Company Quick10K Filing
Price5.86 EPS1
Shares2,200 P/E7
MCap12,896 P/FCF4
Net Debt1,711 EBIT3,174
TTM 2019-12-31, in MM, except price, ratios
20-F 2020-12-31 Filed 2021-04-26
20-F 2019-12-31 Filed 2020-04-02
20-F 2018-12-31 Filed 2019-03-15
20-F 2017-12-31 Filed 2018-03-22
20-F 2016-12-31 Filed 2017-03-20
20-F 2015-12-31 Filed 2016-03-18
20-F 2014-12-31 Filed 2015-03-10
20-F 2013-12-31 Filed 2014-03-21
20-F 2012-12-31 Filed 2013-04-08
20-F 2011-12-31 Filed 2012-04-20
20-F 2010-12-31 Filed 2011-04-18
20-F 2009-12-31 Filed 2010-04-27

TKC 20F Annual Report

Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Note 38 (Commitments and Contingencies) To Our Consolidated Financial Statements in This Annual Report on Form 20 - F.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16.
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
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EX-8.1 a2243220zex-8_1.htm
EX-12.1 a2243220zex-12_1.htm
EX-12.2 a2243220zex-12_2.htm
EX-13.1 a2243220zex-13_1.htm

Turkcell Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin

20-F 1 a2243220z20-f.htm 20-F

Use these links to rapidly review the document

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As filed with the Securities and Exchange Commission on April 26, 2021










For the fiscal year ended December 31, 2020



For the transition period from                                    to





Date of event requiring this shell company report

Commission File Number: 1-15092

(Exact Name of Registrant as Specified in Its Charter)

(Translation of Registrant's Name into English)

Republic of Turkey
(Jurisdiction of Incorporation
or Organization)
  Mr. Ali Serdar Yagci
Telephone: +90 212 313 18 88
Facsimile: +90 216 504 4058
Turkcell Kucukyali Plaza
Aydinevler Mahallesi Inonu Caddesi No:20 Kucukyali Ofispark Maltepe
Istanbul, Turkey

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
  Turkcell Kucukyali Plaza
Aydinevler Mahallesi Inonu Caddesi No:20 Kucukyali Ofispark Maltepe
Istanbul, Turkey

(Address of Principal Executive Offices)

Securities registered pursuant to Section 12(b) ofthe Act:

Title of each class   Trading symbol   Name of each exchange on which registered

Ordinary Shares
Nominal Value TRY 1.000*

  TKC   New York Stock Exchange
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 ý    No o

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 o    No ý

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 ý    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes ý    No o

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.

Large Accelerated Filer ý   Accelerated Filer o   Non-Accelerated Filer o   Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act.    o

The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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

U.S. GAAP o   International Financial Reporting Standards as issued
by the International Accounting Standards Board ý
  Other o

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 o    Item 18 o

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 o    No ý


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  3.D RISK FACTORS     8  

















  5.G SAFE HARBOR     145  




  6.B COMPENSATION     152  

  6.C BOARD PRACTICES     152  

  6.D EMPLOYEES     154  

  6.E SHARE OWNERSHIP     157  














  9.C MARKETS     162  


  9.E DILUTION     162  


ITEM 10.


  10.A SHARE CAPITAL     163  



  10.D EXCHANGE CONTROLS     181  

  10.E TAXATION     182  





ITEM 11.


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ITEM 12.


ITEM 13.


ITEM 14.


ITEM 15.


ITEM 16.



  16.B CODE OF ETHICS     196  







ITEM 17.


ITEM 18.


ITEM 19.

  EXHIBITS     204  

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        This is the 2020 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 "Company", "we", "us", "our", "Group" and similar terms refer to Turkcell, its predecessors, and its consolidated subsidiaries, except as the context otherwise requires.

        Our audited Consolidated Financial Statements as of December 31, 2020 and 2019 and for each of the years in the three-year period ended December 31, 2020 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").

        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, 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.

        Statements regarding total market size in Turkey are based on the Information and Communication Technologies Authority's ("ICTA") or operators' announcements, and statements regarding penetration are based on the Turkish Statistical Institute's ("TUIK") announcements pertaining to the Turkish population.

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

        We have not independently verified the information in industry publications or market research, although management believes the information contained therein to be reliable. We do not represent that this information is accurate.

        The methodology for calculating performance measures such as subscriber numbers, average revenue per user ("ARPU") and churn rates varies substantially among operators, and is not standardized across the telecommunications industry, and reported performance measures thus vary from those that would probably result from the use of a single methodology. In addition, subscriber numbers in the mobile communications sector may be difficult to calculate as a result of individuals having more than one SIM card, or SIM cards being removed due to periods of inactivity. The differing methodologies for calculating these performance indicators make it difficult to draw comparisons between these figures for, and to determine the relative market share of, different mobile operators.


        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


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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 from our historic competitors and/or the entrance of new direct and indirect competitors in the market due to new applications and regulatory changes in Turkey with respect to certain technologies;

    our growth strategy being partly dependent on new investment opportunities;

    instability in the political environment and/or downturn in the economy, as well as volatile international markets in Turkey and/or internationally;

    the continuing impact of the COVID-19 pandemic on the Company and Turkish economy;

    foreign exchange rate risks which could affect the Turkish macroeconomic environment and could significantly affect our results of operation and financial position in future periods if hedging tools are not available at commercially reasonable terms;

    reduction in cash generated from operations and increased capital needs, which may increase our borrowing requirements, and consequently, our finance costs and exposure to the risks associated with borrowing;

    regulatory decisions and changes in the regulatory environment;

    failure by us, our local partners with whom we enter into cooperation agreements or similar agreements, or one of our suppliers, to comply with laws and regulations regarding unethical business practices, including bribery and corruption, and international sanctions;

    interests in several companies that may expose us to various economic, business, political, social, financial, regulatory and legal risks and may not provide the benefits that we expect;

    risks related to our dependence on network and IT systems and the products and services we provide through third party suppliers, as well as our exposure to technological changes in the communications market, including industries where we traditionally do not compete;

    various risks with respect to our base transceiver stations performance, including spectrum limitations and frequency costs, certain coverage and local production obligations relating to the 4.5G license and alleged health risks and zoning limitations related to our base transceiver stations;

    our major shareholder has recently changed;

    legal actions and claims to which we are a party;

    inherent limitations of the effectiveness of our internal control over financial reporting and other controls;

    our ability to retain key personnel, our partners and their employees; and

    volatility in the market price of our ADSs.


        Not Applicable.


        Not Applicable.


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3.A Selected Financial Data

        Our audited annual Consolidated Financial Statements including our consolidated statements of financial position as of December 31, 2020 and 2019 and our consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the three years in the period ended December 31, 2020 ("Annual Consolidated Financial Statements") 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 following information should be read in conjunction with "Item 5. Operating and Financial Review and Prospects", our audited consolidated statement of financial position as of December 31, 2020 and 2019, and the related consolidated statements of profit or loss, other comprehensive income, changes in equity, and cash flows for the years ended December 31, 2020, 2019 and 2018, and the related notes appearing elsewhere in this annual report.

        The following table presents our selected consolidated statements of profit or loss, financial position and cash flows data as of and for each of the years in the five-year period ended December 31, 2020, 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 year ended December 31, 2020 and as of the respective years.

  2020   2019   2018   2017   2016  
  (TRY millions, except share data and certain other data)

Selected Financial Data Prepared in Accordance with IFRS as Issued by the IASB Consolidated Statement of Profit or Loss Data


Total revenue(1)

    29,103.7     25,137.1     21,292.5     17,632.1     14,285.6  

Total cost of revenue(2)

    (20,336.1 )   (17,083.5 )   (14,146.0 )   (11,350.2 )   (9,236.6 )

Total gross profit

    8,767.7     8,053.7     7,146.5     6,281.9     5,049.0  

Other income

    96.6     140.7     241.4     74.4     78.6  

Administrative expenses

    (749.6 )   (779.8 )   (673.4 )   (645.2 )   (721.8 )

Selling and marketing expenses

    (1,373.0 )   (1,555.2 )   (1,626.7 )   (2,005.4 )   (1,910.9 )

Net impairment losses on financial and contract assets

    (349.6 )   (338.9 )   (346.4 )        

Other expenses

    (619.8 )   (487.3 )   (381.5 )   (773.3 )   (312.8 )

Operating profit

    5,772.3     5,033.3     4,359.9     2,932.4     2,181.9  

Finance income

    2,119.5     297.5     1,677.1     597.2     618.3  

Finance costs

    (3,251.2 )   (2,025.1 )   (3,364.1 )   (920.1 )   (791.1 )

Net finance costs(3)

    (1,131.7 )   (1,727.7 )   (1,687.0 )   (322.9 )   (172.8 )

Share of loss of equity accounted investees

    (13.8 )   (15.7 )   (0.1 )        

Profit before income tax

    4,626.8     3,289.9     2,672.8     2,609.5     2,009.1  

Income tax expense

    (387.2 )   (785.6 )   (495.5 )   (571.8 )   (423.2 )

Profit from continuing operations

    4,239.6     2,504.3     2,177.3     2,037.8     1,586.0  

Gain/(loss) from discontinued operations(4)

        772.4             (42.2 )

Total profit for the year

    4,239.6     3,276.7     2,177.3     2,037.8     1,543.8  

Attributable to:


Owners of the Company

    4,237.1     3,246.5     2,021.1     1,979.1     1,492.1  

Non-controlling interests

    2.5     30.2     156.3     58.6     51.7  

Total profit for the year

    4,239.6     3,276.7     2,177.3     2,037.8     1,543.8  

Basic and diluted earnings per share—from continuing operations(5)

    1.94     1.14     0.93     0.90     0.68  

Consolidated Statement of Financial Position Data (at period end)


Cash and cash equivalents

    11,860.6     10,238.7     7,419.2     4,712.3     6,052.4  

Total assets

    51,498.4     45,715.0     42,765.3     33,982.5     31,600.2  

Long-term debt(6)

    16,353.7     12,677.4     13,119.6     8,258.0     6,935.1  

Total debt(7)

    21,586.4     20,305.7     20,155.5     12,536.1     9,781.2  

Total liabilities

    30,713.5     27,632.0     26,711.7     18,937.4     15,531.8  

Share capital

    2,200.0     2,200.0     2,200.0     2,200.0     2,200.0  

Total equity

    20,784.9     18,082.9     16,053.6     15,045.1     16,068.4  

Weighted average number of shares(8)

    2,183,106,193     2,183,922,483     2,184,750,233     2,193,184,437     2,193,184,437  


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  2020   2019   2018   2017   2016  
  (TRY millions, except share data and certain other data)

Consolidated Cash Flows Data


Net cash inflow from operating activities

    13,092.8     9,026.6     5,829.9     3,101.3     607.1  

Net cash outflow from investing activities

    (6,780.6 )   (3,027.3 )   (4,535.6 )   (3,304.6 )   (2,976.7 )

Net cash (outflow)/ inflow from financing activities

    (4,267.8 )   (3,478.0 )   (534.4 )   (1,566.7 )   4,839.0  

Other Financial Data


Dividends declared(9)(10)

    2,585.8     811.6     1,010.0     1,900.0     3,000.0  

Dividends per share (declared)(10)

    1.18     0.37     0.46     0.86     1.36  

Gross margin(11)

    30%     32%     34%     36%     35%  

Adjusted EBITDA(12)

    12,270.3     10,426.4     8,788.0     6,228.3     4,619.5  

Capital expenditures(13)

    9,078.9     7,224.7     7,643.0     4,087.4     3,494.4  

Total revenue includes telecommunication services revenues, equipment revenues, revenue from financial services, call center revenues, and revenue and commission fees on betting business (Note 5). Commission fees on betting business was last recorded in 2019 while revenue from betting business was last recorded in 2018. These businesses were divested in the years mentioned.

Total cost of revenue includes depreciation and amortization charges, cost of goods sold, payments for the Treasury share (the amount paid to the government under our license) and universal service fund, interconnection and termination expenses, employee benefit expenses, radio costs, frequency expenses, transmission costs, roaming expenses, and cost of revenue from financial services, (Note 10).

As at December 31, 2020, interest income and expense on financial assets measured at amortized cost are shown netted of on our consolidated statement of profit or loss. The Company has presented financials as of December 31, 2020, 2019, 2018, 2017 and 2016 accordingly for which the gross amount is TRY 282.0 million, TRY 316.9 million, TRY 255.0 million, TRY 221.2 million and TRY 343.3 million, respectively.

As of October 1, 2016, Fintur was classified as held for sale and reported as discontinued operations, and on December 12, 2018 the Group signed the definitive agreement to transfer its total shareholding in Fintur to the other shareholder of Fintur, Sonera Holding B.V. The transfer was completed on April 2, 2019 for a final value of TRY 2,229.6 million (EUR 352.9 million) (Note 16). Gain on sale of the associate amounting to TRY 772.4 million has been recognized under gain from discontinued operations.

2020, 2019, 2018, 2017 and 2016 EPSs are computed over the "Weighted average number of shares".

Long-term debt consists of long-term loans and borrowings, debt securities issued as well as long-term lease obligations.

Total debt consists of long-term and short-term loans and borrowings, debt securities issued as well as lease obligations.

In line with our Company's share buyback decisions on July 27, 2016, January 30, 2017 and March 24, 2020, we purchased a total of 16,893,807 shares at a price range of TRY 8.92 to TRY 12.35 between 2016 and 2020 at a total transaction amount of TRY 180.2 million. Specifically for the year 2020, the transaction amount was TRY 9,994 thousand, reflecting the purchase of 816,290 shares at a price range of TRY 12.09 to TRY 12.35. Treasury shares are deducted from Equity (Notes 26 and 27).

The dividend paid in 2017 was related to the years 2010 through 2016. TRY 1,900.0 million dividend paid in 2018 relating to the year 2017 was approved by the Annual General Meeting


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    ("AGM") on March 29, 2018 and paid in three installments. The dividend paid amounting to TRY 1,010.0 million in 2019 relating to the year 2018 was approved by the AGM on September 12, 2019, and paid on October 31, 2019. The dividend paid relating to the year 2019 amounting to TRY 811.6 million in 2020 was approved by the AGM on October 21, 2020, and paid on November 30, 2020. The dividend relating to the year 2020 amounting to TRY 2,585.8 million was approved by the AGM on April 15, 2021 which will be paid in three installments.

Dividends per share were computed over 2,200,000,000 shares.

Gross margin is calculated as total gross profit divided by total revenue.

Adjusted EBITDA is a non-GAAP financial measure that is defined as the profit of the Company for the period before finance income, finance costs, income tax expense, other income, other expenses, gain or loss from discontinued operations, share of profit or loss of equity accounted investees and depreciation and amortization. A reconciliation of Adjusted EBITDA to profit for the year is presented below.

Capital expenditure in 2018, 2019 and 2020 includes the impact of IFRS15 and IFRS16 adjustments amounting to TRY 3,000.5 million, TRY 2,441.5 million and TRY 3,365.4 million, respectively.

Non-IFRS measures

        Adjusted EBITDA is a non-GAAP financial measure that is defined as the profit of the Company for the period before finance income, finance costs, income tax expense, other income, other expenses, gain or loss from discontinued operations, share of profit or loss of equity accounted investees and depreciation and amortization. Our management reviews Adjusted EBITDA as a key indicator each month in monitoring our financial performance. Net income is also considered by our management as an indicator of our overall business performance, which includes results from our operations, financing and investing activities. Adjusted EBITDA is not a measurement of financial performance under IFRS 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.

        Adjusted EBITDA, among other measures, facilitates performance comparisons from period to period and management decision making. It also facilitates performance comparisons from company to company, subject to differences in the way it is calculated by different companies. Adjusted EBITDA as a performance measure eliminates potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact of changes in effective tax rates on periods or companies) and the age and book depreciation and amortization of tangible and intangible assets (affecting relative depreciation and amortization expense). Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in evaluating the performance of other mobile operators in the telecommunications industry in Europe, many of which present Adjusted EBITDA when reporting their results.

        Nevertheless, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation from, or as a substitute for analysis of, our results of operations, as reported under IFRS.

        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 excludes the share of profit or loss of equity announced investees and discontinued operations;


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

    it excludes depreciation, amortization and impairments and 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 does not reflect other income and expense items which are generally beyond the scope of our ordinary operations;

    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 from how we do, which may limit its usefulness as a comparative measure.

        We compensate for these limitations by relying primarily on our results under IFRS 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, from net profit, 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,  
  2020   2019   2018   2017   2016  
  (Million TRY)

Profit for the year

    4,239.6     3,276.7     2,177.3     2,037.8     1,543.8  

Gain or (loss) from discontinued operations

        772.4             (42.2 )

Income tax expense

    (387.2 )   (785.6 )   (495.5 )   (571.8 )   (423.2 )

Consolidated profit before income tax

    4,626.8     3,289.9     2,672.8     2,609.5     2,009.1  

Share of loss of equity accounted investees

    (13.8 )   (15.7 )   (0.1 )        

Depreciation and amortization

    (5,974.8 )   (5,046.6 )   (4,288.0 )   (2,597.0 )   (2,203.3 )

Other operating (expense), net

    (523.3 )   (346.6 )   (140.1 )   (698.9 )   (234.2 )

Net finance (costs)

    (1,131.7 )   (1,727.7 )   (1,687.0 )   (322.9 )   (172.8 )

Adjusted EBITDA

    12,270.3     10,426.4     8,788.0     6,228.3     4,619.5  


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        The following table presents selected operational data:

I. Operating Results

  As of and for the
year ended December 31,
  2020   2019   2018  

Industry Data


Population of Turkey (in millions)(1)

    83.6     83.2     82.0  

Turkcell Data(2)


Number of mobile postpaid subscribers at end of period (in millions)(3)

    22.0     20.4     18.8  

Number of mobile M2M subscribers at end of period (in millions)

    2.8     2.6     2.4  

Superbox subscribers at end of period (in thousands)(4)

    591.2     323.2     33.5  

Number of mobile prepaid subscribers at end of period (in millions)(3)

    11.5     12.4     14.9  

Number of fiber subscribers at end of period (in thousands)

    1,664.3     1,484.7     1,385.6  

Number of ADSL subscribers at end of period (in thousands)

    707.6     719.1     905.6  

Number of IPTV subscribers at end of period (in thousands)

    871.3     719.7     613.4  

Total Turkcell Turkey subscribers at end of period (in millions)

    36.7     35.7     36.7  

Total Turkcell Group subscribers at the end of period (in millions)(5)

    47.9     46.7     48.9  

Mobile average monthly revenue per user (in TRY)(6)

    45.5     39.8     33.9  


    59.1     56.5     48.3  

Postpaid (excluding M2M)

    67.0     64.3     55.0  


    21.8     18.3     16.9  

Fixed residential average monthly revenue per user (in TRY)(6)

    69.6     63.2     55.2  

Mobile average monthly minutes of use per subscriber(7)

    518.7     415.3     359.5  

Mobile churn (monthly)(8)

    2.3%     2.7%     2.1%  

Fixed churn (monthly)(9)

    1.9%     2.1%     1.8%  

Number of Turkcell employees at end of period

    4,028     4,060     4,065  

Number of employees of consolidated subsidiaries at end of period(10)

    24,675     21,813     20,120  

The population of Turkey for 2020, 2019 and 2018 is based on TUIK's announcements.

For a discussion of how these metrics affect our revenues, please see "Item 5A. Operating Results,—VI. Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019—a. Total Revenue".

Subscriber numbers do not include subscribers in Ukraine, Belarus, and the Turkish Republic of Northern Cyprus.

Superbox subscribers are included in the number of mobile subscribers.

Subscriber numbers include subscribers in Ukraine, Belarus, and the Turkish Republic of Northern Cyprus.

We calculate average revenue per user ("ARPU") using the weighted average number of our mobile or fixed subscribers, as relevant, in Turkey during the period.

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 mobile subscribers in Turkey for the year divided by twelve. We historically recorded revenues generated through TV business under Turkcell Superonline and presented its ARPU within fixed residential ARPU. As announced, our TV business has become a standalone subsidiary. In order to reflect this change in our organization, as of the third quarter of 2020, we have reclassified mobile TV ARPU from fixed residential ARPU to mobile ARPU. We note that


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    mobile TV revenues are generated by mobile subscribers. IPTV revenues will continue to be recorded under Turkcell Superonline and included in fixed residential ARPU. For comparability purposes, we provide ARPU data for the last three years, revised to reflect this change.

Average monthly mobile churn rate represents the rate of mobile subscriber disconnections during a certain period and 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. See "Item 4.B. Business Overview—V. Churn" for information concerning subscriber disconnection policy, changes in the policy and change in presentation as of the third quarter of 2019 and as of 2020.

Average monthly fixed churn rate represents the rate of fixed subscriber disconnections during a certain period and 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 our fixed subscribers in Turkey that are both voluntarily and involuntarily disconnected from our network. Fixed churn rate includes switches between fiber and ADSL.

See "Item 6.D. Employees" for information concerning our consolidated subsidiaries.

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.

        Competition in the Turkish telecommunications market may adversely affect the growth of our business and our financial condition, and the competition that we face may evolve with our business strategy.

        The majority of our revenue comes from our operations in Turkey. Competition in this market and regulatory actions, in particular those that limit our ability to respond effectively to competitive pressures, may adversely affect the growth of our business and our financial condition. If the competition we face intensifies or the market slows or develops in unexpected ways, this could harm our business and financial condition.

        In our conventional Turkish telecommunications market, we currently face price competition on telecommunication services, in particular from two other operators, Vodafone Telekomunikasyon A.S. ("Vodafone") and Turk Telekomunikasyon A.S. ("Turk Telekom"). In 2018, following a default by Oger Telecom on the bank loans it used to finance its stake in Turk Telekom, Oger Telecom's 55% stake was transferred to a special purpose company established by the creditor banks. The creditor banks have announced the launch of a sale process for their stake in September 2019. We cannot predict how this situation will be resolved or whether there will be changes in its strategy or ownership in the meantime.


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The outcome of this situation could have a significant impact on the competitive environment in which we operate. More generally, we expect to experience continued price driven competition in our main markets. If we do not respond effectively to this competition, the growth of our business and our financial condition may be negatively affected.

        A key element of our strategy is to offer digital services. As a result, we find ourselves increasingly in competition with companies that specialize in the development of internet applications and services (namely "over-the-top", or "OTT" services). The leading companies in these businesses have the advantage of operating in relatively lightly regulated environments and are generally global entities (WhatsApp, YouTube, Spotify, Netflix, etc.), while our Company is, as of today, primarily a Turkey-based telecom company with a smaller global footprint operating in a heavily regulated market. Most of these global players have entered the Turkish market, thereby creating a highly competitive environment in these businesses, which may negatively affect the growth of our digital services businesses. Several of these global players' platforms are now offering local Turkish content in addition to their market-leading international content offerings, thereby improving their competitiveness. Notably, Netflix offers content that they produce locally which competes with the offering of our multi-screen TV platform TV+.

        In addition, newer applications from less well-known developers are constantly being introduced and may disrupt areas of the digital services industry in which we compete or seek to compete. These established and newer applications and services make use of the internet as a substitute for some of our more traditional services, such as messaging and voice. Reduced demand for these telecommunications services has had and are expected to continue to have an adverse impact on our revenues. Furthermore, other "traditional" operators in Turkey also offer such services that they have developed independently or in partnership with global OTTs as part of their offerings, thereby further increasing competition in the local market. Moreover, pirated digital content is provided by multiple online platforms in Turkey, some of which offer a large selection of high-quality content that is readily accessible online and through dedicated apps, which has significantly, and may continue to negatively, affect the demand for the digital content we offer, in particular our TV and music services, which has had and may continue to have an adverse impact on our revenues generated through these services. One of the keys to the competitiveness of our apps is their accessibility through smart phones, which could be adversely affected if their accessibility were not equal to that of competiting apps. As a result of Huawei being placed on a US trade blacklist in 2019, resulting in Google removing the licensed version of its Android mobile operating system from Huawei devices, the development of the mobile apps we offer may become more costly and time-consuming as these will have to be adapted for Huawei's upcoming Harmony app ecosystem.

        In our conventional telecommunications business, in the past, Turkey's principal telecommunications regulator, the ICTA, has interfered with our ability to price our services and respond to competitive pressures. Regulatory actions, in large part from the ICTA, have been a significant factor in shaping the development of the Turkish market and in our ability to respond to changes in the market. Regulatory actions have often favored our competitors, such as interconnection rates which have been set asymmetrically and have facilitated increased competition. It is possible that the ICTA may also act to regulate other areas of our business, including data and digital services, and we cannot predict the impact that such regulation would have on our ability to execute our strategy and on our competitive position. In some businesses, we are dependent on our competitors for certain services that we provide. For example, we are reselling XDSL from the incumbent operator Turk Telekom and we are dependent on their service quality in this business. Therefore, any delay or negligence of Turk Telekom could result in dissatisfaction of our customers and lead to churn of our XDSL subscribers. Competition in the market may also be adversely affected by changes in a number of other areas that are not specific to telecommunications, such as taxes (in particular taxes on our services and on mobile devices), increases in interest rates, depreciation of the Turkish Lira against the U.S. Dollar or Euro, adverse macroeconomic developments and unfavorable changes in consumer behavior. Any one of these could in turn adversely affect the development of our business and consequently, our financial results.


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        Our growth strategy is partly dependent on new investment opportunities, which could affect our business and financial condition, and the return on our investments cannot be guaranteed.

        In addition to growing our existing business, our strategy for growth involves selectively seeking and evaluating new investment opportunities and participating in those meeting our criteria. We may pursue inorganic growth opportunities, principally in Turkey and in countries in which we are already present, in order to leverage our experience and technological base in mobile or fixed telecommunications and/or services. We may also pursue opportunities which include alliances, such as MVNOs, management service agreements, branding and know-how support services, digital services cooperation and marketing partnerships. The opportunities that we pursue in some markets, including Turkey, may include services that would be adjacent or complementary to the services that we already offer in such markets.

        Further, we may provide services in related areas and also consider investing or increasing our investments in business areas outside of the scope of our core business. Examples of opportunities that we have invested in outside of our traditional telecommunications activities include the following:

    As part of our strategic focus on growing our digital services business, we offer our digital services outside of Turkey to other operators through our subsidiary Lifecell Ventures Cooperatief U.A. ("Lifecell Ventures") and BiP Digital Communication Technologies B.V. ("BiP Digital"), both based in the Netherlands. Lifecell Ventures offers Turkcell's digital communications, entertainment and transactional applications and BiP Digital leads the global sales of our digital communication platform, BiP. Lifecell Ventures' business model is based on charging for implementation, support, maintenance, revenue sharing and license fees for the provision of digital service technology and know-how to other operators with re-branding option. We cannot ensure the commercial success or profitability of this business, which depends on our and our partners' ability to compete against global and local players in these markets, as well as the local competitive environment, consumer trends and preferences and market conditions, all of which may be significantly different from the Turkish market. Furthermore, as this business grows and expands into new markets, namely through additional digital services commercial agreements and similar agreements, we will face increasing reputational, regulative and commercial risks in those new markets, both directly and through our local partners.

    We are one of the six founding partners with a 19% share of a company named Turkiye'nin Otomobili Girisim Grubu Sanayi ve Ticaret A.S. ("TOGG"), established in June 2018 to design, develop and manufacture a range of electric and connected cars and establish a mobility ecosystem. The initial capital agreed upon stands at EUR 500 million, to which all parties have committed to contribute as per the level of their individual stakes. As of April 12, 2021, we have invested TRY 28.5 million as our share of the initial capital, and the total paid-in capital of TOGG stands at TRY 150 million. On December 27, 2019, TOGG showcased its C-SUV model and an example of its C-Sedan model, which are scheduled as the first two models in the product portfolio and on 18 July 2020, construction of the production facility in Gemlik was kicked-off. Our Company acts as the technology partner in this business in which we face new risks, namely in relation to development, technology, manufacturing process as well as financial risks.

    Our subsidiary Turkcell Enerji Cozumleri ve Elektrik Satis Ticaret A.S. ("Turkcell Enerji") has been engaged in electricity trading, wholesale and retail sales since 2017 through its electricity supply license from the Turkish Energy Market Regulatory Authority ("EMRA"). This business exposes us to various risks, including regulatory risk and the risk of trading electricity on commercially non-viable terms, the cost of electricity being significantly affected namely by exchange rates, the available supply of natural gas and regulatory actions. Further, the profit margins in this business are currently lower than that of our telecommunications businesses. In


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      addition, as the owned capacity in renewable energy investments of Turkcell Enerji increases, this might bring in additional operational, financial, regulatory and other risks.

    Our subsidiary Turkcell Odeme ve Elektronik Para Hizmetleri A.S. ("Turkcell Odeme" or "Paycell") is one of the founding partners of Sofra Kurumsal ve Odullendirme Hizmetleri A.S. ("Sofra"). Sofra is mainly involved in the provision of services via various means such as service coupons, meal coupons, meal cards, electronic coupons and/or smart cards, as well as vehicle payments and smart keys. The financial success of this company cannot be assured, as its growth is largely dependent on its capacity to penetrate a highly competitive market which is largely controlled by a few key players. Additionally, all three Sofra stakeholders share equal rights, namely in terms of board nominations, and the unanimous consent of the shareholders is required in the context of general assemblies, thereby possibly slowing down the decision-making process and affecting our ability to execute business decisions and take other actions that we consider to be in the best interest of the company.

        We also are involved in various other "techfin" businesses, for example relating to financing and insurance activities, in particular through our Turkcell Finansman A.S. ("Financell" or "Turkcell Finansman") subsidiary.

        Additionally, we have been using our digital platforms more actively, namely our corporate website, our Digital Operator application, the Turkcell My Company app (for corporate curstomers) and their web versions as well as our new initiation of a technology and electronic goods marketplace, Turkcell Pasaj that was launched in December 2020. Growth in digital platforms has expanded our service and products offering which, in return, has brought along logistics and brand perception risks. Any failure in delivering any of these services or products on-time, for which we mainly depend on third-party service providers, may result in customer dissatisfaction, increase customer complaints and impact our brand perception, and result in additional operational, financial, regulatory and other risks.

        New investments may not achieve expected returns or returns that are in line with those of our core business in Turkey, which may result in high value erosion. In many of the markets and businesses in which we have invested, may invest or may increase our investment, it may take several years and significant expenditures to achieve desired profitability, if at all. As a converged player offering multiple telecommunications services, we may consider acquiring fixed operators in certain of the markets in which we operate. Any such acquisition would increase our exposure to the risks associated with these countries and these types of businesses. As a minority shareholder in an investment or a participant in a joint venture, we might encounter difficulties in protecting our shareholder rights. Furthermore, we may face risks in respect of the actions of the other parties in the investment or venture, for example violating anti-corruption laws such as the U.S. Foreign Corrupt Practices Act ("FCPA") and European Union regulations as well as applicable economic sanctions and embargoes and other risks. For further information relating to the corruption and sanctions laws to which we are subject, see—"If we, our local partners with whom we enter into cooperation agreements or similar agreements, or one of our key suppliers fail to comply with laws and regulations regarding unethical business practices, including bribery and corruption, and international sanctions, this could adversely affect our business and financial condition." below. In addition, if an asset in which we have invested does not provide the expected returns, we may consider disposal at a sale price that may be below carrying value or liquidation.

        Any instability in the political environment and/or downturn in the economy, as well as volatile international markets, in particular as a result of the ongoing COVID-19 pandemic, in Turkey and/or internationally may have an adverse effect on our business and financial condition.

        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 economy and political environment have had and are likely to have a material adverse effect on our business and financial


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condition. The performance of the Turkish economy has been and may continue to be affected by global, regional and domestic economic and political developments. The COVID-19 pandemic has created additional uncertainty regarding the outlook for Turkey and for our business.

        Turkey has, from time to time, experienced volatile political, economic and social conditions. Since 2002, the AK Party (the Justice and Development Party) won governing majorities four times during a period in which Turkey's economy generally enjoyed growth and stability. Turkey held its inaugural presidential election in 2014, based on the constitutional changes implemented following the constitutional referendum held in 2007. Recep Tayyip Erdogan, leader of the ruling AK Party, won the election in the first round. On April 16, 2017, a majority of Turkish voters approved a referendum amending certain articles of the Turkish Constitution to expand the powers of the president to create an executive presidency. Turkey's political stability has been affected by the coup attempt against the government in power in 2016. In June 2018, Turkey held its first dual parliamentary and presidential elections, and then-President Recep Tayyip Erdogan won in the first round and became the Executive President for the next five years.

        In 2019, policymakers introduced easing through several channels in a bid to rapidly return the Turkish economy to growth. Starting in July 2019, the Central Bank of the Republic of Turkey ("CBRT") cut its policy rate by 1200 bps in total to 12% by the end of the year. Growth continued in the first quarter of 2020, 4.46% year-on-year. Combined with the hike in the demand for US dollar, global volatility and fragility of emerging markets, the Turkish Lira depreciated by 18% between March and May of 2020. The second quarter of 2020 reflected the adverse effects of the COVID-19 pandemic with a 10.30% contraction in the economy. In May 2020, the Turkish government began lifting COVID-19 restrictions gradually and eased fiscal policy by namely introducing short-time working allowance and tax deferrals. Also, the economy has been supported with credit-channel stimulus by state-owned banks and through monetary expansion. As a result of fiscal and monetary support, the Turkish economy grew 6.29% year-on-year in the third quarter of 2020. On the other hand, these steps resulted in deterioration in current account deficit and inflation. Year-end 2020 inflation reached 14.60%. Turkey tightened its monetary policy in response to the rise in inflation. The CBRT and the Turkish Banking Regulation and Supervision Agency ("BRSA") implemented normalization steps including increasing the policy rate to 17%, implementing orthodox policies by funding banks with only one-week repo channels, emphasizing financial stability, changing banks' reserve requirement regulations to discourage them to grow their Lira loan books and increasing swap limits with foreign banks. Moreover, the asset rule ratio was removed starting December 31, 2020 which may lead to a slowdown in future credit growth. These positive steps helped Turkish assets to gain value and Turkey's credibility to improve in the eyes of foreign investors. Due to the pandemic, the 12-month cumulative budget deficit widened to around 3.42%. Turkey had 5.87% growth in the fourth quarter year-on-year. In January and February 2021, CBRT kept policy rate constant at 17% in January and February. CBRT increased policy rate by 200 bps on March 18, 2021 to 19%, because of inflationary risks stemming from international developments and accelerating domestic loan growth. On the other hand, in March 2021, the Turkish Lira depreciated by approximately 13% following an unanticipated change at the governor of the CBRT on March 20th. New governor stated that policy rate will be above inflation until permanent decline in inflation is secured. Exchange rate developments which are driven by changes in global financial conditions and Turkey's risk premium is likely to affect monetary policy. Furthermore, Turkey faces the ongoing possibility of U.S. sanctions against Turkey since the detainment of Pastor Brunson and the ongoing Halkbank case involving criminal charges against the Turkish state-owned bank Halkbank alleging that it helped Iran evade U.S. sanctions. Moreover, the acquisition of Russian S-400 air defense systems caused the U.S. to impose sanctions through the Countering America's Adversaries Through Sanctions Act (CAATSA) on Presidency of Defence Industries in Turkey. While these sanctions have not had a significant impact on the Turkish economy, the scope and intensity of U.S. sanctions, and, in turn, their effect on the Turkish economy, may evolve. Additionally, Turkey faces the risk of sanctions from the European Union, namely in as a result of its drilling


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activities in the Eastern Mediterranean, as well as its decision to reopen the coastline of Varosha in Northern Cyprus in October 2020. These and other sanctions or the perceived threat of sanctions may result in a weakening of capital inflows or in capital outflows, external liabilities and pressure on inflation and may individually or in the aggregate adversely affect the Turkish economy and, in turn, our business, financial condition and results of operations.

        Any deterioration in loans or in the general economic outlook may negatively affect our mobile and finance businesses along with other industries. Geopolitical and domestic political factors are other sources of uncertainty and impose further risks on the country's economy. More generally, in our view, among the major threats to the global economy in 2021 are inefficient or low efficacy of vaccination, new variants of the virus, weak global growth, and trade tensions between U.S. and China. As the largest exporting partner, a slowdown in Germany and the Eurozone presents an important risk to the Turkish economy. The effect of prolonged low energy prices on commodity-exporting countries in the region such as Russia, Saudi Arabia and Iran may negatively affect the terms of trade between these countries and Turkey. Also, fragile growth outlook in Turkey's key export destinations and geopolitical risks stemming from instability in Iraq, Syria, Iran, Georgia, Cyprus, Egypt, Tunisia, Israel, Armenia, Ukraine and Russia are additional sources of risks for Turkey. Since December 2010, political instability has increased markedly in a number of countries in the Middle East and North Africa, such as Libya, Tunisia, Egypt, Syria, Jordan, Bahrain and Yemen. As a result of the conflicts in Syria, millions of Syrian refugees have fled to Turkey and more can be expected to cross the Turkish-Syrian border if the unrest in Syria continues or escalates. Any continuation or escalation of political instability or international military intervention in Syria may act as a destabilizing factor for Turkey. The high number of refugees within Turkey's borders and foreign intelligence agents infiltrating both refugee camps and local communities remain current threats. Also, tensions between Armenia and Azerbaijan over the disputed region Nagorno-Karabakh, disputes over Mediterranean gas exploration of Turkey and growing tension between Russia and Ukraine in Donbass are possible threats.

