Edgar Filing: TURKCELL ILETISIM HIZMETLERI A S

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated July 28, 2011

Commission File Number: 001-15092

TURKCELL ILETISIM HIZMETLERI A.S.

(Translation of registrant’s name in English)

Turkcell Plaza

Mesrutiyet Caddesi No. 153

34430 Tepebasi

Istanbul, Turkey

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F Q Form 40-F £

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes £ No Q

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes £ No Q

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes £ No Q

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __________

Enclosure: Turkcell’s Q2 2011 IFRS report.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION*

As at 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

(The Group’s audited consolidated financial statements prepared as at and for the year ended 31 December 2010 were approved by the Audit Committee and the Board of Directors (Board Resolution dated 23 February 2011 and numbered 797), however not approved by the General Assembly on 21 April 2011.)

		Note	30 June	31 December
		Note	2011	2010
Assets
	Property, plant and equipment	10	2,804,453	3,068,021
	Intangible assets	11	1,431,662	1,709,311
	GSM and other telecommunication operating licenses		840,658	955,703
	Computer software		524,699	547,607
	Other intangible assets		66,305	206,001
	Investments in equity accounted investees	12	455,179	399,622
	Other investments	13	28,359	33,849
	Due from related parties	23	821	1,044
	Other non-current assets		97,532	107,277
	Trade receivables	14	50,079	35,024
	Deferred tax assets		4,402	2,876
Total non-current assets			4,872,487	5,357,024

	Inventories		22,973	24,386
	Other investments	13	4,702	8,201
	Due from related parties	23	65,426	88,897
	Trade receivables and accrued income	14	884,687	816,151
	Other current assets		331,824	197,740
	Cash and cash equivalents	15	3,340,542	3,302,163
Total current assets			4,650,154	4,437,538

Total assets			9,522,641	9,794,562


Equity
	Share capital		1,636,204	1,636,204
	Share premium		434	434
	Capital contributions		22,772	22,772
	Reserves		(944,565)	(660,121)
	Retained earnings		5,455,031	5,258,327
Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS			6,169,876	6,257,616

Non-controlling interests			(47,491)	(24,019)

Total equity			6,122,385	6,233,597

Liabilities
	Loans and borrowings	19	1,252,486	1,407,316
	Employee benefits		31,049	29,742
	Provisions		55,303	57,055
	Other non-current liabilities	18	97,609	160,832
	Deferred tax liabilities		98,155	93,105
Total non-current liabilities			1,534,602	1,748,050

	Bank overdraft	15	51,524	5,896
	Loans and borrowings	19	616,032	430,205
	Income taxes payable		82,213	96,080
	Trade and other payables		785,357	951,976
	Due to related parties	23	18,256	10,760
	Deferred income		150,853	164,186
	Provisions		161,419	153,812
Total current liabilities			1,865,654	1,812,915

Total liabilities			3,400,256	3,560,965

Total equity and liabilities			9,522,641	9,794,562

The notes on page 7 to 65 are an integral part of these condensed interim consolidated financial statements.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF INCOME

For the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

		Six months ended						Three months ended
	Note	30 June 2011			30 June 2010			30 June 2011			30 June 2010

Revenue			2,801,513			2,955,928			1,455,115			1,467,746
Direct cost of revenue			(1,709,313	)		(1,644,227	)		(915,403	)		(799,018	)
Gross profit			1,092,200			1,311,701			539,712			668,728

Other income	7		23,722			9,650			5,330			3,408
Selling and marketing expenses			(518,195	)		(545,279	)		(256,908	)		(286,048	)
Administrative expenses			(135,249	)		(172,295	)		(65,129	)		(90,000	)
Other expenses	7		(164,246	)		(40,421	)		(128,123	)		(7,851	)
Results from operating activities			298,232			563,356			94,882			288,237


Finance income	8		166,088			146,718			97,173			69,664
Finance costs	8		(227,114	)		(78,101	)		(181,517	)		(44,761	)
Net finance income / (costs)			(61,026	)		68,617			(84,344	)		24,903

