Edgar Filing: TURKCELL ILETISIM HIZMETLERI A S

Form 20-F

As filed with the Securities and Exchange Commission on April 20, 2012

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, 2011

¨	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. Nihat Narin

Telephone: +90 212 313 1244

Facsimile: +90 212 292 9322

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

Ordinary Shares, Nominal Value TRY 1.000*

New York 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ 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


		Page
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		8
	3.C REASONS FOR THE OFFER AND USE OF PROCEEDS		8
	3.D RISK FACTORS		8
ITEM 4.	INFORMATION ON THE COMPANY		21
	4.A HISTORY AND DEVELOPMENT OF THE COMPANY		21
	4.B BUSINESS OVERVIEW		21
	4.C ORGANIZATIONAL STRUCTURE		75
	4.D PROPERTY, PLANT AND EQUIPMENT		76
.	4A. UNRESOLVED STAFF COMMENTS		77
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		77
	5.A OPERATING RESULTS		80
	5.B LIQUIDITY AND CAPITAL RESOURCES		98
	5.C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.		102
	5.D TREND INFORMATION		102
	5.E OFF-BALANCE SHEET ARRANGEMENTS		103
	5.F TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS		104
	5.G SAFE HARBOR		104
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		105
	6.A DIRECTORS AND SENIOR MANAGEMENT		105
	6.B COMPENSATION		109
	6.C BOARD PRACTICES		110
	6.D EMPLOYEES		112
	6.E SHARE OWNERSHIP		114
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		115
	7.A MAJOR SHAREHOLDERS		115
	7.B RELATED PARTY TRANSACTIONS		117
	7.C INTERESTS OF EXPERTS AND COUNSEL		117
ITEM 8.	FINANCIAL INFORMATION		117
	8.A CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION		117
	8.B SIGNIFICANT CHANGES		119
ITEM 9.	THE OFFER AND LISTING		119
	9.A OFFER AND LISTING DETAILS		119
	9.B PLAN OF DISTRIBUTION		120
	9.C MARKETS		120
	9.D SELLING SHAREHOLDERS		121
	9.E DILUTION		121
	9.F EXPENSES OF THE ISSUE		121
ITEM 10.	ADDITIONAL INFORMATION		121
	10.A SHARE CAPITAL		121
	10.B MEMORANDUM AND ARTICLES OF ASSOCIATION		121
	10.C MATERIAL CONTRACTS		131
	10.D EXCHANGE CONTROLS		132
	10.E TAXATION		132
	10.F DIVIDENDS AND PAYING AGENTS		139
	10.G STATEMENT BY EXPERTS		139
	10.H DOCUMENTS ON DISPLAY		139
	10.I SUBSIDIARY INFORMATION		139


ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	139
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	141
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	143
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	144
ITEM 15.	CONTROLS AND PROCEDURES	144
ITEM 16A	AUDIT COMMITTEE FINANCIAL EXPERT	146
ITEM 16B	CODE OF ETHICS	146
ITEM 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES	146
ITEM 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	147
ITEM 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	147
ITEM 16F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	147
ITEM 16G	CORPORATE GOVERNANCE	147
ITEM 17.	FINANCIAL STATEMENTS	153
ITEM 18.	FINANCIAL STATEMENTS	153
ITEM 19.	EXHIBITS	153

INTRODUCTION

This is the 2011 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, 2011 and 2010 and for each of the years in the three-year period ended December 31, 2011 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 “TL”, “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”, “U.S. $” 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 used with our subscribers until April 2010 to measure airtime. As of April 2010, we measure our airtime in TRY rather than counters.

Statements regarding our market share and total market size are based on the Information and Communication Technologies Authority’s (“ICTA”) announcements, and statements regarding penetration are based on the Turkish Statistical Institute’s (“TUIK”) announcements pertaining to the Turkish population. Furthermore, statements regarding our 2G coverage are based on the ICTA’s specifications as well as the TUIK’s announcements, and statements regarding our 3G coverage are based on the 3GPP TS 25.101 specifications for outdoor coverage.

References to the Information and Communication Technologies Authority or ICTA include its predecessor entity, the Telecommunications Authority.

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, and include, among others, the following:

•

competition in our main market;

•

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;

•

developments in the Turkish telecommunications market that will impact the size and usage of our future subscriber base and which are affected by factors outside of our control;

•

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;

•

changes in current and future Turkish telecommunications laws, regulations and regulatory orders which may impact our customers’ usage patterns;

•

regulations imposed by the Information and Communication Technologies Authority (hereinafter, the “ICTA”), that may affect the prices for our services, other legal and regulatory restrictions imposed on us by regulatory authorities in Turkey, and 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 in “access to GSM mobile networks and the call origination market”;

•

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

•

economic and political developments in Turkey and internationally;

•

exposure to certain risks through our interests in associated companies;

•

foreign exchange rate risks;

•

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;

•

our ability to deal with spectrum limitations;

•

zoning limitations related to our Base Transceiver Stations (“BTS”);

•

potential liability and possible reduced usage of mobile phones as a result of alleged health risks related to BTSs and the use of handsets;

•

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

•

a decision by the Turkish Capital Markets Board (“CMB”) that the appointment of one of our board members to the audit committee does not satisfy Turkish legal requirements and our compliance with new corporate governance requirements in Turkey;

•

the influence of our controlling shareholders and disputes between them;

•

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

•

technological changes in the telecommunications market;

•

our dependence on third-party providers to help us navigate the regulatory, security and business risks of industries where we traditionally do not compete;

•

our ability to retain key personnel and distributors;

•

legal actions and claims to which we are a party; 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, 2011 and 2010 and for each of the years in the three-year period ended December 31, 2011, 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 five-year period ended December 31, 2011, presented in accordance with IFRS as issued by the IASB which have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2011, 2010, 2009, 2008 and 2007. The information appearing under the caption “Other Financial Data” is not derived from the audited financial statements.


	2011			2010			2009			2008			2007
	(Million $, except share data and certain other data)
Selected Financial Data Prepared in Accordance with IFRS as Issued by the IASB
Consolidated Statement of Operations Data
Revenues
Communication fees		5,225.4			5,670.2			5,557.3			6,576.9			5,976.9
Commission fees on betting business		51.4			31.2			42.7			176.2			181.3
Monthly fixed fees		63.0			75.4			42.5			65.1			54.8
Simcard sales		21.2			22.9			22.9			28.2			20.8
Call center revenues		38.1			25.2			17.4			16.6			12.9
Other revenues		210.6			157.2			107.2			107.4			81.9
Total revenues		5,609.7			5,982.1			5,790.0			6,970.4			6,328.6
Direct cost of revenues⁽¹⁾		(3,528.9	)		(3,349.0	)		(3,097.1	)		(3,409.0	)		(3,103.4	)
Gross profit		2,080.8			2,633.1			2,692.9			3,561.4			3,225.2
Other income		32.6			14.7			0.9			14.1			7.8
Administrative expenses		(246.5	)		(347.3	)		(273.1	)		(309.3	)		(252.8	)
Selling and marketing expenses		(1,010.6	)		(1,085.8	)		(1,085.1	)		(1,351.7	)		(1,138.2	)
Other expenses		(161.3	)		(64.2	)		(111.2	)		(18.0	)		(22.5	)
Results from operating activities		695.0			1,150.5			1,224.4			1,896.5			1,819.5
Finance income		330.3			277.1			329.6			442.1			308.4
Finance costs		(289.7	)		(102.6)			(187.5	)		(136.8	)		(551.1	)
Net finance income/(costs)		40.6			174.5			142.1			305.3			(242.7	)
Monetary gain⁽²⁾		144.8			—			—			—			—
Share of profit of equity accounted investees⁽³⁾		136.9			122.8			78.4			103.0			64.9
Profit before income taxes		1,017.3			1,447.8			1,444.9			2,304.8			1,641.7
Income tax expense		(292.2	)		(320.8	)		(340.1	)		(549.8	)		(322.4	)
Profit for the period		725.1			1,127.0			1,104.8			1,755.0			1,319.3
Attributable to:
Equity holders of the Company		751.7			1,170.2			1,094.0			1,836.8			1,350.2
Non-controlling interest		(26.6	)		(43.2	)		10.8			(81.8	)		(30.9	)
Profit for the period		725.1			1,127.0			1,104.8			1,755.0			1,319.3
Basic and diluted earnings per share		0.34			0.53			0.50			0.83			0.61
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents		2,508.5			3,302.2			3,095.5			3,259.8			3,095.3
Total assets		9,098.8			9,794.6			9,320.8			8,067.9			8,469.0
Long-term debt⁽⁴⁾		1,057.4			1,407.3			821.2			130.0			140.4
Total debt⁽⁵⁾		1,868.1			1,837.5			1,512.0			785.9			760.0
Total liabilities		3,367.2			3,561.0			3,424.6			2,624.3			2,537.8
Share capital		1,636.2			1,636.2			1,636.2			1,636.2			1,636.2
Total equity/net assets		5,731.6			6,233.6			5,896.2			5,443.6			5,931.2
Weighted average number of shares		2,200,000,000			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		925.8			1,262.6			1,316.6			1,746.3			1,986.9
Net cash used for investing activities		(1,410.5	)		(704.9	)		(1,485.0	)		(695.2	)		(440.5	)
Net cash from (used) for financing activities		31.6			(303.7	)		(5.4	)		(353.6)			(255.0	)
Other Financial Data
Dividends declared or proposed⁽⁶⁾⁽⁷⁾		—			703.4			573.5			713.3			502.3
Dividends per share (declared or proposed)⁽⁷⁾⁽⁸⁾		—			0.32			0.26			0.32			0.23
Gross margin⁽⁹⁾		37	%		44	%		47	%		51	%		51	%
Adjusted EBITDA⁽¹⁰⁾		1,748.1			1,957.4			1,925.4			2,580.3			2,627.1
Capital expenditures		866.0			1,078.6			1,769.3			808.2			783.1

(1)

Direct cost of revenues includes payments for our treasury share (the amount paid to the government under our license) 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)	See Note 2 (Basis of Preparation) to our consolidated financial statements in this Form 20-F for information regarding monetary gain/(loss).

(3)

Share of profit of equity accounted investees primarily includes the income 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. Fintur currently holds all of our International mobile communications investments other than those related to our operations in Northern Cyprus, Ukraine, Belarus and Germany.

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

(5)	Total debt consists of long-term and short-term loans and borrowings as well as lease obligations excluding option contracts.

(6)

On March 23, 2011 our Board of Directors proposed a dividend for the year ended December 31, 2010 of approximately TRY 1,328.7 million ($703.4 million computed using the Central Bank of the Republic of Turkey’s (“CBRT”) TRY/U.S. Dollar exchange rate on December 31, 2011), which corresponds to 75% of our distributable net income for the year. This dividend proposal was discussed but not approved at the Ordinary General Assembly of Shareholders held on April 21, 2011 and the Extraordinary General Assembly of Shareholders held on August 11, 2011 and October 12, 2011.

(7)

The U.S. Dollar equivalents of the dividend for the years ended December 31, 2010 was computed by using the CBRT’s TRY/USD exchange rate on December 31, 2011, whereas the U.S. Dollar equivalents of the dividend for the years ended December 31, 2009, 2008 and 2007 were computed by using the CBRT’s TRY/USD exchange rate on the dates that the General Assembly of Shareholders approved the dividend distribution.

(8)

Dividends per share for the years ended December 31, 2008, 2009, 2010 and 2011 were computed over 2,200,000,000 shares. For the year ended December 31, 2010, the proposed dividend per share in TRY was TRY 0.60. For the years ended December 31, 2009, 2008 and 2007, the dividend per share in TRY was TRY 0.39, TRY 0.50, and TRY 0.29, respectively.

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

(10)	Adjusted EBITDA is a non-GAAP financial measure that equals profit for the period before finance income, finance costs, income tax expense, other income, other expense, monetary gain, share of profit of equity accounted investees and depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that equals profit for the period before finance income, finance costs, income tax expense, other income, other expense, monetary gain, share of profit of equity accounted investees 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 profit for the period 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, which may limit 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,
	2011			2010			2009			2008			2007
	(Million $)
Adjusted EBITDA		1,748.1			1,957.4			1,925.4			2,580.3			2,627.1
Income tax expense		(292.2	)		(320.8	)		(340.1	)		(549.8	)		(322.4	)
Other operating income/(expense)		(57.9	)		(49.4	)		(85.2	)		(15.6	)		(10.8	)
Finance income		29.0			0.5			1.0			11.2			1.6
Finance costs		(81.5	)		(100.4	)		(188.3	)		(80.2	)		(264.4	)
Net (decrease)/increase in assets and liabilities(1)		419.7			(224.7	)		3.8			(199.6	)		(44.2	)
Net cash from operating activities		925.8			1,262.6			1,316.6			1,746.3			1,986.9

The following table presents selected operational data:

Operating Results


	Year ended December 31,
	2011			2010			2009
Industry Data
Population of Turkey (in millions)(1)		74.7			73.7			72.6

Turkcell Data
Number of postpaid subscribers at end of period (in millions)(2)		11.7			10.1			9.4
Number of prepaid subscribers at end of period (in millions)(2)		22.9			23.3			26.0
Total subscribers at end of period (in millions)(2)		34.5			33.5			35.4
Average monthly revenue per user (in $)(3)		11.9			13.0			12.0
Postpaid		23.1			26.6			26.6
Prepaid		6.6			7.6			7.5
Average monthly minutes of use per subscriber(4)		213.8			179.1			134.3
Churn(5)		27.9	%		33.9	%		32.6	%
Number of Turkcell employees at end of period		3,071			2,789			2,709
Number of employees of consolidated subsidiaries at end of period(6)		9,763			8,083			7,743

(1)	The population of Turkey for 2011, 2010 and 2009 is based on TUIK’s announcements.

(2)	Subscriber numbers do not include subscribers in Ukraine, Belarus, Northern Cyprus and Germany or those of Fintur subsidiaries.

(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, Northern Cyprus and Germany or those of Fintur subsidiaries.

(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, Northern Cyprus and Germany or those of Fintur subsidiaries.

(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, Northern Cyprus and Germany or those of Fintur subsidiaries. For the ICTA’s definition concerning active and passive subscriptions, see “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”.

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

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 CBRT. 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 except foreign operations in hyperinflationary economies (including comparatives) are translated to U.S. Dollars at monthly average exchange rates.

The income and expenses of foreign operations in hyperinflationary economies are translated into USD at the exchange rate as of the reporting date. Prior to translating the financial statements of foreign operations in hyperinflationary economies (Republic of Belarus), their financial statements for the current period are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the reporting date. 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 CBRT, 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 CBRT announced that it will continue the implementation of the floating exchange rate regime in 2012.

The following table sets forth, for the periods and the dates indicated, the CBRT’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, 2012 was TRY 1.773 = $1.00.


	2012⁽²⁾⁽³⁾		2011⁽²⁾		2010⁽²⁾		2009⁽²⁾		2008⁽²⁾		2007⁽²⁾
High		1.889		1.907		1.598		1.796		1.696		1.450
Low		1.734		1.496		1.388		1.437		1.145		1.163
Average(1)		1.790		1.670		1.500		1.547		1.293		1.303
Period End		1.773		1.889		1.546		1.506		1.512		1.165

Source: CBRT

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

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

(3)	Through April 1, 2012.


	March 2012		February 2012		January 2012		December 2011		November 2011		October 2011
High		1.8075		1.7676		1.8889		1.9065		1.8752		1.8870
Low		1.7375		1.7340		1.7757		1.8142		1.7442		1.7516

Source: CBRT

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

The following is a discussion of those risks that we believe are the principal material risks faced by our Company and its subsidiaries. No assurance can be given that risks that we do not believe to be material today will not prove to be material in the future. Consequently, the risks described below should not be considered to be exhaustive.

Our activity is concentrated in the Turkish telecommunications market, which is highly competitive. 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 competition in the Turkish mobile telecommunications market intensifies, or if the market slows or develops in unexpected ways, this could harm our business and results of operations. Furthermore, continued price and higher incentive driven competition has, and will continue to, put pressure on our prices and margins, as well as our liquidity.

Actions by Turkey’s principal telecommunications regulator, the ICTA, have interfered, and will continue to interfere, with our ability to price our services and respond to competitive pressures. Regulatory actions such as the ICTA’s regulation of our retail pricing and the ICTA’s ongoing pressure on interconnection rates and maximum prices 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. The regulatory interventions in the past years have increased the competition. Moreover, new licenses and authorizations issued by the regulator such as Fixed Telephony Service (“FTS”) and Mobile Virtual Network Operator (“MVNO”) licenses have made it easier and/or more attractive for new direct and indirect competitors to enter the market.

In the Turkish telecommunications market, we currently face competition from two other mobile providers, Vodafone Telekomunikasyon A.S. (“Vodafone”) and Avea Iletisim Hizmetleri A.S. (“Avea”), and from Turk Telekomunikasyon A.S. (“Turk Telekom”), the historic fixed-line telecommunications operator in Turkey. The competition, in recent years, has intensified and increasingly focused on the postpaid segment, which is where we derive the majority of our revenues, and also on price, leading to commoditization of the market. In particular, Mobile number portability (“MNP”) introduced in 2008, has been accompanied by lower prices and high incentives for subscribers to change operators, which has further increased pressure and has made it more difficult to retain customers. These factors have, and may continue to, contribute to increased churn rates as well as higher acquisition and retention costs, and may have a significant impact on both Turkcell and the market. Moreover, the fixed line incumbent has a significant competitive power in its own market and tax advantages over the mobile business, and potential regulatory developments may favor fixed line operators.

In addition, competition from new technologies such as Internet Protocol Television (“IPTV”), Voice over Internet Protocol (“VoIP”), wi-fi, wide-band wireless (“WIMAX”) and converged offers may provide an alternative to mobile, for both voice and data transmission, and could result in a decrease in our revenues.

In addition to the competition in the Turkish telecommunications market, other developments in the market could harm our business and results of operations. The size and usage patterns of our future subscriber base will be affected by a number of factors outside of our control, which may include: general economic and political conditions; laws, regulations and other means of governmental intervention in the telecommunications sector; development of, and changes to, the mobile market; further intense competition due to aggressive price offers; the availability of coverage, customer service quality and cost to the subscriber of competing mobile services; and improvements in the quality and availability of fixed line telephone services in Turkey.

With regards to our terminal offers, we may increase our focus in this segment depending on market dynamics and global trends. There may be greater emphasis on terminal bundled offers and handset subsidies in the Turkish mobile market, which may influence us to increase the incentives we provide our customers. Furthermore, the competition in the terminal market may increase as more complex terminals become available at lower prices. Additionally, any regulatory developments that may impact operators’ offerings of contracted terminal campaigns, increases in certain taxes, changes in foreign exchange rates, changes in interest rates, changes in banking regulations that could lead to a decrease in credit card limits, supply chain difficulties faced by our vendors and delays resulting from higher demand for, and inadequate supply of, Turkcell branded devices or terminals we promote and user support allocations could adversely affect our business. In addition, mass subsidization of tablets that only have wi-fi connection could negatively impact our 3G business.

Our strategy for growth is partly dependent on new investment opportunities, which 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 and participate in those meeting our criteria. We are open to launching greenfield operations, as well as forming alliances, which may include management service agreements, and conducting mergers and/or acquisitions that will contribute to our economies of scale and create synergies, both inside and outside of Turkey. These opportunities may be in the area of mobile telecommunications and services, fixed line operation and services, convergence and in other areas, such as providing, as an MVNO under our Turkcell Europe brand, mobile voice and data services in Germany targeting the local Turkish population as well as other mobile users with close ties to Turkey. We may replicate this business model in other European countries with Turkish populations. In addition, we may consider new business opportunities such as the “games of chance business”. In the context of our evaluation of potential investment opportunities within the regions we target for international expansion, Turkcell has, from time to time, considered opportunities in countries in the Balkans, Middle East and North Africa (“MENA”), and may consider such opportunities in the future. We may participate in additional public tenders for new licenses or the privatization of public telecom companies as well as in private sale transactions in emerging markets to pursue investment opportunities in line with our growth strategy.

In pursuit of our growth strategy, our management may divert attention and/or cash resources away from other ongoing business concerns, which could harm our business and results of operations if our acquisitions are not successful or if we miss opportunities or threats in our existing businesses. Furthermore, we may miss entering new businesses by underestimating opportunities/overestimating threats, or may enter businesses that cause high value erosion in our core business by overestimating opportunities/threats.

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.

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 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, Libya and Syria, and certain individuals involved in such companies, have been the specific targets of the aforementioned laws and regulations. Investors may be reticent to invest in a company doing business in such countries or other countries that may be at risk due to the political instability in the MENA region. These factors could have an adverse effect on the demand for our shares.

Laws and regulations and the manner in which they and our licenses are interpreted have had and may in the future have an impact on us, and non-compliance with such laws and regulations and licenses could have a material adverse effect on our business and results of operations.

We operate in an industry that is subject to extensive regulation. This is true in virtually all of our businesses, in the Turkish market and in all of the other countries in which we operate. Compliance with new and existing laws, regulations and regulatory orders, as well as with the terms of the licenses under which our businesses are operated, has had and is likely to continue to have a significant impact on our ability to set our pricing, on our competitive position, on our ability to offer new and existing services, on customer use of our services and more generally on the way in which we do business. Furthermore, the laws, regulations, regulatory orders and licenses under which we operate are subject to interpretation and enforcement by regulators with which we are not always in agreement. Compliance with laws, regulations, regulatory orders and licenses and

related regulatory actions has had and in the future is likely to have a significant effect on our business and results of operations, in many cases adverse. Failure to comply may lead to significant penalties and the loss of licenses and could adversely affect our business and results of operations. For more information on regulation and how it may impact our business, see “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”.

In Turkey, we are subject in particular to the Electronic Communications Law No. 5809 (the “Electronic Communications Law”), which came into force in 2008. This law significantly expanded the regulatory powers, duties and authority of the ICTA, 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. Numerous regulations have been published under this law and more are expected. No assurance can be given that these new regulations or the actions of the ICTA will be satisfactory to us.

Pricing is one of the key areas in which we are subject to regulation. The actions of the ICTA and the Ministry of Transport, Maritime Affairs and Communications in our voice, SMS, data, roaming and interconnection pricing have, and will continue to, negatively affect our pricing and our ability to design and launch campaigns and offers and, consequently, have had and will continue to have a negative impact on our business.

Recently, certain new regulations have either come into effect or have been enacted and will come into force in the near future, including regulations regarding quality of service, the sharing of our infrastructure and the protection of personal data and electronic commerce, each of which may have an adverse effect on various aspects of our business. The regulation on quality of service has introduced new and important obligations with respect to call center operation service quality, call service quality and quality of service reporting requirements. Complying with these new regulations may be costly, and non-compliance may lead to adverse publicity and the imposition of penalties. In addition, under new regulations, we may be required to share some of our infrastructure and network with our competitors and to offer national roaming to their subscribers, which could adversely affect our ability to maintain a competitive edge. Finally, new laws have been enacted regarding the protection of personal data and electronic commerce, and new regulations on the protection of personal data are also being considered. These new measures will affect the way we handle and store data, and may also affect the terms of our subscriber contracts and the way we can communicate with customers, in particular by SMS. This could require us to incur compliance costs and could limit our ability to use SMS for marketing purposes.

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.

With a substantial portion of our revenues, assets and business derived from and located in Turkey, and denominated in Turkish Lira, adverse developments in the Turkish market are likely to have a material adverse effect on our business, consolidated financial condition and results of operations. Additionally, potential changes in consumer behavior due to new business models, usage trends and macroeconomic and regulatory changes may adversely affect bad debt.

The biggest threats to the global economy, including Turkey, in 2012, in our view, are the European sovereign credit crisis and the potential contagion risk to other EU countries, high oil prices related to civil unrest and political instability in the MENA, the inflation risk in emerging markets, monetary conflict between Europe and the U.S., the U.S. fiscal problem, risks of a hard landing for the Chinese and Indian economies, and funding concerns with respect to emerging markets.

The Turkish economy grew around 8.5% in 2011. However in 2012, the growth outlook has become more challenging due to tighter credit conditions, a weaker Turkish Lira and signs of setbacks in global economic outlook. Given its large external financing needs, Turkey seems to be more vulnerable than most of its peers to adverse external shocks, which raises downside risks to the growth projections.

The medium-term risks for the Turkish economy, in our view, relate to the high current account deficit and deterioration in inflation expectations. Turkey’s economy has been running large external imbalances since late 2009 and the current account deficit continues to pose significant downside risks, especially given the rising oil prices and deepening crisis in Europe. In the near term, it is expected that TRY funding rates will remain high. Inflation is likely to remain high due to the weak Turkish lira and a long-standing gap between inflation targets and expectations. The latest CBRT expectation survey indicates that consumer inflation is likely to be 7.2% at the end of 2012, higher than the CBRT’s target of 5.2%.

Political risks have also increased, especially with regard to Syria. Violence in neighboring Syria may escalate into a broader sectarian conflict in the Arab world. Clashes in the southeast, the dispute between Turkey and Cyprus over gas drilling, unrest near the southern border (Syria) and tension with Israel are important political risks in Turkey.

We hold interests in several companies that may expose us to various economic, political, social, financial, liquidity, regulatory and legal 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, financial, regulatory and legal risks. The Turkcell Group has investments in Azerbaijan, Georgia, Kazakhstan, Moldova, the Turkish Republic of Northern Cyprus, Ukraine, Belarus and Germany and has operations or business activities that involve other emerging markets. Furthermore, through our subsidiaries in Turkey and internationally, we engage in businesses outside of the scope of our core mobile business. These other businesses are subject to risks that are in some respects different from those of our mobile business.

In addition to entering into new business areas in Turkey, we have also entered into and 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. This includes countries in which we establish or operate mobile communications networks, as well as those through which we route cables or that we otherwise rely on for the transfer of data. 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 weaker and less developed. Some of these countries also suffer from relatively high rates of fraud and corruption. For example, allegations have been made regarding improper payments relating to the operations of KCell, a mobile operator in Kazakhstan and 51% subsidiary of Fintur Holdings B.V., in which we hold a 41.45% stake, while TeliaSonera holds the remainder. The allegations were discussed by Turkcell’s Board of Directors, which requested an independent investigation of the allegations made. TeliaSonera initiated an independent investigation as agreed by the Fintur Board. The Turkcell Board has been informed that to date there has not been substantiated any such allegations and the Fintur Board informs us that it has completed its own investigation. Since no assurance can be given that there will not be further requests for investigation, we remain vigilant on this matter.

The continuity and viability of our operations in these countries may be affected by a number of factors, including political, economic or legal developments and changes to the telecommunications market. On the economic front, in Ukraine, where we operate through our subsidiaries, Limited Liability Company Astelit (“Astelit”), LLC Global (call center) and LLC UkrTower (“UkrTower”) (tower infrastructure service provider company), there is a devaluation risk as the country has a large current account deficit and the government has not satisfied IMF requirements due to populist politics in advance of a general election in October 2012. New regulations were adopted in 2011 relating to mobile number portability, significant market power and interconnection and no assurance can be given that these regulatory developments will be favorable to our operations and financial condition. In addition, the landscape in the competitive Ukrainian telecommunications market is changing as the merger between two of our competitors, Beeline and Kyivstar, has been completed.

Furthermore, the granting of a 3G license to Ukrtelecom and uncertainty relating to certain legal amendments has resulted in the introduction of an additional mobile operator in the market (Utel, Ukrtelecom’s subsidiary). Moreover, Ukrtelecom was sold to a private entity. The acquisition of control of Ukrtelecom or Utel who owns the only 3G license by another operator could give that operator a significant competitive advantage. If a 3G and/or LTE license were to be made available, we would consider submitting a bid, but no timetable has been announced. If successful, the associated costs would increase our Ukrainian financing needs, which could in turn require us to consider new sources of funding or the extension of existing sources. If we are not successful in the pursuit of such a license, because, for example, the cost is prohibitive and/or the number of licenses available is limited, we could find ourselves at a competitive disadvantage in this market.

In addition, in some countries, we hold our stake in our subsidiary with another shareholder and sometimes we are a minority shareholder. Should there be a disagreement between us and other shareholders in the future, the ability of our subsidiary’s management to move forward with its business plan may be affected. If issues arise with respect to a subsidiary, no assurance can be given that it will be able to take the course of action we believe is appropriate.

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 actions or 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, and we may be required to record impairments.

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 risks 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, while the revenues generated by our activities are denominated in other currencies, in particular the Turkish Lira, Ukrainian Hryvnia, Belarusian Ruble and Euro. Sudden increases in inflation or the devaluation of the Turkish Lira, the Ukrainian Hryvnia, 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. The Turkish Lira significantly underperformed other emerging market currencies in 2011, driven partly by the CBRT monetary policy mix and current account deficit concerns, depreciating 22.2% against the U.S. dollar. The Belarusian Ruble also depreciated against the U.S. dollar, by 178.3%, during 2011. The Ukrainian Hryvnia ended the year with only 0.4% depreciation against the U.S. dollar.

The foreign exchange risks that our Turkish activities are exposed to as a result of purchases and borrowings in U.S. Dollars and Euros have to date been manageable, as there is a developed market enabling the hedging of such risk; however, in Belarus hedging is almost impossible due to restricted and undeveloped financial markets. No international bank offers or prices hedging instruments and local banks are too undercapitalized to be able to enter a transaction as a counterparty. In Ukraine, the only hedging tool in practice is non-deliverable forwards (“NDF”), which is a cash-settled product in USD, short-term forward contract on a non-convertible foreign currency which could not be delivered offshore. However, the liquidity in the UAH NDF market is thin and these products are expensive. In the current economic environment and considering the aforementioned political uncertainties, there is a possibility of further devaluations.

Fluctuations between Turkish Lira, Ukrainian Hryvnia and Belarusian Rubles, on the one hand, and U.S. Dollars and Euros, on the other, have had and may have an unfavorable impact on us. We may enter into derivative transactions to manage the risk, however, these 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”.

Reduction in our liquidity and increased capital needs may lead to an increase in our borrowing requirements, which increases our financing costs and our exposure to the risks associated with borrowing.

We continue to experience difficult conditions in our markets and we are facing and may continue to face increased capital needs to finance our technological and geographic expansion. These pressures have reduced, and may continue to reduce, our liquidity. Reduced liquidity may lead to an increase in our borrowing requirements. Borrowing by Turkcell group companies exposes us to interest rate risk and possibly increases 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. Furthermore, no assurance can be given that we will continue have access to financing on terms that are satisfactory to us.