        The COVID-19 pandemic has caused substantial slowdown in the global economy, as evidenced by the sharp fall in investments, exports and industrial production in the second quarter. As the COVID-19 spread globally, financial markets factored in higher risk in their prices and experienced historical levels of volatility and sell-offs. As also indicated in the above paragraphs, Turkey has been and will continue to be affected by this pandemic. Although the current vaccine roll-outs in Turkey and internationally may decrease the negative effects of the pandemic, low efficacy and new variants of COVID-19, among other factors, may lead to renewed lockdowns and a slowdown in global economic activity. Should the measures taken by the governmental bodies be ineffective in countering the effects of the pandemic on the economy, customers in our home market and abroad, both individuals and corporates, could, namely, experience a significant deterioration in purchasing power, leading to a material negative impact on our revenues and a surge in corporate bankruptcies. A decrease in the financial condition of our existing and/or potential customers could in turn lead them to opt for cost-feasible tariffs, thereby negatively affect our upselling potential, or to ask for freeze of our services, which may ultimately result in higher level of churns. In addition, Government's measures will be costly and will thus add to Turkey's state debt and may eventually result in additional pressure on the value of the TRY relative to other currencies. Moreover, measures taken by the public and private sectors both in Turkey and abroad in response to COVID-19 pandemic, including travel restrictions, the closure of stores (including ours), the promotion of social distancing and the adoption of work-from-home by companies and institutions, could have a material impact on the amount and ways our customers use our networks and other products and services and, in turn, on our business and the level of investment requirement. Notably, the closure of our stores, whether partial or complete, has and is expected to continue to have a negative impact on our sales. As such, we have experienced a decrease in gross mobile subscriber acquisitions as well as a decrease in the use of some of our mobile applications resulting from a decrease in the mobility of our customers. Further, our subscribers' use of home internet services has increased, resulting in lower use of our mobile data services. Although we have


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made significant investments to adapt our network to the increase in internet traffic, no assurance can be given that we will successfully meet demand or that we will monetize this investment. In addition, no assurance can be given that additional unexpected cash outflows will not be required in response to COVID-19 pandemic, which could further erode liquidity and increase borrowing requirements. Furthermore, the substantial decrease in international travel, which has had and will continue to have an adverse effect on our roaming revenues (inbound and outbound) and results of operations. Additionally, our mobile network has experienced increased traffic, which in turn might result in an increase in capex requirements and have an adverse impact on our cost of providing competitive capacity and also on our results of operations. Although we have been able to adapt our business operations in Turkey and abroad to the conditions under the COVID-19 pandemic, its impact on our business and financial condition may be more detrimental than we can envisage should the duration and severity of the pandemic be beyond our assumptions.

        Low efficacy of vaccination and inflationary pressures as a result of the factors described above may have a negative impact on consumer sentiment, resulting in a decrease in sales which could have an adverse effect on our business, financial condition and results of operations. Furthermore, geopolitical risks are currently prevailing, primarily on the basis that relations with the U.S. continue to be fragile on various fronts, and this could potentially lead to volatility in the future. There can be no assurance that the political and more importantly geopolitical situation within Turkey or its neighboring countries will not deteriorate. The rise of protectionism and the threat to globalization is likely to impact political and economic affairs. These may individually or in the aggregate adversely affect the Turkish economy and, in turn, our business, financial condition and results of operations.

        Foreign exchange rate risks could affect the Turkish macroeconomic environment and could significantly affect our results of operation and financial position in future periods if hedging tools are not available at commercially reasonable terms.

        We are exposed to foreign exchange rate risks as a result of the fact that our income, expenses, assets and liabilities are denominated in a number of different currencies, primarily Turkish Lira, U.S. Dollars, Euros, Chinese Renminbi ("CNY"), Ukrainian Hryvnia ("UAH"), and Belarusian Ruble ("BYN"). In particular, fluctuations of Turkish Lira, Ukrainian Hryvnia, Belarusian Ruble, and Chinese Renminbi versus U.S. Dollars and Euros, have had and may have an unfavorable impact on us. In particular, a substantial majority of our equipment expenditures is currently, and is expected to continue to be, denominated in U.S. Dollars and Euros, while the revenues generated by our activities are denominated largely in local currencies, in particular the Turkish Lira, Ukrainian Hryvnia and Belarusian Ruble. As of December 31, 2020, our total debt was TRY 21,586 million (including TRY 2,099 million of lease obligations). Consolidated debt breakdown (excluding lease obligations) as of December 31, 2020 was as follows: Turkcell Turkey's debt was TRY 17,469 million, of which TRY 10,197 million (US$ 1,389 million) was denominated in US$, TRY 5,624 million (EUR 624 million) in EUR, TRY 283 million (CNY 253 million) in CNY and the remaining TRY 1,364 million in TRY. Our finance company debt was TRY 1,038 million, of which TRY 259 million (US$ 36 million) was denominated in US$, and TRY 465 million (EUR 52 million) in EUR with the remaining TRY 314 million in TRY. The debt balance of lifecell LLC ("lifecell") was TRY 980 million, all denominated in UAH.

        Additionally, we are exposed to currency mismatches with respect to certain capital expenditures and off-balance sheet obligations, in particular with our universal service obligations for the installation of infrastructure in uncovered areas of Turkey, a service that we have contracted to provide for an amount in TRY, but which requires expenditures in foreign currencies (primarily in USD, but also Euro and Chinese Renminbi). Also, the financing of infrastructure investments, potential license fee payments and any other potential investment opportunities could lead to an increase in our U.S. Dollar and/or Euro debt, further increasing our currency exposure. The effect of the depreciation in TRY is typically reflected in inflation rates in 3-6 months on average. The exchange rate pass through in


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Turkey is reflected in the inflation rate with an additional 1.5-2.0 points in response to 10%-15% depreciation in domestic currency. See "Item 8. Financial Information" and Note 36 to our audited Consolidated Financial Statements included in "Item 18. Financial Statements" of this annual report on Form 20-F. Devaluations that are not matched by adjustments in our tariffs have had, and may continue to have, an adverse effect on our results of operations and our liquidity. See "Item 4B. Business Overview—IV. Tariffs". We are also exposed to currency exchange rates on the prices of the smartphones that we rely on for the promotion of our digital and data services. After the 2008 financial crisis, with the flow of cheap funding, the Turkish economy experienced import driven growth. Therefore consumption patterns have shifted towards foreign currency denominated goods along with raw materials and intermediary goods used in production. Production has been negatively impacted by the price inflation of raw materials and intermediary goods. Depreciation in TRY triggered inflationary pressures which resulted in a deterioration in the purchasing power of consumers. Coupled with slow growth and low purchasing power, consumer demand has fallen. Turkish Lira depreciation has made smartphones that are procured in hard currencies more expensive for our customers, thus potentially reducing new sales of such devices and curbing the market for the services, which has and may continue to have a negative impact on our revenues and profitability.

        According to the CBRT, the TRY depreciated by 23.6% against the U.S. Dollar and 35.4% against the Euro in 2020. As of April 12, 2021, according to the CBRT, the TRY has depreciated a further 10.9% against the U.S. Dollar and 7.4% against the Euro compared to the closing rates on December 31, 2020. Our currency hedging strategy includes derivative transactions and accumulating hard currency by using Turkish Lira cash from our operations. In addition, we have been further diversifying our currency exposure by entering into agreements with our vendors in local currencies, particularly in Chinese Renminbi.

        While we are currently able to hedge our principal TRY exposure to the U.S. Dollar and the Euro on commercially reasonable terms, no assurance can be given that we will continue to be able to do so under all circumstances in the future, in particular taking into account the context created by the COVID-19 pandemic, which has had, and is likely to continue to have, a material impact on the volatility of global markets which, in turn, may lead to a material increase in our financing costs. The increase in public debt in Turkey may also result in increased pressure on the value of the TRY. For further information relating to our financing obligations, see—"Reduction in cash generated from operations and increased capital needs may increase our borrowing requirements, which may increase our financing costs and our exposure to the risks associated with borrowing" below. In several of the other countries in which we have businesses, in particular Ukraine and Republic of Belarus ("Belarus"), there are no or few tools to hedge foreign exchange rate risks effectively due to restricted and undeveloped financial markets in these countries. Any significant fluctuations in the value of the TRY relative to other currencies could have an adverse effect on our business, financial condition and results of operations.

        Reduction in cash generated from operations and increased capital needs may increase our borrowing requirements, which may increase our financing costs and our exposure to the risks associated with borrowing.

        We continue to experience challenging macroeconomic, regulatory and competitive conditions in our markets that may reduce cash generated from operations, and we may continue to face increased funding needs, in particular to finance our technological expansion and investments. In the previous three years, this included the payment of Ukrainian 4.5G license fee and related capital expenditures in Turkey and Ukraine, as well as having a finance company in Turkey. Furthermore, in 2019 and 2020, we paid TRY 1.0 billion and TRY 0.8 billion dividend, respectively, and made capital expenditures and debt repayments.


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        Looking ahead, we expect to continue to experience moderate cash outflows in relation to new licenses and network roll-out, as well as continuing fiber development and dividend payments. Our liquidity position may also be negatively impacted if our shareholders request dividend payments which are higher than the trend of our historic dividend pay-outs. Our working capital requirements have increased in the last three years in particular after our finance company began its operations. The BRSA's existing regulation imposing a cap on the number of installments with regard to consumer loans for mobile phones significantly decreased the demand for new loans and thus has reduced our related working capital requirement accordingly in the recent years. However, working capital requirements could once again increase should the BRSA increase the maximum number of instalments on mobile phone related loans which could drive the demand up considerably. These cash outflows have in the past reduced, and may continue to reduce, our liquidity. Reduced liquidity may lead to an increase in our borrowing requirements and thus our borrowing costs. Our borrowings may expose us to foreign exchange rate risk, interest rate risk and possibly, to increases in our total interest expense, each of which could have a material adverse effect on our consolidated financial condition and results of operations.

        We enter into derivative transactions and keep our cash in hard currencies to manage the risk relating to the Turkish Lira. For the year ended December 31, 2020, as a result of fair value changes in derivative instruments, net derivative assets of TRY 798.3 million are recognized in our consolidated financial statements. However, derivative transactions might have costs and may not fully cover all the risks faced by the Group, and significant judgment is used by our management to determine the fair value of these instruments due to the use of an internally-developed model, which includes significant assumptions related to the treasury curves and credit spreads. For a discussion of our critical accounting policies, see "Critical Accounting Policies" in Part III, Item 5Operating and Financial Review and Prospects. Furthermore, no assurance can be given that we will continue to have access to financing, or be able to conduct derivative transactions, on terms that are economically viable, or at all.

        As of December 31, 2020, our total debt was TRY 21,586.4 million, of which TRY 13,281.7 million consisted of financing obligations paying interest at fixed rates. The remainder of our debt portfolio pays interest at floating rates, which has been decreasing within the last year but could expose us to increased costs if rates increase. In 2015, we arranged a number of financing facilities with a principal amount of approximately $2.9 billion (partly in U.S. Dollars and in Euro) for the refinancing needs of the Company and our subsidiaries and to fund infrastructure investments and any other potential investment opportunities, which has significantly increased our indebtedness. Of this financing amount, we issued a 10-year Eurobond with an aggregate principal amount of $500 million and utilized $500 million in October 2015, which was followed by a EUR 1.25 billion 10-year loan facility from the China Development Bank ("CDB"). EUR 500 million of this facility was immediately utilized. EUR 195 million, USD 325 million and RMB 251 million were subsequently utilized from this facility until its availability period expired in April 2019. Furthermore, in June 2016 we utilized USD 500 million and EUR 445 million under a 5-year club loan agreement with five international banks, the repayment of which was completed on March 23, 2020.

        In April 2018, we issued another 10-year Eurobond with an aggregate principal amount of $500 million and a fixed coupon rate of 5.80% per annum in order to finance upcoming debt service. In 2019, we entered into a USD 150 million 10-year export finance facility covered by Exportkreditnämnden (EKN) of Sweden in order to finance our procurement from a global vendor, and a EUR 50 million three-year sustainability linked loan with an international lender in order to refinance existing indebtedness. In March 2020, we signed a EUR 50 million five-year green loan to be utilized to finance sustainable investments such as renewable energy, energy efficiency, green digital services and green buildings under the internationally recognized Green Loan Principles. In August 2020, we signed a EUR 500 million loan package with CDB which can be utilized in both EUR and RMB terms for financing Turkcell Group's infrastructure investments in the next three years. In


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December 2020, we entered into a USD 90 million, 10-year export finance facility in order to finance our procurement from a global vendor between 2021 and 2023. No assurance can be given that unexpected cash outflows will not be required, which could further erode liquidity and therefore increase borrowing requirements.

        In February 2020, a law was enacted in Turkey (Law No. 7222 regarding Amending Banking Law and other Laws) which enables investors to act collectively according to changing conditions, and issuers and investors to agree on changing the terms and conditions of debt instruments in accordance with their interests, which may have a negative effect on our consolidated financial condition and results of operations.

        On July 27, 2017, the UK Financial Conduct Authority (the "FCA") announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021 and, on March 5, 2021, the FCA further announced the dates on which panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available (immediately after December 31, 2021, in the case of all GBP, EUR, Swiss franc and Japanese yen settings and the 1-week and 2-month USD settings, and immediately after June 30, 2023, in the case of all remaining USD settings). Drawings under the EUR 690 million CDB facility signed in March 2018, first tranche of USD 150 million export finance facility signed on February 25, 2019 and USD 50 million JP Morgan facility signed on March 19, 2018 will bear rates of interest linked to, among other benchmarks, LIBOR, and the agreements related to these facilities will include a rate-replacement mechanism providing for the replacement of LIBOR with a risk-free rate plus a credit adjustment spread. The elimination of the LIBOR benchmark will result in the rate of interest in respect of LIBOR-linked borrowings under the EUR 690 million CDB facility signed in March 2018, first tranche of USD 150 million export finance facility signed on February 25, 2019 and USD 50 million JP Morgan facility signed on March 19, 2018, being determined with reference to such applicable compounded risk-free rate, which could result in such borrowings being subject to a rate of interest that differs from what LIBOR would have been for an equivalent period.

        Moreover, subsequent changes in regulatory guidance, industry standards or market practice could result in further changes to ways in which LIBOR replacement mechanisms or risk-free rates are drafted, implemented or interpreted. In addition, the potential elimination of any other benchmark, changes in the manner of administration of any benchmark, or actions by regulators or law enforcement agencies could result in changes to the manner in which EURIBOR or similar benchmarks are determined, which could require an adjustment to the terms and conditions, or result in other consequences, in respect of any debt linked to such benchmark. Any such change, as well as manipulative practices or the cessation thereof, may result in a sudden or prolonged increase in reported EURIBOR or similar benchmarks (including any LIBOR replacement), which could have an adverse impact on our ability to service debt that bears interest at floating rates of interest.

        In the last three years, we have also borrowed to finance the business of Financell, our finance company and the working capital requirements of our subsidiary in Ukraine. We may continue borrowing to finance our infrastructure investments, finance company (depending on how the market evolves), loan repayments and any other potential investment opportunities. Additionally, we have continued to make excess TRY cash of Turkcell available to other group companies located in Turkey as short-term TRY loans on an arm's length basis in line with prevailing market conditions under the framework shareholder loan agreement signed with respective group companies in 2018.

        Some of our borrowing agreements contain cross default clauses, which could trigger an event of default under such agreements in the event of a default by a Group company under its own borrowing agreements (such default by that Group company being subject to certain thresholds).


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        Regulatory decisions and changes in the regulatory environment in the sectors in which we operate could adversely affect our business and financial condition.

        We are subject to a significant range of legislative and regulatory requirements, both in Turkey and internationally. Compliance with new and existing laws and regulations has had, and is likely to continue to have, a significant impact on the ways in which we do business. This may include but is not limited to the impact on our ability to set our pricing and offer new and existing services, including converged services, on customer use of our services and ability to terminate subscriber contracts, the way we handle, process and store customer data, the terms of our subscriber contracts, the way we communicate with customers, including our ability to contact subscribers with our offers, our ability to implement any planned or future network or infrastructure sharing initiatives as well as our ability to obtain and maintain licenses. 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. Complying with regulations may be costly, and failure to comply, whether or not we agree that such failure took place, may lead to significant penalties, criminal prosecution, adverse publicity and the loss of licenses in the affected line of business or country and could adversely affect our business, financial condition and cause significant reputational and brand damage with customers, investors and regulators. Furthermore, our licenses generally have specified terms and renewal is not assured. For more information on regulation and how it may impact our business, see "Item 4.B. Business Overview—XII. Regulation of the Turkish Telecommunications Industry".

        Pricing is one of the areas in which we are subject to regulation. In the recent past, the ICTA and Ministry of Transport and Infrastructure regulations and actions relating to our voice, SMS, data and value added/digital services have negatively affected our pricing and our ability to design and launch campaigns and offers. For example, in 2018 the ICTA adopted a decision, which sets new price caps applicable to fees for activation/ deactivation, name/title change, account takeover, MSISDN change, SIM card change and detailed bill information. Following this decision, at the start of 2019 new price caps applicable to calls, SMS, international calls and directory assistance service have also been introduced.

        In addition, interconnection rates are still set by the ICTA, and further regulatory actions may adversely affect our Company's wholesale revenues. Namely, the ICTA has determined and may in the future determine that we are an operator with significant market power and as a result impose certain constraints on us, both of which may adversely affect our business and financial condition. For more information, see "Item 4.B. Business Overview—XII. Regulation of the Turkish Telecommunications Industry".

        On 28 July 2020, Turkey amended Law No.5651 on the Regulation of Broadcasts via the Internet and the Prevention of Crimes Committed Through such Broadcasts effective from October 1, 2020, thereby imposing significant obligations on major social media providers, such as the requirement to appoint a representative in Turkey and to host local user data in Turkey, as well as process content removal requests and report these to ICTA. Social media providers that do not comply may face throttling of their traffic bandwidth by up to 90%, which may affect data usage on our networks and, in return, data revenues.

        Expectations and standards with regard to privacy and data protection have been increasing both globally and in Turkey. Stricter privacy laws and regulations are being adopted or existing legislation is being more strictly interpreted and enforced by the authorities, which require companies to invest more diligence and effort towards ensuring compliance. While we are primarily subject to Turkish data protection legislation, the European General Data Protection Regulation and other foreign privacy legislation also have the potential to affect our business through some of our subsidiaries established in the EU and other countries, as well as some of our products and services provided to persons in the EU. Breach of such regulation may potentially result in penalties up to a maximum of 4% of global


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annual turnover or EUR 20 million. Ensuring compliance with these various privacy legislations is a long-lasting commitment, which requires substantial costs, and it is possible that despite our efforts, governmental authorities or third parties will assert that our business practices fail to comply. Changes in privacy legislation or in interpretation of the existing legislation could have an adverse effect on our business and data processing operations and/or subject us to significant civil and criminal penalties, business disruption or reputational harm.

        Furthermore, given that we process personal data, namely of our customers and employees, we are subject to several data protection laws, among which the Law "No. 6698 on The Protection of Personal Data" and the regulations of the Turkish Personal Data Protection Authority, as well as data protection legislation under the Electronic Communications Law and the ICTA's data protection regulations. We are further subject to the Capital Markets Board's ("CMB") Communiqué on Information Systems Management numbered VII-128.9 and Communiqué on Independent Audit of Information Systems numbered III-62.2, which entered into force on January 5, 2018 and introduced new obligations with regards to information systems for certain legal persons. For more information, see "Item 4.B. Business Overview—XII. Regulation of the Turkish Telecommunications Industry". Should we fail to properly implement and comply with these data protection laws and regulations, we may face administrative fines of up to approximately TRY 2.0 million (as at April 12, 2021 and as is subject to a revaluation each year) per breach, depending on the nature of the failure. We may also face other regulatory actions by the Personal Data Protection Authority, as well as administrative fines equal to up to 3% of yearly net sales. Changes to such data protection laws may impose more stringent requirements for compliance and result in significant penalties for non-compliance. Additionally, our Company collects a significant amount of personal data, notably credit card information, from our digital service products users, such as BiP, fizy, lifebox and TV+, and the scope of this data collection has increased significantly following the implementation of artificial intelligence across our platforms aimed at providing personalized content to our customers. If we or those with whom we share personal data fail to comply with these laws and regulations, our reputation could be damaged, possibly resulting in a loss of future business. In addition, the cost and operational consequences relating to the response to breaches and the implementation of remediation measures could be significant.

        On June 7, 2018, the Ministry of Transport and Infrastructure informed operators such as Turkcell that they must primarily request from the most prevailing operator in terms of infrastructure in Turkey—which is Turk Telekom—to perform the excavation work on their behalf. Although Turkcell filed a lawsuit to annual this measure, no assurance can be given that we will be successful in doing so. This situation has negatively affected our ability to expand our fiber network and may affect our future investments.

        Taxation and charges are also areas in which we are subject to specific regulations. Notably, we are subject to a Special Communication Tax ("SCT"), which was set at 7.5% across all product lines throughout the year 2020 and was further increased to 10% effective January 30, 2021. Transceiver and receiver unit surcharge payments are set at 5% of monthly net sales since January 2018. Such taxes have affected, and could continue to adversely affect, consumer demand for products and services, and, therefore, our results of operations.

        We are increasingly involved in providing financial services to our customers. As a result of our existing operations in finance, payment and e-money services, and insurance, we are subject to a variety of banking and finance laws and regulations (the principal regulators include the BRSA, the CBRT and the Insurance Directorate under Undersecretariat of the Treasury). Moreover, pursuant to our services such as TV and music, we are subject to broadcasting and copyright laws and regulations. Additionally, Turkcell Enerji, which is indirectly wholly-owned, holds an electricity supply license from EMRA for the purposes of electricity energy trading and wholesale and retail electricity sales. This company is subject to laws and regulations governing the electricity market in Turkey. Furthermore, Turkcell Foundation is


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exposed to various Turkish regulatory and legal obligations specific to foundations. As we enter new businesses, we will also be exposed to the regulatory regimes and decisions specific to those businesses.

        Notably, in February 2020, the Law No. 7222 Amending Banking Law and Certain Other Laws, Capital Markets Law Article No. 103 was amended so that administrative fines imposed by the CMB are indexed to public companies' financial performances instead of yearly updated fixed administrative fines so far. Accordingly, administrative fines are calculated up to a maximum of the greater of 1% of gross sales proceeds or 20% of pre-tax profit, which may have a significant negative impact on our results of operations.

        If we, our local partners with whom we enter into cooperation agreements or similar agreements, or one of our key suppliers fail to comply with laws and regulations regarding unethical business practices, including bribery and corruption, and international sanctions, this could adversely affect our business and financial condition.

        We are subject to various laws and regulations relating to unethical business practices, including bribery and corruption, and international sanctions. Bribery and anti-corruption laws in effect in many countries prohibit companies and their intermediaries from making improper payments to public officials for the purpose of obtaining new business or maintaining existing business relationships. Certain anti-corruption laws such as the FCPA also require the maintenance of proper books and records, and the implementation of controls and procedures in order to ensure that a company's operations do not involve corrupt payments. Since we operate in several countries, and given that some of our clients, or local partners with whom we enter into cooperation agreements or similar agreements, are government-owned entities and that our projects and agreements often require approvals from public officials, we face the risk that our employees, local partners, consultants or agents may take actions that are in violation of our policies and of anti-corruption laws. In many parts of the world where we currently operate or seek to expand our business, local practices and customs may be inconsistent with our policies, and could violate anti-corruption laws, including the FCPA and European Union regulations, as well as applicable economic sanctions and embargoes. Our employees, local partners or other parties acting on our behalf or with whom we enter into cooperation agreements or similar agreements, or our suppliers, could violate policies and procedures intended to promote compliance with anti-corruption laws or economic sanctions, regardless of whether we had participated in such acts or had knowledge of such acts at certain levels within our organization. Any of the foregoing could result in criminal prosecution and sanctions, fines, penalties, withdrawal of licenses against us, companies in which we invested, and our and their officers and employees and significant damage to our reputation, and negatively affect our competitive advantage and financial position. There can be no assurance that acts of corruption will not occur or be alleged in respect of any of our activities or those of our current or past affiliates.

        We have strong commercial ties to several Chinese vendors from which we have in the past purchased network equipment, and currently have a significant installed base of their equipment, including in the context of the development of our 5G network infrastructure and cloud and IT infrastructure. We also have access to financing from the CDB which facilitates the purchase of Chinese equipment. Should any one of these Chinese entities become subject to U.S. sanctions, or should we or any entity in our supply chain be compelled to terminate a relationship with a vendor as a result of the direct or indirect reexport restrictions implications resulting from an entity being added to the Entity List prohibitions of the U.S. Commerce Department's Bureau of Industry and Security (BIS), which would affect our ability to purchase their equipment in the future and require us to find alternative suppliers, or should we be compelled to terminate or suspend our relationships with these vendors for any other reason, namely as a result the ongoing tensions between China and the U.S., this may lead to an increase in our costs or otherwise affect our ability to develop and maintain our increasingly advanced network infrastructure and negatively affect our competitive advantage and financial position.


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        We hold interests in several companies that may expose us to various economic, business, 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 have and are likely to continue to expose us to economic, political, social, financial, regulatory, currency devaluation and legal risks. These risks have affected and could adversely affect our result of operations and the carrying value of assets in our financial statements.

        Through our subsidiaries in Turkey and internationally, we engage in businesses outside of the scope of our core telecom business. These other businesses are subject to risks that are in some respects different from those of our telecom business. In order to succeed in these new businesses, we will need to obtain the expertise required to compete and operate in these new businesses, which may be costly. No assurance may be given that we will succeed and that we will not incur losses that could adversely affect our business and financial condition. For example, several of our subsidiaries are providing financial services including, for instance, insurance, providing credit, payment intermediation and bill payment services, which are different from those in our traditional telecommunications activities and increase our exposure to certain risks that are common to both. Providing financing and financial services to our customers exposes us, notably, to liquidity and market risk, credit risk, fraud risk and cyber-attack risks, in particular with respect to credit cards and personal information that we process and hold. For additional information on the risks relating to the personal information that we process and hold, see—"Regulatory decisions and changes in the regulatory environment in the sectors in which we operate could adversely affect our business and financial condition". This includes through the expansion of our payment services company, Paycell in Turkey, Ukraine and the Turkish Republic of Northern Cyprus (limited services).

        We also have a finance company, Financell, which manages the working capital requirements and bad debt expenses arising from the demand in the Turkish market for bundled offers featuring both communications services and a communications device, particularly a smartphone or a tablet. Having commenced operations in 2016, Financell carried a total of TRY 2.1 billion in loans outstanding at December 31, 2020. Our cost of risk has improved to 2.4% in December 2020 from 3.2% in December 2019. This may increase in the event that our various lending criteria fail to preserve the quality of our assets, and/or in the event of economic activity and macroeconomic slowdown in Turkey and in Turkish Republic of Northern Cyprus, where, for the latter, we have offered consumer financing up until June 1, 2019. The foregoing may lead to losses and eventual tightening of lending criteria, which in turn may lead to a reduction of our loan portfolio, which is likely to affect the profitability of our finance company. Furthermore, the demand for loans might be negatively affected by prolonged lockdown measures limiting our store traffic, and financial conditions, particularly interest rates and FX rates since most devices' pricing is largely dependent on hard currencies. With regard to Financell's swap agreements, aimed at neutralizing the FX position created by FX funding, any volatility in financial markets may create mark to market gains or losses which could affect our profitability. We have reduced the paid-in capital of Financell from TL 575 million to TL 200 million in February 2021. Although this is intended to raise our debt to equity leverage, the funding need arising from this move may negatively affect our profitability if there is a significant hike in market interest rates.

        The large part of the Turkish financial sector, including banks, financial leasing and factoring companies, and financing companies, is regulated by the BRSA. The BRSA may enact changes in regulations regarding consumer finance activities, which might restrict part of our finance business. As such, initially on August 15, 2018, later on February 26, 2019 and most recently on January 14, 2020, restrictions on the number of installments depending on the purpose of the loan have been adopted through amendments in the relevant legislation. The maturity of certain type of loans (other than loans to consumers for housing finance and complementary goods and services in relation to home renovation/improvement, the financial leases for homes leased to consumers, other loans for the


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purpose of purchasing real estate, loans for the purpose of financing education and learning fees and loans for any refinancing of the same) are explicitly determined under the Regulation on the Principles regarding Incorporation and Activities of Financial Leasing, Factoring and Financing Companies. Accordingly, Financell may provide loans of up to three months for mobile phones with a retail price of TRY 3,500 and above and up to twelve months for mobile phones with a retail price of below TRY 3,500, down from twenty-four months on average up until mid-2018. This has negatively affected the growth of smartphone sales and the frequency of renewals in the Turkish market. The long term growth prospects of our mobile and digital services businesses depend in part on the continuing expansion of the number of smart phone users in the market. Furthermore, on November 14, 2018, the BRSA noticed the factoring, leasing and financial institutions via an article, restricting the distribution of dividends for 2018 and dividends earned before 2018 to only be distributed by prior approval of the BRSA. On January 28, 2021, the BRSA promulgated an additional article which restricted the distributions of dividends for 2020 and limited by 10% of the net profit of 2020 by prior approval of the BRSA. Further, starting from March 19, 2020, a "cultural fund" of 1% over import value is to be paid for imported or manufactured mobile phones which have voice recording qualifications. The President of Turkey was given the authority to increase the Special Consumption Tax rate on mobile phones from 25% to up to 50% since February 2019. An increase in this tax may negatively impact the number of mobile phones sold in Turkey. We cannot rule out the possibility of further increases in tax rates or new taxes and charges, including on mobile devices, data, and services. These restrictions may include a prohibition on financing of specific goods or services in the future. Further, we are diversifying Financell's portfolio with new products as well as new customer segments such as fiber/adsl customers, SMEs and corporates for their digital infrastructure needs, where the return on investment may not meet our expectations. More generally, the financing sector is rapidly evolving and no assurance can be given that we will be able to adapt to market trends and that new competitors will not emerge. If this were the case, we may not be able to realize the synergies that we expect from our finance business.

        Furthermore, our subsidiary Kule Hizmet ve Isletmecilik A.S. ("Global Tower") operates a large portfolio of telecommunication towers in several countries. In the event of expiry, non-renewal or termination of certain concessions or licenses of Turkcell, Turkcell may be forced to transfer to the ICTA the tower assets it owns where ground lease agreements are executed by Global Tower, which would lead to a loss of revenue and have an adverse effect on our business and results of operations.

        Turkcell Group has investments in several emerging or developing markets, including Belarus, the Turkish Republic of Northern Cyprus and Ukraine and has activities that involve other emerging or developing markets. Legal systems, institutions, commercial practices and economies in those markets tend to be relatively underdeveloped and some may also suffer from relatively high rates of fraud and corruption. Were we to be affected by fraud of corruption, we could incur significant penalties under applicable anti-corruption legislation, including the U.S. Foreign Corrupt Practices Act, as well as reputational harm. Turkcell Group also retains relevant risks with regards to its divested businesses. 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. 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. These factors could have an adverse effect on the demand for and the price of our shares. In this regard, we have and are likely to continue to experience issues in some of our international businesses that adversely affect our Company. Recent issues include the following:

    Our operations in Ukraine are adversely affected by the ongoing conflict with Russia, which has further intensified in the months leading to the filing of this annual report on Form 20-F. Weaknesses of state institutions, civil unrest and economic turbulence have also adversely affected the overall economic situation in Urkaine. As a result of the ongoing crisis in the


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      Crimea region following its annexation by the Russian Federation, we were eventually obliged to discontinue services in that region in the fourth quarter of 2014. We completely wrote-off our assets in the Crimea region, while retaining our license and frequency rights. We continue to evaluate our options with respect to the disposal of lifecell's assets in Crimea and the actions that we may take may raise challenges with respect to compliance with lifecell's license requirements. Furthermore, the current military and political crisis in the Eastern part (mainly in Donetsk and Luhansk, otherwise referred to as the ATO zone) with Russia remains unresolved and could lead us to evaluate our options in the Eastern region. The ongoing crisis may adversely affect the Ukrainian economy and our results of operations in Ukraine and/or the value and security of our assets and operations there. We are unable to predict the likely course or duration of these events, or the extent of the adverse impact that they have had and are likely to have on the telecommunications market dynamics and composition, our investment in Ukraine and our operations there.

    In Ukraine, according to National Bank of Ukraine ("NBU") the local currency, the Ukrainian Hryvnia ("UAH"), depreciated against the U.S. Dollar by 19.4% in 2020 following an appreciation by 14.5% in 2019. The UAH appreciated by 1.3% against the U.S. Dollar as of April 12, 2021 as compared to closing rates on December 31, 2020. Inflation followed a downward path until the last quarter of 2020, due to weakening food prices amid more ample supply and a decrease in economic activity. While the annual price inflation slowed to 5% in 2020, from 4.1% in 2019, several factors are expected to drive inflation in 2021, such as weak harvest impacting prices for a wide range of food items, strong recovery in wages, upward reviews in heating tariffs and high fiscal deficit. The pandemic led to a steady easing of the monetary policy by the NBU, which cut its key policy rate by 750bps, to 6.0% in 2020. Inflation on January and February were as 6.1% and 7.5%. NBU increased its key rate from 6.0% to 6.5% in March 2021 to prevent rapid inflation growth. There is a high probability that the key rate may be increased further throughout 2021 as a measure to keep inflation under control. Ukraine's key event risk is that its 2021 budget may need to be revised. At 5.5% of GDP, the 2021 budget deficit target is substantial. The government's ability to finance the deficit will depend directly on whether or not it has access to external markets and loans from the IMF and IFIs. Any delay in obtaining these loans adds risk to the budget deficit, which is planned to be covered through domestic government debt securities. As of December 31, 2020, our debt balance (excluding lease obligations) related to lifecell was UAH 3.6 billion (equivalent to TRY 943 million). lifecell's foreign currency revenues were 3.5% of its total revenues and its foreign currency operational expenses were estimated at 5.8% of its total revenues as of December 31, 2020.

    Our development strategy in Ukraine was marked by our acquisition in 2015 of the 44.96% stake in lifecell that we did not own, with a view to strengthen our regional position, a restructuring of lifecell's balance sheet and the acquisition of a 3G license at a cost of UAH 3,355 million paid in 2015. Furthermore, between 2015 and 2018 we paid a total of UAH 886 million for the conversion of spectrum from military use in three installments. In addition, in 2018, we paid a total of UAH 1,704 million for a 4G license. Significant deployment costs were incurred in 2018. These investments have further increased our country and currency risk exposure and there is no assurance that we will monetize this investment.

      Additionally, the official process for the redistribution of radio frequencies in the 900 MHz range was completed by Ukraine's National Telecommunications Authority on March 18, 2020. Accordingly, the frequency band of lifecell in 900 MHz was increased from 3.8 MHz to 5.6 MHz for UAH 121.2 million, effective as from July 1, 2020 for five years. The license fee has been fully paid. This new license has required further investment in Ukraine, increasing our exposure in this market and may consequently negatively affect our profitability.


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      Apart from economic and political risks, our operations in Ukraine could also expose us to operational, competitive, regulatory and legal risks, all of which may prevent us from delivering our strategic targets. These risks have affected and could adversely affect our result of operations.

    In Belarus, inflation accelerated relatively in 2020. Headline inflation increased to 7.4% in 2020 from 4.7% in 2019, according to the data provided by the National Statistical Committee of the Republic of Belarus. The National Bank of the Republic of Belarus has been on an easing trajectory since the beginning of 2018, bringing the refinancing rate down to 10% from 17% with gradual rate cuts in 2018, to 9% in 2019 and to 7.75% in 2020. While headline inflation increased to 8.7% in February 2021, in order to limit inflation, the National Bank of the Republic of Belarus may strengthen control over the growth of the broad money supply or increase the policy rate in 2021. Economic activity continues to recover, even though the momentum of the growth diminished slightly. Macroeconomic stability is still fragile due to the country's reliance on the Russian economy and political instability. The European Union imposed three packages of sanctions since October 2020, including Alexander Lukashenko and high-ranking officials. Another source of political uncertainty is the controversial presidential election which caused protests and strikes. On the external side, the key risk factor is the disruptions in energy price arrangements with Russia.

      In line with our strategic priority of improving our balance sheet structure, debt of our subsidiary, CJSC Belarusian Telecommunication Network ("Belarusian Telecom") was restructured in 2015. As part of the restructuring, Belarusian Telecom's total existing intra-group loans were converted into subordinated loans, provided directly by Turkcell. As of December 31, 2020, Belarusian Telecom's debt (excluding lease obligations) was BYN 1.5billion (equivalent to TRY 4.2 billion as of December 31, 2020) subordinated loan owed to Turkcell. This subordinated loan was converted to the local currency, BYN, from EUR on April 1, 2019.

      In Belarus, we also face regulatory and operational difficulties and no assurance can be given that the situation will change favorably in the future. These risks have affected and could adversely affect our reputation and results of operations.

    An IMT spectrum tender may be held in the near future as the regulatory body of the Turkish Republic of Northern Cyprus, where we have a subsidiary called Kibris Mobile Telekomunikasyon Limited ("Kibris Telekom"). The draft rules of the tender for consultations has been issued in December 2019. As per the draft tender terms, all currently allocated and the new spectrum will be technology-neutral and the operators will be able to use them for any technology (e.g. 2G, 3G, 4G or 5G), thereby increasing the efficient use of the spectrum and operational flexibility. Such tender may require additional investments, including in fiber, which would in addition require us to obtain permits that we have no certainty of receiving and without which 4G network profitability would be difficult to achieve. Also, there may be a tender in 2021 to restructure the incumbent telecom operator, TRNC Telecommunications Office, although this has not yet been the subject of an official announcement. We may consider to participate in this process; and yet, we face the risk that the tender may be awarded to one of our main competitors, which would adversely affect our growth and our competitiveness in the region. Further, this tender may include the issuance of a third mobile license, which may increase the competition and adversely affect our results. In the past, there have been political discussions regarding the reunification of Cyprus, which, if resumed, may bring growth opportunities for our subsidiary, but may also lead to risks including unfavorable changes in applicable regulations, an increase in competition, an increase in capex requirements and loss of revenues.


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        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 some of these subsidiaries, we do not expect to achieve desired levels of profitability in the near or mid-term. We may also in response to such conditions consider increasing, restructuring or exiting certain of our investments and we may be required to establish new legal entities or engage in new business lines due to our business needs or recently introduced regulations. In addition to the foregoing, the Turkish Commercial Code and related legislation may require us to provide new capital or other financial support to certain of our controlled subsidiaries, which may divert resources from other needs.

        Furthermore, in addition to investing in our international operations, we also engage in business through roaming agreements in a number of countries. In international markets in which monopoly or duopoly markets exist, such as Monaco, the United Arab Emirates or the Maldives, operators tend to increase their roaming prices despite the overall global trend of declining roaming prices, which could increase our roaming costs. Moreover, the terms on which we enter into roaming agreements may change over time, adversely affecting our ability to sustain or enter into such agreements on commercially viable terms.

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

        We are dependent on certain systems and suppliers for information technology ("IT") and network technology ("NT") services, and also carry a significant inventory, and our business continuity is at risk due to our exposure to potential natural disasters, sabotages, regular or severe IT and network failures, human error, security breaches and other cyber security incidents and IT migration risk, any of which could have an adverse effect on our operations, damage our reputation and affect our relationships with our customers and/ or our employees and result in a fine under relevant data protection legislation.