Share of profit of equity accounted investees	12		71,626			60,040			35,601			29,546
Profit before income tax			308,832			692,013			46,139			342,686

Income tax expense	9		(130,340	)		(158,069	)		(67,412	)		(74,203	)
Profit/(loss) for the period			178,492			533,944			(21,273	)		268,483

Profit/(loss) attributable to:
Owners of Turkcell Iletisim Hizmetleri AS			196,070			553,237			(13,546	)		276,491
Non-controlling interests			(17,578	)		(19,293	)		(7,727	)		(8,008	)
Profit/(loss) for the period			178,492			533,944			(21,273	)		268,483

Basic and diluted earnings per share (in full USD)	17		0.09			0.25			(0.01	)		0.13

The notes on page 7 to 65 are an integral part of these condensed interim consolidated financial statements.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010

Profit/(loss) for the period		178,492			533,944			(21,273	)		268,483


Other comprehensive income / (expense):
Foreign currency translation differences		(318,679	)		(287,894	)		(321,083	)		(225,338	)
Net change in fair value of available-for-sale securities		-			(1,318	)		-			(502	)
Income tax on other comprehensive (expense) / income		(1,765	)		229			(1,227	)		138
Other comprehensive income / (expense) for the period, net of income tax		(320,444	)		(288,983	)		(322,310	)		(225,702	)


Total comprehensive income / (expense) for the period		(141,952	)		244,961			(343,583	)		42,781

Total comprehensive income / (expense) attributable to:
Owners of Turkcell Iletisim Hizmetleri AS		(122,681	)		264,938			(334,193	)		51,388
Non-controlling interests		(19,271	)		(19,977	)		(9,390	)		(8,607	)
Total comprehensive income / (expense) for the period		(141,952	)		244,961			(343,583	)		42,781

The notes on page 7 to 65 are an integral part of these condensed interim consolidated financial statements.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGE IN EQUITY

For the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

	Attributable to equity holders of the Company
	Share Capital	Capital Contribution		Share Premium		Legal Reserves			Fair Value Reserve			Reserve for Non- Controlling Interest Put Option			Translation Reserve			Retained Earnings			Total			Non- Controlling Interest			Total Equity


Balance as at 1 January 2010	1,636,204		22,772		434		484,291			1,318			(250,834	)		(746,870	)		4,712,254			5,859,569			36,632			5,896,201
Total comprehensive income
Profit for the period	-		-		-		-			-			-			-			553,237			553,237			(19,293	)		533,944
Other comprehensive income / (expense)
Foreign currency translation differences, net of tax	-		-		-		-			-			-			(286,981	)		-			(286,981	)		(684	)		(287,665	)
Net change in fair value of available-for-sale securities, net of tax	-		-		-		-			(1,318	)		-			-			-			(1,318	)		-			(1,318	)
Total other comprehensive income / (expense)	-		-		-		-			(1,318	)		-			(286,981	)		-			(288,299	)		(684	)		(288,983	)
Total comprehensive income / (expense)	-		-		-		-			(1,318	)		-			(286,981	)		553,237			264,938			(19,977	)		244,961
Change in non-controlling interest	-				-		-			-			-			-			-			-			(339	)		(339	)
Dividends paid	-		-		-		-			-			-			-			(573,451	)		(573,451	)		(17,090	)		(590,541	)
Increase in legal reserves	-		-		-		49,223			-			-			-			(49,223	)		-			-			-
Balance as at 30 June 2010	1,636,204		22,772		434		533,514			-			(250,834	)		(1,033,851	)		4,642,817			5,551,056			(774	)		5,550,282
Total comprehensive income
Profit for the period	-		-		-		-			-			-			-			616,939			616,939			(23,922	)		593,017
Other comprehensive income / (expense)
Foreign currency translation differences, net of tax	-		-		-		-			-			(461	)		102,771			-			102,310			249			102,559
Net change in fair value of available-for-sale securities, net of tax	-		-		-		-			-			-			-			-			-			-			-
Total other comprehensive income / (expense)	-		-		-		-			-			(461	)		102,771			-			102,310			249			102,559
Total comprehensive income / (expense)	-		-		-		-			-			(461	)		102,771			616,939			719,249			(23,673	)		695,576
Increase in legal reserves	-		-		-		1,429			-			-			-			(1,429	)		-			-			-
Dividends paid	-		-		-		-			-			-			-			-			-			-			-
Change in non-controlling interest	-		-		-		-			-			-			-			-			-			428			428
Change in reserve for non-controlling interest put option	-		-		-		-			-			(12,689	)		-			-			(12,689	)		-			(12,689	)
Balance as at 31 December 2010	1,636,204		22,772		434		534,943			-			(263,984	)		(931,080	)		5,258,327			6,257,616			(24,019	)		6,233,597

