing rapidly, the Electronic Communications Law was published to correspond to the needs of the Turkish telecommunications industry. The authorization provisions regulated thereunder will be valid and effective after 6 months following the coming into force of the Law. Within such 6 months, the provisions regulating the authorization, which were in force before the law was published and are not contrary to the provisions of the Law, shall be valid and binding. New Regulations are required to be published. No assurance can be given that this will occur in a timely manner, or that these new regulations will be clear and satisfactory to us. The duties of ICTA, which may be exercised in a manner that is adverse to our operations and our financial results, include those described below. Several of these represent a codification of past practices that did not in our view have a clear legal basis.

Under Article 13 of the Electronic Communications Law, the ICTA may:

•

determine upper and lower limits on tariffs if it considers such intervention necessary. This raises a serious risk for Turkcell since the Article does not require any justification of the ICTA when determining the upper and lower limits of the tariffs. Having the power to determine the upper and lower limits of the tariffs, the ICTA could intervene with our retail prices, which would negatively affect our ability to design and launch campaigns and offers and, consequently, have a negative impact on our business. In the fourth quarter of 2007, the ICTA intervened in the fixing of our retail prices. Although we challenged that action on the basis that it exceeded the ICTA’s authority under then-applicable law, such action nonetheless had an adverse effect on our operational flexibility and our results of operations. With the ICTA Board Resolution dated March 25, 2009, ICTA has set a lower limit to on-net retail tariffs of Turkcell only, and decreases the level of price cap for all GSM operators. The lower limit applies to each retail tariff package of Turkcell by mandating the weighted average on-net price of a tariff package shall not be less than Turkcell’s weighted average call termination rate.

Under Article 6 of the Electronic Communications Law, the ICTA may:

•

analyze the electronic telecommunications industry, determining the relevant markets as well as the operator(s) who have significant market power;

•

make necessary arrangements and perform audits relating to electronic communications as well as to the rights of the subscribers, users, consumers and end-users, in addition to processing personal information and protecting confidentiality;

•

maintain transparency in the board decision process related to the operators and consumers, including explanation of the legal reasoning used;

•

process the reconciliation procedure between the operators and, unless otherwise agreed by the parties, take necessary measures in the event of a failure of the parties to reach an agreement;

•

allocate frequency and satellite position, as well as to plan numbering and its allocation;

•

determine operators’ trade secrets and the scope of the information to be explained to the public, while also securing such trade secrets, in addition to confidential investment information and working plans, to protect operators, per the request of judicial authorities;

•

determine the principles and procedures of access, including interconnection and national roaming;

•

determine the terms and conditions of the authorization to provide communications services, network and/or its infrastructure; audit its implementation and compatibility to the authorization;

•

audit (or be audited on) the legality of the companies that have operations in the electronic communications sector, in addition to determining the principles and procedures related thereto and applying sanctions where there is a contradiction; and

•

impose an administrative fine on operators of a maximum of 3% of the previous calendar year’s net sales in case of infringement of the Electronic Communications Law.

The Access and Interconnection Regulation.

Pursuant to the Access and Interconnection Regulation (the “Regulation”), which became effective on May 23, 2003 and sets forth the rights and obligations of the operators in the telecommunications sector in Turkey, the ICTA has the right to designate operators as having significant market power and to impose certain obligations and penalties on them. On December 15, 2005, the ICTA designated Turkcell, Vodafone, and Avea as “operators holding significant market power” in the “GSM Mobile Call Termination Services Market” and designated Turkcell individually as an “operator holding significant market power” in the “Access to GSM Mobile Networks and Call Originating Markets.” On January 17, 2009, the ICTA declared that such designation would be valid until the end of 2009, which could affect our competitiveness and have a material adverse effect on our results of operations. As a result of the significant market power designation in the “GSM Mobile Call Termination Services Market”, our company, as well as Avea and Vodafone, is required to provide interconnection services on a cost-based basis. According to the provision of the Electronic Telecommunications Law, the ICTA may impose an obligation on operators, who are obliged by the ICTA to provide access and to submit their reference offers for access, and may request to make the necessary amendments in the operators’ reference access offers. Operators are obliged to make the amendments requested by the ICTA in a prescribed manner and period. In addition, the operators shall be obliged to publish their reference offers for access, which have been approved by the ICTA, and to provide access under conditions specified in their reference offers, which have been approved by the ICTA. On March 25, 2009, the ICTA issued the “Interconnection Tariffs” for Turk Telekom and GSM operators, which will become effective on May 1, 2009, and stated that the tariffs, determined in the Interconnection Tariffs, have been approved as the tariffs to be determined in the reference access offers, and published the reference access offers, which includes these tariffs. According to the Interconnection Tariffs, the revised rate for Turkcell will be TRY 0.0655. However, we are of the opinion that Turkcell is not required to apply such tariffs immediately, as otherwise requested by the other operators. We believe that it is likely that this mechanism will have the effect of reducing the rates we are able to charge for interconnection services, which could have a material adverse effect on our business and results of operations.

As a result of the significant market power designation in the “Access to GSM Mobile Networks and Call Originating Markets”, our company may be required to provide access and call origination services to other operators such as MVNOs and Directory Services Operators on a cost-based basis, while operators not designated as “operator holding significant market power” can set their prices differently than the operators designated as such. Being designated as the “operator holding significant market power” in the “Access to GSM Mobile Networks and Call Originating Markets” is likely to have the effect of reducing the rates we can charge to other operators such as MVNOs, which could have a material adverse effect on our business and results of operations.

Wireless Interoperability for Microwave Access (“WIMAX”) and Mobile Virtual Network Operator (“MVNO”) licenses.

Regulatory changes in Turkey to introduce and promote WIMAX and MVNO could have a material adverse effect on our business and results of operations. Specifically, they may result in increased competition and/or the entry of new direct or indirect competitors, which may have a negative impact on our ability to attract and retain customers, the competitiveness of our products and services, our distribution channels, our brand and visibility and our infrastructure investments.

Fixed line telephone services

The ICTA is expected to issue Fixed Telephony Service (“FTS”) licenses and promulgate related regulations, which will enable existing long distance telephony services (“LDTS”) operators, such as our

subsidiary Tellcom, to provide call origination and termination. LDTS providers have not yet had a significant effect on our operations and the timing of expected regulations is uncertain. In the long term they could have the effect of driving down prices and shifting traffic patterns for in-city and long distance calls in Turkey, potentially having an adverse effect on our mobile telecommunications business.

Certain legal and regulatory arrangements.

Certain actions by the Turkish government, the ICTA or other regulatory authorities in Turkey (such as the Competition Board) have in the past, and could in the future, adversely affect our business, consolidated financial condition, results of operations or liquidity. Such actions may include:

•

changes in laws, regulations or governmental policy, or their interpretation, including revisions to the interconnection and access regime or the imposition of price controls;

•

any unfavorable change in corporate and/or income tax legislation, or the imposition of additional consumption taxes or other taxes on subscribers or mobile operators;

•

the grant of additional mobile telephone licenses or other telephony licenses to new entrants and existing operators;

•

the establishment of limitations on our operations or restrictions on our ability to provide services to existing or new subscribers;

•

investigations, enforcement actions or other assessments of the Competition Board or other regulatory authorities;

•

denial of discretionary benefits that we may seek in expanding our network;

•

the introduction of additional fees or charges by governmental authorities; and

•

introduction of new regulations regarding protection of personal data of subscribers and/or users.

Additionally, in the case of war, general mobilization or when the ICTA considers it necessary for public safety or national defense, we may be required to surrender the control of our network wholly or partially to the ICTA for a limited or unlimited period.

Compliance with the requirements of our and our subsidiaries’ licenses or applicable regulations.

We could face severe penalties, including limitation or revocation of our license in extreme cases, if applicable regulatory authorities determine that we are not in compliance with the requirements of our GSM license or our new 3G license or applicable regulations.

The statutes, rules and regulations applicable to our activities and our GSM and 3G licenses are generally new, subject to change, in some cases, incomplete, and have been subject to limited governmental interpretation. Precedents for and experience with business and telecommunications regulations in Turkey are generally limited. In addition, there have been several changes to the relevant legal regime in recent years. There can be no assurance that the law or legal system will not change further or be interpreted in a manner that could materially and adversely affect our operations.

Our licenses contain a number of requirements, including requirements regarding operation, quality and coverage of the network; national security issues; maintenance of confidentiality; prohibitions on anti- competitive behavior; and compliance with international and national standards. If we fail to meet any requirement in our licenses or to comply with applicable regulations, we could be subject to sanction, including the limitation or revocation of our licenses.

Lack of clarity with respect to Turkish telecommunications law, the Turkish legal system, our licenses and/or the regulatory framework governing the Turkish telecommunications industry could impede our ability to operate effectively under our licenses and have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

For a description of our Turkish GSM and 3G licenses and the regulatory regime under which we operate in Turkey, see “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”. In addition to the foregoing, our indirectly owned subsidiary, Limited Liability Company Astelit (“Astelit”), majority owned subsidiary, Belarussian Telecom, and wholly owned subsidiary, Kibris Telecom, hold GSM licenses in Ukraine, Belarus and the Turkish Republic of Northern Cyprus, respectively, and some of them have obtained or will bid for 3G licenses. If Astelit, Belarussian Telecom and Kibris Telecom fail to comply with the terms and conditions of their license agreements, they may incur significant penalties, which could have a material adverse effect on our strategy for international expansion and our business and results of operations. In addition, our wholly owned subsidiaries Tellcom, TurkKule, Superonline and Inteltek have licenses in order to be able to perform their business. Failure to comply with the terms of such licenses may lead to significant penalties and adversely affect their, as well as our, results of operations.

Economic and political developments in Turkey and internationally have had, and may continue to have, a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

As the global financial crisis spreads to non-financial sectors of the world economy, the emerging markets in which we operate, such as Turkey, the Commonwealth of Independent States (“CIS”) region, Ukraine and Belarus, face a sharper economic slowdown and pressure on their exchange rates as a result of falling industrial production and private sector expenditure and rising unemployment. This is likely to adversely impact our business operations and financial results and may require us to record impairments in the valuation of our assets in these countries in our financial statements.

At the end of 2008 and in 2009, the global markets have experienced extraordinarily high levels of volatility and both domestic and external demand has slowed down considerably. The turmoil in global financial markets has spilled over into non-financial corporations and emerging economies that were relatively unharmed by previous turbulence. Although consumer and business sentiment surveys have showed some improvement in the first quarter of 2009, they are still at historically low levels. Industrial production and capacity utilization continue to decline at an alarming rate, all of which may appear to be indicators of a recession.

Turkey is vulnerable to global shocks and global liquidity problems due to its current account deficit and the private sector’s external borrowing needs. However, the current account deficit is likely to decrease rapidly due to the fall in oil and commodity prices and weak domestic demand. The double-digit declines in industrial production and trade, as well as survey-based forward-looking indicators, point to a significant downturn in 2009. A potential IMF arrangement will be crucial in mitigating the concerns over this year’s external financing gap and the level of TRY, particularly in an increasingly uncertain global environment. However, given Turkey’s current account deficit, the corporate sector’s large open foreign exchange position, lower TRY interest rates and the contraction in external financing and foreign direct investment prospects, concerns about the outlook for the TRY will make the situation worse.

Although the telecom sector was generally in a sound financial position when the financial crisis began, its growth is now projected to slow. Falling consumer spending and disposable income may lead to a decline in ARPU and a rise in billing complaints. Furthermore, as the economy has slowed, companies have been scaling back production, making job cuts, and, even worse, some are closing down, which adversely affects our corporate customer revenues. These developments also put pressure on our sales channel and dealers which are starting to feel the repercussions of weakening domestic demand. With a substantial portion of our revenues, assets and business derived from and located in Turkey, and denominated in Turkish Lira, these and other adverse developments in the Turkish market are likely to have a material adverse effect on our business, consolidated financial condition and results of operations.

have been among the potential risks associated with investment in Turkish companies. The instability surrounding the situation in Iraq, as well as tension in and involving the Kurdish regions of northern Iraq, could also have negative economic consequences for us. In 2009, a high profile coup indictment case and general tension in the Middle East have been and are expected to continue to be important political issues.

We hold interests in several companies that may expose us to various economic, political, social, financial and liquidity risks and may not provide the benefits that we expect, and our pursuit of acquisition opportunities may increase these risks.

Our investments in subsidiaries and associated companies within Turkey and internationally could expose us to economic, political, social and financial risks. We have investments in Azerbaijan, Georgia, Kazakhstan and Moldova through Fintur, and in the Turkish Republic of Northern Cyprus, Ukraine and Belarus.

In addition to entering into new business areas in Turkey, we are exploring new investment opportunities, primarily in Emerging Markets such as the CIS region, Eastern Europe, the Middle East, the Balkans and North Africa. Along with Turkey, these countries are generally considered by international investors to be emerging markets. Their legal systems, including telecommunications regulations, are relatively underdeveloped, their economies have only recently begun to open to market principles and their respective institutions and commercial practices are relatively weaker and less developed. Furthermore, some of the countries in which we have businesses or would consider investing, and the companies and individuals that we come into contact with, may be the target of U.S. and international sanctions. There can be no assurance that political, legal, economic, social or other developments in these countries or involving such companies and individuals will not have an adverse impact on our investments and businesses in these countries.

Our international and Turkish subsidiaries may not benefit us in the way we expect for the reasons cited above, as well as other reasons, including general macroeconomic conditions, poor management and legal, regulatory or political obstacles. For many of these subsidiaries, we do not expect to achieve desired levels of profitability in the near or mid-term.

Ukraine

We have been operating in Ukraine since the second half of 2004 through our subsidiary Astelit. Ukraine is undergoing a great deal of change and suffers from ongoing political instability. These factors have a negative impact on the country as a whole and on our operations there. Although the Ukrainian currency has been relatively stable against the U.S. Dollar for almost five years, in 2008, it lost 52% of its value against the U.S. Dollar despite the central bank’s intervention. Ukraine faces the risk of a systemic banking crisis and a serious economic contraction. An economic contraction would bring to an end nine years of growth and would exacerbate the country’s political instability. Current political infighting between the government and the president is a major challenge and threat to Ukraine’s economy. The banking system continues to suffer from a flight of deposits due to the global crisis. In addition, the central bank has injected substantial liquidity into the banking system via long-term refinancing, contributing to the sharp devaluation of the Ukrainian Hryvnia. The devaluation of the Ukrainian Hryvnia and paralysis in the banking system have made the situation in the corporate sector challenging.

In the Ukrainian telecommunications market, the granting of a 3G license to Ukrtelecom and the passage of the National Roaming law in 2006 resulted in the introduction of an additional mobile operator in the market. Furthermore, Ukraine’s government is expected to privatize Ukrtelecom.

We indirectly hold a majority stake in Astelit, our operating company in Ukraine. Should we have a disagreement in the future with System Capital Management Ltd., the other shareholder of Euroasia Telecommunications Holdings B.V. (“Euroasia”), our consolidated subsidiary that controls and consolidates our Ukrainian operations, the ability of Astelit’s management to move forward with its business plan may be affected.

Ukrainian tax authorities are increasingly directing their attention to the business community as a result of the overall Ukrainian economic environment. With respect to this, the local and national tax environment in Ukraine is

constantly changing and subject to inconsistent application, interpretation and enforcement. Non-compliance with Ukrainian laws and regulations can lead to the imposition of severe penalties and interest. While the management of Astelit believes it has complied with Ukrainian tax legislation, there have been many new tax and foreign currency laws and related regulations introduced in recent years that are not always clearly written.

Belarus

In 2008, we made an investment in Belarus, acquiring an 80% stake in the Belarussian Telecommunication Network (“Belarussian Telecom”) for consideration of $500 million. The global crisis has also adversely affected the Belarusian economy and its access to external finance. The slowdown in the global economy has led to decreased demand for Belarusian exports, which has made it more difficult for external economic activity to be balanced. In the first quarter of 2009, with its economy teetering, Belarus devalued its currency by 29% and negotiated a $2.5 billion loan from the IMF fund. Similar to other transition economies, Belarus faces inflationary pressure both on its exchange rate and generally in its economy, which may adversely affect our operations and the valuation of our Belarusian assets in our financial statements.

Northern Cyprus

We have operated a GSM network in Northern Cyprus since July 1999. Any hostilities and/or political instability in Cyprus may have a material adverse effect on the Northern Cypriot economy as well as on the Turkish economy, the progress of Turkey’s accession talks with the EU and our investments and business in Northern Cyprus. In 2009, the political and regulatory climate in Northern Cyprus may be affected by local elections. Our business in Northern Cyprus may also be affected by regulatory actions in the telecom sector.

Turkey

We own a number of subsidiaries in Turkey with operations outside of the mobile telecommunications market that are subject to certain risks that are different from those that we face in our Turkish mobile business.

Our wholly owned indirect subsidiary, Tellcom Iletisim Hizmetleri A.S. (“Tellcom”), has begun a program to establish a fiber-optic network capable of wholesale voice carrying services and data transmission. Tellcom may require several years to generate the expected returns from its capital expenditure, if at all. If Tellcom is not able to successfully carry out its plans to establish a fiber optic network, if such plans require materially more financing than currently expected or if Tellcom is not able to successfully develop its business, this could have a material adverse effect on our business and results of operations.

Tellcom’s broadband investment is not expected to yield positive returns in the near or mid-term due to high investment cost as the planned infrastructure covers a wide area (incity, intercity and local loop). The risks of this investment are multi-faceted as there are regulatory and procedural unknowns as well as an increasingly dynamic competitive environment marked by the dominant position of the incumbent operator, Turk Telekom. The successful execution of Tellcom’s business plan is dependent upon expected new regulations and regulatory actions that are essential to the opening of fixed line and broad-band services to competition. These regulations and regulatory actions relate, in particular, to number assignments, number portability, allowing the unbundling of fixed line and ADSL services and fixing interconnection tariffs. Although a number of these topics are required to be dealt with in regulations that are legally required to be promulgated by the ICTA in May 2009 at the latest, no assurance can be given that these regulations will be enacted in a timely manner, that they will be complete and clear or that they will be satisfactory to Tellcom. We expect that Tellcom will, in the coming months, merge with our newly-acquired Superonline business, which will create further challenges and may require us to consider recording impairments to the asset values in our financial statements.

Tellcom’s business is also heavily dependent upon its ability to obtain local permits and rights-of-way on satisfactory terms. This has in practice proven to be difficult and the terms offered to Tellcom have varied significantly, in some cases adversely affecting its planned development.

Inteltek Internet Teknoloji Yatirim ve Danismanlik Ticaret A.S. (“Inteltek”), our 55%-owned subsidiary, tendered for and signed a contract with the General Directorate of Youth and Sports in 2003 which authorized it to establish and operate a risk management center and become head agent for fixed odds betting. This activity became fully operational during 2004. Since then, the validity of this contract has been challenged by various lawsuits and by new laws reducing the commissions payable to Inteltek and requiring the fixed odds betting business to be subject to new tenders. On August 12, 2008, a tender was conducted which allowed private companies to organize fixed odds and paramutual betting in sports games. Inteltek won the tender and on August 29, 2008 signed a contract to obtain the rights to run the sports betting business for the next ten years with a commission rate of 1.4%, applicable from March 2009. The new commission rate is substantially lower than the previous rate and thus the change in rate will have a negative effect on Turkcell’s profitability and financial results. Any inability of the company to set up an efficient business model under the new terms may aggravate the adverse impact on Turkcell’s operational profitability.

In addition to the foregoing, on April 15, 2009, we submitted a bid for the tender of a 10-year concession to operate the “games of chance business” which belongs to the Turkish National Lottery General Directorate. If successful, this tender is likely to require us to make a significant U.S. dollar payment and will take us into a new line of business.

We are exposed to foreign exchange rate risks that could significantly affect our results of operation and financial position.

We are exposed to foreign exchange rate risk because our income, expenses, assets and liabilities are denominated in a number of different currencies, primarily Turkish Lira, U.S. Dollars, Euros, Ukrainian Hryvnia and Belarusian Rubles. In particular, a substantial majority of our debt obligations and equipment expenses are currently, and are expected to continue to be, denominated in U.S. Dollars and Euros, while the revenues generated by the corresponding activities are denominated in other currencies, in particular the Turkish Lira, Ukrainian Hryvnia and Belarusian Ruble. Although we successfully operated in a hyperinflationary environment with continuous devaluation of the Turkish currency from our inception, sudden increases in inflation or the devaluation rate of the Turkish Lira, the Ukrainian Hrvynia, the Belarusian Ruble or other currencies in which we generate revenue, have had, and may continue to have, an adverse effect on our consolidated financial condition, results of operations or liquidity. In particular, in 2008, the Turkish Lira was devalued by 30%, the Ukrainian Hryvnia by 52% and the Belarusian Ruble by 2% against the U.S. Dollar. We will not be able to offset these devaluations with matching increases in our local currency tariffs. The exchange risk is manageable in Turkey, which has a developed market enabling hedging facilities; however, in Ukraine and Belarus it is not possible due to restricted and undeveloped financial markets. In the current economic environment, there is a strong possibility of further devaluations.

We use analytical techniques such as market valuation and sensitivity and volatility analysis to manage and monitor foreign exchange risk. We keep a portion of our financial assets in U.S. Dollars and Euros to reduce our foreign currency exposure. However, fluctuations between Turkish Lira, Ukrainian Hryvnia and Belarusian Rubles, on the one hand, and U.S. Dollars and Euros, on the other, may have an unfavorable impact on us, as they did in 2008.

In order to manage market volatility in the foreign exchange markets, we may enter into derivative transactions in line with our treasury policies. However, these derivative transactions have a cost and do not fully cover all of our risks, and any derivative transactions exercised that are either above or below market levels might result in unfavorable results to us.

When we translate our results of operations and financial position into U.S. Dollars for the purpose of preparing our financial statements that are expressed in U.S. Dollars, the dollar amounts will vary in accordance with applicable exchange rates. We do not hedge this so-called “translation risk”.

Borrowing by Turkcell group companies exposes us to interest rate risk and possibly increased interest expense, obligates us to meet certain covenants and exposes us to financial risks if covenants are not satisfied or if additional financing is required, each of which could have a material adverse effect on our consolidated financial condition and results of operations.

As of December 31, 2008, the major portion of our outstanding debt consists of the $540 million long-term financing facility for Astelit, which consists of a $390 million senior facility and a $150 million junior facility. Financell B.V. (“Financell”), our wholly owned financing subsidiary, undertook the $390 million long-term senior syndicated facility for Astelit on June 27, 2007. This facility has a variable interest rate, which has been favorable in the current interest rate environment, but would expose us to increased costs if rates increase.

We have examined various hedging alternatives to hedge our interest rate risk. However, we are not presently party to any such arrangements due to their cost and the general market view of forward interest rates. Consequently, an increase in the Libor or Euribor rates would cause an increase in the amount of our interest payments and could have a material adverse effect on our results of operations.

As the Astelit-related debt is denominated in U.S. Dollars, it also exposes us to exchange rate risk to the extent that Astelit’s revenue is in Ukrainian Hryvnia.

We expect to have significant cash requirements in 2009 due to a number of factors, notably Astelit’s financing needs, 3G and other license fees and related network development costs and, if successful, the National lottery tender and other business acquisition costs. At the same time, the positive cash flow generation of our Turkish mobile operations may be diminished, in particular as a result of the current adverse economic climate and competitive pressures. While we believe that our current liquidity position is satisfactory, we may decide to increase borrowings in 2009. We currently are not subject to any financial covenants. However, in connection with any new indebtedness or refinancing of existing debt, in the current lending environment, we may be obliged to accept new covenants in connection with obtaining financing on a consolidated basis or for our majority owned subsidiaries.

Furthermore, in the current credit environment, marked by increasing credit spreads and a general reticence of banks to lend funds, we may have difficulty borrowing on terms that are satisfactory. With respect to Astelit, in particular, if we are unable to borrow on terms that are acceptable, we may need to provide funding ourselves.

We may be unable to adapt to technological changes in the communications market.

The telecommunications industry is characterized by rapidly changing technology with related changes in customer demands for new products and services at competitive prices. Technological developments are also shortening product life cycles and facilitating convergence of various segments in the telecommunications industry, including in our core mobile communications business and the 3G business that we are now entering. Our future success will largely depend on our ability to anticipate, invest in and implement new convergent technologies with the levels of service and prices that customers demand. Technological advances may also affect our level of earnings and financial condition by shortening the useful life of some of our assets.

The operation of our business depends in part upon the successful deployment of continually evolving mobile communications technologies, which requires significant capital expenditures. There can be no assurance that such technologies will be developed according to anticipated schedules, that they will perform according to expectations or that they will achieve commercial acceptance. We may be required to make more capital expenditures than we currently expect if suppliers fail to meet anticipated schedules, performance of such technologies fall short of expectations or commercial success is not achieved.

The effects of technological changes on our business cannot be predicted. In addition, it is impossible to predict with any certainty whether the technology selected by us will be the most economical, efficient or capable of attracting customer usage. Even though there can be no assurance that we will be able to develop new products

and services that will enable us to compete efficiently, we are following general technological trends in communications and technology in order to control our investment risks by using different vendors’ products, and competing in adjacent communication business areas.

The 3G system may not be fully compatible with our infrastructure. The functionalities provided by the 3G network depends on the network equipment suppliers’ current capabilities. In addition, any new requirements defined by the ICTA may not be supported by the equipment suppliers and may require new developments on the equipment by the suppliers.

Turkcell’s ability to implement WIMAX services will be dependent on clearing the WIMAX regulatory and licensing process. WIMAX equipment may not always be compatible with our existing equipment, and our employees may not be familiar with the technical specifications and maintenance requirements of equipment from WIMAX suppliers. In addition, the timing of the WIMAX network implementation might cause a risk for 3G roll-out activities due to limited personnel resources if the WIMAX and 3G roll-out project plans overlap.

The Turkish CMB has informed us that our appointment of one of our board members to the audit committee does not satisfy Turkish legal requirements with respect to audit committees.

Alexey Khudyakov was appointed to the audit committee on July 21, 2006. Alexey Khudyakov’s status on the audit committee is as an “observer member” because under the U.S. Sarbanes-Oxley Act of 2002 he is not considered an independent audit committee member due to his position with one of our affiliated shareholders.

On January 26, 2007, the Turkish CMB informed Turkcell that Alexey Khudyakov’s status as an “observer member” on the audit committee does not satisfy the requirements of Article 25 of the CMB’s Rules pertaining to Audit Committees. The CMB has stated that steps must be taken so that our Company can comply with Article 25. We believe that Mr. Khudyakov does fully meet the requirements of Article 25 as he is a non-executive board member. We have initiated a lawsuit before an administrative court seeking to suspend the execution and to annul the decision of the CMB with respect to Mr. Khudyakov. The administrative court ultimately dismissed our lawsuit in January 2008. In March 2008, we appealed before the Council of State. However, on April 9, 2008, the Council of State rejected our request to suspend the decision. We are still awaiting a final decision with respect to this appeal. Pursuant to the decision we were notified of on October 23, 2008, the CMB imposed on Turkcell an administrative penalty amounting to TRY 11,836 (approximately $7,000 as of April 1, 2009) for not complying with its decision stating that Mr. Khudyakov’s current status, as an “observer member” on the audit committee, does not satisfy the requirements of Article 25, “Committees Responsible for Auditing” of the CMB and required from Turkcell to inform its shareholders of such penalty at the next General Assembly (which was held on January 30, 2009). In November 2008, we commenced a lawsuit before the court. The lawsuit is still pending.

If our position in this matter does not ultimately prevail over that of the CMB, our compliance with the listing requirements of the New York Stock Exchange (“NYSE”) could be called into question, to the extent that the relevant rules of NYSE are based on home country compliance. In this case, remedial action could be required.

Certain of our shareholders hold a majority of our outstanding share capital which allows them together to exercise a controlling influence over us and could have the effect of delaying, deferring or preventing a change of control of Turkcell. Such shareholders have also been involved in ongoing legal disputes that could adversely impact their ability to achieve the consensus necessary to approve important matters relating to our business and operations, and may also affect the ownership and control of our shares.

On November 28, 2005, Alfa Telecom announced that Alfa Telecom Turkey Limited (“Alfa” and, together, with Alfa Telecom and other Alfa Group entities, “Alfa Group”), an affiliate of Alfa Telecom, one of Russia’s leading private telecommunications investors, had completed a series of transactions resulting in Alfa’s

acquisition of a 49% interest in Cukurova Telecom Holdings Limited (“CTH”), one of our principal shareholders. Following such transaction, Alfa held, indirectly through CTH and Turkcell Holding A.S., another principal shareholder, 13.2% of our shares.

On the basis of publicly available information (Form 13D filings), in 2009 Alfa Group reduced its stake in Turkcell to 4.99% following litigation with Telenor ASA (“Telenor Group”). We understand that Alfa Group sold 62.2% of its holdings in Alfa Telecom Turkey Limited (“ATTL”) to Visor Group affiliate Nadash International Holdings Inc. (“Nadash”) and Alexander Mamut’s Henri Services Limited (“HSL”‘) which now own indirectly 4.26% and 3.97%, respectively, of our share capital.

As a result of the aforementioned share transfer and the resulting shareholder structure, we may face the following risks:

•

TeliaSonera, CTH, Alfa Group, HSL and Nadash together currently hold a majority of our outstanding share capital which allows them together to exercise a controlling influence over us. Our Board of Directors currently consists of seven members, and five members are required for a quorum. Two members of the board are affiliated with each of TeliaSonera, Cukurova Telecom Holdings and the Alfa Group, with the seventh member being independent. On the basis of publicly available information (Form 13D filings), we understand Alfa Group is required to use reasonable endeavors to cause the appointment of one nominee of each of the Alfa Group and Nadash/HSL (jointly) to our Board of Directors. The ownership of a substantial percentage of our outstanding ordinary shares by TeliaSonera, the Cukurova Telecom Holdings, the Alfa Group, HSL and Nadash and the affiliation of these shareholders with members of the Board of Directors may have the effect of delaying, deferring or preventing a change in control of Turkcell, may discourage bids for our ordinary shares or ADSs and may adversely affect the market price of our ordinary shares or ADSs.

•

Certain of our shareholders are involved in disputes regarding transactions involving the shares of Turkcell Holding and other entities that own our shares. These disputes, which are presently being litigated, are ongoing and we do not know when they will be resolved. This and other disputes could result in the failure of our shareholders to have a cooperative relationship, which could adversely impact the ability of our shareholders to achieve the consensus necessary to approve important matters relating to our business and operations. This and other disputes could also affect the ownership and control of our shares.

•

According to publicly available information, in 2005, an independent group petitioned a court regarding the exemption provided by the CMB as a result of the aforementioned share transfer to Alfa Group. The dispute is still ongoing. Such disputes could result in the failure of our principal shareholders to have a cooperative relationship, which could adversely impact their ability to achieve the consensus necessary to approve important matters relating to our business and operations.

Spectrum limitations may adversely affect our ability to provide services to our subscribers.

The number of subscribers that can be accommodated on a mobile network is constrained by the amount of spectrum allocated to the operator of the network and is also affected by subscriber usage patterns and network infrastructure. The spectrum is a continuous range of frequencies within which the waves have certain specific characteristics. We now have 11 MHz of spectrum in the 900 MHz band. As our subscriber base grows and we offer a greater number of services, we will require additional capacity for mobile voice and data; however, the currently available spectrum may be limited and we may face a bottleneck, especially in metropolitan areas.

In 2008, the ICTA initiated a tender for the allocation of additional frequency bands, which were vacant following the reorganization of the existing GSM 900 frequency band (890 / 960 MHz) into three separate bands (A,B and C). Turkcell submitted a bid of TRY 24.9 million (excluding VAT and equivalent to $14.9 million as of April 1, 2009) for the A band and won, adding five frequency bands to its prior stock of 50. Related payment was made in February 2009. The ICTA also held a tender for the issuance of four separate 3G licenses to provide

IMT 2000/UMTS services and infrastructure. Turkcell was granted an A Type license providing the widest frequency band (2x20 MHz; 20 MHz on uplink; 1920-1940 MHz and 20 MHz on downlink; 2110-2130 MHz, in total 40 MHz). There is no guarantee, however, that such additional capacity for mobile voice and data will relieve our current constraints and that our ability to provide services to our subscribers will not be adversely affected.

There are alleged health risks related to Base Transceiver Stations (“BTS”) and the use of handsets which could expose us to liability and lead to reduced usage of mobile phones.

We are aware of allegations that there may be health risks associated with the effects of electromagnetic signals from BTS and from mobile telephone handsets. While there is currently no substantiated link between exposure to electromagnetic signals at the level transmitted by our BTS and mobile telephone handsets and long- term damage to health, the actual or perceived health risks of mobile communications devices could adversely affect us through a reduction in subscribers, reduced usage per subscriber, increased difficulty in obtaining sites for base stations and exposure to potential liability. Furthermore, we may not be able to obtain insurance with respect to such liability on commercially reasonable terms. In recent years, legal proceedings have been brought against GSM mobile operators seeking the removal of base station sites for health reasons. Such legal proceedings may make it more difficult for us to establish and maintain such sites.

With regards to the health risks of BTS, local courts presented with the question decided that a base station had no negative effect on human health. However, the supreme court overruled the decisions of some local courts and decided that the base station in question could have negative effects on human health in the long term. If the number of those cases increases or if new regulations were to result, these could have a material adverse effect on our operations and financial results.

We are dependent on certain suppliers for network equipment and for the provision of data services.

Like all operators, we purchase our mobile communications network equipment, including our switching system, base station controllers (“BSCs”), BTS, transmission equipment and the software required to operate such equipment from a limited number of major suppliers. Although we are not bound to purchase our equipment solely from any given supplier and we have already begun using two different vendors’ products on GSM BSS (“Base Station Subsystem”), and are planning to use two different types of equipment for 3G UTRAN (“UMTS Radio Access Network”), there can be no assurance that we will be able to obtain equipment from one or more alternative suppliers on a timely basis in the event that any current supplier is for any reason unable or unwilling to satisfy our equipment requirements. This could occur if, for example, the growth in demand for network equipment exceeds the ability of suppliers of such equipment as a whole to meet such demands. Like all operators, the failure of any of our suppliers to supply equipment to us could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

In addition, equipment from alternative suppliers may not always be compatible with our existing equipment, and our employees may not be familiar with the technical specifications and maintenance requirements of equipment from alternative suppliers. These factors could also have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

We are dependent on certain systems and suppliers for IT services and our business continuity is at risk due to our exposure to potential natural disasters, regular or severe IT failures, human error, hacking and IT migration risk.

We are heavily dependent on IT systems, suppliers for IT services and our IT employees for the continuity of our business. We also regularly upgrade or convert our IT systems. Currently, we have a Business Continuity Management (“BCM”) scheme that is designed to protect and minimize the potential damage to Turkcell’s operations should we experience a crisis situation due to a potential natural disaster, such as an earthquake. The

implementation of the BCM was completed by the end of 2007. In addition, should we experience regular or severe IT failures, whether due to system outages, human error or deliberate transferring, fraud or hacking, not successfully migrate to alternative or improved IT systems or experience a crisis situation, we may not fully recover our IT systems. If such event(s) occurred, it would result in interruptions in the continuity of our business which could have a material adverse effect on our business, consolidated financial position and results of operations.

If we are unable to retain key personnel, and also maintain the loyalty of our dealers and their key personnel, our business, consolidated financial condition or results of operations could be materially and adversely affected.

Our performance depends, to a significant extent, on the abilities and continued service of our key personnel. Competition for qualified telecommunications and information technology personnel in Turkey is intense. In addition, we are dependent on our dealers and their personnel in the growth and maintenance of our customer base. The loss of the services or loyalty of key personnel could adversely affect our financial condition or results of operations as well as breaches of confidentiality regarding our customer, operation and business plan details, particularly if a number of such persons were to join a competitor. Retention and development of high-caliber individuals in these positions is also key to our being able to deliver on our strategy.

Cancellation of our ADSs has been halted on a limited basis and this may adversely affect the liquidity and trading of our ADSs.

Due to uncertainties arising after January 1, 2006 regarding the application of the Turkish capital gains tax and the withholding related thereto, which is required upon the cancellation of ADSs, our ADR depositary, JPMorgan Chase Bank, N.A., consistent with the practice of all depositary banks for Turkish issuers, halted the issuance and cancellation of ADRs. Trading of our ADSs on the New York Stock Exchange has continued and has not been impacted by the closure of the issuance and cancellation books of our ADR depositary.

On March 8, 2007, the Turkish Ministry of Finance issued a new communiqué that facilitated the reopening of the ADS issuance and cancellation books based on certain conditions. On May 17, 2007, our ADR depositary reopened our ADS issuance books and, on a limited basis, our ADS cancellation books. Cancellations are currently limited to non-resident beneficiaries (i.e. beneficiaries not resident or incorporated in the Republic of Turkey) who have purchased ADSs on or after January 1, 2006.

Due to the continued halt of cancellation of our ADSs, except for non-resident beneficiaries who purchased ADSs on or after January 1, 2006, if there were a sudden or significant increase in persons wishing to sell ADSs, there may be adverse effects on liquidity and market disruption in the trading of our ADSs.

We are involved in various claims and legal actions arising in the ordinary course of our business.

We are involved in various claims and legal actions with governmental authorities in Turkey, including the Competition Board, the ICTA and certain other parties. In addition, we may be involved in additional claims and legal actions with various governmental and other parties in the future. For a more detailed discussion of all of our significant disputes, see “Item 8.A. Financial Information” and Note 32 to our audited consolidated financial statements included in “Item 18. Financial Statements” of this annual report on Form 20-F.

Our internal controls have in the past been subject to “material weaknesses”.

As required by applicable laws, we maintain and regularly review internal controls over financial reporting. While our latest review has not revealed any “material weaknesses”, we have suffered from these in the past and no assurance can be given that others will not emerge in the future.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could adversely impact investor confidence and the market price of our common shares or ADSs.

ITEM 4.