        We are heavily dependent on IT and NT systems as well as their suppliers and employees for the continuity of our business. Although we devote significant resources to the development and improvement of IT and NT and of security, backup and continuity systems, we could still experience IT and NT failures and outages due to system deficiencies, human error, natural disasters such as floods and earthquakes, unsuccessful migration to alternative or improved IT and NT systems, or other factors including but not limited to unintentional third party interruptions. Notably, a significant portion of Turkey's population and most of its economic resources are located in a first-degree earthquake risk zone and Turkey has experienced a large number of earthquakes in recent years, which may result in significant damages to the IT and NT systems our business depends upon. These factors also put at risk the inventory that we hold which, if damaged, could adversely affect business continuity and our results of operations.

        Mobile networks are migrating towards internet protocol ("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 the public internet, or internal sources, such as terminals connected to our mobile network. Despite the systems and infrastructure which we have put in place to address these security concerns, we could encounter successful attacks on our infrastructure, which could have an adverse effect on our operations, damage our reputation and affect our relationships with our customers.

        Our IT and NT services are exposed to hacking, sabotage and other cyber security threats, and terrorist or other destructive acts, any of which could have an adverse effect on our operations, damage our reputation


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and affect our relationships with our customers and/or our customers, incur substantial additional costs and result in a fine under relevant data protection legislation and lawsuits from affected customers.

        Our commercial success is heavily dependent upon the security and continuity of our services, and maintaining the security of our customers', employees' and suppliers' personal and financial data, intellectual property, and other confidential and sensitive data is essential to our business. In common with other high-profile businesses which are targeted for cyber-attacks, our networks and systems are constantly exposed to a variety of different cyber threats and we have experienced an increased number of sabotage incidents, as well as attempted cyber-attacks of varying degrees of sophistication by unauthorized parties attempting to obtain access to our computer systems and networks. We believe that no such attacks have succeeded in obtaining access to our critical systems, although in practice such attacks may develop over long periods of time during which they can remain undetected.

        Based on our Cyber Defense Center practices, we have experienced many privilege theft and escalation attempts which have been stopped before causing any harm to our services and products. Also, many phishing and malware activities were detected and stopped, including those which aimed at taking control over our clients and servers. So far, none of these attacks are regarded as material incidents. A successful hack could disrupt our network and our ability to provide services and/or could result in, for example, unauthorized access to, misuse, loss, or destruction of our data or systems and theft of sensitive or confidential data, including personal information of our employees and customers, and theft of services and/or funds. Our data and systems are currently particularly vulnerable to cyber-attacks due to the fact that a significant proportion of our employees work remotely in the context of the ongoing COVID-19 pandemic. Additionally, many phishing and malware activities were detected and stopped, notably ransomware attacks are aimed at several technology companies including Turkcell, which aimed at taking control over our clients and servers. While we are in the process of reviewing the cyber security incident insurance alternatives that are available to us, we currently do not have such insurance, and a compromise of our security systems or those of our business associates, that results in the information we hold being accessed by unauthorized persons, could adversely affect our reputation with our customers and other stakeholders, as well as our operations, results of operations, financial condition and liquidity, and could result in litigation against us or the imposition of penalties. In addition, a breach could require that we expend significant additional resources related to the security of information systems and could disrupt our operations. Remote work without virtual private network ("VPN") makes it difficult to monitor cyber security threats and take necessary actions. It is not possible to make instant monitoring on the computers of the employees, to install the patches that will eliminate critical gaps and to follow the running applications effectively. After the employees connect to the company network via VPN, the systems can be monitored and limited actions can be taken. Our data and systems are currently highly sensitive to DDoS attacks due to the fact that a significant proportion of our employees and customers work remotely in the context of the ongoing COVID-19 pandemic. As our commercial success is heavily dependent on the continuity of our services, and maintaining the availability of our customers, employees and suppliers personal and financial data DDoS mitigation capability is important not to lose our market reputation.

        Although we closely follow general technological trends in communications and technology, we may be unable to adapt to rapid technological changes in communications and information technology, which could result in higher capital expenditures and a greater possibility of commercial failure.

        Rapid technological changes in communications and information technology are redefining the markets in which we operate and the products and services we offer, shortening product life cycles and facilitating the convergence of various segments, including in our core mobile communications businesses. If we fail to anticipate, invest in and implement new technologies with the levels of service and prices that customers demand or to respond effectively to technological changes, our business, financial condition and results of operations could be adversely affected. In addition, such new technologies require significant capital expenditures and it is impossible to predict with any certainty


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whether the technology selected by us will be the most economical, efficient or capable of attracting customer usage, or whether such technologies will be developed according to anticipated schedules, will perform according to expectations or will achieve commercial acceptance. 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 reliance 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 TV, music, energy, mobile financial and payment services, insurance agency services, corporate services such as meal coupons, mobile education solutions, authentication solutions, data center services and entertainment and community services. We are reliant upon third party providers to help us effectively manage and respond to 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 and financial condition.

        We are subject to a variety of risks with respect to our Base Transceiver Stations ("BTSs") performance.

        Spectrum limitations and frequency costs may adversely affect our ability to provide services to our subscribers and the cost to us of providing such services.

        Our spectrum licenses have specified terms and are subject to renewal upon a payment of a fee, but renewal is not assured. The loss of, or failure to renew, our licenses could have a material adverse effect on our business and financial condition. Those licenses have also specified radio spectrum. The spectrum is a continuous range of frequencies within which the waves have certain specific characteristics. The number of subscribers that can be accommodated on a mobile network is constrained by the limited amount of spectrum allocated to the operator of the network and is also affected by subscriber usage patterns and network infrastructure. After the IMT Advanced (known commercially as "4.5G") auction held on August 26, 2015 in Turkey we have 2x10 MHz of FDD spectrum in 800 MHz band, 2x12.4 MHz of FDD spectrum in 900 MHz band, 2x30 MHz of FDD spectrum in 2100 MHz band, 10 MHz of TDD spectrum in 2100 MHz band, 2x29.8 MHz of FDD spectrum in 1800 MHz band, 2x25 MHz of FDD spectrum in 2600 MHz band and 10 MHz of TDD spectrum in 2600 band. Although the acquired spectrum can potentially be used for the next generation network technology known as 5G, some services that are specific to 5G and our future capacity needs will require us to eventually obtain new spectrum. If we are unable to maintain or obtain licenses for the provision of 5G specific telecommunications services or if our licenses are not renewed or are renewed on less favorable terms, our business and results of operations could be harmed. On the other hand, an earlier than expected 5G spectrum tender by the ICTA with the possibility of excessive prices can result in additional costs and investment, including capital expenditures. If the demand for 5G services fails to materialize at a level in line with the industry assumptions, the return on investment may not meet our expectations. Any of the foregoing factors could affect our profitability and our competitive position.

        Spectrum-usage right of 2x11 MHz FDD band in 900 MHz expires on April 2023, after which it will be subject to renewal. All other frequencies that Turkcell has will be available until April 2029. In-line with technological and societal changes, traffic on the 2G network is expected to shift to the 3G and 4.5G networks. Although we aim to migrate our 2G customers to the 3G and 4.5G networks before the expiry of our 2G license, we might not be successful in doing so. If our prospective 2G


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license extension request to the ICTA—which is to be made within 24 months to 6 months prior to the expiry date—is denied, we would face the risk of losing the 2G traffic and the corresponding revenue, which in turn could affect our profitability and competitive position. According to the relevant regulation, Turkcell is required to transfer—free of charge—to the ICTA or another public institution to be determined by the ICTA, the 2G equipment and the immovable possessions on which the equipment have been built when the GSM Concession Agreement expires. A clause in Law No. 5809 allows operators to continue using these equipment and immovables for UMTS and IMT technologies, on the condition that operators pay the fees and abide by certain obligations that are to be determined by the ICTA. Due to technological developments, almost all network technologies work integrated on the same equipment and it is technically impossible to separate or isolate a specific technology from the others. If the GSM Concession Agreement is not renewed or extended after the expiry date, a payment will need to be made to the ICTA and we may face some new obligations.

        As we experience growth in our subscriber base and demand for mobile services and data, and as we offer a greater number of services, we will require additional capacity, which in turn might result in an increase in capex requirements and have an adverse impact on our cost of providing competitive coverage and also on our results of operations. We may face capacity problems, which may in turn lead to deterioration in our network's quality, which, in turn, may negatively impact our operational results.

        We were awarded a license allowing us to deploy an IMT advanced network ("4.5G") in Turkey in October 2015. There are certain coverage and local procurement obligations imposed by the tender. Potential increase in coverage requirements or failure to abide by the requirements of our licenses or applicable regulations may have an adverse effect on our business and financial condition.

        Our 4.5G build-out has required significant financial investments and there can be no assurance that we will be able to meet all of the 4.5G license terms and conditions. The cost of the 4.5G license as well as the capital expenditure required in connection with our 4.5G build-out has been significant. Furthermore, the license agreement contains certain terms that may weigh on the profitability of this investment and may have an adverse effect on our 4.5G investment plans in the future. These include terms regarding minimum required use of local equipment and procurement from local small and medium sized enterprises engaged in production in Turkey in meeting infrastructure obligations, terms warranting our network equipment suppliers to employ a certain number of engineers and local researchers in their local R&D centers, an active network sharing obligation for a portion of the population, high coverage obligations for roads and railroads and significant taxes and spectrum usage fees. With respect to the local procurement requirement, whereas local telecommunications equipment and software production capacity has shown some progress in recent years, there is still not enough research and development, product development and production capacity in the local market to meet the license requirements and thus it has not been possible to fully comply. Operators' requests to waive this requirement for the reporting periods between 2015- 2019 has been rejected by the ICTA, which may result in administrative fines and, in turn, material adverse effects on our financial results.

        There are alleged health risks and zoning limitations related to our BTS which may adversely affect our ability to provide services at certain areas. The fiber business is also affected by local limitations.

        We are aware of allegations that there may be health risks associated with the effects of electromagnetic signals from BTS and from mobile 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 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 the leasing and acquisition of site locations 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 or at all.


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        In recent years, legal proceedings have been brought against mobile operators seeking the removal of base station sites for health reasons. In addition, the Turkish Supreme Court overruled the decisions of some local courts, finding that a 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. Such legal proceedings may make it more difficult for us to establish and maintain such sites. Furthermore, from time to time, there are 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. Such obstacles have made it increasingly difficult to build new BTS sites and maintain our existing sites. The ICTA has issued an updated regulation which further tightened electromagnetic field limits. This may negatively impact network quality and increase our capital expenditures.

        The amendments adopted in the Zoning Law have entered into force in November 2020, under which telecommunication masts and towers are subject to a license or permissions depending on their height. Any difficulty in maintaining or building BTS due to health concerns and our inability to obtain the required permission and certificates, may negatively impact the quality of our network, including our ability to expand and upgrade it, and affect our operational performance.

        Our fiber business must excavate to lay new cables and repair existing cables, and there is an obligation to obtain permission for excavations from authorized municipalities or institutions. In some areas, excavations may be terminated as a result of the high cost of tariffs requested from municipalities. Our investment plans may be affected due to excavations being banned during certain seasons within the administrative boundaries of municipalities. Also, since June 2018 operators primarily have to request from the most prevailing operator in terms of infrastructure in Turkey—Turk Telekom—to perform the excavation work on their behalf, which might negatively affect our ability to expand our fiber network and our future investments (see—"Regulatory decisions and changes in the regulatory environment in the sectors in which we operate could adversely affect our business and financial condition"). In some cases, we could face the risk that, although we get the approval of the Ministry of Transport and Infrastructure, institutions that are subordinated to the Ministry of Transport and Infrastructure refuse to recognize these approvals and grant permissions to excavate. In addition, a law in force has increased the number of metropolitan municipalities and in some cases, the size of their territory was increased, which may lead to an increase in our coverage obligations and the number of BTS required to meet such obligations. Furthermore, right of way conflicts with major municipalities to establish fiber optics infrastructure may affect our ability to provide services and to maintain operational excellence. Related regulatory actions in the future are likely to increase our costs and have a material adverse effect on our business and financial condition.

        We are dependent on a small number of suppliers for network equipment, information systems and handsets and for the provision of data and services. We also rely on a small number of distributors. The failure of any of our counterparty such as suppliers or distributors may have an adverse effect on our business and financial condition.

        We purchase our communications network equipment from a limited number of major suppliers. Our business is dependent on a small number of critical suppliers in areas such as network infrastructure, information systems and handsets and distribution. Further, although starting from January 2021 onwards this has changed to include additional distributors for technology products other than smartphones and tablets, we have been working with only two exclusive distributors in Turkey since 2015, which creates concentration risk. Any financial difficulty or failure of any of our suppliers and/ or our distributors in terms of timing and quality may adversely affect our business and financial condition. Such suppliers and distributors could fail to provide equipment or service on a timely basis as a result of a disruption to the global supply chain due to the ongoing COVID-19 pandemic. If such failures occur, we may be unable to provide products and services as and when requested by our


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customers, or we may be unable to continue to maintain or upgrade our networks. Because of the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products or services of one or more major suppliers with products or services from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a material adverse effect on our business and financial condition.

        Our competitive position could also be adversely affected if our suppliers fall behind technological developments compared to the suppliers of our competitors. Adverse economic conditions have negatively affected and may continue to affect 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, thereby negatively impacting our business and operations. In particular, if prices at which we purchase products from our domestic and international suppliers increase, namely as a result of currency depreciation and inflation—both in Turkey and internationally—, we need to pass on all or a large portion of these additional costs to our customers to be able to maintain our margins. However, we may be unable to increase the selling price of products or services to fully or partially offset the price increases by our suppliers (some of which have considerable negotiating power), particularly if our main competitors choose not to implement such price increases. In addition, our existing license agreements or new regulations may require us to purchase network equipment from specified suppliers or meet certain specifications regarding our existing suppliers. Equipment from these suppliers may not always be compatible with our existing equipment or the supplier may fail to integrate it, and our employees may not be familiar with the technical specifications and maintenance requirements of equipment from these suppliers. Furthermore, if our suppliers fail to meet the requirements, we may end up violating the terms of our license agreements. These factors could also have a material adverse effect on our business and financial condition.

        Our major shareholder has recently changed.

        In October 2020, Turkiye Varlik Fonu ("TWF"), the wealth fund of the Republic of Turkey, acquired control of 26.2% of the outstanding shares of our Company. This stake is held through its wholly owned company, TVF Bilgi Teknolojileri Iletisim Hizmetleri Yatirim Sanayi ve Ticaret A.S. ("TVF BTIH"), now our largest shareholder. The current Chairman of TWF, Recep Tayyip Erdogan, is the President of the Republic of Turkey. Huseyin Aydin, who is a member of our Board of Directors, is also a member of the TWF Board of Directors.

        TWF has a 6.68% stake in our main competitor Turk Telekom, and the Ministry of Treasury and Finance of the Republic of Turkey has a golden share in that company. More generally, TWF is an important investor in the Turkish economy and holds important stakes in numerous other major Turkish companies, including companies that we have business relationships with. This includes several major banks and financial services companies, including Borsa Istanbul, the operator of the Istanbul Stock Exchange, Turksat, and energy and infrastructure operators.

        As of the filing date, LetterOne, which controls the telecom company VEON, holds via IMTIS Holdings an indirect 19.8% economic interest in our Company through its stichting.

        Following the amendment of our Articles of Association at the general assembly on October 21, 2020, a new class of Group A shares has been created with special rights. TVF BTIH, as the sole holder of shares in this class, has the right to appoint a total of five of the nine members of our Board of Directors, including its Chairman. Under the Board's current quorum rules, the affirmative vote of at least five members is required for a decision to be taken. In the event that the Group A shares cease to be held by a single shareholder, all privileges in voting and nomination for the election of the Board of Directors members granted under the Articles of Association to the Group A shares shall automatically terminate.


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        The Group A shares owned by TVF BTIH are subject to a three-year lock-up agreement, during which TVF BTIH is required to use its reasonable endeavors to cause Turkcell not to terminate its ADR program.

        The Turkish law establishing TWF exempts it from a number of laws, notably certain capital markets and competition laws, which may negatively affect minority shareholders' rights. For example, mandatory takeover rules will not apply to TWF's group and TWF group companies are not be bound by a commercial law that requires compensation of minority shareholders if the controlling shareholder pursues detrimental policies.

        We are involved in various claims and legal actions arising in connection with our business, which could have a material effect on our financial condition.

        We are subject to investigations and regular audits by governmental authorities in Turkey, including the Competition Board, the ICTA, tax authorities and certain other parties, and governmental authorities in other countries in which we have operations. We are currently involved in various claims and legal actions with some of these authorities, as discussed below. We set aside provisions on an as-needed basis with regard to our ongoing disputes in line with applicable accounting standards. However, no assurance can be given that the provisions we set aside will be sufficient to cover any actual losses under these matters, or that new disputes will not arise under which we would face additional liabilities and reputational risk. For a more detailed discussion of disputes that we presently believe to be significant, see "Item 8. Financial Information" and Note 38 to our audited Consolidated Financial Statements included in "Item 18. Financial Statements" of this annual report on Form 20-F.

        We face a risk of tax audits and claims in many different areas that are subject to taxation, such as corporate tax, value added taxes, special communication tax and others. Such audits and claims have led to significant tax assessments and penalties in the past and may again in the future. In addition, changes in tax laws and non-tax regulations may lead to the growth of our tax burden and may, as a result, materially adversely affect our financial condition and results of operations. Disputes related to taxation have been particularly significant and major penalties have resulted.

        Current tax and other disputes include the following:

    We have had ongoing disputes regarding the application of the SCT to prepaid card TL/package sales made via our sales channels over numerous years. The Large Taxpayers Office levied SCT and tax penalties on the Company as a result of the Tax Investigation for the year 2011. The Company filed lawsuits for the cancellation of the notification regarding the aforementioned SCT assessment. The court partially accepted and partially rejected the cases and the parties appealed the decisions regarding the parts against them. While the cases are pending before the court of appeal, the Company filed application for the restructuring as per Law No.6736. The tax office has rejected the application. The Company has also filed a case for the cancellation of aforementioned rejection act. The Council of State decided to cancel the rejection act regarding the application for the restructuring. The Large Taxpayers Office and Ministry of Treasury and Finance appealed the decision. The appeal process is pending. In the cases regarding the cancellation of the SCT assessment for the year 2011, the Council of State accepted the appeal and decided to reverse the first instance court decisions in favor of the Company. The Large Taxpayers Office applied for the correction of the decisions, which was refused by the Council of State.

    In accordance with the Law No.7143, in August 2018, the Company filed applications for the restructuring of penalties and interest on the SCT regarding the disputes on the tax amount for the years 2013 and 2014. In August 2018, the tax office accepted the restructuring application for the years 2013 and 2014, and Company paid the restructured amount and settled the disputes by October 2018.


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      In addition, tax investigation reports for the years 2015 and 2016 were delivered to us. Tax Authority imposed tax assessments; (i) TRY 85.1 million in total, comprising TRY 34.1 million in principal and TRY 51.1 million penalty in relation to SCT for 2015 and (ii) TRY 61.7 million in total, comprising TRY 24.7 million in principal and TRY 37.0 million penalty in relation to SCT for 2016.We have concurrently applied for settlement. The successful settlement meeting was held in December 2019 and the assessment has been closed officially following settlement. Our Company remains under investigation on the same matter for the year 2017. Although the Ministry of Finance has addressed this issue through Communiqués enacted on January 1, 2018 for the periods after December 31, 2017, we may be subject to penalties or litigation for the year 2017.

      Following a limited tax investigation at our Company with respect to Value Added Tax ("VAT") and SCT pertaining to financial years 2015 and 2016, the Large Taxpayers Office made an additional request with respect to the taxation of applications included in some of the bundled offers and packages offered to our customers for financial year 2016 and imposed a tax assessment of TRY 247.8 million in total, comprising TRY 53.8 million in principal and TRY 80.7 million penalty in relation to SCT, and TRY 45.3 million in principal and TRY 68.0 million penalty in relation to VAT. A settlement request related to this assessment has been sent to the Revenue Administration for the period of 2016 in December 2018, and accordingly, a successful settlement meeting was held on December 26, 2019 and the assessment has been closed officially following settlement. As a result of the settlement, a single amount of TRY 199 million was settled (including the late payment interest) in relation to: (i) SCT assessment related to prepaid card TL/package sales made via our sales channels for the years 2015-2016 and (ii) VAT and SCT assessment related to the taxation of applications included in some of the bundled offers and packages offered to customers for the year 2016. The settled amount has been paid within the legal term and assessments were closed.

    Under our licenses (2G and 3G) and Authorization Certificate (4.5G) as part of our license, we pay a monthly treasury share equal to 15% of our gross revenue subject to some exemptions. We are currently subject to ongoing audits in this in relation to the periods through 2020, and the Turkish Treasury may change its views based on its interpretations of treasury share calculations. Therefore, unanticipated treasury share liabilities and fines may also be levied.

    According to the Law Serial No. 7061, as of January 1, 2018, Treasury Share investigations will be made by the Ministry of Finance. Investigations are held by the Ministry of Finance for the first time and there is no assessment for the year 2018, 2019 and first quarter of 2020. An investigation related to April-December of 2020 are on-going.

    The Company's management decided to apply for VAT and corporate income tax base increase mechanism for 2017 in accordance with Law Serial No. 7143; accordingly, there will be no tax assessment for the applications related to VAT and Corporate Income Tax ("CIT") but the Company may remain subject to tax assessment for other taxes payable by it.

    The Company signed the closing minutes for the investigations for (i) the year 2017 with regard to SCT and (ii) the year 2018 with regard to SCT, CIT and VAT. A Central Commission of Report Consideration meeting was held on January 27, 2021. The evaluation of the Commission is still pending.

    Operators must pay license and annual utilization fees for the wireless equipment to ICTA. Before January 1, 2018, the fee amount was calculated with respect to the amount per unit of wireless equipment (TRx) and as of January 1, 2018 the fee is calculated as 5% of monthly net sales amount. We argue that the content services are provided without any infrastructure requirements, and therefore, that they should not be considered as mobile electronic communication services. Accordingly, for the January 2018 TRx payment, a lawsuit has been


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      filed and for the months thereafter, no TRx fees were calculated over content services. The Court accepted the case in favor of the Company. The ICTA appealed the decision before the Regional Administrative Court, which rejected the appeal request. This case is finalized in favor of the Company. In October 2019, additional TRx amounts relating to content services were requested from the Company by the ICTA. Based on management's opinion in accordance with the relevant legislation of the ICTA, TRY 128.4 million was paid in November 2019, for 2018 and 2019 fiscal years and legal actions has been taken for 2018. These cases are currently pending. On the other hand, additional TRx amount of TRY 13.5 million for the month of December 2018 was paid on January 29, 2021 with regards to notification of the ICTA for the same reason and due to payment.

    Under the Ministry of Trade's investigation with regard to value added services, subscription contracts and device campaigns, we received an administrative fine amounting to TRY 116.2 million. We filed a lawsuit for the stay of execution and cancellation of the penalty, which led to the withdrawal of the penalty and the related audit reopened. The Court decided that there is no need to grant a decision regarding the withdrawal of the administrative fine. The Council of State granted a final decision and approved the First Instance Court decision. No assurance can be given that significant penalties will not again be imposed and that further disputes will not arise.

      As a result of the investigation, the Ministry of Trade decided to impose an administrative fine amounting to TRY 138.2 million against the Company. The Company filed a lawsuit for the cancellation of the administrative fine. The Court accepted the case in favor of the Company and cancelled the administrative fine. Istanbul Governorship appealed the decision before the Regional Administrative Court. The Company replied the appeal request in due time. The Regional Administrative Court rejected the appeal request in favor of the Company. The Istanbul Governorship appealed the decision before the Council of State. The Company replied to the appeal request, and, the Council of State decided to reverse the Regional Administrative Court's decision and decided to send the case file to the Regional Administrative Court to re-decide after having an expert examination.

    Administrative fines and refunds were requested in the investigation conducted by the ICTA to determine whether the Company complies with the «Procedures and Principles for Protection of Consumer Rights in the Execution of Value Added Electronic Communication Services» regulation. Prior to the final decision taken by the Board within the scope of the investigation, the ICTA has decided: (i) to give 5 months to prove the operators' claims that "it should not be concluded that all subscribers subject to violation are getting services without their will" (ii) to meet the consumer refund complaints regarding the services provided with the same purchasing method during this period and (iii) to submit the detailed report on these actions within a month following the 5 month process. Should our defenses are not accepted, a significant fine can be imposed and refunds may be required as a result of the examination.

    Due to some subscriber complaints, data doubling campaigns are examined by the ICTA in terms of the appropriateness of the campaigns and whether there is an increase in the fees of contracted campaigns. Administrative fines and refunds were requested regarding the data doubling campaigns. Should our defenses not be accepted, a significant fine can be imposed and refunds may be required as a result of the examination.

    ICTA initiated investigations regarding the R&D obligations for the period of 2013-2016, 2016-2017 and 2017-2018 arising from the 3G and 4.5 G licence terms. As a result of the investigation ICTA has decided to imposed an administrative fine of TRY 18.0 million to Turkcell, for the period of 2013-2016. The administrative fine was paid on 26 February 2021 as TRY 13.5 million with the early payment discount (1/4). The Company filed totally 10 different


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      lawsuits for the cancellation of the administrative fines. There has not been any progress in the cases yet. On the other hand, as a result of the investigation, the ICTA has decided to imposed an administrative fine of TRY 31.1 million to Turkcell, for the period of 2016-2017. The administrative fine notified to Turkcell on 29 January 2021 and was paid on 26 February 2021 as TRY 23.4 million with the early payment discount (1/4). The Company filed totally 7 different lawsuits for the cancellation of the administrative fines. There has not been any progress in the cases yet. In addition to the mentioned investigations, administrative fines were also requested in the following reporting period (2017-2018) investigation for similar reasons. Although the investigation process continues, there is a significant risk that as a result of investigation, the ICTA may impose a similar or a higher penalty decision.

    The Turkish Competition Board has, for several years, alleged that we have abused our dominant position in the Turkish mobile market through our exclusive practices directed at our dealers. While there is no ongoing investigation of Turkcell regarding such allegations, this and similar actions may have financial consequences and hinder our ability to effectively respond to competition.

    The ICTA has launched an investigation following a service outage, which took place on May 24, 2020. In addition to the service outage, the ICTA also alleged that the Company had mislead its consumers and the ICTA. A significant fine may be imposed as a result of the investigation, and, additionally, this may negatively affect our reputation.

    The ICTA has launched an investigation into donations collected via SMS in order to determine whether such donations were transferred to the account of associations/foundations in accordance with the regulatory requirements. As a result of the fact that the investigation covers a ten-year period, a significant fine can be imposed as a result of the investigation.

    The Ministry of Commerce has launched an investigation into Turkcell Superonline's subscription termination and cancellation fee processes in order to determine whether these are in accordance with relevant legislations. In light of the broad scope of the investigation and the significant number of consumer complaints, a significant fine can be imposed as a result of the investigation.

        For a more detailed discussion of our disputes that we presently believe to be significant, see Note 38 to our audited Consolidated Financial Statements included in "Item 18. Financial Statements" of this annual report on Form 20-F.

        We have a material amount of deferred tax assets which is subject to significant judgement by our management, and we face risks with regard to the recognitions and recoverability of these assets.

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

        For the year 2020, a TRY 647.9 million deferred tax asset has been recognised in Ukraine in respect of losses. Please refer to Note 9 to our audited Consolidated Financial Statements included in "Item 18. Financial Statements" of this annual report on Form 20-F. lifecell has recorded positive taxable profits for the year ended 31 December 2020, mainly as a result of increased subscriber numbers and cost management. The Group has concluded that the deferred tax assets will be recoverable using the estimated future taxable profits based on the business plan of lifecell. The tax losses can be carried forward indefinitely and have no expiry date. However, the accuracy of the judgments and estimations that lifecell will continue to generate taxable income in the future based on the business plans and the current Tax Regulations in Ukraine may be subject to change.


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        Although we maintain and regularly review our internal control over financial reporting, there are inherent limitations on the effectiveness of our controls, particularly as our Company grows and enters into new businesses.

        We maintain and regularly review internal control over our financial reporting. However, internal control over financial reporting has inherent limitations and there is no assurance that a system of internal control over financial reporting, including one determined to be effective, will prevent or detect all misstatements on a timely basis. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance regarding financial statement preparation and presentation. This risk is exacerbated by our rapid growth into new activities, which creates additional challenges in identifying risks and designing and implementing systems to control them. In addition, we have entered into an agreement with a vendor that will provide a software solution for replicating accounting data from a variety of systems into a single system to obtain consolidated financial reports, which creates risks associated with transition and implementation and can further complicate the process of identifying risks and designing and implementing systems. Furthermore, we operate in a decentralized structure in which most compliance functions are managed at the level of our operating companies rather than at the parent company level, which can further complicate the process of identifying risks and designing and implementing systems.

        Our systems may not always allow us to detect and prevent fraud or other misconduct by our employees, representatives, agents, suppliers, dealers or other third parties. We may be exposed to fraud or other misconduct committed by our employees, representatives, agents, suppliers, dealers or other third parties that could subject us to litigation, financial losses and sanctions imposed by governmental authorities, as well as affect our reputation. Such misconduct could include misappropriating funds, conducting transactions that are outside of authorized limits, engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities, including in return for any type of benefits or gains or otherwise not complying with applicable laws or our internal policies and procedures.

        Our latest review as of December 31, 2020, similar to last year, has revealed certain deficiencies in our controls, although none that we believe constitutes a "material weakness". Our controls have, in the past, suffered from 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 our financial reporting and on our operations and may also cause financial losses.

        Our consolidated financial results and/or operational performance could be 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 technology personnel in Turkey and elsewhere is intense, in particular in the area of cyber-security. In addition, we depend on our dealers, distributors and their employees for the growth and maintenance of our customer base. The loss of the services or loyalty of key personnel could adversely affect our business and financial condition and could lead to breaches of confidentiality, particularly if a number of such persons were to join a competitor. Furthermore, should a significant number of our employees, or certain members of our key personnel, be unavailable due to measures (e.g., quarantine, confinement, etc.) implemented in the context of COVID-19 or other pandemics, or should we suffer the loss of such employees as a result of COVID-19 or other pandemics, this may have a material adverse effect on our operations, including customer service, sales, and the deployment, operation and maintenance of our networks.

        Our ADS price may be volatile, and purchasers of ADSs could incur substantial losses.

        The market price of our ADSs may be highly volatile and could be subject to wide fluctuations, in particular due to the fact that trading in the ADSs will take place in different currencies (U.S. dollars


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on the NYSE and Turkish Lira on the Borsa Istanbul), and mostly at different times (resulting from different time zones, different trading days and different public holidays in the United States and Turkey), resulting in the trading prices of these securities differing on these two markets. Securities markets worldwide experience significant price and volume fluctuations. In particular, the long-term effects to the global securities markets of pandemics and other public health crises, such as the on-going COVID-19 pandemic, are difficult to assess or predict, and may include a decline and volatility in the market prices of our ADSs. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our ADSs in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including changes in our quarterly operating results or dividends, additions or departures of key management personnel, failure to meet analysts' earnings estimates, publication of negative research reports about our industry, failure of securities analysts to cover our stock or changes in financial estimates by analysts, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industry we operate in or individual scandals. Consequently, in response to these events, the market price of our ADSs could decrease significantly, and purchasers of ADSs could incur substantial losses. In addition, share sales by major shareholders, and the perception that significant sales could occur, may have an adverse impact on the price of our shares and ADRs.


4.A History and Development of the Company

        Turkcell Iletisim Hizmetleri A.S. is a joint stock company organized and existing under the laws of the Republic of Turkey, was formed in 1993 and commenced operations in 1994. In July 2000, we completed our initial public offering with the listing of our ordinary shares on the Borsa Istanbul and our ADSs on NYSE. In October 2020, TVF Bilgi Teknolojileri Iletisim Hizmetleri Yatirim Sanayi ve Ticaret A.S. ("TVF BTIH"), a subsidiary of Turkey Wealth Fund ("TWF"), the wealth fund of the Republic of Turkey, acquired control of 26.2% of the outstanding shares of our company, making it our largest shareholder. 19.8% of our shares are controlled by our second largest shareholder IMTIS Holdings S.á r.l., an entity in which Letterone Investment Holdings S.A. has an indirect economic interest.

        The address of our principal office is Turkcell Iletisim Hizmetleri A.S., Turkcell Kucukyali Plaza, Aydinevler Mahallesi Inonu Caddesi No:20 Kucukyali Ofispark, Maltepe, Istanbul, Turkey. Our telephone number is +90 (212) 313 10 00. Our website address is

        We operate under a 25-year GSM license granted in April 1998, a 20-year 3G license granted in April 2009 and a 13-year 4.5G authorization certificate granted in October 2015.

        Our GSM license was granted in April 1998. 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 and Infrastructure for a universal service fund.

        In early 2009, we were granted a 20-year type a 3G license, which provides the widest frequency band 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.

        In 2013, we won an auction held by the Ministry of Transport and Infrastructure related to universal service, which requires installing sufficient infrastructure to uncovered areas with a population


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of less than 500 and the operation of the service in these areas for three years. This contract was extended through December 31, 2019 and the extension contained new requirements to provide mobile broadband services and to operate the new and existing networks together. The Ministry of Transport and Infrastructure extended the contract under the same conditions through December 31, 2020, and is preparing a new auction for the operation of the universal service beyond December 31, 2020.

        In the 4.5G auction held on August 26, 2015, we were awarded a total frequency band of technology agnostic 172.4 MHz, the largest amount of spectrum of any operator. We commenced offering 4.5G services from April 1, 2016. The 4.5G license is effective for 13 years until April 30, 2029. The total fee of EUR 1,623.5 million (excluding VAT and interest payable on the installments) was paid in four installments, where the last installment amounting TRY 1,535 million was paid in April 2017.

        Turkcell has a total frequency bandwidth of 234.4 MHz, which corresponds to 43% of total spectrum available to the mobile operators in Turkey. The large spectrum assets, including the wide frequency bands on 1800 MHz and 2600 MHz, along with a strong network deployment, have enabled us to provide the fastest 4.5G speeds through carrier aggregation techniques and availability of advanced user devices supporting new features. Turkcell supports up to 1400 Mbps speeds on its network and this allows customers to get better network experience and access mobile services at speeds comparable to fiber broadband.

        Following the 4.5G launch, Turkcell focused on providing its own digital services with a view to differentiate its offerings from the competition and tap into new growth areas. We develop and manage digital and techfin services to address the diverse needs of both consumers and corporates.

        Our Company has also branched out into the development of fixed line networks, including fiber-optics connecting directly to the home, creating a fiber-to-the-home ("FTTH") network. In order to fill the gap in the areas where fiber cannot be provided, feasibly deployed, or that are constrained by ADSL service, an alternative fixed wireless access ("FWA") solution is also offered.

        We have a strong track record of profitable operations with total revenues of TRY 29,103.7 million, Adjusted EBITDA of TRY 12,270.3 million and net income of TRY 4,237.1 million for the year 2020. We have achieved these results while continuing to invest in our network to support our strategy of offering quality services and innovative solutions, with capital expenditures totaling TRY 9,078.9 million for the year 2020.

        Our subscriber base has grown substantially since we began operations in 1994. At year-end 1994, we had 63,500 subscribers, and by year-end 2020 that number had grown to 47.9 million for the Group.

        In addition to our operations in Turkey, we have various international operations. For more information, see "Item 4.B. Business Overview—IX. International and Domestic Subsidiaries".

4.B Business Overview

        Over the past 26 years, Turkcell has played a central role in the development of the telecom industry in Turkey, first as a traditional mobile operator, then as a converged telecom operator, and finally, also as a digital service provider. Over recent years, we have strived to pioneer the provision of digital services in the telecom industry and at the same time, have retained our position as the telecom market leader in Turkey on the back of our service quality, value proposition and strong distribution network. Our organizational structure reflects our aim of increasing efficiency and simplifying our business processes, as well as strengthening our position as a provider of converged communications, digital services, digital business services (previously referred to as "digital solutions") and techfin services.


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        We have differentiated our network through its quality and speed of service built on extensive spectrum rights covering 43% of the total spectrum available to mobile operators, and with an extensive network coverage. We have also focused on building an advanced fiber network to support our mobile and fixed offerings, including broadband and television. We have our own fiber network that is currently capable of offering 10 Gbps.

        We had 47.9 million subscribers in Turkey, Ukraine, Belarus and the Turkish Republic of Northern Cyprus as of December 31, 2020. In Turkey, we had 36.7 million total mobile, fixed and IPTV subscribers as at the same date.

        Our business is divided into two main reportable segments: Turkcell Turkey and Turkcell International.

    Turkcell Turkey.  Our Turkish telecommunications business represents the largest share of our business, accounting for 86.5% of our revenues and 86.3% of our Adjusted EBITDA in the year ended December 31, 2020. During the first half of 2015 we realigned our strategy in Turkey to focus on developing innovative and integrated telecommunications solutions for consumer, corporate and wholesale customers in Turkey by leveraging our leading brand, extensive customer base, technological capabilities and strong distribution channels. We have invested in what we believe to be the most advanced mobile and fiber networks in Turkey and have the broadest 4.5G spectrum in Turkey, which we believe provides us with a competitive advantage by allowing us to provide high quality and high speed data service to our customers, as well as providing digital services on top.

    Turkcell International.  Turkcell International accounted for 8.7% of our revenues in the year ended December 31, 2020. We have telecommunications operations in a number of international markets that we believe are complementary to our operations in Turkey and the potential to export our business model. These geographies include Ukraine (which accounted for 6.2% of our revenues in the year ended December 31, 2020), Belarus (which accounted for 1.4% of our revenues in the year ended December 31, 2020) and the Turkish Republic of Northern Cyprus (which accounted for 0.8% of our revenues in the year ended December 31, 2020), the Netherlands and Germany.

    All other segments.  Mainly comprised of our financial services, energy business, and third-party call center business revenues. This segment accounted for 7.1% of our revenues in the year ended December 31, 2020, of which 2.3% is attributable to intersegment eliminations.