Balance as at 1 January 2011	1,636,204		22,772		434		534,943			-			(263,984	)		(931,080	)		5,258,327			6,257,616			(24,019	)		6,233,597
Total comprehensive income
Profit for the period	-		-		-		-			-			-			-			196,070			196,070			(17,578	)		178,492
Other comprehensive income / (expense)
Foreign currency translation differences, net of tax	-		-		-		-			-			(1,673	)		(317,078	)		-			(318,751	)		(1,693	)		(320,444	)
Total other comprehensive income / (expense)	-		-		-		-			-			(1,673	)		(317,078	)		-			(318,751	)		(1,693	)		(320,444	)
Total comprehensive income / (expense)	-		-		-		-			-			(1,673	)		(317,078	)		196,070			(122,681	)		(19,271	)		(141,952	)
Increase in legal reserves	-		-		-		(634	)		-			-			-			634			-			-			-
Dividend to shareholders	-		-		-		-			-			-			-			-			-			(4,622	)		(4,622	)
Change in non-controlling interest	-		-		-		-			-			-			-			-			-			421			421
Change in reserve for non-controlling interest put option	-		-		-		-			-			34,941			-			-			34,941			-			34,941
Balance as at 30 June 2011	1,636,204		22,772		434		534,309			-			(230,716	)		(1,248,158	)		5,455,031			6,169,876			(47,491	)		6,122,385

The notes on page 7 to 65 are an integral part of these condensed interim consolidated financial statements.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

		Six months 30 June
	Note	2011			2010
Cash flows from operating activities
Profit for the period			178,492			533,944
Adjustments for:
Depreciation and impairment of fixed assets	10		285,216			228,670
Amortization of intangible assets	11		132,992			121,974
Net finance income	8		(148,617	)		(82,771	)
Income tax expense			130,340			158,069
Share of profit of equity accounted investees			(85,257	)		(75,261	)
(Gain) / loss on sale of property, plant and equipment			(1,589	)		(1,052	)
Unrealized foreign exchange gain and loss on operating assets			136,654			(44,766	)
Provision for impairment of trade receivables	20		22,440			62,888
Deferred income			(4,854	)		(88,848	)
Impairment losses on goodwill	11		72,198			-
Impairment losses on other non-current investments	13		3,742			-
			721,757			812,847

Change in trade receivables	14		(146,452	)		(199,804	)
Change in due from related parties	23		19,939			16,834
Change in inventories			154			7,929
Change in other current assets			(135,960	)		(125,009	)
Change in other non-current assets			6,087			(19,562	)
Change in due to related parties	23		7,971			3,812
Change in trade and other payables			(136,494	)		(88,819	)
Change in other current liabilities			1,479			(33,234	)
Change in other non-current liabilities	18		(3,278	)		(2,496	)
Change in employee benefits			2,843			3,558
Change in provisions			12,844			12,798
			350,890			388,854