As of December 31, 2011, our consolidated debt was $1,868.1 million.

$518.1 million of our debt portfolio consisted of financing obligations paying interest at fixed rates. The remainder of our debt portfolio pays interest at floating rates, which has been favorable in the current interest rate environment, but would expose us to increased costs if rates increase further.

In 2011, we closely monitored various hedging alternatives to hedge our interest rate risk with a minimum cost. In June 2011, we engaged in a forward start collar agreement for the half of our 5-year maturity portfolio that is exposed to interest rate risk. The collar hedges variable interest rate risk for the period between 2013 and 2015.

As the debt related to the operations of Astelit and Belarusian Telecommunication Network (“Belarusian Telecom”), in which we acquired an 80% stake in 2008, is denominated in U.S. Dollars, we are exposed to exchange rate risks to the extent that Astelit and Belarusian Telecom’s revenues are, respectively, in Ukrainian Hryvnia and Belarusian Rubles. Moreover, we are also exposed to exchange rate risks since the debt of the group companies operating in Turkey are in U.S. Dollars and their revenues are in Turkish Lira.

Some of the borrowing agreements entered into or guaranteed by Turkcell have financial covenants that the borrower is required to observe. Although we are not presently concerned with Turkcell’s ability to observe its own financial covenants, no assurance can be given that the covenants in borrowings entered into or guaranteed by Turkcell will at all times be respected. Our borrowing agreements contain cross default clauses that effectively link Turkcell’s borrowings to those of its subsidiaries. Under these clauses, a default by a subsidiary could constitute an event of default under certain of our borrowings. Some companies in our Group have defaulted, and may in the future default on their financial covenants and payment obligations. For example, since June 2011, Astelit has not met certain payment obligations, which were waived until February 1, 2012. Since that date, our Board of Directors has not acted to approve or reached a consensus for the extension of repayment dates. As a result, Astelit was unable to meet its repayment obligations to Euroasia Telecommunications Holdings BV (“Euroasia”) (55% owned by Turkcell) and Financell BV (100% owned by Turkcell) totaling $323 million and defaulted on its loan agreements. As a consequence of Astelit’s default, cross default clauses have

been triggered on five loan agreements totaling $554 million (currently decreased to $402 million, following the Company’s $150 million guarantee payment) and waivers were obtained for the aforementioned loans before March 31, 2012. In the same vein, Euroasia, a Group company that is a 100% shareholder of Astelit, which had previously borrowed $150 million to finance Astelit, also defaulted on its loan on March 30, 2012. As a guarantor, the Company paid $150 million to related banks on April 6, 2012. As a consequence of Euroasia’s default, cross default clauses have been triggered on four loan agreements (the same ones referenced above) totaling $402 million and waivers are being sought for the aforementioned loans. There can be no assurance that we will not have to make similar payments in the future, which could adversely affect our business and results of operation. Furthermore, if Astelit could not obtain new financing and if our Board or shareholders fail to achieve consensus on Astelit-related issues, Astelit’s and our own financial results and condition would be adversely affected.

Limitations on spectrum as a scarce resource in mobile telecommunication systems, alleged health risks with BTSs and dependence on suppliers for network equipments may adversely affect our ability to maintain operational excellence.

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 2x11 MHz of FDD 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 reorganization of the existing GSM 900 frequency band (890/960 MHz) and we added five frequency bands to our prior stock of 50. 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.

In July, 2011, the ICTA proposed to the Ministry of Transport, Maritime Affairs and Communications, on the subject of GSM frequencies, to be permitted to serve 3G services and the spectrum award of 2x8.6MHz E-GSM band to the operator that has less than 10MHz spectrum in 900MHz and 2x15MHz of 1800MHz to each operator that does not have the spectrum. The ICTA decision implies that only Avea will be eligible for the E-GSM auction, while Vodafone and Turkcell will be eligible for the 1800 auction, which may enable Avea to be the sole beneficiary of the E-GSM band. In that case, Avea would be able to begin UMTS900 services immediately from the E-GSM band, whereas Turkcell and Vodafone would only begin after extensive technical works regarding spectrum clearance are done. Consequently, the competitive coverage advantage of Turkcell may be adversely impacted.

Consistent with the nature of terminal technology development, traffic on the 2G network is expected to shift to the 3G network. However, 3G terminal penetration is the key factor in providing the expected shift in traffic from 2G to 3G. Penetration may stay low or our subscribers may choose to stay on the 2G network for reasons such as the 2G network’s lower battery power consumption. In addition, 3G coverage depends on the deployment of the 3G network, which will certainly take time to achieve, compared to the coverage level of the 2G network. As a result, Turkcell may have difficulties in releasing 900 MHz band for future technologies and may not even provide the MoU capacity needed for the 2G network in some regions for a limited period of time. Additionally, the data traffic on the 3G network increases. If we fail to offer appropriate campaigns and tariff schemes at the right pricing level, we may face overcapacity problems, which may in turn lead to a deterioration in our network’s quality and negatively impact our operational results.

There are alleged health risks associated with our Base Transceiver Stations (“BTS”), as well as zoning limitations, which make it difficult to build BTS.

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 we believe that 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 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. Furthermore, there are hundreds of conflicting and confusing reports in the media about the health effects of BTS. These reports have even caused local residents in certain regions to form large protests in strong objection to the BTS sites. Attempts made by the local authorities and, in particular, the municipality to intervene often worsen the situation. Such obstacles have made it increasingly difficult to build new BTS sites and maintain our existing sites.

With regards to the health risks of BTS, local courts presented with the question have decided that a base station had no negative effect on human health. However, the Turkish supreme court overruled the decisions of some local courts and held that the base station in question could have negative effects on human health over 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.

Furthermore, there are zoning limitations related to our BTS that require operators to obtain construction permits and certificates, which may have an adverse effect on our operating results. As supplemental Article 35 of Law No. 406, which exempts BTS from holding construction permits and certificates of occupancy in accordance with Zoning Law No. 3194, was cancelled by the Turkish constitutional court, we may need to obtain the aforementioned permits and certifications for our BTS. Moreover, following the State Council’s decision to annul a regulation entitled “Safety Certification Regulation”, it has become impossible for us to build new base stations or modify existing ones. Any difficulty in building BTS due to health concerns, inability to obtain the required permission and certificates, and/or the issuance of a new “Safety Certification Regulation” may negatively impact the quality of our network, including our ability to expand and upgrade it, and our operational performance.

We are dependent on certain suppliers for network equipment and for the provision of data and services and the failure of any of our suppliers to supply equipment to us, and at the level of quality we require, could have a material adverse effect on our business, operations, and consolidated financial results and liquidity.

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 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 for any reason, including that the technological requirements for our increasingly advanced infrastructure are too complex, is unable or unwilling to satisfy our demands. This could occur if, for example, the growth in demand for more advanced network equipment exceeds the ability of suppliers of such equipment as a whole to meet such demands. This could also affect our competitive position, if our supplier stays behind technological development compared to the suppliers of our competitors.

The difficult economic environment has adversely affected our domestic and international suppliers, 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. In recent years, adverse economic conditions have affected our suppliers’ revenues, which may lead to mergers in their industry. A potential merger between our vendors, and/or their acquisition by our competitors, could change the competitive landscape, which could have a material adverse effect on our business and expenditures.

In addition, equipment from alternative suppliers may not always be compatible with our existing equipment or the supplier may fail to integrate them, 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 and results of operations.

According to our 3G license agreement, we must purchase at least 40% of our network equipment from suppliers that have R&D centers established in Turkey and these companies must fulfill certain requirements relating to the number of engineers working in their R&D or Technical Support Centers. If our suppliers fail to meet these requirements, we may end up violating the terms of our 3G license agreement and our business could be adversely affected.

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 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 and on April 9, 2008, the Council of State rejected our request to suspend the decision. The Council of State also rejected the appeal. We applied for a correction of the decision but our application was denied. This ultimately ends the judicial process.

Pursuant to the CMB’s decision, the CMB imposed an administrative penalty of TRY 11,836 (equivalent to $6,676 as of April 1, 2012) on Turkcell for not complying with its decision regarding Mr. Khudyakov’s status as an “observer member” on the audit committee. The CMB also required Turkcell to inform its shareholders of the penalty at the following general assembly (held in January 2009). In November 2008, we commenced a lawsuit before the court seeking to suspend the execution of the administrative fine and to annul the CMB’s decision related thereto. The Court rejected the Company’s suspension request and our objection to this decision was rejected. The administrative court ultimately dismissed our lawsuit in May 2011. In July 2011, we appealed before the Council of State. The appeal process is still pending.

In addition, our home country governance requirements as they relate to the composition of our audit committee will be further affected by a new regulation issued by the CMB on December 30, 2011, pursuant to which listed companies must, as from June 30, 2012, have audit committees composed of independent board members. As a result, we will be required to change the composition of our audit committee. We continue our studies regarding our audit committee structure and the compliance with new corporate governance rules published by the CMB. Compliance with our home country governance rules is an important element of our compliance with the listing requirements of the New York Stock Exchange (“NYSE”). Failure to comply with such rules could jeopardize the continued listing and trading of our ADRs on the NYSE.

Turkcell’s complex ownership structure and Board composition has, and could continue to, adversely impact our shareholders’ ability to achieve the consensus necessary to approve matters relating to our business and operations, including the payment of dividends and our compliance with new Turkish corporate governance requirements. Ongoing legal disputes involving our shareholders may affect the ownership and control of our shares and our ability to manage our business.

We understand that Alfa Group, Cukurova and TeliaSonera together indirectly own in the aggregate approximately 65% of our shares. Additionally, according to public filings (a Schedule 13D filed in November 2009), Alfa Telecom and TeliaSonera are discussing a possible consolidation of their holdings in Turkcell in a new company. We cannot predict whether this consolidation will go forward as planned or the form that it will take, and whether their actions will have an effect on our company or the market for our shares. Furthermore, in the case of a potential consolidation, no assurance can be given that their interests will be aligned with those of our other shareholders. Additionally, a potential consolidation of their shareholding could have the effect of 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.

Disputes have from time to time arisen, and may arise in the future, between our shareholders. Such disputes could have an adverse effect on the ability of our management to execute business decisions and other actions, to the extent that such decisions or actions require board or shareholder approval. In March 2011, one of our shareholders, TeliaSonera, publicly announced its intention to take legal action against the Chairman of our Board of Directors, who is also an independent member, alleging that he has not acted in an independent manner. Our Chairman has responded by saying that he has always fulfilled his duties as an independent board member and has reserved the right to initiate legal action.

Our articles of incorporation contain a 51% quorum requirement for shareholder meetings. To the extent that the quorum requirement is not met when a general assembly is convened, the meeting shall be adjourned and should be reconvened at a later date. In addition, to amend our articles of incorporation, there is a 2/3 quorum requirement for the related shareholder meeting. Accordingly, until the relevant required quorum can be obtained, certain corporate actions, amendments to our articles of association and prior Board decisions that require shareholder approval will effectively be blocked.

There have been times when the Turkcell Annual or Extraordinary General Assembly meeting of shareholders (“AGM” or “EGM”) could not convene for reasons beyond our control, and no assurance can be given that this will not occur in the future and that regulatory actions will not be taken in response to this situation. Furthermore, if the AGM or EGM is convened, there may not be a resolution of the agenda items or quorum during the meeting may not be attained. In 2011, three General Assemblies were convened and most of the items on the agendas were not approved, including the payment of a dividend, the approval of our 2010 financial statements and the release of certain of our directors for actions taken in the 2010 year, due to the lack of approval by a simple majority of the shareholders present. No assurance can be provided that this will not occur again in the future and that regulatory actions will not be taken in response to this situation. Our Chairman has initiated a lawsuit against the Company contesting the release issue. In addition, Cukurova Holding A.S. has initiated a lawsuit for cancellation of the General Assembly resolution dated August 11, 2011, regarding the appointment of the statutory auditors. Both lawsuits are still pending.

In addition, a number of new corporate governance requirements have recently been enacted by the CMB, with mandatory effect from June 30, 2012. These include, among other things, a requirement that one-third of our board members and all of our audit committee members be “independent”. No assurance can be given that our board and shareholders will be able to agree on the steps and candidates that will be required to achieve compliance with these new requirements. Compliance with our home country governance rules is an important element of our compliance with the listing requirements of the New York Stock Exchange (“NYSE”). Failure to comply with such rules could jeopardize the continued listing and trading of our ADRs on the NYSE. Furthermore, no assurance can be given that the CMB will not take action against the Company, our board

members and/or our controlling shareholders in respect of the various occurrences and issues described above. No assurance can be given regarding the nature of the action that the CMB might take and the effect that such action may have on the strategy of our company or the operation of our board.

Our complex shareholder structure and the related complexity in the composition of our Board of Directors could complicate our corporate decision-making process and situations may arise where the interests of our majority shareholders are not aligned with those of our public shareholders. These factors could adversely affect our operations and financial results and the market for our shares.

We face risks related to the products and services we provide due to our dependence on certain systems and third-party suppliers as well as our exposure to technological changes in the communications market, including in industries where we traditionally do not compete.

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

We are heavily dependent on IT systems, suppliers of IT services and our IT employees for the continuity of our business and we are continually upgrading and converting our IT systems. Although we devote significant resources to the development and improvement of IT and of security, back up and continuity systems, we could still experience IT and network failures and outages due to system deficiencies, human error, deliberate actions such as unauthorized data transfers, breaches of information security policies, fraud, code breaking or hacking, terror or other destructive acts, natural disasters such as earthquakes and floods, unsuccessful migration to alternative or improved IT systems, or other factors. If we are not able to maintain adequate IT and network systems, or fully recover our IT and network systems in the event of an outage or disruption, the continuity of our operations could be affected, which could have a material adverse effect on our reputation, business, consolidated financial position and results of operations.

2G &3G networks are migrating towards IP technology to transport information. These networks open up the possibility for IP-based services. However, once these services are introduced into the IP-domain, the mobile network may be harmed by potential attacks. The threats on the mobile network can originate from external sources, such as public Internet, or internal sources, such as terminals connected to our mobile network. Despite our efforts in taking security issues very seriously, we could encounter attacks on our infrastructure, which could have an effect on our operations.

We may be unable to adapt to technological changes in the communications market, which could result in higher capital expenditures and a greater possibility of commercial failure.

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. 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, requiring us to record asset impairments.

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.

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. Although we are following general technological trends in communications and technology, there can be no assurance that we will be able to develop new products and services that will enable us to compete efficiently.

We have become active in providing products and services for industries other than telecommunications, many of which are developed and/or maintained by third-party providers. Our dependence on these third-party providers to help us navigate the regulatory, security and business risks of industries where we traditionally do not compete adversely affects our business.

The operation of our business depends, in part, upon the successful deployment of continually evolving products and services, including for applications in industries other than telecommunications, such as mobile financial services, mobile health and mobile education solutions, authentication solutions and entertainment and community services. We are reliant upon third-party providers to help us navigate risks relating to security, regulations and business in the industries where we do not traditionally compete. Changes in such industries may impair our partners’ business and/or negatively impact the content we are developing, such as for entertainment, which, in turn, could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

Additionally, since our customers rely on our technological capabilities and high quality service levels, in cases where an IT failure, fraud, human error or hacking occurs, our revenues and reputation may be adversely affected and we may also be subject to regulatory penalties.

Our business, consolidated financial results and/or operational performance could be materially and adversely affected unless we retain our key personnel, our partners and their employees.

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 distributors, as well as their ecosystem and 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.

We are involved in various claims and legal actions arising in the ordinary course of our business, which could have a material effect on our financial results.

We are currently involved in various claims and legal actions with governmental authorities in Turkey, including the Competition Board, the ICTA, tax authorities and certain other parties. We have set aside provisions for ongoing disputes based on applicable accounting standards. However, no assurance can be given that the provisions we set aside will be sufficient to cover our actual losses under these matters, and that new disputes will not arise under which we would face additional liabilities and reputational risk. For a more detailed discussion of all of our significant disputes, see “Item 8. Financial Information” and Note 33 to our audited consolidated financial statements included in “Item 18. Financial Statements” of this annual report on Form 20-F.

We maintain and regularly review our internal controls over financial reporting, but these controls cannot eliminate the risk of errors or omissions in such reporting.

We maintain and regularly review internal controls over our financial reporting. However, internal control over financial reporting has inherent limitations. It is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, it can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that

material misstatements will not be prevented or detected on a timely basis by internal controls over financial reporting. It is possible to design safeguards to reduce, though not eliminate, this risk. Our latest review has revealed certain deficiencies in our controls, although none that we believe constitute “material weaknesses”. However, our controls have in the past suffered from these and lesser deficiencies and no assurance can be given that others will not emerge in the future. A failure to detect or correct deficiencies and weaknesses in a timely manner could have an adverse effect on the accuracy of financial reporting. Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could also 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. 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.

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 the Treasury (the “Turkish Treasury”) a monthly treasury share equal to 15% of our gross revenue. Of such fee, 10% is paid to the Ministry of Transport, Maritime Affairs and Communications of Turkey (“Turkish Ministry”) for a 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.

In early 2009, we were granted the 20-year type A 3G license, which provides the widest frequency band, for a consideration of EUR 358 million (excluding VAT), and we signed the related 3G license agreement on April 30, 2009. The 3G license agreement has similar provisions to the aforementioned 2G license agreement.

Our subscriber base has grown substantially since we began operations in 1994. At year-end 1994, we had 63,500 subscribers. By year-end 2011, that number had grown to 64.8 million.

In 2011, we had total revenues of $5,609.7 million, our adjusted EBITDA totaled $1,748.1 million and we reported net income attributable to the owners of Turkcell amounting to $751.7 million.

For the year ended December 31, 2011, we spent approximately $866.0 million on capital expenditures, compared to $1,078.6 million and $1,769.3 million in 2010 and 2009, 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 operator announcements, we are the leading provider of mobile services in Turkey in terms of the number of subscribers, with 53% of the Turkish subscriber market as of December 31, 2011. We provide high-quality mobile voice, Internet and other services over our mobile communications network and have developed the premier mobile brand in Turkey by differentiating ourselves from our competitors with our value offers, which include: Superior technologies, more advantages, outstanding and extensive service quality, and

being a leader in social responsibility. We maintain our strong position in the market due to our customer-oriented approach and our ability to provide quick and differentiated solutions to meet customers’ needs. We are in compliance with all of our license requirements in all material respects.

Through our state-of-the-art mobile communications network, we provide comprehensive coverage of an area that, as of December 31, 2011, included 100% of the population living in cities of 1,000 or more people and the majority of Turkey’s tourist areas and principal inter-city highways. As of December 31, 2011, we provided roaming service to our subscribers in 209 countries through commercial roaming agreements with 680 operators.

In 2010, we launched 3G Roaming services in many different locations in the world. As of December 31, 2011, our subscribers enjoyed high speed mobile Internet connections with 263 operators in 110 destinations.

As of December 31, 2011, we covered 88% of the population with 3G technology.

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. The Simcard’s digital memory allows for 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 (“HSDPA”) in UMTS networks, operators gain increased capacity and improved downlink speeds up to 14.4 Mbps. High Speed Packet Access Evolution (“HSPA+”) further enhances the mobile broadband experience and increases the voice and data capacity of HSPA. HSPA+ enhances mobile broadband with peak rates of 42 Mbps and more.

The Turkish Mobile Market

According to a TUIK announcement, the Turkish population is young, with an estimated median age of 30, which is lower than elsewhere in Western Europe, and the majority of the population lives in urban areas. In addition, there were 74.7 million people living in Turkey as of December 31, 2011.

Despite the declining trend in multiple Simcard use, penetration level increased to 87% in 2011 (based on operator announcements, and TUIK population announcement). There is good potential for growth opportunities

in the Turkish mobile communications market in the areas of broadband and 3G services, as well as from Turkey’s youth segment due to the aforementioned demographics. According to the ICTA’s announcements, there are currently three mobile communications operators in Turkey—Turkcell, Vodafone and Avea—with a total of 65 million GSM lines as of December 31, 2011. Vodafone 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 majority-owned 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 owned 35% by Saudi Telecom Company, the Arab world’s largest telephone company.

Strategy

Our vision is to ease and enrich the lives of our customers with leading communications and technology solutions. We strive to build value for our customers, shareholders and employees.

We operate in nine different countries, reaching 64.8 million subscribers. Our operating environment continues to be challenging. In addition to the lingering effects of the global financial crisis, the regulatory and competitive pressures we have been facing continue. In order to sustain our operating margins, it has been crucial that we become more efficient in our delivery of services, so that we continue to lead the market in this environment.

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

•

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 through the highest quality infrastructure, the best offers for customers, innovative products and services and enhanced customer experience, while maintaining our focus on efficiency.

•

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 provide full support to our corporate clients so that they may compete better in their own markets.

•

To develop new mobile service platforms that will enrich our relationship with our customers. We believe that there is significant demand for such services in the Turkish market and Turkcell is the innovative forerunner in creating such technology platforms with the local talent pool.

•

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

•

To grow our existing international subsidiaries. In order to diversify revenue and cash flow risks, we intend to grow the contributions made to the Turkcell Group from subsidiaries. We endlessly explore operational efficiencies, cost and product synergies with Turkcell Turkey.

•

To grow in domestic and international markets through opportunities in telecommunications, technology and new business areas. We are open to 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 outside of the telecommunications industry if we see strong potential and believe that we can add value.

Services

We currently provide high quality mobile voice, Internet and other 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 with airtime of 5 TRY or 20 TRY, while the scratch cards can be purchased in the following amounts: 7 TRY, 12 TRY, 20 TRY, 30 TRY, 50 TRY, 95 TRY, 180 TRY, 360 TRY.

As of December 31, 2011, we had approximately 22.9 million prepaid subscribers and 11.7 million postpaid subscribers, compared to approximately 23.3 million prepaid subscribers and 10.1 million postpaid subscribers as of December 31, 2010.

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.

Consumer Product Management

Consumer Product Management is focused on developing and managing products and services to address the diverse needs of both consumers and corporate customers, thereby enriching their 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 market segments. One of our principal goals is to increase revenues from our existing customers and to foster the acquisition of new customers by offering proprietary products and services.

We closely follow and analyze global trends and develop services to fit local market needs. Turkcell seeks to differentiate itself by providing innovative and pioneering solutions in collaboration with its strong solution providers and various partnerships.

Having a rich portfolio of various services helps us maintain our competitiveness. We believe that increasing customer satisfaction and ensuring customer loyalty through our provision of a unique user experience will also play an important role in our future retention efforts.

Mobile Internet & 3G

We commercially launched 3G simultaneously in 81 province centers and major cities in Turkey at the end of July 2009 and had reached 88% population coverage by December 31, 2011.

In addition, we have launched several innovative services like Videocall, Mobile TV, Video Surveillance, Video Chat and Video Messaging. We offer rich terminal campaigns (handset, smartphone, modem and netbook) to encourage 3G device penetration. There are approximately 7.4 million 3G-enabled handsets in our network.

In 2011, the number of registered 3G subscribers reached 18.5 million people. A variety of data plans are available as part of our voice and terminal bundled offers.

After the launch of 3G, VINN 3G modem, netbook and notebook contracts were offered to customers to enhance mobile Internet experience.

Throughout 2011, we sustained our position as leader of handset offerings through our domination of the iPhone and Blackberry business and we delivered attractive campaigns with “top of the class” models of brands in high demand such as Nokia, Samsung and HTC.

Turkcell has launched its first Turkcell-branded handset, T10, the affordable Android Smartphone, to widen the access to mobile Internet. An updated version, T20, was launched in 2011. The T10 and T20 together reached over 310 thousand sales units and 88% of T10 and T20 users were upgraded to smartphones. We launched our new T11 model at the beginning of 2012. Our T series handsets will continue with new models in the coming days.

In addition to constant communication emphasizing 3G’s coverage, penetration and speed, and increasing smartphone penetration, aiming to increase mobile Internet usage, Turkcell has launched many offers and applications which led to an approximately 50% increase in mobile Internet users.

Consumer Services

Turkcell focuses on the needs of consumers to enhance their daily experiences. By providing a wide range of services, Turkcell enables users to remain connected wherever they are, via their mobile devices. From basic telecommunications services to social community services, Turkcell responds to the diverse needs of consumers to help them connect to life. Turkcell also offers a “multiscreen experience”, allowing customers to enjoy the content of various products and services across multiple devices and multiple screens.

Telco and Social Network Services

‘Tikla Konus’ (Click-to-call) enables subscribers to initiate calls without displaying a phone number. Users click on a click-to-call button on partnering websites, and a call is initiated between two parties without having to dial a number. In 2011, Tikla Konus was used in more than 25 different scenarios: the number of people using the service increased by 600% and minutes talked exceeded 1 million. This solution won the “Best network service or solution serving customers” award at the GSMA 2012 (Mobile World Congress).

It has been a startup year for the social network services. Apart from Tikla Konus, more than 200 thousand subscribers have used at least one of our services, most of which were launched in 2011: ShareWithSMS, ShareWithYourVoice, SendGift, Rumara.

Kim Aramis is a caller notification service that enables customers to identify any missed calls while their handset is either in off mode or otherwise disconnected from the network. Kim Aramis service sends an SMS containing the call time and phone number to the user once his or her handset is reconnected to the network. There is also a common address book feature that further enriches the service by matching the phone number to the address book name of the caller, if available.

Info & Entertainment Services

Turkcell provides a variety of sports services focused on football, as a result of the size of the fan base and popularity of the sport in Turkey. Partnering with a major national TV provider, Turkcell provides a service, GollerCepte, that allows users to instantly send videos of the goals made by their favorite football teams. In addition, Turkcell launched an online social game called Footbocity in 2010, widely appreciated by football fans, which enables users to play interactive games and build their own virtual cities.

Turkcell, with Turkcell Music service (turkcellmuzik.com) transforms the possibility of accessing music anytime and anywhere, into a rich experience with multi-user web, wap and mobile applications (iPhone/iPad and Android).

Music lovers can listen to music from among more than 3 million songs, save the artist name and listen to similar artist radio stations and choose a radio station among 16 different genre radio stations. They can also download the songs to their phones and computers.

Turkcell users can create their own lists, reach these lists through mobile applications and share their favorite songs and lists with their friends via social networks.

The “Ne Bu Çalan” feature which is developed in cooperation with soundhound, enables users to learn the songs that they do not know, listen and download them to their phones. Moreover, iPhone users can download songs to their application without needing any other program and listen.

Turkcell’s Ring Back Tone for subscribers has reached more than 20 million members during 2011. Using the Ring Back Tone platform, Turkcell members select any content they want and let their callers listen to the Ring Back Tone instead of a regular ringtone. They can also assign special content to different people or groups on defined time intervals, as well as using a standard tone for everyone at the same time.

Mobile Applications

Turkcell T-Market is a store, which enables people to download more than 5,000 applications including Turkcell branded applications and third-party applications such as news, games, sports, health and fun. Turkcell branded applications such as Turkcell Pusula, GollerCepte, Muzik and Yol Bilgisi were downloaded more than 9 million times in 2011. 39 million applications were downloaded from Turkcell T-Market in 2011. Customers do not pay any connection fee while visiting Turkcell T-Market and downloading applications.

Turkcell Nimbuzz combines popular instant messaging services such as MSN, GTalk, Facebook chat and Yahoo! Messenger and enables users to chat with all their friends in one list.

Turkcell Cebe Bağlan enables Turkcell T10 and Turkcell T20 users to locate, text and ping their phone in order to find it, and remote lock or remote wipe their phone in case of loss or theft.

Turkcell Yol Bilgisi is a navigation application, which automatically guides users along the best route given the current live traffic conditions and has more than 500,000 points of interest (“POIs”) and turn-by-turn navigation features.

Turkcell Rehber Plus is a social phonebook, which integrates phone book contacts with social network contacts and enables users to access social network updates from a single screen.

Turkcell Videobul is a video application aimed to search several video websites from within one place. By using Videobul, consumers can reach categorized video content and create their own playlists as well.

Turkcell Bebeğim is a free application in which you can find information about pregnancy, baby health, parenting and more, including advice from John Hopkins Hospital’s experts.

Turkcell Servisler enables customers to view the summaries about all Turkcell Services, and also see these services all together in one application. Users can search the Turkcell Services engine by using this application.

Turkcell Partner Services

The Turkcell Partner Ecosystem comprises more than 200 registered business partners functioning as application service providers, content providers, service provider system integrators, independent service vendors, and OEM business partners, as well as many other establishments or individuals, which have the potential to develop innovative mobile services and products. In its broadest sense, Turkcell Partner Program is a versatile business, including a toolset used by this Ecosystem to define, regulate and operate partnership schemes and business models.

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. More than 4,000 partner applications

exist in Turkcell’s application store (T-Market) as of 2011. Turkcell has enriched its customers’ lives through various partner mobile data and services. Together with second level partners, the Turkcell Partner Ecosystem recruits more than 10,000 employees.

The business of this Ecosystem expands across international markets starting from Turkey to countries in different continents such as Ukraine, UK, UAE, China, etc. This business community includes both a wide scale and a variety of companies (over 200 partners) and individuals with different expertise, technical capabilities and backgrounds. This community is assessed by the Turkcell Partner Program team to identify new business opportunities and improve the partner-based business. Turkcell Partner Program leverages various internal and external platforms in order to reach an innovative and rich service portfolio resulting in significant annual revenues.

Turkcell Partner Program defines the criteria set and scope of operations for partnership acquisition for the designated mobile business areas, namely: Business to Consumer (B2C) Services, Business to Business (B2B) Services, Mobile Marketing, Mobile Finance and New Technology Business Areas. The criteria set for management is a dynamic process in which its structure and parameters are adjusted due to continuous monitoring of partners’ actual performance, customer satisfaction, business trends, and market needs.

Due to a series of standardized scoring scheme monitored and exercised annually, excelling partners, promote to Gold & Silver Partnership titles to be awarded by extra marketing, business development, and training benefits.

Turkcellpartner.com serves as a primary digital communication channel for the Turkcell Partner Program and is composed of various interactive components: the portal, blog, wiki, newsletters, RSS, and social media feeds.

Mobile Marketing Business

Turkcell utilizes mobile marketing and advertising channels to create additional value for its customers. This value is ensured by its huge opt in database, a variety of products and channels, and high response rates in comparison with traditional media.