        We have a strong track record of profitable operations with total revenues of TRY 29,103.7 million, Adjusted EBITDA of TRY 12,270.3 million and net income of TRY 4,237.1 million for the year 2020. We have achieved these results while continuing to invest in our network to support our strategy of offering quality service and innovative solutions, with capital expenditures of TRY 9,078.9 million for the year 2020.

        We are the only company listed on both the NYSE and the Borsa Istanbul, and had a market capitalization of TRY 35.4 billion as of December 31, 2020, making us the ninth most valuable publicly traded company in Turkey at that time.

I. Industry

a. Overview

        Mobile telecommunications technologies evolve at a very fast pace and, approximately every decade, a new generation of advanced cellular technology becomes available for use in mobile networks. These technology transitions enable an enhanced user experience via the introduction of


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higher data speeds, reduced latencies, and larger capacities, thereby paving the way for more advanced applications for end users.

        Since Turkcell was founded in 1994, mobile technology has evolved from GSM (2G) to UMTS/HSPA+ (3G) to LTE/LTE-Advanced (4G/4.5G), and recently to 5G, providing new capabilities and extensive improvements in customer experience. 2G was originally intended to carry voice, with some limited data and messaging capabilities, whereas the focus in 3G shifted more to data, along with simultaneous voice and data capability. 4G has brought fully IP-based architecture where everything is considered data. The advent of 4G/4.5G technologies has enabled the introduction of increasingly sophisticated services featuring lower latency and higher data speeds, and capabilities to provide a variety of enriched services beyond mobile broadband, especially for vertical markets such as health, smart cities, transportation, agriculture, education and entertainment. Turkcell currently offers services over 2G, 3G and 4.5G technologies. 5G is not commercially available in Turkey yet, however we are making preparations to ensure that our network architecture and topology are aligned with the needs of a future 5G network. For example, in 2018 we have demonstrated our 5G FWA capability in a millimeter wave band (28GHz), which was the first 5G live network test in Turkey. Since then, we have focused on different usage of 5G, reaching out to as many vertical sectors as possible while maintaining a local R&D focus. Within this scope, we have showcased our 5G capabilities in drone communications, 5G connected ambulances, real-time virtual reality over 5G and 5G live TV broadcasting on our 5G test network. Furthermore, we upgraded our network to be fully ready for NSA 5G (non stand alone—upgraded version of LTE core network to ready 5G) in core network. We are upgrading our LTE base stations to support 5G service in our current frequencies.

        Our Company has also branched out into the development of fixed line networks, including fiber-optics connecting directly to the home, creating a fiber-to-the-home ("FTTH") network. In order to fill the gap in the areas where fiber cannot be provided, feasibly deployed, or that are constrained by ADSL service, an alternative fixed wireless access solution is also offered.

b. The Turkish Telecommunications Market

        We believe that the Turkish telecommunications market has growth potential due to favorable demographics, including a relatively young population and lower penetration levels compared to Western Europe and other developed markets.

        There were 83.6 million people living in Turkey as of December 31, 2020. According to a TUIK announcement, the estimated median age of the Turkish population is 32.7, which is lower than elsewhere in Western Europe, and the majority of the population live in urban areas.

        There are currently two other major operators in the telecommunications sector in Turkey apart from Turkcell: Turk Telekomunikasyon A.S. ("Turk Telekom" and together with its mobile segment Turk Telekom Mobil ("TT Mobil") and TTNET, or "Turk Telekom Group"), and Vodafone Telekomunikasyon A.S. ("Vodafone"). In 2020, the total revenue of the Turkish mobile and fixed markets was TRY 66.5 billion compared to TRY 57.3 billion in 2019, according to the operators' announcements (for the calculation of total market revenues, non-group call centers and financial services revenues are added to Turkcell Turkey's reported revenue and Turk Telekom's construction revenue is excluded).

        Vodafone entered the Turkish mobile market by acquiring Telsim on May 24, 2006 from the Savings Deposit Insurance Fund. The Republic of Turkey's Ministry of Treasury and Finance owns a 25% stake in Turk Telekom, and our largest shareholder, TWF, holds a 6.68% stake according to Turk Telekom's disclosure. In December 2018, Ojer Telekomunikasyon A.S.' shares in Turk Telekom (representing 55% of the company) were transferred to a special purpose vehicle, Levent Yapilandirma Yonetimi A.S., and on September 2019, a financial adviser was mandated for the sale of those shares.


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II. Strategy

        Over the past 26 years, Turkcell has played a central role in the development of the telecom industry in Turkey. This has been achieved as a result of our core competencies, which include our strong brand, excellent customer relations, high quality infrastructure, market-leading technology as well as a skilled work force. Going forward, we will strive to continue the profitable growth of the Group by leveraging our competencies and focusing on three key strategic areas, in addition to growing in our core telecom services: digital services, digital business services, and techfin services.

        The key part of our strategy is growth of our core telecom operations. Our vast home market offers the potential for further growth of our customer base which we intend to increase by focusing on the postpaid segment, while also increasing the revenues generated from these subscribers. We believe the fixed broadband market also offers significant growth potential through fiber and FWA products, which we will pursue accordingly. Furthermore, we aim to maximize the potential of our digital channels both in terms of subscriber acquisitions and device sales. Our core competencies, which are stated above, will prove instrumental in further growth of our key strategic focus areas.

        Turkcell began its digital transformation with the vision of becoming a provider of the full set of digital experiences for its customers and a leader in the digitization of the economy in countries where it operates. Our unique portfolio of digital services such as TV, music, publishing and communication are made available to our customers through our market-leading telecom capabilities, which set us apart from global over-the-top ("OTT") players. We are focused on monetizing these services, particularly on their revenue generation on a standalone basis. Already offered by our international subsidiaries, our digital services are set for expansion in new markets through commercial partnerships, mainly with other telecom operators.

        We continue to support our business model with investments in industries that have synergies with our digital business. As such, we have established a digital business services company that provides tailor-made, end-to-end information & technology (ICT) solutions—connectivity, hardware, data center and cloud services, security services, system integration and managed services, business applications, Internet of Things ("IoT") and Big Data—for enterprise customers particularly in our target sectors including finance, health, education, logistics, manufacturing, retail, energy, tourism, SMEs and central and local authorities by leveraging our ability to combine telecom and IT services and thereby adding value in the course of their digital transformation.

        We also focus on techfin services, namely through our digital payment services platform, Paycell, which has established key vertical business lines including mobile wallet, carrier billing, utility payments, money transfer, QR code payment and POS services. Going forward, Paycell will focus on enhancing its product & services portfolio, expanding merchant acceptance with tailored products, and scaling its existing products. We are committed to capitalizing on this well-established payment services platform. In addition, our financing company, Financell, enables users to purchase smart devices, and our insurance agency company, Turkcell Sigorta, focuses on insurtech products.

III. Customer Segmentation and Services

a. Customer Segmentation

        In Turkey, as of December 31, 2020, we had a total of 36.7 million subscribers including 33.4 million mobile subscribers, 2.4 million fixed broadband subscribers and 871 thousand IPTV subscribers.

        With our digital service provider vision and as part of our increased focus on customers, we take a number of actions designed to increase customer base and loyalty, and such loyalty actions are designed in line with the targeted segments' lifestyles, needs, priorities, and expectations.


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        The aims of the segmentation are to:

    attract new customers;

    increase the loyalty of existing Turkcell customers;

    create value for changing needs of customers with the support of digital services;

    ensure behavioral and emotional brand loyalty; and

    ensure a seamless series of positive brand experience throughout all customer touch points.

On a broader scale, Turkcell Turkey divides its customers into three main categories:

    Consumer Category

        In the consumer category, we manage our mobile customers either under the mass segment or under one of our three large sub-segments, youth, women and premium. In addition, a micro segmented approach has been applied throughout the year, meaning that each customer is matched with offers that best suit their needs and expectations. In line with our goal of being a digital service provider and enlarging our customer base, we provide numerous offers and campaigns enriched with our digital services such as BiP, fizy, TV+, Dergilik and lifebox, in accordance with market dynamics and customer demand.

        Fixed broadband customers are consolidated under a single segment (residential) and managed under the consumer category along with mobile consumers. By positioning the residential segment under the consumer category, we aim to enhance convergence between mobile and fixed businesses. Under the residential segment, we have our fiber internet customers, who use our own fiber infrastructure, and our DSL and cable customers, to whom Turkcell is a reseller. Turkcell's FWA business, Superbox, is run under the residential segment.

    Corporate Category

        The corporate category for our mobile and fixed customers comprises our small and medium business customers and as well as our enterprise customers. We provide differentiated mobile and fixed communication offers for each of these customer groups and support their digital transformation process with our digital business services.

    Wholesale Category

        Our wholesale category focuses on managing wholesale voice, data, roaming, tower and digital services with the national licensed operators, international operators and network-centric business owners such as data centers and content providers.

        For roaming services, the wholesale category strives to achieve the best international coverage for customers to have continuous communication wherever they travel and to enable all visitors to enjoy the service quality of Turkcell.

        For wholesale data and voice services, our main strategy is to become the regional junction point in an increasingly digitally hyper-connected world, and while promoting our infrastructure in the international market, we are focused on growing as a preferred wholesale partner of local operators in the domestic market as well.

b. Services

        We provide high quality mobile and fixed voice, data, TV and digital services to our subscribers throughout Turkey. We provide a range of digital services under communication, music streaming,


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entertainment, and techfin categories. Our mobile 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 SIM card with 3GB of monthly data and a balance of TRY 35, or monthly 750 minutes, 250 SMS and 25GB of data, with 20GB additional quota for their every TRY 34 or more top-up (TRY refill) up to 3 times in 120 days following the opening of the lines. As of December 31, 2020, we had 11.5 million prepaid subscribers and 22.0 million postpaid subscribers, compared to 12.4 million prepaid subscribers and 20.4 million postpaid subscribers as of December 31, 2019.

        We provide a range of fixed services in Turkey including voice, broadband and IPTV to consumers and a wider range of services to our corporate customers from cloud services to traffic carrying. We provide these services through a combination of our own fiber infrastructure, through sharing agreements and leased copper ADSL lines. As such, we offer fixed broadband services through the cable infrastructure of Turksat, the government-owned provider of cable and wireless broadcasting, high-speed internet services, and direct to home broadcasting services in Turkey. As of December 31, 2020, we had approximately 2.4 million fixed broadband customers of which 1.7 million were fiber customers, 707.6 thousand were ADSL customers and 67.7 thousand were cable customers, compared to 2.3 million fixed broadband customers of which 1.5 million were fiber and 719.1 thousand ADSL, and 49.2 thousand cable customers as of December 31, 2019.

(i) Voice Services

        Voice services are among the key services that we provide to our customers. Voice services consist of high-quality mobile communication services on a prepaid and postpaid basis and fixed voice services for consumers and corporate customers.

(ii) Broadband Services

        Our broadband services consist of mobile broadband, fiber to the home/building and ADSL Docsis, cable, LTE and fixed wireless broadband services over our mobile network.

        Our capability to offer 4.5G in 81 cities in Turkey has resulted in increased network abilities and data speeds. We believe that 4.5G services coupled with the wider availability of technological products has contributed to a more connected life for our customers, resulting in an increase in overall internet usage.

        Smartphones, which combine the features of a mobile phone with those of other popular digital mobile devices (e.g. personal digital assistants, media players, GPS navigation, digital camera) and have an open operating system (e.g. iOS, Android, Windows Mobile) allowing access to the internet and running a variety of third-party and owned software applications, are an important component of the growth of our mobile broadband and digital services businesses. Smartphone penetration on our network reached 81% by the end of 2020, up from a 76% penetration at the end of 2019. This growth resulted mainly from non-smartphone customers shifting to smartphones as a result of the various campaigns promoting 4.5G enabled smartphones. As of December 31, 2020, the number of subscribers who have signed up for 4.5G on our network was 31.8 million. This represents 95% 4.5G subscriber penetration of our mobile customers in Turkey. With rising 4.5G penetration and the increase in the number of FWA-service users, average mobile data usage reached 11.7 GB per month in 2020, vs. 7.4 GB per month in 2019, while average mobile data usage of 4.5G users reached 13.6 GB per month


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in 2020, vs. 9.1 GB per month in 2019. The table below shows the number of smartphones on our network and smartphone penetration for the periods indicated:

  2020   2019   2018   2017   2016  

Number of smartphones on our network (millions)

    23.7     22.0     22.4     22.1     19.2  

Number of 4.5G compatible smartphones on our network (millions)

    21.5     19.2     18.0     15.7     11.3  


    81%     76%     74%     72%     64%  

Smartphone penetration is calculated as the ending number of smartphone subscribers (excluding smartphone subscribers with deactivated status) divided by the ending number of Turkcell mobile voice subscribers (excluding Turkcell subscribers with deactivated status).

        Since February 2014, the sale of smartphones through credit cards with installment plans has been banned in Turkey. Turkcell initiated Financell in 2016 to offer its customers consumer loans in their purchase of smart devices. As a macroeconomic prudential measure, the BRSA has introduced a limit to the number of installments for consumer loans, starting from September 2018. Since January 2020, smartphones and tablets with a retail price at or above TRY 3,500 can be offered with a maximum three-month installment plan, whereas the maximum installments is increased to 12 months for smartphones and to six months for tablets with a retail price of up to TRY 3,500.

        Distributors, dealers, Financell and Turkcell offer joint campaigns to the subscribers, which may include the sale of devices by the dealer and a communication service to be provided by us. In addition, we are selling handsets ourselves as a principal. A variety of devices are offered through these campaigns, such as smartphones, LTE available modems and tablets and some complementary products such as accessorizes, game consoles, headsets and virtual reality sets. We deliver attractive joint campaigns with models of brands in high demand such as Samsung, Apple, Huawei and some local handset manufacturers such as Vestel and General Mobile. We believe this contributes to increased smartphone penetration and data usage and further builds customer loyalty by offering a technologically advanced product at a competitive price.

        When we sell goods or services as a principal, income and payments to suppliers are reported on a gross basis in revenue and operating costs, respectively. If we sell goods or services as an agent, revenue and payments to suppliers are recorded in revenue on a net basis, representing the margin earned.

        We offer fixed broadband internet tariffs to our residential customers. We also offer internet, voice and TV bundles, where we benefit from the use of our own fiber. We need the incumbent's network to provide services outside our own fiber infrastructure, and in these circumstances, we differentiate our offering with our unique brand and our competitive customer service. Outside of our own fiber infrastructure we are able to offer double-play packages with broadband and voice to our customers. We do not offer IPTV service on DSL because our TV technology is IP-based and has a multicast structure, and for technical reasons DSL infrastructure cannot support this type of service. We emphasize our "no hidden fees" value proposition with our broadband products by not charging our customers for activation, modem or installation services separately, and by offering high-speed fiber broadband at attractive prices.

        In addition to the internet, voice and TV bundles, our residential broadband customers are offered the fixed broadband and fiber device bundled campaigns, where significant discounts on specific models of smartphones, tablets and modems are offered to customers with 12- or 24-month internet service contracts with our Company. Furthermore, starting from the first quarter of 2020, our residental segment customers are able to benefit from campaigns with devices that match their credit scores and obtain financing from Financell.


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        We also serve our customers with our FWA service called "Superbox", which offers wireless high-speed internet access for customers and primarily preferred by those who are at locations with no fiber infrastructure. Superbox is the first and the widest FWA service in Turkey. The required equipment is included in the subscription plan and uses the LTE Advanced network as a backhaul to provide internet connectivity. As of December 31, 2020, we had 591 thousand Superbox customers in Turkey, up from 323 thousand a year ago. Superbox subscribers are considered as mobile subscribers as the service is provided over our mobile network.

(iii) Digital Services and Solutions

        Over the course of the past five years, Turkcell has developed its own digital services (applications) and solutions. Turkcell has a large portfolio of mobile applications which can be downloaded from app markets and are available on both iOS and Android platforms. These applications are available for any user regardless of their choice of mobile operator. All of these apps are created and sustained by our in-house mobile application development team comprised of more than a thousand R&D engineers.

        Turkcell seeks to differentiate itself by providing innovative and pioneering solutions in collaboration with its strong solution providers and various partnerships. We are also focused on marketing our digital services portfolio to trusted telecom operators around the world. Having established stand-alone companies for some of these services, we have taken an important step towards their global competitive positioning. These companies include the ones for BiP, lifebox, TV+ and fizy brands, with which we aim to stand out in the global competitive arena. As part of this structure, these brands aim to conduct their activities in a faster manner and with a greater focus with their own organizational structures.

        In 2020, total digital services standalone revenues increased by 26% year-on-year to around TRY 1.3 billion, and c.3 million standalone paid users which include subscriptions for IPTV, mobile (OTT) TV, fizy, lifebox and Dergilik. The performance of our digital services portfolio is monitered internally through KPIs that are relevant to each individual service internally.


        BiP is an integrated IP-based communication platform with the following key features:

    Instant messaging, sending photos, videos, audios and documents;

    Group messaging, disappearing messages in the pre-defined time;

    Instant translation;

    Communicating with non-BiP users via SMS and network call;

    Entertaining content: Creating and sharing internet memes, a wide range of emoji;

    High quality VoIP, video call, group video call up to 10 people;

    Integrating two numbers under BiP;

    Virtual number service which enables customers to have a mobile number without a SIM card and make/receive calls through the application;

    "Discover" section on various topics including business, health and weather amongst others;

    Peer-to-peer money transfer;

    Ability to share location with contacts, and

    Emergency communication feature.


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        The BiP Discover section offers a connected life experience as a marketplace that consists of various entertainment and information services. This section offers two-way communication between users and services. BiP Discover serves over hundreds of different services, including top Turkish banks, TV shows, celebrities, content providers and customer services, with around 75 million followers. BiP users, independent of operator, can access an online COVID-19 questionarre at the Ministry of Health channel in the BiP Discover section, and access the Ministry of Health Contact Center Information Line free of charge. Users following the channel can also instantly access current news on the pandemic announced by the Ministry of Health, the COVID-19 Live Map showing the latest updates and other relevant announcements.

        BiP's infrastructure enables Multicloud Architecture, through which operators can build their own digital communication platform, thereby safely storing their communication data in their country as well as customizing their app by changing the brand, app logo and providing their local services. Moreover, all app users (BiP or its customized apps working on this multicloud infrastructure) can seamlessly communicate between each other.

    BiP Meet

        We have developed our own video conferencing solution, BiP Meet, in order to meet the ever-changing needs of consumers and businesses and adapt to the changes brought by the global pandemic. Available as a desktop app and online, BiP Meet is secure, reliable, and user-friendly. We are developing a mobile application version which we aim to launch in 2021. We offer free sign-up to BiP Meet where the trial package provides for up to 50 meetings (limited to 1 hour) per user per month free-of-charge. The trial package includes various features such as secure meetings with password-protected rooms, screen sharing, hiding & unhiding display, microphone and camera management, group and private messaging and host controls.


        Turkcell's multi-screen TV platform TV+, launched in October 2014, delivers an enhanced television viewing experience to its subscribers anywhere, any time with more than 150 channels. Its unique features as compared to other platforms include the abilities to pause and rewind live streams, record to cloud and the capability to switch between four screens. TV+ offers the Ultra HD supported 4K content box and 4K content on IPTV platform. With a view to increase TV+ penetration, we have also deployed TV+ on Apple TV, Android TV, TV+ Ready (Android TV Box) and Smart TV applications. TV+ Ready is a new generation Android box that is easy to install to any television with any internet connection. TV+ Ready is offered with premium content of TV+, and we are the first brand to bring content bundle Android TV offer to the Turkish market. TV+ Ready also enables its user to reach and use other apps available at the Google Play store.


        Digital music service fizy enables its users, through the application and the web version, to access around 33.5 million songs, videos, live concerts and radio channels with high quality sound for a monthly subscription fee with "student", "standard" and "premium" options that also includes data available for this service. Premium users can stream music on fizy without any ad interruptions, and have the flexibility to listen to songs offline. The application offers personalization through enhanced-AI technology. fizy is also available in Belarus and the Turkish Republic of Northern Cyprus.


        Turkcell's personal cloud service, lifebox, is the first local cloud-storage service in Turkey. It enables users worldwide to store their photos, documents, contacts, and videos in one secure,


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convenient and personal space with auto sync abilities, and to share them easily. lifebox also offers a phone book synchronizing feature. Each user who downloads and logs into the application is given 5GB of storage space free of charge. lifebox also offers the PhotoPick feature, which uses AI to suggest the best photo for Instagram. Launched in 2020, lifebox Transfer offers a convenient and free-of-charge experience of fast file sharing without need for membership, while storing the data in Turkey.


        Our digital publishing app, Dergilik, gives users access to more than 400 popular magazines, including international ones, and more than 50 newspapers published in Turkey. Dergilik is offered in two main subscription options: standard subscription with limited access to the content and premium subscription with full access. All magazines and newspapers available on Dergilik are also available for download. The application is enhanced with auto-download features, text to speech (audible articles), spontaneous news feed as well as competitive quiz games. Dergilik users can also reach websites of magazines and newspapers free of data charge.


        Yaani is a search engine and browser, providing a fast, secure and stable browsing experience, combined with a unique set of features through the Yaani browser. Yaani is available for both iOS and Android devices, and is also available as a search engine. Yaani was created based on Turkey's specific user patterns and can access local content first, thereby increasing the relevancy of the searches.


        YaaniMail, Turkey's local free e-mail service, was launched in December 2019 serving individual users with the "" domain. This all-access and cross-platform service provides a pure e-mail experience with its user-friendly and seamless design. Users' personal and sensitive data is kept securely at Turkcell's data centers located in Turkey. Furthermore, in April 2020 the corporate e-mail service YaaniMail Business was launched, providing customized security policies tailored to organizations' needs and offering them the ability to use their own domains. YaaniMail Business can be used as a cloud service without the burden of maintaining the infrastructure; alternatively, with the on-premises model, organizations are able to keep their data locally. YaaniMail Business is offered at affordable prices coupled with an expert support team for remote and on-site assistance.

    Digital Operator and My Company

        One of our priorities as Turkcell is to drive customer loyalty through the digital platform. Within the scope of this strategy, we have invested in our digital self-service channels. The primary channel is our mobile application called "Digital Operator" with which we provide our customers the ability to track their bills, usage and settings and execute transactions and purchases. Digital Operator had 56.4 million downloads to date and 23 million three-month active users in 2020.

        In 2020, we continued to use the Digital Operator app as the platform to offer a successful marketing campaign called "Shake & Win", which has delivered 2.1 billion gifts to date, where most of these gifts were in the form of data, minutes or trial subscriptions to digital services such as TV+, fizy, Dergilik, and lifebox. We also launched Turkcell Gift Pool, a loyalty and gamification hub within the app where users can browse and claim gifts, rewards and privileges. Since its launch in October 2019, 14 million customers visited Turkcell Gift Pool over 210 million times. These have become a substantive medium for Turkcell subscribers to discover and experience our digital services. Since December 2020, Digital Operator serves also as an alternative gateway to our technology and electronic goods marketplace Turkcell Pasaj, where we offer a wide range of technological products.


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        Our fixed broadband subscribers can also manage their accounts with this application. Nearly 300 thousand Turkcell Superonline customers made 2.5 million transactions monthly using the Digital Operator App.

        Turkcell My Company app and web platform feature our digital services and solutions for corporate customers. The platforms are enriched with digital-only campaigns and packages, loyalty scenarios, and a fully digital subscription process. In 2020, 300 million transactions were made by 350 thousand companies from the Turkcell My Company app and web platform.


        UpCall is an application enriching and facilitating our customers' calling experience with its different features offered through our capabilities as a telecommunication operator. When a call is received from a number that is not saved in the user's phonebook, the caller's ID is displayed. The UpCall application also offers a smart search feature that enables the access to the identity of the owner of an unknown number based on the Turkish National Telephone Directory. Further, the application is capable of initiating a group call with a single click; offers the opportunity to add a topic, picture or a sticker to the calls; enables a "do not disturb mode", and proposes a set of ring tones for users who want to inform callers that they are currently not able to answer the call.

    Digital Society Solutions

        Turkcell is not only focused on services that increases ARPU levels but also eager to leverage its digital and technical competencies to create value for society, empower society for equal social inclusion and create a better future together. This focus resulted in several digital society solutions, including Hello Hope, Whiz Kids, DQ, My Dream Companion, My Sign Language, My Gem Inside and Arikovani.

        Launched in 2016, Hello Hope is a mobile application that aims to facilitate the lives of Syrian refugees in Turkey, through Turkish learning flash cards, instant voice translation and useful information. This application became a hub for delivering information on the COVID-19 pandemic, with the collaboration of institutions including the Turkish Red Crescent and World Health Organization. The Whiz Kids project was initiated in 2016 under the auspices of the Ministry of National Education. By way of in-classroom setting as well as trainings through mobile applications and online platforms, the Whiz Kids app aims at empowering children in Turkey to realize their potential through the education of new technologies. The DQ mobile application, launched in January 2019, a project initiated by DQ Institute, is aimed at improving children's technical, cognitive, meta-cognitive, and socio-emotional competencies that are grounded in universal moral values and to enable individuals to face the challenges and harness the opportunities of digital services. The My Dream Companion application enables the visually disabled individuals to access information rapidly and easily, providing them a more active and independent social life through its instant audio description and indoor navigation technologies. My Sign Language is a mobile application that seeks to improve communication between hearing disabled and those unfamiliar with sign language. It also provides hundreds of accessible content items with sign language. My Gem Inside is a mobile application offered free of charge to all in Turkey, that supports the cognitive, emotional and behavioral development of children with autism through over 90 educational programs, along with their development through inclusive education. Arikovani ('Beehive' in Turkish) is a crowdfunding platform that helps entrepreneurs source funds needed to execute their technology or innovation-oriented projects.

    Digital Identity Management Services

        Fast Login is a secure universal login solution which allows users to securely access a wide array of digital services and websites using their mobile phone or e-mail account for authentication. It is


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powered by GSMA under the Mobile Connect name and was launched in December 2015. Simply by matching the user to their mobile phone, Fast Login allows them to login to websites and applications quickly without the need to remember passwords and usernames. Fast Login is integrated to 76 Turkcell and 30 non-Turkcell applications with new technology upgrades. In 2020, Fast Login, having reached 28 million registered users, was used 350 million times with its easy, fast and secure mobile authentication service.

        Mobile Signature, launched in February 2007, enables mobile subscribers to sign electronic documents and transactions with a legally-binding digital signature using public key infrastructure (PKI) on SIM cards. Mobile Signature users can easily verify their personal identity in a digital environment and complete transactions remotely.

        One Time Password is widely used by service providers as a secondary factor for authentication of transactions. The service allows service providers to send a single-use password via SMS to their end users in order to ensure transaction security. It is commonly used for online banking processes and login transactions.

(iv) Digital Business Services

        Turkcell Digital Business Services combines the overall telecom service provider strategy of Turkcell with its "Digital Transformation Business Partner" strategy for corporate customers. In this regard, we contribute to the digital economy by providing end-to-end digital solutions for both private and public enterprise customers. Furthermore, we implement projects with high value propositions, while helping our clients to increase their profits by either lowering their operating costs or generating higher revenue.

        In addition to our connectivity services based on our strong infrastructure, we offer various services such as cloud solutions, data center services, cyber security services, managed services, IoT, big data analytics, business applications, industrial vertical solutions and new generation technologies.

        While continuously meeting the telecommunication and IT needs of enterprises with Turkcell assurance, expertise and differentiation, we continue to improve the quality of our products and services with our superior infrastructure, technology investments and well-qualified human resources.

        We are planning the future technology investments of our customers together with them, by integrating our ongoing infrastructure investments with the new generation services. Thanks to this approach, in their digital transformation journey, our customers are free to focus on their core business, while having an optimum financial model in their new technology investment plans.

        In 2020, total digital business services revenues increased by 30% year-on-year to TRY 1.8 billion.

    Fixed telco & Cyber Security Services

        We serve the Turkish market with our 50 thousand km end-to-end fiber infrastructure, enabling us to provide superior quality service. Turkcell's value proposition of connectivity infrastructure has three main components: Fixed data services, fixed voice & unified communications services and cyber security services.

        In the second quarter of 2020, Turkcell launched its FlexVPN service. FlexVPN enables enterprises to use Turkcell's mobile infrastructure together with fixed access VPN services. Flex VPN offers a flexible solution for organizations' remote-working capabilities through quota-free mobile package offers. As a result of increased remote working, we believe that the FlexVPN service is likely to become an important network access tool for corporate customers.

        SD-WAN (software-defined networking in a wide area network) Services, launched at the beginning of 2019, provides tools for enterprise customers to minimize the time allocated for network management


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and to strengthen branch security. With SD-WAN technology, Turkcell enables cloud-based network services such as firewall, security and routing for enterprise customers. SD-WAN also provides multi-tenant architecture, bonding detailed monitoring, and app-based traffic engineering features. Turkcell aims to offer conventional and next generation network services together.

        Turkcell Single Office service enables companies to switch their on-premise PBX hardware to a cloud-based unified communication service. This service is fully managed and operated by Turkcell teams, and customers are provided with IP phones and flexible payment models. Turkcell's Single Office service includes a softclient capability that works both on iOS and Android devices.

        Managed Security Services is provided to corporate customers for their cyber-security needs and includes DDOS protection, managed firewall services, penetration and vulnerability services, threat intelligence services and a managed security operation center. At the end of 2020, Turkcell has begun to offer cloud-based security services which will enable Turkcell to provide flexible capacity offers with different security vendors. Turkcell manages over three thousand cyber security services for more than 1,500 customers. Furthermore, through its proactive approach, Turkcell has developed its own threat intelligence platform named "Turkcell Bozok".

    Data Center & Cloud Services

        Turkcell offers a wide range of data center solutions for its corporate customers. These services range from co-location solutions to cloud infrastructure (next generation virtual server, virtual data center), backup, disaster recovery and security services. As at the end of 2020, Turkcell managed over 11,000 virtual servers and protected more than 20 Petabyte of data for its corporate customers. As of December 31, 2020, our datacenters are based across eight locations in Turkey on approximately 39,500 sqm. of total data center white space area, i.e. the area where IT equipments are placed.

        In addition to traditional data centers located in Dudullu, Kartal, Yenibosna and Sogutozu, with a total white space area of approximately 15 thousand sqm., we built our first new generation data center in Gebze in 2016, which has an area of 33 thousand sqm. with 10 thousand sqm. of white space and 30 MVA power capacity, thereby meeting the highest corporate standards. In 2018, we invested in our Izmir data center which has 2,350 sqm. white space. In late 2019, we built a new third generation data center in Ankara, the largest in Turkey with its 12 thousand sqm of white space area. Also, we completed the construction of a new datacenter with 6 thousand sqm white space capacity in Corlu in Turkey's Western Europe side, and it is planned to be operational in the second quarter of 2021.

        Turkcell offers cloud services from six of its data centers with high availability and reliability standards. We have integrated all of our cloud services on the website, Through this platform, users may configure their infrastructure and software services within minutes and manage them through a self-service portal. Users can use the latest technologies providing business continuity over Turkcell Cloud without undertaking investment costs. Turkcell Cloud is the first cloud platform that is authorized with ISO27017 "Cloud Computing Information Security" certification in Turkey.

    Managed Services—End to End Solutions

        We provide end to end solutions for customers as part of their digital transformation process, by combining our telecom and IT services capabilities. In these projects, we analyze the needs of our customers from a wide range of industries and provide tailor-made solutions to individual needs—we have implemented almost 1,500 projects to date. With our project management team, we implement system integration projects, IT outsourcing projects, network, security and system management services, application management, end-user services, data center services, digital transformation, IoT, mobile applications, mobile user support and many other solutions and services in accordance with the business processes of our customers.


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    Digital Business Applications

        Business Applications gives corporate customers a competitive advantage by providing non-core industrial solutions. Cloud-based SaaS products such as digital learning, biometric signature, digital archive, domain & hosting solutions and collaborative products, digital invoicing solutions along with new generation products are available to streamline customer processes and provide operational efficiency through new revenue streaming channels, better customer reach and experience. Going forward, we will focus on process automation, remote order and e-commerce solutions as they have become crucial in the context of the COVID-19 pandemic.

        With the rise of the enterprise applications market as well as improvements in mobile internet, cloud services and mobile devices, businesses have been undergoing a strategically important process of digital and mobile transformation. Turkcell continues to be a strategic business partner to companies in all industries for transformation projects that aim to render all processes manageable via mobile devices anytime and anywhere.

    IoT Products & Solution Management

        Turkcell has focused on its Machine-to-Machine ("M2M") and IoT business since 2009, whose principal markets in Turkey include car telematics, team tracking, fleet management, POS terminals, security alarms, smart metering, mobile health management, smart agriculture, smart energy and sales force automation applications. Turkcell launched Turkey's first M2M Platform in March 2012. With the M2M Platform, customers can manage their M2M sim cards more effectively. As of December 31, 2020, the number of M2M subscribers increased to 2.8 million, up from 2.6 million as of December 31, 2019.

        In addition to the M2M Platform, Turkcell launched its IoT Platform in November 2019, which enables enterprises to transform ordinary devices into connected devices. It gives them control of their IoT solutions, providing them the visibility and intelligence required to transform their business. An online dashboard of tools and data feeds, Turkcell IoT Platform is a one-stop IoT platform for device management, data collection, data visualization, application development and runtime analytics. Turkcell IoT Platform runs on, which is a fully automated cloud platform. It offers true multi-tenancy, scalability & high availability and security.

        Turkcell will continue to pioneer this business line with the release of services on upcoming new technologies such as consumer/corporate IoT and NB-IoT (NarrowBand-Internet of Things). Turkcell aims to launch new end-to-end solutions on specific IoT verticals in the upcoming periods.

        Mobility, a key IoT vertical for Turkcell, refers to the integrated application of smart technologies and management strategies in mobility systems, which includes B2C/B2B team tracking, vehicle tracking, connected car solutions and fleet management. Within the Turkcell Kopilot product family, Turkcell enables firms to track their fleet on maps, access critical reports about their fleet and encourage their drivers to drive safely through a single, user-friendly platform. In addition, corporate customers can monitor and manage their sales forces and fleets with Ekip Mobil ("Team Mobile"). Team Mobile is 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. Team Mobile can be used on any mobile device and comes at a minimal investment cost for companies.

        Turkcell designs industry 4.0 and energy solutions that increase the productivity of enterprises in the field of intelligent production and integrated energy solutions. We provide solutions to create smart factories and that are designed for the energy market. Turkcell has launched a new smart energy service named "Turkcell Enerjim", targeting mainly corporates to help them monitor their energy consumption and increase their efficiency.


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        Turkcell has launched a service named "Turkcell Filiz", which is a mobile application and used with the soil-weather IoT station to digitalize agriculture practices. It provides instant data regarding fields and aims to increase the productivity of farmers by assisting them with their irrigation and spraying decisions according to soil and weather conditions.

    Big Data Analytics Services

        Turkcell offers big data analytics services to companies to help them understand sector dynamics. These services also enable companies to obtain information on their customer base by providing demographic and behavioral analysis or competitor analysis to help them support their marketing strategy through data. We use advanced artificial intelligence, machine learning and data analytics capabilities to create new insights and propositions. We have two main service offerings in Big Data domain: "Insight as a Service" and "Analytics as a Service".

    (i) Insights as a Service (Business Insights)

        Turkcell re-designed its B2B insight services in 2019 to create an end to end solution for B2B customer market research needs. Turkcell provides a comprehensive market research or performance report to several sectors on brands' and competitors' customer profile, branch visits, crowdedness, and purchasing behavior, etc. This serves as an innovative and data-based alternative to traditional market research. Also, base station signals are used for location analytics and mobility index projects to create data-based decision-making process for transportation and public sectors, or help companies boost their outdoor marketing activities by enabling them to find the best locations that match their brand. At the end of 2020, Turkcell launched its cloud-based Insights as a Service Platform to serve B2B customers.

    (ii) Analytics as a Service (Business Analytics)

        In addition to the Insights as a Service Platform, Turkcell also launched its Analytics as a Service Platform in 2020. By using this platform, Turkcell has developed unique solutions to enrich customer offerings by analyzing the behavioral data of Turkcell users. These services help customers improve their analytics models such as credit risk scoring, fraud scoring, digital customer scoring and customer segmentations.

        Further, together with SAS, which is the leader in the global analytics market, we launched cloud-based SAS packages for the first time in Turkey in November 2020. We aim to provide advanced analytics services over Turkcell cloud in the industries of focus, so that our customers can use their big data to create analytics reports that will help them to increase their productivity and efficiency.

    Industry Specific Solutions

        Besides our value-added IT services, we also implement digital transformation projects with industry-specific vertical solutions that address the individual needs of each industry. For the ten sectors in our target market including finance, health, education, logistics, manufacturing, retail, energy, tourism, SMEs and central and local authorities, we offer a targeted solution set that points industry specific needs.

        As an integrator that provides and operates all the solutions it needs in terms of technology, we hold a leading position in the public-private partnership (PPP) market in terms of both the number of beds and the number of hospitals. Seven city hospitals—Yozgat, Adana, Eskisehir, Elazig, Bursa, Basaksehir and Tekirdag hospitals—are in operation and the entire technology infrastructure, from hardware to software and from systems to operations, is managed by Turkcell. Besides, Turkcell has established the technological infrastructure of two multi-purpose emergency hospitals in 2020 during the COVID-19 pandemic. As at the end of 2020, total bed capacity of 7 PPP hospitals was over 8 thousand, strengthening our market leadership in terms of these KPIs.


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        Yozgat Hospital was awarded the HIMSS7 certification, that is the highest level of the HIMSS certification and is the only internationally accepted international standard regarding the digitalization level of a hospital in Turkey.

    Partner Ecosystem and Vendors

        There are three different categories of business partnerships in our ecosystem: Our subcontractors, those with whom we develop business and/or products and our sales business partners. We manage this ecosystem on an end-to-end basis.

        Through our sales business partners, we focus on creating new sales prospects for our products, services and system integration projects. Our wide network of these companies enables our services to achieve sales targets.

        In 2020, we launched the "Partner Program" where we created an incremental value of partnership for nearly 150 sales business partners of different competencies in our ecosystem. We aim to grow our ecosystem qualitatively with a win-win approach, through which our partners are positioning our product/services together with their own solutions and services thereby generating revenue through our premium system.

        Moreover, through our partnerships with global vendors, we are expanding the solution sets we offer to our customers vis-a-vis technical competence and project diversity. As at the end of 2020, we have 21 global vendor partnerships.