Interest paid			(24,120	)		(18,669	)
Dividend received			26,581			26,889
Income tax paid			(119,603	)		(121,403	)
Net cash from operating activities			233,748			275,671
Cash flows from investing activities
Acquisition of property, plant and equipment	10		(230,499	)		(337,395	)
Acquisition of intangible assets	11		(84,248	)		(97,145	)
Proceeds from sale of property, plant and equipment			3,451			1,744
Proceeds from currency option contracts			3,516			7,617
Payment of currency option contracts premium			(923	)		(4,212	)
Proceeds from sale of available-for-sale securities			8,201			60,773
Acquisition of available-for-sale securities			(3,609	)		(8,400	)
Interest received			132,832			136,288
Net cash used in investing activities			(171,279	)		(240,730	)

Cash flows from financing activities
Proceeds from issuance of loans and borrowings			270,549			405,568
Loan transaction costs			-			(12,100	)
Repayment of borrowings			(229,911	)		(252,372	)
Change in non-controlling interest			421			(339	)
Dividends paid			(4,622	)		(590,541	)
Net cash used in financing activities			36,437			(449,784	)

Net decrease in cash and cash equivalents			98,906			(414,843	)
Cash and cash equivalents at 1 January	15		3,296,267			3,090,242
Effects of foreign exchange rate fluctuations on cash and cash equivalents			(106,155	)		(71,408	)

Cash and cash equivalents at 30 June	15		3,289,018			2,603,991

The notes on page 7 to 65 are an integral part of these condensed interim consolidated financial statements.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Notes to the condensed interim consolidated financial statements

Page

1. Reporting entity	7
2. Statement of compliance	7
3. Significant accounting policies	7-12
4. Critical accounting judgments and key sources of estimation uncertainty	12-13
5. Operating segments	13-18
6. Seasonality of operations	19
7. Other income and expenses	19
8. Finance income and costs	19
9. Income tax expense	19
10. Property, plant and equipment	20-22
11. Intangible assets	22-26
12. Equity accounted investees	26
13. Other investments	27
14. Trade receivables and accrued income	28
15. Cash and cash equivalents	28
16. Dividends	29
17. Earnings per share	29
18. Other non-current liabilities	30
19. Loans and borrowings	30-31
20. Financial instruments	32-36
21. Guarantees and purchase obligations	36
22. Commitments and contingencies	36-59
23. Related parties	59-64
24. Group entities	65
25. Subsequent events	65

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

1.	Reporting entity

Turkcell Iletisim Hizmetleri Anonim Sirketi (the “Company”) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The Company primarily is involved in establishing and operating a Global System for Mobile Communications (“GSM”) network in Turkey and regional states.

The condensed interim consolidated financial statements of the Company as at and for the six and three months ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in one associate and one joint venture.

The consolidated financial statements of the Company as at and for the year ended 31 December 2010 are available upon request from the Company’s registered office at Turkcell Plaza, Mesrutiyet Caddesi No: 71, 34430 Tepebasi / Istanbul or at www.turkcell.com.tr.

2.	Statement of compliance

The condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2010.

The Group’s audited consolidated financial statements prepared as at and for the year ended 31 December 2010 were approved by the Audit Committee and the Board of Directors (Board Resolution dated 23 February 2011 and numbered 797), however not approved by the General Assembly on 21 April 2011.

The Group’s condensed interim consolidated financial statements as at and for the period ended 30 June 2011 were approved by the Board of Directors on 27 July 2011.

3.	Significant accounting policies

The same accounting policies, presentation and methods of computation have been followed in these condensed interim consolidated financial statements as were applied in the preparation of the Group’s consolidated financial statements as at and for the year ended 31 December 2010.

a)	Comparative information and revision of prior period financial statements

The condensed interim consolidated financial statements of the Group have been prepared with the prior periods on a comparable basis in order to give consistent information about the financial position and performance. If the presentation or classification of the financial statements is changed, in order to maintain consistency, the financial statements of the prior periods are also reclassified in line with the related changes.