INFORMATION ON THE COMPANY

4.A History and Development of the Company

Turkcell Iletisim Hizmetleri A.S. (“Turkcell”), a joint stock company organized and existing under the laws of the Republic of Turkey, was formed in 1993 and commenced operations in 1994. Our principal shareholders are Sonera Holding and Turkcell Holding, which hold 13.07% and 51.00%, respectively, of Turkcell’s shares. Turkcell Holding is 52.91% owned by Cukurova Telecom Holdings Limited and 47.09% by Sonera Holding B.V. Cukurova Telecom Holdings Limited is 51% owned by Cukurova Finance International Limited and 49% by Alfa Telecom Turkey Limited. The address of our principal office is Turkcell Iletisim Hizmetleri A.S., Turkcell Plaza, Mesrutiyet Caddesi, No. 71, 34430 Tepebasi, Istanbul, Turkey. Our telephone number is +90 (212) 313 10 00. Our website address is www.turkcell.com.tr. Our agent for service of process in the United States is CT Corporation, 111 8th Avenue, 13th floor, New York, New York 10011.

We operate under a 25-year GSM license, which we were granted in April 1998 upon payment of an upfront license fee of $500 million. Under our license, we pay the Undersecretariat of Treasury (the “Turkish Treasury”) a monthly ongoing license fee equal to 15% of our gross revenue. Of such fee, 10% is paid to the Ministry of Transportation and Communications of Turkey (“Turkish Ministry”) as the universal services fund. We also operate under interconnection agreements with other operators that allow us to connect our networks with those operators to enable the transmission of calls to and from our GSM system through existing digital fixed telephone switches. For example, we have an interconnection agreement with Turk Telekom that provides for the interconnection of our network with Turk Telekom’s fixed-line network.

In July 2000, we completed our initial public offering with the listing of our ordinary shares on the Istanbul Stock Exchange and our ADSs on NYSE.

Our subscriber base has grown substantially since we began operations in 1994. At year-end 1994, we had 63,500 subscribers. By year-end 2008, that number had grown to 37 million.

In 2008, we had total revenues of $6,970.4 million, our EBITDA totaled $2,580.3 million and we reported net income of $1,836.8 million.

For the year ended December 31, 2008, we spent approximately $1,364.6 million on capital expenditures, including acquisitions through business combinations, compared to $783.1 million and $604.8 million in 2007 and 2006, respectively.

In addition to our operations in Turkey, we have various international operations. For more information, see “Item 4.B. Business Overview—International Operations”.

4.B Business Overview

Based on operators’ announcements, we are the leading provider of mobile services in Turkey in terms of the number of subscribers, with 56% of the Turkish subscriber market as of December 2008. We provide high-quality mobile voice and data services over our mobile communications network and have developed one of the premier mobile brands in Turkey by differentiating ourselves from our competitors in areas such as quality of service, customer service and product variety. We maintain our strong position in the market due to our customer oriented approach and our ability to provide quick solutions to meet customers’ needs.

Through our state-of-the-art mobile communications network, we provide comprehensive coverage of an area that, as of December 31, 2008, included 100% of the population living in cities of 1,000 or more people, 81 of the largest cities and the majority of Turkey’s tourist areas and principal inter-city highways. As of December 31, 2008, we provided service to our subscribers in 202 countries through commercial roaming agreements with 607 operators.

Industry

Overview

GSM, one of the digital standards for mobile communications, was developed in 1987 to facilitate unification and integration of mobile communications worldwide.

As a digital standard, GSM offers a wide range of services that include voice, circuit switched data, packet data and fax, in addition to standard service offerings such as call barring, call forwarding, call waiting and roaming into areas serviced by other GSM carriers. A key component of the GSM network is the Simcard, which enables the user of a mobile phone to be identified. Simcards, also known as “smart cards”, are placed inside each handset and function as its digital brain. Simcards’ digital memory allows for the storage of the subscribers’ personal information, such as the rate plan, phone number and service features. Both postpaid and prepaid subscribers are required to purchase a Simcard in order to use the telecommunications service offered by Turkcell.

GSM networks have traditionally been used exclusively as personal voice communications networks. The mobile telecommunications industry has increasingly provided mobile data services, and GSM, as a technology platform, is suitable for data transmission. Currently, many advanced technology platforms are being developed to enable the provision of more sophisticated data services.

Today, most GSM operators offer the standard data service of 9.6 kilobits per second and High Speed Circuit Switched Data (“HSCSD”) and General Packet Radio Service (“GPRS”), which provide network speeds of up to 57.6 kbps and 160 kbps, respectively, depending on radio network and mobile phone conditions. Enhanced Data rates for GSM Evolution (“EDGE”) and UMTS provide the means for making networks suitable for high-speed wireless data services. EDGE and UMTS platforms allow network speeds of up to 240 Kbps and 384 Kbps, respectively. By using new radio access technology, High Speed Downlink Packet Access in UMTS networks, operators gain increased capacity and improved downlink speeds up to 14.4 Mbps.

The Turkish Mobile Market

The Turkish population is young, with an estimated median age of 28, which is lower than elsewhere in Western Europe, and the majority of the population lives in urban areas. As of December 31, 2008, Turkey’s population was approximately 71.5 million. In our opinion, these factors indicate a good potential for growth for the mobile communications market in Turkey.

There are currently three mobile communications operators in Turkey: Turkcell, Vodafone and Avea, with a total of 65.9 million GSM lines as of December 31, 2008, according to operators’ announcements.

Vodafone, our principal competitor, entered the Turkish GSM market by acquiring Telsim on May 24, 2006. Telsim, which had received a 25-year license at the same time as us and on what we believe to be identical terms, including the $500 million upfront license fee, had been put up for sale by the Savings Deposit Insurance Fund (“SDIF”) in August 2005. The auction for Telsim was held on December 13, 2005 with Vodafone submitting the winning bid of $4.55 billion.

Avea is an operator owned 81% by Turk Telekom. (Turk Telekom’s ownership interest in Avea was increased to its current stake following its purchase of Telecom Italia SpA’s 40.6% interest in Avea in September 2006 for $500 million. Turk Telekom is 55% owned by Oger Telecom, a multinational GSM operator in which Saudi Telecom Company, the Arab world’s largest telephone company, agreed in January 2008 to buy a 35% stake.

Strategy

Our vision is to ease and enrich the lives of our customers with leading communication and technology solutions. Our strategy is to build value for our customers, stakeholders, and employees.

Turkcell operates in eight different countries, reaching 160 million people. There have been significant changes in our operating environment. In addition to the global financial crisis, the regulatory and competitive pressures we face are mounting. Customer demand for converged and differentiated services as well as devices is growing. Furthermore, expansion into international markets and adjacent businesses continues to be important for sustainable growth. In order to sustain our operating margins, it has been crucial that we become more efficient in our delivery of services, so that we may continue to lead the market in this environment.

As a leading communications and technology company, our strategy for growth is to continue our organic growth and to selectively seek and evaluate new investment opportunities. Building on our strength in brand, people, infrastructure, scale; we have identified six strategic priorities in which we intend to pursue opportunities for business growth:

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To grow in our core mobile communication business through increased use of voice and data. Turkcell has a strong market position in Turkey, and we will continue to strengthen our well developed brand values through the highest quality infrastructure, the best offers for customers and the best partnership structures.

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To grow our existing international subsidiaries with a focus on profitability in the long term. In order to diversify revenue and cash flow risks, we intend to grow the contributions made to Turkcell Group from subsidiaries, and to create operational efficiency.

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To grow in the fixed broadband business by creating a synergy among Turkcell Group companies with our fiber optic infrastructure. Investment on fiber optic infrastructure will also enable us to sustain our competitive advantage in our core mobile business.

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To grow in the area of mobility, internet and convergence through new business opportunities. We will focus on creating value for our customers and will continue to drive mobility and enhance internet services with a customer-centric approach. Convergence has become crucial for businesses. We have already introduced total telecom business solutions to give full support to our corporate clients so that they may compete better in their own markets.

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To grow in domestic and international markets through communications, technology and new business opportunities. We are open to launching Greenfield operations as well as forming potential alliances and conducting mergers and/or acquisitions that will contribute to our economies of scale and create synergies. In our strategic screening process for international expansion activities, we consider both the business opportunity and the attractiveness of the market to determine feasible investment opportunities. We may also evaluate new business opportunities such as the National Lottery.

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To develop new service platforms, which will enrich our relationship with our customers through our technical capabilities. We believe that the Turkish market could provide significant demand for such services, and Turkcell is the innovative forerunner in creating technology with the local talent pool.

Services

We currently provide high-quality wireless and value-added mobile communications services to subscribers throughout Turkey. Subscribers can choose between our postpaid and prepaid services. Currently, postpaid subscribers sign a subscription contract and receive monthly bills for services. Prepaid subscribers must purchase a starter pack which consists of a Simcard and includes airtime ranging from 20 to 250 counters. Scratch cards can be purchased in increments of 25 to 1000 counters.

As of December 31, 2008, we had approximately 29.5 million prepaid subscribers and 7.5 million postpaid subscribers, compared to approximately 29.0 million prepaid and 6.4 million postpaid on December 31, 2007.

Voice Services

Voice services are the main services we provide to our customers. Voice services consist of high quality wireless telephone services on a prepaid and postpaid basis.

VAS

VAS management is focused on developing and managing services to address both consumers’ and corporate customers’ different needs, thereby enriching their daily lives. We provide an integrated service approach with a common vision to offer tailored solutions based on the specific needs and preferences of our targeted markets.

One of our principal goals is to increase mobile data and value-added services revenues among our existing customers and to foster the growth of new customers by offering innovative value-added services as well as new ways to access our existing wide range of content and services. Having a rich portfolio of various services helps us maintain our competitiveness.

We focus on the growth of value-added services revenues by increasing penetration and usage of value- added services.

We believe that increased customer satisfaction through our large portfolio of services will also play an important role in our future retention efforts. Assuring customer loyalty is one of our priorities. Through the launch of new value-added services, we aim to obtain our goals of increased revenues as well as customer satisfaction, customer loyalty and customer retention.

We will continue to position new products and services based on the needs and expectations of our customers in order to promote mobile usage, increase awareness of our value-added services and increase the penetration of our services. We closely follow and analyze global trends and develop services to fit local market needs.

We believe that one of the main pillars of Turkcell’s future growth will be the development of new services and business areas. We develop services in partnership with leading companies in various adjacent industries such as internet, media, finance, healthcare and education in order to enhance users’ experience with communication and technology solutions. Turkcell seeks to differentiate itself by providing innovative and pioneering solutions in collaboration with its strong solution providers and various partnerships.

Our value-added services are managed in two groups: Consumer Services and Corporate Services.

Consumer Services

Value-added services provide a number of consumer oriented services including Mobile Internet and content services.

Mobile Internet. Thanks to partnerships with Google, Facebook, Yahoo, Microsoft and popular local brands, such as Mynet, Garanti, Ntvmsnbc and Kariyer.Net internet services, mobile internet usage has almost tripled among Turkcell subscribers with over 19 million Turkcell subscribers having access to the mobile internet during 2008. turkcell-im is a prominent communication and access portal for Turkcell’s VAS. Launched in September 2006, turkcell-im facilitates mobile internet usage and offers a wide selection of content, including news, entertainment, sports, music and chat. As of December 31, 2008, turkcell-im had 11.2 million yearly distinct users with 61 million page views. In addition, 4.2 million items of content were downloaded from turkcell-im within the same year. turkcell-im provides a single point through which users can access the mobile sites of all these brands. Turkcell subscribers are also able to access Google’s search engine through turkcell-im and by SMS without paying any extra charges. In addition, Turkcell was the first GSM operator in Turkey to launch Windows Live Messenger from Microsoft—the most popular instant messaging service in Turkey.

Economic Internet Packages. In May 2008, we relaunched our offers of daily, weekly and monthly internet packages. Turkcell now offers different packages that may be used on mobile phones and, with a Connect Card, on laptop computers to encourage higher consumption and ensure higher data revenues.

Over the past several years, Turkcell has launched several different content based mobile services to ease and enrich the lives of customers, such as Goller Cepte (a service providing goal videos in your mobile) and IBB Trafik (Mobile Traffic Monitoring Solution).

Corporate Services

With our value-added corporate services, we aim to improve the competitive advantage and efficiency of Turkcell’s corporate customers. Mobile Internet usage among corporate customers grew substantially in 2008. Internet traffic increased by 125% due both to internet scratch cards, which provide free internet access for non-users, and revised internet packages with more attractive prices. The successful launch of the iPhone 3G in September 2008 also contributed to growth in mobile internet usage in the last quarter of 2008.

In 2008, we launched the IsteCozumler.com web portal, which enables SMEs (Small Medium Enterprises) to get various services such as CRM (Customer Relationship Management), ERP (Enterprise Resource Planning), communication and HR (Human Resources) applications from a hosted environment through a pay as you go model. Our Solutions Catalogue for 2008 included 60 products with 53 partners. We also offer sales force automations, vehicle tracking and telemetry solutions for different sectors and segments in our Solutions Catalogue. Corporate Messaging Solutions was the leading solution in 2008.

Push to Talk (“PTT”) and Mobile POS are two additional value added services provided to corporate customers that need instantaneous, fast voice communication at a reasonable price. In 2008, Mobile POS demonstrated remarkable growth compared to 2007.

In 2008, our new innovative solutions for corporate customers were IstePosta, IsteKimkimdir and Team tracking through the phone:

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Free Corporate Email and domain name solution: IstePosta.

IstePosta is a service launched in March 2008 for Turkcell corporate customers that do not yet have corporate e-mail addresses and web sites. IstePosta consists of a domain name, e-mail addresses with the company’s name, a web site, Google Apps services (calendar, instant messaging on the web and online documents, to name a few), mobile access for e-mail (free internet packages for e-mail access) and a free internet advertisement coupon (Google AdWords coupon). IstePosta can be used by all Turkcell corporate customers.

We launched IstePosta with Google’s cooperation. As such, Google Apps services are provided within IstePosta. This is the first time Google has cooperated with a mobile communications operator for the aforementioned services.

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Corporate mobile phonebook: IsteKimkimdir.

IsteKimkimdir, the first corporate mobile phonebook to provide service throughout the world, was launched in May 2008. Corporate customers first upload their employees’ information to www.istekimkimdir.com. Once that is done, they may then start to enquire their colleague’s name, surname or number by sending “name surname” or “phone number” to 2200. In addition, authorized people can send group texts to their team, department or the entire company by sending their message to 2200.

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Team Tracking through the Phone: Cepten Ekipmobil

This service was established for companies that needed to track their teams’ locations via their smart phones. Corporate customers who have already registered for Team tracking may access the application via their TurkcellPDA or Blackberry devices. They track their teams’ location through detailed maps. This service helps companies save time, increase the efficiency of their workers and reduce expenses.

New Services and Business Areas

Turkcell continuously seeks to broaden its product range by introducing new services to meet the needs and expectations of customers. Turkcell continues to build on its technical competencies and market know-how to expand its already rich portfolio of services. We closely follow and analyze global trends and develop services that best meet the needs of the local market. Currently, Turkcell focuses on improving content services through a number of different areas, including mobile signature, mobile traffic monitoring, mobile healthcare, mobile learning and mobile advertising.

Turkcell Mobile Signature (Turkcell Mobil Imza)

Mobile Signature is a GSM service that enables customers to sign electronic documents and transactions with a legally-accepted digital signature using GSM SIM cards. Mobile signature subscribers can easily verify their personal identity in a digital environment and complete transactions remotely, without their physical presence. Mobile Signature was launched in February 2007. There are currently 41 application providers in the market, representing industries as diverse as banking, e-government, insurance, healthcare and e-commerce.

The Mobile Signature project has been chosen as an initiative of the GSM Association, with the participation of 18 operators throughout the world. It is expected that more operators will follow the lead of Turkcell and launch their own mobile signature solutions.

Turkcell Health

www.saglik365.com: Saglik365, Health365, is a ubiquitous health platform with a motto of “my everyday health page” for its users. Saglik365 is a Turkcell owned platform launched in October 2008. The platform draws its strength from Turkcell’s powerful network as well as from the expertise of its contributors, who are Turkey’s leading healthcare providers. Saglik365, offering a seamless web to mobile handover, links healthcare providers and application providers with the public to raise awareness of health issues, address issues such as self-care and preventive care and help people take charge of their healthcare.

Telemedicine Project in Adiyaman: In 2008, the Telemedicine Project was realized at two villages called Cakirhoyuk and Ahmethoca in Adiyaman City. Family doctors and nurses in the villages could, via telephone, consult with expert doctors in the city via mobile ECG (Electrocardiography), mobile blood pressure devices. In this project Turkcell worked with the Health Ministry, UNDP (United Nations Development Programme), Intel and Turkey Family Physicians Society.

IBB Cep Trafik (Mobile Traffic Monitoring Solution)

Turkcell has cooperated with the Metropolitan Municipality to provide a “mobile solution” to traffic, a major municipal issue in Istanbul. The agreement signed between the two establishments allows Turkcell subscribers to download the IBB Cep Trafik program to their cell phones so that they can be guided to their destination. Subscribers can now save time by accessing the Traffic Density Map and traffic camera images to check road conditions and select the best possible route. 450,000 subscribers have downloaded the IBB Cep Trafik application, which was used more than 16 million times in 2008.

Location Based Services

Turkcell launched a location based service platform in 2008. Turkcell partners and all third parties could connect to Turkcell’s platform and develop new location based services. Third parties buy location information from Turkcell and develop their services with this business model.

Mobile Wallet

In January 2008, Turkcell and Garanti Bank launched the third global Near Field Communication (“NFC”) based mobile payment pilot, “Turkcell Mobile Wallet”, a project to integrate credit cards into cell phones. With

this NFC service, it will be possible to use cell phones equipped with the MasterCard PayPass application in all locations that accept Garanti Bank’s “Bonus Trink” credit card. This application reduces payment time to less than half a second.

Mobile Payment

Turkcell introduced mobile payment in August 2008. This service allows Turkcell subscribers to make purchases up to 20 Turkish Lira via Turkcell invoice or counters. No additional subscription is necessary. Subscribers can start using the service by sending an approval message to confirm the purchase. This service can be used for payments in many areas, such as subscription fees for online communities and bargain web sites, parking fee payments and online gaming.

Turkcell Mobile Learning

Mobile Learning is an e-learning concept for mobile media. Mobile handsets are used instead of PCs and laptops. Turkcell Mobile Learning is a hosted solution for companies with a large number of employees dispersed at different locations and sites. The Hosted Mobile Learning Platform provides web based user/content management, content generation, delivery and reporting.

Turkcell Mobile Learning is a mobile internet solution. Its management and reporting interface is web based, which can be used via simple internet access and a web browser. Using the Mobile Learning Platform Management Tool, companies or users can generate their own multimedia mobile content, such as flash animation, images, tests, surveys and video, and easily deliver it to mass crowds. Its user interface is a simple mobile phone browsing interface that accesses the relevant content via mobile internet. Any phone that can connect to the internet via GPRS is a Turkcell Mobile Learning compliant handset.

Mobile Marketing and Advertisement

Turkcell creates and manages mobile marketing and advertising channels that, on the one hand, are a unique value for corporate customers in terms of marketing and, on the other hand, bring value to subscribers through targeted offers and incentives from brands that meet their interests and needs. In 2008, Mobile Marketing and Advertisement revenues increased 80% compared to 2007. In terms of projects, 650 mobile marketing projects were completed with 276 brands in 27 different sectors. In terms of customer penetration, more than 19 million subscribers participated in mobile marketing activities via their mobile phones in 2008.

Turkcell has one of the largest customer permission databases in Europe both in terms of number (7.5 million opt-in subscribers) and scope of data richness used for mobile marketing and advertising activities for other brands and advertisers. With this permission database, advertisers can segment their potential customers according to their target market and send a highly targeted campaign or advertisement.

During 2008, Turkcell was active in the field of mobile advertising, launching TonlaKazan (Tone and Win), Targeted IVR (Integrated Voice Recognition), Mobile Ticketing, Sponsored Info Packages and location based applications, and creating advertisement space for its corporate customers. Turkcell continues to create additional areas of inventory in terms of sponsorship and advertisement. In 2009, it is expected that different advertising channels and applications will be launched.

Turkcell is a member of the Global Mobile Marketing Association (“GMMA”), the association endorsed by the GSMA (Global System for Mobile Communications Association) for mobile marketing and advertising, and a founding member for the EMEA region, playing an active role on the board of members and individual committees. In addition to these, Turkcell is an active player in GSMA Advertising Committee.

Partnership Development

Since 2002, Turkcell has been developing new products and services with its partners. Since 2004, these partnerships have been executed through the Turkcell Partner Program. The number of partners reached over 200 in 2008. Turkcell has enriched its customers’ lives through various partner value added services. The Turkcell partner ecosystem has more than 3,000 employees, and the scope of their business covers not only Turkey but also many countries around the world, such as Ukraine, UK, Dubai and countries in the Far East. The Partnership Development Department has leveraged various internal and external platforms in order to reach an innovative and rich service portfolio. The Department has also supported other Turkcell Group companies located in Turkey and abroad since June 2008.

With the goal of nurturing the environment for the development of 3G services and creating an appealing service portfolio with the support and power of our partner ecosystem, we organized a 3G Service Contest and increased 3G awareness within our partner ecosystem. From 2009, with the launch of the 3G infrastructure in Turkey, partners of Turkcell will continue to enrich our customers’ lives with their new innovative services.

The first operator supported mobile applications store in Turkey, Uygulama Pazari, was also launched with our partner ecosystem. Uygulama Pazari serves as a marketplace both for application developers and prosumers. We are now working with 30 global application developer companies. As the brand becomes more well known among developer communities, we expect to work with more global developer companies. In 2009, we expect Uygulama Pazari to boost the local developer community in Turkey.

We believe that new product and service ideas and projects submitted from external sources are crucial to the enrichment of our service portfolio. Being aware of this, the Turkcell Partner Program also launched a new internal service ideas evaluation platform, called Ideas Mine, to gather ideas from external bodies, such as partners and potential partners, evaluate them and share them with related internal business units in a more systematic way. With this platform, partners, potential partners and universities became a new source for ideas and innovation. Thus far, we have received 125 project proposals from 100 students from 20 local universities. Some of them were shared with our partner ecosystem and Turkcell in order to create new projects.

Among the many successes of our partnerships, telemetry solutions is one of the best examples. With its partners, Turkcell introduced a service to help the agriculture sector monitor greenhouses to control crucial parameters such as temperature, humidity and pressure remotely via mobile phones. Another good example is location aware fishing nets, which is also a direct product of one of Turkcell’s partners, providing a solution for fishermen.

We are planning to increase the number of our partners by adding new players that have various competencies and deep business and technical know-how to provide a richer service portfolio to both contribute to our revenue and to ensure customer satisfaction and loyalty in 2009.

Future Services

3G Mobile

3G technology offers full interactive multimedia and is expected to bring mobile networks significantly closer to the capabilities of fixed-line networks and allow for the introduction of high volume-based data services like video telephony. Multimedia services will likely feature prominently in 3G networks, and may include, in addition to conventional mobile voice and data services: high speed Internet and intranet access, video telephony and conferencing, mobile TV, entertainment, information services and direct instant access to home or office IT systems.

On November 28, 2008, the ICTA conducted a tender process to grant four separate licenses to provide IMT 2000/UMTS services and infrastructure. We were granted the A type license, which provides the widest frequency band, for a duration of 20 years at a consideration of EUR 358 million (excluding VAT).

Other Services

International Roaming

Our coverage extends to many countries in Europe, Asia, Africa and North and South America. As of December 31, 2008, we offered international roaming to our subscribers in 202 destinations throughout the world, pursuant to commercial roaming agreements with 607 operators.

Since July 2002, we have provided roaming services for prepaid subscribers of foreign mobile operators visiting Turkey. We were the first operator to provide such a service in Turkey. This service, called “passive CAMEL”, can only be enabled if both operators have installed the CAMEL system on their networks. As of December 31, 2008, we offered prepaid roaming to the prepaid subscribers of 195 operators in 104 destinations.

Since October 2004, we have offered roaming services for Turkcell prepaid subscribers going abroad. This service, called “active CAMEL” (Active Customized Applications for Mobile Network Enhanced Logic), can only be enabled if both operators have installed the CAMEL system on their networks. As of December 31, 2008, we offered prepaid roaming to Turkcell prepaid subscribers through 222 operators in 124 destinations.

Since October 2002, we have offered GPRS roaming. As of December 31, 2008, we had 358 GPRS roaming partners in 144 destinations.

In order to balance international SMS traffic, we began signing international SMS Interworking Agreements with other mobile operators in April 2002. As of December 31, 2008, we had signed 137 International SMS Interworking Agreements. As of December 31, 2008, our subscribers can send SMS to more than 607 mobile operators located in 202 destinations, including 136 CDMA/TDMA operators in North America and China.

Since December 2005, our subscribers have been able to send and receive MMS to and from foreign operator subscribers. As of December 31, 2008, our subscribers were able to send MMS to 89 mobile operators in 58 destinations.

Tariffs

Our charges for voice, messaging and data consist of monthly fees, usage prices, bundles and volume discount schemes and options under various tariff schemes. Our license agreement provides that the ICTA sets the initial maximum tariffs. Thereafter, the maximum price levels are adjusted based on increases in the Turkish Consumer Price Index (The Turkish Republic Ministry of Industry Consumer Price Index minus 3% of Turkish Republic Ministry of Industry Consumer Price Index). As for the U.S. dollar price cap, the same formula is applied using the “USA Consumer Price All Item” index numbers. For more information on how our maximum price levels are established, see also “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry.”

Each customer subscribes to a voice tariff. Voice tariff packages vary based on type of subscriber (postpaid or prepaid, corporate or individual), time and destination of call, and call volume.

Main Tariffs

We have basic tariffs, offering on-net (Turkcell subscriber to Turkcell subscriber) usage advantages and a range of targeted tariff plans. Our basic tariffs are widely preferred by our subscribers. Our main tariff is BizbizeCell, which provides on-net usage advantages. We have segmented tariffs plans that are targeted at specific subscriber groups.

The main tariffs listed below for postpaid and prepaid subscribers are as of March 2009. Prices are given in TRY and include 18% VAT but exclude the 25% Special Communication Tax.


	Postpaid(TRY)*
	BizbizeCell	BizBize Hepimiz	Herkesle	Iste Tarife
Monthly Fee	2.00	10.50-236	13-250	2.5
Calls Out (per minute):
Turkcell to Turkcell	0.37	120-5000 free mins included. Exceeding minutes charged at 0.39 per minute	60-2500 free mins included. Exceeding minutes charged at 0.45 per minute	0.34
				0.4
Turkcell to PSTN(1)	0.47	120-5000 free mins included. Exceeding minutes charged at 0.39 per minute	60-2500 free mins included. Exceeding minutes charged at 0.45 per minute
Turkcell to OMO(2)	0.60	0.60	60-2500 free mins included. Exceeding minutes charged at 0.45 per minute	0.60
SMS Per Message	0.22	0.22	0.22	0.22

(1)	PSTN: Public Switched Telephone Network (landline).

(2)	OMO: Other Mobile Operators.

Prices are given in Turkish Lira and include 18% VAT but exclude the 25% Special Communication Tax.

Based on December 2008 averages, the majority of our subscribers use the Bizbize tariff.

BizBize is a standard Turkcell tariff. Bizbize Hepimiz and Herkesle include special packages at discounted prices.

Iste Tarife is a Corporate Tariff.

In addition to the above, we have segmented tariff plans that are targeted at specific subscriber groups.


	Prepaid(TRY)*
	Süper Tarife		BizBize	BizBize Kampus		BizBize Hepimiz
Calls Out (per minute):
Turkcell to Turkcell	1	(4)	4	1	(6)	0.8	(3)
	2	(5)
Turkcell to Turkcell	4		4	3		4
Turkcell to PSTN	4.4		4.4	3		4.4
Turkcell to OMO	4.4		4.4	3		4.4
SMS (per message)	2		2	1	(7)	2

*	Prices are calculated according to counter unit prices based on the 100 counter card price level that include VAT and SCT.

(3)	Prices above apply if subscribers drop 50 counters in exchange for on-net calls for an hour.

(4)	The prices reflect a charge for every five minutes of a call and apply for 30 days following a 250-counter refill

(5)	The prices reflect a charge for every five minutes of a call and apply for 30 days following a 150-counter refill

(6)	The price reflects a charge for every ten minutes of a call to other KampusCell subscribers.

(7)	For KampusCell subscribers, SMS is free, per day, after three charged SMS.

In addition, we also have lifestyle subscriber programs:

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Young Turkcell (gnctrkcll), a program that targets the youth segment; and

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Turkcell at Work (IsTcell), a program that targets corporate customers and professionals.

Turkcell Platinum and Turkcell Gold offer two worlds to any Turkcell customer that wishes to take advantage of very special services.

In addition to the continuous basic loyalty programs, we have periodic volume-based campaigns that are designed for a specific time period for prepaid and postpaid subscribers. We offer tailored advantages and privileges to our premium customers to ensure their satisfaction and loyalty. We also have campaigns in which minutes and data services are bundled with handsets such as the iPhone 3G.

Roaming Tariffs

When one of our subscribers makes a call outside Turkey, we charge the subscriber based on the charging structure of the local or international rate charged by the local operator where the call is placed, as applicable, plus a surcharge. Since September 2006, by dividing the world into five zones, we have started to offer a flat fee for roaming usage, which is known as the “Turkcell World Tariff”. Whenever our subscribers go abroad, regardless of their tariff, they are subject to the Turkcell World Tariff for their roaming usage.

Based on Turkcell’s roaming agreements, Turkcell hosts foreign operators’ subscribers in its network. When a subscriber of a foreign operator makes a call within the Turkcell coverage area, that subscriber’s operator pays us our inter-operator tariff (“IOT”) for the specific call type. IOT is a wholesale tariff applied between mobile operators having roaming agreements.

Churn

For the year ended December 31, 2008, our annual churn rate was 23.8%. We have what we believe to be an adequate bad debt provision in our consolidated financial statements for non-payments and disconnections amounting to $196.6 and $181.7 million as of December 31, 2008 and 2007, respectively. Due to our large subscriber base as well as intensified competition in the Turkish market throughout the year due to MNP, our churn rate was increased by 4 percentage points in line with our expectations. In 2009, we expect a higher churn rate than in 2008 due to increasing competition.

Seasonality

The Turkish mobile communications market is affected by seasonal peaks and troughs, the effects of which are reflected in our quarterly results and key performance indicators. In general, the effects of seasonality on mobile communications usage positively influence our results in the second and third quarter of the fiscal year and negatively influence our results in the first and fourth quarters of the fiscal year. Local and religious holidays in Turkey also generally affect our operational results.

Network

Coverage

Our mobile communications network is designed to provide high-quality coverage to the majority of the population of Turkey throughout the areas in which they live, work and travel. As of March 31, 2009, Turkcell covered 84.5% of the entire geography of Turkey and 98.84% of Turkey’s population, including 100% of cities with a population of 1,000 or more. Coverage also includes a substantial part of the Mediterranean and Aegean coastline and during 2008, we enhanced coverage in low populated areas (populations of less than 1,000 people) as well. We have significantly exceeded the minimum coverage requirements of our license.

We have also expanded our mobile communications network to add capacity to existing service areas and to offer service to new areas, including improvement of the existing urban, suburban and intercity road coverage. During 2009 we plan to further expand our coverage in cities with a population of 500 or more, Turkish coastal lines, roads and railways in addition to further enhancing coverage and capacity in populated areas.

Network Infrastructure

We have largely employed experienced internal personnel for network engineering and other design activities while employing suppliers for our network infrastructure and as our partners in product/service development. Our suppliers install the base station cell site equipment and switches on a turn-key basis, while subcontractors employed by our suppliers perform the actual site preparation.

Our network consists of standalone Home Location Registers (“HLR”), combined Number Portability Switch Relay Function (“SRF”) and Number Portability Database and Signal Transfer Point (“STP”), BSC, combined Mobile Switch Centers/Visitor Location Registers (“MSC/VLR”), Service Control Points (“SCP”) and BTS. BTSs are the fixed transmitter and receiver equipment in each cell, or coverage area of a single antenna, of a mobile communications network that communicates by radio signal with mobile telephones in the cell. Each BTS is connected to a BSC via leased lines and/or radio relay links called “minilinks.” The BSC monitor and control the BTS. It is possible to cascade the BTSs to each other, thereby realizing considerable cost savings in transmission.

Capacity

In 2008, we continued to develop and improve the quality and capacity of our network. In urban areas, we increased coverage and capacity by placing network infrastructure in commercial sites such as shopping malls, business complexes and entertainment centers. We achieved the highest coverage density in major urban areas, especially Istanbul, Ankara and Izmir.

We believe that we have sufficient bandwidth to serve our current and projected short-term subscriber base and that we currently meet the capacity requirements of our license. To enhance the network capacity where congestion is a possibility, we intend to construct additional network sub-infrastructure, or implement technological advances that will permit bandwidths to be used more efficiently. In 2008, a number of techniques were employed to increase the effective carrying capacity of a given allocation of spectrum as well. The techniques used involved enhancing core network capacity by adding new nodes, processor upgrades and expansions to existing equipment in order to accommodate further increases in our subscriber base and the accompanying call handling and traffic capacity demands. In 2008, we made further capital expenditures to improve existing capacity, replaced some of the phased out hardware with ones offering higher capacity, provided increased network functionality and improved network efficiency in order to better serve our customers. Nevertheless, it may become impractical to continue to apply these techniques in densely populated metropolitan areas due to excessive cost or technological limitations and the amount of spectrum currently allocated to Turkcell’s network, despite these techniques, may not be sufficient to accommodate the future long-term growth of our subscriber base. As a result, we have requested the allocation of additional frequencies in the GSM 900 MHz band from the ICTA to further enhance our network capacity.

The ICTA initiated a tender for the allocation of the additional frequency bands, which are vacant following the reorganization of the existing GSM 900 frequency band (890/960 MHz) into three separate Frequency Bands (A, B and C). Turkcell has submitted a bid at a consideration of TRY 24.9 million (equivalent to $14.9 million as of April 1, 2009) for the A type additional frequency band. All of the necessary procedures and approvals have now been completed. Related payment was made in February 2009. Implementation of the additional five frequency bands was successfully completed in the middle of April 2009.

With the advantage of higher quality communication provided by the A type additional frequency placed at the beginning of the GSM900 band, Turkcell will continue to offer seamless communications services to its customers with by far the most extensive coverage amongst its peers.

We have continued implementing EDGE technology in our network and enlarging our EDGE coverage area. EDGE is an evolution of the GSM technology which allows consumers to use cellular handsets, PC cards and other wireless devices at faster data rates up to 240 kbps or approximately four times faster than GSM/GPRS data rates. Actual data rates vary depending on the access network load at the connection time and the terminal device features used by the customer. We started implementing EDGE in September 2004 by upgrading existing BTS sites primarily in large hotels, airports, shopping centers and other areas experiencing high data traffic. As of March 31, 2009, the Turkcell EDGE network reached over 99.5% of total Base Stations in our network.

Network Maintenance

We have entered into several System Service Agreements. Under these agreements, our mobile communications network, including hardware repair and replacement, software and system support services, consultation services and emergency services are serviced by local providers. Our subcontractors perform corrective and preventative maintenance on our radio network in the field, although providers repair all the network equipment.

We have six regional operation units with qualified Turkcell staff that operate and maintain our network in six main geographical regions. In addition, the Turkcell Network Control Center located in Istanbul monitors our entire network 24 hours a day, 365 days a year, and ensures that necessary maintenance is performed in response to any problems.

Transport Network

Radio Access Network (“RAN”) transmission is provided as leased lines and radio links. As of December 31, 2008, approximately 90% of our BTS transmission was provided by microwave radio-leased line combinations and 10% was provided by the leased lines.

In order to expand network coverage, microwave radio links are preferred since they are owned and operated by Turkcell, itself. When there is no line of sight, copper lines/fiber from transmission service providers are used. Inter-city connections are only carried through transmission service providers due to regulatory restrictions.

All of our switching equipment that forms part of our core network, including MSCs, Gateway MSCs, Tandem switches and HLRs, are located within our own buildings. Transmission between these sites (backbone) is always achieved through Synchronous Digital Hierarchy (“SDH”) leased lines. Interconnections with other Public Land Mobile Network (“PLMN”), Public Switched Telephone Network (“PSTN”) and LDTS (Long Distance Telephony Services), small operator companies are realized with leased lines. We lease all transmission lines from Turk Telekom and Tellcom.

Turkcell has implemented an IP based 3G network and has established an IP / MPLS (Internet Protocol / MultiProtocol Label Switching) network in UTRAN (UMTS Terrestrial Radio Access Network) for aggregating

3G traffic and increasing leased line utilization. Turkcell has decreased transmission costs by using IP based optimization equipment and increasing service quality by converting 2G traffic to IP and converging 2G and 3G traffic transmission infrastructure.

Site Leasing

Once a new coverage area has been identified, our technical staff determines the optimal base station location and the required coverage characteristics. The area is then surveyed to identify BTS sites. In urban areas, typical sites are building faces and rooftops. In rural areas, masts and towers are usually constructed. Our technical staff also identifies the best means of connecting the base station to the network. Once a preferred site has been identified and the exact equipment configuration for that site determined, we begin the process of site leasing and obtaining necessary regulatory permits. Construction of masts or towers that we require in rural areas are performed by Kule Hizmet ve Isletmecilik A.S. (“TurkKule”), a company 100% indirectly owned by us. We lease antenna space and provide maintenance and management services from TurkKule at such towers.

Dropped Calls

Dropped calls are calls that are terminated involuntarily and are measured by using the ratio of total dropped calls during the most congested hour of network traffic during the relevant time period to the traffic intensity in that congested hour. Using such industry standard for dropped calls, our monthly dropped call rate has further decreased to far below 1%.

Services and Platforms

We have an intelligent network and other service platforms enabling our services and we also provide secure and controlled access to the network for the content and service providers to give messaging and data services. This infrastructure is being improved to open up more capabilities of the network towards the application and content providers. New infrastructure also contains a portal where subscribers buy services, receive promotions and enroll for campaigns easily.