Currently, Turkcell has one of the largest opt in databases in Europe geared towards mobile marketing and advertising activities and integrated with 10 different advertising channels. Through this permission database, advertisers can concentrate on their target market, segment their target groups and send specific messages to their recent and potential customers via these channels.

In 2011, 1,500 mobile marketing projects were accomplished with 400 different companies participating in 30 different industries. During 2011, Turkcell was highly active in mobile advertising, as it launched several innovative products, including Targeted Location, Targeted Video Streaming, VCard Ads and other display advertising channels. In May 2011, “Targeted Location” was launched to create a new channel in the permission database to enable brands to communicate with their potential customers at a specifically pre-defined location as they are actually there on real time. This provides a great benefit for brands in terms of their abilities to target customers and to optimize their communication budgets. The system can detect any opt in subscriber at any location regardless of their device type. Another positive feature of this service is that it is integrated within each direct mobile advertising channel of Turkcell, including SMS, MMS, Video, Wap Push, IVR and Mobile Coupon.

Turkcell Enablers and Platforms

Turkcell enablers are the key technical infrastructures behind our proprietary products and services. Turkcell ID enabler is an authentication infrastructure that lets users log in to systems with one common, secure and

simple username and password for hassle free access to systems. Recommendation Engine enhances the customer’s experience on Turkcell portals by providing customer-focused content and offers. 8.7 million people were touched by our Recommendation Engine enabler.

Many value-added services including advanced call based enablers, M2M, location based, mobil data and messaging services and platforms and being served to customers.

Turkcell invests in platforms that enhance the user experience and the discoverability of services such as Turkcell T-Market, which is a one-stop, localized application shop for users to download both free and paid mobile applications to their supported handsets.

New Technology Businesses

TV & Video Services

By streaming technology at 3G speed, Turkcell introduced MobilTV service in 2009 which enabled Turkcell subscribers to watch live television channels and on-demand video content on their mobile phones. On April 18, 2012, Turkcell re-branded MobilTV service and introduced Turkcell TV+ with an enhanced multiscreen “personal” user experience and rich content library.

Turkcell TV+ enables users to watch over 40 live channels, including premium sports TV channels (live Lig TV), combining the experience on their cell phones, tablets and now computers. Turkcell TV+ also introduced an on-demand content library, which includes a large selection of movies, popular TV series and programs. Turkcell TV+ subscribers also enjoy social connectivity, sharing, personalization and content discovery in real time with Facebook and Twitter integration.

Turkcell Mobile Financial Services

Turkcell’s Mobile Financial Services is growing rapidly. Two new services, Turkcell Cep-T Para (Turkcell Mobile Money) and Turkcell Cep-T Cüzdan (Turkcell Mobile Wallet), have been introduced in addition to Turkcell Mobil Ödeme (Turkcell Mobile Payment).

Turkcell Mobil Ödeme is an alternative way to make purchases. It is an easy and secure payment method provided only via SMS approval request. The purchase amount, within the limits allowed, is billed to a mobile phone account or deducted from prepaid credit. 2.5 million Turkcell subscribers have used the Mobil Ödeme service to date.

Turkcell Cep-T Cüzdan, Turkcell’s mobile wallet service based on NFC technology, aims to bring a physical wallet to the mobile world. Cep-T Cüzdan offers consumers added value by providing functionalities beyond payment, from loyalty and ticketing to ID applications and physical access. Turkcell was one of the first mobile network operators to launch NFC services commercially on several handsets, including Turkcell T11 and T20, among the first available NFC SWP-compliant handsets running on the Android platform. The multi-application support of Cep-T Cüzdan allows users to select a preferred payment card from available cards. Last transaction details, loyalty points collected and location-based offers can be accessed and conveniently used through a unique user interface. Currently, three bank applications, Yapi Kredi, Garanti Bank and Akbank, and road toll payment applications in collaboration with Bank Asya, have taken place in Cep-T Cüzdan.

The Turkcell Cep-T Cüzdan solution is recognized to be unique in many ways:

•

Turkcell became the first mobile operator in the world presenting an NFC-based Mobile Wallet solution, supporting multi-bank applications utilizing a MasterCard paypass solution. With its leading technical infrastructure, Turkcell succeeded in creating and managing secure domains inside the SIM.

•

As a successor to Turkcell’s first own branded handset called T10, Turkcell T11 and T20 were produced as SIM-based NFC-enabled. The T20 will be a key factor for the proliferation of NFC services in the Turkish market. The T20 is also one of the first Android UICC-based SWP handsets that has been granted a waiver by MasterCard.

•

Apart from Turkcell’s own branded handsets, Turkcell has also worked with other manufacturers to increase NFC penetration. As a result of this, the world’s first commercial NFC-based mobile wallet launch with a BlackBerry Bold 9900 was done with RIM.

•

Turkcell’s TSM (Trusted Service Manager) is the first “Operator TSM” in Europe certified by MasterCard.

•

Turkcell also launched Europe’s first commercial NFC solution for iPhone, TurkcelliCarte, in cooperation with Visa Europe.

•

Turkcell Cep-T Cüzdan is also used as a case-study by GSMA Pay-Buy-Mobile Group for operators who plan to launch their NFC Services. Cep-T Cüzdan is a finalist in the Mobile Money Innovation on Global Mobile Awards 2012.

•

Turkcell Cep-T Cüzdan was awarded “Best Mobile Transaction (NFC)” Solution in SIMagine 2011.

Turkcell Cep-T Para service was launched in June 2011 and is an open platform to all banks. The platform matches mobile phone numbers with a card number and enables financial transactions such as money transfers and GSM top-ups via mobile phone. Customers can register with their credit or debit card as well as with their prepaid card. Turkcell also launched a prepaid card “Cep-T ParaCard” with the MasterCard logo issued by Garanti Bank. Turkcell customers can purchase the Cep-T ParaCard and subscribe to the Turkcell Cep-T Para service from any Turkcell Communication Center (TIMs) and top-up money to the card via Garanti POS machines at TIMs, or from any Garanti ATM. Customers can use their cards for payments worldwide wherever MasterCard is accepted. Turkcell Cep-T Para is a SIM-based secure service that can be used with any handset. Turkcell Cep-T Para subscribers can use this service to transfer money to any operator’s mobile subscribers. Recipients can withdraw their money instantly from Garanti ATMs by simply using a secure code sent to them, without a debit card. Subscribers can also use the service to top-up their GSM prepaid line. More than 200,000 cards were registered to the service in 2011.

Internet Ventures

Bavul.com is an Internet-based flight ticket search site. Users can search all airline companies’ tickets on bavul.com. They can search or filter tickets, book or purchase them via bavul.com. Users can see all flight ticket alternatives on the same page.

If users cannot find a good deal on bavul.com, they can use the Price Alert tool. The Price Alert tool aims at finding the best tickets. Also, bavul.com has unique content about lots of cities. Bavul.com users are always informed with SMS service about the weather, local time and exchange rates of their arrival destinations. Users can easily find all the information they need about a specific city, such as must-see places, where to shop, and where to visit.

At the same time, bavul.com presents some special offers to Turkcell subscribers. For example, discounts or a credit card bonus are available.

Okul.com.tr is an online educational platform for teachers, parents and students enabling them to exchange information and further enhance communication by providing social features as well as enriched educational content. Moreover, Okul aims to become a continuous learning platform for adults.

Gezenzi is a social microblogging service, where users can share their status, reviews and photos. Users can also explore reviews about POIs, messages and photos around them.

Turkcell Dergilik is a free Turkcell application that enables you to read current and past issues of Turkish magazines, choosing from among a wide variety of publications.

External Innovation & Entrepreneurship

We believe utilization of both internal and external innovation is one of the major drivers for growth. In addition to our strong partner ecosystem built in 2002, we are now more tapped into the entrepreneurial community, in order to develop new products and services and build new partnerships with startup companies. We have confidence in the creativity and agility of technopreneurs to build new experiences for our different customer segments. We have been investing in the local entrepreneurial community, partnering with key stakeholders of this ecosystem, not only entrepreneurs but angel investors, institutional venture capitalists, universities, business incubation centers and non-governmental organizations, as well as public institutions and authorities. In parallel to our local partnerships, we are building an international innovation network with key regional innovation hubs in the U.S., Europe and the Far East, to make sure we are connected to innovation centers and talent pools. We are now one of the main local stakeholders for Endeavor, MIT Enterprise Forum and the U.S. State Department lead Global Entrepreneurship Program (GEP). Turkcell has been differentiating itself from competitors with its sustainable focus on innovation and entrepreneurship through its continuous support of entrepreneurship-related initiatives such as business plan competitions, forums and events like the Global Entrepreneurship Weekend, university roadshows and many others.

One solid example of our startup focus is our investment in a successful startup called Fizy. Fizy is the most popular online music search engine in Turkey. The site enables users to search and stream from a very large music library, and save songs in their playlists. Fizy was also designated by Mashable Awards as the best music search engine in 2011.

Corporate Product Management

An important goal for Corporate Product Management is to provide corporate customers with a competitive advantage by providing non-core industrial solutions, thereby delivering a new category of revenue sets for customers. Spanning from frozen-food chains to farming, many types of solutions are available to streamline customer processes and provide operational efficiency, new revenue streaming channels and better consumer reach and experience.

Corporate Telco Services

Through the Turkcell Akilli Yetenekler (Turkcell Smart Enablers) infrastructure, Turkcell corporate customers are able to enrich their own services to their customers with Turkcell capabilities. By using Turkcell Akilli Yetenekler services, companies can deliver the right service to the right customers via the most appropriate channels.

Authentication Services

Mobile Signature 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 the need for their physical presence. Mobile Signature was launched in February 2007. There are currently 65 application providers in the market, representing industries as diverse as banking, e-government, insurance, healthcare and e-commerce. The Banking Regulation and Supervision Agency (“BRSA”) enacted a decree in January 2010, which requires two-level authentication usage for online banking transactions and positively affected the number of Mobile Signature users.

One Time Password is widely used by corporate customers for two-level authentication controls on transactions. The platform allows corporate customers to send a password valid for one time only via SMS to consumers when providing authentication on transactions.

Location-Based Services

Corporate customers can monitor and manage their sales forces and fleets with Ekip Mobil. Ekip Mobil provides a management console that allows customers to view their field teams/vehicles on a map, define alarms for specific regions and create direct communication channels to the field. Ekip Mobil can be used on any mobile device. For companies, the investment costs are minimal.

Machine to Machine (“M2M”) Communications

Since 2009, Turkcell has been focused on its M2M business, whose principal markets in Turkey are car telematics, team tracking, fleet management, POS terminals, security alarms, smart metering and sales force automations applications.

MobilPOS enables corporate customers to make payment transactions where there is limited fixed-line access for POS terminals. MobilPOS is a SIM card integrated POS device working on the GSM network enhancing usage territory for POS terminals. Customers benefit from the advantage of completing their transactions “location free” as well as from a more enriched customer experience.

Turkcell also offers telemetry solutions for corporate customers. In partnership with specialized third parties, Turkcell telemetry solutions allow customers to remotely access and collect metering data without utilizing a field force. Some examples of where telemetry services may be used include alarm systems, gauge metering, reactive energy, transformer stations, pipeline metering controls, and meteorology stations, among others.

Other Services

International Roaming

Our coverage extends to many countries in Europe, Asia, Africa and North and South America. As of December 31, 2011, we have further enhanced our position as the leading mobile operator of international roaming services by expanding our partnership in 209 destinations throughout the world, pursuant to commercial roaming agreements with 680 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 Customized Applications for Mobile Network Enhanced Logic (“passive CAMEL”), can only be enabled if both operators have installed the CAMEL system on their networks. As of December 31, 2011, we offered prepaid roaming to the prepaid subscribers of 255 operators in 118 destinations.

Since October 2004, we have offered roaming services for Turkcell prepaid subscribers traveling abroad. This service, called Active Customized Applications for Mobile Network Enhanced Logic (“active CAMEL”), can only be enabled if both operators have installed the CAMEL system on their networks. As of December 31, 2011, we offered prepaid roaming to Turkcell prepaid subscribers through 315 operators in 139 destinations.

Since October 2002, we have offered GPRS roaming. As of December 31, 2011, we allowed our subscribers to access the Internet and reach their email accounts while traveling, through 494 GPRS roaming partners across 166 destinations.

In order to balance international SMS traffic, we began signing international SMS Interworking Agreements with other mobile operators in April 2002 and as of December 31, 2011, we had signed 153 International SMS Interworking Agreements. As of December 31, 2011, our subscribers can send SMS to more than 620 mobile operators located in 202 destinations, including North America and China.

Since December 2005, our subscribers have been able to send and receive MMS to and from subscribers of foreign operators. As of December 31, 2011, our subscribers were able to send MMS to 143 mobile operators in 76 destinations.

On July 30, 2009, we became the first operator to launch 3G Roaming services in many different locations around the world. As of December 31, 2011, our subscribers enjoyed high speed mobile Internet connections with 263 operators in 110 destinations.

We have entered into direct international roaming agreements with GSM operators around the world, including in Cuba, Iran, Sudan, Libya and Syria. These arrangements have been entered into in the ordinary course of business and on arm’s-length terms that we believe to be in line with industry standards. Under the roaming arrangements in the listed countries, our net revenues for roaming on our Turkish network totaled less than $5 million and our net expense for our subscribers roaming on the networks of operators on the listed countries was less than $1.4 million. In financial terms, we do not believe that our roaming arrangements with operators in Cuba, Iran, Sudan, Libya and Syria are material.

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 regulates our tariffs 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. For the maximum tariffs established in Turkish Lira, the formula is: the Turkish Consumer Price Index announced by the Ministry of Industry and Trade for Turkey minus 3% of the Turkish Consumer Price Index announced by the Ministry of Industry and Trade. For the maximum tariffs established in U.S. Dollars, the same method is applied to the USA Consumer Price All Item Index Numbers.

Although the Concession Agreement includes a provision regarding the increase of the maximum tariffs, the ICTA has decreased the maximum tariff since 2007, which has negatively affected our tariff structure. The Company initiated lawsuits for the annulment of such decisions. Some of the lawsuits were rejected by the courts and we appealed these decisions. The other lawsuits are pending.

For more information on how our maximum and minimum price levels are established, see also “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”.

There are various voice tariffs based on the subscriber segment (postpaid or prepaid, corporate or individual).

Main Tariffs

We have segmented tariffs plans that target specific subscriber groups. In the postpaid segment, pay as you go tariffs offer on-net (Turkcell subscriber to Turkcell subscriber) usage advantages. The packages include minutes for on-net and fixed line calls, intra-company calls or all national directions. Packages are widely preferred by our customers. In the prepaid segment, the main tariffs offering advantageous prices that are based on a refill amount are “Super Tariff” and “Youth Tariff”. In addition, we provide fee-based optional minute packages/TRY cards for calls to PSTN⁽¹⁾, OMO⁽²⁾ and for calls within a specific time period, such as weekends and nights.

The main tariffs listed below for postpaid and prepaid subscribers are as of March 15, 2012. Prices are given in TRY and include both 18% VAT and the 25% Special Communication Tax.

Consumer Tariffs and Loyalty Programs

Postpaid (TRY)

Bizbize

Tarife
Saniye

Her Yöne Paketler

Kamu

Genç

Hepsi Bir Arada
Paketler

Monthly Fee

9.9

6.9

25-95

29-45

29-149

Calls Out (per minute):

Turkcell to Turkcell

0.500 per
10 minutes

0.415

200-2000 free minutes
included. Exceeding
minutes charged at
0.415 per minute

600-1000 free minutes
included. Exceeding
minutes charged at
0.240-0.300 per
minute

300 free minutes
included. Exceeding
minutes charged at
0.300 per minute

300-4000 free
minutes included.
Exceeding minutes
charged at 0.415
per minute

Turkcell to PSTN(1)

0.415

Turkcell to OMO(2)

0.415

SMS

0-1000 free SMS
included

3000 free SMS
included.

300-4000 free
SMS included

Internet

0-300MB free
Internet included.

300MB-4GB free
Internet included.

Other Benefits

Turkcell to Turkcell
unlimited from 6 am
to 6 pm free minutes
& free 2 days a week
included.

Turkcell to Turkcell
unlimited from 9pm
to 9am free minutes
for 2 days a week
included.

0-60 free
International call
minutes & 0-50
free roaming
minutes at Europe
Zone

SMS Per Message

0.415

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

(2)	OMO: Other Mobile Operators.

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

Prepaid TRY*

Süper Tariff

Genç Tariff

Bizbize Tariff

Refill Amount**

Turkcell to
Turkcell

Turkcell to
PSTN/
Turkcell to
OMO

Turkcell to
Turkcell

Turkcell to
PSTN

Turkcell to
OMO

Turkcell to
Turkcell/
Turkcell to
PSTN/
Turkcell to
OMO

0.50 per 10 min

0.50 per 15 min

0.415 per min

0.50 per 5 min

0.50 per 3 min

Less than 20***

0.415 per min

SMS (Per message)

0.415

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

**	Prices vary depending on the refill amount and apply for 30 days following the first day of refill, except for Genç Tariff. Genç Tariff prices apply 31, 12 and 7 days if refill 20 TL and above, 12 TL and 7 TL, respectively.

***	The charged for a less-than 20 TL refill or no-refill except for Genç Tariff. Genç Tariff prices for less than 7 TL refill is 0.415 per min

With our new tariff scheme, introduced in the first quarter of 2012, we have all-inclusive and flat packages at different price levels and we offer yearly discounted and fixed priced versions of our postpaid price plans to acquire new customers and to retain our current customer base.

In addition, we also have loyalty subscriber programs.

Through our new consumer approach, we group our customers by segments after taking into consideration their occupation and, with regards to the youth segment, their age.

Youth segment management, including the loyalty program called “gnctrkcll” ensures customer retention by presenting campaigns and advantages that fit youngsters’ trends of life. Gnctrkcll aims to reinforce Turkcell brand recognition as a young, dynamic, popular and intimate brand.

In addition to the youth segment, we focus on “new segments” (such as farmers and housewives) with differentiated GSM and non-GSM offers, as well as campaigns and co-branded activities with selected companies from other sectors to create added values to targeted segments. All loyalty schemes are designed in line with the targeted segments’ lifestyles, needs, priorities, and expectations since new segments aim to increase the loyalty of current Turkcell customers, as well as to attract new customers.

Turkcell Platinum, a premium loyalty and customer experience management program which offers special GSM, and non-GSM/third-party advantages to individual customers in order to ensure behavioral and emotional brand loyalty, via a seamless series of positive brand experience in all customer touch points.

For our postpaid business, we have periodical free minutes programs (campaigns) with which the customers gain different amounts of free usage.

For our prepaid business, we offer prepaid customers monthly fee-based packages that includes SMS and voice advantages. We promote such packages to increase retention of the prepaid subscribers and the revenue generated from them.

Customer Data and Terminal offers

We have different offers in which minutes, SMS and data services can be bundled with handsets, which could lead to the use of 3G services and mobile Internet. We also have many mobile Internet offers based on different customer needs, such as:

Data bundled terminal offers: Different terminal models can be bundled with data packages which customers prefer.

Tariff bundled terminal offers: Different terminal models can be bundled with Turkcell’s tariffs on contracted deals.

Short-term contracted VINN offers: 3-month VINN campaign for subscribers who are not looking for a long-term contract (3 months for 39TL with a 4GB data package).

Segmented offers: KamuVINN and Genc VINN including 4GB for 29 TL with a 12-months contract. VINN Modem is given for free (including tax).

Single VINN campaign: without a contract, VINN Modem including 4GB data for 99 TL (including tax).

Need-based VINN offers: Daily pack and 3-month packs launched based on Prepaid VINN customers’ need.

Internet from mobile offers: A monthly Facebook pack for 3 TL (including tax), 3/6-month discount campaigns for monthly 100 MB, 250MB, 1GB packs (with prices of 5TL, 7TL, 19TL, respectively).

Corporate Tariffs and Loyalty Programs

Postpaid

IsteTarife

Şirketiçi

Paketcell

Monthly Fee

6.75 TL

15-20 TL

42-119 TL

Calls Out (per minute):

MVPN (Company Network)

—

6000 free minutes

1500-5000 free minutes

Turkcell to Turkcell

0.415 TL

500-5000 free mins
included. Exceeding
minutes charged at
0.415 per minute

Turkcell to PSTN(1)

0.415 TL

300-3000 free mins
included. Exceeding
minutes charged at
0.415 per minute

Turkcell to OMO(2)

0.415 TL

300-3000 free mins
included. Exceeding
minutes charged at
0.415 per minute

SMS Per Message

0.415 TL

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

(2)	OMO: Other Mobile Operators.

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

IsteTarife is a standard Turkcell tariff. Şirketiçi and Paketcell include special packages at discounted prices.

We offer different package combinations to our corporate customers to meet their communication needs. These packages include company, on-net and/or flat voice offers. We also offer bundled versions of these packages including data and flat SMS.

For small and micro businesses, we have dedicated voice and non-voice offers and provide different benefits for craftsmen, sole traders and professionals such as doctors and lawyers. Meslek Tarifesi (Occupation Tariff), Profesyonel Tarife (Professional Tariff) and Kendi İşim Paketi (Sole Trader Packages) are the main tariffs offered to these customers.

We also address and provide solutions to our corporate customers’ different telco needs with the Total Telecom Solutions Provider (TTSP) approach. We collaborate with our subsidiary, Superonline Iletisim Hizmetleri A.S. (“Turkcell Superonline”), to serve TTSP products like data center, cloud, VOIP, MPLS/VPN, mobile and fixed bundle offers etc. to our customers from one source.

We launched our B2B (business to business) loyalty program, IsteKazan, in March 2010, for Turkcell corporate customers. IsteKazan is the first loyalty program focused on the B2B segment where we worked with more than 40 different brands around the country.

The main focus of IsteKazan is to offer advantages to our corporate customers and provide them with cost advantages on their non-GSM costs. Depending on the customer preferences and requirements, the most appropriate solution package is designed, such as discount bundles, cost level alternatives, etc. With this program, Turkcell corporate customers get discounts in several areas such as market, gas, transportation, technology, car rentals, dry cleaning services, etc.

Roaming Tariffs

Turkcell intends to provide advantageous price schemes to its customers when they are abroad. With a customer-oriented point of view, Turkcell offers a flat fee for roaming usage, dividing the world into zones, known as the “Turkcell World Tariff”. Whenever our subscribers go abroad, regardless of their domestic tariff, they are subject to the Turkcell World Tariff for their roaming usage. Additionally, Turkcell enables its customers to connect to loved ones with advantageous voice, Internet and SMS packages and campaigns.

Based on Turkcell’s roaming agreements, Turkcell hosts the subscribers of foreign operators on its network. When a subscriber of a foreign operator makes a call using Turkcell’s network, 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

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 TRY for a period of 270 days are disconnected (this was changed in 2010 from 210 days).

The ICTA has announced that when prepaid subscribers load or receive at least TRY 10, the subscription should be renewed for nine months. The board resolution has been in effect since October 1, 2010. As a result of this decision, the life cycle of prepaid customers has been lengthened; however, our churn rate was not impacted in 2010. We observed a onetime impact as a decrease in churn in the second quarter of 2011 and for the full year of 2011. The current business practice of Turkcell for prepaid subscribers is to renew the subscription for nine months for each refill and credit transfers over TRY 10. For more information, see “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”.

For the year ended December 31, 2011, our annual churn rate was 27.9%. We have what we believe to be an adequate allowance for doubtful receivables in our consolidated financial statements for nonpayments and disconnections amounting to $327.4 million and $376.8 million as of December 31, 2011 and 2010, respectively. Despite the intense competition in the market, we managed to decrease the churn rate 6 percentage points with effective retention and churn campaigns. Even after adjusting for the life cycle effect, our churn rate in 2011 was lower than in 2010.

Seasonality

The Turkish mobile communications market is affected by seasonal peaks and troughs. Historically, the effects of seasonality on mobile communications usage has positively influenced our results in the second and third quarters of the fiscal year and negatively influenced our results in the first and fourth quarters of the fiscal year. Recently, however, due to changing market dynamics, such as the ICTA’s intervention in our tariffs and increasing competition in the Turkish telecommunications market, the effects of seasonality from our prepaid customers’ mobile communications usage has decreased. Local and religious holidays in Turkey have also generally affected our operational results.

Mobile Network

Coverage

Statements regarding our market share and total market size are based on the ICTA’s announcements, and statements regarding penetration are based on TUIK’s announcements regarding the population. Furthermore, statements regarding our 2G coverage are based on the ICTA’s specifications as well as TUIK’s announcements regarding the population, and statements regarding our 3G coverage are based on the 3GPP TS 25.101 specifications for outdoor 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 December 31, 2011, Turkcell covered 88.30% of all of Turkey and 99.13% 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 2011, 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 the improvement of existing urban, suburban and intercity road coverage. During 2012, we plan to further expand our coverage in settlements with a population of 500 or more, intercity roads and railways, in addition to further enhancing coverage and capacity in populated areas.

We commercially launched 3G simultaneously in 81 province centers and major cities in Turkey in July 2009. As of December 31, 2011, we had reached 88% population coverage (based on 3GPP TS 25,101 specifications for outdoor coverage). As of December 2011, we believe that Turkcell is ahead of meeting 3G license coverage requirements* (regarding 3GPP TS 25,101 specifications for outdoor coverage). With the advantage of higher quality communications provided by the widest spectrum in 3G, Turkcell will continue to offer seamless communications services to its customers with by far the most extensive coverage amongst its peers.

Quality of Service

The ICTA published a “Regulation On Quality of Service in the Electronic Communication Sector” on September 12, 2010, to be effective as of December 31, 2011 (see “—Regulation of the Turkish Telecommunications Industry” for further details). Turkcell Network is currently above the standards set by the statement. As usual, “Call Drop” was one of the major Quality of Service figures that we focused on during 2011.

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 dropped call rate for our 2G network has further decreased to far below 1%.

Turkcell also provides high quality services through its 3G network. In a short time, we have succeeded in reducing the 3G dropped call rate to the same level as the 2G network. The rate of service quality is being enhanced all the time due to investments in our 2G and 3G network to improve the quality and capacity of the network. In addition, we believe that we will keep all our KPI’s above the standards for the entire duration of 2012.

*	As of December 2011, ICTA has not issued any statement specifying 3G coverage requirements.

Network Evolution

Access Network

In 2011, 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 began using Pico BTS solutions to further enhance our coverage at some places where signal penetration problems may exist due to thick concrete walls, coated glass windows, basement floors etc. We achieved the highest coverage density in major urban areas, especially in 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 both our 2G and 3G licenses. Starting from 2009, we have created 3G/HSPA+ coverage to support 3G multimedia services and fast throughput for mobile data traffic, while achieving greater network capacity through improved spectral efficiency.

We have achieved a speed of 42.2 Mbps in 3G through dual carrier technology across the whole country. We have also implemented EDGE technology in our entire network, as EDGE is a complementary technology to UMTS. 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 300 Kbps, three times the data capacity of GSM/GPRS. We have also successfully tested EDGE Evolution technology in our network, consisting of downlink dual carrier feature, where the data rates reaches up to 600 Kbps. Actual data rates vary depending on the access network load at the connection time and the terminal device features used by the customer. Today, all of our base stations are supporting EDGE technology. To enhance our 2G 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.

Transmission Network

Turkcell is one of the first operators in Turkey to start deploying IP Technologies throughout its network. As a result, we not only expanded and modernized our network and All-IP mobile backhaul network ( > 10,000 sites), but also started migrating legacy GSM sites to IP through the deployment of Abis over IP Technologies. Thus, we currently have an IP Mobile Backahul that provides resiliency, ease of operation and operational expense advantages of IP/MPLS. In addition to this, we have also invested into topology redundancy projects for better service availability. Backhaul bandwidth capacity increased for hot spot cell sites for 42 Mbps dual-carrier applications and Microwave R/L network modernization for Native Ethernet and Adaptive Modulation support to increase availability and reduce outages due to severe rain conditions. Usage of Fiber connectivity is increasing mainly at High Capacity RAN aggregation points. Application of xDSL technologies and solutions are also preferred for small cell sites that are not suitable for microwave access.

Core Network

The whole Turkcell Core Network is currently composed of new layered structure Next Generation Network (“NGN”) nodes. In 2011, due to the steep increase in data usage, the GPRS/EDGE and HSPA/HSPA+ (High Speed Packet Access) capacity was increased nearly 100%. In addition, SGSN/GGSN equipment came into service in five additional Operation and Maintenance Centers (OMCs). The aim is to save operational expenses and to set up more redundant data infrastructure. In addition, we continued to increase voice capacity to some extent. MSC-S in Pool (MIP) which is one of the biggest benefits of NGNs was completed for most of the main OMC regions. By using MIP structure, we get (i) full redundant MSC-Ss, (ii) redundant physical interfaces to MGWs, (iii) CAPEX efficiency, and (iv) improvement in radio network KPIs.

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 provide messaging and data

services. This infrastructure is being improved to open up more capabilities on the network for the application and content providers. New infrastructure also contains a portal where subscribers buy services, receive promotions and enroll for campaigns easily.

Network Operations

We have primarily 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.

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 regional operation units with qualified Turkcell staff that operate and maintain our network in sixteen main 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.

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 the masts or towers that we require in rural areas is performed by Kule Hizmet ve Isletmecilik A.S. (“Global Tower”), a company 100% indirectly owned by us. We lease antenna space and provide maintenance and management services from Global Tower at such towers.

Business Continuity Management (“BCM”)

In 2000, we launched our Business Continuity Plan (“BCP”) that encompassed Technical Operations and made 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 2005 and BCM was adopted as a full-time function.

The effectiveness of the BCM plans is practiced with scenarios that include mission critical processes, services, and building evacuations. In 2011, 35 practices were executed and nearly 3,800 people were involved in the practices.

Evaluating scenarios that may affect our operations, the purpose of BCM is to prevent or overcome these situations; to develop continuity 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 Continuity Team and several Emergency Response Teams. The Crisis Management Team is comprised of senior management who are responsible for

managing all facets of the potential crisis. The Business Continuity 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 regions are ready to aid and assist various teams at 17 other regions. In the event that Turkcell’s operations are interrupted, in accordance with the area in which the crisis offers, a chain alert call convenes the teams.