The Company for 30 June 2010 revised the manner in which it accounted for the impact of changes in foreign exchange rates in its statement of cash flows and revised its presentation of prior periods, resulting in a change in the allocation of the impact of foreign exchange rate changes among “Operating activities”, “Effects of foreign exchange on statement of financial position items” and “Effect of foreign exchange rate changes on cash” in the statement of cash flows. The change relates to the impact of re-translation of the underlying functional currency cash flows into the presentation currency, the US Dollar. The Company believes that changes to prior periods are immaterial. The change in the statement of cash flows will not impact the Company’s previously reported statement of income, statement of comprehensive income, statement of financial positions or “Cash and cash equivalents” at the end of any period. The effect of the change on the statement of cash flows is as follows:

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3.	Significant accounting policies (continued)

a)	Comparative information and revision of prior period financial statements (continued)

	For the six months period ended 30 June 2010
	As previously reported			Revisions			As Revised
Net cash from operating activities		320,437			(44,766	)		275,671
Effects of foreign exchange on statement of financial position items		(116,174	)		116,174			-
Effects of foreign exchange rate changes on cash		-			(71,408	)		(71,408	)
Cash and cash equivalents		2,603,991			-			2,603,991

b)	Accounting policies for new transactions and events

Derivative financial instruments

The Group enters into derivative financial instruments to manage its exposure to interest rate, including interest rate collar. Further details of derivative financial instruments are disclosed in Note 13, 19 and 20.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Hedge Accounting

The Group designates certain hedging instruments which include cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the “other gains and losses” line item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3.	Significant accounting policies (continued)

c)	New standards and interpretations

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in this section.

(i)	New and Revised IFRSs do affect presentation and disclosures

IAS 1 (Amendments), “Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010)”

The amendments to IAS 1 clarify that an entity may choose to present the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. The amendments have been applied retrospectively.

(ii)	New and Revised IFRSs affecting the reported financial performance and / or financial position

None.

(iii)

New and Revised IFRSs applied with no material effect on the consolidated financial statements

IAS 24 (Revised 2009), “Related Party Disclosures”

In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government related entities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011.

IAS 32 (Amendments), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements”

The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February 2010. The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated.

IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions”

Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative IFRS 7 fair value disclosures.

IFRIC 14 (Amendments), “Pre-payment of a Minimum Funding Requirement”

Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment requires an asset to be recognized for any surplus arising from voluntary pre-payments made.

IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”

IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3.	Significant accounting policies (continued)

c)	New standards and interpretations (continued)

(iii)

New and Revised IFRSs applied with no material effect on the consolidated financial statements (continued)

Annual Improvements May 2010

Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main standards/interpretations as follow: IFRS 1, “First-time Adoption of International Financial Reporting Standards”; IFRS 3, “Business Combinations”; IAS 27, “Consolidated and Separate Financial Statements”; IAS 34, “Interim Financial Reporting” and IFRIC 13, “Customer Loyalty Programmes”. With the exception of amendments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011.

The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years.

(iv)	New and Revised IFRSs in issue but not yet effective

IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions”

On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs and to provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time. The amendment above will be effective for annual periods beginning on or after 1 July 2011.These amendments are not relevant to the Group, as it is an existing IFRS preparer.

IFRS 7, “Financial Instruments: Disclosures”

In October 2010, IFRS 7, “Financial Instruments: Disclosures” is amended by IASB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 9, “Financial Instruments: Classification and Measurement”

In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace IAS 39, “Financial Instruments: Recognition and Measurement”. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not had an opportunity to consider the potential impact of the adoption of this standard.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3.	Significant accounting policies (continued)

c)	New standards and interpretations (continued)

(iv)	New and Revised IFRSs in issue but not yet effective

IAS 12, “Income Taxes”

In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, “Investment Property”. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be , be through sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 10, “Consolidated Financial Statements”

IFRS 10 replaces the consolidation guidance in IAS 27, “Consolidated and Separate Financial Statements” and SIC 12, “Consolidation - Special Purpose Entities” by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e., whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, control is based on whether an investor has 1) power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3) the ability to use its power over the investee to affect the amount of the returns. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 11, “Joint Arrangements”

IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31, “Interests in Joint Ventures”. The option to apply the proportional consolidation method when accounting for jointly controlled entities is removed. Additionally, IFRS 11 eliminates jointly controlled assets to now only differentiate between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 12, “Disclosure of Interest in Other Entities”

IFRS 12 requires extensive disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. An entity is required to disclose information that helps users of its financial statements evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on its financial statements. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3.	Significant accounting policies (continued)

c)	New standards and interpretations (continued)

(iv)	New and Revised IFRSs in issue but not yet effective

IAS 27 (2011), “Separate Financial Statements”

The requirements relating to separate financial statements are unchanged and are included in the amended IAS 27. The other portions of IAS 27 are replaced by IFRS 10.

IAS 28 (2011), “Investments in Associates and Joint Ventures”

IAS 28 is amended for conforming changes based on the issuance of IFRS 10, IFRS 11 and IFRS 12.

IAS 1 (2011), “Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 provide guidance on the presentation of items contained in other comprehensive income (“OCI”) and their classification within OCI. The new standard is mandatory for annual periods beginning on or after 1 July 2012. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 13, “Fair Value Measurements”

On 12 May 2011, IASB issued IFRS 13, “Fair Value Measurements”, which establishes a single source of guidance for fair value measurement under IFRSs. IFRS 13 defines fair value, provides guidance on its determination and introduces consistent requirements for disclosures on fair value measurements. The standard does not include requirements on when fair value measurements is required; it prescribes how fair value is to be measured if another standard requires it. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IAS 19 (Amendments), “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

4.	Critical accounting judgments and key sources of estimation uncertainty

Key sources of estimations uncertainty

In the period from March to June 2011 the National Bank of the Belarusian Republic sequentially increased the refinancing rate from 10.5% to 18%, due to growing inflation rate that came up to 36.2% for the first six months of 2011. Also, starting from March 2011, the foreign trade deficit being faced by the economy and certain limitations imposed by the government on foreign currency market, resulted in highly limited access to foreign currency for the corporate sector and the public on the open market. Effective from 24 May 2011, the National Bank of the Republic of Belarus has announced the decline rate of Belarusian Ruble against the currency basket, divided equally into USD, EUR and Russian Ruble, by approximately 72.6% in comparison to the rate to the currency basket as of 31 December 2010.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

4.	Critical accounting judgments and key sources of estimation uncertainty (continued)

Key sources of estimations uncertainty (continued)

Besides, in March 2011 international rating agencies Standard & Poor’s Rating Services and Moody’s each downgraded foreign currency long-term credit rating of the Republic of Belarus from B+ to B (Standard & Poor’s). The credit rating of the Republic of Belarus on its national currency has been downgraded from BB to B+ (Standard & Poor’s) in March and further to B (Standard & Poor’s) in May 2011.

While the National Bank of the Republic of Belarus has taken certain measures aimed at stabilizing the situation and preventing negative trends in the domestic foreign exchange market, including speculative pressure on the Belarusian Ruble, there exist the potential for economic uncertainties to continue in the foreseeable future.

Current and potential future political and economic changes in Belarus could have an adverse effect on the subsidiaries operating in this country. The economic stability of Belarus depends on the economic measures that will be taken by the government and the outcomes of the legal, administrative and political processes in the country. These processes are beyond the control of the subsidiaries established in the country.

Consequently, the subsidiaries operating within Belarus may subject to the risks, i.e. foreign currency and interest rate risks related to borrowings and the subscriber’s purchasing power and liquidity and increase in corporate and personal insolvencies, that may not necessarily be observable in other markets. The accompanying condensed interim consolidated financial statements contain the Group management’s estimations on the economic and financial positions of its subsidiaries operating in Belarus. The future economic situation of Belarus might differ from the Group’s expectations. As of 30 June 2011, the Group’s management believes that their approach is appropriate in taking all the necessary measures to support the sustainability of these subsidiaries’ businesses in the current circumstances.