Business Continuity Management (“BCM”)

In 2000, Turkcell launched its Business Continuity Plan (“BCP”) that encompassed Technical Operations and sited Ankara Plaza as the Business Recovery Center. In 2004, the BCP was widened to cover all of Turkcell’s business functions and renamed BCM. Its implementation was completed in July 2005 and BCM was adopted as a full-time function.

In 2006, the BCM plan was tested with 20 different scenarios, including potential natural disasters, that covered various systems, mission critical processes and building evacuations. One test included a joint operation with the Governorship of Istanbul to test a major earthquake scenario.

In 2007, core network and service network equipment, and their management systems, were acquired for our Business Recovery Center in Ankara. The BCM plan was tested with 23 different scenarios, including mission critical processes and building evacuations.

In 2008, the BCM plan was tested with 17 different scenarios, including mission critical processes and building evacuations.

Looking at scenarios that may affect Turkcell’s operations, the purpose of BCM is to prevent or overcome these situations; to develop recovery and crisis scenarios; to make sure Business Continuity planning continues and all key function staff are trained; and to raise awareness and understanding of Business Continuity.

To this end, we established a Crisis Management Team, a Business Recovery Team and several Emergency Response Teams. The Crisis Management Team is made up of senior management who are charged with

managing the whole potential crisis. The Business Recovery Team and Emergency Response Teams are located at the Business Recovery Centers in Ankara and Istanbul as well as in several other locations throughout Turkey, including Izmir and Adana. If needed, these sites are ready to aid and assist various teams at 15 other sites. In the event that Turkcell’s operations are interrupted, in accordance with the area in which the crisis occurs, a chain alert call convenes the teams.

The project was finalized in the fourth quarter of 2007. Thus, we believe that the BCM will be able cover the majority of Turkcell’s operations through potential environmental events and natural disasters.

Sales and Marketing

We design our sales and marketing strategy around subscriber needs and expectations. We try to ensure the loyalty of our subscribers through providing offers, campaigns and our advanced Service Delivery Platforms.

Our nationwide distribution channels are an important asset that help to differentiate us from our competitors and help us achieve our sales targets. Our strong and extensive distribution network consists of dealers, Turkcell Extras, TIMs (Turkcell Communication Centers), Turkcell Distribution Centers (“TDC”) and Turkcell Stores as well as points of sale for counters (airtime), including ATMs, POS, web, call centers, supermarkets and consumer electronic chains and kiosks.

In Turkey, independent handset dealers serve as the primary point of mobile service sales. Subscribers generally must purchase a mobile phone from a dealer to commence services. We sell Simcards and starter packs to distributors, which are delivered to dealers and sales points. In addition, distributors purchase handsets directly from mobile phone importers and distribute them to dealers. Airtime scratch cards for Hazir Kart are sold through our exclusive and non-exclusive dealer networks, supermarket chains, gas stations, digital channels and other distribution points. Muhabbet Kart’s “Chat Card” branded scratch cards are sold through newspaper kiosks and dealers located throughout Turkey. Muhabbet Kart is only sold by A-Tel Pazarlama ve Servis Hizmetleri AS ( “A-Tel”), a 50-50 joint venture between SDIF and Turkcell.

16K, 32K, 64K and 128K (128K cards are only used for spare Simcards) Simcards are in circulation in the market; 64K Simcard starter packs are sold with inclusive 20-100 and 250 counters whereas 16K and 32K starter packs are no longer sold by the Company.

Turkcell Sales Efforts

We sell postpaid and prepaid services to subscribers through our distribution network, which is composed of distributors, Turkcell Distribution Centers, Turkcell Stores and exclusive and non-exclusive dealers. The number of exclusive and non-exclusive dealers totaled in excess of 17,000 sales points as of December 31, 2008. We also sell scratch cards and digital prepaid counters through consumer electronic chains, newspaper kiosks, supermarkets, gas stations, digital channels and ATMs.

Our Exclusive Retail Network consists of powerful retail dealers with good locations, modern designs and superior after-sales service. Turkcell Extra stores lead the market with user friendly atmosphere, new products and services and dedicated employees. In addition, the three flagship Turkcell Stores—fully operated by Turkcell—continue to enhance Turkcell’s brand image in the retail world by providing the best customer experience and introducing top of the line new products and services to our customers.

Our Non-Exclusive dealer network provides us with a high penetration of Turkcell products and services in Turkey. The newly restructured Turkcell Distribution Centers that began in the second quarter of 2008 is aimed at enhancing our distribution effectiveness in the nonexclusive channel. Turkcell Distribution Centers ensure the timely and efficient distribution of Turkcell products and merchandising materials and facilitates the Turkcell brand and offers awareness in this competitive channel.

In total, we have approximately 54,000 sales points for prepaid counters including digital channels, ATMs, POSs, kiosks, Call Centers, Internet, WAP, retail chains, SMS, Digital TV and USSD. In 2008, digital counter sales capabilities over web and POS machines were introduced to the traditional sales channel.

All dealers are paid compensation based on the number of new subscribers they sign up and the level of subscribers’ usage they sign up, as well as additional incentives based on their performance.

Sales Management develops strong relationships with and promote brand loyalty among dealers through a variety of support and incentive programs. Training programs aim to educate dealers about the technical aspects of our products and services, as well as sales techniques to increase sales and enhance customer relations. The “Champions Club” incentive program enhances dealer-employee loyalty and sales efforts. The technological development projects commenced in 2007, and coupled with merchandising services, POP materials and channel specific campaigns, help to support the sales efforts in all of our sales channels.

We address large enterprises through account managers and small and medium businesses (“SMBs”) with indirect sales channels through a corporate focused dealer organization and through Telesales operations serving small SMBs. The main focus is to provide large enterprises and SMBs with mobile services to meet their communication requirements and support these solutions with retention and acquisition programs and tariffs. We work closely with solution partners and application providers to integrate mobility into companies’ operations through tailor-made total solutions packages.

Advertising

We promote the quality and the reliability of our network, the variety and the convenience of our services, our attractive tariffs and campaigns for different consumer needs as well as additional benefits of being a Turkcell customer. Our vision is to ease and enrich the lives of our customers with leading communication and technology solutions.

Our Turkcell brand is supported by sub-brands that are designed to communicate separately to different segmented customers. gnctrkcll, communicates to our youth community and IsTcell advertises to professional and corporate customers. We contacted premium customers via Turkcell Gold and Platinum Programs. We ran a wide variety of price and tariff campaigns in order to manage high price perception. We sustain one-to-one basis communication with our customers via field activities such as the Turkcell RoadShow. We strengthen our communication with each customer group through customized direct marketing events. In order to ensure that each message reaches its targeted customer segment effectively, we advertise extensively through traditional and alternative media such as television, outdoors, cinema, radio, digital media, print and aim to communicate “360°” with our customers.

Customer Services

A key part of our strategy is to provide basic and premium services by working, thinking and acting in a customer-focused manner. Our goal is to develop and sustain a continuous relationship with the customer through tailored service and excellent value. Our customer’s needs and expectations are obtained through all the points where we touch the customer and are reflected in our marketing strategies.

In order to achieve this, we mainly work with two companies, Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri A.S. (“Global Bilgi”) and Hobim Bilgi Islem Hizmetleri A.S (“Hobim”). Global Bilgi offers 24 hours-a-day, 7 days-a-week contact center services at ten sites as of April 1, 2009. Turkcell’s customer service strategies for contact centers are provided by Global Bilgi and we make sure that customer services and customer satisfaction programs, which are also provided by Global Bilgi, are executed in line with Turkcell’s strategies. Hobim handles the printing of invoices and archives subscription documents for us. In order to provide segmented customer service, we design and make improvements for all of the customer processes throughout all channels for different customer segments as well as monitor the quality of service provided.

International Operations

A component of our strategy has been to grow or improve our business in international markets. International expansion and, in particular, continued strong operations in the countries in which we are currently present is, important for us. We believe these operations will provide additional value to us in the future and will continue to serve an important role in our goal to be a leader in communications and technology.

While continued improvement of our current operations is a key priority, we may further expand and increase our presence in key emerging markets in the region, such as C.I.S. region, Eastern Europe, the Middle East, North Africa and the Balkans. In accordance with this intent, we made investments in Ukraine in 2004 and in Belarus in 2008. We intend not only to transfer our technological know-how and marketing expertise, but also to maximize economies of scale and group synergy. As global competition increases in the telecommunications industry, companies need to evaluate opportunities for “intelligent expansion” within their geographic region to ensure development of new business lines and create synergies with existing ones.

Our international endeavors will continue in 2009. We will continue to work on building a fundamentally sound business in Ukraine and Belarus, and we will also continue to selectively seek and evaluate new international investment opportunities. These investment opportunities could include the purchase of licenses and/or acquisitions in markets outside Turkey where we currently do not operate, both in our main and adjacent communication and technology business areas.

Ukraine—Life:)

We acquired our interest in our subsidiary Limited Liability Company Astelit (“Astelit”) on April 2, 2004 by purchasing the entire share capital of Astelit’s parent, CJSC Digital Cellular Communications (“DCC”), from its shareholders. Astelit, 99% owned by DCC, held a nationwide GSM1800 license. On April 4, 2006, Astelit announced a merger of DCC and Astelit, which was completed on August 1, 2006. Our interest in Astelit is held through our wholly-owned subsidiary, Turktell Uluslararasi Yatirim Holding A.S. (“Turktell Uluslararasi”), which holds 55.0% of Euroasia, which is the 100% owner of Astelit.

Astelit began its operations in the Ukrainian market in February 2005 with its new brand “life:)”. As of December 31, 2008, Astelit reached 11.2 million subscribers, a 27% annual increase from 8.8 million subscribers as of December 31, 2007. The majority of subscribers are prepaid subscribers as of December 31, 2008.

The life:) brand reached 99% recognition in the market and is differentiated from the existing mobile brands as being young, innovative, fair and western in 2008. By the end of 2008, Astelit had 34,600 non-exclusive sales points throughout Ukraine, 484 life:) exclusive sales points and 30 customer service centers operating in 178 cities in the country. As of December 2008, Life:) provides roaming opportunities in 171 countries via 429 roaming partners.

As of December 31, 2008, Astelit operated in 99.77% of the cities of Ukraine with a population of more than 10,000 inhabitants and more than 28,180 settlements, and all principal inter-city highways and roads, which corresponds to coverage of approximately 93.8% of the whole population of Ukraine or 84.4% geographical coverage with more than 7,175 base stations. Cumulative capital expenditure for the development of Astelit’s coverage amounted to $1,009.3 million as of December 31, 2008. In 2009, Astelit will continue to invest more to increase its coverage level.

The contract signed with Huawei at the beginning of 2009 may allow Astelit to expand the coverage much faster. Astelit is currently building a highly innovative network in which all base stations will support EDGE.

When completed, this network will enable Astelit to introduce many innovative services and products. Astelit is strongly dedicated to further develop innovations in the market and to apply for a 3G license when one becomes available (no timetable has been announced). Currently, there is only one 3G license that has been granted in Ukraine. This license has been granted, without tender, to the state owned company, Ukrtelecom.

On December 30, 2005, Astelit signed a 6-year, $390 million long-term senior syndicated facility. Of the total facility, $270 million is guaranteed by Export Credit Agency (“ECA”) and $120 million is not guaranteed. Based on Astelit’s financial statements, for the periods ended March 2006, June 2006, September 2006, December 2006 and March 2007, Astelit was in breach of certain financial covenants. Astelit received the necessary waivers from the senior lenders related to the covenant breaches in part due to additional shareholder contributions to Astelit required by the lenders. On April 19, 2007, Astelit sent a letter accompanied by a term sheet to ING Bank, the Facility Agent.

With this term sheet Astelit proposed the restructuring of the senior syndicated facility and provided notice that if some or all of the finance parties did not consent to the proposed amendments, Turkcell would purchase the loans and commitments held by such non-consenting finance parties. As the majority of finance parties did not consent or respond to the amendments proposed in a new facility agreement, Turkcell’s management decided to take over the entire loan amount. Turkcell and Astelit restructured the syndicated facility through Financell (100% subsidiary of Turkcell) and finalized the amended loan agreement as of the second quarter 2007. On June 25, 2007, Astelit together with Financell (a financing company which is 100% subsidiary of Turkcell) and Turkcell finalized restructuring of syndicated long term financing of $390 million.

In connection with this restructuring, we guaranteed the principal amount, any accrued and unpaid interest on the principal amount of the loan and interest, payment of costs, expenses and any other sums payable in connection with the loan lent by Financell to Astelit. In addition to the senior syndicated facility, a long-term junior facility agreement up to $150 million (including interest accruals amounting to $24, million) was also finalized with Turkiye Garanti Bankasi AS Luxemburg Branch and Akbank TAS Malta Branch in December 2005. According to the conditions of the facility agreement, interest costs will be added to the principal amount until total principal amount will reach $150 million. This facility was fully utilized as of December 31, 2008. This junior facility is fully guaranteed by Turkcell.

In January 2005, we loaned $25.5 million to Euroasia through Turktell Uluslararasi, which was used to fund Astelit. By June 2, 2005, our effective interest in Euroasia had increased to 54.2% as the $25.5 million loan was converted to equity and we purchased certain holdings of other shareholders in Astelit. During October 2005, we further loaned $30.6 million to Euroasia through Turktell Uluslararasi. In January 2006, this loan was also converted to equity and our effective interest in Euroasia increased to 54.4%.

In April 2006, a decision was made to further increase the capital stock of Astelit by $40 million through further additional funding from Euroasia. Turktell Uluslararasi and SCM participated in this capital increase in proportion to their respective shareholding. Accordingly, in June 2006, Turktell Uluslararasi contributed $22 million, which increased our effective interest in Euroasia to 54.5%.

During June 2006, Turkcell, through its subsidiary Turktell Uluslararasi, and SCM decided to contribute on a prorata basis an additional aggregate amount of $150 million, in three installments of $50 million, into the capital stock of Euroasia. Turktell Uluslararasi contributed $82.6 million in proportion to its shareholding percentage. This contribution brought our effective interest in Euroasia to 54.8%. The three installments of $27.5 million were paid on July 2006, October 2006 and January 2007.

In March 2007, Turkcell, through its subsidiary Turktell Uluslararasi, and SCM decided to contribute on a prorata basis an additional aggregate amount of $200 million to the capital stock of Euroasia in four equal installments of $50 million during 2007. The four installments were paid in March 2007, May 2007, July 2007 and September 2007. This contribution brought our effective interest in Euroasia to 55.04%.

In 2008, Turkcell through its subsidiary Turktell Uluslararasi, and SCM contributed to the share capital of Euroasia an aggregate amount of $200 million in three tranches, with two tranches each of $50 million, in January and March 2008, and one tranche of $100 million in May 2008 in exchange for shares in the capital of Euroasia. Turktell Uluslararasi and SCM made the contributions proportionate to their shareholding in Astelit at the time of each capital contribution.

Since the acquisition of Astelit in the second quarter of 2004, operations in Ukraine have been consolidated in Turkcell’s financial statements.

Belarussian Telecom

On July 29, 2008, Beltel Telekomunikasyon Hizmetleri AS (“Beltel”) signed a share purchase agreement to acquire an 80% stake in Belarussian Telecom, which is specialized in providing services using GSM Technologies, for consideration of $500 million. On August 26, 2008, control of Belarussian Telecom was acquired from Belarus’ State Committee on Property and $300 million of the total consideration was paid. Two additional payments of $100 million will be paid on December 31, 2009 and December 31, 2010. An additional payment of $100 million will be made to the seller when Belarussian Telecom records full-year positive net income for the first time.

Fintur

We hold a 41.45% stake in Fintur, which currently holds our entire interest in our international mobile communications investments other than our Northern Cyprus, Ukraine and Belarus operations. Below is a description of the businesses currently held by Fintur.

Azercell

Fintur indirectly owns 51% of Azercell Telekom B.M. (“Azercell”), which offers GSM services on both a prepaid and a postpaid basis in Azerbaijan. As of December 31, 2008, Azercell had approximately 3.5 million subscribers, of which approximately 106,000 were postpaid and approximately 3.4 million were prepaid.

The agreement for the privatization of the Republic of Azerbaijan’s 35.7% ownership in Azercell was signed in February 2008 and Azertell A.S., the parent company of Azercell, acquired the Republic of Azerbaijan’s entire stake. Azertell’s ownership in Azercell increased to 100%; however, Fintur’s effective ownership in Azercell remained at 51%.

Geocell

As of December 31, 2008, Fintur indirectly owns 97.5% of Geocell Ltd., (“Geocell”), which operates a GSM network and offers mobile telephony services in Georgia. As of December 31, 2008, Geocell had approximately 1.6 million subscribers, of which approximately 23 thousand were postpaid, approximately 117 thousand were paid-in-advance subscribers that had postpaid services but paid in advance and approximately 1.4 million were prepaid. As of January 30, 2009, Fintur’s stake increased to 100%.

Kcell

Fintur owns 51% of GSM Kazakhstan, (“Kcell”), along with Kazakhtelekom, the Kazakhstan monopoly fixed-line operator, which owns 49%. Kcell offers mobile telephony services in Kazakhstan and had approximately 7.1 million subscribers as of December 31, 2008, of which approximately 61,000 were postpaid, approximately 1.4 million were paid-in-advance subscribers and approximately 5.7 million were prepaid.

Moldcell

At December 31, 2008, Fintur directly and indirectly owned 100% of Moldcell S.A., (“Moldcell”), which offers GSM services in Moldova. As of December 31, 2008, Moldcell had 0.6 million subscribers, of which approximately 41,000 were postpaid, approximately 160,000 were paid-in-advance subscribers and approximately 349,000 were prepaid.

Kibris Telekom

Kibris Mobile Telekomunikasyon Limited Sirketi, or Kuzey Kibris Turkcell (“Kibris Telekom”), a 100% owned subsidiary of Turkcell, was established in 1999. As of December 31, 2008, Kibris Telekom had 0.3 million subscribers.

On April 27, 2007, Kibris Telekom signed a license agreement for installation and operation of a digital, cellular and mobile telecommunication system with the Ministry of Communications and Works of the Turkish Republic of Northern Cyprus. The license agreement became effective on August 1, 2007 and replaced the existing GSM-Mobile Telephony System Agreement which was dated March 25, 1999 and based on revenue- sharing terms. The new license agreement granted GSM 900, GSM 1800 and IMT 2000/UMTS license, for GSM 900 and GSM 1800 frequencies, while the usage of IMT 2000/UMTS frequency bands is subject to the fulfillment of certain conditions. The license agreement is valid for 18 years from the date of signing.

The license fee was set at $30 million including VAT and Kibris Telekom paid $15 million upon the signing of the license agreement and the remainder was paid in 5 equal monthly installments starting from August 2007 until January 2008. The license fee was financed by Kibris Telekom through internal and external funds.

On March 14, 2008, Kibris Telekom was awarded a 3G infrastructure license at a cost of $10 million, which was paid at the end of March 2008. Total capital expenditures for the 3G license was $15 million as at December 31, 2008.

Financell

Financell was incorporated under the laws of the Netherlands in February 2007 and has its registered address in the Netherlands. It is established as an intermediate financing company that is wholly owned by Turkcell. Financell will borrow funds from third party lenders with or without Turkcell guarantee to fund other Turkcell’s subsidiaries.

Other Domestic Operations

We continuously monitor new business opportunities which we believe have positive return potential and/or are critical for sustaining our competitive advantage in our core business.

Global Bilgi

On October 1, 1999, we established Global Bilgi in order to provide telemarketing, telesales, directory assistance and call center services especially for us. In 2005, Global Bilgi completed its transition from call center to contact center as Global Bilgi started to manage customer contacts at every channel except face-to-face interaction. In November 2006, the face-to-face interaction channel was also transferred to Global Bilgi. As of December 31, 2008, Global Bilgi employed 4,635 employees, of which around 74% provide us with customer care and retention services, around 16% serve customers of other clients while the remainder work as administrative personnel. We own 100% of Global Bilgi as of December 31, 2008.

Inteltek

Inteltek was established on April 6, 2001 to explore business opportunities in the gaming industry.

Currently, Turkcell holds 55% of Inteltek through its wholly owned subsidiary Turktell Bilisim Servisleri A.S. (“Turktell”), Intralot, a Greek gaming company, holds 20% and Intralot Iberia Holding, a Spanish company, holds 25%.

Following a successful tender, Inteltek signed a contract on July 30, 2002 which provides for the installation, support and operation of an on-line central betting system as well as maintenance and support for the provision of football betting games with a commission rate of 4.3%. The Central Betting System Contract was scheduled to expire on March 30, 2008. Following a further successful tender, Inteltek signed a contract with the General Directorate of Youth and Sports on October 2, 2003, which authorized Inteltek to establish and operate a risk management center and become head agent for fixed odds betting with a commission rate of 12%. The company became fully operational during 2004. The Fixed Odds Betting contract was scheduled to expire in October 2011. Subsequently, there were three lawsuits filed, two of them were initiated requesting the annulment of the Fixed Odds Betting tender and the other one was initiated requesting an annulment of the Fixed Odds Betting Tender contract. In January 2007, the Danistay, the highest administrative court, decided for a preliminary injunction of the tender and the tender transaction. As a result in March 2007, the General Directorate of Youth and Sports ceased the implementation of Fixed Odds Betting and terminated the Fixed Odds Betting contract dated October 2, 2003. Immediately after this occurred, a lawsuit was initiated by Inteltek against the said transaction. On February 28, 2007, the Turkish parliament passed a law (No. 5583) that allowed Spor Toto Teskilati A.S. (“Spor Toto”) to hold a new tender and sign a new contract that would be valid until March 1, 2008. Under the new conditions, the commission rate of Inteltek decreased from 12% to 7% while the commission rate for central betting system was maintained. In addition, Inteltek initiated a lawsuit against the General Directorate of Youth and Sports on the ground that the said termination was unjustified. For further information, see “Item 8.A. Consolidated Statements and Other Financial Information—Legal Proceedings.”

On February 27, 2008, the Turkish parliament passed a new law (No. 5738) that allowed Spor Toto to sign a new Fixed Odds Betting contract with Inteltek, having the same terms and conditions with the “latest contracts signed with Spor Toto” (contract signed as per Provisional Article 1 of Law 5583) and to be valid for up to one year, until operations start under the new tender which Spor Toto is allowed to hold in accordance with the same law. As per Provisional Article 1 of law No. 5738, Inteltek signed a new Fixed Odds Betting contract with Spor Toto, which took effect on March 1, 2008. A lawsuit was filed requesting suspension of the execution and cancellation of the contract. At the same time, Inteltek signed a new Central Betting System contract with Spor Toto, which took effect on March 31, 2008. Spor Toto conducted the new tender on August 12, 2008, which Inteltek won with an offer of 1.4% on August 28, 2008. On August 29, 2008, Inteltek signed a new contract with Spor Toto to run the sport betting business, Iddaa, for the next 10 years, which became effective as of March 1, 2009 and thereby terminated the Fixed Odds Betting and Central Betting Systems contracts that had been effective in March 2008. Other than the change in commission rate and the right to offer bets on other sports, there is no significant change in terms of Inteltek’s roles and responsibilities under the new agreement.

Superonline

On May 21, 2008, Turktell signed an agreement with Cukurova Group to acquire 100% of Superonline, which is specialized in providing internet and telecommunications services and to sell its 55% share in Bilyoner Interaktif Hizmetler AS (“Bilyoner”). On September 23, 2008, control over Superonline was acquired from Cukurova Group through the transfer of 55% of the shares of Bilyoner. Superonline provides Broadband Internet, Fixed Telephony Voice services and value-added-services that strengthen the company’s awareness and improves the sales of core services such as internet, voice and data. We expect that Superonline will, in the coming months, merge with Tellcom.

Tellcom

Tellcom was established on June 9, 2004 under the name Bilisim Telekomunikasyon Hizmetleri A.S. (“Bilisim”) to provide telecommunication services other than GSM. In February 2006, the company’s name was changed from Bilisim first to Tellcom Telekomunikasyon Hizmetleri A.S. and subsequently to Tellcom. After its incorporation, Tellcom obtained a Long Distance Telephony Services (“LDTS”) right, which allows the company to provide long distance call origination and termination for consumers and corporations, as well as wholesale voice carrying services. Currently, the company carries some of Turkcell’s international traffic, previously

carried by Turk Telekom. Tellcom has also been awarded an ISP license. In March 2006 and April 2007, Tellcom was awarded a 25-year license that allows the company to roll out and operate a transmission infrastructure nationwide. We own 100% of this company.

On November 22, 2006, Tellcom participated in a tender for a ten-year license to operate a fiber-optic cable between Istanbul and Ankara. On January 25, 2007, Tellcom was awarded the license after submitting a winning bid of EUR 21.4 million (approximately $28.4 million as of April 1, 2009). This fiber-optic cable allows for direct competition between Turk Telekom and Tellcom. Tellcom continues to consider participating in additional infrastructure tenders to complement its roll-out plans.

By 2007, Tellcom had become one of the main long distance service providers among alternative operators and the first alternative operator to carry domestic traffic in Turkey. Tellcom also entered the retail broadband market by bringing fiber optics to the homes of residential campuses as well as reselling Turk Telekom’s ADSL services.

Established as an alternate telecom service operator, Tellcom offers its international and national clients wholesale voice carrying, international lease data lines (for corporate clients) and Internet access service with international connectivity.

In 2008, Tellcom continued to invest in its transmission network by expanding its intercity and in-city fiber-optic backbone and by establishing new fiber-based access points at selected residential and industrial areas for end-users and commercial account prospects.

Tellcom will continue to invest in its transmission network in 2009. We expect that Tellcom will, in the coming months, merge with Superonline.

A-Tel

On August 9, 2006, Turkcell acquired 50% of A-Tel’s shares. A-Tel is a joint venture and its remaining 50% shares are held by Turkey’s Savings and Deposit Insurance Fund. A-Tel is involved in marketing, selling and distributing our prepaid systems. It acts as our only dealer for Muhabbet Kart (a prepaid card), and receives dealer activation fees and Simcard subsidies for the sale of Muhabbet Kart. In addition to the sales of Simcards and scratch cards through an extensive network of newspaper kiosks located throughout Turkey, we have entered into several agreements with A-Tel for the sale of campaigns and for subscriber activations. Since 1999, the business cooperation between us and A-Tel has provided important support to our sales and marketing activities. With the brand name Muhabbet Kart, A-Tel’s success in such a competitive environment is partly due to its having well structured campaigns.

TurkKule

TurkKule is a wholly owned subsidiary founded in 2006. TurkKule commenced its operations in 2007 and became the first and only tower service provider to the wireless broadcast and communications industry in Turkey. Its scope of activities includes the construction and purchase of new towers, the maintenance and renewal of existing ones, security services and other related activities.

Turkcell Teknoloji

Turkcell Teknoloji Arasstirma ve Gelisstirme A.S. (“Turkcell Teknoloji”) commenced operations in the TUBITAK Marmara Research Center Technological Free Zone in Gebze in 2007. Turkcell Teknoloji offers a wide variety of products and services within the categories of network platform, service platform, SIM and terminal solutions, as well as next generation technologies. Turkcell Teknoloji looks forward to transforming new ideas into value added products with the cooperation of other entities in its ecosystem, such as R&D companies, universities and research centers.

Potential Investments

Our efforts to selectively seek and evaluate new investment opportunities continue. These opportunities may include the purchase of licenses and acquisitions of interests in other operators in markets outside Turkey in which we currently do not operate, focusing on communications, technology and adjacent and new business opportunities. As part of our evaluation of investment opportunities, on April 15, 2009 we submitted a bid for the tender of a 10 year concession to operate the “games of chance business” which belongs to the Turkish National Lottery General Directorate. If successful, this tender is likely to require us to make a significant U.S. dollar acquisition and will take us into a new line of business.

Regulation of the Turkish Telecommunications Industry

Overview

All telecommunications activity in Turkey is regulated by the ICTA (formerly named the Telecommunications Authority). Electronic Communications Law no. 5809 (the “Electronic Communications Law”), which came into force on November 10, 2008 and replaced Law no. 406 and 2813, is the principal law governing telecommunications activity in Turkey. Since the electronic communications industry changes rapidly and the former telecommunications law had been amended several times, the Electronic Communications Law was published to correspond to the needs of the Turkish telecommunications industry. The authorization provisions regulated thereunder will be valid and effective after 6 months following the coming into force of the Law. Within such 6 months, provisions regulating the authorization, which were in force before the law was published and are not contrary to the provisions of the Law, shall be valid and binding.

The Information and Communications Technologies Authority (the “ICTA”)

The ICTA has the authority to grant licenses and set fees in the electronic telecommunications industry. The duties of the ICTA are specified in Article 6 of the Electronic Communications Law. The duties and authorizations of the ICTA include, among others:

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to analyze the electronic telecommunications industry, determining the relevant markets as well as the operator(s) who have the significant market power;

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to make necessary arrangements and perform audits relating to electronic communications as well as to the rights of the subscribers, users, consumers and end-users, in addition to processing personal information and protecting confidentiality;

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to maintain transparency in the board decision process related to the operators and consumers, including explanation of the legal reasoning used;

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to process the reconciliation procedure between the operators and, unless otherwise agreed by the parties, to take the necessary measures in the event of failure of the parties to supply the conciliation;

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to allocate frequency and satellite position, as well as to plan numbering and its allocation;

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to determine operators’ trade secrets and the scope of the information to be explained to the public, while also securing such trade secrets, in addition to confidential investment information and working plans, to protect operators, per the request of judicial authorities;

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to determine the principles and procedures of access including interconnection and national roaming;

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to determine the terms and conditions of the authorization to be made related to the electronic communications services to be conducted, network and/or its infrastructure; to audit its implementation and compatibility to the authorization;

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to audit (or be audited on) the legality of the companies that have operations in the electronic communications sector, in addition to determining the principles and procedures related thereto and applying sanctions where there is a contradiction, and

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to impose an administrative fine on operators for a maximum of 3% of the previous calendar year’s net sales in case of infringement of the legislation.

According to Article 8 of the Electronic Communications Law, electronic communications services are rendered and/or established (as in the case of an electronic communications network or infrastructure) and operated following the authorization made by the ICTA. Authorization is granted either through notification made in accordance with the principles and procedures determined by the ICTA, in cases where resource allocation is not necessary, or given of usage right, in cases where resource allocation is necessary (allocation of frequency, satellite position, etc.). Under the Electronic Communications Law, usage rights may be granted for up to 25 years; however, there is no clause relating to the term of notification. According to the Electronic Communications Law, principles and procedures relating to the notification and granting of usage rights shall be determined by the regulation issued by the ICTA. In addition, the authorization provisions under the Law will be valid and effective after 6 months following the coming into force of the Law. Within the said 6 months, provisions regulating the authorization, which were in force before the publishing of the mentioned Law and not contrary to the provisions of the Law, shall be valid and binding.

The Electronic Communications Law also specifies general rules and principles relating to tariffs. Pursuant to the Electronic Communications Law, operators may determine the tariffs to be applied by themselves freely in compliance with the relevant legislation and the ICTA arrangements. In the event of determination of the significant market power of the operator, the ICTA may determine the method of the approval, tracking and auditing of the tariffs. They may also determine the lower and upper limit of the tariffs and principles and procedures of the application of the same.

Under the Electronic Communications Law, the ICTA is authorized to determine the principles and procedures related to the process of personal information and protection of confidentiality.

According to the Electronic Communications Law, all provisions of the said Law, excluding the authorization provisions as we explained above, and provisions of the regulation and communiqués, which are not in conflict with the said Law, shall be valid and effective as of the publication date of the mentioned Law, which is November 10, 2008.

The Electronic Communications Law establishes legal principles and broad policy lines that the ICTA must follow. They include:

Creation and protection of a free and efficient competitive environment.

Protection of consumer rights and interests.

Protection of the objectives of development plans and Government programs as well as the strategies and policies set by the Ministry.

Promotion of implementations that ensure that everyone can benefit from electronic communications networks and services in return for a reasonable charge,

Ensuring non-discrimination among subscribers, users and operators under fair conditions and ensuring that services are accessed by users of similar status under fair conditions, unless based on objective grounds or for the aim of facilitating the access of services with definite cover and certain limits specific for dependents.

Unless to the contrary as specified by this Law or based on objective grounds, promotion of qualitative and quantitative sustainability, regularity, reliability, efficiency, clarity, transparency and the efficient use of resources.

Ensuring the conformity of electronic communications systems to international norms.

Promotion of research and development activities and investments by introducing technological improvements.

Promotion of improved service quality.

Giving priority to the requirements of national security, public order and emergency situations.

Except as clearly established in this Law, in relevant legislation and the authorizations, allowing operators to freely determine tariffs in return for providing electronic communications services access charges including interconnection line and circuit rental fees including interconnections.

Taking into consideration the international norms, with a view of at least protecting human health, life and property, environment and the consumer while constructing, using and operating electronic communications equipment and systems.

Ensuring impartiality in the provision of electronic communications services and arrangements thereof.

Taking into consideration the specific needs, including the use of technological developments of disabled, elderly and those who are in need of social protection.

Protection of information safety and communication confidentiality.

The Electronic Communications Law also specifies general rules and principles relating to interconnection between operators. According to the law, for those who are subject to the obligation to provide access, such obligation shall be determined by the ICTA. When an operator does not allow other operators to have access within the provisions of the law or it sets forth unreasonable stipulations and periods for access in a manner that results in not allowing access, and, as a result, the ICTA decides that such behavior will prevent the formation of a competitive environment and the resulting situation will be against the interests of end users, the ICTA will be entitled to impose obligations on such operator to accept the access requests of other operators. Interconnection, including the tariffs for interconnection, is required to be provided on an equal, transparent and non-discriminatory basis with conditions agreed upon between the parties and on the basis of cost and reasonable profit. Agreements for interconnection are publicly available, but precautions are taken by the ICTA to protect commercial secrets of the parties.

Universal Services and Amending Some Laws, Law No. 5369, determines the procedures and principles governing the provision and execution of universal service and to determine procedures and the rules relating to fulfillment of universal services in the electronic communication sector, a universal public service that is financially difficult for operators to provide (and performance of universal service obligation in electronic communication sector). As per the provision of Law No. 5369, the scope of universal services is determined periodically by the Council of Ministers, which will not exceed three years.

The legislation designates the following as Universal Services:

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fixed-line telephony services;

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public pay telephones;

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telephone directory services to be provided in printed or electronic environments;

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emergency calls services;

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Internet services;

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Passenger services to residential areas where access is provided by sea; and

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Sea communication and sailing safety communication services.

This law mandates that all authorized operators must provide Universal Services and the General Directorate of Communication can demand that operators provide Universal Services on a national and/or geographical area basis.

The legislation does not impose any new financial obligations for GSM operators. However, under the legislation a fund to finance the net cost of Universal Services will be established and the Turkish Ministry and Ministry of Finance will determine how fund contributions will be shared between the operators.

Turkcell may be designated as an operator obliged to provide Universal Services and therefore Turkcell may benefit from the fund.

The ICTA issued a Service Quality Directive on November 10, 2005. The Directive has set out procedures and principles to control the conformity of the services of operators.

According to the directive, mobile telephone operators are obligated to meet service quality requirements and submit a report based on these requirements every three months to the ICTA.

On March 8, 2002, the ICTA published a Regulation on Principles and Procedures of National Roaming Agreements. Mobile telecommunications and data operators or operators of other services and infrastructure are entitled to enter into national roaming agreements, general authorizations, telecommunications licenses and the regulations issued by the ICTA. However, such operators are obliged to satisfy reasonable, economically proportionate and technically possible national roaming requests of other operators. Should an operator fail to fulfill its national roaming obligations or should it unjustifiably interrupt such service, the ICTA can impose a fine of a maximum of 3% of the operator’s turnover for the preceding year.

The Regulation establishes the following principles governing national roaming agreements:

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the promotion of practices enabling access to telecommunications services at affordable prices;

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non-discrimination among subscribers, users and operators;

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the establishment and maintenance of competition between telecommunication providers and operators of infrastructure;

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the compatibility of telecommunications systems in accordance with international norms, and maintenance of the integrity of the public telecommunications network; and

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the establishment of a transparent, clear and non-discriminatory balance among the legitimate interests of the parties.

The Electronic Communications Law provides basic guidelines for price and thus leaves the detailed rules and enforcement to the ICTA. According to the law:

(1) the Tariff may be determined as one or more of subscription fee, fixed fee, call charge, line rental, and similar fee items.

(2) Tariffs to be imposed in return for providing any kind of electronic communications services shall be subject to the following provisions:

a) Operators shall freely determine the tariffs under their possession, provided that they comply with the regulations of the ICTA and the relevant legislation.

b) If an operator is designated as having significant market power in the relevant market, the ICTA shall be entitled to determine the procedures regarding the approval, monitoring and supervision of tariffs as well as the highest and lowest limits of the tariffs and the procedures and principles for the implementation thereof.

c) If an operator is designated as having significant market power in the relevant market, the ICTA shall be entitled to make the necessary arrangements to prevent anti-competitive tariffs such as price squeezing and predatory pricing and to supervise the implementation thereof.

(3) Procedures and principles pertaining to the implementation of this article, submission of tariffs to the ICTA and publishing and announcing them to public shall be determined by the ICTA.

The ICTA passed the “Tariff Regulation” on August 28, 2001, which sets out the principles and procedures to be applied for the approval and the audit of the tariff to be applied to the telecommunications services if it is determined that a business enterprise: (i) is a legal or a de facto monopoly; (ii) is in a dominant position in the relevant service or geographic market; or (iii) has significant market power. In case it is determined by the ICTA that the business activities are within the scope of such Regulation, the tariffs should be submitted to the ICTA for approval. In determining which operators possess dominant position, the ICTA will take into consideration the following criteria: market share, vertical integrity, the power to influence market conditions, entrance to relevant market, difficulty to control and replace the network, technologic superiority, lack of competition in the relevant market, the quantity of unused capacity and the power to access financial resources. On June 9, 2004, the ICTA designated Turkcell an “operator holding dominant position” in the GSM Mobile Telecommunications Services Market. However, according to the license agreement Turkcell can determine its tariff freely provided that being within the framework of maximum price limit. Therefore, the above mentioned provisions have not been applied to our Company.