        See "Item 3.D. Risk Factors" for a discussion of the regulatory changes affecting our digital services for consumers and corporates.

(v) Techfin Services

        Turkcell focuses on techfin services through our digital payment services platform, Paycell, and our finance company, Financell.

        The vision of Paycell is to be an enabler on financial inclusion with the combination of technology and financial services. Paycell was established to provide techfin services including mobile wallet, direct carrier billing, inter-city subway/bus card uploads (istanbulkart), utility payments, money transfers, prepaid cards (physical and virtual), QR code payments and POS solutions. We are committed to capitalizing on this well-established payment platform by leveraging our technological know-how as well as our advanced infrastructure. Paycell's aim with end-to-end payment solutions is to bring the merchants and the consumers together, by offering ease-of-use, new technology and tangible benefits to the consumers while facilitating further revenue generation for the merchants through payment and CRM solutions. For its customers, Paycell, through the Paycell mobile application, offers various services including quick and easy payments via QR code, easy money transfers, loyalty advantages and cross-promotions, which position Paycell as a "Super App". In the fragmented techfin market in Turkey, where competition is focused on providing solutions in particular verticals, Paycell differentiates and stands out with its strong positioning enabled by its wide portfolio of services as well as its access to Turkcell's advanced technology expertise, sizeable customer base and extensive sales channel. Further, Paycell's core value proposition for merchants is the ability to know their customer base better, offer targeted deals and a quick and easy method of payment which, at the same time, accumulates customer data for the merchant. Paycell also offers online payment infrastructure systems in order to increase its foothold both in online and offline commerce.

        Moreover, regulatory environment, which have become more supportive following the introduction of recent legislations mainly on open banking, and e-money, also has the potential to positively impact techfin activities.


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        Our finance company, Financell serves to meet the financial needs of individual and corporate customers for their technology products. Established in 2018 as a subsidiary of Financell, Turkcell Sigorta Aracilik Hizmetleri A.S. ("Turkcell Sigorta") provides insurance agency services such as device protection, personal accident insurance & bill protection. Turkcell Sigorta intends to expand its services by tapping the health and home insurance markets.

(vi) Wholesale

    (i) International Roaming

        Our international roaming strategy has always been to achieve the best international coverage for our customers by providing continuous communication wherever they travel and to enable international visitors to enjoy the service quality of Turkcell. Our coverage extends to many countries around the world through our roaming agreements. As of December 31, 2020, we believe we have further enhanced our position as a leading mobile operator of international roaming services in Turkey by expanding our partnership in 207 destinations throughout the world, pursuant to commercial roaming agreements with 581 operators.

        On January 20, 2015, we launched LTE roaming services for our subscribers at many different locations around the world. As of December 31, 2020, our subscribers experienced LTE roaming services with 258 operators in 129 destinations. On April 1, 2016, we launched LTE roaming services for visitors from many different countries. As of December 31, 2020, subscribers of 261 operators from 116 different locations experienced LTE roaming services on the Turkcell network. We also provide international GPRS, MMS and 3G services. We also provide roaming services for both postpaid and prepaid subscribers of foreign mobile operators visiting Turkey. As of December 31, 2020, our subscribers can send SMS to more than 734 mobile operators located in 209 destinations.

        Flight and travel restrictions were imposed globally starting from the beginning of the second quarter of 2020 due to the pandemic. These measures, which partially eased during the summer months, were imposed again in the fourth quarter as a result of the pandemic's second and third waves. The international roaming business was one of the most affected from these measures. In order to minimize this negative impact for future periods, we re-negotiated the commercial roaming agreements with foreign operators in line with revised projections reflecting new conditions, thereby keeping the negative impact of the pandemic at a minimum.

        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 roaming arrangements in the listed countries, our net revenues for roaming on our Turkish network totaled less than TRY 3.5 million in 2020 while our net expense for our subscribers roaming on the networks of operators in the listed countries was less than TRY 4.8 million. In terms of revenue generation, we do not believe that our roaming arrangements with operators in Cuba, Iran, Sudan, Libya and Syria are material. For additional details regarding our international roaming agreements with Syria, please refer to "Item 4.B Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA)".

    (ii) Wholesale Voice

        Turkcell and Superonline Iletisim Hizmetleri A.S. ("Turkcell Superonline") together supply wholesale voice service by establishing interconnection agreements with fixed line and mobile operators and international carriers.

        As of December 31, 2020, Turkcell Superonline had interconnection agreements with over 100 national and international carriers. Turkcell has interconnection agreements with Turk Telekom,


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Vodafone, TT Mobil and other Fixed Telephony Service Operators and via these agreements, parties connect their networks to enable the transmission of calls to and from their mobile communications system. As of December 31, 2020, Turkcell had interconnection agreements with over 60 fixed line and mobile operators and carriers.

        As of December 31, 2020, Turkcell had agreements with 12 Directory Service Providers.

        A full MVNO agreement was signed between Turkcell and Netgsm, a local telecommunications company, on November 5, 2020.

        For Turkcell, in Turkey, current interconnection rates are setby the ICTA's decision on mobile termination rates ("MTRs") and fixed termination rates ("FTRs"). For more information, see "Item 4.B. Business Overview—XII. Regulation of the Turkish Telecommunications Industry".

    (iii) Wholesale Data

        Our vision on wholesale data is to become a preferred regional player in a digitally hyper-connected world. To do this, we have developed a robust infrastructure which includes 12 border crossings from Turkey to other jurisdictions. Five border crossings are towards Europe where we offer various options to connect with important European cities through protected and completely separate routes. Seven of the border crossings are towards the East, where we offer capacity services to the Caucasus and Caspian region as well to the Middle East. In accordance with our strategy, Turkcell Superonline is also establishing and executing a domestic wholesale business strategy to provide wholesale products such as bit stream access via its FTTx fiber coverage, infrastructure services, backbone transmission, Ethernet, IP transit capacities, cyber security and VPN services to operators, service providers and data center companies in the domestic market in Turkey. Turkcell Superonline is leading the localization strategy for Turkey's data and internet traffic by developing partnerships with national operators, internet exchange platforms, Tier-1 operators, global/local content and cloud service providers to enable direct access to all networks and also commercializing internet traffic.

        Turkcell Superonline has been taking important steps to develop Istanbul as the world's newest and important internet and content base due to its geostrategic location by successfully handling to transform the "Silk Road" into the "Fiber Road". Accordingly, the company provides a bridge between east and west, which supplies a continuous connection with partnerships the Tier-1 operators and strategic partners between Asia, Middle East and Europe. Turkcell Superonline provides telecom services to more than 150 international operators including Tier-1 companies, Content Delivery Networks ("CDN") and OTTs. As of December 31, 2020, we have the capacity to carry more than 10 Tbps of international traffic.

IV. Tariffs

        Our charges for voice, data and digital services consist mainly of bundles and also monthly fees, subscription fees, and volume discount schemes and options under various tariff schemes.

        We have various segmented tariff plans for mobile that target specific subscriber groups (postpaid or prepaid, corporate or consumer). A majority of our customers choose all-inclusive packages which include minutes to Turkcell, intra-company calls (for the corporate segment) and all national calls, data and some of our digital services.

        "Comfort Packages" is a payment plan structure launched in 2019 through which subscribers enter into a postpaid subscription contract under which monthly renewal is not mandatory and where add-on packages may be purchased via top-up packages. With Comfort Packages, our aim is to attract new subscribers and also, switch prepaid subscribers to the postpaid payment model. In 2020 we launched "Mega Plan", a new tariff structure offering large data quota that is available for a longer time frame.


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Its users pay monthly for yearly quota; consume as per their own usage habits, enjoying an experience without of the feeling of being restricted in monthly time limitation for the data quota.

        Turkcell's fixed offers are based on speed and quota. The tariffs are designed by taking different needs of each customer segment into consideration. Turkcell's own fiber infrastructure enables fiber offers with speeds of up to 1000 Mbps, which we usually offer as bundled with our TV product. Turkcell also offers a tariff for a speed of 10 Gbps. Turkcell's ADSL service offers speeds up to 8 Mbps which can be offered as bundled with fixed voice service. Since 2016, VDSL is offered to our customers using DSL products, with higher speeds of up to 100 Mbps. Our cable internet offers are at speeds up to 35 Mbps. Our FWA product Superbox offers are at speeds up to 375 Mbps with a minimum speed of 10 Mbps.

        Turkcell's strategy is to provide the best customer experience through enriched value propositions and over a well-invested infrastructure. Better user experience and differentiated offers provide Turkcell with the flexibility to price its tariffs based on cost and investments and to apply, to a certain degree, an inflationary pricing policy.

(i) Consumer Tariffs and Loyalty Programs

        We mainly offer bundled tariffs including voice, data, SMS and various digital services. We focus on providing a leading mobile experience in Turkey, and in order to meet customer needs in different segments (such as youth) we offer a large portfolio of tariffs. Data quotas have become the key selling point in our tariffs which are enriched with our digital services.

        Our aim is to provide offers that are tailored to the individual needs of our customers, considering their tenure, data usage and risk score, thereby favoring customer retention.

        In fixed broadband products (fiber, DSL and Cable internet), we have various tariffs for different internet speeds and quota. We offer 10 Mbps to 1000 Mbps internet speed for fiber internet, which we serve through our own infrastructure. In 2018, we have launched our fiber internet offer with 10 Gbps speeds, which is offered only by us in Turkey. Our fixed broadband tariffs are generally for a 12-month or 24-month commitment. We offer services to our customers also through the Vodafone and the Turksat infrastructure as part of our mutual infrastructure sharing agreements.

        We offer IPTV service, namely TV+, bundled only with our fiber internet service on our fiber infrastructure. Our fixed voice service is bundled with our fixed broadband service. Further, we also offer tablet, smartphone and new technology device campaigns with fixed broadband internet packages. In 2020, we launched TV+ Ready, a new generation easy-to-install Android set-top box as a first for the Turkish market provided by a telecom operator. TV+ Ready includes the premium content offered by TV+. The device also enables users to access on the Google Play store through their TVs.

        For households that are at locations without our fiber infrastructure, we offer wireless high-speed internet access service called Superbox, serving through our 4.5G network. Superbox device is included in the subscription plan.

        Turkcell aims to provide advantageous price schemes to its customers when abroad. With a customer-oriented focus, Turkcell offers alternative options depending on their roaming frequency. All Turkcell postpaid customers can enjoy "Roam Like Home" offer, enabling them to use their tariff at home while abroad by paying an additional daily fee.

        We have three applications called Platinum, GNC, and Turkcell Bizce which serve as platforms for our loyalty programs.

        Platinum is Turkcell's premium customer program for both consumer and corporate subscribers. Customers who use Platinum and Platinum Black tariffs are eligible to use the privileges Turkcell Platinum offers through the application. Platinum tariffs start from a minimum 89 TL and include


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richer package contents. The Platinum app offers one-on-one 24/7 customer service and gifts that suit the lifestyle of Platinum tariff customers. Tickets to popular shows, books, device and accessory gifts, airport transfers, car park services at numerous shopping malls, local car wash services and discounts at various restaurants are amongst the gifts that are offered through this program.

        GNC is an application for youth segment users. GNC offers young people entertainment through its new entertainment platforms, and provides advantageous offers and gifts. The GNC app announces surprise data offers twice a week through gamification scenarios such as "Crack the Egg" and provides co-branding offers, gift cards and free data with "Push & Catch". Users can play mini games and win freebies through tournaments. Users can compete on "Challenge TV", GNC's new content platform through challenge videos, and win various gifts according to views or likes.

        Turkcell Bizce is the platform aimed at women that supports equal opportunity, personal development and economic engagement for women. The platform enables customers to sell their handcrafted products online through "Bizim Pazar", which also offers expert self-development videos. The usage of Turkcell Bizce is data free, and the design of the application offers a seamless customer experience.

        In addition, we have been conducting a marketing campaign called "Shake & Win", which can be deemed a loyalty program. The campaign is available through our online self-service channel Digital Operator app and extends various gifts including free one-month subscriptions to some of our digital services, free daily or weekly data quota. Also, we provide special gifts to our loyal customers who have been Turkcell customers for over ten years and for Platinum customers.

        Further, we continue the loyalty program launched in 2019 in the form of a marketing campaign via gamification called #youdoit. The campaign runs through a channel on BiP and announces a new task on a digital service every week. Customers who accomplish their weekly tasks are entitled to weekly data packages. In 2020, the campaign became a true engagement and growth platform for our services via its gamification model and further increased its value for the company through its sales driven weekly tasks.

        Also, we continue our interactive campaign called "Surprise Point" where customers join through BiP app and visit certain locations to receive similar gifts as in the case of Shake & Win campaign. These campaigns have not only helped to increase data usage, but also enabled our subscribers to become familiar with our digital services. They have also contributed to customer retention by increasing their loyalty.

(ii) Corporate Tariffs and Loyalty Programs

        We focus on meeting the specific needs of varying corporate customer segments with tailored offers coupled with the best network and service experience. We offer various bundle packages including voice minutes, data, SMS, company on-net and/or flat minutes and digital services. As we strive to become corporates' technology partner in their digital transformation journey, we also provide a wide range of integrated services and solutions for them through our subsidiary, Turkcell Digital Business Services. These services include cloud services, security solutions, systems integration, consulting, innovation projects for the business fields of the future; such as data analytics, the Internet of Things, M2M Communication, Industry 4.0, and Artificial Intelligence.

        One of our key focus is to provide our corporate customers with the best internet experience in both fixed and mobile connectivity. Through Turkcell Superonline's independent fiber backbone as well as the DSL infrastructure of the incumbent fixed operator, we deliver fixed internet services.

        We also aim to reduce the operating costs of our corporate customers by offering attractive co-branding offers for their main cost items. In that regard, our Win at Work loyalty program helps companies meet their basic needs such as courier services, car leasing and translation with special


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discounted rates. Further, launched in 2019, our smartphone leasing plans for corporates aim at reducing their smart device procurement costs.

(iii) Wholesale Tariffs

        Based on Turkcell's roaming agreements, Turkcell hosts 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 for the specific call type. Inter-operator tariff is a wholesale tariff applied between mobile operators with roaming agreements. In 2020, ensuring the necessary wholesale roaming cost basis by re-negotiating the terms with the foreign operators in order to keep the negative impact of the pandemic at a minimum level has enabled us to support the continuation of our favorable tariffs. Our "Roam Like Home" offer was one of the main focuses of the renegotiations for our wholesale roaming agreements.

        Interconnection rates in Turkey are based on the ICTA's decision on the interconnection tariffs for Turkcell, Vodafone, TT Mobil, Turk Telekom and fixed telephony service operators.

        With respect to data sales, Turkcell intends to provide competitive prices to promote Istanbul as a regional hub for peering and IP transit services and international capacities, as well as to support the domestic wholesale market through its robust network with feasible commercial conditions.

V. Churn

        The mobile churn rate is the percentage of disconnected subscribers 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 provide the necessary payment for a period of 270 days are disconnected. Under our churn policy, prepaid subscribers are disconnected from the system if they do not top-up above TRY10 during a twelve-month period.

        In the first quarter of 2017, our mobile churn policy was extended from the regulatory minimum in Turkey of 9 months to 12 months, except with regard to prepaid customers who last topped up before March of each year, which will be disconnected by year-end at the latest. Prior periods have not been restated to reflect the change in churn policy. The mobile churn rate for 2017 disclosed in this document have been positively impacted by this change, in part due to the fact that we have been successful in reactivating certain subscriptions during the additional three-month extension. We believe that following this revision, the seasonality effect in churn rate, which is caused by periodic subscriber acquisition, has been reduced to a great extent. In this regard, we have deactivated 580 thousand inactive prepaid customers in 2019-end, and 666 thousand in 2020.

        Additionally, the ICTA, through a board decision taken at the end of 2018, has imposed obligations on operators to record and to keep up-to-date identity information on their subscribers (both consumer and corporate segments and including the fixed segment), matching this information with the products/numbers that are being used. The decision also requires that operators complete missing information on existing subscribers and to terminate these subscriptions if the information is not provided within a given date. Likewise, foreigners are required to register their subscriptions with their "foreign identity number" if they are to use their subscription for more than 90 days, otherwise


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their subscriptions are also terminated after another period of 90 days during which they can only receive calls. These obligations have resulted in a one-time bulk deactivation of subscriptions, especially of the subscriptions foreigners, impacting our churn rates in the third quarter and particularly in fourth quarter of 2019. In the third and fourth quarter of 2019, a total of 1.9 million mobile subscriber lines were disconnected as a result of this regulatory change. New subscriptions are made if and only if the required identity information is given upfront. We will continue to monitor subscriptions accordingly and terminate if and when necessary (in cases of death, deportation, etc.).

        In 2020, as required by a decision of the ICTA, the line of a deceased customer should either be transferred to a successor or another user or terminated. Such lines on which no action is taken are to be deactivated on the 120th day. This obligation have resulted in a one-time bulk deactivation of 214 thousand customers in the third and fourth quarters in total. Such deactivations are expected to continue in the upcoming quarters but the impact is be expected to significantly lower.

        Starting in the third quarter of 2018, we changed the presentation of churn figures to demonstrate average monthly churn figures which we believe corresponds to market practice. In 2020, the average monthly mobile churn rate decreased to 2.3% from 2.7% in 2019.

        The churn rate for the fixed broadband products is calculated in the same way as the churn rate for the mobile products (except in fixed broadband, customers that change infrastructure from fiber to DSL/Cable or vice versa counted in churn rate).

        The average monthly fixed churn rate decreased from 1.9% in 2020 from 2.1% in 2019.

        We have what we believe to be an adequate allowance for doubtful receivables in our Consolidated Financial Statements for non-payments and disconnections amounting to TRY 787.2 million and TRY 795.8 million as of December 31, 2020 and 2019, respectively.

VI. 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. These seasonality effects have been less significant as we typically launch market campaigns to address the change in demand levels. Local and religious holidays in Turkey generally affect our operational results positively through higher consumption. Yet, in 2020, the market was significantly lower compared to previous years as the pandemic had led to significant restrictions against mobility.

        The Turkish fixed broadband market is also affected by seasonal peaks and troughs. Historically, the effects of seasonality on fixed broadband usage have negatively influenced our results in the third quarter of the fiscal year. This is mainly due to summer holidays when both usage and acquisition numbers decrease and churn increases due to residents moving. Yet, in 2020, fixed broadband demand increased as a result of the pandemic and subscriber acquisitions were high in every quarter. On the contrary, in the corporate segment, fixed broadband acquisitions were negatively affected by the lock-down measures.

VII. Mobile and Fixed Network

a. Coverage

        Our mobile communications network is designed to provide high-quality coverage to the majority of Turkey's population throughout the areas in which they live, work and travel. Coverage also includes a substantial part of the Mediterranean and Aegean coastline. We enhanced coverage in low-populated


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areas (populations of less than 1,000 people) as well. In terms of 2G, 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. In addition, in 2018, within the scope of the Ministry of Transport and Infrastructure's Rural Coverage Project as part of universal services which we started in August 2013, about one thousand 4.5G base stations covering 1,623 villages with populations of less than 500 were installed. As per the universal service obligation, the network infrastructure serving these areas has to be shared by all operators. People living in these villages are currently served by LTE services (in addition to 2G) in a similar service quality provided in the urban areas. The daily lives of the 250 thousand people in these villages have been improved thanks to enhanced mobile communication and high-speed mobile internet services. ULAK (local network vendor producing 4.5G base stations)'s 4.5G radio equipment was used markedly, corresponding to about half of total deployments.

        We commercially launched 3G simultaneously in 81 provinces and major cities in Turkey in July 2009. Benefiting from higher-quality communications provided by the widest spectrum in 3G, Turkcell will continue to offer seamless communications services to its customers with what we believe to be the most extensive coverage amongst its competitors.

        In 2020, we have continued to develop and improve the coverage and capacity of our network. In order to adapt to the increasing number of customers working remotely in the context of the COVID-19 pandemic, we increased both coverage and capacity by investing in additional network infrastructure in residential areas. We have used 3G and 4.5G Small Cells (such as femto and micro) to enhance our network coverage and capacity where and when necessary. Additionally, 3G and 4.5G repeaters have been used to extend the network coverage without adding new sites.

        Our fixed communications network is designed to provide high capacity and high-quality service to consumer and corporate customers. Moreover, we believe that it is well designed and implemented to provide capacity to our mobile network. Our fixed network has the capability to carry large volumes of data and internet traffic in-country, and is also connected to national and international telecom operators.

        As of December 31, 2020 our own fiber network reached 50 thousand kilometers and connects all cities across Turkey. In 23 cities we have fiber to the home ("FTTH") network and home pass, whereby the number of premises that are connected to our fiber network has reached nearly 3.8 million. Through partnership engagements, we have become capable of delivering fiber and cable (hybrid-fiber coaxial) internet service to 7.0 million households in 30 cities. We also provide enterprise Wi-Fi services.

        In the fixed access network we have two main network structures called fiber to the building ("FTTB") and FTTH. In FTTB network, we are installing switches to access our subscribers. In FTTH networks, we are installing Gigabit Passive Optical Network ("GPON") and 10-Gigabit-capable symmetric passive optical network ("XGS-PON") equipment which is the latest access network technology for residential and business subscribers. These network structures enable Turkcell to offer high speed internet, TV, Voice over IP. The fixed access network also provides bandwidth requirement for mobile sites with metro ethernet services.

b. Quality of Service

        The ICTA published a "Regulation on Quality of Service in the Electronic Communications Sector" on September 12, 2010, effective as of December 31, 2011 (see "Item 4.B. Business Overview—XII. Regulation of the Turkish Telecommunications Industry" for further details). The Turkcell network


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is currently above the standards set by the ICTA statement. Typically, "Call Drop" was one of the important Quality of Service figures that we focused on.

        Dropped calls are calls that are terminated involuntarily and are measured by using the ratio of total dropped calls during all day. Using such industry standards for dropped calls, our dropped call rate for our 2G&3G network has further decreased below 0.312% in 2020.

        The rate of service quality is being enhanced continuously due to extensive network optimization and investments in our 2G, 3G and VoLTE network to improve the quality and capacity of the network. According to the statistics gathered from vendors, Turkcell has one of the best 2G, 3G and VoLTE dropped call rates compared to other networks around the world.

        We have been offloading voice and data traffic by utilizing small cells in the network for an improved customer experience. Together with Turkcell Superonline, we have also implemented Wi-Fi offload integrated with the Turkcell 3G and 4.5G networks to further enhance the customer experience. Additionally, we are using a variety of solutions such as the Special Distributed Antenna Solutions (especially for major stadiums), indoor active systems that simplify deployment and streamline capacity/coverage expansions, and outdoor products to optimize the coverage and capacity of our Radio Access Network.

        Turkcell received the first ISO 9001 certificate in 1999. Since then, independent firms have been auditing Turkcell's management system annually and have been renewing the certificate every three years within the scope of International Mobile Communications Design, Installation, Operation, Sales and After Sales Services. The most recent certificate was received on December 3, 2019 based on ISO 9001:2015 Quality Management Standards. This certificate will be valid until December 3, 2022. In addition, Turkcell received the ISO/IEC 20000-1:2005 IT Service Management System Certificate in January 2011. As the first telecommunications company to receive the ISO 20000-1:2005 certificate in Turkey, Turkcell has promoted the adoption of an integrated process approach to effectively deliver managed services to meet business requirements. Turkcell and Superonline still maintain ISO 20000 certificates (ISO 20000-1:2011).

        On the fixed network side, we monitor traffic utilization in our access network continuously to prevent any saturation and upgrade the capacity as soon as possible. Turkcell modifies and redesigns the network topology to meet the future requirements which allows us to improve our quality of service performance.

        The optical transmission network relying on Dense Wavelength Division Multiplexing ("DWDM") systems with Automatically Switching Optical Network ("ASON") and Optical Transport Network ("OTN") using protection mechanisms benefits from alternative fiber routes wherever available. This increases the capabilities of re-routing in the event of service interruption. Thus, the delivered point to point services provides an availability experience up to 99.999%; a quality level defining the transmission network as an upper level "carrier-class" network.

c. Network Evolution

(i) Radio Network

        With the 172.4 MHz spectrum acquired in the 2015 auction, Turkcell spectrum holdings reached 234.4 MHz, corresponding to 43% of total spectrum assets available to mobile operators in Turkey. Leveraging the advantage of our large spectrum assets and significant network infrastructure investments, our 4.5G network capability evolved from peak speeds of 375 Mbps to 1400 Mbps. Currently, Turkcell's 4.5G network supports LTE Advanced Pro technology, providing high-end features like 4x4 MIMO, 256QAM, 3-4-5 Carrier Aggregation, Narrow Band IoT (NB-IoT), eMTC, and LAA. In the future, as technology and its ecosystem evolve to new heights, we expect to introduce new


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capabilities to sustain our technology leadership, further enhance customer experience, and enable new services.

        Although the 900 MHz band is still primarily used for GSM900, we have been rolling out UMTS900 to provide a much stronger 3G coverage layer for voice calls redirected from the 4.5G network via a technique called Circuit Switched Fallback for deep indoor and improved rural coverage. This has been possible with certain previous activities such as Thin Layer Project for GSM 900, by which we have extracted enough spectral capacity to partially re-farm the 900 MHz band for UMTS. As the next step, we have started deploying second UMTS900 carrier, which leads to a more efficient utilization of 900 MHz spectrum and generate additional capacity. As we migrate 3G traffic to 900 MHz from 2100 MHz, we gain a capacity boost in the 2100 MHz band, which has already been in part repurposed for LTE. In this regard, we have deployed LTE in the 2100 MHz band, previously used by 3G only, to attain better spectrum efficiency, enlarge our 4.5G footprint in a cost-efficient manner, and improve end user experience.

        In the IMT-Advanced ("4.5G") tender held on August 26, 2015, Turkcell acquired large amounts of both frequency division duplex ("FDD") spectrum: 2x10 MHz from the 800 MHz, an additional 2x1.4 MHz from the 900 MHz, 2x29.8 MHz from the 1800 MHz, additional 2x10 MHz from the 2100 MHz, and 2x25 MHz from the 2600 MHz frequency bands. For time division duplex ("TDD") frequencies, 1x10 MHz from the 2100 MHz and 1x10 MHz from the 2600 MHz bands were also acquired. All frequency bands are technology-neutral and can be used for any technology, providing efficiency and flexibility for spectrum usage in the network. We currently use the 900 MHz band for 2G and 3G, the 2100 MHz band for 3G and 4.5G, and the 800 MHz, 1800 MHz and 2600 MHz bands for 4.5G.

        For voice services, Voice over LTE (VoLTE) has been supported from day one to provide voice services over our 4.5G network. We activated EVS (Enhanced Voice Services) on our VoLTE voice service to further enhance the voice quality and thus became one of the first mobile operators in the world supporting this high-end feature. The applicable regulations mandate that our 2G network remains active until April 2023; however most of our voice traffic is already carried by our 3G network, which has enabled us to gradually make our 2G network leaner without impacting service experience of our customers. As the VoLTE terminal support base grows, voice services will continue to be migrated to the 4.5G network from legacy 3G/2G networks.

        In order to provide a solution for VPN over wireless technologies like 4.5G, we have announced the Mobile VPN offer to our corporate customers. Through this solution, corporates are able to connect to the internet cloud over a wireless interface using 4.5G technology, without sacrificing their service quality requirements. This is a fast and flexible solution for connections between their branch offices and headquarters.

        Through our ongoing investment in 4.5G infrastructure, we became the first operator in Turkey to support NB-IoT, which is required for a new generation of innovative IoT applications on 4.5G networks. This technology is now available on request across our entire 4.5G footprint and enables machines to communicate faster and more effectively. Furthermore, through our Cat-M (eMTC) network support which enables fleet management, asset tracking and smart metering, we are able to provide higher data transfer throughput and have greater mobility for M2M communications.

        We provide a "Wireless to the Home" or Fixed Wireless Access ("FWA") service called Superbox, which offers wireless high-speed internet access for customers without fiber connectivity. The required equipment is included in the subscription plan and uses 4.5G network as a backhaul to provide internet connectivity at our customers' premises. As part of 5G preparations, we have demonstrated 5G FWA capability in a millimeter wave band (28GHz), which was the first 5G live network test in Turkey. We continue testing 5G FWA capabilities in 3.5 GHz and mmWave bands which will enable us to upgrade our FWA service where needed once the new frequencies are awarded.


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        For real-life scenarios in which the terrestrial network may be down or unable to provide the required coverage, we have developed a technology called 'Dronecell' which provides mobile connectivity from airborne drones with the help of a micro base station installed on the drones. This solution can be useful when communications in the areas are affected by natural disasters, or when temporary coverage in some other areas is necessary.

        Offering a unique experience to our customers with our strong 4.5G infrastructure, we continue our efforts to prepare our network for 5G. We have thoroughly tested the Massive MIMO technology for FDD and TDD, which can be deployed to meet capacity demands in dense areas. These collective activities help to maximize spectral efficiency, further enhancing network capacity and improving overall user experience. We believe that Turkcell has a significant competitive advantage with its Massive MIMO, in addition to having the widest spectrum in Turkey.

        Furthermore, we have been closely cooperating with our network vendors for long term prospects through projects that enable Turkcell to deploy the latest technologies even before their availability on the market. This puts Turkcell at the forefront of the technology race and allows for the evaluating of the new technology benefits in the development phase, and then their timely deployment upon their commercial availability.

        Turkcell continues to provide extensive support to projects involving domestic products, mainly for fulfilling obligations related to the usage of domestically produced network equipment as per the 4.5G license. We cooperate with domestic companies regarding base stations, antennas, transports and infrastructure solutions. For example, the ULAK Project initially started as an initiative of the Undersecretariat for Defense Industries (UDI), aimed at designing and developing national software and hardware components for an LTE-Advanced communication system and enhancing Turkey's self-sufficiency in this area. ULAK has become a network vendor, producing 4.5G base stations. The first deployments of ULAK base stations in the network were realized in a city in the north-eastern part of Turkey. Additionally, Communications Technologies Group aims to provide an end-to-end local and national 5G solution, which is funded by TUBITAK (The Scientific and Technological Research Council of Turkey). Turkcell is one of the major project partners of this group, and is responsible for generating use cases and requirements.

        In the scope of 5G, we participate in the activities of international organizations such as 3GPP, ITU-T, NGMN, 5G IA (the private arm of 5G-PPP), ONF, TIP, and GSMA by joining in meetings, work groups, projects and programs that help us follow the latest developments and shape our future strategies. Within the context of this objective, Turkcell became one of the leaders of NGMN's "5G Pre-Commercial Networks Trials" project, which strives to test the earliest 5G equipment prototypes in the field. Moving beyond the state-of-the-art, in another project, the 5G-MOBIX consortium serves to develop 5G-enabled cooperative, connected and automated mobility for vehicles, where Turkcell is the leader of the Greece-Turkey corridor. For 5G-MOBIX, which happens to be the first 5G-PPP and also Horizon2020 project of Turkcell, vehicular communications tailor-made to ameliorate impediments to an efficient crossing of the hard borders between Turkey and Greece are developed and tested using commercial-grade 5G technology. In its second 5G PPP project, which commenced in December 2020 together with our partners, Turkcell will explore the performance enhancements of the D-band (i.e., 130-174.8 GHz) which is expected to offer high-capacity wireless backhaul links. To extend its reach and knowledge base using a sustainable strategy, Turkcell has also signed agreements with vendors (Ericsson, Huawei, Samsung, ZTE, Aselsan) to collaborate in the research & development activities as well as realization of novel 5G use cases. In addition to technology organizations and vendors, Turkcell has been engaging with universities and research centers. Specifically, a memorandum of understanding (MoU) for 5G Research and Development has been signed with some major universities in Turkey within the scope of "The 5G Valley" initiative led by the ICTA.


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        With the leading global vendors including Ericsson, Huawei and Samsung, we have been demonstrating and trialing 5G since 2017. Within the scope of the first 5G use cases, we tested FWA and AR/VR to take additional steps into the 5G era. We continue our trial and demo projects with all possible vendors and reach out to new vertical sectors. The main objective of our 5G trials and demos is to be prepared for the 5G frequency auction and 5G network launch, by assessing all vendors to determine the best network products and solutions. We also aim to create 5G use cases, which will be ready at the outset, when 5G networks are commercially launched in Turkey.

        Furthermore, we led the 5G network deployment at Istanbul Airport, which is an active sharing solution serving three mobile operators. The network is in the 3500 MHz band in which each operator is assigned a 100 MHz channel bandwidth. Although the frequency auction of this band has not yet been launched in Turkey, the ICTA has given a special permission to mobile operators to deploy 5G solutions on this band. The 5G network at the Istanbul Airport will be the first commercial 5G network utilizing new 5G frequencies in Turkey.

(ii) Transmission Network

        Turkcell is the first operator in Turkey to start deploying All-IP NodeBs throughout its network. We currently have an All-IP mobile backhaul for BTSs, Node-Bs and eNodeBs that provides resiliency, ease of operation and operational expense advantages. In addition, we have also invested in topology redundancy projects due to our IP/MPLS backhaul for better service availability. Backhaul bandwidth capacities were increased for wide coverage of up to 450 Mbps. 4.5G applications and the Microwave Radio Link network was modernized for Native Ethernet and Adaptive Modulation support to increase availability and reduce outages resulting from severe rain conditions. Usage of fiber connectivity is moving further from High-RAN aggregation points towards Low-RAN aggregation points. Furthermore, fiber to mobile site applications have been started for 4.5G readiness of sites with very high traffic. Due to higher bandwidth requirements of the 4.5G users, we have migrated from SDH based leased lines to DWDM, or dark fiber multi-Gigabit Ethernet links on the high traffic aggregation points.

        We successfully completed a renovation program in order to converge fixed and mobile backhaul transport networks in 2020. All fixed and mobile transport-IP network was converged with high scale and the leading-edge technology routers in order to be ready for the capacity demand of 5G applications.

(iii) Core Network

        The whole Turkcell core network is currently composed of IP based layered structure Next Generation Network (NGN) nodes, supporting all mobile standards, including 2G/3G/4.5G. By using a Geographical Redundant Pool (GRP) structure, we get (i) full redundant MSC-Ss, (ii) redundant physical interfaces to MGWs, (iii) CAPEX efficiency, and (iv) improvements in radio network KPIs. By implementing IMS (IP Multimedia Subsystem) based VoLTE (Voice Over LTE) and SRVCC (VoLTE Voice Continuity to 2G/3G), all subscribers can use seamless HDVOICE technology.

        We have deployed and continue to develop our all IP Mobile Broadband GPRS network to provide the high speed and reliability to meet the demand of our businesses and consumers. 2G/3G/4.5G data services are given from our converged core network, which is designed to support all mobile broadband.

(iv) Fixed Network

        Our own fiber optic network provides up to 1000 Mbps high speed internet service in 23 cities across Turkey. We are installing and investing in EDGE technology access equipment in our network. We believe that with this strategy Turkcell will be ready to offer future customer experiences. Since February 2018, we offer 10 Gbps high speed internet as an on-demand service.


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        In the context of the COVID-19 pandemic, we increased our in-home investments and provided the first Wi-Fi 6 supported Home-Gateways, which significantly increase in-home service experience. We also initiated virtualized access network projects and have been actively involved in Open Networking Foundation (ONF) projects which promotes experience sharing and early adoption of future technologies, and assisted in its early phase development.

        We are providing end-to-end Wi-Fi services for our enterprise customers, which enables their guests to access WiFi. The Enterprise Wi-Fi service includes installation with authentication services, and further provides the necessary interface.

        We also provide smart Wi-Fi services for SOHO customer, which provides Wi-Fi connectivity to their customers. The service provides plug and play for easy installations.

        We use Turksat cable network for Fixed Virtual Network Operator (FVNO) services, with the goal of reaching more homes with our services.

        Furthermore, Turkcell has launched commercial 400 Gbps per wavelength using single channels in its backbone. We are continuously investing in our backbone network in order to be prepared for bandwidth-intensive services with the latest technology. Fixed networks provide backhaul that not only connects the signal towers to the telecom network, but also allows for enough bandwidth to support operations in 4.5G. This is creating an environment in which optical cabling and fiber to Ethernet media converters are among the most important parts of a mobile network. As a result, fiber will remain an integral part of telecom networks.

(v) 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.

d. 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.

e. Network Maintenance

        We have entered into several system service agreements. Under these agreements, our mobile and fixed 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 mobile and fixed communications 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 Turkey.

        In addition, the Turkcell Service Operation 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 problem. Ankara BCM Organization was established in order to ensure the continuity of the event monitoring, operations and information activities of the services, as well as the recovery activities of BCM Critical services after any disaster that is likely to occur within the scope of a possible Istanbul earthquake scenario.


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f. Site Leasing

        If a new coverage area is 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 facades 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 is identified and the exact equipment configuration for that site is determined, we start the process of site leasing and obtaining necessary regulatory permits. Site leasing processes and construction of the masts or towers are performed by our wholly-owned subsidiary, Global Tower. We lease the land and provide site management services (yearly rental payments, contract renewals, rework permits) through Global Tower. If we decide to buy the land, another wholly-owned subsidiary, Turkcell Gayrimenkul Hizmetleri A.S. ("Turkcell Gayrimenkul"), handles the necessary procedures. We also manage all these processes for technical demands for Turkcell Superonline and Global Tower.

g. Business Continuity Management ("BCM")

        Turkcell Business Continuity Management identifies potential threats and their impact and provides a framework for building resilience with the ability to create an effective response that safeguards the interests of our key stakeholders, their reputation, brand and value-creating activities. We established the Business Continuity Management System ("BCMS") to implement, operate, monitor, review, maintain and improve the business continuity.

        Turkcell BCMS is assisted by business continuity coordinators at technical and non-technical groups. Regular BCM training and awareness programs are carried out throughout the organization. The effectiveness of BCMS is monitored every year through internal/external audits, and integrated exercises, the results of which are reviewed in management review meetings. In 2020, we exercised and tested our business continuity plans, communication and warning procedures to ensure that they are consistent with the business continuity objectives.