5.	Operating segments

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

The Group comprises the following main operating segments: Turkcell, Euroasia Telecommunications Holding BV (“Euroasia”) and Belarusian Telecommunications Network (“Belarusian Telecom”), all of which are GSM operators in their countries.

Other operations mainly include companies operating in telecommunication and betting businesses and companies provide internet and broadband services, call center and value added services.

Information regarding the operations of each reportable segment is included below. Adjusted EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Adjusted EBITDA definition includes revenue, direct cost of revenues excluding depreciation and amortization, selling and marketing expenses and administrative expenses. Adjusted EBITDA is not a financial measure defined by IFRS as a measurement of financial performance and may not be comparable to other similarly-titled indicators used by other companies.

The accounting policies of operating segments are the same as those described in the summary of significant accounting policies.

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5.	Operating segments (continued)

	Six months ended 30 June
	Turkcell						Euroasia						Belarusian Telecom						Other						Total
	2011			2010			2011			2010			2011			2010			2011			2010			2011			2010

Total external revenues		2,424,552			2,626,272			164,188			170,912			33,309			21,599			179,464			137,145			2,801,513			2,955,928
Intersegment revenue		5,826			8,159			2,382			1,691			43			24			205,663			187,379			213,914			197,253
Reportable segment adjusted EBITDA		745,800			860,922			42,473			26,122			(7,016	)		(15,302	)		107,971			97,100			889,228			968,842
Finance income		136,995			132,294			294			7,212			20,284			439			24,366			29,364			181,939			169,309
Finance cost		8,506			(32,535	)		(29,217	)		(25,724	)		(187,701	)		(15,994	)		(43,068	)		(43,430	)		(251,480	)		(117,683	)
Depreciation and amortization		(227,662	)		(230,359	)		(57,901	)		(51,651	)		(82,602	)		(32,404	)		(56,997	)		(40,860	)		(425,162	)		(355,274	)
Share of profit of equity accounted investees		-			-			-			-			-			-			71,626			60,040			71,626			60,040
Capital expenditure		196,675			270,081			19,129			40,191			8,776			52,742			109,307			113,583			333,887			476,597

	Three months ended 30 June
	Turkcell						Euroasia						Belarusian Telecom						Other						Total
	2011			2010			2011			2010			2011			2010			2011			2010			2011			2010

Total external revenues		1,257,980			1,296,472			87,218			88,456			16,034			11,183			93,883			71,635			1,455,115			1,467,746
Intersegment revenue		3,138			3,637			1,121			1,116			26			4			105,384			96,405			109,669			101,162
Reportable segment adjusted EBITDA		403,119			420,524			23,711			20,295			(2,838	)		(6,212	)		54,699			53,820			478,691			488,427
Finance income		71,295			62,030			130			1,939			20,161			123			8,928			14,565			100,514			78,657
Finance cost		33,465			(16,930	)		(14,062	)		(11,400	)		(174,707	)		(9,771	)		(27,554	)		(24,113	)		(182,858	)		(62,214	)
Depreciation and amortization		(115,969	)		(119,001	)		(29,630	)		(28,611	)		(70,683	)		(15,856	)		(28,885	)		(19,202	)		(245,167	)		(182,670	)
Share of profit of equity accounted investees		-			-			-			-			-			-			35,601			29,546			35,601			29,546
Capital expenditure		128,910			144,437			11,753			13,077			3,516			16,807			65,500			53,433			209,679			227,754

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5.	Operating segments (continued)

	As at 30 June 2011 and 31 December 2010
	Turkcell				Euroasia				Belarusian Telecom				Other				Total
	2011		2010		2011		2010		2011		2010		2011		2010		2011		2010
Reportable segment assets		3,827,769		3,860,173		578,806		616,375		170,422		517,312		1,095,641		1,045,535		5,672,638		6,039,395
Investment in equity accounted investees		-		-		-		-		-		-		455,179		399,622		455,179		399,622
Reportable segment liabilities		930,155		1,092,496		138,121		153,927		65,539		83,161		160,146		198,780		1,293,961		1,528,364