The ICTA published a regulation on processing personal information and protecting confidentiality in the telecommunications industry on February 6, 2004. This Regulation establishes general principles to secure personal information and protect confidentiality. The Regulation established the following principles: an operator’s technical or administrative precautions to secure its services and its network must be approved by the ICTA; operators must warn their consumers about risks and give them information to prevent such risks; except pursuant to a legal obligation or court decision, an operator may not listen to, observe, record, preserve or disconnect voice telecommunications without the permission of those communicating; and operators may not observe, record or preserve data traffic concerning telecommunications except for their services.

The ICTA published a regulation concerning “Co-Location and Facility Sharing” on December 31, 2003. According to the Regulation, operators holding significant market power and Turk Telekom will be Co-Location incumbents and operators having the right to establish their facilities upon or under the public’s or third party’s land or having the rights to compulsory such lands, will be of Facility Sharing incumbents.

General Principles of Application of the regulation concerning “Co-Location and Facility Sharing”: Co-Layout and Facility Sharing prices will be determined on cost basis. Any land, facility and the facilities under the usage of Co-Location responsible is in the scope of Co-Location and Facility Sharing to increase competition, to use restricted sources efficiently and to support public good. The costs should be certificated by the Co-Location responsible. Efficient competition should be incited between the operators. To not corrupt parties operational and investment plans, an efficient communication between parties shall be provided.

On September 5, 2004, the ICTA abolished the Regulation on Administrative Fines to be imposed on the Operators (published on August 1, 2002) and published the Regulation on Administrative Fines, Sanctions and Precautions to be imposed on the Operators. According to the amended Regulation the ICTA retains the right to impose fines in the event an operator: submits incorrect or misleading documents or fails to submit documents as requested by the ICTA; does not timely submit such documents; does not permit inspection or audits to be made by the ICTA; uses unpermitted equipment or equipment not complying with standards alters technical features of equipment; or, does not pay fees arising from its use of license and frequencies or does not comply with the provisions of license agreements, telecommunications licenses and general authorizations or the legislation. In addition, the amended Regulation authorizes the ICTA to impose sanctions and precautions as well as administrative fines.

On April 13, 2004, the ICTA amended the Regulation on the authorization of Long Distance Call Services. Such authorization includes the provision of inter province and/or national call services over all types of operators’ telecommunications networks and infrastructure. By March 31, 2006, the resulting amendment had allowed 45 new operators to obtain licenses to provide long distance call services. As of April 2009, the number of operators holding such licenses had decreased to 31.

In July 2006, the ICTA published an annex to the Authorization Regulation specifying provision relating to the Authorization of Directory Services Operators.

In accordance with the Authorization Regulation, the ICTA will now grant licenses allowing operators to provide Directory Services. Under the terms of the license, Directory Service Operators must provide their services without infringing the provisions of the relevant law or regulation related to the protection of confidentiality by accessing to the database on the subscriber’s information’s of the other authorized Telecom operators (including GSM operators and Turk Telekom). Before a Directory Service Operator can provide authorized services they must sign interconnection agreements with the authorized operators.

The ICTA published a Regulation entitled “The Right of Way in Execution of the Telecommunication Services” on May 2, 2006. This Regulation, which established general principles for the right of way for the establishment and usage of infrastructure facilities, is required for the execution of telecommunication services.

On April 17, 2007, the ICTA issued a telecommunication certificate entitled “Fixed Telecommunications Services”. Operators will be able to apply for such telecommunication certificate once the ICTA determines the license fee. License holders will be allowed to provide various data and telephony services (including local calls) and internet access services. Related to such authorization, in November 2008, the ICTA amended the Regulation on the authorization of Fixed Telecommunications Services, which states the type of authorization, liabilities and obligations of the operators that obtain the fixed telecommunications services certificate.

Authorization of MNP

Pursuant to Article 32 of the Electronic Communications Law, operators are required to supply operator number portability.

On February 1, 2007, the ICTA issued regulations on MNP. MNP allows subscribers to keep their existing telephone number when changing telephone operator, their physical location or their current service plan. These regulations have become operational in the fourth quarter of 2008 based on a public statement of the ICTA. Since we believe the MNP regulations conflict with our rights under our license agreement, without due compensation, we initiated a lawsuit on March 29, 2007 for the annulment of the MNP regulations. While we do not protest the substance of mobile number portability, we do, however, believe that our rights under our license agreement should remain protected or, if they are violated, we should be justly compensated. This lawsuit is still pending as our request for a stay of these regulations was rejected, and we appealed that decision; however, we did not prevail. See “Item 8.A Consolidated Statements and Other Financial Information—Legal Proceedings.”

Turkish Competition Law and the Competition Authority

In March 1997, the Competition Law (Law No. 4054) established a Competition Board. The Competition Board consists of 7 members who are appointed for a term of six years. It is an autonomous authority with administrative and financial independence established to ensure effective competition in markets for goods and services.

Powers and Functions of the Competition Board

The Competition Board can carry out investigations, evaluate requests for exemptions, monitor the market, assess mergers and acquisitions, submit views to the Ministry of Industry and Trade and perform other tasks stipulated by the Competition Law. The ICTA can apply to the Competition Board if it determines that agreements regarding access, network interconnection and roaming violate the Competition Law.

Furthermore, any real or legal entity may file a complaint with the Competition Board. Upon determination of any violation, the Competition Board can take necessary measures to prevent the violation and may impose

fines on those who are liable for such prohibited practices. According to Competition Law, the Competition Board may impose fines up to 10% of the annual gross income of the operators, which is constituted by the end of the previous financial year and determined by the Competition Board. In September 2002, the ICTA and the Competition Board entered into a Protocol on Cooperation. The Protocol establishes a framework whereby the ICTA and the Competition Board can cooperate on legal actions and attitudes regarding measures, detections, regulations and inspections that affect competition conditions and the extension of competition in the telecommunications sector. The Protocol on Cooperation allows issues to be resolved more effectively and maintains a free and sound competition environment in the telecommunications sector. Furthermore, it prevents controversial and/or misleading statements by handling the complaints of the operators, and it harmonizes the interpretation of related legislation thus enabling mutual cooperation and information transfer.

GSM Licensing in Turkey

We signed a renewed license agreement for our GSM license on February 13, 2002. The major provisions of the renewed agreement are identical to those in the license agreement we had signed with the Turkish Ministry in 1998. However, the renewed agreement provides that a monthly payment of 15% over our gross sales paid to the Turkish Treasury shall be subject to the legal interest rate. Also, if such payments are not duly paid twice in any given year, a penalty in an amount equal to triple the last monthly payment shall be payable to the Turkish Treasury. We are also obliged to pay annual contributions to ICTA’s expenses in an amount equal to 0.35% of our gross sales. Finally, an article concerning the protection of users’ (“subscribers”) rights and an article concerning arbitration for the settlement of disputes are included in the renewed license agreement.

GSM license is subject to the ICTA’s right to suspend or terminate operations of the license on the grounds of security, public benefit, national defense or to comply with the law. However, suspension or takeover of facilities under these circumstances is subject to the payment of compensation to the operator. The ICTA can also inspect such licensee and nullify its license if the licensee has materially failed to comply with the terms of its license. The ICTA may also terminate licenses in cases of gross negligence or non-payment of the authorization fee.

The terms of license agreements are governed by the Authorization Regulation, and it provides that the ICTA can supervise licensed operators of value added services, approve the transfer of licenses to third parties, ensure continuation of services in the event of cancellation of a license and approve the investment plans submitted by licensees.

Under the Authorization Regulation, the licensee is responsible for installing telecommunications equipment in conformance with international signalization systems and numbering plans. Furthermore, the licensee is obligated to make those investments which are necessary to offer the licensed service. These obligations include the design of the service, the making of financial investments and the installation and operation of the facility required for the service. Licensees are allowed to determine the prices for services, subject to the regulations of the ICTA. Upon the expiry of a license, including termination, the facilities and immovables of the licensee will be transferred by the licensee in accordance with the license agreement.

The License Agreement

General

From 1993 until April 27, 1998, we were subject to a revenue-sharing agreement with Turk Telekom. Under our revenue sharing agreement with Turk Telekom (successor of PTT), Turk Telekom allocated frequency bands necessary for the operation of a GSM network, executed subscriber contracts, performed subscriber billing and fee collection and allowed us access to Turk Telekom’s existing communications networks. In addition, Turk Telekom allowed us to construct base station control stations at Turk Telekom’s facilities and leased transmission connections between base stations, mobile telephone exchanges and control stations to us.

In exchange, we provided mobile telephone services within Turkey through a multi-phase build-out of a GSM system. The first phase of the build-out covered Istanbul, Ankara and other large population centers along with airports and airport roads. The second and third phases provided for the build-out of the GSM network to less densely populated areas. In addition, through our contractual relationships with service providers, we provided the necessary equipment and expertise for the operation of the GSM network. We received 100% of the fees generated by Simcard sales, 32.9% of the fees billed for connection, monthly fixed fees and outgoing calls and 10% of the fees billed for incoming calls, an arrangement that resulted in payment to us of approximately 25% to 30% of the net system revenue generated by subscribers of our GSM network. We currently operate under a 25-year GSM license which we were granted in April 1998 upon payment of an upfront license fee of $500 million. Initially, we signed the license agreement with the Turkish Ministry and as per the requirements under the Amending Law, we have renewed the agreement to which the ICTA is the party. The new agreement has introduced two extra articles. The first one involves an administrative fee, amounting to 0.35% of the previous year’s gross revenue less tax, treasury share, and VAT, payable to the ICTA until the last working day of April in the following year. The other article underlines consumer rights of subscribers during their subscription to the network.

The Law, numbered 5398 and dated July 3, 2005, changed the definition of the calculation basis of Treasury share and Contribution to the Expenses of the ICTA to “gross sales”. Article 16 of Law No. 5398 provides that the license agreements shall be adapted to this change upon the request of the operators. Accordingly, Turkcell applied to the ICTA on June 25, 2005. On March 10, 2006, the adapted license agreement was signed between Turkcell and the ICTA. After the tender, which relates to the allocation of GSM 900 additional frequency band, made by the ICTA on June 20, 2008, the license agreement was amended to include the additional frequency band and was signed by Turkcell and the ICTA on February 25, 2009, which made small additional changes in the articles of the license agreement entitled performance bond and allocated frequency bands.

Terms

Under the license agreement, we hold a licensed concession to provide telecommunications services in accordance with GSM-PAN European Mobile Telephone System standards in the 900 MHz frequency band. Our license covers 55 channels and allocates telephone numbers between the 530 and 539 area codes in the national numbering plan. Our license also permits us to establish customer service centers, sign contracts with subscribers and market our services to subscribers. Our license was issued with an effective date of April 27, 1998, for an initial term of 25 years. At the end of the initial term, we must renew our license subject to the approval of ICTA. We shall apply to the ICTA between 24 months and 6 months before the end of our license. Our license is not exclusive and is not transferable without approval of ICTA.

We paid a license fee of $500 million to the Turkish Treasury upon effectiveness of our license. As security for the performance of our obligations, we were required to deliver cash or a bank guarantee equal to 1% of our license fee as a performance bond. In addition to this performance bond, upon the execution of the license agreement dated February 25, 2009, we were also required to deliver cash or a bank guarantee in the amount of TRY 1,264,500 (approximately $758,003 as of April 1, 2009) which corresponds to 6% of the tender (relating to the allocation of GSM 900 additional frequency band) price, as a performance bond. On an ongoing basis, we must pay 15% of our gross sales, defined as of March 2006 to exclude interest charges for late collections from subscribers and indirect taxes such as 18% VAT as well as other expenses and the accrued amounts that are recorded for reporting purposes to the Turkish Treasury.

On June 25, 2005, the Turkish Government declared that GSM operators are required to pay 10% of their existing monthly ongoing license fee to the Turkish Ministry as a universal service fund contribution in accordance with Law No. 5369. As a result, starting from June 30, 2005, we pay 90% of the ongoing license fee to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund.

Furthermore, under the Regulation on Authorization Regarding Telecommunications Services and Infrastructures, all kinds of share transfers must be communicated to the ICTA, whereas result in the change of

“control component” of the company under the said regulation the “control component” is defined as “the rights that allow for applying a decisive effect on an enterprise, either separately or jointly, de facto or legally”.

License Conditions

Our license subjects us to a number of conditions. While the license agreement provides that our license may be revoked in the event that we fail to meet any of these conditions, we believe that we are currently in compliance with all license conditions.

Coverage

Our license requires that we meet coverage and technical criteria. We must attain geographical coverage of 50% of the population of Turkey (living in cities or towns of 10,000 or more inhabitants) within three years of our license’s effective date and at least 90% of the population of Turkey (living in cities or towns of 10,000 or more inhabitants) within five years of the effective date of our license. This coverage requirement excludes coverage met through national roaming and installation sharing arrangements with other GSM systems and operators. Upon the request of ICTA, we may also be required, throughout the term of our license, to cover at most two additional areas each year. Except in the event of force majeure, we must pay a late performance penalty of 0.2% of the investment in the related coverage area per day for any delay of more than six months in fulfilling a coverage area obligation. As of today, we have met and surpassed all coverage obligations.

Service Offerings

Our license requires that we provide services that, in addition to general GSM phone services, include free emergency calls and technical assistance for customers, free call forwarding to police and other public emergency services, receiver optional short messages, video text access, fax capability, calling and connected number identification and restrictions, call forwarding, call waiting, call hold, multi-party and three-party conference calls, billing information, and the barring of a range of outgoing and incoming calls.

Service Quality

Generally, we must meet all the technical standards of the GSM Association as determined and updated by the European Telecommunications Standards Institute and Secretariat of the GSM Association. Service quality requirements require that call blockage not exceed 5% and call drops not exceed 2 dropped calls per erlang, which is the industry standard measuring the ratio of total dropped calls during the most congested hour of network traffic during the relevant time period to the traffic intensity for that congested hour. The ICTA has the right to monitor our service standards, compile information, and take action to guarantee customer rights. Additionally, as a guarantee of our service and coverage commitments, we must obtain all-risk insurance coverage at an adequate amount to provide for uninterrupted operation.

Tariffs

The license agreement regulates our ability to determine our tariff for GSM services. The license agreement provides that, after consultation with us and consideration of tariffs applied abroad for similar services, the ICTA sets the initial maximum tariffs in Turkish Lira and U.S. Dollars. Thereafter, our license provides that the maximum tariffs shall be adjusted at least every six months. The license agreement provides a formula for adjusting the existing maximum tariffs based on, in the case of maximum tariffs established in Turkish Lira, the Turkish Consumer Price Index announced by the Ministry of Industry and Trade of Turkey. The increase applied is 97% of the increase in the index. In the case of maximum tariffs established in U.S. Dollars, the increase is based on the U.S. Consumer Price All Item Index minus 3%. Although action is required for an adjustment of maximum tariffs, our license agreement provides that we are free to establish rates for services up to the then existing maximum tariff (subject only to a seven-day prior notification to ICTA).

The maximum rates constitute the highest rates we may charge for the services included in these customized service packages. Generally, the maximum rates for particular services are set higher than the standard tariffs for those services. Therefore, in customizing our service packages to meet the needs of different customer segments, we may combine higher activation or monthly charges (or both) with lower airtime rates.

Under the standard tariff, we may from time to time notify the ICTA of a per-minute airtime fee, which is treated as its Basic Unit Rate.

The standard tariffs and the maximum rates have been established in Turkish Lira and ICTA’s schedule of standard tariffs and maximum rates are premised on the TRY/$ Exchange Rate in effect on the date they were approved by ICTA. Although we believe the tariff structure in our license will, in most instances, permit adjustments designed to offset devaluations of the Turkish Lira against the U.S. Dollar, any such devaluation that we are unable to offset will require us to use a larger portion of our revenue to service our non-Turkish Lira foreign currency obligations. Additionally, in the event that the ICTA were to establish maximum tariffs at levels below those that would enable us to adjust our rates to offset devaluations, this could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

As a result of certain applications made to it, the ICTA decided to implement a new requirement that our on-net tariffs be no less than the lowest interconnection rate applicable to other GSM operators. However, in the relevant legislation, which was applicable at that time, no authority was given to the ICTA to set minimum barriers for the tariffs granted. For this reason, we believed that such intervention was contrary to the applicable legislation. The ICTA also decided to set a maximum price of TRY 0.66 (including VAT) for off-net calls under common subscription packages. However, we believed that this intervention by the ICTA, which decreased the previous maximum tariffs, conflicted with the relevant provisions of the license agreement. The ICTA was only empowered to apply the formula set forth in the license agreement, as explained above. By setting minimum tariffs for our Company only, we believed that the Authority created unfair competition and violated provisions of the Law, which stipulated that prices for telecommunications services be cost-based. On the grounds explained above, we filed a lawsuit before the 13^th Chamber of Counsel of State in relation to the annulment and suspension of the execution of the aforementioned decision. On May 26, 2008, the 13^th Chamber of Counsel of State suspended the ICTA’s decision regarding the interconnection rate applicable for setting our minimum on-net tariffs. The ICTA objected to the decision however, the request was rejected. The ICTA requested the cancellation of the aforementioned suspension decision (with its petition submitted to the file); however, its request was rejected. The lawsuit is still pending. For more information, see “Item 8.A.—Consolidated Statements and Other Financial Information—Legal Proceedings”).

However, as per Article 13 of the Electronic Communications Law, in the event of determination of the significant market power of the operator, the ICTA may determine the lower and upper limit of the tariffs and principles and procedures of the application of the same. Based on such Article, the ICTA may take a similar decision which will have an effect on our future tariffs.

Relationship with ICTA

The license agreement creates a mechanism for an ongoing relationship between us and ICTA. The ICTA and Turkcell coordinate their activities through a License Coordination Committee (“the Committee”). The

Committee is comprised of five members, two appointed by ICTA, two by us and one by agreement of the ICTA and our members, or, if no agreement is reached, by the Chairman of the Information and Communication Technologies Board. The Committee is charged with the task of ensuring the proper and coordinated operation of the GSM network, assisting in the resolution of disputes under the license agreement and facilitating the exchange of information between the parties.

The Committee meets at least quarterly and establishes its own operating principles and procedures unless an extraordinary meeting is called by any party with a 7-day advance notice. Matters in dispute are expected to be submitted to the Committee for resolution. While not binding, the Committee may render consultative decisions. Either the ICTA or we may convene a special meeting to consider issues that arise under the license agreement.

License Suspension and Termination

The ICTA may suspend our operations for a limited or an unlimited period if necessary for the purpose of public security or national defense, including war and general mobilization. During suspension, the ICTA may operate our business, but we are entitled to any revenues collected during such suspension, and our license term will be extended by the period of any suspension.

Our license may be terminated under our license agreement:

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upon a bankruptcy ruling against us by a competent court or a bankruptcy compromise decision, which is an agreement between creditors and a debtor to reschedule the debt of the debtor, if such ruling or compromise is not reversed or dismissed within 90 days after notice;

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upon our failure to perform our obligations under the license agreement if such failure is not cured within 90 days after notice;

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if we operate outside the allocated frequency ranges and fail to terminate such operations within 90 days after notice; or

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if we fail to pay our ongoing license fee.

In the event of termination, we must deliver the entire GSM system to ICTA.

If our license is terminated for our failure to perform our obligations under our license, the performance guarantee given by us in an amount equal to 1% of the license fee may be called. The license agreement makes no provision for the payment of consideration to us for delivery of the system on such termination.

In the event of a termination of our license, our right to use allocated frequencies and to operate the GSM system ceases. Upon the expiration of the license agreement, initially scheduled to occur in 2023, without renewal, we must transfer to ICTA, or an institution designated by ICTA, without consideration, the network management center, the gateway exchanges, and the central subscription system, which are the central management units of the GSM network. These units include related technical equipment, immovables, and all other installations and assets used in the operation of the system. We may apply to the ICTA between 24 and 6 months before the end of the 25-year license term for the renewal of the license. The ICTA may renew the license, taking into account the legislation then currently in effect.

Applicable Law and Dispute Resolution

Under our license agreement, any dispute arising from or under our license shall be brought before the License Coordination Committee. If the dispute is not settled within 30 days before the License Coordination Committee, it shall be referred to the parties. If the dispute is not resolved by the parties within 15 days, then it shall be settled by an arbitral tribunal in accordance with ICC Rules. The governing law of any arbitration is Turkish law and any such arbitration shall be conducted in English. Disputes relating to national security or public policy shall not be subject to arbitration proceedings.

Authorization of 3G Licenses

The Council of Ministers decision regarding the “Determination of the Minimum Values of License Agreement Regarding the IMT-2000/UMTS Services and Infrastructure” and The Council of Ministers’ decision regarding the “Enforcement of the Authorization Plan Regarding the IMT-2000/UMTS Services and Infrastructure” was published in the official gazette in February 16, 2007. These decisions authorized the ICTA to begin the process of preparing regulations for 3G Licenses.

The ICTA conducted a tender process for the granting of 3G licenses on September 7, 2007. Based on the tender process conducted on September 7, 2007, Turkcell was awarded a 3G license. However, on September 19, 2007, the ICTA canceled the 3G license tender due to the fact that Turkcell’s competitors did not participate in the 3G tender process. On November 28, 2008, the ICTA conducted a new tender process to grant four separate licenses to provide IMT 2000/UMTS services and infrastructure. We were granted the A type license, which provides the widest frequency band, at a consideration of EUR 358 million (excluding VAT). We signed the license agreement relating to the 3G authorization on April 30, 2009. The license agreement has a term of 20 years. Our ability to implement 3G services will be dependent on clearing the 3G regulatory process. Our failure to implement 3G could affect our competitive position.

The 3G license agreement has similar provisions with the aforementioned license agreement relating to 2G. However, note that while a clause concerning arbitration for the settlement of disputes is included in the 2G license agreement, no such clause is in the 3G license agreement. According to the 3G license agreement, disputes arising between the parties shall be settled by the Council of State of the Republic of Turkey.

Access and Interconnection Regulation

The Access and Interconnection Regulation (the “Regulation”) became effective when it was issued by the ICTA on May 23, 2003. The Regulation sets forth the rights and obligations of the operators in the telecommunications sector in Turkey and establishes rules and procedures pertaining to their performance of such obligations. The Regulation primarily sets forth applicable principles, details of access and interconnection obligations, financial provisions, and policies and procedures regarding negotiations and contracts for access and interconnection.

The Regulation is driven largely by a goal to improve the competitive environment and ensure that users benefit from telecommunications services and infrastructure at a reasonable cost. Under the Electronic Communications Law, the ICTA may compel a telecommunications operator to accept another operator’s request for use of and access to its network. All telecommunications operators in Turkey may be required to provide access to other operators. The operators who are compelled to provide access to other operators may be obliged to provide service and information on the same terms and qualifications provided to their shareholders, subsidiaries, and affiliates by ICTA.

According to the Electronic Communications Law, access contracts and interconnection contracts can be executed with the mutual understanding of the parties. If the parties do not execute the access contract within two months of the access request or the existence of any disagreement in the access contract, the Authority may intervene in the negotiations of the access contract, upon request of one of the parties.

In accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) are obliged to renew their interconnection agreements within two months after the issuance of the Regulation. The renewed agreements must comply with the provisions of the Regulation, including cost-based pricing. Accordingly, we entered into a supplementary protocol with Vodafone, on October 9, 2003, with Turk Telekom

on September 20, 2003, and with Avea on September 21, 2004. As a result of intervention by the ICTA, we entered into new supplemented protocols with Turk Telekom on November 10, 2003, and Vodafone on November 21, 2003, with amended tariffs and tariff adoption procedures.

In accordance with Article 7 of the aforementioned Electronic Communications Law, the ICTA may determine the operators that have significant market powers in the relevant market as a result of market analyses. After determination of the operators who have significant market power, the ICTA may impose additional liabilities for such operators in order to protect the competitive environment. Based on the regulations under the previous law, ICTA, on August 21, 2003, designated us as an “operator holding significant market power” in the “GSM Mobile Telecommunication Services Market” and “GSM Mobile Call Termination Services Market” and Vodafone an “operator holding significant market power” in “the GSM Mobile Call Termination Services Market.” On January 4, 2005, the ICTA designated Turkcell individually as an “operator holding significant market power” in the “GSM Mobile Call Termination Services Market”. Finally, on December 15, 2005, the ICTA designated Turkcell, Vodafone, and Avea as “operators holding significant market power” in the “GSM Mobile Call Termination Services Market” and designated Turkcell individually as an “operator holding significant market power” in the “Access to GSM Mobile Networks and Call Originating Markets”. According to the new regulation published in the Official Gazette dated January 17, 2009 and numbered 27113, unless otherwise agreed, any decision taken by the ICTA in the years 2005 and 2006 relating to market analysis will be valid and effective until the end of calendar year 2009.

The ICTA published a communiqué on June 3, 2003, defining “significant market power” as “the power to influence economic parameters such as the purchase or sale price of services provided to other operators and users; supply and demand of said services; market conditions; components of fundamental telecommunications network utilized for telecommunications services; and access to users in the relevant telecommunications market.” In determining which operators possess significant market power, the ICTA will take into consideration the following criteria: market share; the power to influence market conditions; the relationship between quantity of sales and size of the relevant market; the power to control access to the end user; power to access financial resources; and experience regarding production and introduction of services in the market.

While all operators will be obliged to enter into negotiations for interconnection agreements with any requesting operator, Turkcell, Vodafone, and Avea as “operators holding significant market power” in the “GSM Mobile Call Termination Services Market”, as well as Turk Telekom, are obliged to provide interconnection. These operators may limit access or interconnection to other operators only if it is objectively proven that network operation security or network integrity or data protection cannot be maintained or that interconnection or access is technologically unfeasible; in any case, the approval of the ICTA is also required. The ICTA may also limit the interconnection obligation of an operator upon the operator’s request, provided that there are technical and commercial alternatives to the interconnection or that required resources for such interconnection are unavailable. While operators not deemed to hold significant market power are free to set their access and interconnection tariffs, operators holding significant market power are required to determine their access and interconnection tariffs on a cost basis. Specifically, the Regulation provides that the tariffs will be the marginal cost of procuring efficient services, including an “appropriate return” on capital employed for procurement of services, plus a portion of overall costs attributable to such service.

In addition, the ICTA has required operators to share certain facilities with other operators under certain conditions specified in the Electronic Communications Law and to provide co-location on their premises for the equipment of other operators at a reasonable price. As mentioned in such Law, procedure and principle relating to the co-location and facility sharing shall be determined by ICTA.

Under the Regulation, operators holding significant market power are required to provide access and services to all operators on equal terms. Operators with significant market power are also required to perform unbundling of their services, which means that they have to provide separate service of and access to transmission, switching, and operation interfaces. Furthermore, the ICTA may establish rules applicable to the division of the costs of facilities among parties.

All access and interconnection contracts must be submitted to the ICTA within fifteen days of execution. The ICTA may request modifications to the contracts should they contain any provisions contrary to the legislation. The access and interconnection contracts will be publicly available, excluding trade secrets. All operators holding significant market power will also be required to prepare reference interconnection proposals and submit them to ICTA. Except where otherwise specified by ICTA, reference interconnection proposals will be renewed every year. We have submitted our reference interconnection proposal regarding 2009 to ICTA.

If two operators are unable to reach an interconnection agreement within two months of the date of the initial access request, either party may refer the dispute to the ICTA for resolution. After this request, the ICTA initiates a settlement procedure and establishes terms, conditions, and fees applicable to the agreement and binding on both parties.

Should a telecommunications operator violate any provisions of the Regulation, the ICTA may impose an administrative fine of a maximum of 3% of the operator’s turnover for the preceding calendar year.

As a result of the significant market power designation in the “GSM Mobile Call Termination Services Market”, our company, as well as Avea and Vodafone, is required to provide interconnection services on a cost-based basis.

According to the provision of the Electronic Telecommunications Law, the ICTA may impose obligation on operators, who are obliged to provide access by the ICTA, to submit their reference offers for access, and may request to make necessary amendments in their reference access offers. Operators shall be obliged to make the amendments requested by the ICTA in prescribed manner and period. On the other hand, the operators shall be obliged to publish their reference offers for access, which have been approved by the ICTA, and to provide access under conditions specified in their reference offers, which have been approved by the ICTA. On March 25, 2009, the ICTA issued “Interconnection Tariffs” for Turk Telekom and GSM operators, which will become effective on May 1, 2009, and stated that tariffs, determined in the Interconnection Tariffs, have been approved as the tariffs to be determined in the reference access offers, and published the reference access offers, which is including these tariffs, in the simply and constant manner. According to the Interconnection Tariffs the revised rate for Turkcell will be TRY 0.0655 (approximately $0.039 per the TRY/S exchange rate on April 1, 2009). However, we are of the opinion that Turkcell is not required to apply such tariffs immediately, as otherwise requested by the other operators.

Ukraine License Agreement

Astelit owns two GSM activity licenses, one for GSM—900 and one for DCS—1800. As of December 31, 2008, Astelit owns 20 GSM—900, DCS—1800, D-AMPS and Radiorelay frequency licenses that are regional or throughout Ukraine. In addition to the above GSM licenses, Astelit owns four licenses for fixed local phone connections with wireless access using the D-AMPS standard. According to the licenses, Astelit should adhere to state sanitary regulations to ensure that the equipment used does not injure the population by means of harmful electro-magnetic emissions. Licenses require Astelit to inform authorities of the start/end of operations within one month and changes in the incorporation address within 10 days. Also, Astelit must present all the required documents for inspection by the Ukrainian Telecommunications Authority at their request. The Ukrainian Telecommunications Authority may suspend the operations of Astelit for a limited or an unlimited period if necessary due to the expiration of the licenses, upon mutual consent, or in case of violation of the terms regarding the use of radio frequencies. If such a violation is determined, the Ukrainian Telecommunications Authority will notify Astelit of the provisions violated and will set the deadline for recovery. If the deadline is not met, the licenses may be terminated.

Belarus License Agreement

Belarussian Telecom owns a license, issued on March 18, 2005 for a period of 10 years, that will be valid until March 18, 2015. Pursuant to the Share Purchase Agreement dated July 29, 2008 between the State

Committee on Property of the Republic of Belarus (“the seller”), Beltel and the Company, the seller granted an extension on the license to render standard GSM services until August 26, 2018. In addition, the license shall be extended for an additional ten years and the seller shall provide relevant official documents for such evidency authorization until December 31, 2009.

Under its license, Belarussian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the date of the license until 2017. However, Belarussian Telecom’s period of execution in relation to coverage requirements are extended for three years starting from the acquisition date.

Turk Telekom, Vodafone and Avea Interconnection Agreements

General

We have interconnection agreements with Turk Telekom, Vodafone and Avea whereby they allow us to connect our networks with theirs to enable the transmission of calls to and from our mobile communications system through existing digital fixed telephone switches.

The interconnection agreements also establish understandings between the parties relating to various key operational areas, including call traffic management, and the agreements contemplate that we and the other parties will agree to the contents of various manuals that will set forth in detail additional specifications concerning matters which are not specifically covered in the interconnection agreement. These matters include quality and performance standards, interconnection interfaces and other technical, operational, and procedural aspects of interconnection.

The interconnection agreements specify that the parties shall comply with relevant international standards, including standards adopted by the GSM Memorandum of Understanding, the Telecommunications Standards Bureau of the International Telecommunications Union, and the European Telecommunications Standards Institute. In the absence of applicable international standards, the interconnection agreements provide that the parties will establish written standards to govern between them.

The interconnection agreements outline the applicable interconnection principles and provide the technical basis and rationale for technical specifications and manuals to be agreed to by the parties. The interconnection agreements:

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set forth agreements between the parties relating to the location of exchanges;

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create obligations regarding network alterations;

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establish routing principles to govern how call traffic will be routed within a network and between the networks of the parties, including interconnection routing rules;

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provide for arrangements concerning capacity and expansion of capacity through new points of interconnection;

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mandate arrangements concerning the use of numbering to transmit calls in accordance with national and international practices;

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provide for periodic technical review meetings between the parties;

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permit each party to engage in testing of interconnection exchanges;

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address the consequences of transmission failures;

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create an obligation to cooperate in order to maximize overall quality of transmission of calls in accordance with international standards;

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deal with emergency calls, calling line identification and malicious call identification;

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assure the ability of a party to have access to the other party’s premises where relevant equipment may be located (subject to appropriate protections);

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establish procedures to deal with network faults; and

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address issues relating to the construction and installation of antennas, towers, and other elements of system infrastructure.

In addition, the parties agree to provide to the other party information which is necessary to enable performance of their interconnection obligations, the provision of services, or utilization of equipment and/or buildings as contemplated in the interconnection agreement.

Turk Telekom

Pursuant to the interconnection agreement with Turk Telekom, Turk Telekom agrees to permit us to use its buildings, premises, and other infrastructure and to lease the means of communications transmission between our GSM exchanges, base stations, and base station control stations. We retain the right, however, to establish our own transmission network at our own expense in the event that such transmission network is not made available to us by Turk Telekom, subject to the consent of ICTA.

If Turk Telekom enters into interconnection agreements with other operators of mobile or similar telecommunications services, the conditions of such agreements must be the same as those in their interconnection agreement with us. If any such agreement does contain differing terms, we have the right to demand identical terms. If we desire to use the facilities and such use would impair the use of such facilities by others, our request will be given priority over potential users of the facilities that have not entered into license agreements with ICTA. Priority among operators which have entered into such license agreements will be given to the application that was first received by Turk Telekom.

The Turk Telekom interconnection agreement specifies that ownership of the GSM equipment and other materials, including those in existence on the date of the Turk Telekom interconnection agreement and those subsequently installed, belong to us. The agreement also provides that intellectual property rights will belong to the developer or owner.

Payments

The Turk Telekom interconnection agreement provides for the payment by us to Turk Telekom of fees for the interconnection services provided by Turk Telekom and for the lease of transmitting facilities linking base stations, mobile telephone exchanges and base station control stations. Turk Telekom is not entitled to any payment in respect of our use of our own transmission system. Turk Telekom also agrees to pay us for calls transmitted over our network.

The Turk Telekom interconnection agreement provides that Turk Telekom will pay the 1% Turkish communications tax, which is payable on the basis of communications fees collected by Turk Telekom from customers in connection with telephone, facsimile, telex and data excluding subscription fees. Turk Telekom is required to pay this tax to the relevant municipality pursuant to the Municipality Revenues Act. We would be liable in respect of any increase in the applicable rate of the communication tax. If a party fails to make payment when due, it shall pay default interest, to be calculated based on the commercial advance interest rate of the Central Bank of Republic of Turkey for the period between when the payment is due and when the payment shall be made, and it shall also penalty for such delay at a rate of 10%.

A number of the provisions of the Turk Telekom interconnection agreement address matters concerning billing and payment of bills for services rendered under the Turk Telekom interconnection agreement. Each party is required to record call information and to provide that information to the other party. Each party is responsible for invoicing the other party on a monthly basis.

Call Tariffs

In accordance with the agreement concluded between Turkcell and Turk Telekom on September 20, 2003, the call tariffs are set in Turkish Lira and will be revised by the parties every three months based on the consumer price index. During periods of sharp devaluation of the Turkish Lira, the devaluation rate will also be taken into consideration in such revisions. These price terms were applicable until the end of 2004 when both parties will revise them based on conditions reached at that time. All the rates are net of all applicable taxes.

The parties could not agree on call termination tariffs which would be applicable from December 12, 2004; Turk Telekom referred this dispute to the ICTA for resolution. The ICTA determined final call termination tariffs. In accordance with the decision of the ICTA; as of March 1, 2006, Turk Telekom had to pay Turkcell TRY 0.140 (approximately $0.084 as of April 1, 2009) per minute. Turkcell had to pay to Turk Telekom a net amount of TRY 0.02 (approximately $0.015 as of April 1, 2009) per minute for local traffic and a net amount of TRY 0.037 (approximately $0.022 as of April 1, 2009) per minute for metropolitan and long-distance traffic routed from Turkcell to Turk Telekom. On January 15, 2007, the ICTA revised the Standard Reference Interconnection Tariffs for GSM and fixed network operators.

Turk Telekom applied once more to the ICTA for determination of call termination tariffs and, in response, the ICTA determined final call termination tariffs.

In accordance with the decision of ICTA, as of March 1, 2007, Turk Telekom pays Turkcell TRY 0.136 (approximately $0.082 as of April 1, 2009) per minute and Turkcell pays to Turk Telekom a net amount of TRY 0.0189 (approximately $0.011 as of April 1, 2009) per minute for local traffic and a net amount of TRY 0.03 (approximately equivalent to $0.018 as of April 1, 2009) per minute for metropolitan and long-distance traffic routed from Turkcell to Turk Telekom, retroactively.

In accordance with the September 26, 2008 decision of the ICTA, effective from April 1, 2008, Turk Telekom pays Turkcell TRY 0.091 (approximately $0.055 as of April 1, 2009) per minute and Turkcell pays to Turk Telekom a net amount of TRY 0.0171(approximately equivalent to $0.010 as of April 1, 2009) per minute for local traffic and a net amount of TRY 0.027 (approximately equivalent to $0.016 as of April 1, 2009) per minute for metropolitan and long-distance traffic routed from Turkcell to Turk Telekom, retroactively.

On March 25, 2009, the ICTA issued new Interconnection Tariffs. According to this decision, as of May 1, 2009, Turk Telekom will pay Turkcell TRY 0.0655 (approximately $0.039 as of April 1, 2009) per minute and Turkcell will pay Turk Telekom a net amount of TRY 0.0171 (approximately $0.010 as of April 1, 2009) per minute for local traffic and a net amount of TRY 0.027 (approximately $0.016 as of April 1, 2009) per minute for metropolitan and long-distance traffic routed from Turkcell to Turk Telekom. Pursuant to this decision, the ICTA has announced local interconnection rates for Turk Telekom for the first time. Accordingly, Turkcell will pay Turk Telekom TRY 0.0139 (approximately $0.008 as of April 1, 2009) for local interconnection per minute. However, we are of the opinion that Turkcell is not required to apply such tariffs immediately, as otherwise requested by the operators.