Turkcell’s BCM will be able to 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 by providing offers, campaigns and our advanced Service Delivery Platforms.

Our nationwide distribution channel is an important asset that helps us differentiate ourselves from our competitors and achieve our sales targets. Our strong and extensive distribution network consists of distributors, Turkcell Distribution Centers (“TDC”), Corporate Solution Centers, non-exclusive dealers, Turkcell Communication Centers (“TIMs”), Turkcell Stores and Consumer Electronic Chains, as well as points of sale for prepaid airtime, including ATMs, POS, web, call centers, supermarkets 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 activate 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, a 50-50 joint venture between SDIF and Turkcell. On January 31, 2012, we notified SDIF that the service provider agreement between us and A-Tel will be annulled effective from August 1, 2012.

Prior to April 2010, 16K, 32K, 64K and 128K (128K cards were only used for spare Simcards) Simcards were in circulation in the market. Starting from April 2011, 256K Simcards with NFC were introduced. These cards are important in increasing the penetration of NFC-enabled mobile services.

Prior to April 2010, 64K and 128K Simcard starter packs were sold with inclusive 20 and 100 counters. Starting from April 2010, started packs include a Simcard with airtime of 5 TRY or 20 TRY.

Turkcell Sales Efforts

We sell postpaid and prepaid services to subscribers through our distribution network, which is composed of distributors, TIMs, TDCs, Turkcell Stores, Consumer Electronic Chains, Corporate Solution Centers and exclusive and non-exclusive dealers. The number of exclusive and non-exclusive dealers totaled approximately 17,000 sales points as of December 31, 2011. We also sell scratch cards and digital prepaid airtime 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. TIMs lead the market with user friendly atmosphere, new products and services and dedicated employees. In 2009, TIMs were relaunched with the motto “We aim to ease your life with technology” in order to enhance our customer service oriented image under the “TIM” brand. In addition, the three flagship Turkcell Stores—fully operated by Turkcell—continue to enhance Turkcell’s brand image in the retail world by providing what we believe is 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. TDCs are aimed at enhancing our distribution effectiveness in the non-exclusive channel and ensure the timely and efficient distribution of Turkcell products and merchandising materials. They also facilitate the Turkcell brand and offer awareness in this competitive channel.

In total, we have more than 95,000 sales points for prepaid airtime including digital channels, ATMs, POSs, kiosks, Call Centers, Internet, WAP, retail chains, SMS, Digital TV and USSD. Since 2008, we have also offered digital counter sales capabilities over POS machines in the traditional sales channel.

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

Sales Management develops strong relationships with and promotes brand loyalty among dealers through a variety of support and incentive programs. Training programs aim to educate dealers’ personnel on the technical aspects of our products and services, as well as sales techniques to increase sales and enhance customer relations. The technological development projects commenced in 2007, and coupled with merchandising services, point-of-purchase (“POP”) materials and channel specific campaigns, help to support the sales efforts in all of our sales channels.

We address strategic enterprises, large enterprises and medium businesses through three channels, which are account managers and small businesses with indirect sales channels, corporate focused dealer organizations and through Telesales operations. With the objective of working closely with more customers and improving effectiveness and efficiency, we increased the number of directly managed corporate customers. The main aim of this activity is to provide mobile services to large and medium enterprises and SMBs in order to meet their communication requirements and also to 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 have worked continuously to bring the innovations in the mobile communications world to Turkey. Since our inception, we believe we have improved the lives of our subscribers with time saving solutions and by providing products and services that ease and enrich their lives.

Our goal is to become the strongest brand in Turkey. As one of Turkey’s most beloved brands and leading mobile operator, we are helping our customers to share anything anywhere anytime by providing them innovative technology solutions. In 2011, we tailored our communications strategy to the concept of “Life is beautiful when shared”. The “Life is beautiful when shared” concept is reinforced by our value offers: superior technologies, more advantages, outstanding and extensive service quality, and being a leader in social responsibility. With our renewed vision, we lend our power to our customers by enabling them to be more connected to life with simple communications solutions ready at their fingertips.

In 2011, we launched our new logo. We evaluated our current brand architecture, naming strategy and brand expression in order to create a more powerful Turkcell brand. All sub-brands renewed to support one Turkcell brand. We increased the brand equity of all of our products. Turkcell group companies’ branding principles were also reviewed in order to a build a clearer link with Turkcell and to create a more powerful, unified Turkcell brand. In 2012, we will continue to support Turkcell Group companies for brand and communication issues.

In 2011, Turkcell brand communications started to be coordinated in a more harmonic and synergetic way to strengthen our power in communications and to deliver more consistent messages through all media. In order to ensure that each of our messages effectively reach its targeted customer segment, we advertised extensively through traditional and alternative media such as television, outdoor events, cinema, radio, digital and social media, and print. We aim to communicate “360°” with our customers. In 2012, our goal is to have the highest level of brand awareness among our competitors, as we did in 2010 and 2011.

Customer Services

The key part of our strategy is to provide basic and premium services by thinking and acting in a customer-focused manner. Our goal is to sustain a continuous relationship with the customer through customer satisfaction. We aim to achieve operational excellence throughout all customer touchpoints by continuously improving and correcting processes. We design our processes and service structure based on customer experiences.

We mainly work with two companies, Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri A.S. (“Turkcell Global Bilgi”) and Hobim Bilgi Islem Hizmetleri A.S. (“Hobim”). Hobim handles the printing of invoices and archives subscription documents for us. Turkcell Global Bilgi offers 24 hours-a-day, 7 days-a-week contact center services at several sites and manages more than 250 million contracts annually. Turkcell’s customer service strategies for contact centers are implemented by Turkcell Global Bilgi and we make sure that customer services and customer satisfaction programs, which are also provided by Turkcell Global Bilgi, are executed in line with Turkcell’s strategies. Turkcell Global Bilgi’s success has been verified by a number of domestic and international awards. Among these were the 2011 Top Ranking Performance of ContactCenterWorld.com “The Best Contact Center” both in the world and the EMEA region; “Employer of the Year” at the European Business Awards 2011; “Large Contact Center of the Year” highly commended at the European Call Center Awards 2011, due to an expanding business volume announced on the list provided by Bilisim 500 Research in 2010.

We also offer services at face to face channels. Our centers are established all around Turkey in order to meet our customers’ technological needs and demands.

For corporate customers, account managers are assigned for exclusive service. An account manager is the single point of contact and provides proper solutions in response to customer needs.

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.

In addition to the operational targets, we aim to achieve excellent customer satisfaction. We evaluate the performance of our service providers with the help of “mystery shoppers” and satisfaction surveys and make our service providers aware of any deficiencies and offer suggestions as to how to improve their service to our customers.

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 the C.I.S. region, Eastern Europe, the Middle East, Africa and the Balkans. Accordingly, we made investments in Ukraine in 2004 and in Belarus in 2008. Through such investments, 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.

In line with our business strategy, we have signed a wholesale traffic purchase agreement to provide voice and data services in Germany targeting the local Turkish population and other mobile users with close ties to

Turkey. Our subsidiary in Germany, operating under a MVNO (Mobile Virtual Network Operator) business model, has launched its services on a nationwide basis in March 2011 under the Turkcell Europe brand. Through similar cooperative business models, we intend to carry the Turkcell Europe brand to other Western European countries in which a sizeable Turkish community resides.

Our international endeavors will continue in 2012. In parallel to our continuous efforts in strengthening our businesses in Ukraine, Belarus and Germany, we will continue to selectively seek and evaluate new international investment opportunities in strategic emerging markets. These investment opportunities can be implemented through the purchase of new licenses and the acquisition of existing companies, as well as through alternative business models such as management contracts or MVNO-type partnerships, both in our main and adjacent communication and technology business areas.

Ukraine—Life:)

We acquired our interest in our subsidiary 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 Telecommunications Holdings B.V. (“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, 2011, Astelit had 9.7 million subscribers, a 7% annual increase from 9.1 million subscribers as of December 31, 2010. The majority of subscribers are prepaid subscribers as of December 31, 2011. During the third quarter of 2010, the definition of active subscriber was modified to churn out any subscriber whose only activity was the receipt of bulk SMSs or call forwarding.

The life:) brand has become one of the best in the country and reached 99% recognition in the market due to its strong differentiation from existing mobile brands and focus on innovation, transparency and youthful spirit. The company has been known in the market as one of the most dynamic and innovative ever since life:) was the first to introduce a number of new technologies and products that had previously been unavailable to Ukrainian subscribers. The company is highly targeted to keep its innovation leadership in marketing and sales. In 2011, Astelit adopted its new regional strategy, which divides the country into three major regions and focuses on each region with tailored marketing and sales activities. As a result, Astelit expands and improves its sales network to bring its products and services to the most remote parts of the country. By the end of 2011, Astelit had 34,443 non-exclusive sales points throughout Ukraine, 433 life:) exclusive sales points and customer service centers operating in 216 cities in the country. As of December 2011, Astelit provided roaming opportunities in 181 countries via 561 roaming partners.

As of December 31, 2011, Astelit operated in 100% of the cities of Ukraine with a population of more than 10,000 inhabitants and more than 29,598 settlements, and all principal inter city highways and roads, which corresponds to coverage of approximately 97.8% of the whole population of Ukraine or 91.9% geographical coverage with more than 9,482 base stations. Cumulative capital expenditure for the development of Astelit’s coverage amounted to $1,356.9 million as of December 31, 2011. In 2012, Astelit will continue investing to increase capacity of its network.

Astelit is strongly dedicated to further developing 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, which was privatized in 2011.

The Ukrainian telecommunications market is regulated by the National Commission on Communications Regulation & Informatisation (“NCCRI”), which is controlled by the President of Ukraine. In accordance with

the NCCRI Regulation Plan for 2012, the technical specifications for MNP call routing model and the Regulations on MNP customer’s service standards are scheduled for adoption by NCCRI in the fourth quarter of 2012.

On June 25, 2007, Astelit together with Financell B.V. (“Financell”), a financing company which is a 100% subsidiary of Turkcell) and Turkcell entered into $390 million syndicated financing arrangement (replacing a prior financing arrangement under which Astelit was in default). Under this arrangement, Financell borrowed funds from a syndicate of banks and made a loan of the same amount to Astelit, and we guaranteed the principal amount of the loan to Astelit, 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 by Financell to Astelit.

In addition to the senior syndicated facility, a long-term junior facility agreement for up to $150 million (including interest accruals amounting to $24 million) was also entered into 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 the principal amount reaches $150 million. This facility was fully utilized as of December 31, 2011. This junior facility is fully guaranteed by Turkcell.

In March 2007, Turkcell, through its subsidiary Turktell Uluslararasi, and SCM decided to contribute on a pro rata basis, an additional aggregate amount of $200 million to the capital stock of Euroasia. 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 exchange for shares in the capital of Euroasia. In June and October 2009, Turkcell through its subsidiary Turktell Uluslararasi, and SCM contributed to the share capital of Euroasia an aggregate amount of $121 million in exchange for shares in the capital of Euroasia. Turktell Uluslararasi and SCM made the 2008 and 2009 contributions in proportion to their shareholding in Astelit at the time of each capital contribution.

On July 16, 2009, a new facility agreement with Financell was signed. The purpose of this agreement was to finance payments of goods and services delivered/rendered by Ericsson AB Sweden and its Ukrainian subsidiary. As of December 31, 2011, Astelit’s loan principal on this facility was $51.9 million.

As of February 1, 2012, Astelit had debt repayments due to Euroasia in the amount of $150 million and to Financell in the amount of $173 million. Since June 2011, Astelit has not met the payment obligations, which were waived until February 1, 2012. Since that date, our Board of Directors has not acted to approve or reached a consensus for the extension of repayment dates. As a result, Astelit was unable to meet its repayment obligations to Euroasia and Financell totaling $323 million and defaulted on its loan agreements. As a consequence of Astelit’s default, cross default clauses have been triggered on five loan agreements totaling $554 million (currently decreased to $402 million, following our $150 million guarantee payment) and waivers were obtained for the aforementioned loans before March 31, 2012. In the context of guarantees, Financell has pledges on shares and all assets of Astelit including bank accounts. Additionally, Financell has a second priority pledge on Euroasia shares held by System Capital Management Limited together with a guarantee and indemnity given by System Capital Management Limited. Financell has rights to commence enforcement of pledges and guarantee under certain conditions.

In the same vein, Euroasia, a Group company that is a 100% shareholder of Astelit, which had previously borrowed $150 million to finance Astelit, also defaulted on its loan on March 30, 2012. As a guarantor, we paid $150 million to related banks on April 6, 2012. In relation to the guarantee agreement, a first priority pledge on Euroasia shares held by System Capital Management Limited has been established in favor of Turkcell. Upon payment of the guaranteed amount, Turkcell has the right to commence enforcement of this pledge on the Euroasia shares under certain conditions. As a consequence of Euroasia’s default, cross default clauses have been triggered on four loan agreements (the same ones referenced above) totaling $402 million and waivers are being sought for the aforementioned loans.

With respect to the amounts due to Financell, our Board of Directors decided to extend a guarantee to Financell in order to perform its obligations with respect to the loans granted by the banks for providing Group financing. The guarantee will be up to $410.7 million principle amount plus sum of interest, any other costs, expenses and fees that may accrue in connection with the credit line agreements. This guarantee includes the debt repayments of $173 million due under the loan agreements signed between Astelit and Financell, and of the loans that Financell granted to Astelit which have not yet fallen due. Astelit’s debts are denominated in foreign currencies which expose Astelit to foreign exchange and convertibility risks.

Since the acquisition of Astelit in the second quarter of 2004, the results of our operations in Ukraine have been consolidated in our consolidated financial statements.

Belarusian Telecom

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

In 2009, Belarusian Telecom signed supply agreements with supplier firms ZTE and Huawei for products and services related to infrastructure investments in Belarus. In connection with these transactions, Turkcell gave guarantees of up to $35 million to ZTE and $29 million to Huawei in 2009. The $29 million guarantee given to Huawei expired in March 2011. As a result of an agreed early payment to ZTE in 2010, $19.1 million of the $35 million guarantee remains to be paid. In 2010, Turkcell gave an additional guarantee of $17 million to ZTE.

At December 31, 2011, Belarusian Telecom had 1.8 million subscribers, the majority of whom were prepaid, and operated through 104 exclusive and 1,290 non-exclusive sales points. During the third quarter of 2010, the definition of active subscriber was modified to churn out those who had not refilled their account in more than six months.

At December 31, 2011, Belarusian Telecom operated 2G services in all, and 3G services in 81%, of the cities with a population of more than 10,000, and 2G services provided in 99.4% of all principal intercity highways and roads of Republic of Belarus (total length of all Belarus highways and roads is 15,086 km), which corresponds to coverage of approximately 99.5% of the entire population of Belarus, or 91.5% of the geographical coverage.

As of February 1, 2012, mobile number portability was launched with a donor initiated mechanism. Subscribers who want to port their numbers have to apply to their existing operator, which is in favor of the dominant market players.

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, 2011, Kibris Telekom had 0.4 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 Public Works of the Turkish Republic of Northern Cyprus. The license agreement became effective on August 1, 2007 and replaced the previous GSM-Mobile Telephony System Agreement dated March 25, 1999, which was based on

revenue-sharing terms. The new license agreement granted a 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. 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 including VAT, which was paid at the end of March 2008.

In the third quarter of 2010, Kibris Telekom completed and began operating the radio transmission (airlink) project providing direct international voice and data connection to the mainland. The project is the only direct connection in the Turkish Republic of Northern Cyprus, aside from the Telecommunication Authority.

Financell

Financell is incorporated under the laws of the Netherlands 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 a Turkcell guarantee to fund other Turkcell subsidiaries.

Turkcell Europe

Turkcell Europe was founded by Turkcell in 2010. Headquartered in Cologne, Germany, Turkcell Europe commenced activity in March 2011.

Turkcell Europe offers Turkcell’s service quality both across Germany and Turkey not only to the people of Turkish origin living in Germany but also those who have close commercial contact with Turkey.

Besides providing advantageous offers to those who call Turkey from Germany, Turkcell Europe, which offers the advantages of using Turkcell also in Turkey, aims to provide its customers in Turkey and Germany with a unique user experience. Furthermore, Turkcell Europe subscribers can access the products and services offered exclusively to Turkcell users via T-Mobile (Deutsche Telekom AG), Germany’s premier mobile communications network operator.

With its extensive distribution network, Turkcell Europe offers services to its customers at nearly 1,000 locations spread across Germany. Having reached a membership base of over 200,000 subscribers during its first year of operation, Turkcell Europe is one of the fastest-growing Virtual Mobile Networks.

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.

Turkcell Global Bilgi

On October 1, 1999, we established Turkcell Global Bilgi in order to provide telemarketing, telesales, and call center services, particularly for us. In 2005, Turkcell Global Bilgi completed its transition from call center to contact center as Turkcell 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 Turkcell Global Bilgi. As of December 31, 2011, Turkcell Global Bilgi employed 5,952 employees, of which approximately 61% provide us with customer care and retention services, around 32% serve customers of other clients while the remainder work as administrative personnel. We own 100% of Turkcell Global Bilgi.

Turkcell Global Bilgi owns a 100% share of Global-Bilgi LLC since 2008, which operates in Ukraine and provides telemarketing, telesales and call center services; and owns a 99% share of Global-Bilgi FLLC since 2009 which operates in Belarus to provide call center services.

Inteltek

Inteltek Internet Teknoloji Yatirim ve Danismanlik Ticaret A.S. (“Inteltek”) operates fixed-odds betting and pool games on sports games. Currently, Turkcell holds 55% of Inteltek through its wholly owned subsidiary Turktell Bilisim Servisleri A.S. (“Turktell”), while Intralot, a Greek gaming company, holds 20% and Intralot Iberia Holding, a Spanish company, holds 25%.

Inteltek’s business is currently operated under a contract entered into on August 29, 2008 with Spor Toto Teskilati A.S. (“Spor Toto”). The current contract is based on specific Turkish legislation relating to gaming enacted in 2008 and was entered into following numerous legal challenges to prior contracts. Under the current contract, Inteltek runs the sport betting business, iddaa, for a period of 10 years, effective as of March 1, 2009 and superseding a prior agreement. Under this contract, Inteltek has guaranteed TRY 1,500 million (equivalent to $846 million as of April 1, 2012) turnover for the first year of the contract and has given similar guarantees for future years. The guaranteed turnover for the following years will be computed using producer price indices. Inteltek shall pay the guaranteed turnover difference (after deducting commission income) to Spor Toto if actual turnover is below guaranteed turnover. To date, actual turnover has exceeded that amount. In addition to the foregoing, Inteltek signed a mobile betting dealer agreement with Spor Toto on January 12, 2010, which gives it the right to operate 1,000 mobile terminals.

In the context of evaluating investment opportunities in neighboring countries, Inteltek received authorization from Azerbaijan Azeridmanservis Limited Company to organize, operate, manage and develop the fixed-odds and paramutual sports betting business in Azerbaijan. In this context, Azerinteltek QSC (“Azerinteltek”) was incorporated on January 19, 2010 in Azerbaijan and is 51% owned by Inteltek. According to the agreement concluded between Azerinteltek and Azerbaijan Azeridmanservis Limited Company on September 30, 2010, Azerinteltek received the authorization to organize, operate, manage and develop the fixed-odds and paramutual sports betting business in Azerbaijan for a period of 10 years. Azerinteltek started its operations, with the brand name “Topaz”, on January 18, 2011 and reached 245 agents as of December 31, 2011.

Inteltek is the domestic market leader and is ranked among the most prominent operators in the international gaming sector. Inteltek intends to continue to explore business opportunities both in Turkey and abroad based on its experience and dynamism.

Turkcell Superonline

Turkcell Superonline has 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. It also has authorization to provide satellite communication services, infrastructure operating services, Internet services and wired broadcasting services. Currently, the company carries some of Turkcell’s international traffic, previously carried by Turk Telekom (the incumbent operator). Turkcell Superonline was created in 2009 through the merger of our subsidiary Tellcom with the Superonline business acquired from the Cukurova Group.

Established to be an innovative telecom service operator, Turkcell Superonline offers its international and national clients wholesale voice carrying, international lease data lines (for corporate clients) and Internet access service with international connectivity. Furthermore, Turkcell Superonline is in the retail broadband market, bringing fiber optics to residences. Turkcell Superonline provides fast communication technology with its own fiber optic infrastructure in Turkey and provides telecommunication solutions to individuals and corporations in the areas of voice, data and videos (triple play).

We believe that Turkcell Superonline differentiates itself through its steadfast commitment to the quality of after-sale services. Turkcell Superonline supplies corporations with industry-leading service level agreements utilizing its professional technical support personnel and highly qualified team of consultants. Turkcell Superonline has been awarded the ISO 9001:2000 Quality Management System Certificate. Turkcell Superonline aims to become one of the “leading innovative Telecommunications Operators” in Turkey and it intends to continue to seize opportunities in the Internet and telecommunications markets.

In December 2009, Turkcell Superonline won a tender worth EUR 20.9 million to lease the fiber optic infrastructure network of BOTAS, Turkey’s State-owned pipeline company, for 15 years. The project was completed in the first quarter of 2012.

In 2010, Turkcell Superonline, together with Etisalat (UAE), Mobily (Saudi Arabia), Jordan Telecom, Mada-Zain Consortium (Jordan), and Syria Telecommunications Establishment (Syria) signed an agreement that will initiate the Regional Cable Network (“RCN”) Project. Starting from Fujairah (United Arab Emirates) and passing through Riyadh (Saudi Arabia), Amman (Jordan), Tartous (Syria) and reaching Istanbul (Turkey), the RCN Project’s fiber optic cable line is expected to cover the entire Gulf region in the Middle East for the first time. Although we had planned for the project to be operating in 2012, current developments in Syria are hindering completion.

In addition, Turkcell Superonline founded, with six other leading service providers, the Turkish Network Alliance Platform (“TNAP”) to improve the quality and reduce the access time by carrying Internet traffic of Internet service providers through a fiber backbone that is a safe and back-up route of access established by the service providers. TNAP is expected to increase the speed, safety and quality of Internet traffic and improve the load of domestic Internet traffic in addition to supporting a better infrastructure for Internet service providers.

In 2011, Turkcell Superonline continued to invest in its transmission network by expanding the intercity and in-city fiber-optic backbone along with establishing new fiber-based access points at selected residential and industrial areas for end users and commercial account holders. As of December 31, 2011, Turkcell Superonline’s installed backbone was approximately 30,000 km long and its services reached 10 cities, including İstanbul, Ankara, İzmir, Bursa, Kocaeli, Adana, Gaziantep, Antalya, Mersin and Samsun in Turkey.

Turkcell Superonline has begun to provide 1000 Mbps service also to homes in May 2011 for the first time in Turkey in line with the Turkcell Group’s strategy to provide state-of-the-art technology for its customers with top quality service. Turkcell Superonline has rendered Turkey one of the first five countries in the world where a 1000 Mbps connection is provided to homes thanks to this service option.

On August 12, 2011, Turkcell Superonline signed a Share Purchase Agreement to acquire a 100% stake in Global Iletisim, which is specialized in providing Internet and telecommunications services. In November 2011, the control over Global Iletisim was acquired from Yildiz Holding AS for a consideration of $(0.5) million.

Turkey was named among the most successful countries in the “Strategies of Leading FTTx Operators” report published by IDATE, with Turkcell Superonline’s fiber Internet applications. IDATE underlines that Turkcell Superonline is an important player in the field of FTTH, one that has proven to be a leading player not only in Europe, but also worldwide. The report also states that “In the spring of 2011, Turkcell Superonline rolled out a new 1 Gbps access offer, making the operator one of the few in Europe to do so. Turkcell Superonline is in the process of positioning itself as one of the uncontested players in FTTH/B in Europe, and even, we believe, in the world.

Turkcell Superonline aims to continue to invest in and expand its own fiber optic network and further utilize the group synergy created with Turkcell. The Company intends to continue to take advantage of business opportunities within the broadband industry in 2012.

Global Tower

Global Tower is a wholly owned subsidiary founded in 2006. Global Tower’s core business is to supply installation, leasing and maintenance services of tower, rooftop and indoor infrastructures for mobile operators, TV & radio broadcasters and operators of civilian/military wireless communication/monitoring systems. Global Tower’s site sharing business model eliminates the initial investment cost for its customers and also contributes to the reduction of adverse environmental impacts and the efficient use of resources in the countries in which it operates.

Having begun operations in 2007, Global Tower serves its customers with a portfolio of more than 5,000 existing tower sites. Global Tower, Turkey’s first and only tower infrastructure service provider company, began operations in Ukraine in 2009 under the name UkrTower.

Turkcell Teknoloji

Turkcell Technology, a wholly owned subsidiary of Turkcell, commenced operations in 2007 in the TUBITAK Marmara Research Center Technological Free Zone in Kocaeli, Turkey. Turkcell Technology’s growing team of experts develops a wide range of convenient and reliable solutions with innovative roadmaps. Through integrated intelligence and high performance capabilities, Turkcell Technology’s comprehensive portfolio addresses the following domains: SIM asset and services management, mobile marketing, roaming, terminal and terminal applications, value-added services, mobile Internet and mobile financial services.

To ensure a permanent competitive edge and value for its solutions, Turkcell Technology cooperates with a wide network of national and international R&D companies, universities and research centers and plays an active role in international R&D programs. With the goal of being Turkey’s leading R&D and innovation base, Turkcell Technology demonstrates the value it attaches to innovation with its increasing number of patents each year. Currently, Turkcell Technology holds more than 125 pending patents.

Equity Accounted Investments

Fintur

We hold a 41.45% stake in Fintur, which holds interests in international mobile communications operations. Below is a description of the businesses currently held by Fintur.

Azercell

Fintur indirectly owns 51.3% of Azercell Telekom B.M. (“Azercell”), which offers GSM services on both a prepaid and a postpaid basis in Azerbaijan. As of December 31, 2011, Azercell had approximately 4.2 million subscribers, of which approximately 0.2 million were postpaid and approximately 3.9 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 Azertel A.S., the parent company of Azercell, acquired the Republic of Azerbaijan’s entire stake. Azertel’s ownership in Azercell increased to 100%; however, Fintur’s effective ownership in Azercell remains at 51.3%. Azercell was granted a 3G license in the fourth quarter of 2011.

Geocell

At December 31, 2011, Fintur indirectly owned 100% of Geocell Ltd. (“Geocell”), which operates a GSM network and offers mobile telephony services in Georgia. As of December 31, 2011, Geocell had approximately 2.1 million subscribers, of which approximately 0.03 million were postpaid, approximately 0.3 million were paid-in-advance subscribers that had postpaid services but paid in advance and approximately 1.7 million were prepaid.

Kcell

Kcell is 51% owned by Fintur and the remaining 49% is owned by Kazakhtelecom JSC, the Kazakh incumbent fixed line telecom provider. TeliaSonera has signed an agreement with Kazakhtelecom to acquire 49% of the shares in GSM Kazakhstan LLP. The transaction was finalized during the first quarter of 2012. TeliaSonera has further agreed, subject to certain conditions, to sell 25% of the shares minus one share in KCell in an Initial Public Offering (“IPO”). The IPO is expected to be completed during 2012. Fintur Holdings B.V. is owned by TeliaSonera (58.55%) and Turkcell (41.45%). Once both steps of the transaction have been completed, TeliaSonera’s effective ownership in Kcell will be 61.74%. Kcell offers mobile telephony services in Kazakhstan and had approximately 10.8 million subscribers as of December 31, 2011, of which approximately 0.1 million were postpaid, approximately 1.4 million were paid in advance subscribers and approximately 9.3 million were prepaid.

Moldcell

At December 31, 2011, Fintur directly and indirectly owned 100% of Moldcell S.A. (“Moldcell”), which offers GSM services in Moldova. As of December 31, 2011, Moldcell had 1.1 million subscribers, of which approximately 0.1 million were postpaid, approximately 0.3 million were paid-in-advance subscribers and approximately 0.7 million were prepaid.

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 SDIF. 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.

On January 31, 2012, we notified SDIF that the service provider agreement between us and A-Tel will be annulled effective from August 1, 2012.

Potential Investments

Our efforts to selectively seek and evaluate new investment opportunities continue. These opportunities may include the purchase of new licenses and the acquisition of existing companies as well as alternative business models such as management contracts or other forms of cooperation in markets outside Turkey in which we currently do not operate, focusing on communications, technology and adjacent and new business opportunities. Our international expansion strategy focuses on key emerging markets, mainly in Eastern Europe, the Middle East, Africa and the Balkans.

We will continue to selectively seek and evaluate new international investment opportunities. In the context of our evaluation of potential investment opportunities within the regions we target for international expansion strategy, Turkcell has, from time to time, considered opportunities in countries in the Middle East and North Africa, and may consider such opportunities in the future. We may participate in additional public tenders for new licenses or the privatization of public telecom companies as well as in private sale transactions in emerging markets to pursue investment opportunities in line with our growth strategy.

Furthermore, following the launch of Turkcell Europe in Germany, we will evaluate expanding into other Western European countries where there is a sizeable Turkish community through wholesale partnerships or alternative cooperative business models.

Regulation of the Turkish Telecommunications Industry

Overview

All telecommunications activity in Turkey is regulated by the ICTA. Electronic Communications Law nos. 5809 (the “Electronic Communications Law”), which came into force on November 10, 2008 and partially replaced Law no. 406 and 2813, is the principal law governing telecommunications activity in Turkey. The Electronic Communications Law was published to correspond to the rapidly evolving Turkish telecommunications industry, and new regulations are in the process of being published. The duties of the ICTA, which may be exercised in a manner that is adverse to our operations and our financial results, include those described below.

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.

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 scarce resource allocation is not necessary, or by granting of usage rights, in cases where resource scarce 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.

On the other hand, in cases where the quantity of rights of use is limited, Section 9-6(a) of the Electronic Communication Law allows the Ministry of Transport, Maritime Affairs and Communications to determine the criteria, such as (i) the authorization policy regarding electronic communications services which cover the assignment of satellite position and frequency band on a national scale and which need be operated by a limited number of operators, (ii) the starting date of the service, (iii) the duration of the authorization and the number of operators to serve. While the criteria are determined by the Ministry of Transport, Maritime Affairs and Communications, the authorization is still granted by the ICTA.

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.