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5.	Operating segments (continued)

Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Revenues
Total revenue for reportable segments		2,630,300			2,828,657			1,365,517			1,400,868
Other revenue		385,127			324,524			199,267			168,040
Elimination of inter-segment revenue		(213,914	)		(197,253	)		(109,669	)		(101,162	)
Consolidated revenue		2,801,513			2,955,928			1,455,115			1,467,746

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Adjusted EBITDA
Total adjusted EBITDA for reportable segments		781,257			871,742			423,992			434,607
Other adjusted EBITDA		107,971			97,100			54,699			53,820
Elimination of inter-segment adjusted EBITDA		(32,264	)		(24,071	)		(19,436	)		(14,357	)
Consolidated adjusted EBITDA		856,964			944,771			459,255			474,070
Finance income		166,088			146,718			97,173			69,664
Finance costs		(227,114	)		(78,101	)		(181,517	)		(44,761	)
Other income		23,722			9,650			5,330			3,408
Other expenses		(164,246	)		(40,421	)		(128,123	)		(7,851	)
Share of profit of equity accounted investees		71,626			60,040			35,601			29,546
Depreciation and amortization		(418,208	)		(350,644	)		(241,580	)		(181,390	)
Consolidated profit before income tax		308,832			692,013			46,139			342,686

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Finance income
Total finance income / (costs) for reportable segments		157,573			139,945			91,586			64,092
Other finance income		24,366			29,364			8,928			14,565
Elimination of inter-segment finance income		(15,851	)		(22,591	)		(3,341	)		(8,993	)
Consolidated finance income		166,088			146,718			97,173			69,664

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5.	Operating segments (continued)

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Finance costs
Total finance cost for reportable segments		208,412			74,253			155,304			38,101
Other finance cost		43,068			43,430			27,554			24,113
Elimination of inter-segment finance cost		(24,366	)		(39,582	)		(1,341	)		(17,453	)
Consolidated finance cost		227,114			78,101			181,517			44,761

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Depreciation and amortization
Total depreciation and amortization for reportable segments		368,165			314,414			216,282			163,468
Other depreciation and amortization		56,997			40,860			28,885			19,202
Elimination of inter-segment depreciation and amortization		(6,954	)		(4,630	)		(3,587	)		(1,280	)
Consolidated depreciation and amortization		418,208			350,644			241,580			181,390

	Six months ended						Three months ended
	30 June 2011			30 June 2010			30 June 2011			30 June 2010
Capital expenditure
Total capital expenditure for reportable segments		224,580			363,014			144,179			174,321
Other capital expenditure		109,307			113,583			65,500			53,433
Elimination of inter-segment capital expenditure		(16,086	)		(14,850	)		(9,267	)		(6,922	)
Consolidated capital expenditure		317,801			461,747			200,412			220,832

	30 June 2011		31 December 2010
Assets
Total assets for reportable segments		4,576,997		4,993,860
Other assets		1,095,641		1,045,535
Investments in equity accounted investees		455,179		399,622
Other unallocated amounts		3,394,824		3,355,545
Consolidated total assets		9,522,641		9,794,562

TURKCELL ILETISIM HIZMETLERI AS AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at and for the six and three months ended 30 June 2011

(Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5.	Operating segments (continued)

	30 June 2011		31 December 2010
Liabilities
Total liabilities for reportable segments		1,133,815		1,329,584
Other liabilities		160,146		198,780
Other unallocated amounts		2,106,295		2,032,601
Consolidated total liabilities		3,400,256		3,560,965

Geographical information

In presenting the information on the basis of geographical segments, segment revenue is based on the geographical location of operations and segment assets are based on the geographical location of the assets.

Six months ended

Three months ended

30 June

2011

30 June

2010

30 June

2011

30 June

2010

Revenues