For SMS services from Turk Telekom’s network to our network, as of, and since, December 2006, Turk Telekom has paid us a net amount of TRY 0.033307 (approximately $0.020 as of April 1, 2009) per SMS after deducting VAT and other taxes. For SMS services from our network to Turk Telekom’s network, we have paid Turk Telekom a net amount of TRY 0.017227 (approximately $0.010 as of April 1, 2009) per SMS after deducting VAT and other taxes. SMS termination rates are subject to revaluation quarterly.

Currently, for SMS services from Turk Telekom’s network to our network, Turk Telekom will pay us a net amount of TRY 0.033661 (approximately 0.020 as of April 1, 2009) per SMS, excluding VAT and SCT. For SMS services from our network to Turk Telekom’s network, we will pay Turk Telekom a net amount of TRY 0.017410 (approximately 0.010 as of April 1, 2009) per SMS, excluding VAT and SCT.

In accordance with the interconnection agreement between Turkcell and Turk Telekom, for international calls originating from Turkcell network and carried by Turk Telekom, Turkcell pays Turk Telekom 70% of the net amount of Turk Telekom’s retail international call charges. Pursuant to this agreement, Turk Telekom was obliged to pay us 45% of the international settlement charge (terminal rate) that is transferred by the international carrier operator to Turk Telekom for incoming international calls that are terminated on our network. For the termination service price of calls from international destinations to Turkcell network carried by Turk Telekom, Turkcell applied to the ICTA for reconciliation. As a result of that process, the ICTA decided Turk Telekom to pay Turkcell TRY 0.136 (approximately equivalent to $0.082 as of April 1, 2009) for termination of international calls. We and Turk Telekom have an ongoing dispute over this agreement. See “Item 8.A. Consolidated Statements and Other Financial Information—Legal Proceedings”.

We do not pay any charges to Turk Telekom for calls to special service numbers which are called free of charge according to Turk Telekom tariffs. For calls to special service numbers that are not free of charge, one party pays the other 72% of the other’s retail charge for that service, excluding VAT and SCT.

Rental Rates

According to the Interconnection Agreement with Turk Telekom, the rental rates for Turk Telekom’s real estate, leased by us and located in residential areas, should be established according to an expert’s report prepared by the local real estate experts of Turkish Emlak Bank. If there is no Turkish Emlak Bank unit in the area, or if the Turkish Emlak Bank cannot prepare an expertise report, then the rental rate is based on the average rental prices determined by the relevant units of the Chamber of Commerce and Industry or, in cases where the above two units are not available, according to a report prepared by a valuation committee that will be established by the participation of three Turk Telekom personnel and one of our personnel.

Upon the expiry of a one-year rental period, rental price increases will be made according to rates issued in the annual state tenders report prepared by the Ministry of Finance, and 45% of the rental fee will be added for expenses, including personnel, lighting and water, among others, starting from the beginning of the lease period.

Charges for Energy at Switching Centers

We can subscribe to Turkish Electricity Distribution Co. (“TEDAS”) or another relevant electricity distribution company as a standalone customer and pay its energy usage charges. In such case, we will not pay any charges to Turk Telekom. We may also source energy by connecting a three phase electricity measuring gauge to Turk Telekom’s energy distribution panel. The expenses related to the connection of the measuring gauge will be borne by us. In addition, we may source energy by connecting an electricity measuring gauge to Turk Telekom’s generator, provided that all expenses related to the connection will be borne by us. The energy usage fee shall be calculated in accordance with a formula set forth in the Turk Telekom interconnection agreement. Under the Revenue Sharing Agreement, we were not required to pay Turk Telekom for these services.

Miscellaneous

A party may seek to modify the Turk Telekom interconnection agreement by serving the other party with a notice of request to review such agreement if:

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our license is materially changed (whether by amendment or replacement);

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a material change occurs in the laws or regulations governing telecommunications in Turkey;

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the Turk Telekom interconnection agreement expressly provides for a review or makes express provision for a review or the parties agree in writing that there should be such a review;

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a material change occurs which affects or could affect the commercial or technical basis of the Turk Telekom interconnection agreement; or

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there is a general review pursuant to the Turk Telekom interconnection agreement.

Upon service of a review notice, the parties must negotiate in good faith toward a resolution of the subject matter of the review. If the parties fail to reach agreement within three months from the date of service of the review notice, either party may request that the ICTA determine the manner, if any, in which the Turk Telekom interconnection agreement should be modified. The Turk Telekom interconnection agreement will be modified in accordance with that determination, unless the determination is subject to a legal challenge. The Turk Telekom interconnection agreement can be assigned in accordance with our license agreement. The Turk Telekom interconnection agreement will terminate automatically upon the expiry of our license period or on termination of our license agreement by ICTA. Neither party may assign the businesses which are the subject matter of the interconnection agreement to any third party unless such assignment is required under the provisions of the Regulation and the License Agreement or the other party’s prior consent is obtained.

Vodafone Interconnection Agreement

As a result of the acquisition of Telsim by Vodafone, all the liabilities of Telsim arising from the Interconnection Agreement signed with us were transferred to Vodafone as of May 24, 2006. In line with this, Turkcell and Vodafone signed an agreement in July 2006 to amend the present interconnection agreement through agreeing general principles of our collaboration as a result of the transfer.

In light of this transaction, the following discussion will only refer to Vodafone. It should be noted however, that agreements entered into before May 24, 2006 were entered into by Telsim, the acquired company.

The Vodafone interconnection agreement provides for the payment of fees by us to Vodafone for the interconnection services provided by Vodafone. A number of the provisions of the Vodafone interconnection agreement address matters concerning billing and payment of bills for services rendered under the Vodafone interconnection agreement. Each party is required to record certain call information and to provide that information to the other party. Each party is responsible for invoicing the other party on a monthly basis.

Call Tariffs

Turkcell and Vodafone could not agree on call termination tariffs and Vodafone referred this dispute to the ICTA for resolution. The ICTA applied provisional call and SMS termination tariffs as of March 1, 2006 to both parties. In accordance with this decision; Vodafone was to pay Turkcell TRY 0.140 (approximately $0.084 as of April 1, 2009) per minute and Turkcell was to pay to Vodafone a net amount of TRY 0.152 (approximately $0.091 as of April 1, 2009) per minute. Likewise, the ICTA determined that Vodafone was to pay Turkcell TRY 0.0297 per SMS as of March 1, 2006 (approximately $0.018 as of April 1, 2009).and Turkcell was to pay Vodafone a net amount of TRY 0.0322 per SMS (approximately $0.019 as of April 1, 2009).

In accordance with the agreement concluded between Turkcell and Vodafone in July 2006, both parties agreed on call and SMS termination tariffs to be applied and this agreement became binding despite the earlier decision by the ICTA. According to the agreement, Turkcell and Vodafone will charge to each other TRY 0.1737 (approximately $0.104 as of April 1, 2009) per minute for call traffic accessing each other’s network and a net amount of TRY 0.0322 (approximately $0.019 as of April 1, 2009) per SMS accessing each other’s network. In case call traffic switched from Vodafone to Turkcell exceeds 50,000,000 minutes in a month, Vodafone will pay a net amount of TRY 0.16 (approximately $0.096 as of April 1, 2009) per minute for call traffic. This charging method is valid from May 24, 2006, until March 31, 2008. Turkcell will pay Vodafone a net amount of TRY 0.165 (approximately $0.099 as of April 1, 2009) per minute for call traffic from April 1, 2007, until March 31, 2008. Both parties will pay each other net amount of TRY 0.160 (approximately $0.096 as of April 1, 2009) per call between April 1, 2008 and March 31, 2009.

In case SMS traffic switched from Vodafone to Turkcell exceeds 50,000,000 in a month, Vodafone will pay a net amount of TRY 0.0297 (approximately $0.018 as of April 1, 2009) per SMS. This charging method was valid from May 24, 2006, until March 31, 2007. Both parties will pay each other TRY 0.0322 (approximately $0.019 as of April 1, 2009) per SMS between April 1, 2007 and March 31, 2009.

All the call tariffs are set in Turkish Lira and were revised by the parties on March 31, 2008 and March 31, 2009 based on the consumer price index. During periods of sharp devaluation of the Turkish Lira, the devaluation rate will also be taken into consideration in such revisions. Based on this revaluation methodology, between April 1, 2007 and March 31, 2008 termination rates, excluding VAT and SCT, are as follows: for calls from Turkcell to Vodafone, Turkcell pays Vodafone TRY 0.182919 per minute (approximately $0.110 as of April 1, 2009); for calls from Vodafone to Turkcell TRY 0.177376 per minute (approximately $0.106 as of April 1, 2009); for SMS, each party pays the other TRY 0.035697 per SMS (approximately $0.021 as of April 1, 2009). For SMS, each party paid the other TRY 0.038963 per SMS (approximately $0.023 as of April 1, 2009) for the term between April 1, 2008 and March 31, 2009.

The pricing terms of the Vodafone interconnection agreement will be applicable until March 31, 2009, when both parties will revise the pricing terms based on conditions reached at that time. All the rates are net of all applicable taxes. If the parties cannot agree on new call termination tariffs until July 2009, both parties shall refer to the ICTA for resolution. During the resolution period both parties will charge each other a net amount of TRY 0.16 (approximately $0.096 as of April 1, 2009) per minute for the call termination and a net amount of 0.0322 (approximately $0.019 as of April 1, 2009) for SMS termination.

However, with respect to call traffic, the parties have applied to ICTA. On August 26, 2008, the ICTA concluded the reconciliation process to be applied between Turkcell and Vodafone to be valid and binding as from April 1, 2008, by applying its provisional termination tariffs. Currently, in accordance with this decision, Turkcell pays Vodafone TRY 0.095 per minute (approximately $0.057 as of April 1,2009) and Vodafone pays Turkcell TRY 0.091 per minute (approximately $0.055 as of April 1, 2009) for call traffic. On March 25, 2009, the ICTA issued “Interconnection Tariffs” for Turk Telekom and GSM operators”. Beginning May 1, 2009, Turkcell will pay Vodafone 0.0675 TRY per minute (approximately $0.11 as of April 1, 2009) and Vodafone will pay Turkcell 0.0655 TRY per minute (approximately $0.039 as of April 1, 2009) for call traffic. However, we are of the opinion that Turkcell is not required to apply such tariffs immediately, as otherwise requested by the operators.

Both parties charge each other 10% higher priced than effective call termination tariffs per minute for accessing the other’s directory inquiry services.

A party may seek to modify the Vodafone interconnection agreement by serving the other party with a notice of request to review such agreement if:

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its license is materially changed (whether by amendment or replacement);

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a material change occurs in the law or regulations governing telecommunications in Turkey;

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the interconnection agreement expressly provides for a review or makes express provision for a review or the parties agree in writing that there should be such a review;

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a material change occurs that affects or could affect the commercial or technical basis of the interconnection agreement; or

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there is a general review pursuant to the interconnection agreement.

The Vodafone interconnection agreement will remain in force for the duration of the license period unless one of the parties serves a three month termination notice to the other party.

The Vodafone interconnection agreement will terminate:

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automatically upon expiry of the parties’ respective license periods or on termination of the respective license agreements by the Turkish Ministry; or

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save for events of force majeure, upon one month’s termination notice by the parties, due to failure to fulfill the obligations in the interconnection agreement for a period in excess of three months.

Even in the event of termination of the interconnection agreement, all services provided and the obligations of the parties during the term of this agreement will remain effective for a period of six months until interconnection can be established with Turk Telekom or another alternative network operator.

Any disputes between the parties shall first be subject to friendly settlement efforts. In the event that the parties fail to reach an amicable settlement, they then shall refer the matter to the ICTA for its recommended solution to the dispute in question. If the proposed solution recommended by the ICTA is not accepted by the parties, the parties are free to refer the matter to arbitration in accordance with the provisions of the Turkish Civil Procedural Law.

Avea Iletisim Hizmetleri A.S. Interconnection Agreement

We and Avea, the entity incorporated as a result of the merger of Is-TIM and Aycell, signed a protocol canceling the interconnection agreement between Turkcell and Aycell and the parties agreed that the Is-Tim interconnection agreement will be applicable between the parties. References to the “Avea Interconnection Agreement” refer to the original Is-TIM interconnection agreement that now governs our interconnection relationship with Avea.

Payments

The Avea Interconnection Agreement provides for the payment of fees by us to Avea for the interconnection services provided by Avea. A number of the provisions of the interconnection agreement address matters concerning billing and payment of bills for services rendered under the interconnection agreement. Each party is required to record certain call information and to provide that information to the other party. Each party is responsible for invoicing the other party on a monthly basis.

Call Tariffs

In the decision dated June 29, 2006, the ICTA applied its provisional call termination tariffs and, in accordance with this decision, Turkcell was to pay Avea a net amount of TRY 0.175 (approximately $0.105 as of April 1, 2009) per minute and Avea was to pay Turkcell a net amount of TRY 0.140 (approximately $0.084 as of April 1, 2009) per minute. On August 2, 2007, the ICTA concluded the reconciliation process between Turkcell and Avea, by applying its provisional termination tariffs. In accordance with this decision, Turkcell pays Avea TRY 0.167 per minute (approximately $0.100 as of April 1, 2009) and Avea pays Turkcell TRY 0.136 per minute (approximately $0.082 as of April 1, 2009).

In the decision dated July 31, 2007, the ICTA set call termination tariffs between us and Avea and, in accordance with this decision, we pay Avea a net amount of TRY 0.167 (approximately $0.100 as of April 1, 2009) per minute and Avea pays to Turkcell a net amount of TRY 0.136 (approximately $0.082 as of April 1, 2009) per minute. Both parties charge each other an amount 10% higher than effective call termination tariffs per minute for accessing each other’s directory inquiry services.

On August 26, 2008, the ICTA concluded the reconciliation process to be applied between Turkcell and Avea to be valid and binding as from April 1, 2008, by applying its provisional termination tariffs. Currently, in accordance with this decision, Turkcell pays Avea TRY 0.112 per minute (approximately $0.067 as of April 1, 2009) and Avea pays Turkcell TRY 0.091 per minute (approximately $0.055 as of April 1, 2009). On March 25, 2009, the ICTA issued “Interconnection Tariffs” for Turk Telekom and GSM operators. As of May 1, 2009, Turkcell will pay Avea 0.0775 TRY per minute (approximately $0.046 as of April 1, 2009) and Avea will pay Turkcell 0.0655 TRY per minute (approximately $0.039 as of April 1, 2009) for call traffic. However, we are of the opinion that Turkcell is not required to apply such tariffs immediately, as otherwise requested by the other operators.

On March 7, 2007, the ICTA determined the SMS termination fees between Turkcell and Avea. According to this decision, we pay Avea a net amount of TRY 0.0365 per SMS (approximately $0.022 as of April 1, 2009) and Avea pays Turkcell a net amount of TRY 0.0297 per SMS (approximately $0.018 as of April 1, 2009).

All call and SMS tariffs are subject to revision quarterly, based on the Consumer Price Index. However, since current charges are determined by the ICTA, as a result of its decision, only SMS termination charges are subject to inflation revision. Based on this quarterly revaluation methodology, current rates for SMS, excluding VAT and SCT, are as follow: Turkcell pays Avea TRY 0.041286 per SMS (approximately $0.025 as of April 1, 2009) and Avea pays Turkcell TRY 0.041286 per SMS (approximately $0.025 as of April 1, 2009).

On January 16, 2009, the ICTA concluded the reconciliation process to be applied between Turkcell and Avea. Currently, in accordance with this decision, Turkcell pays Avea TRY 0.0187 per SMS (approximately $0.011 as of April 1, 2009) and Avea pays Turkcell TRY 0.0170 per SMS (approximately $0.010 as of April 1, 2009). SMS termination charges are subject to inflation revision. Based on this quarterly revaluation methodology current rates for SMS, excluding VAT and SCT, were as follows: Turkcell pays Avea 0.018896 TRY per SMS (approximately $0.011 as of April 1, 2009) and Avea pays Turkcell 0.017178 per SMS (approximately $0.01 as of April 1, 2009).

A party may seek to modify the interconnection agreement by serving the other party with a notice of request to review the agreement if:

•

its license is materially changed (whether by amendment or replacement);

•

a material change occurs in the law or regulations governing telecommunications in Turkey;

•

the interconnection agreement expressly provides for a review or makes express provision for a review or the parties agree in writing that there should be such a review;

•

a material change occurs which affects or could affect the commercial or technical basis of the interconnection agreement; or

•

there is a general review pursuant to the interconnection agreement.

We and Avea have an on-going dispute over SMS termination fees. The relevant court accepted the request of Avea and we have appealed the decision. This lawsuit is still pending. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” of this annual report on 20-F.

The Avea interconnection agreement will remain in force for the duration of the license period unless one of the parties serves a three-month termination notice to the other party.

The Avea interconnection agreement will terminate:

•

automatically upon expiry of the parties’ respective license periods or on termination of the respective license agreements by the Turkish Ministry; or

•

Even in the event of termination of the interconnection agreement, all services provided and the obligations of the parties during the term of this agreement will continue to become effective for a period of six months until interconnection can be realized with Turk Telekom or another alternative network operator.

Any disputes between the parties shall first be subject to friendly settlement by the efforts of the parties. In the event that parties fail to reach an amicable settlement, then they shall refer the matter to the ICTA for its recommended solution to the dispute in question. If the proposed solution recommended by the ICTA is not accepted by the parties, the parties are free to refer the matter to arbitration in accordance with the provisions of the Turkish Civil Procedural Law.

Agreements Concluded with Operators Licensed to Provide Satellite Services

We have executed agreements with Globalstar Avrasya Uydu Ses ve Data Iletisim A.S. and Teknomobil Uydu Haberlesme A.S., operators licensed to provide satellite services. The scope of such agreements is the interconnection between the networks of the parties and the determination of the principal and procedures of the methods of network operating and clearance.

Agreements Concluded with the Operators Licensed To Provide Long-Distance Call Services

Turkcell, as an “operator holding significant market power”, entered into Call Termination Agreements with all operators licensed to provide Long-Distance Call Services. Under the Call Termination Agreements, Turkcell agreed, among other things, to terminate voice calls carried by the operators and rising from a national fixed telecommunication’s network and/or any international telecommunication’s network in accordance with technical specifications set out in the agreement.

Agreements Concluded with the Operators Licensed to Provide International Transit Traffic Services

Turkcell entered into International Traffic Carrying Services Agreements with nine operators. Under these Agreements, we may carry calls to these operators’ switches for onward transmission to their destinations and these operators should provide the termination of these calls on the relevant network. These operators charge us at various prices identified within the scope of the agreement for the calls directed to numerous networks around the globe. The operators may modify their rates upon fifteen days advanced written notice and these rates will be applicable upon our approval.

Directory Services

Turkcell entered into agreements relating to the provision of directory services with Rehberlik Hizmeti Servisi A.S. on June 30, 2008, Infoline Rehberlik ve Cagri Merkezi Hizmetleri A.S. dated February 24, 2009 and BN Elektronik Haberlesme ve Telekomunikasyon Hizmetleri A.S. dated March 31, 2009. The aforementioned agreements determine the principles and procedures related to the access of the companies to Turkcell data base, providing of guidance services to the subscribers and clearing procedure of the parties. Such agreements are valid and binding for a term of one year. However, if neither party notifies the other party one month before the expiration of the agreement of its request to terminate, the agreement will automatically be renewed for another one year term.

Prospective Legislation and Regulations

Within the scope of the provisions of the Electronic Communications Law, current telecommunications legislation shall be revised and amended. However, during this period, all regulations and communiqués that were effective prior to the publication of the Electronic Communications Law will still be valid and binding with the condition not being contrary to the provisions of the Electronic Communications Law. Therefore, subjects, which are explained below, have not yet been regulated by the ICTA.

Regulations

Defining the Relevant Markets

In accordance with the Electronic Communications Law, the ICTA determines the relevant market and the operator(s) who have significant market power in the relevant market. The ICTA may also regulate obligations for the operators, who have significant market power, for the purpose of supplying and protecting of significant competitive environment. Therefore, the ICTA has published a questionnaire to obtain our opinion for the purpose of market analyzing. Currently, only three markets have been nominated by the ICTA as relevant markets pursuant to which it is authorized to determine the operators within such market holding significant market power or a dominant market position. These markets are the mobile telecommunications market, the mobile call termination market and access to GSM mobile networks and the call-originating market.

Authorization of Value Added Telecommunication Services Operators

The ICTA is preparing to authorize the operators to provide Value Added Telecommunication Services by appending an annex to the Authorization Regulation, specifying provisions relating to such services. The ICTA will specify the authorizations, types and procedures to be applied and the minimum value of an authorization fee for Value Added Telecommunication Services within the annex.

In order to assess operator concerns regarding this regulation, the ICTA has sent a questionnaire to the operators regarding technical, marketing and regulatory issues of the Value Added Telecommunication Services within the EU Regulations and international applications.

In accordance with Regulation, we may be required to provide access and/or interconnection services to requesting VAS operators.

Authorization of Mobile Virtual Network Operators (“MVNOs”)

According to a proposed regulation, MVNOs shall provide their services by using the infrastructure of GSM operators. The ICTA has published a draft annex to the Authorization Regulation specifying provisions relating to MVNO’s. We have specified our concerns regarding the draft Regulation on the grounds that obligating us to share our infrastructure with the MVNO’s would infringe on our rights in accordance with our license agreement.

New Environment Tax

The Law No: 5491, the “Law Amending the Environmental Law”, was published on May 13, 2006. This law includes a draft system to levy a tax on subscribers of mobile operators. The law that is currently in effect does not determine a system for this proposed tax.

4.C Organizational Structure

The following chart lists each of our key subsidiaries (including our ownership interest in Fintur) and our proportionate direct and indirect ownership interest as of April 1, 2009:

LOGO

Notes:

(1)	KCell is 51% owned by Fintur and the remaining 49% is owned by Kazakhtelecom JSC, the Kazakh incumbent fixed-line telecom provider.

(2)	Azertel is 51% owned by Fintur and the remaining 49% of the shares are owned by Cenay Group, a privately held Turkish group of companies. Azercell is 100% owned by Azertel. Fintur’s effective ownership in Azercell is 51%.

(3)	Gurtel is 99.99% owned by Fintur and as of December 31, 2008 Geocell is 97.5% owned by Gurtel. As of January 30, 2009, Gurtel’s stake in Geocell increased to 100%.

(4)	Moldcell is 99% owned by Fintur and 1% owned by Molfintur SRL, a wholly-owned subsidiary of Fintur.

(5)	On May 21, 2008, Turktell signed an agreement with Cukurova Group to acquire a 100% stake in Superonline, which is specialized in providing internet and telecommunications services, and to sell its 55% share in Bilyoner.

(6)	On July 29, 2008, Beltel signed a share purchase agreement to acquire an 80% stake in Belarussian Telecom.

For information on the country of incorporation of our key subsidiaries, see “Item 4.B. Business Overview”.

4.D Property, Plant and Equipment

Our principal property, plant and equipment consists of management offices, switching sites, network infrastructure sites, and network and office equipment.

Property

We own six properties: two properties in Kocaeli, two properties in Bursa, one property in Gaziantep and one property in Adapazari. Our property in Tekirdag was sold in 2008. In 2008, we also rented two properties in Davutpasa and a property in Maltepe, as well as three properties in Istanbul Maltepe and Manisa.

We own buildings in Istanbul Beyoglu (headquarters), Istanbul Maltepe, Istanbul Gunesli, Ankara-Cinnah, Ankara-Sogutozu, Adana, Diyarbakir, Samsun, Davutpasa and Izmir. A new building was acquired in Istanbul Kartal in 2006. In addition, we rent the following buildings: Academy, Turkcell Head Quarters Plus (TMO+) and Maltepe Plus. In 2008, we rented the Corlu and Mersin Operation Maintenance Offices.

In addition to the foregoing properties, we maintain three rented office buildings and a warehouse in Istanbul. In 2006, we acquired another warehouse in Istanbul Tuzla.

Switches

We have switches in Istanbul, Ankara, Izmir, Tekirdag, Bursa, Kocaeli, Mugla, Balikesir, Denizli, Aydin, Konya, Samsun, Trabzon, Erzurum, Diyarbakir, Adana, Antalya, Mersin and Manisa. Additionally, we have Remote BSC (“RBSC”) locations at Artvin, Alanya and Gaziantep.

Base stations

As of the end of December 2008, we owned over 15,050 base stations and leased the land underlying such base stations.

In December 2006, we sold 2,862 towers that our base stations mounted on to TurkKule, an entity established on November 24, 2006, in order to provide antenna space to all telecommunication operators, TV and radio broadcasters, and civilian and military communication system operators in Turkey. However, the Telecommunication Authority decided that the sales of the towers from Turkcell to TurkKule had to be cancelled by October 10, 2007.

The towers were therefore repurchased by Turkcell from TurkKule on September 30, 2007. Currently, TurkKule constructs its own masts and towers in order to provide service for the wireless broadcast and communications industry in Turkey. Since the beginning of 2007, Turkcell has rented all the tower spaces required for its base stations from TurkKule.

ITEM 4A.

UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING

AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis by our management of the financial condition and the results of our operations should be read together with the consolidated financial statements included in this annual report. In addition to historical information, the following discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in “Risk factors” and elsewhere in this annual report.

Overview of the Turkish Economy

In 2008, the global markets experienced extraordinarily high levels of volatility and both domestic and external demand slowed down considerably. The turmoil in global financial markets spilled over into

non-financial corporations and emerging economies that were relatively unharmed by previous turbulence. As a result, Turkey has faced a sharper economic downturn and pressure on its exchange rate due to falling industrial production and private sector expenditure and rising unemployment. Despite the challenges of the crisis on Turkey’s economy and the threat of a global recession, in 2008 our revenues increased to $6,970.4 million, from $6,328.6 million in 2007, and our net income increased to $1,836.8 million, from $1,350.2 million in 2007.

Turkey is vulnerable to global shocks and global liquidity problems due to its current account deficit and the private sector’s external borrowing needs. The double-digit declines in industrial production and trade, as well as survey-based forward-looking indicators, point to a significant downturn in 2009. A potential IMF arrangement will be crucial in mitigating the concerns over this year’s external financing gap and the level of TRY, particularly in an increasingly uncertain global environment. However, given Turkey’s current account deficit, the corporate sector’s large open foreign exchange position, lower TRY interest rates and the contraction in external financing and foreign direct investment prospects, concerns about the outlook for the TRY will make the situation worse.

The Turkish economy has also been and will continue to be vulnerable to political instability. Political uncertainty within Turkey, including actions by terrorist and ethnic separatist groups, along with armed conflict and the threat of armed conflict in neighboring countries, such as Iran, Syria, Georgia and Armenia, historically have been among the potential risks associated with investment in Turkish companies. The instability surrounding the situation in Iraq, as well as tension in and involving the Kurdish regions of northern Iraq, could also have negative economic consequences for us. In 2009, a high profile coup indictment case and general tension in the Middle East have been and are expected to continue to be important political issues.

The USD/TRY exchange rate was very volatile in 2008 due to developments in the global markets as well as to Turkish politics. At the end of 2008, the TRY had depreciated 30% against the USD. As global sentiment continues to weigh on the currencies of Emerging Markets with external financing gaps, the TRY is likely to depreciate further. Given Turkey’s current account deficit, its corporate sector’s large open foreign currency position and lower interest rates under the current tight external financing and foreign direct investment prospects, concerns about the outlook for the TRY will not be alleviated. Inflation increased to 10.06% (consumer price index) for the year ended December 31, 2008, which is significantly higher than the 2008 target rate of 4.0%. In 2009, annual inflation is expected to fall due to weakening aggregate demand conditions, lower commodity prices and a favorable base effect, despite the exchange rate pass-through from a weaker Turkish Lira.

Turkey’s current account deficit totaled $41.4 billion in 2008 compared to $38.2 billion in 2007. This deficit amounted to 5.5% and 5.7% of Gross Domestic Product (“GDP”) in 2008 and 2007, respectively, according to a new national accounting system. However, the current account deficit is likely to decrease rapidly as the fall in oil and commodity prices and weak domestic demand bring the price of imports down faster than exports.

In 2008, net foreign direct investment amounted to $15.1 billion, a decline of 24.1% as opposed to 2007. Net foreign direct investment inflows financed 36% of the current account deficit, compared to approximately 52% in 2007. Turkey’s Net Public Debt to GDP ratio decreased to 28.6% in 2008 from 29.5% in 2007, according to the new national account system.

Taxation Issues in Telecommunications Sector

Under current Turkish tax laws, there are several taxes imposed on the services provided by telecommunications operators in Turkey. These taxes are charged to subscribers by GSM operators and remitted to the relevant tax authorities. They may be charged upon subscription, on an annual basis or on an ad valorem basis on the service fees charged to subscribers.

The following are the most significant taxes imposed on our telecommunications services:

Special Communications Tax

The Turkish government imposed a special 25% communications tax on mobile telephone services as part of a series of new taxes levied to finance public works required to respond to the earthquakes that struck Turkey’s Marmara region in 1999. This tax is paid by mobile users and collected by GSM operators. The special communications tax on new subscriptions was TRY 26.0 (equivalent to $15.6 as of April 1, 2009) and TRY 27.8 (equivalent to $16.7 as of April 1, 2009) in 2007 and 2008, respectively. As of January 1, 2009, the special communications tax on new subscriptions levied is TRY 31.1 (equivalent to $18.6 as of April 1, 2009). The tax has had a correlative negative impact on mobile usage.

Under a new Law, No. 5838, which became effective on March 1, 2009, wired, wireless and mobile internet service providers are subject to a special 5% communications tax (previously such tax was 25%). Other than mobile internet services, all mobile telecommunication services remain subject to a special 25% communications tax. The tax collected from subscribers in one calendar month is remitted to the tax authorities within the first 15 days of the following month.

Value Added Tax (“VAT”)

Like all services in Turkey, services provided by GSM operators are subject to VAT, which is 18% of the service fees charged to subscribers. We declare VAT to the Ministry of Finance within 24 days and remit VAT paid by our subscribers within the first 26 days of the month following when the tax was incurred, after the offset of input VAT incurred by us.

We have calculated our VAT responsibility on ongoing license fees since June 2003, and it has not been recalculated, pursuant to a decision of the Istanbul Tax Court, since February 2004.

Reverse charge VAT is calculated on the invoices issued by foreign GSM operators. VAT responsibility is calculated on the mark-up amount on subscribers’ invoices for roaming services.

License and Annual Utilization Fees

According to Article number 46 of the Electronic Communications Law, subscribers registered in the system are subject to both license and annual utilization fees.

The license fee is paid once on the subscription for wireless equipment. As of January 1, 2009, the license fee is TRY 12.0 (equivalent to $7.2 as of April 1, 2009). For postpaid subscribers, the license fee is divided into the number of months remaining in the year in which it is payable and charged to the subscriber in equal installments.

The amount of the annual utilization fee depends on whether a subscriber is postpaid or prepaid. For postpaid subscribers, the annual utilization fee is the same amount as the license fee, TRY 12.0 (equivalent to $7.2 as of April 1, 2009), and is charged to subscribers in 12 equal monthly installments. In addition, GSM operators pay monthly charges to the government. For prepaid subscribers, the annual utilization fee is calculated by multiplying the number of registered prepaid subscribers by the annual utilization fee. The calculated bulk annual utilization fee is paid by the GSM operators the following year on the last business day in February.

Special Consumption Tax

The special consumption tax is a tax on prescribed goods, which includes mobile phones. The special consumption tax is charged on mobile phones either when they are imported or when they are sold by Turkish manufacturers. The special consumption tax on mobile phones (mobile phones are legally defined as “low power mobile wireless equipment”) is currently 20%.

For a description of various tax related disputes to which we are party, see “Item 8.A. Consolidated Statements and Other Financial Information—Legal Proceedings.”

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with IFRS as issued by the IASB.

The preparation of our consolidated financial statements in accordance with IFRS as issued by the IASB require us to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. On an ongoing basis, we evaluate our estimates and underlying assumptions, including those related to revenue recognition, useful lives or expected patterns of consumption of the future economic benefits embodied in depreciable assets, bad debts, income taxes, contingencies, and litigation. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A summary of our significant accounting policies is set forth in Note 3 to our consolidated financial statements. We have identified the following critical accounting policies and estimates utilized by us in preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue in accordance with International Accounting Standard No:18 “Revenue”.

Our revenues are mainly derived from communication fees, commission fees on betting business, monthly fixed fees, sales of simcards, call center revenues and revenues on handsets. Communication fees consist of charges for calls that originate or terminate on our mobile communications network, including international roaming, and are based on minutes of actual usage of service.

Per-minute communication fees vary according to the subscriber’s service package. Such fees are recognized at the time the services related to the betting games are rendered. Monthly fixed fees are charged to each postpaid subscriber in a specified monthly amount that varies according to the subscriber’s service package, regardless of actual use of our mobile communications network services. Monthly fixed fees are recognized on monthly basis when billed. Call center revenues consist of revenues for call center services provided by our call center subsidiary to affiliates and third party companies. Call center revenues are recognized at the time services are rendered.

We recognize simcard sales as revenue upfront upon delivery to subscribers, net of returns, discount and rebates. Simcard costs are also recognized upfront upon sale of the simcard to the subscriber.

In connection with our ongoing promotional campaigns, both postpaid and prepaid services may be bundled with handset and other services and these bundled services and products involve consideration in the form of fixed fee or a fixed fee coupled with continuing payment stream. Campaigns for both postpaid and prepaid services may be bundled with other services. Deliverables are accounted for separately where a market for each deliverable exists and if the recognition criteria are met individually. Costs associated with each deliverable are recognized at the time of revenue recognized. The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. Revenues allocated to handsets given in connection with campaigns are recognized under other revenues. Our revenues depend on the number of subscribers, call volume, and tariff pricing.

As is the case throughout Europe, airtime charges are generally paid only by the initiator of the call, except when a subscriber travels outside Turkey, in which case we charge the subscriber for a portion of the incoming call.

Commission fees on our betting business are recognized at the time all services related to the games are fully rendered. Under the head agency agreement, we are obliged to undertake any excess payout, which is presented on net basis with the commission fees.

Useful Life of Property, Plant and Equipment, Intangible assets

Almost all of our operational tangible and intangible fixed assets (excluding GSM and other operating licenses, brand name, customer base and customs duty and VAT tax exemption rights) are depreciated over an eight-year term, which represents our best estimate of their useful life. If the technology we use had rapidly changed, causing its estimated useful life to decrease by one year to seven years, the annual depreciation expense on our operational fixed assets for 2008 would have decreased by $80.1 million. However, if the estimated useful life of our fixed assets had increased to nine years, annual depreciation expenses on our operational fixed assets for 2008 would have increased by $131.2 million.

Impairment of long-lived assets

When events or circumstances arise that require us to test our long-lived assets for impairment, the recoverable amount of the assets is estimated. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets. On an ongoing basis, we review indicators of potential impairment, which include significant adverse changes in the legal or business climate that could affect the value of long-lived assets, plans to dispose of a long-lived asset before the end of its previously estimated useful life, and a significant decrease in the market price of a long-lived asset. We also monitor technological changes or decreases in the number of subscribers, which could cause impairment of our long-lived assets.

In assessing the recoverability of our fixed and intangible assets, we make judgments and assumptions about the estimated future cash flows and other factors. Our estimates of future cash flows are subject to a significant number of variables, including the number of subscribers, average revenue per subscriber, inflation, devaluation, competition, and other economic factors. In addition, our discount rate is also based on a number of factors, such as the risk-free rate of interest, which may change over time.

During the years ended December 31, 2008, 2007 and 2006, we did not identify any impairment and, accordingly, our financial statements for such years do not include any adjustments for the impairment of long-lived assets.

Estimation of allowance for doubtful accounts

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amount of allowance for doubtful accounts. To make these estimates and assumptions, we analyze our receivables and historical bad debts, subscriber credit worthiness and current social and economic trends.

If our estimates or assumptions are proven to be incorrect for any reason, we may not have a sufficient allowance to cover our bad debts. Historically, our provision for doubtful accounting has been sufficient to account for our bad debts.

We believe that the accounting estimate related to the establishment of an allowance for doubtful accounts is a critical accounting estimate because the evaluation is inherently judgmental, and therefore requires the use of significant assumptions about expected subscriber default amounts that may be susceptible to significant changes. Such changes in the estimates regarding the allowance for bad debts could have a significant impact on our consolidated financial statements.

Our bad debt expense as a percentage of revenues increased by approximately 68% to 0.94% of revenues in 2008 from 0.56% of revenues in 2007. If our bad debt expense as a percentage of revenues increased to 1.5% of revenues, an additional provision for bad debts of approximately $38.9 million would be required.

Liabilities arising from litigation

We are involved in various claims and legal actions arising in the ordinary course of business. A provision is recognized in our balance sheet if we currently have a legal or constructive obligation as a result of a past event that can be reliably estimated and that is likely to require an outflow of economic benefits to settle the obligation. Our current estimated liability related to some of our pending litigation is based on claims for which our management can estimate the amount and range of loss. We evaluate our pending litigation on a continual basis to determine if any developments during the course of the litigation require a provision to be made. Due to the complexity of the Turkish legal system, it is often difficult to accurately estimate the final outcome of a lawsuit. This as well as other variables can affect the time and amount we provide for certain legal actions.

Our accruals for legal claims are, therefore, subject to estimates made by us, which are subject to change as the status of our legal cases evolves over time. Such a revision of potential liability in our estimates could materially impact our consolidated financial condition, results of operations, and liquidity.

Income taxes

The calculation of our total tax charge involves a degree of estimation and judgment with respect to certain items whose tax treatment cannot be finally determined until a resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax liability in each of the jurisdictions and countries in which we operate. This process involves estimating the actual current tax exposure and assessing temporary differences resulting from differing treatment of items, such as deferred revenue and reserves for tax and accounting purposes. We assess the likelihood that our deferred tax assets will be recovered from future taxable income, and, to the extent the recovery is not considered probable, the deferred asset is adjusted accordingly.

Income tax expense comprises current and deferred taxes.

The recognition of deferred tax assets is based upon whether it is probable that future taxable profits will be available, against which the temporary differences can be utilized. Recognition, therefore, involves estimates regarding the future financial performance of the particular legal entity in which the deferred tax asset has been recognized.