The Electronic Communications Law establishes legal principles and broad policy lines that the ICTA must follow, some of which are stated below:

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Creation and protection of a free and efficient competitive environment.

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Protection of consumer rights and interests.

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

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

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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.

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Ensuring the conformity of electronic communications systems to international norms.

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Except as clearly established in the 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.

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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.

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

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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 the 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 a universal service obligation in the 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 designated 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. Turk Telekomünikasvon A.S. and the GSM operators are currently designated as a Universal Service provider.

The Cabinet of Ministers Decision No: 27984 and dated July 4, 2011, allowed the use of Universal Service Fund to extend the mobile GSM network coverage to all uncovered areas with a population of 500 or less. The number of such locations was 2128 at the time, which were specifically listed in the afore-mentioned decision. The locations are equally divided between the three GSM operators. On January 10, 2012 Turkcell, Avea and Vodafone signed contracts with the Ministry of Transport, Maritime Affairs and Communications to determine the scope of work for the locations that are assigned to Turkcell by the Cabinet of Ministers Decision No: 27984. According to this contract Turkcell have to install the sufficient infrastructure to cover mentioned locations.

The Electronic Communications Law also specifies general rules and principles relating to tariffs. Pursuant to the Electronic Communications Law, operators may freely determine the tariffs they apply 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. It may also determine the lower and upper limit of the tariffs and principles and procedures of the application of the same.

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 the public shall be determined by the ICTA.

According to this regulation, the ICTA may intervene in the structure of our tariffs or may impose certain criteria relating to the revision of our tariffs. Pursuant to its decision dated December 8, 2009, the ICTA determined Turkcell, individually, to be an operator holding a significant market power in the “Access to Mobile Networks and Call Originating Markets” and, together with Avea and Vodafone, to be an operator holding significant market power in the “Mobile Call Termination Market”. 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 operators “holding significant market power” can set their prices more freely. For example, due to our status as an operator holding significant market power, we are required to provide access and call origination services to a certain MVNO operator. Being designated as an “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 other operators, such as MVNOs, which would have a material adverse effect on our business and results of operations. Furthermore, in addition to the negative pricing conditions, the uncertainty concerning the MVNO market has, and may in the future, negatively impact our business.

The ICTA abolished “The Regulation On Quality of Service” (issued in 2005), and published a new “Regulation On Quality of Service in the Electronic Communication Sector” on September 12, 2010, effective as of December 31, 2011, which sets out the procedures and principles to control the conformity of the services of operators. According to the regulation, new and important obligations with respect to call centers will be applicable to all operators that provide service to end users. Furthermore, mobile telephone operators are required to meet new service quality requirements and submit a report based on these requirements every three months to

the ICTA. With this new regulation, additional requirements for service quality must be fulfilled. There are four separate regulations attached to this regulation: Call Center Service Quality Regulation, Internet Service Quality Regulation, Mobile Operators’ Service Quality Regulation and Fixed Operators’ Service Quality regulation. For each individual regulation, operators’ service quality will be separately measured and reaching certain KPI’s for each service area will be expected (i.e. IVR menu durations, call setup times. If the operators fail to reach these KPI’s more than once, this may result in the imposition of penalties. The results of quality measurements can also be publicly available.

The ICTA published the 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 ICTA is preparing to abolish the Regulation on Personal Information Processing and Protection of Privacy in the Telecommunications Sector, and preparing to publish a new Regulation on Data Privacy in Electronic Communications Sector. The ICTA requested our Company’s opinions on the draft regulation. The purpose of this regulation is to define the procedures and principles that govern the operators and legal entities/individuals which provide/receive services in the electronic communication sector in an effort to process, store and protect the personal information of subscribers. In contrast to the current regulation, the draft regulation would require the consumer’s approval prior to a direct marketing SMS being sent. Therefore, if this regulation is approved, our methods of contacting customers about new tariff offers and services will be impeded unless we already have the subscriber’s permission. In addition, all of our subscribers’ traffic data, including those related to missed calls and data processing logs, would be required to be maintained by us for one year, which would result in additional expenses for the Company.

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 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 or alters technical features of equipment; or does not pay fees arising from its use of licenses 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.

Regulation on Authorization regarding the Electronic Communication Sector

In 2009, the ICTA published the “Regulation on Authorization regarding the Electronic Communication Sector”, which determines the principles and procedures for the authorization of the companies that seek to provide electronic communication services and/or to install or operate electronic communications networks or infrastructure.

Wireless Interoperability for Microwave Access (“WIMAX”) license

Regulatory changes in Turkey to introduce and promote WIMAX nationwide 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 issued Fixed Telephony Service (“FTS”) licenses pursuant to the Regulation on Authorization regarding the Electronic Communication Sector, which enables existing long distance telephony services

(“LDTS”) operators, such as our subsidiary Turkcell Superonline, to provide call origination and termination. LDTS and, consequently, FTS providers have not yet had a significant effect on our operations. In the long term they could have the effect of driving down prices and shifting traffic patterns for in-city as well as long distance calls in Turkey, potentially having an adverse effect on our mobile telecommunications business.

As of April 18, 2012, there were 178 operators with authorization for Fixed Telecommunication Services: 74 for Infrastructure Operating Services; 150 for Internet Service Provision Authorization; 42 for Mobile Virtual Network Services Operators and 14 for Directory Service Operators.

On February 3, 2010, the ICTA published a new Regulation entitled “The Right of Way in Execution of the Electronic Communications Services” and abolished the Regulation entitled “The Right of Way in Execution of the Telecommunication Services”. This Regulation aims to determine the principles and procedures for the right of way for the establishment and usage of all kinds of electronic communications networks and/or infrastructure facilities; which is required for the execution of electronic communications services.

Regulation on Mobile Number Portability (“MNP”)

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

MNP allows subscribers to keep their existing telephone number when changing their telephone operator, their physical location or current service plan. These regulations, published in 2007, became operational in the fourth quarter of 2008. Since we believe the MNP regulations conflict with our rights under our license agreement, without due compensation, we initiated a lawsuit in 2007 for the annulment of the MNP regulation. While we do not object to 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. The Court rejected the case in June 2009 and we appealed the decision. The appeal process is still pending. See “Item 8.A Consolidated Statements and Other Financial Information—Legal Proceedings”. In 2009, the ICTA issued a new regulation on MNP, abolishing the 2007 regulation. For new subscriptions, subscribers cannot port out to another operator in the first three months.

Turkish Competition Law and the Competition Authority

In 1997, the Competition Law (No. 4054) established a Competition Board. The Competition Board consists of seven 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 person 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 policies 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 competitive 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 legislations thus enabling mutual cooperation and information transfer. In November 2011, the ICTA and the Competition Board entered into a new Protocol on Cooperation. The Protocol regulates the mechanisms to improve cooperation which are currently implemented between the Authorities and the efficiency of which will be increased in the future cooperation, in particular among them “Information exchange,” “Requesting opinion,” and “Coordination and cooperation.”

GSM Licensing in Turkey

A GSM license is subject to the ICTA’s right to suspend or terminate operations under 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 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.

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, in operating condition, will be transferred by the licensee in accordance with the license agreement.

Our License Agreement

General

Since April 1998, we have operated under a 25-year GSM license for which we paid an upfront license fee of $500 million. In 2002, we signed a renewed license agreement for our GSM license which provides that a monthly payment of 15% over our gross revenue paid to the Turkish Treasury shall be subject to the legal interest rate. 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. In addition, we must pay annual contributions in an amount equal to 0.35% of our gross revenue to ICTA’s expenses. 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. After the tender relating to the allocation of additional GSM 900 frequency bands, made by the ICTA in June 2008, the license agreement was amended to include the additional frequency band and was signed by Turkcell and the ICTA in February 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 can renew our license, subject to the approval of ICTA, provided that we apply between 24 months and six months before the end of our license. Our license is not exclusive and is not transferable without the approval of the 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 $713,238 as of April 1, 2012), 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 revenue, 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 treasury share 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 treasury share to the Turkish Treasury and 10% to the Turkish Ministry as a universal service fund contribution.

Furthermore, under the Regulation on Authorization regarding the Electronic Communication Sector, all kinds of share transfers, acquisitions and actions of the operators which are authorized by a Concession Agreement must be communicated to the ICTA, and such share transfers, acquisitions and actions shall be made with the written approval of the ICTA if they result in a change of control component of such operators. 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. See “—ICTA” above for a description of the regulation governing quality of service.

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. For the adjustment of the maximum tariffs established in Turkish Lira, the formula is: the Turkish Consumer Price Index announced by the Ministry of Industry and Trade for Turkey minus 3% of the Turkish Consumer Price Index announced by the Ministry of Industry and Trade. For the maximum tariffs established in U.S. Dollars, the same method is applied to the USA Consumer Price All Item Index Numbers.

Although the Concession Agreement includes a provision regarding only the increase of the maximum tariffs, the ICTA has decreased the maximum tariff since 2007, which has negatively affected our tariff structure (the last decision being on November 4, 2011). The Company initiated lawsuits for the annulment of such decisions. The lawsuits are pending.

The maximum tariffs set by the ICTA constitute the highest rates we may charge for the services included in these customized service packages. Generally, the maximum tariffs set by the ICTA for particular services are set higher than the standard tariffs determined by the ICTA 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.

The standard tariffs and the maximum tariffs set by the ICTA 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 the 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, on September 25, 2007 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) (equivalent to $0.37 as of April 1, 2012) for GSM to GSM calls under general 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 empowered only 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 ICTA created unfair competition and violated provisions of the Electronic Communications Law, which stipulated that prices for telecommunications services be cost-based. On the grounds explained above, we filed a lawsuit before the 13th Chamber of Counsel of State in relation to the annulment and suspension of the execution of the aforementioned decision. On May 26, 2008, the 13th 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, but the request was rejected. On April 13, 2010, the 13th Chamber of the Counsel of State cancelled the ICTA’s decision regarding the interconnection rate applicable for setting our minimum on-net tariffs. The ICTA appealed the decision. The appeal process is still pending.

The ICTA, with its board resolution dated September 25, 2008, set the maximum price of TRY 0.66 (including VAT and SCT) (equivalent to $0.37 as of April 1, 2012) for off-net calls under general subscription packages. Thereafter, with the ICTA board resolution dated March 25, 2009, the ICTA has set a lower limit to on-net retail tariffs of Turkcell only, for the term of June 2009 - December 2010, and decreases the level of price cap for all GSM operators. We filed a lawsuit before the 13th Chamber of Counsel of State in relation to the annulment and suspension of the execution of the aforementioned decision. In June 2011, the 13th Chamber of Counsel of State rejected the lawsuit. We appealed the decision. The appeal process is still pending.

The lower limit applies to each retail tariff package of Turkcell by mandating that the weighted average on-net price of each and every subscription tariff package shall not be less than Turkcell’s weighted average call termination rate. This resolution has required Turkcell to report the weighted average on-net price of each and every subscription package in three month periods. To comply with the board resolution, Turkcell has adjusted the on-net prices of various tariff packages as necessary.

Subsequently, ICTA, with its decision dated December 21, 2010, decided that this Resolution should be applied permanently, and the reporting should be monthly instead of quarterly. We filed a lawsuit before the 13th Chamber of Counsel of State in relation to the annulment and suspension of the execution of the aforementioned decision. The 13th Chamber of Counsel of State rejected the suspension of the execution request. We objected to the decision. The lawsuit is still pending.

The board resolution also reduces the current price cap from 0.80 TRY/min (equivalent to $0.45 as of April 1, 2012) (including VAT and SCT), which pertains to general subscription packages (GSM-GSM), to 0.64 TRY/min (equivalent to $0.36 as of April 1, 2012). The Resolution has also set such price as an upper limit for special subscription packages. To comply with the board resolution, Turkcell adjusted on-net and off-net prices of some tariff packages.

Our Company filed a lawsuit before the Council of State in relation to the annulment and suspension of the execution of this decision of the ICTA. In June 2011, the 13th Chamber of Council of State rejected the lawsuit. We appealed the decision. The appeal process is still pending.

The ICTA, with its board resolution dated September 16, 2009, set the maximum price of TRY 0.65 (equivalent to $0.37 as of April 1, 2012) (including VAT and SCT) for GSM to GSM calls under general subscription packages.

The ICTA, with its board resolution dated February 10, 2010, further reduced down the current price cap to TRY 0.40 (equivalent to $0.23 as of April 1, 2012) (including VAT and SCT) for GSM to PSTN as well as GSM to GSM. The same resolution has set the current price cap of Turk Telekom to TRY 0.37 (equivalent $0.21 as of April 1, 2012) (including VAT and SCT) for PSTN to GSM.

However, under 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.

We believe that, pursuant to our license agreement, we can determine our tariffs freely, provided that they remain within the framework of the applicable maximum price limit. However, the ICTA may intervene with our retail tariffs. With respect to our retail tariffs, 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, the ICTA set a lower limit for solely Turkcell’s on-net retail tariffs, and decreased the price cap level for all mobile operators. The lower limit applies to each of Turkcell’s retail tariff packages by mandating that the weighted average of the on-net price of a tariff package not be less than Turkcell’s weighted average call termination rate. The board resolution also reduced the current price cap from 0.80 TRY/min (equivalent to $0.45 as of April 1, 2012) (including VAT and SCT), pertaining to general subscription packages, to 0.64 TRY/min (equivalent to $0.36 as of April 1, 2012). The resolution also set such price as an upper limit for special subscription packages. The ICTA, with its board resolution dated September 16, 2009, set the maximum price of TRY 0.65 (equivalent to $0.37 as of April 1, 2012) (including VAT and SCT) for GSM to GSM calls under general subscription packages. The ICTA, with its board resolution dated February 10, 2010, further reduced the current price cap to TRY 0.40 (equivalent to $0.23 as of April 1, 2012) (including VAT and SCT) for GSM to PSTN as well as GSM to GSM. The same resolution set the current price cap of Turk Telekom to TRY 0.37 (equivalent to $0.21 as of April 1, 2012) (including VAT and SCT) for PSTN to GSM. Finally, with its board resolution dated March 24, 2011, the ICTA set the current price cap as TRY 0.415 (including VAT and SCT) for GSM to PSTN and GSM to GSM (equivalent to $0.23 as of April 1, 2012). With the same board resolution, the ICTA made a distinction between national and international SMS rates. The national SMS rate was set as TRY 0.415 (equivalent to $0.23 as of April 1, 2012), and the international SMS rate was set as TRY 0.83 (equivalent to $0.47 as of April 1, 2012). Finally, with the board resolution dated November 4, 2011, the price caps have been left same as set on March 24, 2011.

The ICTA has in the past intervened and may again intervene with the charging period, impacting the prices we charge for our tariffs. For example, effective September 1, 2010, the ICTA requires all operators to apply the maximum price cap during the first minute of all calls. The usage behavior and our financial results will be adversely affected if the ICTA intervenes on charging periods.

Relationship with the ICTA

The license agreement creates a mechanism for an ongoing relationship between us and the 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 seven-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 treasury fee.

In the event of termination, we must deliver the entire GSM system to the 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 the ICTA, or an institution designated by the 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 six 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

In 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, at a consideration of EUR 358 million (excluding VAT). We signed the license agreement relating to 3G authorization on April 30, 2009. The license agreement has a term of 20 years.

The 3G license agreement has provisions that are generally similar to those contained in our license agreement relating to 2G. However, with respect to dispute resolution, while our 2G license provides for arbitration for the settlement of disputes, under the 3G license agreement, disputes arising between the parties shall ultimately be settled by the Council of State of the Republic of Turkey.

With the 3G License Agreement, as opposed to the 2G License Agreement, the Company assumed an obligation related to its electronic communications network investments, such as the obligation to provide at least 40% of its electronic communications investments from suppliers that have a Research and Development Center in Turkey and the obligation to provide at least 10% of its electronic communications investments from suppliers that are Small and Medium Size Enterprises (“SME”) established in Turkey.

According to the Authorization Regulation, breaches by operators resulting in the termination of the GSM concession agreement for any reason shall also result in the termination of the operator’s concession agreement signed for IMT-2000/UMTS service. Also, if the GSM concession agreement is not renewed at the end of its natural expiration, the ICTA may continue to allow the utilization of the needed infrastructure by IMT-2000/UMTS services on terms and conditions to be set by the ICTA itself.

The statutes, rules and regulations applicable to our activities and our 2G 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.

In addition to the foregoing, our indirectly owned subsidiary Astelit, majority-owned subsidiary Belarusian Telecom, and wholly owned subsidiary Kibris Telekom 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, Belarusian Telecom and Kibris Telekom 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 subsidiaries Global Tower, Superonline, Inteltek and Azerinteltek have licenses 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.

Access and Interconnection Regulation

The Access and Interconnection Regulation (the “Regulation”) became effective when it was issued by the ICTA on September 8, 2009 and abolished the Access and Interconnection Regulation which was published on May 23, 2003. The Regulation sets forth the rights and obligations of the operators relating to access and interconnection 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 the goal of improving the competitive environment and ensuring that users benefit from electronic communications 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 access to and use of 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 agreements and interconnection agreements can be executed with the mutual understanding of the parties. If the parties do not execute the access agreements within two months of the access request or if there is any disagreement in the access contract, the ICTA may intervene in the negotiations of the access contract upon request of one of the parties.

In accordance with Article 7 of the aforementioned Electronic Communications Law, the ICTA may determine the operators that have significant market power 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. 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 September 1, 2009 and numbered 27336, unless otherwise agreed, any decisions taken by the ICTA in the years 2005 and 2006 relating to market analysis were valid and effective until the end of calendar year 2009. Pursuant to its decision dated December 8, 2009, the ICTA determined Turkcell individually as an operator holding significant market power in the “Access to Mobile Networks and Call Originating Markets”. Finally, on December 8, 2009, the ICTA designated Turkcell, Vodafone and Avea as operators holding significant market power in the “Mobile Call Termination Market”.

Pursuant to its decision dated December 8, 2009, the ICTA designated Turkcell individually as an operator holding significant market power in the “Access to Mobile Networks and Call Originating Markets” and as operator holding significant market power in the “Mobile Call Termination Market”, along with Avea and Vodafone. 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 cost-based basis. Consequently, according to the Electronic Telecommunications Law, the ICTA may oblige such operators to provide access and to submit their reference offers for access and interconnection to the ICTA for review, and may require amendments to the offers. Operators are obliged to make the amendments requested by the ICTA in a prescribed manner and within a prescribed period. In addition, the operators are obliged to publish their reference offers for access and interconnection, which have been approved by the ICTA, and to provide access under the conditions specified in their reference offers and interconnection, which have been approved by the ICTA. On February 10, 2010 the ICTA published “Interconnection Tariffs” for Turk Telekom and GSM operators, which became effective on April 1, 2010. The Interconnection Tariffs have been approved as the tariffs to be determined in the reference access offers. According to the Interconnection Tariffs, the revised rate for Turkcell is 0.0313 (equivalent to $0.018 as of April 1, 2012).

The intervention of the ICTA in the prices that operators charge for reference access and interconnection services, along with our designation as an “operator holding significant market power” in certain markets, has had the effect of reducing the rates we are able to charge for interconnection services, which has had and will continue to have a material adverse effect on our revenues, business and results of operations.

Regulation on Co-Location and Facility Sharing.

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.

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.

The ICTA published a Communiqué concerning “Co Location and Facility Sharing” on December 2, 2010 (which abolished the regulation published on December 31, 2003). According to the new Communiqué, ICTA should determine operators to be co-location incumbent if operators do not enable co-location or there’s a dispute against competition or end-users. Similarly, ICTA could set tariffs if the tariffs for Co-Layout is not determined on a cost basis.

The Communiqué defines the criteria for operators who are incumbents for facility sharing and also states the items which must be considered for determining the Facility Sharing prices.

Subsequently, the provisions that regulate ICTA approval of the examination fee determined by the Co-Location and Facility Sharing incumbent have been removed, opening up the Co-Location and Facility Sharing process to negotiation. In addition, the Facility Sharing incumbent’s right to allocate a facility for its own network and investment plans has been reduced to 25% of the facility.

All access and interconnection contracts must be submitted to the ICTA within fifteen days of execution. Except where otherwise specified by ICTA, reference interconnection proposals will be renewed every year. The Company submitted its final reference access proposal regarding 2011 to the ICTA in the first quarter of 2011.

The ICTA published a Communiqué concerning “Cellular System Antenna Facility Design, Set Up and Sharing” on March 18, 2011 (which abolished the regulation published on April 16, 2008). The Communiqué

frames, antenna facilities design, set up and sharing to enable antenna usage by multiple operators. The emission points will not be determined by operators, therefore operators will have to work cellular planning together. Operators must share every antenna facility regardless of tower or building top distinction. Antenna facilities must be set up in certain capacity that at least one more operator can benefit. Finally, when antenna facility set up and sharing requests are evaluated, if the owner of the facility refuses the request, the rationale of refusal will be informed to the requesting operator. This way, negotiation between parties is supported and ICTA involvement is kept at minimum levels.

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 obligations on operators, who are obliged by the ICTA to provide access, 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 the 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 February 10, 2010 the ICTA published “Interconnection Tariffs” for Turk Telekom and GSM operators, which became effective on April 1, 2010. The Interconnection Tariffs have been approved as the tariffs to be determined in the reference access offers. According to the Interconnection Tariffs the revised rate for Turkcell will be TRY 0.0313 (approximately $0.018 as of April 1, 2012).

Regulation on Spectrum in the Electronic Communication Sector

ICTA proposed a strategy to Ministry of Transport, Maritime Affairs and Communications by a Board Decision dated July 27, 2011. Due to the fact that the decision-making authority of matters such as politics of authorization, start of service, authorization period, and the number of operators to provide service, lies with Ministry of Transport, Maritime Affairs and Communications, the ICTA has decided that:

Frequencies allocated for GSM services should also be used for 3G services (within the allocation time period)

Before the proposed GSM/3G usage, 2x8.6 MHz frequency (as 1 pack) in E-GSM band to be auctioned for GSM bidders who have less than 10MHz frequency in 900MHz band, 2 packs of 2x15MHz frequency each in 1800MHz band to be auctioned for GSM bidders who do not have any frequency in 1800MHz.

The second part of the Board Decision implies that only Avea will be eligible for the E-GSM auction and Vodafone & Turkcell for the 1800 auction.

Regulation on Consumer Rights in the Electronic Communication Sector

The ICTA published a “Regulation on Consumer Rights in the Electronic Communication Sector” on July 28, 2010 (which abolished the regulation published on December 22, 2004). This Regulation introduces some radical changes to the electronic communication sector. With this Regulation, the ICTA determined new procedures/changes regarding:

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the process and timing of churn steps;

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the obligation of the operators to keep subscribers informed of services, including, but not limited to:

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services with special contents;

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informing customers about amendments of the campaigns and tariffs;

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the consumer complaints solution mechanism;

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billing processes;

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the right to determine upper invoice limits;

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safe Internet;

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conditions we set for customers to suspend or limit services;

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visually-impaired subscribers;

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the definition of personal data; and

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spam messages and emails.

Pursuant to this authority, the ICTA may regulate, for example, the maximum and minimum limits on billing, spam messaging and the definition of personal data as it relates to directory services. For instance, the ICTA has published a draft regulation which obliges operators to give the option to consumers to put an upper limit on their bills. In addition, the ICTA may restrict the conditions under which certain mobile Internet and services are provided by third parties. Moreover, the ICTA published a Board Decision regarding Safe Internet on August 22, 2011, and the service has begun to be offered to subscribers free of charge. Operators have been obliged to provide Safe Internet Service to subscribers, who demand this service, as two separate profiles, the child profile and the family profile. The subscribers can change their profiles or opt out from the Safe Internet Service easily. For the child profile, the subscriber can only access Internet addresses on a white list, prepared by the Safe Internet Service Working Board. For the family profile, the subscriber cannot access Internet addresses on a black list, prepared by the Safe Internet Service Working Board. This Board consists of 11 members coordinated by the Ministry of Family and Social Policies. The Safe Internet Service Working Board is made up of 3 members from the Ministry of Family and Social Policies, 2 members from the Internet Committee, 2 members from the ICTA, 4 members, who are experts in psychology, pedagogy, sociology and other related branches, selected by the ICTA out of 8 candidates proposed by the Ministry of Family and Social Policies.

The ICTA’s regulation of these activities could have an adverse effect on our mobile telecommunications business and we may be fined if we do not comply. Furthermore, our compliance with the ICTA’s regulations may increase the costs of our doing business and could negatively impact our financial results.

Registered Email Service Regulation

Registered Electronic Mail Service will be started in July 2012. Mobile operators cannot provide registered electronic mail service; however, the service may create a new mobile business area with new bundled mobile products, which are able to service our subscribers.

Ukraine License Agreement

Astelit owns two GSM activity licenses, one for GSM-900 and one for DCS-1800. As at December 31, 2011, Astelit owned 24 GSM-900, DCS-1800, D-AMPS and microwave Radiorelay frequency licenses, which are regional and national. In addition to the GSM licenses, Astelit owns licenses for fixed local phone connections and wireless access using the D-AMPS standard. According to the licenses, Astelit should adhere to state sanitary regulations to ensure that the equipment used is not hazardous to the population and does not emit harmful electro-magnetic emissions. Licenses require Astelit to inform authorities of the start/end of operations within three months and changes in the incorporation address within 30 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 the case of a 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 violations and will set the deadline for recovery. If the deadline is not met, the licenses may be terminated.

Belarus License Agreement

Belarusian Telecom owns a license, issued on August 28, 2008, that is valid for 10 years. In addition, the license shall be extended for an additional ten years. The State Property Committee of the Republic of Belarus, as the Seller, has fulfilled its obligations stated in the Sale and Purchase Agreement and submitted the related official documents on December 18, 2009. According to the current legislation of the Republic of Belarus, a license extension is made upon the expiration of its validity period. Consequently, Belarusian Telecom will apply for such an extension to the Ministry of Communications and Informatization in August 2018. Under the terms of its license, Belarusian Telecom is required to gradually increase its geographical coverage through 2018. However, Belarusian Telecom’s period of execution with regard to coverage requirements has been 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, Avea and Fixed Telephony Service Operators 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 on 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 their relationship.

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.

Negotiations were held with Vodafone and Avea to provide electronic communication services within the scope of the IMT-2000/UMTS authorization; however, parties could not agree on the terms. The ICTA decision n°371 dated July 15, 2009 determined the fees to be applied for voice (as TRY 0.0655 (equivalent to $0.0369 as of April 1, 2012)) and video call (as TRY 0.0775 (equivalent to $0.0437 as of April 1, 2012)) termination within the scope of IMT-2000/UMTS services. Our company initiated a lawsuit before the Council of State to annul and suspend the entry into force of the said decision of ICTA. The Court overruled the suspension of execution request and the Company objected to this decision, but our objection was rejected. The lawsuit is still pending.

Turk Telekom

Pursuant to the interconnection agreement, 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, belongs 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 services, but excluding subscription fees. Turk

Telekom is required to pay this tax to the relevant municipality pursuant to the Municipality Revenues Act. We are liable in respect of any increase in the applicable rate of the communication tax. If a party fails to make payment when due, it must pay default interest, to be calculated based on the commercial advance interest rate of the CBRT for the period between when the payment is due and when the payment shall be made, and it shall also pay a 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 relevant articles of the Electronic Communications Law and subsequent Access and Interconnection Ordinance, the ICTA regulated both fixed and mobile termination rates. In previous years, the call termination rates have substantially decreased with the interventions of the ICTA.

Current interconnection rebates are based on the ICTA’s decision on the Interconnection Tariffs issued on February 10, 2010. According to this decision, as of April 1, 2010, Turk Telekom pays Turkcell TRY 0.0313 (approximately $0.0177 as of April 1, 2012) per minute and Turkcell pays Turk Telekom a net amount of TRY 0.0139 (approximately $0.0078 as of April 1, 2012) per minute for local traffic, a net amount of TRY 0.0171 (approximately $0.0096 as of April 1, 2012) per minute for metropolitan and a net amount of TRY 0.0224 (approximately $0.0126 as of April 1, 2012) for long-distance traffic routed from Turkcell to Turk Telekom.

On April 10, 2009, Turk Telekom consulted the ICTA in determining the SMS termination fee and the ICTA with its decision dated September 9, 2009 set the SMS termination fee at TRY 0.017 (approximately $0.0096 as of April 1, 2012) for SMS Services from Turk Telekom’s network per SMS, and TRY 0.017 (approximately $0.0096 as of April 1, 2012) for SMS services from our network to Turk Telekom’s network. Currently, for the SMS Services between Turk Telekom and Turkcell, the SMS termination fees that are set by the ICTA with its decision dated September 9, 2009 are being applied.

In accordance with the interconnection agreement between Turkcell and Turk Telekom, for international calls originating from the 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 directed Turk Telekom to pay Turkcell TRY 0.136 (approximately equivalent to $0.0767 as of April 1, 2012) for termination of international calls. This call termination rate for international calls has been reduced in subsequent years by the ICTA in parallel with the reduction of national call termination rates. As of April 1 2010, Turk Telekom pays Turkcell TRY 0.0313 (approximately $0.0177 as of April 1, 2012) per minute. 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 expert’s 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 will 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.

On August 22, 2011, Türk Telekom initiated a lawsuit on the grounds that on-net tariffs of the Company are under the interconnection fees notwithstanding ICTA’s decision implementing a requirement that our on-net tariffs be no less than the lowest interconnection rate applicable to other GSM operators. The lawsuit is still pending.

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 by agreeing upon 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

Current voice call termination rebates are based on the ICTA’s decision on the “Interconnection Tariffs” for Turk Telekom and GSM Operators, issued on February 10, 2010. Beginning April 1, 2010, Turkcell pays Vodafone TRY 0.0323 per minute (approximately $0.0182 as of April 1, 2012) and Vodafone pays Turkcell TRY 0.0313 per minute (approximately $0.0177 as of April 1, 2012) for voice call traffic. In addition, Turkcell shall pay Vodafone TRY 0.0775 (approximately $0.0437 as of April 1, 2012) per minute for video calls and vice versa.

The fees for SMS services were determined by the ICTA on October 27, 2009, upon Vodafone’s request. For the SMS services the ICTA determined that as of July 1, 2009, Vodafone is to pay Turkcell TRY 0.017 (approximately $0.0096 as of April 1, 2012) per SMS and Turkcell pays Vodafone the same amount per SMS.