        Turkcell BCM focuses on the digitalization in the context of business plans, by providing business resilience, corporate memory, flexibility, integration and interactivity relation between business and technical services. Turkcell's BCM will be able to cover the majority of Turkcell's operations through potential environmental events and natural disasters. Our purpose is to ensure the continuity of the voice call, messaging, data/internet and societal security services for Turkcell, availability of fixed voice call services, data/internet, hosting services, data centers and societal security services for Turkcell Superonline, provision of site acquisition services for infrastructure requirements of mobile operators, TV/Radio broadcasters and technical infrastructure suppliers and installation, testing, commissioning, operation and maintenance of tower, in building, roof top infrastructure/sites for Global Tower at acceptable predefined levels following disruptive incidents. Business continuity plans are prepared by taking into consideration customer expectations, company policies and legal obligations. They are regularly exercised to guarantee the operation of time-sensitive business activities in case of business disruptions. We are continuously improving our business continuity capacity in accordance with the "ISO 22301 Societal Security, Business Continuity Management System" internationally while preserving our image as a reputable and solid integrated service provider.

        Turkcell Service Continuity Management aims to ensure the continuity and recovery activities of the services provided to our customers, by providing the continuity of the service commitment levels, managing the risks that may affect our services, including disasters and emergencies, and supporting the Turkcell Business Continuity Management System. Turkcell has also developed a Crisis Management Plan, which is aimed at effectively managing a crisis, including fire, terrorism, operational interruption, cyber attack, food poisoning and epidemics. Turkcell's Crises Management Plan exercises, training and


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awareness activities are carried out periodically with the participation of crisis management teams and related groups.

h. Enterprise Risk Management ("ERM")

        Turkcell's Enterprise Risk Management team is responsible for coordinating the process of identifying, assessing and overseeing actions by management and the company's business units to manage the risks that may affect the business objectives of the company. ERM supplies an information platform to management regarding the risks that may impact the decision-making process. Turkcell ERM aims to develop an approach of integrating risk management with the core management processes as well as enterprise risk culture. While doing this, Turkcell uses an ERM framework which is compatible with the COSO ERM framework and the ISO 31000 Standard. Based on ERM procedures, risks are identified and evaluated in terms of impact and likelihood. Risk responses controls, issues and actions are developed and the entire process is monitored.

        Turkcell's ERM team is the owner of an enterprise risk database. A range of management tools are used for risk identification and evaluation such as workshops, brainstorming sessions, risk reporting from division directors and risk contacts, in-depth interviews with the management team and research reports while coordinating the process of identifying and assessing risks. New risks and opportunities, updates on on-going risks, financial risks, cyber risks and risk and trend research from the around the world are reported to the Early Detection of Risk Committee bi-monthly.

        In 2020, the COVID-19 pandemic was also considered as an important risk and was followed up by this committee. Developments in relation to the pandemic and its impacts on Turkcell's business units, related decisions and actions were regularly reported to the Board of Directors for both Turkcell and the Group companies.

VIII. 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.

a. Sales Channel

        We serve through one of the largest retail telecommunications distribution networks in Turkey, with around 1,300 branded (exclusive) stores, many at prime locations, and 4,408 semi-branded dealers (i.e. digital sales points) as of December 31, 2020. Our two exclusive distributors provide our products as well as consumer technology goods (such as handsets, tablets, notebooks, IoT devices, accessories, personal care products and small home appliances) and aftersales services to this wide dealer network, while eight exclusive Turkcell Distribution Centers (TDCs) focus solely on semi-branded dealers. Effective as of December 31, 2020, the definition of devices in our distributor contracts has been revised to cover only smartphones and tablets. With this revision, our obligation to procure other technology products only from these two distributors has ended. Starting from January 1, 2021, we have been running a process to select new distributors for the sale of all kinds of accessories, hardware, equipment, new generation technology products other than smartphones and tablets. We also have a door-to-door sales force and home technology management team. This provides us an important channel on which to distribute our integrated solutions directly to home of consumers. We also operate a dedicated corporate direct sales team of over 830 personnel who can offer tailored solutions in their segment of expertise.

        Our nationwide distribution channel is an important asset that helps us differentiate from our competitors and achieve our sales targets. As mentioned above, our distribution network consists of distributors, TDCs, Turkcell branded stores (Turkcell Plus & Turkcell), corporate solution centers, and


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semi-branded dealers, digital channels and ATMs. We offer postpaid and prepaid mobile subscription, fixed and mobile tariffs and solutions, Superbox Plug&Play modems and digital service subscriptions through our distribution network. The total number of branded and semi-branded dealers, including corporate solution centers, was over 5,700 sales points as of December 31, 2020.

        Our retail channel went through a physical transformation that was completed in 2018. In the context of the COVID-19 pandemic, we have taken necessary precautions to ensure that the safety of visitors and our employees at our stores. In that regard, we implemented the "contactless retail experience" to minimize physical contact at our stores. Accordingly, customers are provided with the option to download campaign information as well as the label information of products to their smart devices.

        Our non-branded dealer network provides us with a high penetration across Turkey. All dealers are compensated based on the number of new subscribers they sign up and the level of those subscribers' usage, in addition to other performance-based incentives.

        We categorise our alternative sales channels under three main headings: our call centers, non-telco sales and the Turkcell flagship store.

        We offer a fast and secure access to our products and service portfolio on 24/7 basis via our call center, our web site ( and the Digital Operator app. We proactively reach our customers through our telesales team. Our non-telco channel consists of ATMs, call centers, internet branches of banks and chain stores. Further, we have one flagship store located in Istanbul.

        Alternative sales channels have been the main channel for digital service sales. In 2020, 2.4 million TV +, lifebox, fizy subscriptions were sold over alternative sales channels using big data along with our analytical models and machine learning.

        During 2019 and 2020, our digital sales channels went through an extensive transformation. Accordingly, UX and UI components as well as the entire shopping journey are improved and tailored to the needs of our customers. We have re-designed our digital channels as two main platforms: Turkcell's official website and the Digital Operator app. Our website has been serving as a sales channel since 2012. Besides Turkcell's telecommunication service portfolio, our website includes offers under other categories, including smartphones, tablets, computers, mobile accessories and home technologies.

        With a view to leverage our capabilities in digital channels, in December 2020, we launched a technology and electronics marketplace (an e-commerce platform) in Turkey, called Turkcell Pasaj. At Turkcell Pasaj, a wide range of electronic goods, from smart devices to new generation technologies, are offered from several leading suppliers besides Turkcell. Customers are offered different payment alternatives including mobile payment, Paycell digital money besides debit/credit card and also financing through Financell. Turkcell Pasaj offers same-day delivery in some cities and courier guarantee in one business day. Customers will soon be able to also pick up their delivery from any Turkcell store. Turkcell Pasaj platform is developed by Turkcell developers and we conduct necessary improvements in-house.

        On the corporate front, corporate clients are managed under four different segments: public accounts, strategic accounts, major accounts, small and medium sized business accounts. Turkcell's account managers are direct contacts for the first three segments, while our dealers and telesales teams are responsible for the small and medium sized business segment.

        Within Turkcell's sales teams, besides the account managers, pre-sales teams, solution architects, business development and product management teams also support corporate clients. Furthermore, vertical solution teams were formed to develop industry specific solutions for certain industries including retail, manufacturing, energy, healthcare, education, finance, transportation and logistics.


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These teams aim to create cross industry solutions to serve the digital transformation of our corporate clients.

        Turkcell also provides turnkey mobile and digital transformation and IT outsourcing projects for large corporations with the contribution of solution partners.

b. Advertising

        Turkcell has positioned itself as an ecosystem brand, providing a portfolio of both telecom and digital services that add value to its customers' lives. We base our communication efforts on four pillars that underline our strategy and key strengths. The first pillar is our integrated mobile and fixed infrastructure which we believe to be superior; second is the superior service quality that we undertake throughout the year; third is our innovative approach in all fields of operation and fourth and final is our offers, products or services tailored to needs of our customers through behavior-analysis.

c. Customer and Experience Management

        The key part of our customer and experience management strategy is to provide our customers with effortless, personalized and consistent experience across all channels. Our goal is to maintain a continuous relationship with our customers through fostering a high level of customer satisfaction and make our customers feel safe and valuable. We continuously ask our customers how satisfied they are with the service they receive and for any suggestions through near real-time mobile surveys. We aim to achieve operational excellence throughout all customer touch points across every customer segment by continuously improving and simplifying processes and services. Customer feedback is the major input for Turkcell's continuous process and journey for improvement.

        With respect to the provision of customer services, we mainly work with our subsidiary Global Bilgi Pazarlama Danismanlik ve Cagri Servisi Hizmetleri A.S. ("Turkcell Global Bilgi"). Turkcell Global Bilgi offers 24/7 contact center services at 25 locations in Turkey and Ukraine. Turkcell Global Bilgi provides customer-experience-focused solutions to create value in customer care, customer acquisition, service design, tele-sales, technical support, customer loyalty, customer data management and experience analytics. In 2020, Turkcell Global Bilgi managed approximately 115 million calls received through its interactive voice response system. Turkcell's customer service strategies for contact centers are implemented by Turkcell Global Bilgi. We audit their operations along with monitoring whether customer services and customer satisfaction programs are executed in line with Turkcell's customer strategies.

        The "digitalization" of our customers has continued to be a priority in 2020. Our aim is to migrate our customers from conventional channels to digital channels and create effective and user-friendly online self-service channels. As a result of our investments in the Digital Operator application, our primary online self-service channel, active users have exceeded 16 million by the end of 2020. Further, we continued to conduct numerous projects to improve customer experience over IVR, a digital platform connecting Turkcell to its customers. We refurbished and modernized this channel with artificial intelligence technologies, and created our own "Digital Assistant", which was a contributing factor to the considerable improvement of the performance of this channel. Our proactive scenarios on IVR have enabled us to reach out to more customers through this channel. Through the integration of all IVR packages with the CRM infrastructure and offering these via text-to-speech technology, we managed to reduce our costs and started to offer more personalized offers to our customers.

        At Turkcell Superonline, we started to offer our customers the option to solve modem internet connection problems over the IVR channel. In addition, our customers can receive information such as commitment expiry dates and additional fees through our enriched IVR proactive solutions.


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        Turkcell developed chat-based service channels, where customers can access us anytime and anywhere quickly and easily without connecting to the call center. Customers can also contact Turkcell via instant messaging to ask a question about their lines or our applications. In 2020, there were around 1.6 million such chat sessions on average per month. With artificial intelligence based chatbot technology, Turkcell has increased the automation level of its instant chat-based services for its customers.

        Turkcell connects with social media users 24/7 with a total of 55 accounts on Facebook, Twitter, Instagram, YouTube and LinkedIn. We responded to nearly 211 thousand comments from 63 thousand social media users per month, on average, in 2020.

        Turkcell has ISO 10002 certification since 2011 and continuously renews its ISO 10002 certification annually within the scope of design, installation, operation, sales, and after-sales services of global mobile communications within Turkcell functions. The latest certification ISO 10002: 2004 Quality Management-Customer Satisfaction-Complaints Handling Certificate was received in 2019.

        Turkcell encourages all employees to embrace an "I'm here for my customer" approach and awareness. In this respect, we have initiated the "Customer Action Transformation Program" in 2019 which continued throughout 2020. As part of this program, Turkcell employees are encouraged to be involved in the process of idea-generating by taking a role in the design of products and services with the aim of enhancing customer experience. In the context of this program, 300 employees participated in nearly 200 projects. One of the key metrics of this customer-focussed program is to increase our Net Promoter Score (NPS) over our competitors. NPS studies are conducted by FutureBright for Turkcell on a quarterly basis. In the fourth quarter of 2020, our NPS in mobile for consumer segment rose 22 from 19 in the previous year and the gap with our closest competitor has widened further by 5 points, reaching 15 points.

IX. International and Domestic Subsidiaries

        A component of our strategy is to grow or improve our business in our home market and in the international markets where we are already present. Continued strong operations in the countries in which we are currently present is important for us. We believe these operations offer growth opportunities and we expect them to provide additional value to the Group in the future.

        While continued improvement of our current operations is a key priority, we will seek and evaluate the opportunities of offering our portfolio of digital and financial services, both in Turkey and in international markets, and increasing their number of users.


        We acquired our interest in our subsidiary lifecell (formerly known as "LLC Astelit" or "Astelit" operating under the "life:)" brand) on April 2, 2004, by purchasing the entire share capital of Astelit's parent, CJSC Digital Cellular Communications.

        On July 10, 2015, we completed the acquisition of SCM's 44.96% stake in our Netherlands-based subsidiary Euroasia Telecommunications Holding B.V, which owned 100% of LLC Astelit, and which merged with Lifecell Ventures in December 2016. The terms of the acquisition required a payment of $100 million as consideration for the acquisition, the payment of Astelit's debts obtained through and with the guarantee of SCM Group, the termination of all guarantee agreements to which SCM Group was party and the release of SCM Group in this regard. In accordance with IFRS 10 "Consolidated Financial Statements", the acquisition of the remaining 44.96% in Astelit for a total consideration of $100 million was considered an equity transaction and the deficit representing the difference between the non-controlling interests was derecognized, while the consideration paid for the acquisition of shares amounting to TRY 929 million was deducted from retained earnings in July 2015. Following this


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transaction, Astelit's borrowings obtained from and with the guarantee of SCM Group were repaid in July 2015. The Group converted a material portion of Astelit's borrowings to equity and restructured Astelit's remaining borrowings in order to mitigate the foreign exchange risks associated with borrowings denominated in foreign currency. Astelit's capital was increased by $686 million (equivalent to TRY 1,995 million as of December 31, 2015) and Astelit obtained $66 million (equivalent to TRY 192 million as of December 31, 2015) subordinated loan directly from the Company in the third quarter of 2015.

        On January 15, 2016 the company announced a new stage of its development, made a large-scale rebranding into "lifecell", and in connection therewith changed its legal name to "lifecell LLC" on February 2, 2016.

        In April 2016, lifecell sold 811 towers to a subsidiary of Turkcell in Ukraine, UkrTower LLC ("UkrTower"), and signed a tower lease agreement which allows lifecell to leaseback these assets.

        On July 7, 2017, Turkcell injected $74 million (equivalent to TRY 268 million) in the capital of lifecell. Funds were allocated for the repayment of the abovementioned subordinated loan. On July 10, 2017, lifecell repaid $72.8 million to the Company (equivalent to TRY 264 million): $66 million of principal and $6.8 million of interest.

        In 2018, the capital of lifecell was increased again by $65 million (equivalent to TRY 259 million) in four tranches for the 4G license fee payment in Ukraine.

        On September 11, 2019, lifecell obtained a EUR 28 million (equivalent to TRY 175 million) subordinated loan directly from Turkcell. The proceeds were used for the reduction of the lifecell loan portfolio.

        On February 21, 2020 and March 26, 2020, the capital of lifecell was increased again by EUR 12 million (equivalent to TRY 79 million) and by EUR 12 million (equivalent to TRY 85 million), respectively.

        As of 31 December, 2020, the company utilized loans fully denominated in local currency of UAH 3.9 billion (equivalent to TRY 1.0 billion as of December 31, 2020) under the guarantee of Turkcell.

        As of December 31, 2020, lifecell had 9.3 million registered mobile subscribers, mainly prepaid. lifecell's three-month active subscribers had reached 8.1 million as of December 31, 2020.

        The company is known as dynamic and innovative as it was the first to introduce a number of new technologies and products in the Ukrainian mobile market. The company is highly motivated to continue its innovation leadership in marketing and sales. There were 353 exclusive lifecell shops in 182 cities across Ukraine as of December 31, 2020. lifecell also introduced the first "digital kiosks" to the market in 2019, set up in some major shopping malls in Kyiv that allowed customers to purchase SIM cards at any time of the day. In addition, lifecell products are available at 26 thousand other sales points throughout Ukraine. lifecell also has an online sales channel,, which was launched in August 2020 as a renewed version.

        As of December 31, 2020, lifecell provided roaming services in 212 countries via 553 roaming partners and eight satellite operators.

        The Ukrainian telecommunications market is regulated by the Cabinet of Ministers of Ukraine (main state policy), the Ministry of Digital Transformation, the State Service of Special Communication Administration ("SSSC") (technical policy aspects) and by the National Commission for the State Regulation of Communications and Informatization ("NCCIR") controlled by the President of Ukraine and which carries out general telecommunication market regulation and inspection.


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        NCCIR held the 3G license tender on February 23, 2015. lifecell submitted a bid of UAH 3,355 million (equivalent to TRY 376 million as of March 19, 2015) and was awarded the first lot, which is the 1920-1935 / 2110-2125 MHz frequency band. Furthermore, lifecell paid a total of UAH 886 million for the conversion of spectrum from military use in three installments between 2015 to 2018. After winning the tender, lifecell launched 3G services on June 4, 2015, becoming the first operator to offer a 3G network in Ukraine.

        As of December 31, 2020, lifecell provides 3G services in more than 7.8 thousand towns and settlements in Ukraine (excluding Crimea and Sevastopol city and uncontrolled territories of the Luhansk and Donetsk regions). As of December 2020, lifecell has the widest 3G geographical coverage over the country based on its own calculations by using operators' relevant disclosures. lifecell ceased recording revenues from Crimea and Sevastopol city as of the end of September 2014 and impaired its assets in that region. Furthermore, in 2016 the company also discontinued services in and lost its revenue stream from the uncontrolled territories of Luhansk region and since February 2017 lifecell has been unable to provide mobile services and ceased recording revenue in the disputed part of the Donetsk region. The company impaired its assets in the disputed part of the Donetsk and Luhansk region in the fourth quarter of 2017. Cumulative capital expenditure for the development of lifecell's coverage amounted to $2.4 billion as of December 31, 2020.

        NCCIR held the 4G license tenders for the 2600 MHz band on January 23, 2018 and for the 1800 MHz band on February 26, 2018. lifecell was awarded 4G licenses for 15 years at a cost of UAH 909 million (equivalent to TRY 173 million as of December 31, 2018), and UAH 795 million (equivalent to TRY 151 million as of December 31, 2018) for the 15 MHz in each frequency band, the latter of which was paid in April 2018. In February 2018 lifecell made payments of UAH 187 million (equivalent to TRY 36 million as of December 31, 2018) to PrJSC VF (Vodafone) Ukraine, and in May 2018, UAH 19 million (equivalent to TRY 4 million as of December 31, 2018) to JSC Kyivstar for the installment and conversion of spectrum from operators use. After winning the tenders, lifecell launched 4G services in the 2600 MHz band on March 30, 2018 and in the 1800 MHz band on July 1, 2018, becoming the first operator to offer 4.5G services in Ukraine nationwide.

        As of December 31, 2020, 4.5G from lifecell is available in over 3,546 towns and settlements in Ukraine (excluding Crimea and Sevastopol city and uncontrolled territories of the Luhansk and Donetsk regions), while in more than 109 Ukrainian towns and settlements, lifecell is the only operator providing 4G network services. As of December 2020, lifecell continues its leadership in smartphone penetration with 81.2% in the Ukrainian telecommunication market.

        Lifecell provides 3G&4G coverage of 75% of the population of Ukraine, or 44% geographical coverage, through 6,483 base stations.

        In May 2019, lifecell and Ericsson Ukraine deployed the first 5G network demo segment and presented its advanced capabilities at the Sweden-Ukraine Business Forum in Kyiv. The speed test was attended by state representatives, regulators and the media, and reached 25.6 Gbps download throughput using spectrum in the ultra-high frequency band of 28 GHz. In 2020, 5G technology was tested at the lifecell head quarter with the collabration of Ericsson.

        On October 29, 2019, lifecell and two other leading mobile operators signed a Memorandum of Understanding with the Ukrainian Government to reorganize radio-frequency resources to the 900 MHz band. It will ensure maximum coverage of the entire territory of Ukraine with 4G mobile communication, including rural areas and main roads. Accordingly, in March 2020, lifecell's 900 MHz frequency band was increased from 3.8 MHz to 5.6 MHz. These frequencies, which are currently being used for 2G services, will also be utilized for 4G services. Ukraine's National Telecommunications Authority opted not to hold a tender process and the license fee for lifecell was determined as UAH 121 million (equivalent to US$ 4.6 million as of March 19, 2020, the payment date). The license fee has been fully paid. The respective license became effective as of July 1, 2020 for five years. As of


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December 31, 2020, lifecell and two other leading mobile operators launched LTE900 across Ukraine. Operators also entered into infrastructure sharing agreements in settlements with populations of less than two thousand inhabitants.

        Mobile Number Portability ("MNP") was introduced in Ukraine in May 2019. As of the end of 2020, lifecell was the leader in the MNP port-in subscriber market. lifecell was also the first among all operators providing its subscribers with a free online registration procedure enabled via BankID.

        lifecell launched its first MVNO partnership in July 2016 with one of the largest national internet service provider (Volia-Cable) in order to provide converged telecommunications services for subscribers of the two companies. By the end of 2020, lifecell had six active MVNO partnerships.

        Since 2017, the company continues its strategic focus on developing high-quality digital services. Accordingly, lifecell offers Turkcell's digital services including BiP, lifebox, TV+, and the magazines app in the Ukranian market. This year, lifecell launched a telemedicine application, Likar Online, enabling its users to get remote consultancy from doctors. lifecell has participated in efforts to combat the COVID-19 pandemic by donating 2 mechanical ventilators to the Ukraine COVID-19 control center, providing free of charge communication packages to over 13 thousand health sector workers in March and April and by sending over 8 million information messages to its subscribers on behalf of the Ministry of Health.

        In response to the need in the Ukrainian market for cardless and cashless payment services, lifecell introduced its online money transfer tool. In August 2017, Paycell LLC was incorporated as a subsidiary of lifecell in order to operate as a financial institution and perform loan granting, leasing, money transfer and e-money services. Licenses for leasing and loan granting was obtained in October 2017, and licenses for e-money and local currency transfers were obtained in September and October 2018, respectively. Paycell LLC provides financial services for the transfer of funds in Ukraine.

        In line with global tech trends, lifecell was the first operator among the "big three" in Ukraine to launch eSIM in November 2019. It is sold online at, and since the beginning of 2020 eSIM physical starter packs were introduced at lifecell shops. In June 2020, a new online sale experience was launched with fully automated 24/7 sale and immediate delivery of eSIMs to customer's email. In September 2020, as a first in the Ukrainian market, customers are provided with the option of choosing their phone number when buying eSIMs online. In November 2020, eSIM sales with choice of phone number was launched at EasyPay's 14 thousand self-care terminals across Ukraine.

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 provides services using GSM and UMTS technologies, for a 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 a further $100 million was paid in December 2010. An additional payment of $100 million will be made to the seller in instalments contingent of the financial performance of Belarusian Telecom. For more information, see Note 28 (Other non-current liabilities) to our Consolidated Financial Statements.

        As at December 31, 2020, Belarusian Telecom had 1.4 million registered mobile subscribers, the majority of which were prepaid, and its three-month active subscribers reached 1.1 million. Belarusian Telecom is the leader of MNP market in Belarus in terms of number of port-in subscribers' count. Belarusian Telecom has 10 own stores, 135 exclusive and 299 non-exclusive sales points. Sales from its online channel continuously increases with the rising customer demand.

        As at December 31, 2020, Belarusian Telecom operated 2G and 3G services in all cities with a population of more than 10,000, and provided 2G services on all principal intercity highways and roads


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of the Republic of Belarus, which corresponds to a coverage of approximately 99.9% of the entire population of Belarus, or 97.7% geographical coverage. In Belarus, the only LTE license is owned by JLLC Belarusian Cloud Technologies ("becloud") and beCloud is the only infrastructure provider for LTE services. Belarusian Telecom offers 4G service since August 2016 on becloud's LTE infrastructure, serving in all regions and major cities of Belarus with a 35% 4G territory coverage as of December 31, 2020. Availability of 4G services has improved the quality of data services and customer experience. As of December 31, 2020, the share of 4G subscribers in the three-month active subscribers reached 63%. Rising 4G penetration led to a growth in average monthly data consumption per user to 13GB. 4G network served 73% of total data traffic in 2020.

        Belarusian Telecom has a wide range of products in its portfolio, which consists of voice and data products, terminal offers and an enriched digital services portfolio. BiP, fizy, lifebox, Magazines, TV+ and Games Platform are the main services in the digital services portfolio. In January 2019, Belarusian Telecom launched a digital tariff plan "Play" which is a unique offer in the market, combining all digital services in a single package.

        Belarusian Telecom is the first mobile operator to launch a digital SIM-card activation service in Belarus in 2020 via a mobile application by using face recognition technology based on a machine learning algorithm. The service was successfully implemented by Lifetech LLC, a 99.9% owned subsidiary of Belarusian Telecom.

        In line with our strategic priority of improving our balance sheet structure, we restructured the debt of Belarusian Telecom in 2015. As part of the restructuring, Belarusian Telecom's total existing intra-group loans were converted into a subordinated loan, provided directly by Turkcell. Following the restructuring, Belarusian Telecom's debt was EUR 612 million subordinated loan. On April 1, 2019, this EUR nominated subordinated loan was converted to the local currency amounting to BYN 1.46 billion (equivalent to TRY 4.2 billion as of December 31, 2020) and remains outstanding as of December 31, 2020.

        In Belarus, the lack of pricing regulations in the wholesale and retail mobile markets to prevent dominant operators' abusive pricing practices continued to have an adverse impact on our business. We continue to hold discussions with authorities with regard to the implementation of such regulations.

Lifetech LLC

        Lifetech LLC ("Lifetech"), which is a subsidiary of Turkcell Group, was established in 2012. It is 99.9% owned by Belarusian Telecom and has around 160 professionals located in Belarus. Lifetech provides a full cycle of software development services and develops custom and platform-based solutions to Turkcell Group and other customers and carries out software development projects both in Belarus and other countries. Lifetech is a member of High-Technology Park of Belarus since 2019.

Kibris Telekom

        Kibris Telekom, a wholly-owned subsidiary of Turkcell, was established in 1999 in the Turkish Republic of Northern Cyprus.

        As of December 31, 2020, Kibris Telekom had 0.5 million registered subscribers. In 2020, Kibris Telekom's financial and operational performance was negatively impacted by the pandemic as the country's economy relies heavily on higher education which is highly dominated by foreign students and on tourism.

        On April 27, 2007, Kibris Telekom signed a license agreement for the installation and operation of a digital, cellular and mobile telecommunication system with the Ministry of Public Works and Transportation 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,


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1999, which was based on revenue-sharing terms. The license agreement granted GSM 900, GSM 1800 licenses. The license agreement is valid for 18 years from the date of signing. The license fee was $30 million including VAT and financed by Kibris Telekom through internal and external funds.

        On March 14, 2008, Kibris Telekom was awarded a 3G (IMT 2000/UMTS) infrastructure license at a cost of $10 million including VAT, which was paid at the end of March 2008.

        In 2012, Kibris Telekom acquired Internet Service Provider and infrastructure establishment and operation licenses. Kibris Telekom applied for a right of way to major municipalities and the Ministry of Transportation in order to establish a national fiber optic infrastructure. On January 24, 2014, a protocol was signed between Kibris Telekom and the Ministry of Transportation for the right of way for highways. Total fiber optic infrastructure implementation was at 69 kilometers by the end of 2020. In 2017, Lifecell Digital Ltd. ("Lifecell Digital") was incorporated in order to operate as an Internet Service Provider company and offer converged telecom services. Lifecell Digital also acquired an infrastructure license in December 2018.

        The National Regulatory Authority started to decrease mobile termination rates gradually in July 2014 over a year; with around a 71% decline in total, from TRY 0.10 to TRY 0.03. The rates were then increased by 62% to TRY 0.05 in August 2019. MNP is in effect in the country since 2018.

        According to the requirements of Electronic Communications Law, prepaid lines were registered in 2015. On May 7, 2019, an amendment was made to the Electronic Communications Law, making signed contracts obligatory for prepaid subscribers.

        The interoperability of mobile phones across the island officially began on July 11, 2019. This marked a historic moment for the island. Turkish Cypriots and Greek Cypriots, travelling to both sides of Cyprus, had been losing their connection prior to the implementation of this measure.

Turkcell Global Bilgi

        On October 1, 1999, Turkcell Global Bilgi was established to provide telemarketing, telesales, and call center services, particularly for Turkcell Group. Turkcell Global Bilgi manages customer contacts at every channel and offers customer care services to more than 70 companies in banking, retail, e-commerce, insurance, energy, public sector and the airline industry. By announcing its presence as a Customer Experience Center in 2016, Turkcell Global Bilgi started to analyze customer experiences deeper, gaining vast experience in the process. On August 4, 2017 Turkcell Global Bilgi obtained an R&D center certificate from the Ministry of Science, Technology and Industry. As of December 31, 2020, with 19 locations across Turkey, Turkcell Global Bilgi had 16,322 employees. 61% of these employees serve Turkcell's customers, 33% serve customers of third parties, with the remaining working as administrative personnel. Turkcell owns approximately 100% of Turkcell Global Bilgi.

        Since 2008, Turkcell Global Bilgi owns a 100% stake in Global Bilgi LLC, which operates in Ukraine and provides telesales and call center services to lifecell and many other companies in the Ukrainian, Russian and English languages at six locations with 848 employees.

        In 2020, we took measures relating to the COVID-19 pandemic at a very early stage and made a rapid company-wide transition to remote-working as well as remote training, development and motivation practices. Following the implementation of this transition, our call center services have continued uninterrupted and with no change in service quality.


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Turkcell Superonline

        Turkcell Superonline was founded in 2009 through the merger of our subsidiary Tellcom with the Superonline business acquired from the Cukurova Group. We believe that Turkcell Superonline differentiates itself through its 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 a fixed telephony services authorization, which enables it to provide call origination and termination for consumers and corporations, as well as wholesale voice carrying services. It is also authorized to provide satellite communication services, infrastructure operating services, internet services and wired broadcasting services, as well as mobile virtual network operating services. The company carries the majority of Turkcell's traffic.

        Turkcell Superonline offers its local and foreign clients wholesale voice termination, international leased data lines, internet access, telehouse and infrastructure services. Furthermore, Turkcell Superonline is active in the retail fixed 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 TV.

        Turkcell Superonline won the tenders of BOTAS, Turkey's state-owned pipeline company, and TEIAS, Turkey's state-owned electric power transmission company, for the indefeasible right to use the capacity of the fiber optic cables already installed by BOTAS for 15 years in 2009 and TEIAS for 15 years in 2017, including the right to install additional fiber optic cables and to use the capacity of these fiber optic cables during the same period. These transactions are considered as finance leases as the lease term is for the major part of the remaining useful life of the fiber optic cables already installed by BOTAS, and Turkcell Superonline made a significant investment during the initial period of the lease agreement which is an indicator that the transaction is a finance lease. The recognized cost of the indefeasible right of use as of December 31, 2020 is TRY 160 million.

        Turkcell Superonline began to provide 1000 Mbps service to homes in May 2011 for the first time in Turkey in line with Turkcell Group's strategy of providing state-of-the-art technology for its customers with top-quality service. Turkcell Superonline has rendered Turkey as one of the first countries where a 1000 Mbps connection is provided to homes. Since 2018, Turkcell Superonline offers 10 Gbps connections on a demand basis.

        As of December 31, 2020, Turkcell Superonline has 50 thousand km fiber backbone covering 81 major cities in Turkey and has 11 border crossings. The company offers fiber in-city coverage in 23 cities and increased its homepasses to around 3.8 million as of December 31, 2020 from around 3.6 million in the previous year. Including partnership engagements, we are capable of covering 7.0 million households in 30 cities. We have five border crossings to Europe, offering various diversity options to important European cities through protected and completely diverse routes. With our stable fiber infrastructure and six border crossings to the East, we offer capacity services through Middle East, CIS and Asia. Our next generation network designed over this strong infrastructure enables us to deliver high quality solutions to telecom operators, multinational and national private corporations and governmental institutions.

        Turkcell Superonline pursues a domestic wholesale business strategy as well providing wholesale products such as bit stream access via its FTTx fiber coverage, infrastructure services, backbone transmission, Ethernet, IP transit capacities, cyber security and VPN services to operators, service providers and datacenter companies in the Turkish market.

        Turkcell Superonline is leading the localization strategy for Turkey's data and internet traffic by developing partnerships with internet exchange platforms, Tier-1 operators, global/local content and


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cloud service providers to enable direct access to all networks, and also commercializing internet traffic. Turkcell Superonline aims to continue to invest in and expand its own fiber optic network and further utilize the group synergy created with Turkcell.

        On February 1, 2019, the Turkcell Board of Directors approved a resolution to issue lease certificates in accordance with capital markets legislation by Turkcell Superonline through an asset leasing company in the domestic market, for an amount of up to TRY 500 million, up to 12-month tenor, on various dates and at various amounts without public offering, as private placement and/or to be sold to institutional investors. The CMB approval was obtained on May 16, 2019 for the issue programme. The first issue of TRY 75 million with 116-day tenor and 23.7% interest rate was made on June 14, 2019. It was followed by the second issue of TRY 150 million on October 8, 2019 with a 119-day tenor and 14.0% interest rate. The third issue of TRY 175 million was made on February 4, 2020 with 140-day tenor and 9.6% interest rate. On March 24, 2020, the Turkcell Board of Directors approved a new resolution to allow Turkcell Superonline to issue lease certificates for an amount of up to TRY 600 million under the same conditions. The CMB approval was obtained on June 4, 2020. The first issue of TRY 100 million under this programme was made on June 23, 2020 with 148-day tenor and 8.1% interest rate. It was followed by the second issue of TRY 50 million on November 18, 2020, with 125-day tenor and 14.95% interest rate, which will mature on March 23, 2021.

        In 2020, JCR Eurasia Rating evaluated Turkcell Superonline in an investment-level category on the national and international scales and assigned the ratings on the Long-Term National Scale as 'AA (Trk)' and the Short-Term National Scale as 'A-1+ (Trk)' with 'Stable' outlooks.

Global Tower

        Global Tower was established in 2006 as a wholly owned subsidiary of Turkcell and commenced its operations in 2007 to provide infrastructure management by leasing places on towers to private and public entities and institutions. It is the first and only tower company in Turkey. In addition to Turkey, it has operations in Ukraine, Belarus and the Turkish Republic of Northern Cyprus. Today, it serves not only mobile network operators but also broadcasting, ISPs, energy, public institutions and other related industries. Its 100%-owned subsidiary in Ukraine, UkrTower, was founded in 2009 and its 100%-owned subsidiary in Belarus, Beltower LLC ("Beltower"), was founded in 2016. Beltower has a right of use agreement signed with Belarusian Telecom.

        Global Tower operates a unique portfolio of 10,913 towers, 8,789 of which are located in Turkey. Global Tower owns 1,175 towers in Ukraine and operates 834 towers in Belarus, as well as 115 towers in the Turkish Republic of Northern Cyprus with right of use, through agreements with the tower owners to sublease them to third parties through revenue share agreements. Global Tower also provides service over 155 mobile towers. Global Tower provides fast and high-quality service to its customers in collaboration with its business partners.

        In Turkey, Global Tower manages the processes of renting, maintaining and installing towers in 15 structured regions with its 4 solution partnerships and 3 installation subcontractors. With this structure, the distance between any two service points in Turkey is less than 90 km.

        Global Tower helps customers expand their network, enables peer-to-peer telecommunications and provides broadcasting field infrastructure solutions, turnkey setup services and professional operation-maintenance services. With its project management, field rental, construction works, telecommunications equipment setup and ready-for use field delivery solutions, it helps private and public institutions reach more customers.

        Global Tower's wide service range consists of shared infrastructure services in tower/rooftop/in house fields, TV-radio infrastructure solutions, E2E and wind power infrastructure solutions, M2M/scada/telemetry infrastructure solutions, GSM-R solutions, mini data centre infrastructure solutions,


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mobile tower solutions, acclimatized system room solutions, energy infrastructure solutions, hybrid systems solutions (solar/wind), infrastructure maintenance and operation services, field acquisition and contract management services and satellite telecommunication solutions & services.

        Global Tower has obtained a satellite service license from the ICTA and initiated its satellite services where point-to-point or point to multipoint seamless and telco-grade data communication is needed. We are already operating 2+2 HUB location services to provide closed satellite network solutions to our mobile network infrastructure and serving several corporate customers and public institutions data communication via our VSAT and SCPC satellite products. Our experienced satellite operations center and field operations & maintenance teams provide 24/7 services for more than two thousand VSAT terminals.

        On March 24, 2020, the Turkcell Board of Directors approved the issuance of lease certificates by Global Tower through an asset leasing company based in Turkey. The issuance of up to TRY 300 million must be made in Turkish Lira terms, with maturities up to 12 months, and be offered in the domestic market in one or more tranches as private placement and/or sold to institutional investors with no public offering. No transaction was done in 2020.

        Under the capital reduction resolution taken by the Board of Directors in September 21, 2020 and with its general assembly decision, Global Tower's capital was reduced by TRY 100.0 million to TRY 245.3 million.

        Global Tower is among the businesses within Turkcell Group that we may consider a strategic action for further value creation.

Turkcell Teknoloji Arastirma ve Gelistirme A.S.

        Turkcell Teknoloji Arastirma ve Gelistirme A.S ("Turkcell Teknoloji"), a wholly-owned subsidiary of Turkcell, commenced operations in 2007 in the TUBITAK Marmara Research Center Technological Free Zone in Kocaeli, Turkey. In 2015, Turkcell Teknoloji consolidated its operations at Kucukyali Technology Plaza in Istanbul.

        Turkcell Teknoloji's R&D center employs over a thousand researchers accredited by the Ministry of Industry and Technology. Turkcell Teknoloji's established team of experts develops a wide range of convenient and reliable solutions with innovative roadmaps. Through integrated intelligence and high-performance core capabilities, (data analytics and artificial intelligence, Blockchain, Network Technologies, IoT, VR/AR), Turkcell Teknoloji's comprehensive portfolio addresses the following domains: mobile communication solutions, smart cloud platform and platform developed solutions, location based services and platforms, roaming solutions, geographic information systems, network management solutions, 5G infrastructure projects, customer relationship management and solutions, next generation value added services, music and entertainment services, IPTV services, mobile marketing solutions, mobile financial systems, campaign management systems, IoT, AR / VR, big data processing, business intelligence applications, smart SIM card solutions, digital identity technologies, image video processing, text analysis, suggestion engines, voice analytics, robot assistants, robotics process automation, mobile analytical platform, artificial intelligence in health, learning and education applications solutions, e-mail and search engine solutions, digital broadcasting solutions, CDN (Content Delivery Network) Solutions, OTT and block chain solutions.

        In line with Turkcell's strategy of expanding digital services and ICT services in Turkey and in international markets, Turkcell Technology aims to develop new digital and ICT services worldwide according to the latest technology and market requirements.

