1 Results for Third Quarter 2002 October 25, 2002
2 Notice The information contained in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Neither the company nor any of its respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
3 Overview of Operations Muzaffer Akpınar, CEO
4 Turkcell Today Retained leadership position in Turkish mobile market Subscriber base up by 7% to 14.89 million by adding 1.05 million net new adds in Q3 Revenue up by 7% to $534.3 million in Q3 EBITDA before FX loss margin improved to 41.4% Net income reached $ 58.8 million Blended minutes of usage per subscriber increased by 7% to 61.7 Strong cash in hand $305.4 million Majority of year end targets will be achivable Aria Telsim Aycell TURKCELL Remained Market Leader * Competitor information based on various media reports. No official market share statistics are currently available
5 Background for Q3 2002 Environment Industrial production and capacity utilization rates improved in Q3 2002 GDP growth was positive for the second consecutive quarter Recovery in economy is observed but still fragile Political volatility due to elections still clouds operating environment Instability in the region brings further uncertainty to Turkey Depreciation of TL against USD lowered to 5% in Q3 2002, YTD depreciation reached 14.5% We remain cautious about Q4 2002 and 2003
6 Maintained Leading Position in the Market Subscriber base grew in line with Q2 2002 trends Preserved market position with customer focused organization Balanced market share and cost of acquiring new subscribers Maintained tariffs despite heigthened pricing competition initiated by one of the competitors Continue to monitor the competitors and environment Net New Subscribers Added (thousands) ARPU, SAC ($), Payback period (month) 1,090 1,050 2.2 28 1.8 23 511 12.5 12.6 Q1 2002 Q2 2002 Q3 2002 Q2 2002 Q3 2002 ARPU (blended) SAC Payback period
7 Customer satisfaction through services Usage improvement achieved in line with expectations in Q3 2002 Retention of subscribers on our network evidenced by stable churn rate Postpaid subscriber base (4.66 million) remained relatively stable for the last four quarters Stable contribution of value added services Best New Service award to GPRSLand at the World Communications Award Revenue Breakdown (%) 10 10 Blended Minutes of Usage (min) 61.7 57.5 90 90 52.7 Q2 2002 Q3 2002 Q1 2002 Q2 2002 Q3 2002 Voice SMS & Data
8 Capital Expenditure and Network Quality Total capex & capex per sub (US$) 3,458 Drop rate : 0.77% Congestion : 0.15% 253 243 226 211 188 12 27 20 1994-2000** 2001 Q1 2002 Q2 2002 Q3 2002 Cumulative Capex (million US$) Cumulative Capex per Subscriber* Quality indicators such as drop rate and congestion rate remain satisfactory as per international measurements and better than our licence requirements Capital expenditure totaled $59.3 million for the first nine months of 2002 Additional $18.1 million spent for maintenance of the network and expensed in OPEX *Turkcell only ** Including Licence Current capex covers both capacity investments in radio network in selected areas and software upgrades for new services Capital expenditures for the year will be lower than the originally budgeted amount of $150 million and will total approximately $85 million
9 Regulatory Issues and Legal Environment No national roaming agreement reached and development is not expected soon unless a significant change in commercial terms occur No significant changes in pending legal issues Fintur restructuring transaction closed in August Cost based interconnect tariff regulation in the telecom sector is on the agenda of Telecom Authority No changes in Turkcell shareholder structure other than 8.4% of Pamukbank s direct and indirect stake that were transfered to Saving Deposit Insurance Fund
Overview of Financial Results 10
11 ARPU ARPU (Blended, quarterly, US$) ARPU by Subscriber Type (Quarterly, US$) 12.6 12.5 12.6 20.9 24.4 25.4 Prepaid Postpaid 6.5 6.0 6.0 Postpaid ARPU in Q3 2002 increased in line with usage trends Prepaid ARPU in Q3 2002 stayed stable Blended ARPU stayed stable in Q3 2002 mainly due to increase in postpaid ARPU eliminating the dilutive impact of increasing prepaid subscribers in total subscriber base
12 P/L Highlights Revenue and Gross Margin (US$ millions,%) Pre-FX EBITDA and Margin (US$ millions, %) 497 534 441 52% 55% 40% 36% 41% 177 177 221 Post-FX EBITDA and Margin (US$ millions, %) Net Income (US$ millions) 153 163 211 59 35% 33% 39% 6-27
13 Cost levels improved S & M Expenses (US$ millions) G & A Expenses (US$ millions) 53 45 28 27 27 25 6% 11% 8% 6% 5% 5% SAC (US$ per subscriber, quarterly) Direct Cost of Revenues (US$ millions) 32 28 23 70% 309 343 347 69% 65% % of revenue
14 Balance Sheet Hightlights CASH & CASH EQUIVALENTS 133 168 305 SHORT TERM DEBT LONG TERM DEBT TOTAL DEBT 273 456 453 1,336 1,024 944 1,609 1,480 1,397 NET DEBT TOTAL EQUITY 1,476 1,312 1,092 1,331 1,291 1,348
15 Cash flow (US$ $ millionsm illions) 2001 Q1 2002 Q2 2002 Q3 2002 EBITDA Post FX 460 160 163 211 Less: Capex Licence & Investments Interest Other Net Change in Debt Equity Cash Generated (197) (13) (21) (98) (208) (41) (53) (45) 85 9 (156) 152 (438) (68) (55) (83) 178 - - - (120) 47 (122) 137 Cash Balance 243 290 168 305
16 Financing Debt Repayment Schedule (US$ million) 2002 2003 2004 2005 Principle 318 451 128 700 Interest 152 124 99 96 Total 470 575 227 796 Covenants met and room for additional borrowing is approximately $1billion Required Actual Total Debt/EBITDA 3.50x 2.00x EBITDA/Interest 2.00x 6.56x Turkcell is still planning to meet its obligations mainly through its cash at hand and cash to be generated from operations Some of the interest rates on our outstanding local debt were lowered in line with market developments