Moreover, with respect to MMS Services, until November 1, 2010, Vodafone and Turkcell each paid the other a net amount of TRY 0.094 (approximately $0.053 as of April 1, 2012) per MMS, in accordance with the MMS Termination Protocol signed by both parties in 2008. Due to the amendment of the MMS Termination Protocol, beginning from November 1, 2010, Vodafone and Turkcell each pay the other a net amount of TRY 0.055 (approximately $0.031 as of April 1, 2012) per MMS. As of November 1, 2011, due to a new amendment of the MMS Termination Protocol, Vodafone and Turkcell each pay the other a net amount of TRY 0.045 (approximately $0.025 as of April 1, 2012) per MMS.

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

Miscellaneous

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.

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 Vodafone interconnection agreement should be modified. The Vodafone interconnection agreement will be modified in accordance with that determination, unless the determination is subject to a legal challenge. The Vodafone interconnection agreement cannot be assigned or transferred by the parties without the other party’s prior written consent.

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 will first be subject to friendly settlement efforts. In the event that the parties fail to reach an amicable settlement, they then must 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 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

Current voice call termination rates are based on the ICTA’s decision on the “Interconnection Tariffs” for Turk Telekom and GSM Operators issued on February 10, 2010. As of April 1, 2010, Turkcell pays Avea

TRY 0.0370 per minute (approximately $0.0209 as of April 1, 2012) and Avea pays Turkcell TRY 0.0313 per minute (approximately $0.0177 as of April 1, 2012) for call traffic. In addition, Turkcell and Avea each pay the other TRY 0.0775 (approximately $0.0437 as of April 1, 2012) per minute for video calls.

On January 16, 2009, the ICTA concluded the reconciliation process to be applied between Turkcell and Avea with regards to SMS termination fees. In accordance with this decision, Turkcell pays Avea TRY 0.0187 per SMS (approximately $0.0105 as of April 1, 2012) and Avea pays Turkcell TRY 0.0170 per SMS (approximately $0.0096 as of April 1, 2012).

Avea applied to the ICTA for MMS Services and the ICTA decided to enter into a MMS Termination Protocol that was signed with Avea on June 22, 2009. ICTA also determined the fees for MMS Services. Pursuant to the ICTA’s decision, Avea currently pays TRY 0.0340 (approximately $0.019 as of April 1, 2012) to Turkcell and Turkcell pays TRY 0.0374 (approximately $0.0211 as of April 1, 2012) per MMS.

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. The Supreme Court accepted our appeal request. However, the Court of First Instance accepted the lawsuit again. We appealed the decision. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” of this annual report on Form 20-F.

On November 4, 2010, Avea initiated two lawsuits on the grounds that on-net tariffs of the Company are under the interconnection fees, notwithstanding ICTA’s decision implementing the requirement that our on-net tariffs be no less than the lowest interconnection rate applicable to other GSM operators. During the judgment of one of the lawsuits, an expert report from a committee of experts was submitted to the court, which is in favor of the Company. Both lawsuits are still pending.

Miscellaneous

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

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 interconnection agreement should be modified. The interconnection agreement will be modified in accordance with that determination, unless the determination is subject to a legal challenge. The interconnection agreement cannot be assigned or transferred by the parties without the other party’s prior written consent.

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:

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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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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 principles and procedures of the methods of network operation and clearance.

Agreements Concluded with the Operators (Formerly) Authorized as Fixed Telecommunication Services Operator

Call Termination Agreements

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

International Transit Traffic Services Agreements

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 such rates will become applicable upon our approval.

Interconnection Agreements

Turkcell entered into interconnection agreements with six fixed telecommunication service operators. Interconnection rates are regulated by the ICTA. As of April 1, 2010, Turkcell pays fixed-line operators TRY 0.0320 per minute (approximately $0.0180 as of April 1, 2012) and fixed line operators pay Turkcell TRY 0.0313 per minute (approximately $0.0177 as of April 1, 2012) for voice call traffic.

SMS Termination Agreements

During 2011, Turkcell entered into SMS Termination Agreements with four Fixed Telephony Service Operators. In accordance with the ICTA regulations on SMS Termination Rates on Turkcell’s network, fixed Telephony Service Operators pay Turkcell TRY 0.0170 per SMS (approximately $0.0096 as of April 1, 2012).

MVNO Services

Negotiations to enter into agreements with MVNOs are pending. However, it should be noted that the ICTA, with its decision, which was taken upon application of one MVNO, decided that Turkcell has to send a draft MVNO agreement to the MVNO which applied to the ICTA. Furthermore, the ICTA, with the same decision, determined the call origination and termination fees for voice as TRY 0.0313 per minute (approximately $0.0177 as of April 1, 2012), for video call as TRY 0.0775 per minute (approximately $0.0437 as of April 1, 2012) and for SMS as TRY 0.0170 (approximately $0.0096 as of April 1, 2012) per SMS to be applied to the MVNO which submitted an application to the ICTA. Negotiations on the details of the draft agreement are still a matter of dispute between Turkcell and the MVNO candidate.

Directory Services

Turkcell entered into agreements relating to the provision of directory services with thirteen Directory Service Providers, which are licensed to provide directory services by the ICTA. The aforementioned agreements determine the principles and procedures related to the access of the companies to Turkcell database, the provision of directory 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

The Electronic Communications Law provides that current telecommunications legislation shall be revised and amended. The revision and amending processes are still ongoing. 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, on the condition that they are not contrary to the provisions of the Electronic Communications Law. Therefore, certain subjects, which are explained below, have not yet been regulated by the ICTA.

Regulations

The ICTA, in preparing to abolish the Regulation on Personal Information Processing and to publish a new Regulation on Data Secrecy in Electronic Communications Sector, has requested our Company’s opinions on the draft Regulation. The purpose of this regulation is to define the procedures and principles that the operators and legal entities/individuals which provide/receive services in the electronic communications sector may employ in an effort to process, store and protect personal information. For example, in contrast to the current regulation, the draft regulation would require the consumer’s approval prior to a direct marketing SMS being sent.

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, 2012:

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. TeliaSonera has signed an agreement with Kazakhtelecom to acquire 49% of the shares in GSM Kazakhstan LLP. The transaction was finalized during the first quarter of 2012.

(2)	Azertel is 51.3% owned by Fintur and the remaining 48.7% of the shares are privately-owned companies. Azercell is 100% owned by Azertel. Fintur’s effective ownership in Azercell is 51.3%.

(3)	Gurtel is 99.99% owned by Fintur and Geocell is 100% owned by Gurtel.

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

(5)	Turkcell Europe started its operations in March 2011 as an MVNO by providing mobile voice and data services in Germany.

(6)

We signed a share purchase agreement in regard to the acquisition of all of the shares of Global İletişim from its shareholders on August 12, 2011. The transfer of shares took place in November 2011. Global Iletişim merged with Turkcell Superonline on March 30, 2012. See Note 7 of our Consolidated Financial Statements in this Form 20-F for detailed information.

(7)

Fizy was established on April 6, 2011. The company’s main operations consist of music and video broadcasting, music subscription sales, production, advertisement, publicity and promotion services on the Internet. Fizy Medya Internet ve Bilisim Teknolojileri Limited Sirketi transferred its domain name, brand, customer database and software to Turktell on January 28, 2011 and Turktell has agreed to put these rights as capital to Fizy.

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.

The Group owns buildings in Istanbul Beyoglu (headquarters), Turkcell Head Quarters Plus (TMO+), Istanbul Maltepe, Istanbul Kartal, Istanbul Davutpasa, Ankara Cinnah, Ankara Sogutozu, Adana, Diyarbakir, Samsun, Izmir, Antalya, Trabzon, Bursa, Academy, Sisli, Van, Kayseri and Maltepe Plus.

In addition to the foregoing properties, we maintain two rented warehouses in Istanbul (Tuzla Omsan and Trio) and one in Çorlu.

Core Network Infrastructure

Our core network consists of standalone Home Location Registers (“HLR”), a combined Number Portability Switch Relay Function (“SRF”) and Number Portability Database and Signal Transfer Point (“STP”), Base Station Controllers (“BSC”), Radio Network Controllers (“RNC”). The Core Network common for 2G and 3G radio networks and carries voice over IP, with combined Mobile Switch Centers/Visitor Location Registers (“MSC/VLR”), Media Gateways (“MGW”), Charging Control Node (“CCN”). Our core packet switching network consists of SGSNs (Serving GPRS Support Node) and GGSNs (Gateway GPRS Support Node) providing GPRS/EDGE, and HSPA/HSPA+ (High Speed Packet Access) capability for mobile packet traffic.

We have switches in Istanbul, Ankara, Izmir, Adana, Antalya, Aydin, Balikesir, Bursa, Bodrum (Muğla), Corlu (Tekirdag), Corum, Denizli, Diyarbakir, Erzurum, Eskisehir, Gaziantep, Hatay, Kayseri, Kocaeli, Konya, Manisa, Mersin, Mugla, Sakarya, Samsun, Sivas, Tokat, Trabzon, Van and Zonguldak. We also have Remote BSC (“RBSC”) locations at Adiyaman, Afyon, Agri, Alanya (Antalya), Artvin, Elazig, Kars, Kutahya, Ordu, Rize, Sanliurfa and Sirnak.

In addition, we own switch buildings in different cities in Turkey, such as Mahmutbey (Istanbul), Aydin, Balikesir, Denizli, Mugla, Bodrum, Izmit, Konya and Erzurum. Switch buildings are where the network switching equipment such as (“MSCs”), (“MGW”), (“BSC”) and (“RNC”) is located.

Access Network Infrastructure

Our Access Network consists of BTS and Node Bs located on rooftops or towers. 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. In the same manner, Node Bs are radio signal transmitter and receiver equipment in each 3G cell, connected to and controlled by RNC in order to realize 3G and HSPA+ coverage for 3G /HSPA equipped mobile phones.

At the end of December 2011, we owned over 29,000 base stations and leased the land underlying such base stations.

In 2009, the ICTA resolved that operators may transfer the right of use of their towers to third parties. In accordance with this resolution, we transferred the right of use of 2,914 towers to Global Tower, including the towers that are determined as suitable for right of use transfer, to be used by Global Tower for the provision of its services to the wireless broadcast and communications industry in Turkey, 95 of which were removed from the network up until the end of 2011. As of December 31, 2011, Global Tower provided services to the industry with 2,506 masts and towers built by Global Tower and 2,819 towers transferred from Turkcell located throughout Turkey.

Transmission Network Infrastructure

Each BTS is connected to a BSC via our transmission network. Turkcell’s Mobile Backhaul utilizes various transport technologies to provide for an efficient, resilient and cost effective transmission network. Connectivity between sites is provided using leased lines carried over Synchronous Digital Hierarchy (“SDH”), Ethernet over Dense Wavelength Division Multiplexing (“DWDM”) and Radio links where appropriate. Cell sites with site connectivity are mostly served by point-to-point microwave radio links owned and managed by Turkcell, make up more than 90% of our network. Interconnections with other Public Land Mobile Networks (“PLMN”), Public Switched Telephone Networks (“PSTN”), Long Distance Telephony Services (“LDTS”) and small operator companies are realized through leased lines connections. We lease all our transmission lines through two different infrastructure providers, namely Turk Telekom or Turkcell Superonline, not only to increase the availability and reliability of our network but also to decrease operational expenditures through tariff competition.

4A. Unresolved Staff Comments

None.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis by our management of our 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

2011 was a challenging year for global markets. Global growth took a sharp turn for the worse over the summer of 2011. On the other hand, Turkey’s post-crisis recovery was strong: the Turkish economy grew uninterruptedly for nine quarters in a row. Turkey’s GDP grew by 8.5% in 2011, driven by domestic demand. Despite nine successive quarters of positive growth, the growth outlook for 2012 has become more challenging due to tighter credit conditions and signs of setbacks in the global economic outlook. However, in 2011 our revenues increased by 4.1% from TRY 9,003.6 million in 2010 to TRY 9,370.1 million, mainly due to 20.1% growth in Turkcell Turkey’s mobile Internet and services revenues, as well as a 32.3% higher contribution from our subsidiaries.

2012 is expected to be a year of slowing global growth with wide divergences between regions and countries. The global outlook is more uncertain than at any time since the 2008 global financial crisis. Market players expect overall global growth to slow from 4.2% in 2010 and about 3.0% in 2011 to 2.5% in 2012, a little below the long-term average. The Euro area is expected to fall back into recession and only modest growth is likely for the U.S. Emerging markets continue to be the key driving force for global economic growth. Peripheral sovereign debt crisis and the potential contagion risk to other EU countries, civil unrest and political instability in the MENA region, the inflation risk in emerging markets, the U.S. fiscal problem, risks of hard landing for the Chinese and Indian economies, rising oil prices due to geopolitical risks and EM funding concerns are the biggest threats to the global economy in 2012. On the other hand the announcement by the Federal Reserve that easy monetary policy will continue until at least the end of 2014 is positive for EM economies and the efforts made in solving the Eurozone crisis are promising.

The medium-term risks for the Turkish economy relate to the high current account deficit and deterioration in inflation expectations. Turkey’s economy has been running large external imbalances since late 2009.

Asymmetric growth drivers (i.e., too much domestic, and very little foreign demand) have caused a very swift widening in Turkey’s external imbalance. Despite recent moderation, the current account deficit continues to pose significant downside risks, more so against the backdrop of the deepening crisis in Europe. If Turkey’s strong growth is to be sustainable over the long term, high quality financing will be required. Turkey’s current account deficit totaled $77.1 billion in 2011, compared to $46.6 billion in 2010. This deficit amounted to 9.9% and 6.7% of Gross Domestic Product (“GDP”) in 2011 and 2010, respectively. In 2011, net foreign direct investment amounted to $13.4 billion, an increase of 77% compared to 2010. Net foreign direct investment inflows represented an amount equal to 17% of the current account deficit, compared to approximately 16% in 2010.

With respect to inflation, consumer prices accelerated to 10.5% in 2011, the highest year-end reading since 2003 and breaching the CBRT’s 5.5% year-end point target due to sharp TRY depreciation and the price and tax hikes (including on car sales, mobile phones, etc). Inflation is likely to remain high due to the lagged impact of currency weakness, unfavorable base effect, and recent electricity and natural gas price hikes. The latest CBRT expectation survey indicates that consumer inflation is expected to be 7.5% at the end of 2012, above the CBRT target of 5.2% for 2012.

In December 2010, the CBRT adopted an unorthodox policy mix with multiple macro targets and multiple policy tools. The bank’s primary objective is price stability, but the new framework also took into account financial stability, which meant simultaneously managing risks relating to growth, currency and external balances. CBRT deliberately triggered the TRY depreciation to halt the rapid widening of the current account deficit. However, over-depreciation of TRY threatened the inflation target and even put at risk confidence in Turkish assets. To ease the pressure on TRY and inflation, the CBRT hiked the overnight TRY lending rate in October 2011. In the near term, it is expected that TRY funding rates will remain high in order to put pressure on the currency depreciation and above-target inflation. However, it could be difficult to contain the depreciation in TRY and deterioration in inflation expectations by not hiking the policy rates.

Political risks have increased, especially with regard to Syria. Violence in neighboring Syria may lead to a civil war that could then quickly escalate into a broader sectarian conflict in the Arab world. In 2012, the preparation of a new constitution will likely be the main local political focus. However, growing attacks by terrorists could slow the process of making the new constitution. Clashes in the southeast, the dispute between Turkey and Cyprus over gas drilling, unrest near the southern border (Syria) and tension with Israel are the most important political risks in Turkey.

EM currencies have been depreciating throughout 2011 on the back of the global risk-aversion trend, especially since August 2011 when the U.S. sovereign rating was downgraded by S&P and the EU debt crisis intensified. TRY had significantly underperformed other EM currencies in 2011, driven partly by the CBRT monetary policy mix and current account deficit concerns. TRY has fallen about 22.2% against the USD in 2011, the worst performer among major EM currencies. The plunge forced the CBRT to reverse course and intervene in currency markets to support TRY, as well as lending to banks at higher rates to stem consumer demand. TRY might start to over-perform compared to other EM currencies with the recent actions of CBRT in 2012.

Taxation Issues in the 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 34.0 (equivalent to $19.2 as of April 1, 2012) and TRY 31.78 (equivalent to $17.93 as of April 1, 2012) in 2011 and 2010, respectively. As of January 1, 2012, the special communications tax on new subscriptions levied is TRY 37.0 (equivalent to $20.9 as of April 1, 2012). The tax has had a correlative negative impact on mobile usage.

Under 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.

VAT for roaming services was, until November 3, 2009, calculated solely on the mark-up amount on subscribers’ invoices for roaming services. Following the Ministry of Finance’s declaration of a change in its position regarding roaming charges, we began imposing VAT and the special communications tax on the entire amount of roaming charges, starting from November 3, 2009, to comply with this change in position.

Reverse charge VAT is calculated on the invoices issued by foreign GSM operators.

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, 2011, the license fee is TRY 13.20 (equivalent to $7.45 as of April 1, 2012). The license fee is paid to the government in equal installments, which is divided into the number of months remaining in the year. However, it is collected in 12 equal monthly installments. As of January 1, 2012, the license fee is TRY 14.56 (equivalent to $8.21 as of April 1, 2012).

The payment of the annual utilization fee to the government depends on whether a subscriber is postpaid or prepaid. For postpaid subscribers, the monthly utilization fee is TRY 1.1 (equivalent to $0.62 as of April 1, 2012), and is charged to subscribers monthly. For prepaid subscribers, the annual utilization fee is calculated by multiplying the number of registered prepaid subscribers at the previous year-end by the annual utilization fee and the calculated bulk annual utilization fee is paid by the GSM operators the following year on the last business day in February. We have decided to collect utilization fees from some of our prepaid subscribers starting from June 20, 2011.

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 rate on mobile phones (mobile phones are legally defined as “transmitter/receiver cellular phones”) was 20% prior to October 13, 2011, and the special consumption tax calculated in accordance with the 20% rate must not fall below TRY 40.00 (equivalent to $22.56 as of April 1, 2012) per cellular phone device (Temporary Article 6 of Special Consumption Tax Code).

The Special Consumption Tax rates were raised on some motor vehicles, mobile phones, alcoholic beverages and tobacco products by a Decision of the Board of Ministers, which was published on the Official Gazette on October 13, 2011. The SCT rate over cellular phones was increased from 20% to 25% and the minimum SCT amount to be calculated was increased to TRY 100 (equivalent to $56.4 as of April 1, 2012) (previously the minimum SCT amount was TRY 40 (equivalent to $22.56 as of April 1, 2012)) effective from October 13, 2011.

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

See Note 3 (Significant Accounting Policies) to our consolidated financial statements in this Form 20-F.

5.A Operating Results

Our audited consolidated financial statements as of December 31, 2011 and December 31, 2010 and for each of the years in the three-year period ended December 31, 2011 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 (the “2G License”) and a 20-year GSM license (the “3G License”). We were granted the 2G License in April 1998 upon payment of an upfront license fee of $500 million. On April 30, 2009, we signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and infrastructure. We acquired the A type license providing the widest frequency band for a consideration of EUR 358 million (excluding VAT). The 3G License is effective for 20 years starting from April 30, 2009. Pursuant to the agreement, we started to provide IMT 2000/UMTS services as of July 30, 2009.

Under our 2G License, we pay the Undersecretariat of the Treasury (the “Turkish Treasury”) a monthly treasury share equal to 15% of our gross revenue. Of such fee, 10% is paid to the Ministry of Transport, Maritime Affairs and Communications of Turkey (“Turkish Ministry”) for the universal services fund. Based on a law enacted on July 3, 2005 concerning the regulation of privatization, the gross revenue description used for the calculation of the treasury share and universal service fund was changed. According to such regulation, accrued interest charged for late collections, indirect 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. The Council of State, the highest administrative court, approved the agreement on March 10, 2006. The resulting definition of gross revenue for the treasury share has been effective since March 10, 2006.

We believe that the build-out of our network in Turkey is substantially completed. As of December 31, 2011, our network covered 100% of Turkish cities with a population of 1,000 or more and the majority of Turkey’s tourist areas and principal intercity highways. We currently meet the coverage requirements of our 2G license in all material respects.

In accordance with our 3G license agreement, we are required to cover 100% of the population within the borders of all metropolitan municipalities and within the borders of all cities and municipalities in three and six years, respectively. Moreover, we are required to cover 100% of the population in all settlement areas with a population higher than 5,000 and 1,000 in eight and ten years, respectively, following the date of the agreement. As of December 31, 2011, we had reached 88% population coverage (based on 3GPP TS 25.101 specifications for outdoor coverage).

Other than our 2G and 3G licenses, 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 ours. We also have interconnection agreements with Vodafone and Avea pursuant to which we have agreed, among other things, to pay interconnection fees to 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.

Our subscriber base has grown substantially since we began operations in 1994. At year-end 1994, we had 63,500 subscribers. By year-end 2011, that number had grown to 64.8 million.

According to the ICTA’s announcements, there were 65.3 million GSM lines in the Turkish GSM market as of December 31, 2011. In addition, the penetration rate in such market was 87% as of December 31, 2011. Despite the increasingly competitive environment, we sustained our leading market position with a market share of 53% for the year ended December 31, 2011, according to the ICTA’s announcements. We increased our postpaid subscriber base from 30% in 2010 to 34% in 2011 due to our focus on value. On the channel front, we made revisions to our existing subdealer network and the commission structure to increase the availability of the Turkcell brand. As of December 31, 2011, we had 22.9 million prepaid and 11.7 million postpaid subscribers in our Turkish GSM network. Despite the negative macroeconomic indicators in Turkey, we recorded the highest usage levels since 2001. Our average MoU in Turkey increased 19% to 213.8 minutes in 2011 from 179.1 minutes in 2010, as a result of our successful campaigns. Our average revenue per user in Turkey decreased to $11.9 in 2011 from $13.0 in 2010 mainly arising from the depreciation of the TRY against the USD. In TRY terms, ARPU slightly increased to TRY 19.8 in 2011 compared to TRY 19.5 in 2010. Despite the intensifying challenges in the macroeconomic, competitive and regulatory environment, we have increased our average revenue per user metric in Turkey mainly due to rising mobile Internet revenues and our postpaid subscriber base.

Our revenues are generated in large part from interconnection fees and retail tariffs. Regulatory decisions have had and may continue to have the effect of decreasing interconnection rates and imposing price caps on our retail tariffs. For a more detailed discussion of these factors, please see “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry” and “Item 5.D. Trend Information”.

gross subscribers acquired during the period. Churn refers to subscribers that are both voluntarily and involuntarily disconnected from our network. Our churn rate for operations in Turkey was 27.9% for the year ended December 31, 2011, compared to 33.9% for the year ended December 31, 2010. Our churn rate decreased 6 percentage points.

We have an allowance for doubtful receivables in our consolidated financial statements for non-payments and disconnections that amounted to $327.4 million and $376.8 million as of December 31, 2011 and 2010, respectively, which we believe is adequate. The main reason for the decrease in allowance for doubtful receivables in USD terms is the depreciation of the TRY against the USD. In TRY terms, allowance for doubtful receivables increased by 6.2%.

International and Other Domestic Operations

In addition to our businesses in Turkey, we have telecommunications operations in Ukraine, the Turkish Republic of Northern Cyprus, Belarus and Germany. We also operate in other countries through our associate, Fintur. 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. See “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry”.

In previous periods, disagreements existed between us and the other mobile communications operators regarding the revision of the 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 33 to our consolidated financial statements in this Form 20-F.

Operating Costs

Direct Cost of Revenues

Direct cost of revenues includes treasury shares, 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 and 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 and customers.

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,
	2011			2010			2009
(in $ millions)
Revenues		5,609.7			5,982.1			5,790.0
Direct Cost of Revenues		(3,528.9	)		(3,349.0	)		(3,097.1	)

Gross Profit		2,080.8			2,633.1			2,692.9
Administrative expenses		(246.5	)		(347.3	)		(273.1	)
Selling and Marketing expenses		(1,010.6	)		(1,085.8	)		(1,085.1	)
Other income/(expense)		(128.7	)		(49.5	)		(110.3	)

Results from operating activities		695.0			1,150.5			1,224.4
Finance costs		(289.7	)		(102.6	)		(187.5	)
Finance income		330.3			277.1			329.6

Net finance income/(costs)		40.6			174.5			142.1
Monetary Gain/(loss)		144.8			—			—
Share of profit of equity accounted investees		136.9			122.8			78.4

Profit before income taxes		1,017.3			1,447.8			1,444.9
Income tax expense		(292.2	)		(320.8	)		(340.1	)

Profit for the year		725.1			1,127.0			1,104.8
Attributable to:
Equity holders of the Company		751.7			1,170.2			1,094.0
Non-controlling interest		(26.6	)		(43.2	)		10.8
Profit for the year		725.1			1,127.0			1,104.8

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


	For the years ended December 31,
	2011			2010			2009
(in $ millions)
Statement of Operations Data (% of revenue)
Revenues
Communication fees		93.2			94.8			96.0
Commission fees on betting business		0.9			0.5			0.7
Other revenue		5.9			4.7			3.3
Total revenue		100.0			100.0			100.0
Direct cost of revenues		(62.9	)		(56.0	)		(53.5	)
Gross margin		37.1			44.0			46.5
Administrative expense		(4.4	)		(5.8	)		(4.7	)
Selling and marketing expenses		(18.0	)		(18.2	)		(18.7	)
Other operating income/(expense)		(2.3	)		(0.8	)		(1.9	)
Results from operating activities		12.4			19.2			21.1

Segment Overview

We have three reportable segments, as described below, which are based on the dominant source and nature of our risk and returns as well as our internal reporting structure. These strategic segments offer the same types of services, but they are managed separately because they operate in different geographical locations and are affected by different economic conditions.

We are comprised of the following main operating segments: Turkcell, Euroasia and Belarusian Telecom, all of which are GSM operators in their countries.

Other operations mainly include our companies operating in telecommunications and betting businesses and companies that provide Internet and broadband services, call center and value added services.


	Turkcell			Euroasia			Belarusian Telecom			Other			Total
	2011			2011			2011			2011			2011
(in $ million)
Total external revenues		4,805.5			364.5			47.9			391.8			5,609.7
Intersegment revenue		13.0			4.3			0.1			414.3			431.7
Reportable segment adjusted EBITDA		1,507.8			94.2			(12.2	)		190.9			1,780.7
Finance income		283.0			0.7			15.5			59.0			358.2
Finance cost		108.9			(56.3	)		(283.9	)		(160.0	)		(391.3	)
Monetary gain/(loss)		—			—			144.8			—			144.8
Depreciation and amortization		(485.8	)		(116.5	)		(224.5	)		(111.3	)		(938.1	)
Share of profit of equity accounted investees		—			—			—			136.9			136.9
Other material non-cash items:
Impairment on goodwill		—			—			53.0			—			53.0
Bad debt expense		28.4			0.4			1.0			1.6			31.4
Impairment on equity accounted investees		—			—			—			15.8			15.8


	Turkcell			Euroasia			Belarusian Telecom			Other			Total
	2010			2010			2010			2010			2010
(in $ million)
Total external revenues		5,294.1			334.0			48.9			305.1			5,982.1
Intersegment revenue		14.7			5.3			0.1			386.3			406.4
Reportable segment adjusted EBITDA		1,751.1			64.5			(32.6	)		213.6			1,996.6
Finance income		255.4			0.8			0.8			60.1			317.1
Finance cost		(34.6	)		(44.0	)		(28.5	)		(66.1	)		(173.2	)
Depreciation and amortization		(474.7	)		(120.4	)		(80.8	)		(92.1	)		(768.0	)
Share of profit of equity accounted investees		—			—			—			122.8			122.8
Other material non-cash items:
Impairment on goodwill		—			—			23.5			—			23.5
Bad debt expense		122.7			(1.3	)		0.4			4.5			126.3


	Turkcell			Euroasia			Belarusian Telecom			Other			Total
	2009			2009			2009			2009			2009
(in $ million)
Total external revenues		5,176.1			350.1			17.4			246.4			5,790.0
Intersegment revenue		22.8			1.0			0.1			304.1			328.0
Reportable segment adjusted EBITDA		1,819.3			20.2			(38.3	)		144.9			1,946.1
Finance income		304.3			2.1			1.4			75.8			383.6
Finance cost		(162.9	)		(54.9	)		(12.5	)		(33.0	)		(263.3	)
Depreciation and amortization		(396.3	)		(79.9	)		(52.7	)		(67.9	)		(596.8	)
Share of profit of equity accounted investees		—			—			—			78.4			78.4
Other material non-cash items:
Impairment on goodwill		—			—			61.8			—			61.8
Bad debt expense		65.5			4.9			0.5			4.5			75.4

Turkcell

2011 compared to 2010

Total revenues generated by Turkcell decreased 9.2%, to $4,818.5 million in 2011 from $5,308.8 million in 2010, mainly due to the 11.0% depreciation, on average, of the TRY against the USD. However, on a TRY basis, total revenues slightly increased 0.5% mainly due to growth in mobile Internet and services revenues and interconnect revenues due to increased incoming minutes which were offset by a decrease in outgoing voice revenues due to the negative impact of regulatory changes effective from April 1, 2010 and declining prices in the Turkish mobile market. For a more detailed discussion of the factors affecting our revenues, please See “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry” and “Item 5.D. Trend Information”.

Turkcell’s EBITDA deteriorated 13.9%, to $1,507.8 million in 2011 from $1,751.1 million in 2010. On a TRY basis, EBITDA deteriorated 6.2%, primarily due to an increase in the direct cost of revenues which was partially offset by a decrease in administrative expenses. The increase in the direct cost of revenues mainly resulted from an increase in interconnect costs arising from an increase in off-net airtime, together with higher fixed network costs and wages and salaries expenses.

Net finance income increased 77.5%, from $220.8 million in 2010 to $391.9 million in 2011. On a TRY basis, net finance income also increased 99.5% mainly due to an increase in interest income resulting primarily from increased interest income on time deposits due to an increase in the cash balance including time deposits with maturity of more than 3 months. Change in translation gain/(loss) due to the 22.2% depreciation of the TRY against the USD in 2011, as opposed to the 2.7% depreciation of the TRY against the USD in 2010, also has a positive impact on improvement of net finance income since Turkcell has a long position.

Depreciation expense increased 2.3% from $474.7 million in 2010 to $485.8 million in 2011. On a TRY basis, depreciation expense also increased by 13.6%.