5.A Operating Results

Our audited consolidated financial statements as of December 31, 2008 and for each of the years in the three-year period ended December 31, 2008 included in this annual report have been prepared in accordance with IFRS as issued by the IASB.

Overview of Business

Turkcell, a joint stock company organized and existing under the laws of the Republic of Turkey, was formed in 1993 and commenced operations in 1994. We operate under a 25-year GSM license, which we were

granted in April 1998 upon payment of an upfront license fee of $500 million. Under our license, we pay the Undersecretariat of Treasury (the “Turkish Treasury”) a monthly ongoing license fee equal to 15% of our gross revenue. Of such fee, 10% is paid to the Ministry of Transportation and Communications of Turkey (“Turkish Ministry”) as the universal services fund. Since June 2004, Simcard sales, outgoing roaming revenues, and late payment interest charges have been included in the definition of gross revenue and included in the monthly calculation of ongoing license fees. In 2005, following the codification of a law concerning the regulation of privatization, the gross revenue description used for the calculation of treasury shares was changed. According to such regulation, accrued interest charged for late payments, taxes, such as VAT, and other expenses are excluded from the description of gross revenue. In light of such changes, we applied to the ICTA to revise the related articles of the amended agreement and completed certain necessary procedures. Danistay, the highest administrative court, approved the agreement on March 10, 2006. The resulting definition of gross revenue for the ongoing license fee has been effective since March 10, 2006.

We also operate under interconnection agreements with other operators that allow us to connect our networks with those operators to enable the transmission of calls to and from our mobile communications system through existing digital fixed telephone switches. For example, we have an interconnection agreement with Turk Telekom that provides for the interconnection of our network with Turk Telekom’s fixed-line network. Under our agreement with Turk Telekom, as amended, we pay Turk Telekom an interconnection fee per call based on the type and length of the call for calls originating on our network and terminating on Turk Telekom’s fixed-line network, as well as fees for other services. We also collect an interconnection fee from Turk Telekom for calls originating on their fixed-line network and terminating on our network. We also have interconnection agreements with Vodafone and Avea pursuant to which we have agreed, among other things, to pay interconnection fees to the them for calls originating on our network and terminating on theirs, and they have agreed to pay interconnection fees for calls originating on their networks and terminating on our networks.

We believe that the buildout of our network in Turkey is substantially completed. As of December 2008, our network covered 100% of the Turkish cities with a population of 1,000 or more and substantially all of Turkey’s Mediterranean and Aegean coastline. We currently meet the coverage requirements of our license.

Our subscriber base has grown substantially since we began operations in 1994. At year-end 1994, we had 63,500 subscribers. By year-end 2008, that number had grown to 37 million.

According to the operators’ announcements, there were approximately 65.9 million subscribers in the Turkish GSM market as of December 31, 2008. In addition, the penetration rate in such market was 92% as of December 31, 2008. Despite the increasingly competitive environment, we achieved 4.5% growth in our subscriber base, which resulted in a market share of 56% for the year ended December 31, 2008, according to operators’ announcements. The 4.5% increase in our subscriber base was supported by our focus on postpaid and corporate segment with attractive acquisition and retention campaigns as well as promotions for switches from prepaid to postpaid subscriptions. On the channel front, we made revisions to our existing subdealer network and the premium structure to increase availability of Turkcell brand and concentrate more on prepaid subscribers. Our prepaid mobile service increases our market penetration and limits our credit risk. This service permits access to our GSM services to subscribers who would like to avoid monthly billing for our services. As of December 31, 2008, we had 29.5 million prepaid and 7.5 million postpaid subscribers in our Turkish GSM network.

In spite of the negative macroeconomic indicators in Turkey, our average MoU in Turkey has increased 26% to 95.9 minutes in 2008 from 76.3 minutes in 2007, as a result of our initiatives aimed at creating a “win-win” situation by incentivizing usage through bundled, free minute offers while maintaining a value generation focus. Despite the dilutive impact of a growing prepaid subscriber base, the adverse impact of current macroeconomic developments, and a downward revision in interconnection rates, our average revenue per user in Turkey increased to $14.5 in 2008 from $14.3 in 2007. In 2009, we believe that usage will increase as our successful incentives and loyalty programs continue; however, we expect ARPU in TRY terms to remain flat.

Churn rate is the percentage calculated by dividing the total number of subscriber disconnections during a period by the average number of subscribers for the same period. For these purposes, we define “average number of subscribers” as the number of subscribers at the beginning of the period plus one half of the total number of gross subscribers acquired during the period. Churn refers to subscribers that are both voluntarily and involuntarily disconnected from our network. Under our disconnection process, postpaid subscribers who do not pay their bills are disconnected and included in churn upon the commencement of a legal process to disconnect them, which commences approximately 180 days from the due date of the unpaid bill. Pending disconnection, non-paying subscribers are suspended from service (but are still considered subscribers) and receive a suspension warning, which in some cases results in payment and reinstatement of service. Prepaid subscribers who do not reload units for a period of 210 days are disconnected and cannot reuse their numbers. Our churn rate for operations in Turkey was 23.8% for the year ended December 31, 2008 compared to 19.9% for the year ended December 31, 2007. Given our large subscriber base and intensified competition in the Turkish market due to MNP, our churn rate increased by 4 percentage points in line with our expectations. In 2009, we expect a higher churn rate than in 2008 due to increasing competition in this slowly growing market that has been adversely affected by the significant global downturn.

We have a bad debt provision in our consolidated financial statements for non-payments and disconnections that amounted to $196.6 and $181.7 million as of December 31, 2008 and December 31, 2007, respectively, which we believe is adequate.

International and Other Domestic Operations

In addition to our businesses in Turkey, we also have telecommunications operations in Ukraine, the Turkish Republic of Northern Cyprus and Belarus.

Belarussian Telecom

In accordance with the share purchase agreement, Beltel agreed to grant an option to the minority shareholder for it to sell its stake of 20% to Beltel at fair value after 5 years from the closing date of the transaction. We recognized a liability in relation to the put option and derecognized minority interest.

Belarussian Telecom’s results of operations for the four months ended December 31, 2008, which amounted to a loss of $13.9 million, are included in our consolidated financial statements as of December 31, 2008. Our management estimates that if the acquisition had occurred on January 1, 2008, consolidated revenue would have been $6,971.1 million and consolidated profit attributable to equity holders of the Company would have been $1,814.4 million.

The goodwill recorded on the acquisition is attributable mainly to the synergies expected to be achieved from integrating Belarussian Telecom into the Turkcell group’s telecommunications business in the region.

Superonline

On May 21, 2008, Turktell Bilisim Servisleri A.S. (“Turktell”), our 100% owned subsidiary, signed an agreement with Cukurova Group to acquire its 100% stake in Superonline, which provides internet and telecommunications services in exchange for our 55% share in Bilyoner Interaktif Hizmetler AS (“Bilyoner”). The transaction closed on September 23, 2008. We accounted for the acquisition of Superonline in accordance

with IFRS 3, the consideration paid being the fair value of Bilyoner’s shares. The Group recognized a gain on disposal of Bilyoner shares in the consolidated income statement based on the fair value of Bilyoner’s shares.

Superonline’s results of operations for the three months ended December 31, 2008, which amounted to a loss of $4.0 million, are included in our consolidated financial statements. Management estimates that if the acquisition had occurred on January 1, 2008, consolidated revenue would have been $7,001.2 million and consolidated profit attributable to equity holders of the Company would have been $1,829.5 million. We expect that Tellcom will, in the coming months, merge with Superonline.

A-Tel

A-Tel is accounted for under the equity method. Results of the operations for the year ended December 31, 2008 are included in the accompanying consolidated financial statements using an ownership rate of 50% as at and for the year ended December 31, 2008.

Potential Investments

For a description of, and additional information regarding, our international and other domestic operations, see “Item 4.B. Business Overview”.

Revenues

In Turkey, we and other mobile communications operators have entered into interconnection agreements which set out the terms and conditions regarding the pricing terms as well as the periodical revision of such terms. As a result of the significant market power designation in the “GSM Mobile Call Termination Services Market”, our company, as well as Avea and Vodafone, is required to provide interconnection services on a cost-based basis. Due to this designation the ICTA annually reviews our prices for interconnection services and has the authority to publish “Standard Reference Interconnection Tariffs”, which recommend call termination fees for us. The current rate recommended for Turkcell is TRY 0.091 (approximately $0.055 as of April 1, 2009). On March 25, 2009, the ICTA determined new interconnect rates as TRY 0.0655 (approximately $0.039 as of April 1, 2009) effective from May 1, 2009.

These “Standard Reference Interconnection Tariffs” are not necessarily directly applicable to our current or future interconnection agreements. However, if we are unable to reach an agreement with other parties on prices for interconnection services, the ICTA may oblige us to apply the “Standard Reference Interconnection Tariffs”,

as it has done in connection with our previous disputes with Turk Telekom, Avea, Vodafone and LDTS operators. We have recognized interconnection revenues and cost pursuant to the “Standard Interconnection Reference Tariffs” since April 1, 2008.

In previous periods, disagreements existed between us and the other mobile communications operators regarding the revision of pricing terms of the interconnection agreements. In addition, there is a disagreement with Turk Telekom about international calls. See “Item 8.A. Consolidated Statements and Other Financial Information—Legal Proceedings” and Note 32 to our consolidated financial statements in this Form 20-F.

Inteltek, our betting subsidiary, is operating pursuant to a Head Agency Agreement and Central Betting System Operation and Risk Management Agreements (“CBS Agreement”) signed with a governmental body. The Head Agency Agreement and CBS Agreement entitle Inteltek to receive up to a maximum of 7% of gross takings of fixed odds betting games and 4.3% of gross revenues on para-mutual and fixed odds betting games. Under the Head Agency Agreement, Inteltek is obligated to payout any excess amounts, and thus its revenues are presented on a net basis with the commission revenues.

Inteltek signed a contract on July 30, 2002 which provides for the installation, support and operation of an on-line central betting system as well as maintenance and support for the provision of football betting games. The Central Betting System Contract was scheduled to expire on March 30, 2008.

Inteltek signed another contract with Genclik ve Spor Genel Mudurlugu (“GSGM”) on October 2, 2003 which authorized Inteltek to establish and operate a risk management center and become head agent for fixed odds betting. The Fixed Odds Betting Contract was scheduled to expire in October 2011. However, in relation to the lawsuits related to the operations of Inteltek, GSGM ceased the implementation of the Fixed Odds Betting Contract starting from March 2007. Following this annulment decision, Spor Toto and Inteltek signed a new Fixed Odds Betting Contract on March 15, 2007, with less-advantageous conditions compared to previous contract signed in 2003, that expired on March 1, 2008.

Inteltek signed a new Fixed Odds Betting Contract with Spor Toto, which took effect on March 1, 2008. At the same time, Inteltek signed a new Central Betting System Contract with Spor Toto, which took effect on March 31, 2008 as having the same conditions with the current contract but to be valid for one year utmost until the operation started as a result of the new tender.

On August 28, 2008, Spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting in sports games. Inteltek, gave the best offer for the tender. On August 29, 2008, Inteltek signed a contract with Spor Toto, receiving the rights to run the sport betting business for the next ten years. New commission rate, which is 1.4% of gross takings (until March 1, 2009, the commission rate was 7% of gross takings), is applicable as of March 2009.

Operating Costs

Direct Cost of Revenues

Direct cost of revenues includes ongoing license fees, transmission fees, base station rents, billing costs, cost of Simcards sold, depreciation and amortization charges, repair and maintenance expenses directly related to services rendered, roaming charges paid to foreign mobile communications operators for calls made by our subscribers while outside Turkey, interconnection fees mainly paid to Turk Telekom, Vodafone and Avea, handset costs offered as part of our loyalty programs and wages, salaries, and personnel expenses for technical personnel.

Administrative Expenses

Administrative expenses consist of fixed costs, including company cars, office rent, office maintenance, travel, insurance, consulting, collection charges, wages, salaries, and personnel expenses for non-technical, non-marketing, and non-sales employees and other overhead charges. Our administrative expenses also include bad debt expenses of our postpaid subscribers.

Selling and Marketing

Selling and marketing expenses consist of customer relations, sales promotions, dealer activation fees, advertising, prepaid frequency usage fees, wages, salaries, and personnel expenses of sales and marketing related employees and other expenses, including travel expenses, office expenses, insurance, company car expenses, and training and communication expenses.

Results of Operations

The following table shows information concerning our consolidated statements of operations for the years indicated:


	For the years ended December 31,
	2008		2007		2006
(US$ millions)
Revenues	6,970.4		6,328.6		4,700.3
Direct Cost of Revenues	(3,409.0	)	(3,103.4	)	(2,627.9	)

Gross Profit	3,561.4		3,225.2		2,072.4
Administrative expense	(309.3	)	(252.8	)	(154.9	)
Selling and Marketing expense	(1,351.7	)	(1,138.2	)	(827.5	)
Other income / (expense)	(3.9	)	(14.7	)	1.6

Results from operating activities	1,896.5		1,819.5		1,091.6
Finance expense	(136.8	)	(551.1	)	(108.0	)
Finance income	442.1		308.4		184.0

Net finance income/(costs)	305.3		(242.7	)	76.0
Share of profit of equity accounted investees	103.0		64.9		78.6

Profit before income taxes	2,304.8		1,641.7		1,246.2
Income tax expense	(549.8	)	(322.4	)	(413.2	)

Profit for the period	1,755.0		1,319.3		833.0
Attributable to:
Equity holders of the Company	1,836.8		1,350.2		875.5
Minority interest	(81.8	)	(30.9	)	(42.5	)

Profit for the period	1,755.0		1,319.3		833.0

The following table shows certain items in our consolidated statement of operations as a percentage of revenue:


	For the years ended December 31,
	2008		2007		2006
Statement of Operations Data (% of revenue)
Revenues
Communication fees	94.4		94.4		93.8
Commission fees on betting business	2.5		2.9		3.7
Other revenue	3.1		2.7		2.6
Total revenue	100.0		100.0		100.0
Direct cost of revenues	(48.9	)	(49.0	)	(55.9	)
Gross margin	51.1		51.0		44.1
Administrative expense	(4.4	)	(4.0	)	(3.3	)
Selling and marketing expenses	(19.4	)	(18.0	)	(17.6	)
Other operating income/(expense)	(0.1	)	(0.2	)	0.0
Results from operating activities	27.2		28.8		23.2

Segment Overview

Segment information is presented in respect of our geographical and business segments. The primary format, geographical segments, is based on the dominant source and nature of our risk and returns as well as our internal reporting structure. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of the entities. Our main geographical segments are Turkey, Ukraine, Belarus and the Turkish Republic of Northern Cyprus.


	Turkey						Ukraine						Turkish Republic of Northern Cyprus			Belarus				Other					Eliminations						Consolidated
	2008		2007		2006		2008		2007		2006		2008	2007	2006	2008		2007	2006	2008		2007		2006	2008		2007		2006		2008		2007		2006
(US$ million)
Total external revenues	6,456.1		5,991.9		4,544.5		436.7		252.8		87.9		77.1	83.9	67.9	0.5		—	—	—		—		—			—		—		6,970.4		6,328.6		4,700.3
Inter-segment revenue	4.2		5.3		1.2		2.0		1.2		—		9.1	6.0	5.4	—		—	—	—		—		—	(15.3	)	(12.5	)	(6.6	)	—		—		—

Total segment revenue	6,460.3		5,997.2		4,545.7		438.7		254.0		87.9		86.2	89.9	73.3	0.5		—	—	—		—		—	(15.3	)	(12.5	)	(6.6	)	6,970.4		6,328.6		4,700.3

Segment result	1,959.2		1,928.6		1,236.5		(68.6	)	(108.0	)	(154.9	)	23.4	13.6	7.2	(16.1	)	—	—	(0.2	)	(0.1	)	—	2.7		—		1.2		1,900.4		1,834.2		1,090.0
Unallocated income/(expense), net																															(3.9	)	(14.7	)	1.6

Results from operating activities																															1,896.5		1,819.5		1,091.6

Net finance costs																															305.3		(242.7	)	76.0
Share of profit/(loss) of equity accounted investees	(48.1	)	(44.0	)	(2.7	)														151.1		108.9		81.3							103.0		64.9		78.6
Gain on monetary position, net Income tax expense																															(549.8	)	(322.4	)	(413.2	)

Profit for the period																															1,755.1		1,319.3		833.0

In presenting information on the basis of business segments, segment revenue is based on the operational activity of the entities. Our main business segments are telecommunications and betting.


	Telecommunications			Betting			Other Operations			Consolidated
	2008	2007	2006	2008	2007	2006	2008	2007	2006	2008	2007	2006
(US $ million)
Total external revenues	6,776.2	6,130.4	4,517.0	176.2	181.3	172.4	18.0	16.9	10.9	6,970.4	6,328.6	4,700.3

Turkey

Total revenues generated in Turkey increased by 8% to $6,460.3 million as of December 31, 2008, from $5,997.2 million as of December 31, 2007, due to partial impact of the higher usage, subscriber growth and upward price adjustments.

The segment result of Turkey remained almost stable and was realized at $1,959.2 million where it was $1,928.6 million in 2007. The increase in revenues was offset by the increase in direct cost of revenues and selling and marketing expenses in nominal terms.

Total revenues generated in Turkey increased by 32% to $5,997.2 million as of December 31, 2007 from $4,545.7 million in 2006 due to higher usage, subscriber growth, appreciation of the TRY against U.S. Dollars and upward price adjustments.

The segment result of Turkey increased by 56% to $1,928.6 million in 2007 from $1,236.5 million in 2006 due to strong revenue growth coupled with a decrease in direct cost of revenues as a percentage of revenues such as depreciation and amortization and ongoing license fees despite higher sales and marketing and administrative expenses.

Ukraine

Astelit, in which we hold a 55.0% stake through Euroasia, has operated in Ukraine since February 2005 under the brand “life:)”. Since its inception in February 2005, Astelit has worked on establishing network coverage to provide high quality services in Ukraine. As of December 31, 2008, Astelit had established more than 7,175 base stations to ensure a rapid roll-out of its infrastructure, which currently covers approximately 93.8% of the Ukrainian’s population. “life:)” was the first in the market to introduce EDGE and GPRS services, which provide the highest data transfer speed available in the GSM network. Astelit has also focused on establishing brand awareness and values as well as growing its subscriber base. Through its distribution channel of approximately 34,600 sales points and high brand recognition in the Ukrainian market, Astelit’s subscriber base grew by 27% to 11.2 million by the end of December 31, 2008 from 8.8 million by the end of December 31, 2007. In 2008, segment revenue of Ukraine increased by 73% in 2008 to $438.7 million from $254.0 million in 2007, mainly due to the increase in its customer base and higher usage.

The segment results of Ukraine improved by 36% to a loss of $68.6 million for the year ended December 31, 2008, from a loss of $108.0 million in 2007, mainly due to the increase in revenues despite higher operational costs such as depreciation and amortization charges, interconnection costs due to higher volume of calls to other operators, higher radio cost as a result of the increase in base stations and higher selling expenses due to increase in selling activities.

Astelit’s subscriber base grew 57% to 8.8 million by the end of December 31, 2007 from 5.6 million in 2006 and as a result, segment revenue in Ukraine increased by 189% in 2007 to $254.0 million from $87.9 million in 2006.

Like the increase in segment revenue, the segment results in Ukraine improved by 30% from a loss of $154.9 million for the year ended December 31, 2006 to a loss of $108 million for the year ended December 31, 2007 mainly due to the increase in subscriber base despite higher operational costs such as interconnection costs due to higher volume of calls to other operators.

The Turkish Republic of Northern Cyprus

Kibris Telekom, a wholly owned subsidiary, started providing services to its subscribers in the Turkish Republic of Northern Cyprus on August 3, 1999. Kibris Telekom has increased its range of services provided based on mobile voice and data transfer and quality, thus increasing the number of its subscribers as well as the level of its investments over the years. As of December 31, 2008, the number of Kibris Telekom’s subscribers was 0.3 million.

Segment revenue of the Turkish Republic of Northern Cyprus remained almost stable at $86.2 million as of December 31, 2008 compared to $89.9 million as of December 31, 2007.

Segment results of the Turkish Republic of Northern Cyprus increased by 72% to $23.4 million as of December 31, 2008, from $13.6 million as of December 31, 2007 mainly due to the decrease in the ongoing license fee related to Mobile Communication License Agreement signed by Kibris Telekom on April 27, 2007 under which Kibris Telekom agreed to pay the tax authorities of Turkish Republic of Northern Cyprus an ongoing license fee on a monthly basis equal to 15% of gross revenues instead of revenue sharing of 50%.

Segment revenue of the Turkish Republic of Northern Cyprus increased by 23% to $89.9 million as of December 31, 2007, from $73.3 million in 2006 mainly due to the increase in the number of subscribers by 9% and 7% depreciation of TRY against U.S. Dollars on average terms.

Segment results of the Turkish Republic of Northern Cyprus increased by 89% to $13.6 million as of December 31, 2007, from $7.2 million in 2006 mainly due to the increase in revenues and decrease in ongoing license fee as a result of the renewed license agreement signed on April 27, 2007.

Betting Business

Our betting business is comprised of the operations of Inteltek. Our betting business was also comprised of Bilyoner until the end of September 2008, when we sold our 55% stake in Bilyoner, through our wholly-owned subsidiary Turktell, to Demir Toprak A.S. in order to purchase all shares of Superonline.

A significant portion of the segment revenue is generated by Inteltek, our 55% owned subsidiary.

Revenues of the betting business decreased by 3% to $176.2 million as of December 31, 2008 from $181.3 million as of December 31, 2007, primarily due to decrease in commission rate from 12% to 7% starting from March 15, 2007.

Revenues of the betting business increased by 5% to $181.3 million as of December 31, 2007 from $172.4 million as of December 31, 2006, mainly due to the appreciation of the TRY against U.S. Dollars by 9% despite the decrease in commission fees on betting business from 12% to 7% starting from March 15, 2007 with the renewed contract.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

We had 37.0 million GSM subscribers in Turkey, with 29.5 million prepaid subscribers as of December 31, 2008, compared to 35.4 million GSM subscribers in Turkey, with 29.0 million prepaid subscribers, as of December 31, 2007. During 2008, we added approximately 1.6 million new Turkish GSM subscribers.

In Ukraine, we had 11.2 million and 8.8 million subscribers as of December 31, 2008 and 2007, respectively. During 2007, we added approximately 2.4 million new Ukrainian GSM subscribers.

Revenues

Total revenues for the year ended December 31, 2008 increased 10% to $6,970.4 million from $6,328.6 million in 2007. The increase in revenues is mainly due to partial impact of the higher usage and subscriber growth combined with the upward price adjustments, as well as the positive impact of our consolidated subsidiaries.

Revenues from communication fees for the year ended December 31, 2008 increased by 10% to $6,576.9 million from $5,976.9 million in 2007. The increase in communication fees resulted from the growth in the subscriber base and improved usage combined with the upward price adjustments.

Commission revenues from our betting business decreased to $176.2 million for the year ended December 31, 2008, as compared to $181.3 million for the year ended December 31, 2007, mainly due to decrease in commission rate from 12% to 7% starting from March 15, 2007.

Direct cost of revenues

Direct cost of revenues increased 10% to $3,409.0 million for the year ended December 31, 2008 from $3,103.4 million in 2007, primarily due to the increase in ongoing license fees, wages and salaries, radio and interconnection costs despite a decrease in depreciation and amortization.

Ongoing license fees and universal funds paid to the Turkish Treasury and Turkish Ministry increased by 12% to $975.7 million for the year ended December 31, 2008, from $871.4 million in 2007, primarily due to an increase in gross revenues and deduction of sales discounts of 2006 from ongoing license fee calculation base in 2007. Ongoing license fees and universal service funds expenses increased by 0.2 percentage points as a percentage of revenues primarily due to absence of one-off ongoing license fee impact recorded in 2007 in regard to sales discounts in 2006 offset by positive effect of consolidated subsidiaries on revenues.

Depreciation and amortization charges decreased by 14% to $679.9 million for the year ended December 31, 2008 from $793.0 million in 2007, primarily due to fully depreciated fixed assets. The amortization expense for our GSM license and other telecommunication operating licenses was $57.0 million and $50.3 million for the years ended December 31, 2008 and 2007, respectively.

Interconnection and termination costs increased by 14% to $496.1 million for the year ended December 31, 2008 from $434.3 million in 2007 due to an increase in calls terminated by other operators despite decreases in interconnection tariffs.

Transmission costs, site costs and maintenance costs increased by approximately 25% to $228.2 million for the year ended December 31, 2008 from $183.6 million in 2007, primarily due to the increase in transmission costs mainly as a result of the increase in the number of leased transmission lines in 2008 as compared to 2007. In addition, uncapitalizable antenna site costs and expenses increased 25% to $283.4 million for the year ended December 31, 2008 from $226.2 million in 2007, primarily due to an increase in radio base station number, electricity prices and maintenance and rent expenses of radio base stations.

Wages, salaries and personnel expenses for technical personnel increased by 39% to $270.6 million for the year ended December 31, 2007 from $194.2 million in 2007, primarily due to an increase in the number of employees and a periodic increase in salaries.

Roaming expenses increased by 9% to $104.8 million for the year ended December 31, 2008 from $96.4 million in 2007 due to increased duration in more expensive zones in 2008.

Billing costs increased by 12% to $46.0 million for the year ended December 31, 2008 from $41.2 million in 2007, primarily due to an increase in the number of postpaid subscribers and increase in postage fees.

As a percentage of revenues, the direct cost of revenues remained stable at 49% for the year ended December 31, 2008 as compared to 2007. Lower depreciation and amortization expenses (2.8%) as a percentage of revenues are offset by higher wages and salaries (0.8%), radio costs (0.5%), ongoing license fee (0.2%), interconnection costs (0.3%), non-revenue based operational expenses (0.3%) and other operational expenses (0.7%)

Gross profit margin was 51% for the year ended December 31, 2008 which was flat compared to 2007.

Administrative expenses

General and administrative expenses increased by 22% to $309.3 million for the year ended December 31, 2008 from $252.8 million in 2007 primarily due to an increase in bad debt expenses as a result of an increase in the postpaid subscriber base. Additionally, an increase in wages and salaries due to an increase in the number of employees and a periodic increase in salaries, as well as an increase in consultancy and legal expenses, have had an increasing impact on general and administrative expenses. As a percentage of revenues, general and administrative expenses increased to 4.4% for the year ended December 31, 2008 from 4.0% in 2007 as a result of the increase in bad debt expenses.

Wages, salaries and personnel expenses for non-technical and non-marketing employees increased by 7% to $111.7 million for the year ended December 31, 2008 from $104.9 million in 2007, primarily due to an increase in the number of employees and a periodic increase in salaries.

Bad debt expenses increased by 87% to $65.7 million for the year ended December 31, 2008 from $35.1 million in 2007, primarily due to an increase in the postpaid subscriber base. We provided an allowance of $196.6 million and $181.8 million for doubtful receivables for the years ended December 31, 2008 and 2007, respectively, based upon our past experience and estimates.

Consulting expenses increased by 24% to $34.9 million for the year ended December 31, 2008 from $28.1 million in 2007, primarily due to the consulting services related to new international investment projects and lawyer consultancy in 2008.

Other expenses, including collection expenses, increased by 15% to $97.0 million for the year ended December 31, 2008 from $84.7 million in 2007, primarily due to the increase in legal expenses as a result of increase in the number of cases initiated for doubtful receivables from subscribers.

Selling and marketing expenses

Selling and marketing expenses increased by 19% to $1,351.7 million for the year ended December 31, 2008 from $1,138.2 million in 2007, primarily due to increased advertising and acquisition expenses as well as retention-related campaign costs in an active competitive environment. An increase in prepaid subscribers’ frequency usage fee expenses and wages and salaries also contributed to the increase in selling and marketing expenses during the year. As a percentage of revenues, selling and marketing expenses increased from 18.0% in 2007 to 19.4% for the year ended December 31, 2008.

Selling expenses, which consist of distributor support, dealer support, and other selling expenses, increased 19% to $598.4 million for the year ended December 31, 2008 from $501.6 million in 2007 in line with the increase in subscriber acquisitions together with the increased dealer and distributor activities and change in the dealer structure and premium system in April 2008.

Total marketing expenses which consist of advertising, market research, sponsorships expenses and customer relations expenses increased by 8% to $325.4 million for the year ended December 31, 2008 from $300.4 million in 2007. The increase stems primarily from increased advertising expenses resulting from increased competition and the launch of MNP.

Prepaid subscribers’ frequency usage fee expenses increased by 24% to $249.5 million for the year ended December 31, 2008 from $202.0 million in 2007 due to an increase in the prepaid subscriber base and frequency usage fee per subscriber.

Wages, salaries and personnel expenses for selling and marketing employees increased by 37% to $131.2 million for the year ended December 31, 2008 from $95.8 million in 2007, primarily due to increase in number of employees and a periodic increase in salaries.

Results from operating activities

Results from operating activities increased to $1,896.5 million for the year ended December 31, 2008, from $1,819.5 million in 2007. However, as a percentage of revenues, results from operating activities decreased to 27.2% in 2008 from 28.8% in 2007, mainly due to higher sales and marketing and administrative expenses.

Net financial income / (expenses)

In 2008, we recorded net financial income of $305.3 million compared to net financial expenses of $242.8 million in 2007, primarily due to a significant decrease in translation losses from $460.8 million in 2007 to $44.5 million in 2008 and an increase in income interest income on bank deposits from $241.1 million in 2007 to $359.4 million in 2008 as a result of the increase in cash balance.

Financial expenses decreased by 75% to $136.8 million for the year ended December 31, 2008 from $551.1 million in 2007. Financial expense in 2007 was primarily due to foreign exchange losses of $460.8 million compared to $44.5 million in 2008. Foreign exchange losses in 2007 can be classified into two main categories: the first category comprises losses incurred on derivative financial instruments, in particular forward contracts, that matured in 2007 and that amount to $232.5 million; the second category comprises realized and unrealized foreign exchange losses on net foreign exchange position, which amounted to $228.3 million. Foreign exchange losses in 2008 are mainly attributable to net foreign exchange position. On a consolidated basis, foreign exchange gains on net foreign exchange position of Turkcell are offset by the foreign exchange losses of Astelit realized on loans and borrowings due to the depreciation of Hrvinia against the U.S. Dollar by 52% in 2008.

Financial income increased by 43% to $442.1 million for the year ended December 31, 2008 from $308.4 million in 2007 mainly as a result of our increased cash balance.

Share of profit of equity accounted investees

Our share of the profit of equity accounted investees was $103.0 million for the year ended December 31, 2008 as compared to $64.9 million in 2007. The increase in the net profit of equity accounted investees was primarily due to Fintur’s successful performance in 2008.

Although A-Tel generated net income for the years ended December 31, 2008 and 2007, we have eliminated A-Tel’s revenue that is generated from services rendered to us to the extent of our share in A-Tel, with corresponding elimination from the selling and marketing expenses in our consolidated financial statements. This consolidation elimination had a negative impact on the share of profit of equity accounted investees line.

Income tax expense

Income tax expense for the year ended December 31, 2008 was $549.8 million and $322.4 million in 2007. This increase was mainly due to increase in profit before tax of Turkcell.

The effective tax rate was 24% and 20% for the years ended December 31, 2008 and 2007, respectively. Higher effective tax rate in 2008 is mainly due to the losses consolidated from Ukraine operations.

Differences between the effective tax rate and the statutory tax rate include, but are not limited to, the effect of tax rates in foreign jurisdictions, tax exempt income, non-deductible expenses or tax incentives not recognized in profit or loss.

Minority interests

Minority interests in the net profit of our consolidated subsidiaries is classified separately in the consolidated statements of operations under “minority interests”. Minority interests increased to $81.8 million for the year ended December 31, 2008 as compared to $30.9 million in 2007, primarily due to the increase in the net loss generated by our 55% owned subsidiary, Euroasia.

For the year ended December 31, 2008, Euroasia generated a net loss of $326.5 million leading to income from minority interests of approximately $130.3 million. In 2007, the net loss of Euroasia amounted to $167.7 million and resulted in income from minority interests of approximately $74.2 million. Euroasia has generated higher losses for the years ended December 31, 2008, compared to 2007, primarily due to foreign exchange losses as a result of the 52% depreciation of the Hrvinia against the U.S. Dollar in 2008.

Net profit generated by Inteltek for the years ended December 31, 2008 and 2007 has resulted in expenses from minority interests of approximately $46.2 million and $42.1 million, respectively, which has had an offsetting effect on the minority income recorded from Euroasia.

Profit for the period attributable to equity holders of the Company

Profit for the period attributable to equity holders of the Company increased to $1,836.8 million for the year ended December 31, 2008 as compared to $1,350.2 million for the year ended December 31, 2007. This was mainly due to the positive effect of the decrease in the foreign exchange losses in 2008 to $44.5 million from $460.8 million in 2007 and higher finance income of $442.1 million compared to $308.4 million in 2007.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

We had 35.4 million GSM subscribers in Turkey, including 29.0 million prepaid subscribers, as of December 31, 2007, compared to 31.8 million GSM subscribers in Turkey, including 26.0 million prepaid subscribers, as of December 31, 2006. During 2007, we added approximately 3.6 million new Turkish GSM subscribers.

In Ukraine, we had 8.8 million and 5.6 million subscribers as of December 31, 2007 and 2006, respectively. During 2007, we added approximately 3.2 million new Ukrainian GSM subscribers.

Revenues

Total revenues for the year ended December 31, 2007 increased by 35% to $6,328.6 million from $4,700.3 million in 2006. The increase in revenues was mainly due to partial impact of higher usage, subscriber growth, and appreciation of TRY against U.S. Dollars, combined with the upward price adjustment as well as the positive impact of our consolidated subsidiaries.

Revenues from communication fees for the year ended December 31, 2007 increased 36% to $5,976.9 million from $4,406.7 million in 2006. The increase in communication fees resulted from the growth in the subscriber base improved usage, appreciation of TRY against U.S. Dollars combined with the upward price adjustments.

Commission revenues from betting business amounted to $181.3 million for the year ended December 31, 2007, as compared to $172.4 million for the year ended December 31, 2006. Although the commission rate on the betting business decreased from 12% to 7% effective from March 15, 2007 with the renewed contract, commission income was higher in 2007 as a result of the 9% appreciation of the TRY against the U.S. Dollar in 2007.

Direct cost of revenues

Direct cost of revenues increased by 18% to $3,103.4 million for the year ended December 31, 2007 from $2,627.9 million in 2006, primarily due to the increase in interconnection fees, ongoing license fees, wages and salaries, depreciation and amortization, and appreciation of the TRY against the U.S. Dollar.

Ongoing license fees and universal funds paid to the Turkish Treasury and to the Turkish Ministry increased 14% to $871.4 million for the year ended December 31, 2007 from $764.7 million in 2006, primarily due to an increase in gross revenue. Ongoing license fee and universal service fund expenses decreased by 2.5 percentage points as a percentage of revenue of which 0.7 percentage point was related to one off ongoing license fee impact on 2006 sales discounts.

Depreciation and amortization charges increased by 9% to $793.0 million for the year ended December 31, 2007 from $730.0 million in 2006, primarily due to the appreciation of the TRY against the U.S. Dollar. The amortization expense for our GSM license and other telecommunication operating licenses was $50.3 million and $58.9 million for the years ended December 31, 2007, and 2006, respectively.

Interconnection and termination costs increased by 22% to $434.3 million for the year ended December 31, 2007 from $355.9 million in 2006 due to higher tariffs agreed with Vodafone and 9% appreciation of TRY against U.S. Dollars.

Transmission costs, site costs, information technology, network maintenance expenses and infrastructure cost increased by approximately 23% to $183.6 million for the year ended December 31, 2007 from $149.1 million in 2006, primarily due to the increase in transmission and maintenance costs as a result of increased transmission line rent expenses in 2007 as compared to 2006. In addition, uncapitalizable antenna site costs and expenses increased 30% to $226.2 million for the year ended December 31, 2007 from $173.4 million in 2006, primarily due to an increase in radio network operations.

Wages, salaries and personnel expenses for technical personnel increased by 42% to $194.2 million for the year ended December 31, 2007 from $136.7 million in 2006, primarily due to an increase in bonuses accrued for employees, an increase in the number of employees and a periodic increase in salaries.

The cost of Simcards sold increased by 16% to $50.4 million for the year ended December 31, 2007 from $43.6 million in 2006, due to recognized impairment on Simcards as a result of a decrease in the market value of Simcards because of discounts given.

Billing costs increased by 22% to $41.2 million for the year ended December 31, 2007 from $33.9 million in 2006, primarily due to the increase in the number of subscribers and in postage fees.

As a percentage of revenues, direct cost of revenues decreased to 49% for the year ended December 31, 2007 from 56% in 2006. This improvement of 7 percentage points was due to lower depreciation and amortization expenses (3 percentage points), ongoing license fees (2.5 percentage points), of which 0.7 percentage points was related to an exceptional ongoing license fee impact on 2006 sales discounts, interconnection costs (1 percentage point) and non-revenue based operational expenses (0.4 percentage points) as a percentage of revenues.

Gross profit increased to $3,225.2 million for the year ended December 31, 2007 from $2,072.4 million in 2006, primarily due to growth in the number of subscribers, an increase in usage, upward price adjustments, the decrease in depreciation and amortization expenses and ongoing license fees as a percentage of revenues as discussed above.

Administrative expenses

General and administrative expenses increased by 63% to $252.8 million for the year ended December 31, 2007 from $154.9 million in 2006, primarily due to the reversal of income accrual of $15.5 million recognized in 2006 for the fee previously paid to BNP Paribas for Irancell which was paid back to us in 2007 and an exceptional increase in bonuses paid to employees amounting to $37.6 million as well as the appreciation of the TRY against the U.S. Dollar. As a percentage of revenues, general and administrative expenses increased to 4% for the year ended December 31, 2007 from 3% in 2006.

Wages, salaries and personnel expenses for non-technical and non-marketing employees increased by 62% to $104.9 million for the year ended December 31, 2007 from $64.9 million in 2006, primarily due to a one-time increase in bonuses paid to employees, an increase in the number of employees and a periodic increase in salaries.