        Turkcell Teknoloji closely monitors advancements in technology and produces artificial intelligence solutions developed in-house. These solutions can be gathered under the headings of image processing, sound analytics, natural language processing, and suggestion engines. Authentication, fake identification,


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facial recognition, emotion recognition from facial expressions, speech to text (and vice-versa), recommendation engines, chatbot, sentiment analysis, summary extraction/topic determination from text, auto-correct services for text are some of the services built by Turkcell through artificial intelligence techniques. These services are integrated with Turkcell products. We have the ability to target our customers with the best offer at the right time from the right channel via AI driven real time-marketing automation solutions. By doing so, we are able to structure real-time & personalized offers with the contribution of customer behavior tracking.

        Turkcell Teknoloji has completed two major projects based on Blockchain Technology and is exploring new usecases with a dedicated team to adapt this technology transformation for Turkcell. Blockchain based credit score sharing platform has been a joint effort with the other mobile telecom operators in Turkey since 2019. This platform helps to block device sale to fraudsters, improving bad debt levels. The blockchain based digital identity solution (Proov) was launched in 2020 and is expected to be instrumental in digitalization of the country.

        With the goal of becoming Turkey's leading R&D and innovation base, Turkcell Teknoloji demonstrates the value it attaches to innovation with its increasing number of patents each year. In 2020, the Turkcell Teknoloji R&D Center submitted over 557 new national and 24 international patent applications. As of December 31, 2020, Turkcell Teknoloji has 2,674 national and 167 international patent applications and over 700 granted patents.

        Turkcell Teknoloji 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. Turkcell Teknoloji aims to enlarge entrepreneurial ecosystem and technoparks vision and, in addition to this, engages in collaborations with universities from all over Turkey and supports academic studies focussed on artificial intelligence, 5G, blockchain and AR/VR.

        Turkcell Teknoloji sits at the board of two different clusters of the Eureka program, one of the pre-eminent programs across Europe providing an open network platform for international cooperation in innovation involving more than 40 countries, as a decision and strategy player shaping the future of technologic and innovative projects in ICT and telecoms domains. The two leading clusters of the Eureka program are ITEA3 and Celtic Next. ITEA3 is a transnational and industry-driven Research, Development and Innovation program in software innovation in the ICT, while Celtic Next is the ICT cluster focusing on Next Generation Telecommunications for the Digital Society, strengthening the competitiveness of the European industry by fostering European R&D cooperation in telecommunications and the well-being of society by stimulating innovative information and telecommunication services. Establishment and progress of the European research vision and agenda is supported by Turkcell Teknoloji by having core activities in these arenas. In addition to these strategic activities, Turkcell Teknoloji has a long history of developing research projects within these clusters, participating to the projects as an international consortia coordinator, national consortium leader or as a project partner according to the strategic decisions within the company. Turkcell Teknoloji works closely with its national and global partners to initiate new projects in the Eureka clusters and Horizon 2020 calls with the mission of reaching technologic and innovative results that have commercial value and with a view to feeding the ecosystem and strengthening the partnership network. Horizon 2020 is a publicly funded European Commission program which is the biggest EU Research and Innovation initiative to promote discoveries and world's primary project ideas to be transformed into real implementations that have influence and a positive impact in society, business and the economy. As of 2020, Turkcell Teknoloji has completed 15 Horizon project applications and has six ongoing projects. We seek to continue to increase the Horizon project applications and funded projects in the coming years.

        Turkcell Teknoloji's R&D and innovation strategies are human oriented. Supporting the academic development of researchers is also a part of this strategy. In this context, PhD and Master programs,


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designed to improve the technical infrastructure of our researchers in line with the technical fields required by our industry, have been continuing since 2014. Additionally, Turkcell Teknoloji has carried out important efforts to spread technology by publishing on national and international platforms.

Turkcell Satis

        Turkcell Satis (formerly known as Turkcell Satis ve Dagitim Hizmetleri A.S.) sells telecommunication and IT products through our flagship store and provides a wide variety of products via our website In 2016, Turkcell Satis started to sell equipment to other entities as corporate sales. In addition, since Turkcell Satis is experienced in the sector, it also acts as an intermediary between producer and distributors to support the determination of products, pricing, amount to be sold, sales support components and management of their inventory.

        In January 2019, the company's legal name was changed to Turkcell Satis ve Dijital Is Servisleri A.S., (often referred to as Turkcell Digital Business Services) and its area of operations have been expanded to cover end to end IT and technology related solutions and services for enterprises, including data center, cloud, security, digital transformation, system integration and IT managed services. In March 2021, Turkcell Dijital Is Servisleri A.S. established as a wholly owned subsidiary of Turkcell Superonline to ultimately carve out this enterprise business from Turkcell Satis in order to monitor this business' performance more coherently.

Turkcell Finansman

        Turkcell Finansman ("Financell"), a wholly-owned subsidiary of Turkcell, was established in October 2015 with the approval of the Banking Regulation and Supervision Agency ("BRSA", the financial institutions regulator in Turkey) and launched nationwide in March 2016. It is the first finance company in the Turkish telecommunications sector to be focused primarily on meeting the financial needs of individuals and corporate customers, and provides financing solutions to existing or new Turkcell customers for their handset, tablet or accessory purchases. As at the end of 2020, Financell is the leading company in terms of number of customers among all customer finance companies.

        In September 2017, Financell established a branch in the Turkish Republic of Northern Cyprus and started handset financing operations. Due to growing cost and risks, the branch was closed in June 2019 however collections from this operation still continue.

        Since 2017, Financell also offers insurance and bundled insurance products with consumer loans through Turkcell Sigorta, through a revenue sharing agreement with BNP Paribas Cardiff. This insurance product insured customers against unexpected circumstances that may occur, such as unemployment, death, disease, accidents and hospital stay.

        Since January 2020, smartphones and tablets with a retail price at or above TRY 3,500 can be offered with a maximum three-month installment plan, and those with a retail price of up to TRY 3,500 with a maximum 12-months installment plan. Such limitation has negatively impacted the number of contracts sold by Financell. In 2019, Financell included corporate entities to its existing individual customer portfolio which also aims to support Turkcell's corporate business. In 2020, Financell started providing financing solutions also to Turkcell Superonline customers.

        Application and sales channels are extensive for individual customers to reach Financell loans. With a prudent risk management approach, Financell serves over Turkcell's approximately 3,400 stores (1,300 Turkcell's own store and approximately 2,100 digital sales points), Turkcell website, Turkcell Digital Operator application and the call centers of Turkcell and Financell.

        During the COVID-19 pandemic, Financell has supported its customers by postponing loan installments due dates upon request.


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        Financell is funded by equity and borrowings from different sources. Even though the major funding source is bilateral loans from domestic and international lenders, Financell also tapped into the local debt capital markets for bond issues. In March 2021, Turkcell Finansman issued commercial paper with a nominal value of TRY 100 million. Additionally, in order to diversify its borrowing base, Financell also resorts to other funding alternatives such as asset-backed securities ("ABS"). From April 2017 to December 31, 2019, Financell executed six ABS issuances via Aktif Yatirim Bankasi A.S. (a domestic investment bank) at an amount totaling TRY 485 million. ABS issuances were fully matured on 23 September 2020. In addition, non-performing consumer loans amounting to TRY 71.8 million were sold to various asset management companies based in Turkey in 2020.

        Financell had TRY 2.1 billion loans outstanding and TRY 3.5 billion of consumer loans had been granted as at the end of 2020 from TRY 2.5 billion loans outstanding and TRY 3.0 billion of consumer loans as at the end of 2019. Cost of risk has decreased to 2.4% in December 2020 from 3.2% in December 2019. The insurance coverage ratio as of December 2020 was 87.4%.

        In April 2020, Fitch Ratings affirmed Financell's Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) at B+ and National Long-Term Rating as 'AA–(tur)' with a stable outlook and have subsequently withdrawn all the ratings for commercial purposes.

Turkcell Sigorta

        In June 2018, the insurance agency Turkcell Sigorta was incorporated as a subsidiary of Financell in order to offer various insurance products. Turkcell Sigorta operates in the field of tech insurance and aims to use Turkcell's know-how in digital technologies and introduce innovations that are necessarily conducive to the advent of new economic paradigms, new processes and new products. Turkcell Sigorta launched its first insurance product in December 2018.

        Turkcell Sigorta provides a wide variety of insurance products, including health and life, non-life (property insurance, electronic devices, errors and omissions, EAR (Erection All Risks), CAR (Construction All Risks), cash in transit, cash in safe, machinery breakdown, employers' liability, political violence, third person liability, fidelity, professional liability, directors and officers liability) compulsory earthquake policy, marine cargo, motor third party liability and auto insurance to Turkcell and its subsidiaries' employees. In addition, Turkcell Sigorta provides insurance advisory and claim advisory services to Turkcell Group. Turkcell Sigorta also provides other insurance products with leading insurance companies like Zurich and BNP Paribas Cardiff, such as device protection, travel insurance, personal accident insurance and critical illness insurance for women. Starting from early 2020, Turkcell Sigorta focused on establishing end-to-end digital insurance sales processes and a data-driven digital sales infrastructure. These efforts have resulted in enhanced call center outbound facilities, more efficient data analytics & usage as well as QR-based direct digital sales processes for various insurance products. These actions facilitated the creation of necessary digital channels to be utilised for expanding its retail product portfolio.

Turkcell Odeme

        Turkcell Odeme became operational as of March 2015 presenting users with a convenient mobile payment solution and offering a streamlined experience under the "Paycell" brand. Paycell is a payment services platform providing digital payments and core financial solutions.

        In August 2016 Turkcell Odeme acquired a Payment Service Provider License from the BRSA to become the first mobile network operator subsidiary in Turkey holding this license. With its brand "Paycell", Turkcell Odeme has expanded its merchant network by implementing easy and secure payment methods in new areas such as mobile app stores, restaurant chains, parking lots, transportation services, physical goods and airport fast track services. Paycell makes life easier for customers by offering direct carrier billing, money transfer, payment services and wallet, plus cash top-up for the


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Turkcell prepaid line and the public transportation card IstanbulKart as well as the Paycell debit card. Paycell also provides merchants a QR based payment alternative and mobile POS solutions.

        Having received an electronic money payment license in July 2017, Paycell launched digital money, prepaid card and utility bill payments through the Paycell application and selected Turkcell stores as well as non-Turkcell affiliated stores. In December 2017 Paycell entered into a 5-year contract with Visa to issue debit cards. The business has continued its growth through the addition of new features including peer to peer money transfer, expanded merchant integrations and the rising penetration of Paycell prepaid cards.

        Paycell continued its physical and online expansion in 2020 with the addition of new merchants to its merchant network and by adding new products to its existing partnerships such as with, one of Turkey's largest online marketplaces. In the context of the COVID-19 pandemic, Paycell has managed to boost end user adoption through its key offline partnerships such as Sok Market (a supermarket chain) and Burger King. Furthermore, Paycell has struck a partnership with Kahve Dunyasi (second largest coffee chain in Turkey) for QR payments, while also onboarding Turkcell's own store network to its QR payments system. In the meantime, Paycell has also capitalized on the growing e-commerce market. A partnership with Getir (Turkey's largest online grocery delivery company by scale) earned Paycell a fintech social responsibility award for enabling the elderly population (who were under strict government lockdown during pandemic) to order and pay via their mobile phones, thereby leveraging Paycell's direct-to-carrier billing service. As at 31 December 2020, Paycell was active at more than 12 thousand merchants mainly via its QR Payments.

        2020 has reached a vital milestone on Paycell's expansion trajectory: Paycell became the first fintech to get approval from the governing body (in accordance with Turkish Tax Law 507) for its Android POS product, which in itself has significant potential to disrupt the conventional POS system by leveraging Android technology. This product provides merchants with greater functionality and customization capabilities, enabling SMEs and key merchants to use one single device for many business applications in addition to receiving fast and secure payments.

        2020 was also a successful year in terms of consumer product and services launch. Paycell launched its 'Ready-to-use Limit' feature in July for those who are also Turkcell postpaid subscribers. Thanks to this feature added to the Paycell mobile app, users can utilize their monthly mobile payment limits, calculated to uniquely reflect theuser's credit worthiness, to top up their prepaid Paycell Card. They can also use their limits for online shopping, or else purchase physical goods via the Paycell QR merchant network. The amount spent is reflected on the user's Turkcell mobile phone bill on a monthly basis.

        Throughout the year, Paycell realized over 180 campaign offerings. With intense marketing communications and social media reach in addition to the tailwind of the pandemic environment, active Paycell card usage and Paycell application download numbers ramped up in 2020.

        Paycell took its first step toward globalization in October 2017 by launching direct carrier billing services in the Turkish Republic of Northern Cyprus. In 2018, Paycell launched e-money and local currency transfer services in Ukraine, allowing Ukrainian customers to make digital payments.

        As of December 31, 2020, Paycell had 4.7 million three-month active users. The Paycell app had been downloaded 9.2 million times to date. The Paycell prepaid card reached 3.4 million users and spending via Paycell prepaid cards in 2020 amounted to TRY 335 million. Paycell mobile payments active users reached 2.2 million and with 7.9 million credit cards being registered at Paycell. The total transaction volume through Paycell reached TRY 9 billion.

        Paycell generated TRY 285 million in revenue in 2020 marking 13% year on year growth, while its EBITDA reached TRY 147 million with a 52% margin.


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Turkcell Enerji

        Turkcell Enerji, a 100%-owned subsidiary of Turkcell, was established on February 20, 2017 with the vision of being a leader in the transformation of energy markets in Turkey through digitalized, decentralized and decarbonized solutions. Turkcell Enerji owns an electricity supply license, issued by the Energy Market Regulatory Board (EMRA), on May 11, 2017, for a period of 20 years. This enables the company to trade electricity and/or electrical capacity. Turkcell Enerji supplies electricity to eligible residential, commercial and industrial customers in Turkey. In 2020, Turkcell Enerji has completed solar rooftop projects for renewable power generation at selected Turkcell Group buildings and data centers. The focus on renewable energy will continue with large-scale projects and investments.

Lifecell Ventures

        Lifecell Ventures is a 100% subsidiary of Turkcell incorporated in the Netherlands.

        In line with Turkcell Group's strategic priority of monetizing its digital services, Lifecell Ventures is responsible for delivering our digital services and solutions to the global markets and expanding Turkcell Group's footprint by launching new offerings, accelerating the company's owned OTT activities, growing current services and making strategic alliances with other operators. Lifecell Ventures uses technology to provide a digital experience to consumers worldwide and enable telecom operators to compete effectively by offering digital communications, entertainment, music, TV, transactional and e-commerce applications as well as real time action-based marketing solution. Lifecell Ventures' business model is based on charging for implementation, support, maintenance, revenue sharing and license fees for the provision of digital service technology and know-how to other operators with re-branding option. Lifecell Ventures has the ambition of contributing to taking telecoms to the "next level", which is a more digital service focus, rather than being an infrastructure company.

        Lifecell Ventures launched the first international digital solution partnership with BiP and lifebox services at Moldcell, the Eastern European operator under a revenue sharing model. The company expanded digital solution partnerships in 2019 with the launch of BiP and lifebox with the Albanian operator ALBtelecom, which operates in Albania with a population of three million. In February 2019, Lifecell Ventures signed a cooperation agreement with Digicel Group of the Caribbean. In October 2020, Digicel Group launched the communication platform BiP, TV platform PlayGO (TV+), the personal cloud storage platform Billo (lifebox) and Fast Login in 32 countries, in partnership with Lifecell Ventures. Digicel is managing its own consumers' data while offering its subscribers market-leading action in real time through LCV's Real Time Action Marketing and Real Time Trend Monitoring tools.

Yaani Digital B.V.

        Yaani Digital B.V. is a wholly-owned subsidiary of Lifecell Ventures and is incorporated in the Netherlands. It was acquired by Lifecell Ventures from NTENT, Inc, an American company, on May 14, 2019. The perpetual license and usage rights associated with the source codes of the Yaani search engine rest with Yaani Digital. The transfer of all identifiable assets is realized with the signing of the Mutual Cancellation and Release Agreement on June 1, 2020.

BiP Digital Communication Technologies B.V.

        BiP Digital Communication Technologies B.V. ("BiP Digital")—whose commercial title was Lifecell Digital Communication Technologies B.V. prior to December 4, 2020—has been incorporated in Amsterdam, the Netherlands on September 7, 2020. BiP Digital is wholly owned by Turkcell's subsidiary Lifecell Ventures. Under its status as a financial holding, the main purpose of the company is to incorporate, in any manner to participate in, to manage and to supervise businesses and companies and


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to give advice and to provide services to businesses and companies with which the company is affiliated in a group and to third parties.

Bip Iletisim Teknolojileri ve Dijital Servisler A.S.

        Bip Iletisim Teknolojileri ve Dijial Servisler A.S. ("Bip Iletisim") is a wholly owned subsidiary of BiP Digital. The company has been originally incorporated on February 16, 2018 under the previous title as Turkcell Ozel Finansman A.S. and on July 24, 2020 amendments to articles of association and its commercial title have been registered under trade registry. The current title of Bip Iletisim has been registered on December 14, 2020. The main purpose of the company is providing communication solutions for users in terms of instant messaging, voice & video calling and also video conferencing via the applications on their internet-connected devices or web.

Lifecell Dijital Servisler ve Cozumler A.S.

        Lifecell Dijital Servisler ve Cozumler A.S. ("Lifecell Dijital"), 100% directly owned by Turkcell's subsidiary Turktell Bilisim A.S., was incorporated on March 4, 2020. The main purpose of the company is computer programming activities by coding system, database, network software and coding of customer specific software.

Lifecell Bulut Cozumleri A.S.

        Lifecell Bulut Cozumleri A.S. ("Lifecell Bulut"), wholly owned by Lifecell Dijital, was incorporated on April 22, 2020. Main purpose of the company is to be engaged in cloud technologies, data processing, hosting and related activities.

Lifecell Muzik Yayin ve Iletim A.S.

        Lifecell Muzik Yayin ve Iletim A.S. ("Lifecell Muzik"), wholly owned by Lifecell Dijital, was incorporated on April 22, 2020. Main purpose of the company is to provide on-demand broadcasting music and video services/contents within the framework of the provisions of the Law No. 6112 on Radio and Television Establishment and Broadcasting Services.

Lifecell TV Yayin ve Icerik Hizmetleri A.S.

        Lifecell TV Yayin ve Icerik Hizmetleri A.S. ("Lifecell TV"), wholly owned by Lifecell Dijital, was incorporated on April 22, 2020. Main purpose of the company is television programming, video on demand content and broadcasting activities.

Equity Accounted Investments

Turkiye'nin Otomobili Girisim Grubu Sanayi ve Ticaret A.S. ("TOGG")

        On November 2, 2017, Turkcell signed the Joint Initiative Group Cooperation protocol and on May 31, 2018 a Shareholders Agreement was signed by Turkcell with the intention of participating as a potential contributor in "Turkey's Automobile Project". Under this protocol, the signing parties agreed to determine the framework of the activities to meet the requirements of the project for designing, developing and manufacturing a range of electric and connected cars and establishing a mobility ecosystem as well as establishing a local company to own the intellectual and industrial property rights. Accordingly, on June 25, 2018, TOGG was incorporated, in which Turkcell has participated as a founding partner with a 19% stake. AG Anadolu Grubu Holding A.S., BMC Otomotiv Sanayi ve Ticaret A.S., Kok Ulasim Tasimacilik A.S., Vestel Elektronik Sanayi ve Ticaret A.S. and Turkcell (through its wholly owned subsidiary Turkcell Gayrimenkul) have equal partnerships in TOGG each with a 19% shareholding; whereas Turkiye Odalar ve Borsalar Birligi holds 5%. The CEO of TOGG


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was appointed on September 1, 2018. On December 27, 2019, TOGG showcased its C-SUV model and an example of its C-Sedan model, which are the first models in the product portfolio. On July 2020, construction of the production facility was initiated in Gemlik, Bursa. Mass production ramp-up is expected to start by the end of 2022. In October, TOGG signed a letter of intent with Farasis Energy (Ganzhou) Ltd. to develop energy storage solutions for Turkey and surrounding countries. Turkcell has committed to a 19% of the total capital participation of €500 million over the following years.


        Sofra, in which Turkcell indirectly holds a 33.3% stake, was incorporated on July 24, 2018. Belbim Elektronik Para ve Odeme Hizmetleri A.S., a subsidiary of the Municipality of Istanbul, and Posta ve Telgraf Teskilati A.S., the Turkish postal services company, act as shareholders together with our subsidiary Turkcell Odeme. Sofra offers meal cards issued under the "PAYE Card" brand, enables personnel of customers to conveniently purchase food at member merchants. PAYE Card is also accepted at public transportation payment in Istanbul. In 2020, PAYE Card has over 80 thousand cardholders with around 17 thousand merchants. PAYE Card also launched virtual card which enables consumers to pay with QR at stores.

Non-Consolidated Group Companies

Turkcell Foundation

        Turkcell Foundation ("Turkcell Vakfi", "Foundation") was founded by our Company on October 11, 2018 in Turkey. The Foundation is a not-for-profit organization that intends to reduce mainly the public burden of the state by contributing to projects and charities that will meet the social, educational, health, technological, environment, cultural, and moral current and future needs of the Turkish society. The board of directors of the Foundation consists of five members, all of which have been appointed among the high-level executives of Turkcell.

Entities & Businesses Related to Previous Operations

Inteltek Internet Teknoloji Yatirim ve Danismanlik Ticaret A.S.

        Inteltek Internet Teknoloji Yatirim ve Danismanlik Ticaret A.S. ("Inteltek") offers information and entertainment services. On September 30, 2020, we completed the sale of our total 55% shareholding in Inteltek to Intralot Iberia Holding SAU, the other shareholder of Inteltek. The final value of the transaction was approximately TRY 6.1 million. We generated approximately TRY 1.6 million in profit from this transaction, which has been reflected in our 2020 third quarter financial statements. As at December 31, 2020, Inteltek is not a subsidiary of Turkcell.

Turkcell Europe GmbH

        Turkcell Europe GmbH ("Turkcell Europe") was founded by Turkcell in 2010 as an MVNO providing service over the T-Mobile (Deutsche Telekom AG) network. Headquartered in Cologne, Germany, Turkcell Europe commenced activity in March 2011.

        Until the end of 2014, Turkcell Europe continued its operation as an MVNO and offered Turkcell's service quality across both Germany and Turkey. In order to increase the efficiency of our operations in Germany, we made changes to the business model in 2014 from a "wholesale traffic purchase" agreement to a "marketing partnership". The Marketing Partnership agreement between Turkcell Europe and Telekom Deutschland Multibrand GmbH, the subsidiary of Deutsche Telekom was signed on August 27, 2014, which involved the transfer of Turkcell Europe subscribers and operations to a Deutsche Telekom subsidiary as of January 15, 2015. The marketing partnership ended on April 30, 2020 pursuant to a termination protocol executed between the parties.


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        Turkcell Europe's revenue contribution to the Turkcell Group amounted to EUR 100 thousand in 2020 where, post-termination, the revenue generation ended.

X. Potential Investments

        Our efforts to selectively seek and evaluate new investment opportunities continue. Our strategy for growth involves selectively seeking and evaluating new investment opportunities and participating in those meeting our criteria. We may pursue inorganic growth opportunities both in Turkey and in countries where we are already present with a controlling stake in order to leverage our experience and technological base. We may also pursue opportunities which include alliances, such as MVNOs, management service agreements and marketing partnerships, and that may be in the area of mobile or fixed telecommunications and services.

        We may also evaluate network sharing opportunities and participate in joint infrastructure companies within Turkey.

        We will evaluate the opportunities of marketing the portfolio of our digital services in international markets to increase the users and our revenues from these services.

XI.   Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 ("ITRA")

        Based on our information and the information provided to us by our affiliates, as of the date of this annual report, we believe that certain of our business activities in 2020 and in 2021, and the business activities of certain of our affiliates, are subject to disclosure pursuant to Section 219 of ITRA.

        During the year ended December 31, 2020, Turkcell had international roaming relationships with the following companies in Iran and Syria: TCI Mobile Company of Iran, MTN Irancell, Taliya Iran, Telecommunication Kish Co., Rightel, Syriatel and MTN Syria. Turkcell had gross revenues of approximately TRY 1.5 million and net profits of approximately TRY 0.3 million attributable to these agreements during the year ended December 31, 2020.

        During the year ended December 31, 2020, lifecell had international roaming relationships with the following companies in Iran and Syria: MTN Irancell, Rightel, Syriatel and MTN Syria. lifecell had gross revenues of approximately EUR 309.2 thousand and no net profits attributable to these agreements during the year ended December 31, 2020.

        Turkcell has developed several digital services such as BiP, Dergilik, fizy, lifebox, TV+ etc. which are available for download free of charge and have been downloaded from within Iran. The Company believes that these downloads from within Iran have generated no revenue or profits. For details regarding the risks we face with regard to our business in Iran, please refer to "Item 3.D—Risk Factors—Any instability in the political environment and/or downturn in the economy, as well as volatile international markets , in particular as a result of the ongoing COVID-19 global outbreak, in Turkey and/or internationally may have an adverse effect on our business and financial condition."

        Turkcell Superonline provided transit IP and leased line services through network interface agreements with Telecom Infrastructure Company of Iran ("TIC"). During the year ended December 31, 2020, gross revenues attributable to these agreements were approximately TRY 26.0 million, and net profits were approximately TRY 8.0 million. Furthermore, Turkcell Superonline has a business relationship with Teleka Maedeh Co. (Telecom Idea) based in Iran, which acts as its solution partner and agent. During the year ended December 31, 2020, gross revenues attributable to these agreements were approximately TRY 0.9 million, and net losses were approximately TRY 1.2 million. Costs attributable to the services provided by Teleka Maedeh Co. were approximately EUR 254.0 thousand for the year 2020, and all payments were made to QBIC ELECTRONICS TRADING LLC (a company based in the United Arab Emirates), an authorized intermediary. Turkcell


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Superonline also has data interconnection business in Syria through a consortium with Syria Telecom for which revenue and net profit or losses are currently not known to the Company.

        We have made enquiries of our major shareholders regarding activities in Iran and Syria. Telia Carrier, one of our major shareholders until October 2020 (see item 7. Major Shareholders and Related Party Transactions for further details) has indicated that it is no longer direct interconnected with any Iranian or Syrian company. Furthermore, we have been informed that Telia Sweden, Telia Norway, Telia Latvia, Telia Lithuania, Telia Finland, Telia Estonia and Telia Denmark had roaming relationships with MTN Syria and with MCI Iran (only voice and SMS roaming, no data) during 2020. For the year ended December 31, 2020, we have been informed that total inbound cost was EUR 1.7 thousand and total outbound cost were EUR 41.1 thousand. No payments or receivables have been made by Telia Carrier for the accumulated traffic related to Iran.

        Furthermore, one of our major shareholders TWF has indicated that, although they do not have a business relationship or investments in Iran or Syria, and as publicly reported, as per the terms of the natural gas sale and purchase agreement from 1996 between the Republic of Turkey and Iran, Boru Hatlari ile Petrol Tasima AS, a wholly-owned entity of TWF, has been importing natural gas from Iran to the Republic of Turkey since December 10, 2001 following the completion of the pipeline connection between the two countries. TWF has also indicated that T.C. Ziraat Bankasi AS ("Ziraat Bankasi"), a wholly-owned entity of TWF, has a representation office in Tehran, Iran, which does not have any commercial or banking activity and Ziraat Bankasi does not have any intention to change or extend current activities carried out by this office. TWF has also indicated that this is publicly disclosed information.

        Although it is difficult to do with a reasonable degree of certainty, we have concluded that our Iranian business partners described in this section may be owned or controlled indirectly by the Government of Iran. However, to our knowledge, none of the services provided by Turkcell and our affiliates in Iran described in this section have been used by the Government of Iran to commit serious human rights abuses against the people of Iran. Furthermore, we understand that the U.S. Department of the Treasury's Office of Foreign Assets Control has issued a general license authorizing U.S. persons to engage in certain of the activities described in this section. We and our affiliates intend to continue the activities described in this section in 2021.

XII. Regulation of the Turkish Telecommunications Industry

a.     Overview

        All telecommunications activity in Turkey is regulated by the ICTA. The Electronic Communications Law No. 5809 (the "Electronic Communications Law"), which came into force on November 10, 2008, is the principal law governing telecommunications activity in Turkey. The Electronic Communications Law was published to respond to the rapidly-evolving Turkish telecommunications industry, and all secondary regulations have been updated to be in accordance with this law. 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.

b.     ICTA

        The ICTA has the authority to grant licenses and set fees in the electronic telecommunications industry.

        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 ICTA authorization. Authorization is granted either through notification made in accordance with the principles and procedures determined by the ICTA, in cases


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where scarce resource allocation is not necessary, or by the granting of usage rights, in cases where scarce resource allocation is necessary (allocation of frequency, satellite position, etc.). Under the Electronic Communications Law, usage rights may be granted for up to 25 years; however, there is no clause relating to the term of notification. According to the Electronic Communications Law, the principles and procedures relating to the notification and granting of usage rights is determined by the ICTA through secondary regulations.

        According to the Electronic Communications Law, usage rights can only be restricted where the resources are required to be operated by a limited number of operators and for the purpose of ensuring the effective and efficient use of the scarce resources. In cases where the quantity of rights of use is limited, Article 9-6(a) of the Electronic Communications Law allows the Ministry of Transport and Infrastructure 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 to 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 and Infrastructure, the authorization is still granted by the ICTA.

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

    Creation and protection of a free and efficient competitive environment.

    Protection of consumer rights and interests.

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

    Promotion of implementations that ensure that everyone can benefit from electronic communications networks and services.

    Ensuring non-discrimination among subscribers, users and operators under fair conditions.

    Ensuring the conformity of electronic communications systems to international norms.

    Protection of information safety and communication confidentiality.

    Determination of the procedures and principles related to the personal data and protection of privacy.

        The Electronic Communications Law also specifies general rules and principles relating to interconnection between operators. Agreements for interconnection are publicly available, but precautions are taken by the ICTA to protect the commercial secrets of the parties.

        The Universal Service 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 the fulfillment of universal services in the electronic communications sector. In accordance with Law No. 5369, the scope of universal services is determined and periodically reviewed, with the review period not exceeding every three years, and can be re-determined by the President of Republic of Turkey.

        The legislation designates the following as universal services: fixed-line telephony services, public pay telephones, telephone directory services to be provided in printed or electronic environments, emergency call services, internet services, passenger services to residential areas where access is solely provided by sea and 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/


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or geographical basis. Turk Telekom and the GSM operators are currently designated as universal services providers.

        The Council of Ministers Decision No. 2011/1880, which was published in the Official Gazette numbered 27984 and dated July 4, 2011 allowed the use of the universal service fund to extend the mobile GSM network coverage listed in the annex of the decision to uncovered areas with a population of 500 or below. On February 13, 2013, we were appointed as universal service provider after a tender process and the related contract was signed on February 20, 2013. Under the aforementioned contract, Turkcell duly carried out its undertakings for installing sufficient infrastructure to cover 1,799 rural locations and the investment and operating expenses are compensated by the universal service fund of the Ministry of Transport and Infrastructure. This contract was renewed until December 31, 2020, and the extension contained new requirements to provide mobile broadband services and to operate the new and existing networks together. The Ministry of Transport and Infrastructure has approved the extension of the contract under the same conditions through June 30, 2021. The Ministry of Transport and Infrastructure is preparing a new tender for the operation of the Universal Service in 2021.

        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.

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

    The tariff may be determined as one or more subscription fees, fixed fees, call charges, line rentals, and similar fee items.

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

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

    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.

    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.

    Procedures and principles pertaining to the implementation of Article 13 of the Electronic Communications Law, 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. In the Mobile Call Termination Market, all three operators are designated as having "Significant Market Power" ("SMP"). Accordingly, the mobile termination rates of all operators are being regulated by the ICTA.

        In the Mobile Access and Call Origination Market only Turkcell was designated as having SMP. As of January 1, 2020, the Mobile Access and Call Origination Market has been deregulated and Turkcell's SMP designation was removed. For additional details and further steps regarding Turkcell's SMP designation, see "Risk Factors" section.


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        In addition to the duties and authorities stated above, the Law Regarding the Establishment of ICTA No. 2813 has been amended and the ICTA has been given the authority to apply a conciliation procedure for the receivables including administrative sanctions (except for the receivables that are intermediated for collection and the penalty requirement for the treasury share) and the debts of the ICTA. According to this provision, it is possible to settle on a part of the disputed amount and to waive the primary or secondary claims and the settled matters cannot be made the subject of a lawsuit or a complaint.

        Telegraph and Telephone Law numbered 406 has also been amended such that in the event that the treasury share is not paid in full in the given period, the ICTA may impose a penalty in the amount of the incomplete or unpaid treasury share.

        In 2019, the ICTA finalized "The Wholesale Central and Local Market Analysis". By its Board decision dated December 31, 2019, the ICTA decided to designate solely Turk Telekom as an SMP for both markets. Access to fiber products, VULA (Virtual Unbundling of Local Access) access, margin squeeze obligations are also imposed on Turk Telekom in addition to its current obligations.

        In 2020, as per the amendments to Article 49 and 50 of the Electronic Communication Law, subscription agreements are allowed to be concluded either in writing or electronically through methods determined by the ICTA which enable the identity verification process of subscribers. Within this scope, on December 8, 2020, the ICTA published the Draft Regulation on the Identity Verification Process of the Applicant in the Electronic Communication Sector for public opinion. The aim of the Draft Regulation is to regulate the procedures and principles regarding to verify the identity of the applicants' transactions that will be processed electronically. Such regulation is expected to be published in the official gazette in 2021.

c.     Regulation on Quality of Service in the Electronic Communications Sector

        The Regulation on Quality of Service in the Electronic Communications Sector, effective since December 31, 2011 is applicable to all operators that provide service to end users and sets out the procedures and principles to control the conformity of the services of operators. 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. Additional requirements for service quality must be fulfilled. If the operators fail to reach these requirements more than once, this may result in the imposition of penalties. The results of quality measurements can also be made publicly available on the website of the ICTA for a period of one month, stating that the operator has failed to comply with the service quality requirements.

d.     Regulation on Administrative Fines, Sanctions and Precautions in the Electronic Communications Sector

        According to the Regulation on Administrative Fines, Sanctions and Precautions to be imposed on operators, effective as of February 15, 2014, 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 submit such documents in a timely manner; 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; does not meet the regulations regarding numbering, number portability, calling line identification, access and interconnection, end-user tariffs, consumer rights, value added services, data protection, national security and public order, service quality and such or does not comply with the provisions of license agreements, telecommunications licenses and general authorizations or the legislation. The ICTA is authorized to impose sanctions and precautions as well as administrative fines.

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Electronic Communications Law. According to the new provision, entities (including "natural persons" and "private legal entities which are not operators") who fail to comply with the obligations determined by ICTA regarding national cyber-security activities and protective measures against cyber-attacks, or fail to implement the measures taken by ICTA, will be subject to administrative fines.

e.     Regulation on Authorization regarding the Electronic Communications Sector

        In 2009, the ICTA published the "Regulation on Authorization regarding the Electronic Communications Sector" ("Authorization Regulation"), 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. In 2016, there had been major amendments to the aforementioned Regulation. According to the amendments:

    Operators authorized with the limited usage right authorization may sell devices, make installations, carry out maintenance or give consultations if it is related to or necessary for its field of activity. As a result of this amendment, Turkcell is able to sell devices in relation to electronic communication services.

    Companies that apply to the ICTA for authorization should have paid the minimum amount of paid capital set by the ICTA. Those operators authorized before the amendment of the Regulation are also liable to meet this condition. According to the ICTA decision dated March 31, 2016, the operators authorized to provide Public Access Mobile Radio Service should have minimum paid in capital amounting to TRY 250,000 and the operators granted other authorization types should have minimum paid in capital amounting to TRY 1,000,000.

    All operators should obtain the consent of the ICTA prior to the transfer, acquisition or any other transaction regarding 10% or more of their shares. Those operators authorized with limited usage rights should also notify the ICTA within two months at the latest in case of a transfer, acquisition or any other transaction of their shares up to 10%.

    Operators should provide free call center services, which was not an obligation in the former Regulation.

    Operators should keep the traffic data of their customers for two years, which was set at one year in the former Regulation.

    Operators are liable to notify the ICTA of any amendments to documents regarding the employees of the operators (including employee lists) which have been previously submitted to the ICTA.

    The ICTA is entitled to decline authorization applications and proceed with operator inspections to confirm the accuracy of the information and documents submitted during the authorization application.

        In addition to the amendments of the abovementioned Regulation, the ICTA decision on Procedures and Principles Regarding the Usage of Caller Line Identification was published increasing the liabilities of the operators.

f.      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 have been operational in the fourth quarter of 2008. Since we believe the MNP regulations conflict with our rights under our license


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agreement, without due compensation, we filed a lawsuit in 2007 for the cancellation 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, where they are violated, that we should be justly compensated. The Court rejected the case in June 2009 and we appealed the decision. The Plenary Session of the Chambers for Administrative Cases approved the court decision. We applied for the correction of the decision. The Court rejected Turkcell's request of the correction of the decision. Turkcell made an individual application before the Constitutional Court, against the respective decision. The Constitutional Court process is pending. In 2009, the ICTA issued a new Regulation on MNP, abolishing the 2007 regulation and amended certain Articles of this Regulation in November 2015. Mobile subscribers are eligible to make a porting request only after 90 days of the date of activation of their first mobile connection.

g.     Regulation on Security of Network and Information in Electronic Communications Sector

        In 2008, the ICTA published the "Regulation on Security of Electronic Communication", which determines the principles and procedures for precautions to be taken by the operators for eliminating or derogating the risks caused by threats or weaknesses of (i) the physical area of the operators, data, hardware/software security and reliability, and (ii) sustaining the reliability of human resources. In accordance with the regulation, our Company is required to comply with TS ISO/IEC 27001 or ISO/IEC 27001 standards. Turkcell was the first mobile operator in Turkey to receive the ISO/IEC 27001:2005 certification for its Network Operations function in 2008 covering all operations throughout Turkey. In 2011, Turkcell's IT function was also certified for ISO/IEC 27001:2005 and Turkcell's ISO/IEC 27001:2005 scope became one of the largest among telecommunication operators in Europe. In 2015, the Information and Communications Technology and Network departments successfully passed ISO 27001:2013 audits and were deemed to be in compliance with the ISO 27001:2013 version. By having an ISO/IEC 27001:2013 certificate covering telecom infrastructure operations, Turkcell fulfills its regulatory obligations and offers its customers the benefits of an internationally-recognized secure management of operations and services. In July 2014, the ICTA repealed the above regulation and published the "Regulation on Security of Network and Information in Electronic Communications Sector" which requires the Company to set up and maintain a specialized team to detect, prevent and report all cyber events and work in coordination with the National Computer Emergency Response Center, in addition to the abovementioned obligations.

h.     Presidency Circular on Information and Communication Security Measures

        The Presidency Circular on Information and Communication Security Measures dated July 6, 2019, aims to ensure the security of critical data, which may threaten national security or lead to the deterioration of the public order when the data privacy, integrity and accessibility is impaired. Pursuant to the Circular, the Presidential Office for Digital Transformation published an "Information and Communication Security Guide", on July 27, 2020, which sets out the information and communication security measures to be followed by public institutions as well as the enterprises providing critical infrastructure services which includes telecommunication operators. The guide covers measures and related activities to be carried out by public institutions and concerned enterprises to ensure the security of their asset groups, applications and technology in accordance with degree of criticality, i.e. basic, medium and advanced. Accordingly, telecommunication companies shall determine the degree of criticality of their assets and draw a roadmap to implement effectively the concerned measures, for asset groups with advanced criticality level in two years. The guide is expected be updated periodically, and to be published on the website of the Presidential Office for Digital Transformation.