2010 compared to 2009

Total revenues generated by Turkcell increased 2.1%, to $5,308.8 million in 2010 from $5,198.9 million in 2009, mainly due to the 2.9% appreciation, on average, of the TRY against the USD. However, on a TRY basis total revenues decreased 0.4%. We believe that this decrease was mainly a result of regulatory decisions that had the effect of decreasing interconnection rates and imposing price caps on our retail tariffs, which were partially offset by the growth in mobile Internet and service revenues as well as the increasing postpaid subscriber base. Due to such regulatory decisions, we have redesigned our tariffs and offers and revenue per minute has declined to TRY 0.11 in 2010 from TRY0.14 in 2009. For a more detailed discussion of these factors, please See “Item 4.B. Business Overview—Regulation of the Turkish Telecommunications Industry” and “Item 5.D. Trend Information”.

Turkcell’s EBITDA deteriorated 3.7%, to $1,751.1 million in 2010 from $1,819.3 million in 2009. On a TRY basis, EBITDA deteriorated 4.8%, primarily due to an increase in administrative expenses. Our increase in administrative expenses mainly resulted from an increase in bad debt expenses as a result of an increase in the postpaid subscriber base, together with higher wages and salaries. The increase in the direct cost of revenues had an impact on the deterioration of EBITDA, primarily resulting from an increase in fixed network costs and wages and salaries expenses and partially netted off by a decrease in interconnect costs due to a lowering of interconnect rates, despite the increase in off-net traffic.

Net finance income increased 56.2%, from $141.4 million in 2009 to $220.8 million in 2010. On a TRY basis, net finance income also increased 49.8% mainly due to a decrease in interest expense resulting from the absence of provisions related to litigation late payment interest expenses in 2010, partially offset with an increase in loan interest expense due to an increase in outstanding debt balance and a decrease in interest income arising from lower interest rates. Change in translation gain/(loss) due to the 2.7% depreciation of the TRY against the USD in 2010, as opposed to the 0.4% appreciation of the TRY against the USD in 2009, also has a positive impact on improvement of net finance income since Turkcell has a long position.

Depreciation expense increased 19.8% from $396.3 million in 2009 to $474.7 million in 2010. On a TRY basis, depreciation expense also increased 17.2%.

Euroasia

2011 compared to 2010

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, 2011, Astelit had established 9,482 base stations to ensure a rapid roll out of its infrastructure, which currently covers approximately 97.8% of the Ukrainian’s whole population. “life:)” was the first in the market to introduce EDGE and GPRS services, which provide the highest data transfer speed available in the Ukrainian 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 34,443 non-exclusive sales points throughout Ukraine, 433 life:) exclusive sales points and high brand recognition in the Ukrainian market, Astelit’s subscriber base increased 6.6% from 9.1 million at the end of December 31, 2010 to 9.7 million at the end of December 31, 2011. Euroasia’s segment revenue increased 8.7%, from $339.3 million in 2010 to $368.8 million in 2011. Euroasia’s segment revenue increased by 9.2% on an original currency basis mainly stemming from the growth in our subscriber base as well as growth in mobile Internet usage and roaming revenues.

Euroasia’s EBITDA increased 46.0% to reach $94.2 million in 2011 from $64.5 million in 2010. As a percentage of revenues, EBITDA increased 6.5 percentage points to 25.5% in 2011 from 19.0% in 2010. Improvement in EBITDA mainly resulted from an efficient approach to marketing and selling expenses, as well as other cost-control initiatives conducted by Euroasia which resulted in lower selling and marketing expenses both in nominal terms and as a percentage of revenues on an original currency basis.

Net finance cost increased 28.7%, from a $43.2 million loss in 2010 to a $55.6 million loss in 2011, mainly due to higher loan interest expenses and deterioration in foreign exchange gain/loss as a result of the 0.4% depreciation of the Ukrainian Hryvnia against the U.S. Dollar in 2011, as opposed to 0.3% appreciation of the local currency against the U.S. Dollar in 2010, since Euroasia has a short position.

2010 compared to 2009

Astelit’s subscriber base decreased 25.4% from 12.2 million at the end of December 31, 2009 to 9.1 million at the end of December 31, 2010, mainly due to the change in subscriber definition and churn in 2010, which was

designed to monitor value-adding subscribers and their behavior more closely. In 2010, Euroasia’s segment revenue decreased 3.4%, from $351.1 million in 2009 to $339.3 million in 2010, while revenue decreased 1.8% on an original currency basis, mainly due to closing of our unprofitable carrier business line and reductions in interconnect rates during the year.

Euroasia’s EBITDA increased 219.3% to reach $64.5 million in 2010 from $20.2 million in 2009. As a percentage of revenues, EBITDA increased 13.3 percentage points to 19.0% in 2010 from 5.8% in 2009, within the context of the turnaround strategy and effective cost control initiatives. The main drivers of the increase in EBITDA were tariff redesigns, resulting in a decrease in interconnection cost, and cost cutting measures, which resulted in lower direct cost of revenues and administrative expenses as a percentage of revenues.

Net finance cost decreased 18.2%, from a $52.8 million loss in 2009 to a $43.2 million loss in 2010, thanks to the absence of the foreign exchange losses incurred in 2009 as a result of the 3.7% depreciation of the Ukrainian Hryvnia against the U.S. Dollar in 2009, as opposed to a 0.3% appreciation of the local currency against the U.S. Dollar in 2010, since Euroasia has a short position that is partially offset with the increase in interest expense.

Belarusian Telecom

2011 compared to 2010

In 2011, Belarusian Telecom’s subscriber base grew 20%, reaching 1.8 million people, compared to 1.5 million in 2010, and as a result, Belarusian Telecom’s segment revenue increased on a constant U.S dollar basis. However, Belarusian Telecom’s segment revenues decreased 2.1% from $49.0 million in 2010 to $48.0 million in 2010 due to the 69.1% devaluation of Belarusian Ruble in 2011, on average.

Belarusian Telecom’s EBITDA improved 62.6% from a $32.6 million loss in 2010 to a $12.2 million loss in 2011. On an original currency basis, Belarusian Telecom’s EBITDA improved as well due to a decrease in direct cost of revenues, general administrative expenses and selling and marketing expenses as a percentage of revenues which resulted from a higher increase in revenues when compared with the increase in these operational costs.

Net finance cost increased 869.0% to a $268.4 million loss in 2011 from a $27.7 million loss in 2010, mainly due to deterioration in foreign exchange loss as a result of the devaluation of the Belarusian Ruble against the U.S. Dollar in 2011 by 178.3%, while the Belarusian Ruble only depreciated 4.8% in 2010.

As at December 31, 2011, an impairment test was performed for Belarusian Telecom and an after-tax impairment in the amount of $206.0 million was calculated for the cash-generating unit, mainly due to adverse performance against previous plans resulting from the deteriorated economic environment in Belarus since the second quarter of 2011, and due to the increase in the carrying amount of Belarus operations resulting from inflation accounting, as Belarus was recognized as being a hyperinflationary economy within the context of IAS 29 “Financial Reporting in Hyperinflationary Economies” (“IAS 29”), as per the decision taken in the fourth quarter of 2011. The aggregate carrying amount of goodwill arising from the acquisition of Belarusian Telecom was totally impaired by $53.0 million and is included in other expense. The remaining impairment amounting to $169.3 million was allocated to the fixed assets of the cash-generating unit on a pro-rata basis based on the carrying amount of each asset in the cash-generating unit and is included in depreciation expense. The tax effect of the long-lived asset impairment of $16.3 million is included in deferred taxation benefit.

2010 compared to 2009

In 2010, Belarusian Telecom’s subscriber base grew 25.0%, reaching 1.5 million people, compared to 1.2 million in 2009. As a result, Belarusian Telecom’s segment revenue increased 180.0% in 2010, reaching $49.0 million, from $17.5 million in 2009.

Belarusian Telecom’s EBITDA improved 14.9% from a $38.3 million loss in 2009 to a $32.6 million loss in 2010. The improvement in EBITDA resulted from the higher amount of revenue when compared to the increase in the direct cost of revenues, selling and marketing and general administrative expenses. The increase in direct cost of revenues mainly resulted from the increase in interconnection costs, handset costs given as part of loyalty campaigns and fixed network expenses, on an original currency basis.

Net finance cost increased 149.5% to a $27.7 million loss in 2010 from an $11.1 million loss in 2009, mainly as a result of higher interest expenses due to a larger amount of loans and borrowings.

As at December 31, 2010 and 2009, we had impaired goodwill resulting from the acquisition of Belerusian Telecom by $23.5 million and $61.8 million, respectively, following adverse movements in the discount and growth rates, as well as an adverse performance against previous plans. We fully allocate the impairment loss to goodwill and include it in other expenses.

Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010

We had 34.5 million GSM subscribers in Turkey, including 22.9 million prepaid subscribers, as of December 31, 2011, compared to 33.5 million GSM subscribers in Turkey, with 23.3 million prepaid subscribers, as of December 31, 2010. During 2011, we recorded positive net additions of 1.1 million Turkish GSM subscribers.

In Ukraine, we had 9.7 million and 9.1 million subscribers as of December 31, 2011 and 2010, respectively. During 2011, we gained approximately 0.6 million new Ukrainian GSM subscribers. This was primarily due to the positive returns on the regional growth strategy aimed at new acquisitions and expansion of the subscriber base.

Revenues

Total revenues for the year ended December 31, 2011 decreased 6.2% to $5,609.7 million, from $5,982.1 million in 2010, mainly due to the 11.0% depreciation, on average, of the TRY against the USD. On a TRY basis, our revenues increased 4.1% compared to 2010, mainly due to 20.1% growth in Turkcell’s mobile Internet and services revenues, as well as 32.3% higher contribution from our subsidiaries, particularly through Turkcell Superonline and Astelit. Additionally, in 2011, our interconnect revenues increased significantly, mainly due to the increase in incoming airtime, which led to an improvement in the percentage of interconnection revenues in our revenues, whereas our outgoing revenues decreased due to the negative impact of regulatory changes effective from April 1, 2010, and declining prices in the Turkish mobile market.

Revenues from communication fees for the year ended December 31, 2011 decreased 7.8% to $5,225.4 million, from $5,670.2 million in 2010, mainly due to the 11.0% depreciation, on average, of the TRY against the USD. However, our revenues from communication fees increased 2.2% on a TRY basis due to the growth in mobile Internet and service revenues together with the increase in interconnect revenues due to the increase in incoming airtime partially netted off with the decrease in outgoing revenues. Communication fees consist of revenues from postpaid and prepaid subscribers, interconnect revenues and roaming revenues. In Turkey, postpaid revenue increased whereas prepaid revenue decreased compared to 2010. Although the total number of postpaid subscribers is significantly lower than the total number of prepaid subscribers, the contribution, in absolute terms, of postpaid revenues to total revenue growth is higher than the deterioration in prepaid revenues in Turkey. This is mainly due to higher average revenue per postpaid subscriber. Postpaid subscriber usage is generally higher than prepaid subscriber. In Turkey, during 2011, we maintained our focus on the postpaid segment, with newly launched campaigns and offers, increased data lines, increased penetration of smartphones and promotions to switch customers from the prepaid to the postpaid segment. We focus on postpaid subscribers because there is, in general, a higher average revenue per postpaid subscriber and a lower churn rate. In 2011, postpaid average revenue per user was $23.1 whereas prepaid average revenue per user was $6.6. These figures

indicate that postpaid average revenue per user is approximately 3.5 times the prepaid average revenue per user. Therefore, the increase in the number of postpaid subscribers has a positive effect on blended average revenue per user on a constant U.S. dollar basis.

Commission revenues from our betting business increased to $51.4 million for the year ended December 31, 2011, from $31.2 million for the year ended December 31, 2010. On a TRY basis, commission revenues increased 85.2%. This increase was primarily due to the increase in betting turnover and the positive effect of betting operations started in Azerbaijan.

Monthly fixed fees revenue decreased 16.4% to $63.0 million for the year ended December 31, 2011, compared to $75.4 million for the year ended December 31, 2010. On a TRY basis, monthly fixed fees revenue decreased 7.9% mainly due to the increased usage of packages which do not include monthly fixed fees.

Direct cost of revenues

Direct cost of revenues, including depreciation and amortization, increased 5.4% to $3,528.9 million in 2011 from $3,349.0 million for the year ended December 31, 2010. On a TRY basis, direct cost of revenues increased 18.2% compared to 2010, due to an increase in depreciation and amortization expenses mainly resulting from the impact of inflation accounting in Belarus and the impairment impact recognized for Belarusian operations together with an increase in interconnect costs and network related expenses.

Treasury shares and universal funds paid to the Turkish Treasury and Ministry of Transport, Maritime Affairs and Communications (“Turkish Ministry”) decreased 6.6%, from $826.7 million for the year ended December 31, 2010 to $772.4 million in 2011, primarily due to the 11.0% depreciation, on average, of the TRY against the USD; however, they increased 3.6% on a TRY basis parallel to increases in revenues and therefore remained almost the same as a percentage of revenues.

Depreciation and amortization charges increased 22.0%, from $757.4 million for the year ended December 31, 2010 to $924.4 million in 2011, while on a TRY basis depreciation and amortization charges increased 39.8%, mainly due to the impact of inflation accounting in Belarus and the impairment impact recognized for Belarusian operations together with impact of the fixed asset useful life revision. The amortization expense for our GSM license and other telecommunication operating licenses was $66.0 million and $70.8 million for the years ended December 31, 2011 and 2010, respectively.

Interconnection and termination costs increased 9.8% to $631.7 million in 2011 from $575.2 million for the year ended December 31, 2010. In addition, they increased 22.4% on a TRY basis due to a significant increase in off-net traffic.

Transmission costs, site costs and maintenance costs decreased approximately 18.4%, from $181.4 million for the year ended December 31, 2010 to $148.0 million in 2011. On a TRY basis, these costs decreased 9.0%, resulting from the significant decrease in the average unit rent of leased lines. Furthermore, uncapitalizable radio costs and expenses increased 6.1%, from $329.6 million for the year ended December 31, 2010 to $349.8 million in 2011. In addition, radio costs increased 18.7% on a TRY basis due to the increase in the number of radio base stations.

Wages, salaries and personnel expenses for technical personnel increased 4.2% to $275.8 million in 2011 from $264.7 million for the year ended December 31, 2010. They increased 15.7% on a TRY basis due to the increase in the number of employees and a periodic increase in wages and salaries.

Roaming expenses decreased 20.8% to $47.9 million in 2011, from $60.5 million for the year ended December 31, 2010. On a TRY basis they decreased 11.6% due to a decrease in GSM roaming tariffs between international operators and Turkcell, partially netted off by an increase in roaming durations.

Billing costs increased 2.3% to $54.5 million in 2011 from $53.3 million for the year ended December 31, 2010. On a TRY basis they increased 13.0%, primarily due to an increase in the number of postpaid subscribers.

As a percentage of revenues, direct cost of revenues increased 6.9 percentage points to 62.9% in 2011, from 56.0% in 2010, mainly due to increases in depreciation and amortization expenses 3.8 pp. interconnection expenses 1.6 pp wages and salaries 0.5 pp network related expenses 0.3 pp and other items 0.7 pp as a percentage of revenues.

Gross profit margin decreased 6.9 percentage points to 37.1% in 2011 from 44.0% in 2010.

Administrative expenses

General and administrative expenses decreased 29.0%, to $246.5 million in 2011 from $347.3 million in 2010. On a TRY basis, these expenses decreased 21.3%, mainly due to decrease in bad debt expenses due to a change in bad debt policy and improved collection performance for the receivables from last year and earlier, which partially set off increased wages and salary expenses resulting from periodic increases in such figures and a higher number of personnel. As a percentage of revenues, general and administrative expenses decreased to 4.4% for the year ended December 31, 2011, from 5.8% in 2010.

Wages, salaries and personnel expenses for non-technical and non-marketing employees decreased 2.7%, to $98.1 million in 2011 from $100.8 million for the year ended December 31, 2010. On a TRY basis, they increased 8.6%, primarily due to periodic increases in wages and salaries and an increase in the number of personnel.

Bad debt expenses decreased 75.1% to $31.4 million in 2011 from $126.3 million for the year ended December 31, 2010. On a TRY basis, they decreased 72.9%, mainly due to a change in bad debt policy and improved collection performance for the receivables from last year and prior years. We provided an allowance of $327.4 million and $376.8 million for doubtful receivables for the years ended December 31, 2011 and 2010, respectively, depending on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection trends and general economic conditions.

Other expenses, including collection and consulting expenses, decreased 2.7% to $117.0 million in 2011 from $120.2 million for the year ended December 31, 2010. On a TRY basis, they increased 7.7% due to the increase in consultancy expenses.

Selling and marketing expenses

Selling and marketing expenses decreased 6.9% to $1,010.6 million in 2011 from $1,085.8 million for the year ended December 31, 2010. However, on a TRY basis, they increased 3.1%, primarily due to higher selling and marketing expenses together with higher wages and salary expenses partially netted off with a decrease in frequency usage fees paid for prepaid subscribers. As a percentage of revenues, selling and marketing expenses decreased from 18.2% for the year ended December 31, 2010 to 18.0% for the year ended December 31, 2011.

Selling expenses, which consist of distributor support, dealer support, and other selling expenses, decreased 1.1%, to $415.6 million for 2011 from $420.3 million for 2010. On a TRY basis, selling expenses increased 9.9%, mainly due to higher dealer support expenses in 2011 resulting from increase in postpaid subscriber acquisitions.

Total marketing expenses, which consist of advertising, market research, sponsorships expenses and customer relations expenses, increased 4.9%, to $277.6 million in 2011 from $264.6 million for the year ended December 31, 2010. On a TRY basis, they increased 16.3%, mainly due to an increase in the volume of advertisements in 2011 compared to 2010.

Prepaid subscribers’ frequency usage fee expenses decreased 49.8%, to $111.0 million in 2011 from $221.1 million for the year ended December 31, 2010. On a TRY basis, these expenses decreased 46.0%, mainly as a result of the positive impact of the frequency fee charged to some of the prepaid subscribers starting from June 2011. Decline in the prepaid subscriber base also has an impact on the decrease in prepaid subscribers’ frequency usage fee expenses which is partially netted off with the increase in frequency usage fee tariff.

Wages, salaries and personnel expenses for selling and marketing employees increased 4.3%, to $141.7 million in 2011 from $135.8 million for the year ended December 31, 2010. On a TRY basis, these expenses increased 15.8%, due to an increase in the number of employees and a periodic increase in wages and salaries.

Other operating income/(expense)

Other operating expense increased to $128.7 million in 2011 from $49.5 million in 2010, mainly due to impairment charges recognized on our investments together with an increase in legal penalties incurred in 2011.

Other expenses for the year ended December 31, 2011 are mainly comprised of: an impairment charge recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to $53.0 million, and impairments recognized on our investments in Atel and Aks TV amounting to $15.8 million and $5.7 million, respectively. In addition, provisions for Special Communication Tax (“SCT”) on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007, as explained in Note 33 (Commitments and Contingencies, Legal Proceedings) to our consolidated financial statements in this Form 20-F, amounting to $31.2 million, a penalty regarding the fine applied for tariffs above upper limits amounting to $23.5 million, a penalty imposed as a result of an investigation into breaching confidentiality of personal data, and relevant legislation, of $5.4 million, a penalty on the compatibility of our practices regarding the subscription annulment procedures amounting to $5.0 million, a penalty imposed as a result of the investigation initiated by the ICTA upon the complaint of a subscriber regarding our overcharging of data tariffs and international roaming campaigns amounting to $0.7 million and $2.7 million, respectively, and a penalty regarding number portability amounting to $1.2 million, are also recorded as other expense.

Results from operating activities

Results from operating activities decreased to $695.0 million in 2011 from $1,150.5 million for the year ended December 31, 2010. As a percentage of revenues, results from operating activities decreased from 19.2% in 2010 to 12.4% in 2011 mainly due to an increase in the direct cost of revenues and other operating income/(expense) as a percentage of revenues.

Net financial income/(costs)

Net financial income decreased 76.7% in 2011, to $40.6 million from $174.5 million in 2010, due to an increase in financial expenses from $102.6 million in 2010 to $289.7 million in 2011, mainly arising from a higher translation loss, which was partially netted off by an increase in finance income from $277.1 million in 2010 to $330.3 million in 2011. On a TRY basis, net financial income decreased 93.4%.

Finance income increased 19.2%, to $330.3 million in 2011 from $277.1 million for the year ended December 31, 2010. On a TRY basis, it increased 30.7% due to increase in interest income on time deposits resulting from the increase in cash balance including time deposits with maturity of more than 3 months.

Finance cost increased 182.4%, to $289.7 million in 2011 from $102.6 million for the year ended December 31, 2010. On a TRY basis, it increased 244.4%, mainly due to higher translation losses, which increased from a $13.8 million loss in 2010 to a $202.7 million loss in 2011. Foreign exchange losses in 2011 and 2010 are mainly attributable to our net foreign exchange position.

Monetary gain(/loss)

We recognize a monetary gain/(loss) amounting to $144.8 million, which arose from our Belarusian operations. The economic environment in Belarus deteriorated significantly starting from the second quarter of 2011. The cumulative inflation in the last three years exceeded 100%. As a result, Belarus was considered a hyperinflationary economy. In consequence, the accounting rules for “Reporting in hyperinflationary economies” were applied to our Belarusian operations for the year ending December 31, 2011. With respect to this, monetary gain is recorded as a result of the effect of general inflation and calculated as the difference resulting from the restatement of non-monetary assets, shareholders’ equity and statement of income items.

Share of profit of equity accounted investees

Our share of profit of equity accounted investees increased 11.5% in 2011, to $136.9 million from $122.8 million for 2010, mainly due to a higher net income contribution from Fintur, particularly from its operations in Kazakhstan.

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 selling and marketing expenses in our consolidated financial statements. This consolidation elimination had a negative impact on the share of profit of the equity accounted investees line.

Income tax expense

Income tax expense decreased 8.9% in 2011, to $292.2 million from $320.8 million in 2010, mainly due to the 11.0% depreciation, on average, of the TRY against the USD. On a TRY basis, income tax expense increased 0.3%.

The effective tax rate was 28.7% and 22.2% for the years ended December 31, 2011 and 2010, respectively.

Our domestic tax rate is 20%. Differences between the effective tax rate and our domestic tax rate include, but are not limited to, the effect of allowance for deferred tax assets, tax rates in foreign jurisdictions, tax exempt income and non-deductible expenses.

Non-controlling interests

Non-controlling interests in the net profit of our consolidated subsidiaries is classified separately in the consolidated financial statements of operations under “non-controlling interests”. Non-controlling interests decreased to a $26.6 million gain for the year ended December 31, 2011, compared to a $43.2 million gain for 2010.

Non-controlling interest gain from Euroasia’s net loss amounting to $75.8 million in 2011 is $34.1 million for the year ended December 31, 2011 whereas non-controlling interest gain from Euroasia’s net loss amounting to $101.0 million in 2010 is $45.4 million. Besides, non-controlling interest gain recognized from our investment in Azerinteltek decreased to $1.6 million in 2011 from $2.7 million in 2010 and we recognized non-controlling interest gain from Fizy amounting to $0.5 million for the first time in 2011. In addition, net profit generated by Inteltek for the years ended December 31, 2011 and 2010 resulted in a loss from non-controlling interests of approximately $9.6 million and $4.9 million, respectively.

Profit for the year attributable to equity holders of the Company

Profit for the year attributable to equity holders of the Company decreased from $1,170.2 million in 2010 to $751.7 million in 2011. Profit for the period attributable to equity holders of the Company also decreased on a TRY basis by 33.2%. This was mostly due to the increase in direct cost of revenues which primarily arose from increase in depreciation expenses, together with deterioration in net finance income and other operating income/expense partially netted off with the positive impact of monetary gain/loss.

Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009

We had 33.5 million GSM subscribers in Turkey, including 23.3 million prepaid subscribers, as of December 31, 2010, compared to 35.4 million GSM subscribers in Turkey, with 26.0 million prepaid subscribers, as of December 31, 2009. During 2010, we lost approximately 1.9 million Turkish GSM subscribers.

In Ukraine, we had 9.1 million and 12.2 million subscribers as of December 31, 2010 and 2009, respectively. During 2010, we lost approximately 3.1 million new Ukrainian GSM subscribers. This was primarily due to the change in subscriber definition and churn in 2010, which was designed to monitor value-adding subscribers and their behavior more closely.

Revenues

Total revenues for the year ended December 31, 2010 increased 3.3% to reach $5,982.1 million, from $5,790.0 million in 2009, mainly due to the 2.9% appreciation, on average, of the TRY against the USD. On a TRY basis, our revenues increased 0.8% compared to 2009, mainly due to an increase in Turkcell’s mobile Internet and services revenues, as well as a higher contribution from our subsidiaries, particularly through Turkcell Superonline, despite regulatory decisions relating to a decrease in interconnection rates and a price cap. In 2010, our interconnect revenues decreased significantly, mainly due to cuts in interconnect rates, which led to a decline in the percentage of interconnection revenues in our revenues.

Revenues from communication fees for the year ended December 31, 2010 increased 2% to $5,670.2 million, from $5,557.3 million in 2009, mainly due to the 2.9% appreciation, on average, of the TRY against the USD. However, our revenues from communication fees decreased 0.5% on a TRY basis due to regulatory decisions leading to lower interconnect tariffs and a price cap which were partially offset by the growth in mobile Internet and service revenues together with the increasing postpaid subscriber base. Communication fees consist of revenues from postpaid and prepaid subscribers, interconnect revenues and roaming revenues. Although the total number of postpaid subscribers is significantly lower than the total number of prepaid subscribers, the contribution, in absolute terms, of postpaid revenues to total revenue growth is higher than the growth in prepaid revenues in Turkey. This is mainly due to higher average revenue per postpaid subscriber. Postpaid subscribers’ usage is generally higher than prepaid subscribers’. In Turkey, during 2010, we maintained our focus on the postpaid segment, with newly launched campaigns and offers, increased data lines and promotions to switch customers from the prepaid to postpaid segment. We focus on postpaid subscribers because there is, in general, a higher average revenue per postpaid subscriber. In 2010, postpaid average revenue per user was $26.6 whereas prepaid average revenue per user was $7.6. These figures indicate that postpaid average revenue per user is approximately 3.5 times the prepaid average revenue per user. Therefore, the increase in the number of postpaid subscribers has a positive effect on blended average revenue per user.

Commission revenues from our betting business decreased to $31.2 million for the year ended December 31, 2010, from $42.7 million for the year ended December 31, 2009. On a TRY basis, commission revenues decreased 29.3%. This decrease was primarily due to the lower commission rate we received as the head agent of the fixed-odds betting games through 2010 (1.4% of gross takings compared to our previous agreement, which ended in March 2009, of 7% of gross takings and a 4.3% commission).

Monthly fixed fees revenue increased 77.4% to reach $75.4 million for the year ended December 31, 2010, compared to $42.5 million for the year ended December 31, 2009, mainly due to an increase in our postpaid subscriber base and an increase in our monthly fixed fee per subscriber. On a TRY basis, monthly fixed fees revenue increased 72.0%.

Direct cost of revenues

Direct cost of revenues, including depreciation and amortization, increased 8.1% to $3,349.0 million in 2010 from $3,097.1 million for the year ended December 31, 2009. On a TRY basis, direct cost of revenues increased 5.7% compared to 2009, mainly due to an increase in depreciation and amortization expenses arising from certain

fixed asset write-offs, the depreciation impact on asset retirement obligation and an increase in network related expenses, which were partially offset by lower interconnect costs as a result of the significant decrease in interconnect rates, despite the increase in off-net airtime.

Treasury shares and universal funds paid to the Turkish Treasury and Turkish Ministry increased 2.1%, from $809.8 million for the year ended December 31, 2009 to $826.7 million in 2010, primarily due to the 2.9% appreciation, on average, of the TRY against the USD; however they decreased 0.5% on a TRY basis and remained almost the same as a percentage of revenues.

Depreciation and amortization charges increased 28.2%, from $590.7 million for the year ended December 31, 2009 to $757.4 million in 2010, while on a TRY basis depreciation and amortization charges increased 25.4%, mainly due to fixed asset write-offs related to our obsolete equipment owned by Turkcell and other group companies and the depreciation impact on asset retirement obligation. The amortization expense for our GSM license and other telecommunication operating licenses was $70.8 million and $50.4 million for the years ended December 31, 2010 and 2009, respectively.

Interconnection and termination costs decreased 6.4% to $575.2 million in 2010 from $614.7 million for the year ended December 31, 2009. In addition, they decreased 8.0% on a TRY basis due to significant decreases in interconnection rates, despite the increase in off-net traffic.

Transmission costs, site costs and maintenance costs decreased approximately 7.3%, from $195.6 million for the year ended December 31, 2009 to $181.4 million in 2010. On a TRY basis, these costs decreased 9.5%, resulting from the significant decrease in the average unit rent of leased lines. Furthermore, uncapitalizable radio costs and expenses increased 18.1%, from $279.2 million for the year ended December 31, 2009 to $329.6 million in 2010. In addition, radio costs increased 15.2% on a TRY basis due to higher electricity prices and the increase in the number of radio base stations.

Wages, salaries and personnel expenses for technical personnel increased 15.7% to $264.7 million in 2010 from $228.7 million for the year ended December 31, 2009. They increased 12.9% on a TRY basis due to the increase in the number of employees and a periodic increase in wages and salaries.

Roaming expenses decreased 16.8% to $60.5 million in 2010, from $72.7 million for the year ended December 31, 2009. On a TRY basis they decreased 18.7% due to a decrease in tariffs between international operators and Turkcell, partially netted off by an increase in roaming durations.

Billing costs increased 18.2% to $53.3 million in 2010 from $45.1 million for the year ended December 31, 2009. On a TRY basis they increased 15.4%, primarily due to an increase in the number of postpaid subscribers and higher postage fees.

As a percentage of revenues, direct cost of revenues increased 2.5 percentage points to 56% in 2010, from 53.5% in 2009, mainly due to increases in network related expenses (0.4 pp), depreciation and amortization expenses (2.5 pp) and other items (0.6 pp) as a percentage of revenues, partially netted off by a decrease in interconnect costs (1.0 pp).

Gross profit margin decreased 2.5 percentage points to 44.0% in 2010 from 46.5% in 2009.