Bad debt expenses increased by 15% to $35.1 million for the year ended December 31, 2007 from $30.5 million in 2006, primarily due to the increase in our revenues. We provided an allowance of $181.8 million and $133.6 million for doubtful receivables for the years ended December 31, 2007 and 2006, respectively, based upon our past experience.

Consulting expenses increased by 69% to $28.1 million for the year ended December 31, 2007 from $16.6 million in 2006, primarily due to the consulting services related to new international investment projects in 2007.

Other expenses, including collection expenses, increased by 97% to $84.7 million for the year ended December 31, 2007 from $42.9 million in 2006, primarily as a result of the income accrual of $15.5 million recognized in 2006 for the fee previously paid to BNP Paribas for Irancell.

Selling and marketing expenses

Selling and marketing expenses increased by 38% to $1,138.2 million for the year ended December 31, 2007 from $827.5 million in 2006, primarily due to the increased advertising and acquisition expenses as well as retention-related campaign costs in an active competitive environment. Appreciation of the TRY against the U.S. Dollar also contributed to the increase in selling and marketing expenses during the year. As a percentage of revenues, selling and marketing expenses remained stable at 18% for the years ended December 31, 2007 and 2006, respectively.

Selling expenses, which consist of distributor support, dealer support, and other selling expenses, increased by 49% to $501.6 million for the year ended December 31, 2007 from $336.9 million in 2006, in line with the increase in subscriber acquisitions together with the increased dealer and distributor activities, as well as the 9% appreciation of the TRY against the U.S. Dollar.

Total marketing expenses, which consist of advertising, market research and customer relations expenses, increased by 29% to $300.4 million for the year ended December 31, 2007 from $232.4 million in 2006. The increase stemmed primarily from the increased advertising expenses resulting from increased competition.

Prepaid subscribers’ frequency usage fee expenses increased by 27% to $202.0 million for the year ended December 31, 2007 from $159.4 million in 2006 due to an increase in the prepaid subscriber base and a 9% appreciation of the TRY against the U.S. Dollar.

Wages, salaries and personnel expenses for selling and marketing employees increased by 42% to $95.8 million for the year ended December 31, 2007 from $67.3 million in 2006, primarily due to an increase in bonuses paid to employees, an increase in the number of employees and a periodic increase in salaries.

Results from operating activities

Results from operating activities increased to $1,819.5 million for the year ended December 31, 2007 from $1,091.6 million in 2006, primarily due to the strong revenue growth coupled with a decrease in the direct cost of revenues as a percentage of revenues, despite higher sales and marketing and administrative expenses.

Net financial income / (expenses)

In 2007, we recorded net financial expenses of $242.7 million compared to net financial income of $76.0 million in 2006, primarily due to a significant increase in translation losses from $41.3 million in 2006 to $460.8 million in 2007.

Financial expenses increased by 410% to $551.1 million for the year ended December 31, 2007 from $108.0 million in 2006, primarily due to foreign exchange losses of $460.8 million. Foreign exchange losses can be classified into two main categories: the first category comprises losses incurred on derivative financial instruments, in particular forward contracts, that matured in 2007 and that amounted to $232.5 million; and the second category comprises realized and unrealized foreign exchange losses on net foreign exchange position, which amounted to $228.3 million.

Financial income increased by 68% to $308.4 million for the year ended December 31, 2007 from $184.0 million in 2006 as a result of our increased cash balance.

Share of profit of equity accounted investees

Our share of the profit of equity accounted investees was $64.9 million for the year ended December 31, 2007 as compared to $78.6 million in 2006. The decrease in the net profit of equity accounted investees was primarily due to the accounting impact of A-Tel, which had a negative effect on the share of profit of equity accounted investees line, as described below.

Although A-Tel generated net income for the years ended December 31, 2007 and 2006, we have eliminated A-Tel’s revenue that is generated from services rendered to us to the extent of our share in A-Tel, with corresponding elimination from the selling and marketing expenses in our consolidated financial statements. This consolidated elimination had a negative impact on the share of profit of equity accounted investees line.

Income tax expense

Income tax expense for the year ended December 31, 2007 was $322.4 million and $413.2 million in 2006. This decrease was due to reduction in the corporate tax rate from 30% to 20% in 2006 which was effective from January 1, 2006 resulting in increase in taxation expenses in 2006.

The effective tax rate was 20% and 33% for the years ended December 31, 2007 and 2006, respectively.

According to Article 32 of the New Corporate Tax Law No. 5520, the corporate tax rate was reduced from 30% to 20%. In this respect, corporate income is subject to corporate tax at the rate of 20%, effective from January 1, 2006.

According to the Income Tax Law which was published in the Official Gazette on April 8, 2006, the investment allowance application was abolished as of January 1, 2006. Accordingly, taxpayers have been granted an option either to use the tax benefits of investment incentive certificates subject to their filing their tax returns at a 30% corporate tax rate, or to file their tax returns at a 20% corporate tax rate (which is the tax rate effective as of January 1, 2006) without using the tax benefits of investment incentive certificates. Our company chose to use the tax benefit of investment incentive certificates which provides us with a 0.2% net benefit on corporate taxes. However, the law allows the taxpayers to utilize their investment allowance rights obtained under the scope of the previous provisions only with regard to income generated in 2006, 2007 and 2008.

Minority interests

Minority interests in the net profit of our consolidated subsidiaries is classified separately in the consolidated statements of operations under “minority interests”. Minority interests decreased to $30.9 million for the year ended December 31, 2007 as compared to $42.5 million in 2006, primarily due to the decrease in the net loss generated by our 55% owned subsidiary, Euroasia.

For the year ended December 31, 2007, Euroasia generated a net loss of $167.7 million leading to income from minority interests of approximately $74.2 million. In 2006, the net loss of Euroasia amounted to $198.0 million and resulted in income from minority interests of approximately $89.3 million. Euroasia has generated losses for the years ended December 31, 2007 and 2006, primarily because it is in the start-up stage of its business.

Net profit generated by Inteltek for the years ended December 31, 2007 and 2006 has resulted in expenses from minority interests of approximately $42.1 million and $43.8 million, respectively, which has had an offsetting effect on the minority income recorded from Euroasia.

Profit for the period attributable to equity holders of the Company

Profit for the period attributable to equity holders of the Company increased to $1,350.2 million for the year ended December 31, 2007 as compared to $875.5 million for the year ended December 31, 2006. This increase was primarily due to growth in revenues together with lower operational expenses, despite higher financial expenses.

Effects of Inflation

The annual inflation rates in Turkey were 10.1%, 8.4% and 9.7% for the years ended December 31, 2008, 2007 and 2006 respectively, based on the Turkish consumer price index. Turkey ended 2008 with an inflation rate which was more than double the Central Bank’s target. Liquidity turmoil in the global markets and the related “credit crunch”, a rise in commodity prices especially in oil and oil related products, and continued uncertainty of food prices were the main reasons for such high inflation. However, with the help of tight monetary policy followed by the Central Bank of Turkey, this effect has been lessened and demand side inflation has been brought under control. The current inflation target set by the Central Bank is 7.5% with a confidence interval of 5.5% and 9.5% for 2009. Service price inflation and continued uncertainty surrounding food prices along with the increase in oil prices are expected to be challenging issues in 2009. For additional information, see “Item 3.A. Selected Financial Data-Exchange Rate Data” and “Item 3.D. Risk Factors”.

Foreign Currency Fluctuations

We conduct our business in several currencies other than functional currencies of each of our locations. As a result of our exposure to foreign currency, exchange rate fluctuations have a significant impact, in the form of both translation and transaction risks, on our consolidated financial statements.

Exchange rate movements impact our assets and liabilities denominated in currencies other than TRY. We use forward exchange contracts and options to hedge our non-TRY denominated liabilities.

Our foreign currency risk management policy is focused on hedging foreign currency exposure arising from non-TRY denominated liabilities and purchase commitments. Please see “Item 11. Quantitative and Qualitative Disclosures about Market Risk-Exchange Rates and Foreign Currency Exposure”. We hedge our currency risks with forward exchange contracts and options.

New Accounting Standards Issued

New IFRS Accounting Standards

IFRS 8 “Operating Segments” introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for our 2009 consolidated financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by our Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently, we present segment information in respect of our business and geographical segments.

Revised IAS 23 “Borrowing Costs” removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as a part of the cost of that asset. The revised IAS 23 will become mandatory for our 2009 consolidated financial statements and will not constitute a change in our accounting policy.

IFRIC 13 “Customer Loyalty Programmes” addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. IFRIC 13, which becomes mandatory for our consolidated financial statements, is not expected to have a significant impact on the consolidated financial statements.

Revised IAS 1 “Presentation of Financial Statements” (2007) introduces as a financial statement “the statement of comprehensive income”, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other IFRSs. Revised IAS 1, which is mandatory for our 2009 consolidated financial statements, is expected to have a limited impact on the presentation of the consolidated financial statements.

Revised IFRS 3 “Business Combinations” (2008) incorporates the following changes that are likely to be relevant to the Group’s operations:

•

The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations.

•

Contingent consideration will be measured at fair value, with subsequent changes therein recognised in profit or loss.

•

Transaction costs, other than share and debt issue costs, will be expensed as incurred.

•

Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in profit or loss.

•

Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.

Revised IFRS 3, which is mandatory for our 2010 consolidated financial statements, will be applied prospectively and therefore there will have no impact on prior periods in our 2010 consolidated financial statements.

Amended IAS 27 “Consolidated and Separate Financial Statements” (2008) requires accounting for changes in ownership interests by us in a subsidiary, while maintaining control, to be recognised as an equity transaction. When we lose control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to IAS 27, which become mandatory for our 2010 consolidated financial statements, are not expected to have a significant impact on our consolidated financial statements.

Amendment to IFRS 2 “Share-based Payment—Vesting Conditions and Cancellations” clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations. The amendments to IFRS 2 will become mandatory for our 2009 consolidated financial statements, with retrospective application and are not expected to have any impact on our consolidated financial statements.

Amendments to IAS 32 “Financial Instruments. Presentation and IAS 1 Presentation of Financial Statements—Puttable Financial Instruments and Obligations Arising on Liquidation” requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which become mandatory for our 2009 consolidated financial statements, with retrospective application required, are not expected to have any impact on our consolidated financial statements.

The International Financial Reporting Interpretations Committee (“IFRIC”) issued on 3 July 2008 an interpretation IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”. IFRIC 16 applies to any company that hedges the foreign currency risk arising from its net investments in foreign operations and wants to qualify for hedge accounting in accordance with IAS 39. It does not apply to other types of hedge accounting. The interpretation is effective for annual periods beginning on or after October 1, 2008 and is not expected to have any effect on our consolidated financial statements.

The IFRIC issued on 3 July 2008 an Interpretation, IFRIC 15 “Agreements for the Construction of Real Estate”. The Interpretation will standardize accounting practice across jurisdictions for the recognition of revenue among real estate developers for sales of units such as apartments or houses before construction is complete. The Interpretation is effective for annual periods beginning or after January 1, 2009 and is not expected to have any effect on our consolidated financial statements.

Eligible Hedged Items (amendment to IAS 39 “Financial Instruments: Recognition and Measurement”) introduces application guidance to illustrate how the principles underlying hedge accounting should be applied in the designation of i) a one-sided risk in a hedged item and ii) inflation in a financial hedged item. The amendment is effective, with retrospective application, for annual periods beginning on or after 1 July 2009 and is not expected to have any effect on our consolidated financial statements.

IFRIC 17 “Distributions of Non-cash Assets to Owners” requires entities to recognise certain distributions of non-cash assets at fair value, and to recognise in profit or loss the difference between the fair value of the assets distributed and their carrying amounts. IFRIC 17 provides guidance on when and how a liability for certain distributions of non-cash assets is recognised and measured, and how to account for settlement of that liability. Transactions within its scope will need to be measured at fair value. IFRIC 17 is effective for annual periods beginning on or after July 2009; earlier application is permitted only if IFRS 3 Business Combinations (2008), IAS 27 Consolidated and Separate Financial Statements (2008) and the related amendments to IFRS 5 are applied at the same time.

IFRIC 18 “Transfers of Assets from Customers” provides guidance on transfers of property, plant and equipment (or cash to acquire it) for entities that receive such contributions from their customers. IFRIC 18 applies prospectively to transfers of assets from customers received on or after July 2009; earlier application is permitted provided that the necessary valuations and other information were obtained at the time that those transfers occurred. The interpretation is not expected to have significant effect on our consolidated financial statements.

5.B Liquidity and Capital Resources

Liquidity

We require significant liquidity to finance capital expenditures for the expansion and improvement of our mobile communications network, for operational capital expenditures, for working capital, and to service our debt obligations. A summary of our consolidated cash flows for the years ended December 31, 2008, 2007 and 2006 is as follows:


	2008		2007		2006
U.S $million
Net cash provided by operating activities	1,674.4		2,156.2		1,854.9
Net cash used for investing activities	(695.2	)	(440.5	)	(632.5	)
Net cash used for financing activities	(353.6	)	(255.0	)	(395.8	)
Net cash increase in cash and cash equivalents	206.7		1,737.5		831.5

Net cash provided by our operating activities for the years ended December 31, 2008 and 2007 amounted to $1,674.4 million and $2,156.2 million, respectively. The decrease in 2008 was primarily due to the increase in taxes paid.

Net cash used for investing activities for the years ended December 31, 2008 and 2007 amounted to $695.2 million and $440.5 million, respectively. Cash used for acquisition of subsidiaries was $310.0 million for the year ended December 31, 2008 whereas it was nil in 2007. For the year ended December 31, 2008, we spent approximately $808.2 million for capital expenditures compared with $783.1 million in 2007. Of the $808.2 million in capital expenditures, approximately $388.4 million was related to capital expenditures made by Turkcell mainly for our mobile communications network in Turkey. Total capital expenditures made by Astelit were $155.8 million for the year ended December 31, 2008. Interest received has increased to $354.2 million by $103.8 million from $250.4 million as a result of the increased cash balance in 2008.

In 2009, we plan to spend approximately $1,300 million for 2G and 3G operational expenditures, including a 3G license in Turkey, in core, access and service network. As for our international subsidiaries, we expect to spend approximately $300 million on capital expenditures in 2009.

Our capital expenditures including acquisitions through business combinations (in $ millions) by geographical segments are as follows:


	Turkey	Ukraine	Turkish Republic of Northern Cyprus	Belarus	Total
2008	640.3	155.8	17.6	550.9	1,364.6
2007	540.2	206.0	36.9	—	783.1
2006	391.7	200.2	12.9	—	604.8

Our capital expenditures including acquisitions through business combinations (in $ millions) by business segments are as follows:


	Telecommunications	Betting	Other operations	Total
2008	1,310.7	21.9	32.0	1,364.6
2007	759.4	1.3	22.4	783.1
2006	594.5	3.3	7.0	604.8

The net cash used for financing activities for the years ended December 31, 2008 and 2007 amounted to $353.6 and $255.0 million, respectively. In 2008, we made a $557.0 million dividend payment whereas we made a $457.6 million dividend payment in 2007.

Source of liquidity

Our loans from financial institutions consist of local and international bank borrowings with either fixed or variable interest rates. A significant portion of our bank borrowings is utilized to finance our consolidated subsidiaries’ financing needs. All of our loans are U.S. Dollar or Belarusian Ruble (“BYR”) denominated. The interest rates vary from Libor + 0.6% to Libor + 2.3% for the loans denominated in U.S. Dollars and 1/2 Refinancing rate of the National Bank of Belarus (“RR”) to RR+2 for the loans denominated in BYR. The loans are payable over the period 2009 to 2020.

The ratio of our loans and borrowings to equity was 14% as of December 31, 2008 as compared to 13% as of December 31, 2007. We have been able to maintain our leverage at a satisfactory level and well in line with our targets.

On February 26, 2007, we put in place a $3 billion unsecured syndicated Term Loan facility to be utilized for potential investments, but we cancelled this facility on May 29, 2007, because we did not foresee any immediate financing need for a particular project within the timeframe during which the committed facility would be available. We are continuing our efforts to selectively seek out and evaluate new international investment opportunities. These opportunities could include the purchase of licenses and acquisitions in markets outside of Turkey in which we do not currently operate. In the future, we may reinitiate, as necessary, our efforts to create a financing arrangement, such as a term loan facility.

In connection with the Iranian project, we had transferred funds to East Asian Consortium BV (“Eastasia”), which was formed for the purpose of the Iranian project, in the form of capital as required by the license terms set by the Iranian Telecom Authority. From February 2006, Eastasia became wholly-owned by Turkcell. Prior to February 2006, Eastasia was 85% owned by Turkcell and 15% owned by Ericsson Turkey. These funds remained unused due to unresolved licensing issues. In order to use these funds, we obtained a new loan on June 21, 2006 from West LB A.G. in the amount of EUR 80.0 million with a term of 2 years and at a rate of Euribor plus 0.75% with an early pre-payment option, in return for a restricted deposit of an equivalent amount by Eastasia. The loan amount was paid before its maturity on January 24, 2008 and the restricted cash was released at the same date.

On December 30, 2005, Astelit, together with ING Bank N.V. (“ING Bank”) and Standard Bank London Ltd. (“Standard Bank”), finalized a long-term syndicated financing project of $390.0 million, of which $368.7 million has been used.

By the end of 2006, we decided to take over all or a portion of the rights and obligations of Astelit’s senior creditors, who may decline to participate in the facilities following restructuring. On April 19, 2007, Astelit sent a letter, accompanied by a term sheet, to ING Bank, the Facility Agent. With this term sheet, Astelit proposed a restructuring of the senior syndicated facility and provided that in the event that some or all of the creditors did not consent to the proposed amendments, Turkcell would purchase the loans and commitments held by such non-consenting creditors. Since the creditors did not consent to the proposed amendments, Astelit repaid the lenders under the long-term syndicated financing project on June 27, 2007, through borrowings from Financell, a wholly-owned subsidiary.

In addition, as part of the project financing package, a long term junior facility of up to $150.0 million (including interest amounting to $24.0 million) was also finalized with Turkiye Garanti Bankasi AS Luxemburg Branch and Akbank T.A.S. Malta Branch. The junior facility is fully guaranteed by Turkcell. This facility has been fully utilized as at December 31, 2008.

As at December 31, 2008, the Group is not subject to any financial covenants or ratios with respect to its borrowings.

Under the current assumptions and circumstances, we expect to generate adequate levels of cash to maintain our strong cash position in the future and to have positive cash flow related to our communications and technology activities in Turkey. According to our current business plan for the operations in Turkey, we believe that we will be able to finance our current operations, capital expenditures, and financing costs and maintain and enhance our network through our operating cash flow and our strong cash balance as of December 31, 2008. Our commitments through 2009 include dividend payments, quarterly corporate tax payment, payment due on December 31, 2009 for the acquisition of Belarussian Telecom and capital expenditures, including the 3G licensing fee payment.

The forward-looking statements made here regarding our liquidity and any other financial results are not a guarantee of performance. They are subject to risks and uncertainties that could cause future activities and results of operations to be different from those set forth in this Annual Report.

Important factors that may adversely affect our projections include general economic conditions, change in the competitive environment, developments in the domestic and international capital markets, increased investments, and changes in telecommunication regulations. Please see “Item 3.D. Risk Factors” for a discussion of these and other factors that may affect our projections.

Capital Transactions

On March 22, 2006, our Board of Directors declared that our statutory paid-in capital would be increased from TRY 1,854.9 million to TRY 2,200.0 million by capitalizing TRY 345.1 million out of the total dividend for 2005. After the approval at General Assembly Meeting held on May 22, 2006, TRY 345.1 million was distributed to our shareholders in the form of a stock split (345,112,659 units of shares). The capital increase was accounted for as a stock split in our consolidated financial statements. As a result of the aforesaid transactions, we issued new shares with a total nominal value of TRY 345,112,659.

All share amounts and per share figures reflected in our historical financial statements have been retrospectively restated for the stock splits discussed above.

Capital Transactions in Astelit

On April 4, 2006, Astelit, our Ukrainian subsidiary, announced the merger with DCC, our other Ukrainian subsidiary, in order to optimize the internal processes of both companies. On August 1, 2006, the merger transaction was completed.

In January 2006 and June 2006, we made contributions to the capital increase of Astelit amounting to $30.6 million and $22.0 million, respectively.

In June 2006, we and SCM (the other shareholder of Astelit) decided to contribute an aggregate amount of $150.0 million to Astelit in proportion to our respective shares as required by the lenders of the syndicated loan to obtain a waiver letter for breaches of financial covenants. The three installments of $27.5 million were paid in July 2006, October 2006 and January 2007.

In March 2007, we and SCM decided to contribute on a pro-rata basis an additional aggregate amount of $200 million to the capital stock of Euroasia in four equal installments of $50 million during 2007. The four installments were paid in March 2007, May 2007, July 2007 and September 2007. After the execution of the final installment, our effective interest in Euroasia increased to 55.0% as of December 31, 2007.

In December 2007, we and SCM decided to contribute to the share capital of Euroasia in an aggregate amount of $200 million in three tranches, first two tranches of each $50 million to be paid on January 31, 2008 and March 31, 2008, and one tranche of $100 million to be paid on May 30, 2008 in exchange for shares in the capital of Euroasia, whereby we and SCM shall make such contribution proportionate to our shareholding in Euroasia at the time of each capital contribution. We paid our contribution portion as of December 31, 2008. For a description of and additional information regarding our funding and commitments in relation to Astelit, see “Liquidity and Capital resources—Liquidity—Sources of Liquidity”.

In February 2009 and April 2009, we and SCM decided to contribute to the share capital of Euroasia in an aggregate amount of $20 million and $150 million, respectively, in exchange for shares in the capital of Euroasia, whereby we and SCM shall make such contribution proportionate to our shareholding in Euroasia at the time of each capital contribution.

General Economic Conditions

As the crisis spreads to the economy on a global scale, Turkey’s growth performance is likely to slow significantly. Revenue performance from foreign trade will be adversely affected as the economy shows. The IMF program can provide insurance against external financing concerns and provide assurances about the policy framework.

Our credit ratings at December 2008 are noted below:


Standard & Poor’s		BB+
Fitch		BB
Moody’s		Ba2

Any further upgrades from the ratings agencies may allow us to lower the cost of borrowing for any future indebtedness in the domestic and international debt and capital markets. Conversely, any ratings downgrade may limit our future access to debt and capital markets and increase the cost of borrowing.

In addition, Standard & Poor’s, Fitch and Moody’s assigned local currency ratings of BB+, BBB- and Ba2, respectively in 2008. There are no prepayment covenants in our financial contracts that would be triggered by changes in our credit ratings.

Dividend Payments

We have adopted a dividend policy, which is set out in our Corporate Governance Guidelines. As adopted, our general dividend policy is to pay dividends to shareholders with due regard to trends in our operating performance, financial condition, and other factors. Our Board of Directors intends to distribute cash dividends in an amount of not less than 50% of our lower of distributable profit based on the financial statements prepared in accordance with the accounting principles accepted by the CMB or statutory records, for each fiscal year starting with profits for fiscal year 2004. However, the payment of dividends will still be subject to our cash flow requirements in compliance with Turkish law and regulations and the approval of, or amendment by, our Board of Directors and the General Assembly of Shareholders.

On February 27, 2008, our Board of Directors decided to make a proposal to the General Assembly for distribution of a total net cash dividend of TRY 648.7 million (equivalent to $429.0 million as at December 31, 2008) (which constitutes 50% of distributable income for the year ended December 31, 2007). This dividend proposal was approved at the Ordinary General Assembly of Shareholders to be held on April 25, 2008, and a cash dividend distribution began on May 22, 2008.


	Amount per share (TRY in full)*	Total (TRY Million)	USD equivalent (Million) December 31, 2008
Dividend in cash	0.2948699	648.7	429.0

*	Amount of per share figure is computed over 2,200,000,000 shares.

In connection with the redenomination of the Turkish Lira and as per the related amendments of the Turkish Commercial Code, in order to increase the nominal value of the shares to TRY 1, 1,000 units of shares, each having a nominal value of TRY 0.001, shall be merged and each unit of share having a nominal value of TRY 1 shall be issued to represent such shares. We are still in the process of merging 1,000 existing ordinary shares, each having a nominal value of TRY 0.001, to one ordinary share having a nominal value of TRY 1 each. After the share merger which appears as a provisional article in the Articles of Association to convert the value of each share with a nominal value of TRY 0.001 to TRY 1, all shares will have a nominal value of TRY 1. Although the merger process has not been finalized, the practical application is to state each share having a nominal value of TRY 1 as approved by the CMB.

On March 27, 2009, our Board of Directors decided to propose to the General Assembly a distribution of a total net cash dividend of TRY 1,098.2 million (equivalent to $726.2 million as at December 31, 2008 and which constitutes 50% of distributable income for the year ended December 31, 2008). This dividend proposal is to be evaluated and decided upon at the Ordinary General Assembly of Shareholders expected to occur on May 8, 2009.

Our 2008 consolidated profit calculated in accordance with CMB accounts is TRY 2,312.8 million (equivalent to $1,529.3 million as at December 31, 2008) whereas the 2008 standalone commercial profit of Turkcell after tax, calculated in accordance with the Turkish Commercial Law is TRY 3,045.5 million (equivalent to $2,013.8 million as at December 31, 2008) and based on the CMB regulations, the lower of the two profits, which is TRY 2,312.8 million (equivalent to $1,529.3 million as at December 31, 2008), shall be taken as the basis for the dividend distribution calculation.


	Amount per share (TRY in full)*	Total (TRY Million)	USD equivalent (Million) December 31, 2008
Dividend in cash	0.4991787	1,098.2	726.2

*	Amount of per share figure is computed over 2,200,000,000 shares.

New Technology Investments and Partnership Opportunities

Cash flow from the operations provides us with sufficient means to implement our plans. However, new technologies are excluded from the current projections, so addition of any new technology such as 3G technology or any new partnership opportunity may require both higher operating expense and capital expenditures leading to a need for additional cash injection in the future.

5.C Research and Development, Patents and Licenses, etc.

As of December 31, 2008, we have applied for the registration of 13 patents. We own 1 utility model under the applicable Turkish patent legislation. As of December 31, 2008, we have registered 401 trademarks and

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54 trademark applications under the applicable Turkish trademark legislation. We have 2 international trademarks and 6 international trade mark applications. As of December 31, 2008, we have registered 12 industrial designs under the applicable Turkish legislation on the protection of industrial designs and we have 1 international industrial design application.

As of March 10, 2006, we opened a technology center which brings together all our research and development operations in a single location. We further advanced our research and development operations in 2007 with the establishment of a wholly owned, indirect subsidiary, Turkcell Teknoloji Arastirma ve Gelistirme A.S. (“Turkcell Teknoloji”), on April 2, 2007, to carry out our research and development activities. The activities of the technology center are expected to include the following:

•

Partnership software development, customization and/or integration of software products of suppliers through the service and product development processes; and

•

Developing network infrastructure strategies in a fast evolving information-communication technologies world; and designing short and long term technology road maps for our operations.

As of December 31, 2008, our R&D Center has a staff of around 269 qualified people among whom 19% have masters degrees and 2% have a Ph.D. degree. Additionally, 19 experts work as contractors.

5.D Trend Information

Changing Subscriber Base

Our revenues are impacted by the increasing proportion of prepaid subscribers in our subscriber base. The proportion of prepaid subscribers in total gross additions was 85%, 89%, and 90% in 2008, 2007 and 2006, respectively. Trends indicate that prepaid subscribers have more control on their usage pattern than postpaid subscribers. We expect that for the foreseeable future, the proportion of prepaid subscribers in total gross additions will remain high. For 2009, we expect similar levels of TRY ARPU as in 2008 and an increase in usage. We will aim to achieve revenue growth in TRY terms; however, we do expect some margin pressure due to the volatile macro environment and increased competition.

5.E Off-Balance Sheet Arrangements

Off-balance sheet arrangements refer to any transaction, agreement, or other contractual arrangement involving an unconsolidated entity (other than contingent liabilities arising from litigation, arbitration or regulatory actions), under which a company has:

•

provided guarantee contracts;

•

retained or contingent interests in transferred assets;

•

any obligation under derivative instruments classified as equity; or

•

any obligation arising out of material variable interests in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging, or research and development arrangements with the company.

We routinely enter into operating leases for property in the normal course of business. At December 31, 2008, there were no commitments and contingent liabilities in material amounts arising from such operating leases.

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Contingent Liabilities

The following table illustrates our major contingent liabilities as of December 31, 2008.

Total
amount
committed

Amount of contingent liability expiration per period Remaining commitment

at December 31,
2008

Indefinite*

Less than
one year

1–3
years

3–5
years

Over
5 years

U.S.$ Million

Bank Letters of Guarantee

218.8

86.3

26.4

0.5

0.0

105.6

*	Bank letters of guarantee are not given for a specific period. Most of the guarantees will remain as long as the business relationship with the counterparty continues.

As of December 31, 2008, we are contingently liable in respect of bank letters of guarantee obtained from banks and given to custom authorities, private companies and other public organizations amounting to $218.8 million.

We have fully guaranteed the $150 million long-term junior facility of Astelit. See “Item 5.B. Liquidity and Capital Resources—Sources of Liquidity”.

5.F Tabular Disclosure of Contractual Obligations

The following tables illustrate our major contractual and commercial obligations and commitments as of December 31, 2008.


	Payments due by period
Contractual Obligations	Total	Less than 1 year	1-3 years	3-5 years	After 5 years
(U.S.$ Million)
Loans and borrowings*	837.4	632.3	29.6	165.4	10.1
Finance Lease Obligations	9.9	3.8	6.1	—	—
Payable in relation to the acquisition of Belarussian Telecom	300.0	100.0	100.0	—	100.0
Financial liability in relation to put option	89.2	—	—	89.2	—
Total Contractual Cash Obligations	1,236.5	736.1	135.7	254.6	110.1

*	includes undiscounted interest


	Amount of Commitment
Other Commercial Commitments	Total	Less than 1 year	1-3 years	3-5 years	After 5 years
(US$ Million)
Purchase Obligations	847.0	819.2	27.8	—	—

As at December 31, 2008, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory, purchase of sponsorship and advertisement services and 3G license amount to $847.0 million. Out of total purchase commitments, $563.9 million represents commitments with respect to property, plant and equipment and intangible assets.

5.G Safe Harbor

Not applicable.

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ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A Directors and Senior Management

Board Members

Under the Turkish Commercial Code and our Articles of Association, the Board of Directors is responsible for our management. Our Articles of Association mandates a Board of Directors containing seven members.

The following table sets forth the name of each member of our Board of Directors, who all serve for terms of three years. Our Articles of Association provide for a staggered Board of Directors. However, as a result of prior resignations and interim appointments, every member of our Board of Directors is up for re-election at our Annual General Assembly expected to be held on May 8, 2009.


Name		Date appointed to the Board of Directors
Mehmet Emin Karamehmet (Chairman)		May 22, 2006
Mehmet Bulent Ergin		April 29, 2005
Aimo Eloholma		August 22, 2007
Tero Erkki Kivisaari		May 14, 2007
Alexey Khudyakov		May 22, 2006
Oleg Malis		May 22, 2006
Colin J. Williams		May 22, 2006

Executive Officers

We are managed on a day-to-day basis by the Corporate Executive Team with the guidance of the Board of Directors. Officers do not have fixed terms of office. The following table sets forth the name and office of each member of our Corporate Executive Team during fiscal year 2008.


Name		Office
Sureyya Ciliv		Chief Executive Officer
Cenk Bayrakdar		Chief Information and Communication Technologies Officer
Levent Burak Demiralp**		Chief Sales Officer
Tayfun Cataltepe		Chief Corporate Strategy and Regulations Officer
Selen Kocabas		Chief Business Support Officer
Serkan Okandan		Chief Financial Officer
Koray Ozturkler		Chief Corporate Affairs Officer
Lale Saral Develioglu		Chief Marketing Officer
Emre Sayin***		Chief Consumer Sales Officer
Cenk Serdar*		Chief Business Development Officer
Ilter Terzioglu		Chief Network Operations Officer
Ekrem Yener		Chief Corporate Business Officer

*	Mr Cenk Serdar, who served as our Chief Business Development Officer, resigned on March 13, 2009.

**	Mr. Levent Burak Demiralp, who served as our Chief Sales Officer, resigned as of July 1, 2008.

***	Mr. Emre Sayin, who served as our Chief Corporate Business Officer, was appointed Chief Sales Officer as of July 1, 2008.

Biographies

Board Members

Mehmet Emin Karamehmet, age 65, was first appointed as the Chairman of the Board of Directors on September 30, 1993. He is also the Chairman of the Board of Directors of Cukurova Holding, BMC, Cukurova Havacilik, Noksel and a member of the Board of Directors of Cukurova Insaat Makinalari A.S. Mr. Karamehmet attended Dover College, Kent, England, and Robert College, Turkey.

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Mehmet Bulent Ergin, age 60, was first appointed as a member of the Turkcell Board of Directors on April 29, 2005. After holding responsibility for Hochtief AG’s First Bosphorus project and Tekfen A.S.’s Iraq-Turkey pipeline project, Mr. Ergin worked in various positions at Cukurova Group companies. He held a managerial position at Cukurova Ithalat ve Ihracat T.A.S. and was a member of the Board of Directors of Maysan A.S. and Baytur Trading S.A. Currently, Mr. Ergin is Chairman of the Board of Directors of Genel Denizcilik Nakliyati A.S., Show TV and Aksam Gazetesi, and he also holds the position of Board membership in Cukurova Holding. Mr. Ergin majored in Civil Engineering at Robert College, Turkey.

Aimo Eloholma, age 59, was appointed to the Board of Directors on August 22, 2007. Mr. Eloholma joined TeliaSonera in 1974 and held management and executive positions in data communications, sales and marketing, business development and corporate planning, and international operations. Currently, he is the Head of International Business Support in TeliaSonera Eurasia, Chairman of the Board of Directors in Megafon and member of the Board of Directors in Fintur. He also served as a non-executive board member of Turkcell in 2003-2004. He holds a Master of Science in Electrical Engineering from Helsinki University of Technology and has also studied Economics and Business Administration.

Tero Erkki Kivisaari, age 36, was first appointed as a member of the Board of Directors on May 14, 2007. Currently, Mr. Kivisaari is President of TeliaSonera in Eurasia since May 1, 2007 and the Chairman of the Board of Directors of Fintur Holdings B.V. Previously Mr. Kivisaari has served as the chief financial officer and vice president of TeliaSonera in Eurasia. Mr. Kivisaari has served as an associate professor of finance at the Helsinki School of Economics and holds an MBA in finance.

Alexey Khudyakov, age 38, was appointed to the Board of Directors on May 22, 2006. He is also a Vice President at Altimo. Prior to his appointment to Altimo, Mr. Khudyakov held a Vice President position with Alfa Bank, managing the bank’s investments in Golden Telecom and Kyivstar. He also worked for the Moscow office of McKinsey & Co. from 1998 to 2002. Mr. Khudyakov holds a Master of Business Administration degree from INSEAD and a Master’s degree in Applied Mathematics and Physics from the Moscow Institute of Physics and Technology. He is a non-executive board member of Turkcell. He is also an Observer Member of the Audit Committee of Turkcell’s Board of Directors. Mr. Khudyakov was named to the Audit Committee in reliance on Rule 10A-3(b)(1)(iv)(D) under the Securities Exchange Act of 1934.

Oleg Malis, age 34, was appointed to the Board of Directors on May 22, 2006. He is also Senior Vice President of Altimo. Mr. Malis began working for Altimo in 2005. Between 2003 and 2005 Mr. Malis was Senior Vice President and M&A Director at Golden Telecom. Before joining Golden Telecom, Mr. Malis founded Investelectrosvyaz and Corbina Telecom. Mr. Malis holds a degree in Systems Engineering from Moscow State Aviation Technological University.

Colin J. Williams, age 67, was appointed to the Board of Directors on May 22, 2006. He serves as a Voting Member and Chairman of the Audit Committee of Turkcell’s Board of Directors. He is also Supervisory Director and Chairman of the Supervisory Board of Treofan, a packaging film company, with activities in Europe, North America and South Africa. He is Chairman of Clondalkin and Chair of the Audit and Remuneration Committees of Clondalkin, a consumer and industrial packaging company; and chairman of Dewhurst, an industrial textiles company. From January 2001 to December 2004, Mr. Williams served as President of SCA, North America, which is active in the packaging sector, personal care and paper tissue products. He was a long-term board member and Vice Chairman of ICCA, the International Corrugated Packaging Institution, the European Federation of Packaging and the Federation of Paper Producers (CEPI). Mr. Williams is the founding President of Propak Europe and was a board member of the Greater Philadelphia Chamber of Commerce between 2002 and 2004. From 1988 to 2001, Mr. Williams was the President of SCA Packaging, prior to which he served as the Managing Director of Bowater, a corrugated packaging company, for four years. From 1978 to 1984, he was first the Sales Director and then the General Manager of Chicopee in the Netherlands, a non-woven fabrics company of Johnson & Johnson. Mr. Williams holds an MBA degree in finance from NYU, an M.Sc. degree in physical chemistry and a doctorate from Lund University in Sweden.

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Executive Officers

Sureyya Ciliv, age 50, was appointed as the Chief Executive Officer of Turkcell on January 9, 2007. Having previously worked as Microsoft Turkey country manager between 1997-2000, he served in various management positions in Microsoft Global Sales, Marketing and Service Group in the USA between 2000 and 2007. Prior to 1997, Mr. Ciliv was the General Manager and Chairman of Novasoft Systems Inc., a company he established in Boston, USA.. Sureyya Ciliv received his MBA degree from Harvard University in 1983 after successfully graduating with honors in Industry & Operations Engineering and Computer Engineering from the University of Michigan in 1981.

Cenk Bayrakdar, age 40, started working for Turkcell in 2002 and since April 1, 2006 he is the Chief Information and Communication Technologies Officer. Prior to his appointment, he was Content Services and Partnering Management Division Head in Turkcell. Mr. Bayrakdar started his career as a management trainee at Koc Holding and, after holding the post of Information Systems and Production team leader at Arcelik, he worked at Corbuss and Turktell as a Business Development Manager. Cenk Bayrakdar is a graduate of Istanbul Technical University, Department of Electronics and Communication Engineering. He holds a master’s degree in Industrial Engineering from Texas A&M University.