Administrative expenses

General and administrative expenses increased 27.2%, to $347.3 million in 2010 from $273.1 million in 2009. On a TRY basis, these expenses increased 23.9%, mainly due to a higher amount of bad debt expenses arising from the increase in our postpaid subscriber base and higher wages and salaries resulting from periodic increases in such figures and a higher number of personnel. As a percentage of revenues, general and administrative expenses increased to 5.8% for the year ended December 31, 2010, from 4.7% in 2009.

Wages, salaries and personnel expenses for non-technical and non-marketing employees increased 22.0%, to $100.8 million in 2010 from $82.6 million for the year ended December 31, 2009. On a TRY basis, they increased 18.6%, primarily due to periodic increase in wages and salaries and an increase in the number of personnel.

Bad debt expenses increased 67.5% to $126.3 million in 2010 from $75.4 million for the year ended December 31, 2009. On a TRY basis, they increased 63.4% mainly due to an increase in the postpaid subscriber base. We provided an allowance of $376.8 million and $268.2 million for doubtful receivables for the years ended December 31, 2010 and 2009, respectively, depending on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection trends and general economic conditions.

Other expenses, including collection and consulting expenses, increased 4.4% to $120.2 million in 2010 from $115.1 million for the year ended December 31, 2009. On a TRY basis, they increased 2.0% due to the increase in consultancy expenses.

Selling and marketing expenses

Selling and marketing expenses increased 0.1%, to $1,085.8 million in 2010 from $1,085.1 million for the year ended December 31, 2009. However, on a TRY basis, they decreased 2.5% primarily due to lower selling expenses and frequency usage fees paid for prepaid subscribers, which were partially offset by higher wages and salaries. As a percentage of revenues, selling and marketing expenses decreased from 18.7% for the year ended December 31, 2009 to 18.2% for the year ended December 31, 2010.

Selling expenses, which consist of distributor support, dealer support, and other selling expenses, decreased 7.0%, to $420.3 million for 2010 from $451.7 million for 2009. On a TRY basis, selling expenses decreased 9.3%, mainly due to lower distributor and dealer support expenses in 2010 resulting from fewer subscriber acquisitions.

Total marketing expenses, which consist of advertising, market research, sponsorships expenses and customer relations expenses increased 3.5%, to $264.6 million in 2010 from $255.6 million for the year ended December 31, 2009. On a TRY basis, they increased 0.8% mainly due to an increase in the volume of advertisements in 2010 compared to 2009, partially netted off by a decrease in sponsorship expenses.

Prepaid subscribers’ frequency usage fee expenses decreased 7.9%, to $221.1 million in 2010 from $240.1 million for the year ended December 31, 2009. On a TRY basis, these expenses decreased 10.3% as a result of the decline in the prepaid subscriber base, which was partially netted off by an increase in the frequency usage fee per subscriber.

Wages, salaries and personnel expenses for selling and marketing employees increased 34.3%, to $135.8 million in 2010 from $101.1 million for the year ended December 31, 2009. On a TRY basis, these expenses increased 31.0% due to an increase in the number of employees and a periodic increase in wages and salaries.

Other operating income/(expense)

Other operating expense decreased to $49.5 million in 2010 from $110.3 million in 2009, mainly due to a decrease of $38.3 million in impairment recognized on goodwill arising from the acquisition of Belarusian Telecom (2010: $23.5 million, 2009: $61.8 million).

Other operating expenses in 2010 were comprised of: a $23.5 million impairment change recognized on goodwill which arose from the acquisition of Belarusian Telecom; a penalty imposed as a result of an ICTA investigation relating to tariff plans, VAS service subscriptions and charging applications of the Company, which

amounted to $14.0 million, $5.0 million and $2.1 million, respectively; a Special Communication Tax (“SCT”) and VAT calculated on roaming services that had to be collected from subscribers as a result of a $12.9 million tax settlement; and a $5.8 million provision established for SCT on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007, which was based on the previous settlement gains. As of December 31, 2009, the provision set for SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $14.5 million. This matter, however, was settled at $2.8 million and the difference was reflected as income in “other operating expense”.

Results from operating activities

Results from operating activities decreased to $1,150.5 million in 2010 from $1,224.4 million for the year ended December 31, 2009. As a percentage of revenues, results from operating activities decreased from 21.1% in 2009 to 19.2% in 2010, mainly due to an increase in the direct cost of revenues and administrative expenses as a percentage of revenues.

Net financial income /(costs)

Net financial income increased 22.8% in 2010, to $174.5 million from $142.1 million in 2009, due to a decrease in financial expenses from $187.5 million in 2009 to $102.6 million in 2010, arising from lower litigation late payment interest expenses, which were partially netted off by a decrease in finance income from $329.6 million in 2009 to $277.1 million in 2010. The latter was due to a decrease in interest income resulting from lower interest rates. On a TRY basis, net financial income increased 18.0%.

Finance income decreased 15.9%, to $277.1 million in 2010 from $329.6 million for the year ended December 31, 2009. On a TRY basis, it decreased 18.3% due to lower interest rates.

Finance cost decreased 45.3%, to $102.6 million in 2010 from $187.5 million for the year ended December 31, 2009. On a TRY basis, it decreased 46.6% mainly due to lower litigation late payment interest expenses arising from legal disputes, which were partially netted off by an increase in interest expenses on loans as a result of higher outstanding loan balances as well as higher translation losses, which increased from a $0.6 million loss in 2009 to a $13.8 million loss in 2010. Foreign exchange losses in 2010 and 2009 are mainly attributable to our net foreign exchange position.

Share of profit of equity accounted investees

Our share of profit of equity accounted investees increased 56.6% in 2010, to $122.8 million from $78.4 million for 2009 mainly due to a higher net income contribution from Fintur, particularly from its operations in Kazakhstan.

Income tax expense

Income tax expense for the year ended December 31, 2010 was $320.8 million compared to $340.1 million in 2009. On a TRY basis, income tax expense decreased 8.6% due to lower profit before tax.

The effective tax rate was 22.2% and 23.5% for the years ended December 31, 2010 and 2009, respectively.

Non-controlling interests

Non-controlling interests in the net profit of our consolidated subsidiaries is classified separately in the consolidated financial statements of operations under “non-controlling interests”. Non-controlling interests increased to a $43.2 million gain for the year ended December 31, 2010, compared to a $10.8 million loss for 2009.

For the year ended December 31, 2009, Euroasia generated a net loss of $111.8 million and had negative equity. Therefore, non-controlling interest loss was not allocated from Euroasia’s net loss in 2009. Non-controlling interest gain allocated from Euroasia’s net loss amounting to $101.0 million in 2010 is $45.4 million. In addition, non-controlling interest gain recognized from our investment in Azerinteltek amounted to $2.7 million. However, net profit generated by Inteltek for the years ended December 31, 2010 and 2009 resulted in a loss from non-controlling interests of approximately $4.9 million and $10.8 million, respectively.

Profit for the year attributable to equity holders of the Company

Profit for the year attributable to equity holders of the Company increased from $1,094.0 million in 2009 to $1,170.2 million in 2010. Profit for the period attributable to equity holders of the Company also increased on a TRY basis by 3.7%. This was mainly due to an increase in net finance income, share of profit of equity accounted investees and non-controlling interests, partially netted off by a decrease in the results of our operating activities.

Effects of Inflation

The annual inflation rates in Turkey were 10.5%, 6.4% and 6.5% for the years ended December 31, 2011, 2010 and 2009, respectively, based on the Turkish consumer price index. Sharp increases in import prices and the decline in the TRY were the main factors causing inflation to exceed the CBRT’s 5.5% year-end target in 2011. The rise in inflation, which hit a double-digit figure in 2011, is expected to be temporary. However, inflation is likely to remain high in the first half of the year 2012 due to the unfavorable base effect, recent electricity and natural gas price hikes and the delayed impact of currency weakness. A greater favorable base effect is expected to be seen in the fourth quarter of 2012. Under the assumptions of a broadly stable exchange rate and continued deceleration in domestic demand, inflation could decline to about 6.5% at year-end, which is in line with CBRT’s forecast. The current inflation target set by the CBRT is 5.2%, with a confidence interval of between 3.0% and 7.0% for 2012. The most recent CBRT expectations survey indicates that consumer inflation will decrease to around 7.5% by the end of 2012. For additional information, see “Item 3.A. Selected Financial Data—Exchange Rate Data” and “Item 3.D. Risk Factors”.

Belarus is currently in the middle of an economic crisis. However, this is not related to global economic uncertainty, but typical of a country at the beginning of its transition from a centrally-planned economy to a market economy. Due to the 178% change in USD/Belarusian Ruble, consumer prices increased to 108.7% in 2011, one of the highest inflation rates in the world. According to the Belarus Finance Minister, inflation in 2012 will be kept within 20-23% by pursuing a tight monetary policy and maintaining the stable exchange rate of foreign currency.

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, Ukrainian Hryvnia, Belarusian Rubles, Euro and Azerbaijan Manat for our operations in Turkey, Ukraine, Belarus, Germany and Azerbaijan, respectively. We use forward exchange contracts and options to hedge our non-TRY denominated liabilities.

The foreign exchange risks that our Turkish activities are exposed to as a result of purchases and borrowings in U.S. Dollars and Euros have to date been manageable, as there is a developed market enabling the hedging of such risk; however, in Belarus, hedging is almost impossible due to restricted and undeveloped financial markets. No international bank offers or prices hedging instruments and local banks are undercapitalized to be able to enter into transactions as a counterparty. In Ukraine, the only hedging tool seems to be non-deliverable forwards (“NDF”) which is a cash-settled product in USD, a short-term forward contract on a non-convertible foreign currency which could not be delivered offshore. The liquidity in the UAH NDF market is very thin and more expensive than the forward rates. In the current economic environment and considering the aforementioned political uncertainties, there is a possibility of further devaluations in Belarus and also as Ukraine’s economy is fragile and vulnerable to external shocks, there is a possibility that UAH can be devalued. Any fluctuation in the NDF market can signal the market expectation on UAH devaluation.

Our foreign currency risk management policy is focused on hedging foreign currency exposure arising from non-TRY denominated liabilities and purchase commitments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk”. We hedge our currency risks with forward exchange contracts and options.

Interest Rate Hedging

Monitoring and examining financing opportunities to improve our financial flexibility and performance has been a continuous process for us. Depending on the availability in both domestic and international debt/capital markets, we continuously monitor new financing alternatives for contingency purposes as well as to fund potential new investments or acquisitions. We are exposed to interest rate risk as 72% of our total debt portfolio is based on floating rate. We also closely monitor various hedging alternatives to hedge our interest rate risk with a minimum cost. In June 2011, we engaged in a forward start collar agreement for half of our five-year maturity portfolio that is exposed to interest rate risk. The collars hedge variable interest rate risk for the period between 2013 and 2015.

New Accounting Standards Issued

See Note 3 (Significant Accounting Policies, New Standards and Interpretations) of our Consolidated Financial Statements in this Form 20-F.

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, 2011, 2010 and 2009, is as follows:


	2011			2010			2009
U.S. $ million
Net cash provided by operating activities		925.8			1,262.6			1,316.6
Net cash used for investing activities		(1,410.5	)		(704.9	)		(1,485.0	)
Net cash generated/(used) for financing activities		31.6			(303.7	)		(5.4	)
Net cash increase/(decrease) in cash and cash equivalents		(453.1	)		254.0			(173.9	)
Effects of foreign exchange rate fluctuations on cash and cash equivalents		(335.7	)		(48.0	)		8.7

Net cash provided by our operating activities for the years ended December 31, 2011 and 2010, amounted to $925.8 million and $1,262.6 million, respectively.

Net cash from operating activities decreased in 2011, parallel to a $401.9 million decrease in profit from operational activities compared to 2010. However, we consider the subtotal after the adjustments for profit for the period in order to analyze the increase in cash from operating activities. Since these lines are adjusting in nature, they are to be excluded from net cash from operating activities, as they either do not have any effect on net cash from operating activities or they have an offsetting effect on the changes in working capital. As a result, the trend in cash from operating activities should be correlated with the trend in results from operating activities and income tax expense. The corresponding subtotal, after adjustments, decreased from $1,879.2 million in 2010 to $1,403.0 million in 2011. The negative impact of the decrease in operational revenues, together with the increase in interest paid and decrease in dividends received ($71.3 million in 2011 from $99.8 million in 2010), was partially netted off with the decrease in income taxes paid ($276.2 million in 2011 from $322.8 million in 2010) and resulted in a 26.7% decrease in net cash provided by our operating activities.

Net cash used for investing activities for the years ended December 31, 2011 and 2010, amounted to $1,410.5 million and $704.9 million, respectively. The increase in net cash used for investing activities is mainly due to an increase in acquisitions of financial assets partially offset by the decrease in capital expenditures and increase in interest received. For the year ended December 31, 2011, we spent approximately $866.0 million on capital expenditures compared to $1,078.6 million in 2010. Of the $866.0 million in capital expenditures, approximately $473.5 million was related to capital expenditures made by Turkcell, mainly for our mobile communications network in Turkey, whereas such amount was $506.1 million in 2010. Total capital expenditures of Euroasia remained almost stable at $65.1 million for the year ended December 31, 2011, compared to $66.5 million for the year ended December 31, 2010, whereas total capital expenditures of Turkcell Superonline decreased from $310.6 million in 2010 to $207.9 million in 2011.

We have gathered net cash from our financing activities for the year 2011 amounting to $31.6 million, whereas we have $303.7 million of net cash used for 2010. The change is mainly attributable to the decrease in dividends paid and lower repayment of loans and borrowings, partially netted with the decrease in proceeds from the issuance of loans and borrowings. In 2011, proceeds from the issuance of loans and borrowings was $552.9 million, compared to $1,071.8 million in 2010. We repaid $516.9 million of our loans and borrowings in 2011, compared to $772.9 million in 2010, and we made a dividend payment totaling $4.0 million in 2011, compared to $590.5 million in 2010.

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 denominated in U.S. Dollar, Belarusian Ruble (“BYR”), EUR or TRY denominated. The variable interest rates vary from Libor + 1.35% to Libor + 4.60% for the loans denominated in U.S. Dollars, refinancing rate of the National Bank of Belarus + 2 for the loans denominated in BYR, variable Euro rate vary from Libor + 2.65% to Libor + 3.465%. The fixed interest rates vary from 2.24% to 8.00% for the loans denominated in U.S. Dollars, and from 10.24% to 15.0% for the loans denominated in TRY. The loans are payable over the period from 2012 to 2024.

The ratio of our loans and borrowings to equity was 33% as of December 31, 2011, compared to 29% as of December 31, 2010. We have been able to maintain our leverage at a satisfactory level and well in line with our targets. For more information, see Note 25 to our Consolidated Financial Statements.

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.

On December 30, 2005, Euroasia, 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 $390.0 million had been used.

By the end of 2006, we decided to take over all or a portion of the rights and obligations of Euroasia’s senior creditors, who may decline to participate in the facilities following restructuring. On April 19, 2007, Euroasia sent a letter, accompanied by a term sheet, to ING Bank, the Facility Agent. With this term sheet, Euroasia 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, Euroasia repaid the lenders under the long-term syndicated financing project on June 27, 2007, through borrowings from Financell, a wholly-owned subsidiary. As of December 31, 2011, the outstanding balance was $177.4 million.

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 was fully utilized as at December 31, 2011.

In the same vein, Euroasia, a Group company that is a 100% shareholder of Astelit, which had previously borrowed $150 million to finance Astelit, also defaulted on its loan on March 30, 2012. As a guarantor, we paid $150 million to related bankson April 6, 2012. In relation to the guarantee agreement, a first priority pledge on Euroasia shares held by System Capital Management Limited has been established in favor of Turkcell. Upon payment of the guaranteed amount, Turkcell has the right to commence enforcement of this pledge on the Euroasia shares under certain conditions. As a consequence of Euroasia’s default, cross default clauses have been triggered on four loan agreements (the same ones referenced above) totaling $402 million and waivers are being sought for the aforementioned loans.

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Under the current assumptions and circumstances, we expect to generate adequate levels of cash to maintain a positive 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, 2011. However, we continue to experience difficult pricing and competitive conditions in our markets, which have caused a decrease in our net cash provided by operating activities, which we expect will continue. We are also facing increased capital needs to finance our technological and geographic expansion, which may increase our net cash used for investing activities. These pressures have reduced, and may continue to reduce, our liquidity and may lead to an increase in borrowing needs and net cash used by financing activities.

Our commitments through 2012 include possible dividend payments, quarterly corporate tax payments, and capital expenditures. In 2012, we expect our revenues to grow, mainly driven by increasing mobile Internet and service revenues, as well as growing contributions from our subsidiaries.

We expect that our total operational capital expenditures as a percentage of revenues in 2012 will be in line with 2011, reflecting in part continued outlays for 3G and new technology expenses. This is based on our current projects and activities, and does not include any new projects.

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, changes in telecommunication regulations and mismatches between the currencies in which we generate revenue and hold liquid assets and the currencies in which we incur liquid obligations and debt. See “Item 3.D. Risk Factors” for a discussion of these and other factors that may affect our projections.

Capital Transactions

All share amounts and per share figures reflected in our historical financial statements have been restated retrospectively for the aforementioned stock splits.

Capital Transactions in Euroasia

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.

In February 2009, April 2009 and September 2009, we and SCM decided to contribute to the share capital of Euroasia in an aggregate amount of $20 million, $37 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. We paid our contribution portion of amounting $11.0 million, $20.3 million and $46.2 million as of April 23, July 1 and October 9, 2009, respectively, for the above stated capital contribution decisions.

In 2010 and 2011, there were no capital transactions in Euroasia. For a description of and additional information regarding our funding and commitments in relation to Euroasia, see “—Liquidity—Sources of Liquidity”.

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General Economic Conditions

In 2011, Turkey differentiated itself by turning the prolonged global crisis into an opportunity with its strong fundamentals. In 2011, Turkey registered GDP growth of around 8.5% and real economic growth for 2012 is expected to be around 2.5% mainly due to strong domestic demand. However, Turkey’s external borrowing needs and current account deficit result in concerns about its economic outlook.

Dividend Payments

For additional details regarding our dividend policy, see “Item 8.A. Consolidated Statements and Other Financial Information—Dividend Policy”.

5.C Research and Development, Patents and Licenses, etc.

We own a number of patents, utility models, trademarks and industrial designs.

The activities of our technology center, which houses all of our R&D operations in a single location, include the following:

•

Partnership software development, customization and/or integration of software products of suppliers through the service and product development processes;

•

Developing network infrastructure strategies in a fast evolving information-communication technologies world; and

•

Designing short and long-term technology road maps for our operations.

Internally developed software arising from our R&D partnership amounted to approximately $27.0 million, $29.1 million and $25.6 million in 2011, 2010 and 2009, respectively. Internally developed software does not include any costs relating to the research phase.

5.D Trend Information

Changing Subscriber Base

The proportion of postpaid subscribers in our subscriber base was 34%, 30% and 27% in 2011, 2010 and 2009, respectively, due to our value focus.

The majority of our subscriber base, however, consists of prepaid subscribers. Trends indicate that prepaid subscribers have more control over their usage patterns.

Regulations affecting our prices

The ICTA has on several occasions intervened to place caps on the tariffs that we charge in the Turkish market. The ICTA’s intervention in our retail voice, SMS and mobile data prices, has, and will continue to, negatively affect our ability to design and launch campaigns and offers and, consequently, has had, and will continue to have, a negative impact on our business. The ICTA has also intervened to place caps on our interconnection rates.

In the fourth quarter of 2007, the ICTA intervened in the fixing of our retail prices. With the ICTA board resolution dated March 25, 2009, ICTA set a lower limit for solely Turkcell’s on-net retail tariffs, and decreased the price cap level for all mobile operators. The lower limit applies to each of Turkcell’s retail tariff packages by mandating that the weighted average of the on-net price of a tariff package not be less than Turkcell’s weighted average call termination rate. The board resolution also reduced the current price cap from 0.80 TRY/min (equivalent to $0.45 as of April 1, 2012) (including VAT and SCT), pertaining to general subscription packages, to 0.64 TRY/min (equivalent to $0.36 as of April 1, 2012). The resolution also set such price as an upper limit for special subscription packages.

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The ICTA, with its board resolution dated September 16, 2009, set a maximum price of TRY 0.65 (equivalent to $0.37 as of April 1, 2012) (including VAT and SCT) for GSM to GSM calls under general subscription packages. The ICTA, with its board resolution dated February 10, 2010, further reduced the current price cap to TRY 0.40 (equivalent to $0.23 as of April 1, 2012) (including VAT and SCT) for GSM to PSTN as well as GSM to GSM. The same resolution set the current price cap of Turk Telekom to TRY 0.37 (equivalent to $0.21 as of April 1, 2012) (including VAT and SCT) for PSTN to GSM. As a result, we have adjusted the on-net and off-net prices of certain tariff packages, which has had, and will continue to have, adverse effects on our pricing ability. Finally, as of April 1, 2011, the ICTA increased the price caps for GSM to GSM calls to TRY 0.415 (equivalent to $0.23 as of April 1, 2012).

The ICTA may take additional action with respect to our tariff prices. We cannot predict the magnitude or scope of any such future action, particularly given the ICTA’s past actions that have imposed pricing limitations on the Turkish market with little or no prior notice. Any such actions may have a material adverse effect on our competitive position, our pricing and our results of operations.

With respect to the interconnection rates that we charge, after a 33% reduction for Turkcell in 2008, the interconnection rates issued by the ICTA on March 25, 2009 for all mobile operators in Turkey provided for a further 29% decrease, on average, among all operators. On February 10, 2010, there was an additional 52% reduction in Turkcell’s interconnection rates. Further cuts will result in our having to redesign our tariffs and will impact our operational results, depending on pricing trends and marketing strategies in the Turkish mobile communications market. Following this decrease, average Mobile Termination Rates (“MTRs”) in the European Union are now up to 5 times above Turkcell’s MTRs.

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. General economic conditions, competitive pressures and the trend in our retail and interconnection pricing have exerted, and will continue to exert, pressure on the level of our financial results.

Liquidity

Our activities have traditionally generated strong positive cash flow. 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, 2011. However, we continue to experience difficult pricing and competitive conditions in our markets, which have caused a decrease in our net cash provided by operating activities, which we expect will continue. We are also facing increased capital needs to finance our technological and geographic expansion, which may increase our net cash used for investing activities. These pressures have reduced, and may continue to reduce, our liquidity and may lead to an increase in borrowing needs and net cash used by financing activities.

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

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•

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. The future minimum operating lease payments under non-cancellable leases amount to $53.0 million and $41.4 million as of December 31, 2011 and 2010, respectively.

Contingent Liabilities

The following table illustrates our major contingent liabilities as of December 31, 2011.


			Amount of contingent liability expiration per period—Remaining commitment
	Total amount committed		At December 31, 2011		Indefinite*		Less than one year		1–3 years		3–5 years		Over 5 years
U.S.$ million
Bank Letters of Guarantee		194.2		194.2		42.5		9.1		8.4		0.1		134.1

*	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, 2011, 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 $194.2 million.

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, 2011.


	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(*)		1,991.7		867.8		833.3		279.8		10.8
Finance Lease Obligations		24.6		2.8		6.4		1.8		13.6
Payable in relation to the acquisition of Belarusian Telecom		100.0		—		—		—		100.0
Financial liability in relation to put option		11.9		—		11.9		—		—
Total Contractual Cash Obligations		2,128.2		870.6		851.6		281.6		124.4

*	Includes undiscounted interest.

Amount of Commitment

Other Commercial Commitments

Total

Less than
1 year

1-3
years

3-5
years

After
5 years

(U.S.$ million)

Purchase Obligations

780.2

389.9

383.2

7.1

—

As at December 31, 2011, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and purchase of sponsorship and advertisement services amount to $780.2 million. Out of total purchase commitments, $67.7 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.

Each member of our Board of Directors is appointed for a term of three years. Our Articles of Association provide for a staggered Board of Directors. At our Annual General Assembly dated April 29, 2010, we removed our prior Board of Directors and appointed the following individuals as members: Colin J. Williams; Karin Birgitta Eliasson; Mehmet Bulent Ergin; Tero Erkki Kivisaari; Alexey Evgenievich Khudyakov; Oleg Adolfovich Malis; and Gulsun Nazli Karamehmet Williams.

In 2011, our Board of Directors had the following members:


Name		Date appointed to the Board of Directors
Colin J. Williams (Chairman)*(1)		April 29, 2010
Karin B. Eliasson		April 29, 2010
Mehmet Bulent Ergin		April 29, 2010
Tero Erkki Kivisaari		April 29, 2010
Alexey E. Khudyakov		April 29, 2010
Oleg A. Malis		April 29, 2010
Gulsun Nazli Karamehmet Williams		April 29, 2010

*	Following our April 29, 2010 General Assembly Meeting, the members of our Board of Directors elected Mr. Colin J. Williams as Chairman.

(1)	Mr. Williams has filed a lawsuit requesting the cancellation of a decision taken at the Extraordinary General Assembly held on October 12, 2011, not to release him from his activities and operations during the fiscal year of 2010.

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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 2011.


Name		Office
Sureyya Ciliv		Chief Executive Officer
Hulusi Acar		Chief Consumer Sales Officer
Umit Akin		Chief Legal Affairs Officer
Cenk Bayrakdar		Chief New Technology Business Officer
Tayfun Cataltepe		Chief Regulation Strategies & Wholesale Business Officer
Meltem Kalender Ozturk(1)		Chief Group Human Resources Officer
Ilker Kuruoz		Chief Information and Communication Technologies Officer
Serkan Okandan(2)		Chief Financial Officer
Koray Ozturkler		Chief Corporate Affairs Officer
Lale Saral Develioglu		Chief International Business Officer
Selen Kocabas(3)		Chief Corporate Business Officer
Burak Sevilengul(4)		Chief Consumer Marketing Officer
Ilter Terzioglu		Chief Network Operations Officer
Ekrem Yener		Chief International Expansion Officer
Emre Sayin		Chief Consumer Business Officer

(1)	Ms. Öztürk was appointed Chief Human Resources Officer in March 2011.

(2)	Mr. Okandan resigned from his position as Chief Financial Officer effective December 31, 2011.

(3)	Prior to being appointed Chief Corporate Business Officer in March 2011, Ms. Kocabas was Chief Business Support Officer.

(4)	Mr. Sevilengul was appointed Chief Consumer Marketing Officer in April 2011.

Biographies

Board Members

Colin J. Williams, age 70, was appointed as the Chairman of the Board of Directors on February 25, 2010 and re-appointed on April 29, 2010. He also serves as a Voting Member and Chairman of the Audit Committee of Turkcell’s Board of Directors. He is Chairman of Clondalkin and Chair of the Audit and Remuneration Committees of Clondalkin, a consumer and industrial packaging 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 New York University, an M.Sc. degree in physical chemistry and an honorary doctorate from Lund University in Sweden.

Karin Eliasson, age 50, was appointed as a member of the Board of Directors on April 29, 2010. Ms. Eliasson has been Senior Vice President, Head of Group Human Resources at TeliaSonera since 2008. Prior to joining TeliaSonera, Ms. Eliasson was Senior Vice President of Human Resources at Svenska Cellulosa Aktiebolaget, SCA. From 2000 until 2003 she served as the CEO of Novare Human Capital AB. Ms. Eliasson is a member of the Board of Directors of Proffice AB and Insurance company PRI Pensionsgaranti mutual. She holds a Bachelor of Science in Human Resources from Mid Sweden University.

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Mehmet Bulent Ergin, age 64, was first appointed as a member of the Turkcell Board of Directors on April 29, 2005 and was re-appointed on April 29, 2010. After taking responsibility in 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 managing director at Maysan A.S. and Baytur Trading S.A. Currently, Mr. Ergin is the 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 Digiturk and Cukurova Holding. Mr. Ergin majored in Civil Engineering at Robert College, Turkey.

Tero Erkki Kivisaari, age 39, was appointed to the Board of Directors on May 14, 2007 and was re-appointed on April 29, 2010. Mr. Kivisaari has been the President of TeliaSonera in Eurasia since May 1, 2007. Previously, Mr. Kivisaari has served as the Chief Financial Officer and Vice President of TeliaSonera in Eurasia. Mr. Kivisaari is a member of the Board of Directors of Azercell, Moldcell, A.S. OJSC Megafon and Nurminen Logistics Plc; and the Chairman of Fintur Holdings B.V. board. He served as CFO of Fintur Holding B.V. from 2003. Mr. Kivisaari has been the CFO of SmartTrust AB, a mobile software company owned by Carlyle Group, GE Capital, Eqvitec and Sonera Group. Prior to that, he had held the position of Vice President of Sonera Group’s International Operations. Mr. Kivisaari served as an associate professor of finance at the Helsinki School of Economics and holds an MBA in finance.

Alexey Khudyakov, age 41, was appointed to the Board of Directors on May 22, 2006 and re-appointed on April 29, 2010. He is Vice President of Altimo, a leading investor in telecoms, and also serves as non-executive Chairman and Chair of the Audit Committees of High River Gold Mines, a gold mining company. Prior to his appointment to Altimo, Mr. Khudyakov held a Vice President position with Alfa Bank, managing the bank’s direct investments in the telecom sector. Before that, he was a management consultant with McKinsey & Co. 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 37, was appointed to the Board of Directors on May 22, 2006 and re-appointed on April 29, 2010. Senior Vice President of Altimo until January 2011. He began working for Altimo in 2005. Between 2003 and 2005, he was Senior Vice President and M&A Director at Golden Telecom. Prior to that, Mr. Malis founded Investelectrosvyaz and Corbina Telecom. Mr. Malis holds a degree in Systems Engineering from Moscow State Aviation Technological University.

Gulsun Nazli Karamehmet Williams, age 34, was appointed to our Board of Directors on April 29, 2010. In November 2011, she was appointed to the Board of Genel Energy plc, an independent oil exploration and production company. Since 2004, she has worked in different positions at Digiturk (Digital Platform Iletisim Hizmetleri A.S.), where she currently holds the position of Chief Content Officer and Executive Member of the Board. Prior to Digiturk, she worked at BSKYB UK. She studied at Sarah Lawrence College (USA) and Richmond University (UK) and has a B.A. in Communications.

Executive Officers

Sureyya Ciliv, age 53, was appointed 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.