Tayfun Cataltepe, age 47, joined Turkcell in 2007 as Chief Corporate Strategy and International Expansion Officer. Currently acting as Turkcell’s Chief Corporate Strategy and Regulations Officer, Mr. Cataltepe received his MBA from Michigan Technology University and his PhD from California University after graduating from Electronic Engineering Department of the Bosphorus University. Mr. Çataltepe worked as a Research and Development Engineer in the Bell Laboratories and then he was hired by AT&T as IP Network and Service Planning projects manager. Following AT&T, he joined Aycell as the Deputy General Manager in charge of Technical Operations and was promoted to Deputy General Manager in charge of AVEA Network Operations in 2004 and held this position until 2006 when he became responsible for the European Telecom Sector Post Merger and Acquisition Corporate Integration Services at Ernst & Young.

Selen Kocabas, age 40, joined Turkcell in 2003 and since May 1, 2003, she is the Chief Business Support Officer in charge of human resources, corporate information systems, procurement and contract management, and administrative issues. Mrs. Kocabas started her professional career as a Management Trainee at Koc Holding, Mrs. Kocabas later worked as Human Resources Expert at Arcelik, then as a Human Resources Coordinator at Marshall, followed by Groupe Danone SA where she worked as Human Resources Director. Selen Kocabas is a graduate of Economics from Istanbul University. She also obtained a master’s degree in Human Resources Management from Marmara University.

Serkan Okandan, age 39, joined Turkcell in 2000. Since January 1, 2006, he is the Chief Financial Officer of Turkcell. Prior to this appointment, he was the Financial Control and Reporting Division Head of Turkcell. Mr. Okandan started his professional career at PricewaterhouseCoopers in 1992. He then worked for DHL and Frito Lay as a Financial Controller. Serkan Okandan is a graduate in Economics from Bosphorus University.

Koray Ozturkler, age 45, joined Turkcell in 1998 and since April 9, 2008 he is the Chief Corporate Affairs Officer. Prior to this appointment he was the Investor Relations division head in Turkcell and before that he was the division head of International Business Development. Mr. Ozturkler started his career in the USA at Accenture Consulting. He continued his career at Yapi Kredi Bank.Mr. Ozturkler is a graduate of Johnson C. Smith University Marketing Division and he received his MBA majoring in MIS from Mercer University.

Lale Saral Develioglu, age 40, joined Turkcell in 2003 and since June 19, 2006 she is the Chief Marketing Officer of the Company. Prior to this position, she was the Individual Marketing Division Head of Turkcell. Starting her career at Unilever, Lale Saral Develioglu served as Brand Manager for 5 years and Marketing Manager for 6 years in various product categories and markets between 1992 and 2003. She is a graduate from the department of Industrial Engineering of Bogazici University. She also holds a master’s degree in Management Engineering from Rensselaer Polytechnic Institute, New York.

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Emre Sayin, age 41, joined Turkcell in 2007 as Chief Corporate Business Officer. Currently, acting as Turkcell’s Chief Consumer Sales Officer, he worked for Evyap Pazarlama ve Tic A.S. as the Deputy Manager in charge of Marketing in 2005-2006 and for Kodak A.S. as the General Manager in 2002-2005. Prior to that, Emre Sayin was the chief marketing officer for Microsoft Turkey between 1999-2002. Sayin worked as the marketing and category manager of Unilever Turkey between 1992-1999. Emre Sayin is a graduate of Bosphorus University’s Department of Industrial Engineering and holds a Master’s degree from Rutgers University.

Ilter Terzioglu, age 42, joined Turkcell in 2003 and since April 1, 2006 he is the Chief Network Operations Officer. Mr. Terzioğlu has worked in the communications sector since 1993 and served as Assistant General Manager at Ericsson, Superonline and Show TV.Mr. Terzioglu is a graduate of the Department of Econometrics at Istanbul University.

Ekrem Yener, age 47, joined Turkcell in 2007 as Chief Enterprise Business Officer. Currently acting as Turkcell’s Chief Corporate Business Officer, prior to joining Turkcell, Mr. Yener started his post as the Ankara Regional Manager of Microsoft Turkey, was appointed Microsoft’s Deputy General Manager in charge of Marketing in 2002, and then held the post of Deputy General Manager in charge of Business and Strategy Development from 2004 to 2007. A 1982 graduate of the Istanbul Technical University’s (ITU) Department of Metallurgical Engineering, Yener received a Master’s Degree in Material Sciences from UC Berkeley in 1986 and in High Level Marketing Management from the Kellogg University in 2002.

6.B Compensation

The compensation of the Board of Directors is resolved by the shareholders at general assemblies. The Board, upon the recommendation of the Corporate Governance Committee together with its own determinations, should decide on a proposal to the General Assembly whether board members will be remunerated and if such is the case, the form and amount of compensation to be paid to the board members. In our Extraordinary General Assembly held on September 21, 2007, it was decided that our Board members, except for independent board members, who would receive annual compensation of EUR 100,000 as established at our May 22, 2006 General Assembly, an annual compensation amounting to $60,000 during the period they serve as board members and commencing from the date of the Extraordinary General Assembly.

For the year ended December 31, 2008, we paid an aggregate of approximately $7.9 million to our executive officers including: indemnities, salaries, bonuses and other benefits. There was no deferred or contingent compensation accrued for the year payable to executive officers other than those already included in $7.9 million. In 2007, we paid an aggregate of approximately $12.4 million to our executive officers including: indemnities, salaries, bonuses and other benefits. Furthermore, we do not maintain any profit sharing, pension or similar plans. We have Directors and Officers Liability Insurance that covers our directors and officers from liabilities that arise in connection with performing their duties and our liabilities in connection with our directors’ and officers’ performance of their duties. The coverage amount is $40 million, and there are a number of insurers, each covering a different layer of the policy. The Directors and Officers Liability insurance is London based, but it is provided through two insurance companies in Turkey, Genel Sigorta A.S. and AIG Sigorta A.S. In 2007 we paid a premium amounting to approximately $693,000, and in 2008 we paid a premium of approximately $542,000. The policy will expire on August 26, 2009, and we will consider its renewal based on the terms and conditions offered.

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6.C Board Practices

Under the Turkish Commercial Code and our Articles of Association, our Board of Directors is responsible for our management. The Articles of Association provide for a Board of Directors consisting of seven members. The members each serve for a term of three years. None of the members of the Board of Directors has entered into a service agreement with us.

For more information on our directors and the period during which each director has served on the board, see “Item 6.A. Directors and Senior Management”.

Our Board of Directors has adopted the Turkcell Corporate Governance Guidelines, the Audit Committee Charter, the Corporate Governance Charter and the Corporate Governance Secretariat Terms of Reference. The principal provisions of the guidelines are available on our website, www.turkcell.com.tr.

Committees of the Board of Directors

The Audit Committee

We are required under Turkish laws and regulations, U.S. securities laws and regulations and the rules of the New York Stock Exchange (“NYSE”) to have an audit committee of the Board of Directors appointed from among the members of the Board of Directors. Our audit committee has two members: Mr. Colin J. Williams and Mr. Alexey Khudyakov (non-voting observer member). As required by the CMB Communiqué Serial:X No: 19 (since June 12, 2006, Communiqué Serial:X No: 22) which is binding upon public companies in Turkey, Mr. Williams and Mr. Khudyakov are non-executive members of our Board of Directors. Mr. Williams chairs the audit committee and is considered independent under the U.S. Sarbanes-Oxley Act of 2002, the rules promulgated thereunder by the U.S. Securities and Exchange Commission, the applicable rules of the NYSE and the CMB Corporate Governance Principles. Mr. Khudyakov is an “observer member” on the audit committee and is not considered independent under the U.S. Sarbanes-Oxley Act of 2002 and rules promulgated thereunder. On January 26, 2007, the CMB informed Turkcell that Alexey Khudyakov’s current status, as an “observer member” on the audit committee does not satisfy the requirements under Article 25, “Committees Responsible for Auditing” of the CMB. The CMB has stated that steps must be taken urgently so that our Company can comply with Article 25. We believe that Mr. Khudyakov does fully meet the requirements of Article 25 as he is a non-executive Board member and have initiated a lawsuit before an administrative court seeking to suspend the execution and to annul the decision of the CMB with respect to Mr. Khudyakov. The administrative court ultimately dismissed our lawsuit in January 2008. In March 2008, we appealed before the Council of State. However, on April 9, 2008, the Council of State rejected our request to suspend the decision. We are still awaiting a final decision with respect to this appeal.

Pursuant to the decision we were notified of on October 23, 2008, the CMB gave Turkcell an administrative penalty amounting to TRY 11,836 (approximately USD 7,000) for not complying with its decision stating that Mr. Khudyakov’s current status, as an “observer member” on the audit committee, does not satisfy the requirements under Article 25, “Committees Responsible for Auditing” of the CMB and required that Turkcell inform its shareholders of such penalty at the next General Assembly (which was held on January 30, 2009). In November 2008, we commenced a lawsuit before the court. The lawsuit is still pending.

If our position in this matter does not ultimately prevail over that of the CMB, our compliance with the listing requirements of the NYSE could be called into question, to the extent that the relevant rules of the NYSE are based on home country compliance. In this case, remedial action could be required.

Under the provisions of the Turkish Commercial Code, the Board of Directors must be responsible, as a whole, for all decisions and cannot delegate responsibility to committees of the board. As a consequence, parallel to the Swiss Code, committees in Turkish law merely have a “decision-shaping”, rather than “decision-taking” role. Additionally, as per a decision of the Board of Directors, the responsibility of the audit committee members is also considered as a joint responsibility of all Board members.

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The principal duties of the Audit Committee include the following:

•

assisting the board’s oversight of the quality and integrity of our financial statements and related disclosure;

•

overseeing the implementation and efficiency of our accounting system;

•

pre-approving the appointment of and services to be provided by our independent auditors;

•

preparing and monitoring the agreement between us and the independent auditor and overseeing the performance and efficiency of our independent audit system and internal audit mechanisms; and

•

establishing procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting control systems or auditing matters and establishing procedures for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

The Corporate Governance Committee

The Corporate Governance Committee mainly assists the Board of Directors with the development and implementation of our corporate governance principles and presents to the Board of Directors remedial proposals to that end. It establishes a transparent system for the determination, evaluation and training of Board member candidates. The Committee makes recommendations to the Board of Directors, where appropriate, regarding our compensation strategy both for the Board members and the Chief Executive Officer and Chief Financial Officer and the Chief Executive Officer and Chief Financial Officer succession plan. In the relations between the Company and our shareholders, the Committee assists the board. To that end, it oversees the investor relations activities.

The members of our Corporate Governance Committee are Mr. Mehmet Bulent Ergin and Mr. Oleg Malis. The Board of Directors does not have a remuneration committee; however, the Corporate Governance committee may give recommendations on remuneration, including the remuneration of our Chief Executive Officer. In accordance with Turkish law, the committee does not have the power to set remuneration independent of the Board of Directors.

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6.D Employees

From our formation in 1993, we have grown from approximately 90 employees to 2,809 employees as at December 31, 2008. Due to our customer growth and the increasing need for competent employees, we focus on the quality of our recruitment. The following table sets forth the number of employees by activity employed by us at December 31, 2006, 2007 and 2008.


	2008	2007	2006
Turkcell
Marketing(1)	179	183	146
Sales(1)	520	491	451
Finance	225	204	196
Service & Product Development(2)	532	669	665
Network Operations & Regulations(2)	821	791	718
Business Support	298	322	333
VAS Management	96	98	111
CEO Office	138	92	99
International Investment Coordination(3)	15	14	26
Investments	—	11	6
Subtotal	2,809	2,875	2,751
Subsidiaries
Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri A.S.	4,635	4,766	3,239
Limited Liability Company Astelit	1,284	1,420	1,709
Belarussian Telecom	434	—	—
Global Bilgi LLC	327	0	0
Tellcom Iletisim Hizmetleri A.S.	289	173	43
Turkcell Teknoloji Arastirma ve Gelistirme A.S	269	63	0
Kibris Telekom	174	152	118
Others(4).	154	208	148
Subtotal	7,566	6,782	5,257
Total	10,375	9,657	8,008

(1)	As of April 1, 2006, Marketing and Sales has been separated into two functions to ensure more dedicated concentration on each function. Sales include “Consumer Sales” and “Corporate Business”.

(2)

As of February 1, 2006, the Service and Product Development, Network Operations and Regulations has been separated into two functions to ensure more dedicated concentration on each function. To increase our business effectiveness and our adaptation to change and by taking regulation excellence principles into consideration, “Regulations” have been moved into the Corporate Strategy as of July 1, 2008.

(3)	International Investment Coordination includes expats and that is not included in the Subtotal.

(4)

Others includes the following subsidiaries: Turkcell Kurumsal Satis ve Dagitim Hizmetleri A.S., Corbuss, Sans Oyunlari Yatirim Holding A.S., Turktell Bilisim Servisleri A.S., Inteltek Internet Teknoloji Yatirim ve Danismanlik Ticaret A.S., Kule Hizmet ve Isletmecilik A.S., Bilyoner Interaktif Hizmetler A.S., Superonline Uluslararasi Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri A.S. and Rehberlik Hizmetleri Servisi A.S.

The achievement of our goal of being the premier mobile brand in Turkey is only possible through the delivery of a consistently high quality of service. High levels of subscriber satisfaction can only be achieved if our employees are capable and competent professionals dedicated to subscriber service.

We are able to recruit highly qualified employees due to our position of leadership in the Turkish telecommunications market and our strong corporate identity. Stringent hiring and training standards have resulted in a professional organization with high-caliber employees within a challenging workplace.

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With regard to employee compensation and benefits, the major principles of our policy are to preserve internal equity and external competitiveness and reflect individual performance in compensation packages.

Significant factors involved in the process of determining compensation and benefits for our employees are our grading structure (based on the Mercer IPE system), market movement data and individual performance. We make salary adjustments once yearly. Principal factors in salary adjustments are market movements and economic indicators (e.g. the rate of inflation). We pay performance bonuses annually to all our employees in accordance with individual and company performance results. Our performance evaluation system evaluates the whole year performance of our employees through two primary activities: target setting and 360-degree evaluation. Benefits packages are designed in line with the local market practice and linked to grade bands/levels where the benefits package improves as the grade band/level increases.

We also conduct the Defined Contribution Plan (the “DCP”), a project based on our “social responsibility objective” toward our employees. The DCP is a voluntary pension system in which we and the employee make equal contributions. After a vesting period of three years, the employee gets ownership of the contribution we made. The DCP covers all employees who have been working with us for a minimum of six months.

Each of our employees undergoes an orientation program incorporating classroom training and e-learning training. The training provides employees with information concerning corporate culture and ethics, an introduction to our services, basic mobile communications knowledge and functions of departments. Each employee has the opportunity to participate in the individual, organizational, functional and managerial development programs after regular training needs analysis. In addition, each employee receives specific training for his or her particular job.

To further develop our employees we have created the Turkcell Academy. The Turkcell Academy is structured as a center of development for Turkcell Group employees. The Turkcell Academy was created as part of Turkcell’s philosophy of investing in people and is one of our proactive development solutions supporting group strategies and Turkcell’s performance. With the Turkcell Academy’s branded long-term development programs, technical and non-technical courses, web-based training systems, e-learning and language teaching, Turkcell Group has become an environment in which employees get together to receive a broad variety of educational content and to share information.

The Turkcell Academy is also intended to improve the future society of Turkey and to reach out to young people through social responsibility projects. Together with strategic partnerships with universities and training consultancies and with Academy trainers’ experience and knowledge, the Turkcell Academy has become a valuable and important part of our company.

Our employees are not members of any union, and there is no collective bargaining agreement with our employees. We have not experienced any work stoppages.

6.E Share Ownership

The aggregate amount of shares owned by our Board members and senior officers as of March 31, 2009 was 60,592, which amount is less than 1% of our outstanding shares. No individual Board member or senior officer owned 1% or more of our outstanding shares.

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ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A Major Shareholders

The following table sets forth our major shareholders’ ordinary share ownership representing approximately 66.52% of our company’s capital. This information is current as of March 19, 2009.


Name and Address of Owner	Nominal TRY Value of Shares Owned(1)	Percent of Class
Sonera Holding B.V.(2) P.O. Box 8675 NL 3009 AR Rotterdam The Netherlands	287,632,179.557	13.07	%

Cukurova Holding A.S.(3) Buyukdere Cad. Yapi Kredi Plaza A Blok Kat: 15, 34330, Levent, Istanbul, Turkey	995,509.429	0.05	%

Turkcell Holding A.S.(4) Buyukdere Cad. Yapi Kredi Plaza A Blok Kat: 15 34330, Levent, Istanbul, Turkey	1,122,000,000.238	51.00	%

Turkiye Genel Sigorta A.S.(3) Meclisi Mebusan Cad., No: 25 34433, Salipazari, Istanbul, Turkey	1,558,452.599	0.07	%

Bankrupt Bilka Bilgi Kaynak ve Iletisim San. ve Tic. A.S. Cumhuriyet Cad. No: 16 Kat: 2 Oda:2 Sisli, Istanbul, Turkey	153,999.575	0.01	%

M.V. Holding A.S.(5) K.V.K. Plaza Bayar Cad., Gulbahar Sok. No: 14 34742 Kozyatagi, Istanbul, Turkey	51,021,712.590	2.32	%

Shares Publicly Held	736,638,146.012	33.48	%

(1)

On April 29, 2005, the General Assembly approved a revaluation of our ordinary shares from TL 1,000 to TRY 1. The revaluation resulted in the formation of fractional shares, which have not yet been merged into whole ordinary shares. Therefore, we give the nominal value of the ordinary shares owned rather than the units or fractional units thereof.

(2)	Controlled by TeliaSonera.

(3)

As of the date of this annual report on Form 20-F, TeliaSonera and Cukurova Telecom Holdings currently own, directly or indirectly, approximately 37.1% and 26.98%, respectively, of our share capital, through Turkcell Holding A.S. On the basis of publicly available information (Form 13D filings), Alfa Group, which previously held, indirectly through Cukurova Telecom Holdings Limited and Turkcell Holding A.S., 13.2% of our shares, has reduced its stake to 4.9896% following litigation with Telenor Group. We understand that Alfa Group sold 62.2% of its holdings in Alfa Telecom Turkey Limited (“ATTL”) to Visor Group affiliate Nadash International Holdings Inc. (“Nadash”) and Alexander Mamut’s Henri Services Limited (“HSL”) which now own indirectly 4.2576% and 3.967%, respectively, of our share capital.

(4)	Controlled indirectly by Cukurova Telecom Holdings and Alfa Telecom (through its Altimo subsidiary).

(5)	Controlled by Murat Vargi.

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As of April 1, 2009, Turkcell had 74,497,937 ADRs outstanding held by 50 registered ADR holders. To the best of our knowledge, as of April 1, 2009, in accordance with the loan agreements signed between our shareholders and various banks, 153,999.575 of shares having a nominal value of TRY 153,999.575 have been pledged by our shareholders as security in favor of such banks.

On June 23, 2006, a pledge was established in favor of SDIF over 16,000,000 Turkcell shares, each having a nominal value of TRY 1 in connection with a Share Certificate Pledge and Subordinate Pledge Agreements signed between SDIF and Cukurova Holding A.S., an appropriate annotation regarding the pledge has been made in the share book of Turkcell.

On November 8, 2006, Cukurova Holding A.S. offered 64,720,522.819 registered shares with a nominal value of TRY 64,720,502.819 for circulation on the Istanbul Stock Exchange. These shares are shown among the publicly held shares. In addition, Cukurova Investments N.V. offered 63,591,825.482 registered shares with a nominal value of TRY 63,591,825.482 for circulation on the Istanbul Stock Exchange. These shares we also offered through a secondary public offering on the NYSE.

The pledge right which was established on our shares owned by Cukurova Holding A.S., in connection with the Share Certificate Pledge Agreement dated September 27, 2005, signed between Cukurova Holding A.S. and SDIF and the Subordinate Pledge Agreement dated September 28, 2005, signed between Cukurova Holding A.S. and Yapi ve Kredi Bankasi A.S. (“YKB”), on 17,626,227.756 units of our shares, each having a nominal value of TRY 1, has been removed from the Share Book of Turkcell through a resolution of our Board of Directors on February 21, 2007.

On May 11, 2007, our Board of Directors approved a resolution for the blank endorsement of 11,000,000 shares, each having a nominal value of TRY 1, and held by MV Holding A.S. for their transfer and assignment pursuant to paragraph “m” of Article 9 of the Istanbul Stock Exchange Quotation Regulation.

On May 11, 2007 our Board of Directors also approved a resolution for the blank endorsement of 9,218,606.390 of our shares, each having a nominal value of TRY 1, and held by MV Investment N.V. for their transfer and assignment pursuant to paragraph “m” of Article 9 of the Istanbul Stock Exchange Quotation Regulation.

Also on May 11, 2007, 1,781,393.610 registered shares, which were owned by M.V. Investments N.V. and previously endorsed in blank for circulation on the Istanbul Stock Exchange in parts on April 21, 2004 and October 21, 2004, were listed among publicly held shares.

It was understood from the announcement of Cukurova S.A., which was sent to the Istanbul Stock Exchange on July 16, 2007, that Cukurova Holding A.S. and Cukurova Investments N.V. sold and transferred some of our shares to JP Morgan Securities Ltd. for sale to foreign investors. This transaction’s total nominal value was TRY 74,782,937.

A pledge right on some of our shares owned by Cukurova Holding A.S. was established in favor of YKB as per the financial restructuring agreement signed on September 28, 2005, between YKB and Cukurova Holding A.S. We were informed by Cukurova Holding A.S. that the aforementioned pledge has been removed. Accordingly, the pledge annotation in our Share Book with a total nominal value of TRY 21,197,403.690 was cancelled on August 2, 2007.

It has been understood from the announcement of Cukurova Holding A.S., which was sent to the Istanbul Stock Exchange on July 16, 2007, that 7,598,502.084 units of these shares (6,991,406.768 units of registered shares and 607,095.316 units of shares which were already endorsed in blank) have been transferred and assigned to JP Morgan Securities Ltd. by Cukurova Holding A.S. in order to be sold to investors residing abroad. Our board of directors resolved to approve the circulation of our shares in the total nominal value of TRY 6,991,406.768 through the blank endorsement of these shares.

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A pledge right on some of our shares owned by Cukurova Investments N.V. was established in favor of YKB as per the financial restructuring agreement signed on September 28, 2005, between YKB and Cukurova Holding N.V. As per the letter sent by YKB to Cukurova Holding A.S., the latter informed us that the aforementioned pledge has been removed. Accordingly, the pledge annotation in our Share Book with a total nominal value of TRY 67,184,434.916 was cancelled on August 22, 2007.

It has been understood from the above mentioned letters and the announcement of Cukurova Holding A.S. which was sent to the Istanbul Stock Exchange on July 16, 2007, that 67,184,434.916 units of shares (64,494,842.514 units of registered shares and 2,689,592.402 units of shares which were already endorsed in blank) have been transferred and assigned to JP Morgan Securities Ltd. by Cukurova Investments N.V. in order to be sold to investors residing abroad and our Board of Directors resolved on August 22, 2007 to approve the circulation of our shares in the total nominal value of TRY 64,494,842.514 through the blank endorsement of these shares.

On December 18, 2007, our Board of Directors approved a blank endorsement of 16,494,257.660 shares held by MV Investments N.V. and 22,000,000 shares held by MV Holding A.S., each having a nominal value of TRY 1 per share, for their transfer and assignment pursuant to paragraph “m” of Article 9 of the Istanbul Stock Exchange Quotation Regulation.

On the basis of publicly available information (Form 13D filings), Alfa Group, which previously held, indirectly, 13.2% of our shares, has reduced its stake to below 5% as a result of litigation with Telenor Group. Alfa Group’s holdings in Turkcell were sold to Nadash and HSL.

As per a public announcement sent to the Istanbul Stock Exchange on April 28, 2008, and a letter sent to us by Cukurova, we understand that Cukurova has sold 90,200,000 shares to JP Morgan Securities Ltd. for sale to foreign investors. Accordingly, along with the circulation of such shares with a nominal value of TRY 90,200,000, our free float has increased from 29.38% to 33.48%.

7.B Related Party Transactions

We have entered into agreements with our executive officers and with several of our current and former shareholders or affiliates of shareholders. We believe that all of such agreements are on terms that are comparable to those that would be available in transactions with unrelated parties. Our policy is to seek price quotes for services and goods we purchase and select the most favorable price.

Agreements with KVK Teknoloji:

KVK Teknoloji, incorporated on October 23, 2002 and one of the Company’s principal simcard distributors, is a Turkish company that is affiliated with some of the Company’s shareholders. In addition to sales of simcards and scratch cards, the Company has entered into several agreements with KVK Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which KVK Teknoloji must place advertisements for the Company’s services in newspapers. The objective of these agreements is to promote and increase handset sales with the Company’s prepaid and postpaid brand simcards, thereby supporting the protection of the Company’s market share in the prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for KVK Teknoloji and the total advertisement benefit received, reflected in the Company’s market share in new subscriber acquisitions. Distributors’ campaign projects and market share also contributed to the budget allocation. The total amount of Simcard and scratch card sales to KVK Teknoloji in 2008 amounted to $860.7 million. In 2008, total amount charged by KVK Teknoloji for dealer activation fees and other selling activities amounted to $103.4 million.

Agreements with A-Tel:

A-Tel is involved in the marketing, selling and distributing of the Company’s prepaid systems. A-Tel is a 50-50 joint venture between the Company and SDIF. A-Tel acts as the Company’s only dealer for Muhabbet Kart (a prepaid

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card), and receives dealer activation fees and simcard subsidies for the sale of Muhabbet Kart. In addition to the sales of simcards and scratch cards through an extensive network of newspaper kiosks located throughout Turkey, the Company has entered into several agreements with A-Tel for sales campaigns and subscriber activations. The total amount of Simcard and scratch card sales to A-Tel in 2008 amounted to $132.6 million. In 2008, total amount charged by A-Tel for dealer activation fees and other selling activities amounted to $49.1 million.

Agreements with Digital Platform:

Digital Platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the Company’s principal shareholders, Cukurova Group. The Company has an agreement related to the corporate group SMS services that the Company offers to Digital Platform, and an agreement for call center services provided by the Company’s subsidiary Global Bilgi. The total amount of call center service fees and interest charges from Digital Platform was approximately $20.3 million in 2008.

Agreements with Millenicom Telekomunikasyon Hizmetleri A.S.:

European Telecommunications Holding AG (“ETH”), a subsidiary of Cukurova Group, holds the majority shares of Millenicom. Millenicom renders and receives call termination and international traffic carriage services to and from the Company. In 2008, the total amounts charged by, and to, Millenicom Telekomunikasyon were $8.5 million, and $13.0 million, respectively.

Agreements with ADD:

ADD, a media planning and marketing company, is a Turkish company owned by one of the Company’s principal shareholders, Cukurova Group. The Company operates a media purchasing agreement with ADD, which was revised on September 1, 2008 and will be effective until August 31, 2009. The purpose of this agreement is to benefit from the expertise and bargaining power of ADD against third parties, regarding the formation of media purchasing strategies for both postpaid and prepaid brands. Additionally, ADD is a party to the sponsorship and advertisement agreements which are an integral part of the “Restructuring Framework Agreement” signed between the Company and Digital Platform. The total amount charged by ADD in 2008 amounted to $165.3 million.

Agreements with Hobim:

Hobim, one of the leading data processing and application service provider companies in Turkey, is owned by Cukurova Group. The Company has entered into invoice printing and archiving agreements with Hobim under which Hobim provides the Company with scratch card printing services and monthly invoice printing services, manages archiving of invoices and subscription documents for an indefinite period of time. Prices of the agreements are determined as per unit cost plus profit margin. The total amount charged by Hobim in 2008 in relation to these contracts was $20.9 million.

Betting SA:

Betting SA is incorporated under the laws of Greece and is owned by one of the major shareholders of Inteltek. Inteltek has a service agreement with Betting SA for consultancy services, including monitoring operations, providing continuous evaluation of betting, maximizing game revenues of fixed odds betting, operating fixed odds betting games in the most efficient manner, with integrity and securely. In 2008, the total amount charged by Betting SA related to this agreement was $9.8 million.

Agreements with Kyivstar:

Alfa Group, a minor shareholder of the Company, holds the majority shares of Kyivstar. Astelit receives call termination and international traffic carriage services from Kyivstar. In 2008, the total amounts charged by and charged to Kyivstar were $63.8 million and $63.6 million, respectively.

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7.C Interests of Experts and Counsel

Not Applicable.

ITEM 8.

FINANCIAL INFORMATION

8.A Consolidated Statements and Other Financial Information

Audited consolidated financial statements as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008, are included at “Item 18. Financial Statements.”

Legal Proceedings

For a discussion of the various claims and legal actions in which we are involved, see Note 32 (Contingencies) to our consolidated financial statements in this Form 20-F.

Dividend Policy

We have adopted a dividend policy, which is included in our Corporate Governance Guidelines. As adopted, our general dividend policy is to pay dividends to shareholders with due regard to trends in our operating performance, financial condition and other factors. Since 2004, the Board of Directors has endeavored to distribute cash dividends of at least 50% of our distributable net profits per fiscal year, although the payment of dividends remains subject to our cash flow requirements, applicable Turkish laws and the approval of, or amendment by, the Board of Directors and the General Assembly of Shareholders.

In accordance with Turkish law, the distribution of profits and the payment of an annual dividend with respect to the preceding financial year is subject to a recommendation which may be made by the Board of Directors each year for approval by the shareholders at the annual general assembly. The Board may decide whether or not to recommend a distribution of profits together with the amount of dividend and the shareholders, through the general assembly, accept or reject such proposal, if any. Dividends are payable on a date proposed by the Board of Directors and determined at the general assembly of shareholders, which date, under the CMB requirements, must be earlier than the end of the fifth month following the end of the preceding financial year. However, the CMB is authorized to designate another deadline for distribution of dividends in any given year.

In connection with the redenomination of the Turkish Lira and as per the related amendments of Turkish Commercial Code, in order to increase the nominal value of the shares to TRY 1, 1,000 units of shares, each having a nominal value of TRY 0.001, shall be merged and each share having a nominal value of TRY 1 shall be issued to represent such shares. Turkcell is currently in the process of merging 1,000 existing ordinary shares, each having a nominal value of TRY 0.001, to one ordinary share having a nominal value of TRY 1. After the share merger, which appears as a provisional article in the Articles of Association to convert the value of each share with a nominal value of TRY 0.001 to TRY 1, all shares will have a value of TRY 1. Although the merger process has not been finalized, the practical application is to state each share having a nominal value of TRY 1 approved by the CMB. Basic and diluted weighted average number of shares and net income per share as of December 31, 2004 are retrospectively changed to reflect each share having a nominal value of TRY 1.

In 2006, we distributed a dividend of TRY 1,018,150,363 from our 2005 distributable income to our shareholders. The dividend was in the form of a 50% cash dividend and a 50% bonus share distribution. The cash dividend in the amount of TRY 509,075,181 was distributed to our shareholders from May 29, 2006 and amounted to TRY 0.274451 per ordinary share. The stock dividend was distributed starting from June 12, 2006 by adding TRY 345,112,659 of the total dividend to our paid-in capital, which corresponded to a 18.605586% share dividend per share.

Subsequently, a bonus share distribution was made on June 12, 2006. The Board of Directors resolved to add the capital inflation adjustment difference of TRY 51,661,781 to the capital and distribute the bonus shares

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to be issued accordingly. As a result, together with the foregoing bonus dividend distribution corresponding to TRY 0.18605586 bonus share per dividend per share, a total bonus share distribution of TRY 345,112,659 per share then having a nominal value of TRY 345,112,659 was distributed to our shareholders.

In 2007, we distributed a cash dividend of TRY 567,039,784 from our 2006 distributable income of TRY 1,270,352,019 to our shareholders. The cash dividend was distributed to our shareholders from April 16, 2007 and amounted to TRY 0.2577453 per ordinary share.

In 2008, we distributed a cash dividend of TRY 648,713,951 from our 2007 distributable income of TRY 1,297,427,903 to our shareholders. The cash dividend was distributed to our shareholders from May 22, 2008 and amounted to TRY 0.2948699 per ordinary share.

Annual profits are calculated and distributed in accordance with our articles of association after deduction from our annual revenues of all expenses, depreciation, taxes, required reserves and any losses from the previous years.

As per CMB regulations, dividend distributions of publicly held companies since the accounting period ended on December 31, 2005 are regulated as follows:

From the distributable net dividend calculated as per the CMB’s regulations, the entire amount calculated according to the CMB regulations regarding the requirement of minimum dividend distribution shall be distributed in the event such amount can be covered by the distributable net dividend in the statutory records. In the event the entire amount cannot be covered by the distributable net dividend in the statutory records, the total distributable net dividend in the statutory records shall be distributed. In the event there is net loss in the financial statements prepared as per the CMB regulations or statutory records, there shall be no dividend distribution.

For the year ended on December 31, 2005, taxes and reserves on 2005 profit were computed based on the statutory financial statements prepared in accordance with Turkish tax laws which may differ significantly from our IFRS accounts.

The CMB determined that for the accounting period ended December 31, 2008, the minimum dividend distribution rate should be at least 20% of the total distributable dividend. This distribution can be in cash or in the form of bonus share distribution, or both in cash and in the form of bonus share distribution, provided that it will not be less than 20% of the total distributable dividend. The amount of dividend to be distributed shall be resolved in the general assembly meetings of the companies.

To the extent we declare dividends in the future, we will pay those dividends in Turkish Lira. In the case of ordinary shares held in the form of ADSs, dividends will be converted into U.S. Dollars by the depositary for the ADSs, to the extent it can do so on a reasonable basis, and will be distributed to the holders of the ADSs. Because exchange rates between the Turkish Lira and the U.S. Dollar fluctuate continuously, a holder of ADSs will be subject to currency fluctuation generally, but particularly between the date on which dividends are declared and the date dividends are paid. Under current Turkish regulations, dividends or other distributions paid in respect of the ordinary shares or ADSs generally will be subject to withholding taxes. See “Item 10E. Taxation”.

8.B Significant Changes

Not applicable.

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ITEM 9.

THE OFFER AND LISTING

9.A Offer and Listing Details

Our capital consists of ordinary shares. Pursuant to an amendment in Turkish Capital Markets Law and a communiqué issued by the Turkish CMB, our shares traded on the Istanbul Stock Exchange were dematerialized as of November 2005. For detailed information on the dematerialization of our shares, see “Item 10.B Transfer of Shares”.

Our ordinary shares are traded on the Istanbul Stock Exchange under the symbol “TCELL” and our ADSs are traded on the NYSE under the symbol “TKC”. Currently two ADSs represent five of our ordinary shares. Our ADSs are evidenced by American Depositary Receipts (“ADRs”), issued by Morgan Guaranty Trust Company of New York, as Depositary under a Deposit Agreement, executed in July 2000, among us, Morgan Guaranty Trust Company of New York and registered holders from time to time of ADRs. ADRs were first issued in July 2000.

On April 29, 2005, we modified the ratio of our ordinary shares per ADS from 2,500 ordinary shares per ADS to five ordinary shares per two ADSs in connection with the redenomination of the Turkish Lira and the change of the nominal value of our ordinary shares.

Beginning January 1, 2006, capital gains realized without meeting a one year holding period are subject to a withholding tax in Turkey. On July 7, 2006, a provision was added to article 1/a of Code 5527 stating that foreign-based taxpayers, natural persons and corporations are subject to 0% tax. See “Item 10.E. Taxation”.

The table below sets forth, for the periods indicated, the reported high and low closing quotations (as extracted from Reuters) on the NYSE and the Istanbul Stock Exchange. All quotations have been adjusted to take into account all dividends we have issued in the form of shares and cash.


	New York Stock Exchange ($ per ADS)(1)		Istanbul Stock Exchange (TRY per Ordinary Share)
	High	Low	High	Low
Annual information for the past five years
2008	27.47	9.70	12.60	6.90
2007	29.73	12.70	13.90	6.42
2006	16.14	9.72	8.00	5.13
2005	13.41	10.22	7.06	4.92
2004	12.13	5.42	5.75	2.70
Quarterly information for the past two years
2008
First Quarter	27.47	20.89	12.60	9.69
Second Quarter	23.10	14.55	11.73	7.00
Third Quarter	19.49	13.44	8.90	6.90
Fourth Quarter	16.35	9.70	9.00	7.05
Quarterly information for the past two years
2007
First Quarter	14.80	12.70	7.63	6.42
Second Quarter	16.93	13.21	8.85	6.65
Third Quarter	21.87	15.40	10.40	8.40
Fourth Quarter	29.73	21.07	13.90	10.10
Monthly information for most recent six months
November	14.42	10.20	8.85	7.30
December	15.33	12.66	9.00	8.25
January	15.33	11.93	9.35	8.05
February	14.30	12.32	9.35	8.45
March	12.39	11.15	8.45	7.70
April (as of April 1, 2009)	12.72	12.72	8.05	8.05

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(1)

Share prices have been revised to reflect the ADR ratio change for our American Depositary Receipt (ADR) program, which became effective on April 29, 2005. In connection with the redenomination of the Turkish Lira and the change of the nominal value of the Turkcell ordinary share, the Turkcell ADR ratio was changed from the existing ratio of one (1) ADS to two thousand five hundred (2,500) ordinary shares to a new ratio of two (2) ADSs to five (5) tradable shares.

Fluctuations in the exchange rate between the Turkish Lira and the U.S. Dollar will affect any comparisons of ordinary share prices and ADS prices.

On April 1, 2009, the closing price per ordinary share on the Istanbul Stock Exchange was TRY 8.05 and per ADS on the NYSE was $12.72.

The Depositary confirmed that we had 81,977,243 ADRs outstanding as of the close of business December 31, 2008. We had 74,497,937 ADRs outstanding as of the close of business April 1, 2009.

9.B Plan of Distribution