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i.      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 four years. It is an autonomous authority with administrative and financial independence established to ensure effective competition in markets for goods and services.

        The Competition Board can carry out investigations, evaluate requests for exemptions, monitor the market, assess mergers and acquisitions, submit views to the Ministry of 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.

        Any person or legal entity may file a complaint with the Competition Board. The Competition Board can take necessary measures to prevent violations and may impose fines on those who are liable for such prohibited practices. The Competition Board may impose fines of 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. The ICTA and the Competition Board entered into a Protocol on Cooperation in 2002, followed by follow-up Protocols in 2011 and 2015. The original Protocol established a framework whereby the ICTA and the Competition Board can cooperate on legal actions and policies regarding measures, regulations and inspections that affect competition conditions and competition in the telecommunications sector. The follow-up Protocols regulate the mechanisms to improve cooperation between the ICTA and the Competition Board.

j.      The Principles on Applications Regarding Anticompetitive Acts in Electronic Communications Sector

        One of the principles that the ICTA must follow is the creation and protection of a free and efficient competitive environment. The Electronic Communications Law specifies that the ICTA is authorized to set rules (that do not contradict the Turkish Competition Law) to prevent anticompetitive acts, to investigate the operators as officio or upon a claim, and to take necessary measures against anticompetitive actions. Considering that applications regarding anticompetitive acts are made by different methods and based upon a variety of documents, the ICTA published the "Principles on Applications Regarding Anticompetitive Acts in Electronic Communications Sector" on December 20, 2017 in order to clarify these points.

k.     Regulation on the Establishment of Metropolitan Municipalities in Fourteen Provinces and of Twenty-Seven Districts and Amending Certain Laws and Decree Laws

        The Law No. 6360 on the "Establishment of Metropolitan Municipalities in Fourteen Provinces and of Twenty-Seven Districts and Amending Certain Laws and Decree Laws" was published in the Official Gazette on December 6, 2012 and enacted on March 30, 2014 through municipal elections. The Law, increasing the number of metropolitan cities from 16 to 30, dissolves the legal entity of villages and special provincial administrations in cities where there are metropolitan municipalities. By the amendment of the Law for Metropolitan Municipalities, the number of metropolitan municipalities increased and the borders of certain metropolitan municipalities were extended. Following this amendment, the ICTA increased our coverage obligations, defined in our concession agreement, with its decision, based on this law amendment which requires us to make material capital expenditures. We filed a lawsuit for a stay of execution and cancellation of the ICTA's aforementioned decision. The Council of State granted a motion for the stay of execution of ICTA's aforementioned decision. The ICTA objected to this decision. The objection was also rejected in favor of Turkcell. The hearing was held on November 27, 2018. The Court annulled the decision of the ICTA. The ICTA appealed the decision. Turkcell replied to the appeal request in due time. Council of State rejected the ICTA's appeal request in favor of the Company and approved the first instance court decision with its definitive


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judgment. Thus, the judicial process has been finalized in favor of the Company. Since then the ICTA has been working on a new regulation aligned with the Law No. 6360.

l.      Regulation on Base Station Implementation in Electronic Communication Sector

        In 2012, according to Law No. 6360 and Municipality Law No. 5393, the Metropolitan Municipalities were authorized to give site selection certification to the BTS considering the requirements of city and building aesthetics and electronic communication services. The Site Selection Certificate Regulation was published in the Official Gazette dated January 27, 2018, and entered into force on the date of its publication. According to this regulation, a fee (TRY 3,972 plus VAT per station for the year 2021) will apply only to the BTSs established after December 6, 2012.

m.    Zoning Law and Construction Certificate Requirement of Base Stations

        The Supreme Court of Appeals rescinded the regulation regarding the base stations exemption from obtaining construction permits on October 1, 2009. The existing zoning law in Turkey requires mobile operators to obtain construction certificates for all existing and new base stations, resulting in the shutdown of certain stations for which certification cannot be obtained. In Turkey, nearly half of the premises were built illegally without any permission. As a result, a number of municipalities started taking legal action such as affixing seals to suspend construction, or demolition orders against base stations, negatively affecting our coverage, quality of service and customer experience. We have also taken legal action requesting nullity of those acts.

        Legislative work has been done to fill the legal gap caused by the annulment decision of the Supreme Court. The amendments adopted in the Zoning Law have entered into force as of November 17, 2020. With these amendments, three segments have been designated according to the characteristics of electronic and communication systems. (i) The masts and towers that are above 15 meters have become subject to a license, (ii) the masts and towers that are less than 15 meters and (iii) the masts and towers that are below 10 meters on the rooftops are now subject to obtaining a permission. A Site Selection Certificate must still be obtained prior to the license/permit applications. It shall be necessary for the masts and towers over 15 meters that have been established and/or to be established on the parcels and land, to be specified in the 1/1000-scale implementary zoning plan; however, it shall not be required for the other types of BTS's. There shall be no license and permission requirement for the stations established between July 2, 2004 and October 1, 2009. It shall be mandatory for stations established before July 2, 2004 and between October 1, 2009 and November 17, 2020 to apply within a year and carry out the necessary documents within three years. The fines imposed on electronic communication stations established before November 17, 2020 shall be voided, and demolition decisions shall not be applied.

n.     Regulation on the Internet

        Law on the Regulation of Broadcasts via the Internet and the Prevention of Crimes Committed Through such Broadcasts has been revised by Law No. 6518, which became effective on February 19, 2014. The new law required that all internet access providers, which include all mobile and fixed network operators as well as all internet service providers, form a Union of Internet Access Providers ("UAP") within three months, which was duly established. After the establishment of the UAP, if any internet service provider or any operator giving internet services fails to become a member of the UAP, it shall also be fined in an amount equal to one percent of the previous year's revenues.

        In addition, the law raises the existing fines for not removing content as requested by the court. The law also introduces URL-based blocking of websites which requires new capital as well as operating expenditures for all internet access providers.


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        Law No. 7253, published on July 31, 2020, has made amendments to Law No.5651, according to which social network providers located abroad which receive more than one million connections daily from Turkey shall appoint at least one representative in Turkey until October 1, 2020. If they fail to do so, those social networks are to face fines, while further failure is to result in the banning of advertisements to the networks. If non-compliance continues, traffic bandwidth to relevant social networks are to be narrowed by 90% by the members of the UAP.

o.     GSM Licensing in Turkey

        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.

        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, and 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 licensee is responsible for installing telecommunications equipment in conformance with international signalization systems and abiding by the numbering plans. Furthermore, the licensee is obligated to make the necessary investments to offer the licensed service, including 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.

p.     Our GSM License Agreement


        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. However, as a result of the aforementioned amendments made to the Telegraph and Telephone Law, it has been provided that in the event that the treasury share is not paid in full in the given period, the ICTA has the right to impose a penalty in the amount of one full amount of the incomplete or unpaid treasury share. In addition, we must pay annual contributions in an amount equal to 0.35% of our gross revenue to the ICTA's expenses. 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 in February 2009 by Turkcell and the ICTA, which made small additional changes in the articles of the license agreement entitled performance bond and allocated frequency bands, and was signed again in February 2016 with small amendments. The license agreements of Turkcell were last amended in 2019.

    Terms and Conditions

        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


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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 the ICTA, provided that we apply between 24 months and 6 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 the effectiveness of our license. 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. Since 2005, we are required to pay 90% of the treasury share to the Turkish Treasury and 10% to the Ministry of Transport and Infrastructure as a universal service fund contribution. Since January 1, 2018, all of our treasury share is paid to the ICTA, which then transfers it to the Turkish Treasury and the Ministry of Transport and Infrastructure as detailed above. The calculation method for the treasury share was later revised and consequently, the following are not be considered in calculation of the treasury share: overdue interests which are accrued to the subscribers for any unpaid balance, accrual amounts for the purpose of reporting, reflecting the installation and maintenance costs of the mobile radio stations to other mobile operators and finally, amounts for the purpose of correction accounting records which occur in the same year due to errors (such as customer information, type of business, amount and price).

        Furthermore, under the Authorization Regulation, 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".

        Our license subjects us to a number of conditions. It may be revoked in the event that we fail to meet any of these conditions.


        Our license requires that we meet coverage and technical criteria. We must attain 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 the 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. We met and surpassed all coverage obligations before their due dates.

    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.


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    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. Moreover, we must meet the standards that the ICTA imposes under "Regulation on Quality of Service in the Electronic Communications Sector".


        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 (price caps) 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 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 Commerce minus 3% of the Turkish Consumer Price Index announced by the Ministry of Commerce. For the maximum tariffs established in U.S. Dollars, the same method is applied to the USA Consumer Price All Item Index Numbers.

        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 and/or liquidity. The maximum tariffs set by the ICTA may constitute the highest rates we may charge for the services included in these customized service packages. Since TT Mobil does not have such an obligation in its licence, a policy decision had been taken by the Ministry of Transportation and Infrastructure for TT Mobil to comply with maximum tariffs. However, with a Board Decision dated November 17, 2020, ICTA announced that Turk Telekom is exempted from the maximum tariff regulation in accordance with a recent stay of execution decision of the Court. The latest ICTA Board Decision dated March 31, 2021 sets the rates at TRY 0.806 per minute for national voice and TRY 0.58 for national SMS for Turkcell and Vodafone as of April 1, 2021.

    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"), which is responsible for 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.

    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 upon a bankruptcy ruling that is not reversed or dismissed within 90 days, upon our failure to perform our obligations under the license agreement if such failure is not remedied within 90 days, if we operate outside the allocated frequency ranges and fail to terminate such operations within 90 days or if we fail to pay our treasury fee.


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        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. 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.

        Under our license agreement, any dispute arising from scope, implementation and termination of the agreement shall be brought before the Committee. If the dispute is not settled within 30 days before the 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.

        Additionally, the Law No. 7061 dated November 28, 2017 has introduced the settlement mechanism set forth in a provision of the Tax Procedural Law No. 213 for the disputes in relation to the payment of the treasury share.

q.     Authorization of 3G License

        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 and then the agreement was renewed and resigned in February 2016 with small amendments which do not change the core of the service. 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, we are obliged to meet certain coverage obligations. We are required to cover the population within the borders of all metropolitan municipalities within three years and all cities and municipalities within six years. We are also obliged to cover every region with a population over 5,000 within eight years and population larger than 1,000 within 10 years. Following the amendment of the Law for Metropolitan Municipalities, the number of metropolitan municipalities increased and the borders of some metropolitan municipalities were extended. After this amendment, the ICTA increased our coverage obligations, defined in our concession agreement, by its decision, based on this law amendment. We filed a lawsuit for the stay of execution and the cancellation of this decision. The Council of State accepted our stay of execution request. The ICTA objected to this decision. The objection was also rejected in favor of Turkcell. The hearing was held on November 27, 2018. The Court annulled the decision of the ICTA. The ICTA appealed the decision. Turkcell replied to the appeal request in due time. Council of State rejected the ICTA's appeal request in favor of the Company and approved the first instance court decision with its definitive judgment. Thus, the judicial process has been finalized in favor of the Company.


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        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 obtain at least 40% of its electronic communications investments from suppliers that have a Research and Development Center in Turkey and the obligation to obtain at least 10% of its electronic communications investments from suppliers that are small and medium sized enterprises 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.

r.      Authorization of 4.5G License

        In the IMT- Advanced ("4.5G") tender held on August 26, 2015 to grant spectrum usage for 800 MHz, 900 MHz, 1800 MHz, 2100 MHz (FDD,TDD) and 2600 MHz (FDD, TDD), the Company purchased a total of 172.4 MHz, the broadest 4.5G spectrum allocation of any operator in Turkey (including widest frequency bands on 1800 MHz, 2100 MHz and 2600 MHz) for EUR 1,623.5 million (excluding VAT and interest payable on the installments).

        The tender gave equal opportunity to the operators in the low frequency bands utilized for coverage while enabling competition in higher frequency bands mainly used for capacity. The Company has reached a total frequency bandwidth of 234.4 MHz and our ownership in total bandwidth in the market increased to 43% (234.4 MHz / 549.2 MHz) with the new frequencies acquired. The operators can utilize the new spectrum in a technology-neutral way.

        The ICTA granted Turkcell's 4.5G License on October 27, 2015. The 4.5G License is effective for 13 years until April 30, 2029. According to the license, Turkcell started to provide 4.5G services from April 1, 2016.

        The 4.5G License Agreement has provisions that are generally similar to those contained in our license agreement relating to 2G and 3G. Accordingly, the Company;

    must achieve population coverage of 95% of the population of Turkey and coverage of 90% of the population within the borders of all cities and all city districts within eight years,

    must cover 99% of highways, high speed railroads and tunnels with lengths more than one kilometers within eight years, 95% of double roads within six years and 90% of conventional railroads within ten years, and

    is obliged to share actively with other mobile operators, any new 3G or 4.5G site which it will decide to build within settlement areas with a population of less than 10,000 and highways, dual carriageways, tunnels, high speed railroads and conventional railroads, from the effective date of the license granted to the Company.

        While building its infrastructure for 4.5G networks, Turkcell, as well as its competitors, is required to purchase up to 45% of its network related hardware (i.e. base stations, switches, routers and as


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such) and software from local suppliers, and purchase 10% of the network equipment and software from local SMEs engaged in production in Turkey. The local network related hardware purchase requirement is defined in three periods: 30% for first year, 40% for second year and 45% for the third and subsequent years. Reporting on these requirements should be made to the ICTA on a yearly basis. In case of a projection of a failure to meet the requirement for locally produced hardware and software due to the lack of sufficient local supply and other relevant conditions, the Company shall file an application to the ICTA 6 months before the due date, and request an easing or removal of the requirement. Based on the law, operators have requested to remove this requirement for five annual reporting periods, between 2015-2020. However, operators' requests to waive this requirement for the reporting periods between 2015-2019 have been rejected by the ICTA; which may result in administrative fines with material adverse effect on our financial results.

        In addition to the above-mentioned obligations, in the context of the 4.5G license, the Company assumed the obligation to obtain at least 40% of its electronic communications investments from suppliers with a Research and Development Center in Turkey, as well as the obligation to obtain at least 10% of its electronic communications investments from small and medium sized enterprises suppliers that are established in Turkey and manufacture local products.

        Breaches regarding the abovementioned obligations and breaches resulting in the termination of the GSM and IMT-2000/UMTS concession agreements for any reason shall also result in the termination of the Operator's 4.5G authorization. The Company may apply to the ICTA between 18 and 12 months before the natural end of authorization (April 30, 2029) for renewal. The ICTA may renew the authorization, taking into account the current legislation.

s.     Licenses and Authorizations of our Subsidiaries

        In addition to the foregoing, our majority owned subsidiary, Belarusian Telecom, and wholly-owned subsidiaries lifecell and Kibris Telekom hold GSM licenses in Belarus, Ukraine and the Turkish Republic of Northern Cyprus, respectively, and all of them have obtained 3G licenses. lifecell also holds 4G licence. If lifecell, 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, Turkcell Superonline, Turkcell Enerji, Paycell, Financell, Lifecell Muzik and Lifecell TV 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.

    Ukraine License Agreement

        As of December 31, 2020 lifecell owns 9 activity licenses: a technology neutral license, issued for 3G, one license for international and long-distance calls and seven PSTN licenses for seven regions in Ukraine. As of 31 December 2020, lifecell owns twenty frequency use licenses for IMT (LTE-2600, LTE-1800, LTE-900), IMT-2000 (UMTS), GSM-900, GSM-1800, and microwave Radiorelay and Broadband Radio Access, which are regional and national. Additionally, lifecell holds a specific number range—three NDC codes for mobile network, twenty-eight permissions on a number resource for short numbers, ten permissions on a number resource for SS-7 codes (six regional and four international), one permission on a number resource for Mobile Network Code, eight permissions on a number resource for local ranges for PSTN licenses, two permissions on service codes for alternative routing selection for international and long-distance fixed telephony, and one permission on a code for global telecommunication service "800".

        According to the licenses, lifecell must adhere to state sanitary regulations to ensure that the equipment used does not injure the population by means of harmful electromagnetic emissions.


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Licenses require lifecell to inform authorities of the start/end of operations within four months and changes in the incorporation address within 30 days. Also, lifecell must present all the required documents for inspection by the NCCIR by their request. The NCCIR may suspend the operations of lifecell 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 lifecell of the violations and will set a deadline for recovery. If the deadline is not met, the licenses may be terminated.

        In 2020, the Ministry of Health of Ukraine significantly eased the limitations applicable to electromagnetic field exposure (EMF) levels emanating from base stations. The maximum EMF level is now set at 100 mW/cm2 or 19,42 V/m, compared to 10mW/cm2 or 1,94 V/m. This increase in maximum EMF levels will allow lifecell to increase the power output of transceivers on base stations where required. We believe that a higher power output of some transceivers will allow an improvement in quality of connection and coverage in certain areas, mainly in highly populated areas of cities where several base stations from different operators are located at close distance from one another and work in different bands. Further, this change will enable us to install sites in new zones.

    Belarus License Agreement

        Belarusian Telecom owns a license for mobile services without technological limitations (technology neutral), issued on August 28, 2008, for a period of 10 years. However, in accordance with the Edict of the President of the Republic of Belarus dated November 26, 2015, numbered 475, the license is issued without limitation of the period of validity. Starting from March 1, 2016 the license is valid from the date of the licensing authority's decision on its issue and for an unlimited period. Under the terms of its license, Belarusian Telecom has coverage requirements for 2G and 3G networks. Belarusian Telecom had been provided with additional time by the license authority to fulfill all 2G signal coverage requirements regarding the settlements. Management of the company is in close communication with the regulatory body regarding 2G license requirements and have applied for certain license requirement adjustments. We expect to have some regulatory changes in 2G network licence and those changes may eliminate coverage requirements in the upcoming years. 3G related license requirements have been fulfilled. There is no any coverage requirement for 4G services in the license.

        Based on local legislation, 4G infrastructure can be built by JLLC Belarusian Cloud Technologies ("beCloud") only. Belarusian Telecom uses beCloud's infrastructure to deliver LTE services for its customers.

    Turkcell Superonline Authorizations

        Turkcell Superonline was authorized as a Fixed Telephony Service Provider as of November 19, 2004 (for 15 years), Infrastructure Provider as of March 6, 2006 (for 25 years), Internet Service Provider as of February 15, 2005 (no duration specified), Satellite Communication Service Provider as of March 24, 2009 (no duration specified), Cable Broadcast Service Provider as of November 23, 2009 (no duration specified) and Mobile Virtual Network Operator as of July 14, 2015 (for 15 years). Upon the expiry of the term of Turkcell Superonline's Fixed Telephony Service Provider authorization on November 19, 2019, and subsequently on November 19, 2020, the ICTA extended the authorization period by one year.

        The Authorization By-Law for Telecommunication Services and Infrastructure published in the Official Gazette on August 26, 2004 was abrogated with the By-Law on Authorization for Electronic Communications Sector dated May 28, 2009. According to this abrogation, Turkcell Superonline's "Authorization" on Infrastructure Operating Service, Internet Service Provision and Satellite Communication Service have been changed to "Authority" on Infrastructure Operating Service, Internet


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Service Provision, Satellite Communication Service and Cable Broadcast Service. Turkcell Superonline's "License" on Long Distance Telephony Services License has been changed to "Authorizations" relevant to the Fixed Telephony Services. Aforementioned Public Access Mobile Radio Service Provider Authorization of Turkcell Superonline was annulled as of December 31, 2015.

        Turkcell Superonline was authorized as a Platform Operator and Infrastructure Operator, according to the Radio and Television Supreme Council's decision numbered 24, dated March 26, 2014. Such authorizations have been provided by the Radio and Television Supreme Council, according to the rules of the Media Law and also the Radio and Television Supreme Council By-Law on Broadcasting via Cable Networks. In accordance with the Media Law and its regulations, the Platform Operator Authorization and Infrastructure Operator Authorization are provided annually. Within the scope of the Platform Operator Authorization and Infrastructure Operator Authorization, Turkcell Superonline has the right to operate the platform and infrastructure of TV services.

t.      Access and Interconnection Regulation

        The Access and Interconnection Regulation became effective upon issue 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 the ICTA.

        In accordance with Article 7 of the aforementioned Electronic Communications Law, the ICTA may determine those operators that have significant market power in the relevant market as a result of market analysis. After determination of the operators of SMP, 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 TT Mobil 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, 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 designated Turkcell individually as an operator holding significant market power in the "Access to Mobile Networks and Call Originating Markets" and designated Turkcell, Vodafone and TT Mobil as operators holding significant market power in the "Mobile Call Termination Market". Based on the market analysis of the ICTA for the 2012-2015 term, all three operators were declared as operators holding significant market power in the "Mobile Call Termination Market" and Turkcell is once again recognized as the only operator holding significant power in "Access to GSM Mobile Networks and Call Originating Markets". The Mobile Access and Call Origination Market has been deregulated and Turkcell's SMP designation was removed as of January 1, 2020.


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        As a result of the significant market power designation in the "GSM Mobile Call Termination Services Market", our Company, as well as TT Mobil and Vodafone, is required to provide interconnection services on a cost basis. Consequently, according to the Electronic Telecommunications Law, the ICTA may oblige such operators to provide access and to submit their reference offers for 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 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. Please refer to the Interconnection table under the caption "(ii) Interconnection Rates—Turkcell, Vodafone, TT Mobil and Turk Telekom" for the approved interconnection rates as at March 20, 2020.

        ICTA Board Decision regarding Mobile Call Termination Market Analysis, dated September 23, 2020, conditionally removes cost-based pricing obligation for SMS/MMS services by October 1, 2021. In addition, 'interconnection obligation' is expanded to include providing IP interconnection.

u.     Regulation on Co-Location and Facility Sharing

        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 Communique concerning "Co-Location and Facility Sharing" on December 2, 2010 (which abolished the Regulation published on December 31, 2003). According to the Communique, the ICTA should determine operators to be co-location incumbent if operators do not enable co-location, or where is a dispute against competition, or end-users. Similarly, the ICTA could set tariffs if the tariffs for co-layout are not determined on a cost basis.

        The Communique 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 the 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.

        The ICTA published a regulation concerning "Cellular System Antenna Facility Design, Set Up and Sharing" on March 18, 2011 (which abolished the Regulation published on April 16, 2008). The regulation frames antenna facilities design, set up and sharing to enable base station facility 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 base station 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. Some incentives, such as exemptions on certain certification fees, will be given if sharing occurs on existing or new sites. Finally, when antenna facility set up and sharing requests are evaluated, if the owner of the facility refuses the request, the requesting operator will be informed of the reason for the refusal. This way, negotiation between parties is supported and ICTA involvement is kept at a minimum level. On December 6, 2016, the ICTA repealed the above


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regulation and replaced it with "The Regulation on the Procedures and Principles of Sharing of Cellular System Antenna Installations and Radio Access Networks". According to this Regulation:

    The number of sharing types has increased. The terms and conditions of sharing on highways, railways and within tunnels is now a separate section.

    In regions where the population is lower than 10,000, if an operator is unable to use the antenna installations built by another operator before the IMT licensing, the operator must notify the ICTA about the situation and the ICTA may let the operator build a new antenna installation. This operator is obliged to make an installation facilitating the sharing by all types with at least two other operators. The operator cannot turn down any sharing requests involving installations set up after IMT licensing in motorways, high speed and very high speed railways, dual carriage highways, tunnels and conventional railways, except for indoor installations.

    In regions where the population is higher than 10,000 at the time of application to the Authority to build a new installation, provided that there are no physical, technical, administrative and legal barriers, the operator is obliged to offer the types of sharing to the maximum extent possible.

    In regions where the population is lower than 10,000, except indoor installations, new antenna installations which were established between the date of the IMT authorization and the issue date of this Regulation, all settlements and motorways, high speed and very high speed railways, dual carriage highways, tunnels and conventional railways must be brought in line with the conditions set by this Regulation.

        In the 4.5G Authorization Document, in provinces with a population of less than ten thousand and at sites to cover highways, dual carriageways and railroads, any new 3G or 4.5G site to be built must be shared actively by all operators within this region. We informed the ICTA that we support any local R&D and P&D, as long as it complies with international technical and financial standards and can be sustainable. However, the 4.5G Authorization Document does not provide details on compliance with international standards. The ICTA may oblige operators to buy and use locally produced products, independent of quality standards, if a local vendor produces sufficient equipment to support the mobile operators' demands. This may cause technical problems in our network. Should such technical problems occur, it could negatively affect our quality of service, leading to increased costs for the 4.5G infrastructure roll-out and could negatively affect our customer experience.

v.      Regulation on Consumer Rights in the Electronic Communications Sector

        The ICTA published a "Regulation on Consumer Rights in the Electronic Communications Sector" on July 28, 2010 (which abolished the Regulation published on December 22, 2004) and made some changes to such regulation on June 20, 2013. This regulation introduced some radical changes to the electronic communications sector. With this regulation, the ICTA determined new procedures/changes regarding: the process and timing of churn steps, the obligation of operators to keep subscribers informed of services, including, but not limited to, informing customers about amendments of the campaigns and tariffs, the consumer complaints solution mechanism, billing processes and safe internet. The Regulation on Consumer Rights in the Electronic Communications Sector, which came into force in April 2018, repealed and replaced the previous regulation. Although the new version mainly preserves the provisions of the former regulation, one of the main differences is that the first service on/off operation in a calendar year may no longer be charged in case the services were suspended/disconnected due to non-payment within due date. Moreover, the Regulation on Consumer Rights in the Electronic Communications Sector has been amended to allow subscription contracts to be made electronically as of October 28, 2017. Procedures and principles regarding the use of digital signatures are to be determined separately by the ICTA.


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        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 is now offered to subscribers free of charge. Operators must provide Safe Internet Service to subscribers, who request this service, as two separate profiles, the child profile and the family profile, each of which can restrict subscribers from accessing certain internet addresses and content. Subscribers can easily change their profiles or opt-out from the Safe Internet Service.

        The ICTA set forth the reimbursement process arising from its decisions by publishing the procedures and principles to be applied to the reimbursement of subscribers which came into force in 2018. In addition, "the Procedures and Principles Regarding the Services with Limited Amount of Use and the Applications of Upper Limits of Receipts" published on August 19, 2016 has been in force since December 1, 2017. Notifications regarding those services with limited amount of use and the applications of upper limits of receipts used to be regulated by separate documents. But with the aforementioned Procedures and Principals, the means, timing and content of the notifications regarding the services with limited amount of use and the upper limits of receipts has been consolidated under a regulation. 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 doing business and could negatively impact our financial results.

        An ICTA decision dated June 21, 2018 favoring subscribers with special needs, veterans, and widows/ widowers and orphans of martyrs was published and came to effect on January 1, 2019. The decision requires operators that have more than 200 thousand subscribers to offer their services to these groups that are "in need of social support" at a 25% discount. The discount is to be offered upon proof of identity and the subscriber's special need.

        Following the decision of the ICTA dated March 31, 2020, until the measures introduced by the Presidential Circulars regarding the COVID-19 pandemic are lifted, operators are permitted to carry out call center services remotely, to send invoices electronically and to transmit the documents of the subscriber by mail in the context of subscription transactions. Furthermore, the ICTA has postponed for a period of up to three months the submission of information and documents prepared within the scope of the regular reports that are to be submitted to it.

        The ICTA decision on Procedures and Principles for the Termination of Subscription Agreements via e-Government Gateway has been published on May 12, 2020. The decision allows subscribers, who use mobile and fixed individual lines, to cancel their subscriptions through the e-government portal as of September 15, 2020.

        An amendment to Law No 5809 made by Law No 7247 on June 26, 2020 has made it possible for subscription agreements to be made in an electronic medium and that the identity verification process shall be regulated by the ICTA with secondary legislation. The ICTA has not yet published the secondary legislation.

w.     Regulation on Data Privacy in the Electronic Communications Sector

        Under Article 51 of the Electronic Communications Law, the ICTA is authorized to determine the principles and procedures related to the processing of personal data and protection of privacy. Accordingly, the ICTA had published "Regulation Concerning the Processing of Personal Data and the Protection of Privacy in the Electronic Communications Sector", of which a revised version will enter into force on June 4, 2021. The Company filed a lawsuit for the stay of the execution and cancellation of the related provisions of the aforementioned regulation.

        This regulation aims to determine the procedures and principles of personal data processing and the protection of privacy in the electronic communications sector. The regulation sets out the sector-


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specific rules such as security measures, notification of data breach and data breach risks, obtaining explicit consent, data transfers, traffic and location data, caller ID blocking.

x.     Law on the Protection of Personal Data

        Turkey, as a part of its legislative reforms to align with the EU legislations, has adopted an extensive data protection regime. The Law on the Protection of Personal Data (the "Law"), which came into force on April 7, 2016, regulates the processing and transfers of personal data of natural persons and protection of privacy.

        The Law introduced several obligations for processing and transferring the personal data including but not limited to fair and lawful processing, protection of personal data, consent requirement, providing notice of processing, registration with the Registry of Data Controllers and notification to the Data Protection Authority ("DPA") in case of a data breach. According to the Law, the DPA is authorized to impose sanctions and precautions as well as administrative fines which are determined in the Law.

        The Law also determines the rights of the data subjects, such as the right to apply to the data controller to learn whether the personal data has been processed, to learn if it is being used properly according to the purpose of the processing, to know the third parties to whom the personal data is transferred in Turkey or abroad, to request the personal data to be rectified, erased or destroyed and the receiving third parties to be notified of that rectification, erasure or destruction.

        As per Article 16 of the Law, the By-Law on the Data Controllers Registry specifying procedures and principles regarding the registration of Data Controllers was published on December 30, 2017 and came into force on January 1, 2018. Pursuant to this regulation, data controllers are obliged to register with the registry prior to processing personal data and the exemptions from the registration requirement is to be determined by the Data Protection Board. Accordingly, the Company registered with the registry within the given deadline by the Data Protection Board. The data controllers that are not established in Turkey also have the responsibility to register with the Registry via their representative that they will assign and data controllers are obliged to prepare a personal data processing inventory that includes the purposes for processing of personal data, data categories, data subjects, the maximum retention period of the data and technical and organizational measures taken regarding data security.

        In addition to the aforementioned regulation, on October 28, 2017 the Regulation Regarding the Deletion, Destruction and the Anonymization of Personal Data was published and came into force on January 1, 2018. The objective of the Regulation is to set forth procedures and principles regarding the deletion, destruction or anonymization of personal data processed wholly or partly by automated means and other than by automated means which form part of a data filing system. Furthermore, the Communique on Principles and Procedures to be Followed in Fulfillment of the Obligation to Inform and the Communique on Principles and Procedures for the Request to Data Controller was published and came into force on March 10, 2018 regulating principles and procedures in relation to the obligation to inform data subjects and rules and processes for data subjects to exercise their rights regarding personal data. With respect to international data transfers, the DPA has not yet published the list of countries, which have an adequate level of protection as of the date hereof.

        Failure to comply with the Law on the Protection of Personal Data may result in the imposition of administrative sanctions including fines up to TRY 2.0 million by DPA as of January 2021. The Company is carrying out a compliance program with regard to compliance matters arising from the Law on the Protection of Personal Data and its secondary legislation, as well as the General Data Protection Regulation which applies to several products and services of our Company provided to data subjects who are in the European Union.


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        Additionally, under the General Data Protection Regulation (GDPR), Data Protection Officer (DPO) needs to be determined to represent obligated data controllers. In November 2019, Turkcell appointed its DPO based on her expert knowledge of data protection laws and practices globally. By appointing the DPO, Turkcell aims to implement effective and focused management in the field of data protection. In an effort to establish a sustainable and digitized personal data management process, all processing activities have been reviewed and necessary technology investments were made in 2020. Such steps show the commitment of Turkcell to adopt extensive compliance practices and best practices around the world.

y.      Regulation on Electronic Commerce

        Law No. 6563 on the Regulation of Electronic Commerce published in the Official Gazette on November 5, 2014, amended Article 50 of the Electronic Communications Law, providing that without the prior consent of the subscribers, unsolicited electronic communications for the purposes of direct marketing or messages with adult content is prohibited. An "opt-in" mechanism has been adopted for electronic messages; however, this provision does not apply retroactively to the databases which were established by obtaining the data subjects' consent before the Law No. 6563 on Regulation of Electronic Commerce entered into force on May 1, 2015.

        The Electronic Commerce Law and "Commercial Communications and Commercial Electronic Messages Regulation" published in accordance with this law excludes messages that are sent to the subscribers and users of the operators about their own products and services, and these messages are regulated in "The Principles and The Procedures Regarding the Communication with the Purposes of Advertising and Marketing" published by the ICTA on July 9, 2015. According to electronic commerce legislation, sending commercial electronic messages is also subject to the prior consent of recipients. Violation of this legislation may result in an administrative fine.

        As per the amendments to the "Commercial Communications and Commercial Electronic Messages Regulation" dated January 4, 2020 a centralized commercial electronic communication management system ("CCECMS") for obtaining, exercising, and tracking opt-in/opt-out requests and complaints from recipients of electronic commercial communications was established under the supervision of the Ministry of Trade. Pursuant to the amendments, service providers are required to be registered with CCECMS and transfer every consent obtained under the Commercial Communications and Commercial Electronic Messages Regulation to CCECMS before the deadlines regulated by the Ministry of Trade. The consents that are not uploaded to CCECMS before the relevant deadlines will be considered invalid. In case service providers fail to comply with the Electronic Commerce Law and Commercial Communications and Commercial Electronic Messages Regulation, administrative fines may be imposed by the Ministry of Trade.

        The deadline for registration and transfer of the consents was June 1, 2020. However, the Ministry of Trade postponed the deadline to upload consents to CCECMS for service providers with more than 150,000 commercial electronic message consents to December 31, 2020 and the deadline for recipients to review their consent declarations on CCECMS to February 5, 2021. The Ministry of Trade also postponed the deadline to transfer recipient consents to CCECMS for service providers with 150,000 or less commercial electronic message consents to May 31, 2021 and the deadline for recipients to review their consent declarations on CCECMS to July 15, 2021.

z.     Registered Email Service Regulation

        Registered Electronic Mail Service was 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.


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aa.   Regulation on Refurbished Products

        The Regulation on the refurbishment of used mobile phones and tablets, warranty conditions of refurbished devices, authorization of refurbishment centers, and regulation of the obligations of market actors entered into force on August 22, 2020. When the standards for refurbishment centers are determined by the Turkish Standardization Institute, consumers will have access to second-hand mobile phones with a higher reliability, and so, more second-hand devices are expected to be included in the ecosystem.

bb.   Turk Telekom, Vodafone and TT Mobil Interconnection Agreements

(i)    General

        We have interconnection agreements with Turk Telekom, Vodafone, TT Mobil 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.

        The interconnection agreements establish understandings between the parties relating to various key operational areas, including call traffic management, and the agreements entail that we and the other parties will agree on the contents of various manuals setting forth additional specifications concerning matters that are not specifically covered in the interconnection agreement, such as quality and performance standards 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.

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

(ii)   Interconnection Rates—Turkcell, Vodafone, TT Mobil and Turk Telekom

        In accordance with the relevant articles of the Electronic Communications Law and subsequent Access and Interconnection Ordinance, the ICTA regulates both fixed and mobile interconnection rates. In previous years, the interconnection rates have substantially decreased with the interventions of the ICTA.

        Current mobile interconnection rates are set asymmetrically, based on the ICTA's decision on the Interconnection Tariffs issued in June 2013. The latest decision concerning interconnection rates was published in October 2014 and remains in force with no change in the existing rates. The MMS interconnection rates were also introduced in 2014. The evolution of interconnection rates for voice


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calls between Turkcell, Vodafone, TT Mobil, Turk Telekom and Alternative Fixed Line Operators is summarized in the table below.

  VOICE (TRY Kurus)  
Fixed Line
  TURKCELL   VODAFONE   Local   Single   Double  


    15.60     15.60     15.60           4.10     5.90        


    14.80     14.80     14.80           3.40     5.10        


    14.00     14.00     14.00           2.00     3.70        


    14.00     15.20     17.50           2.00     3.70        


    13.60     14.50     16.70           1.89     3.00        


    9.10     9.50     11.20           1.71     2.70        


    6.55     6.75     7.75     1.39     1.71     2.70        


    3.13     3.23     3.70     1.39     1.71     2.24     3.2  


    2.50     2.58     2.96     1.39     1.71     2.24     3.2  


    2.50     2.58     2.96     1.39     1.71     2.24     3.2  

        Effective from July 2013, Turkcell is paid TRY 0.0043 per SMS for SMS termination on its network. Respective rates for Vodafone are TRY 0.0043 per SMS and for TT Mobil TRY 0.0047.

  SMS (TRY Kurus)  


    1.70     1.73     1.87     1.70  


    0.43     0.43     0.47     1.70  


    0.43     0.43     0.47     1.70  

        Effective from October 2014, Turkcell is paid TRY 0.0086 per MMS for MMS termination on its network. Respective rates for Vodafone are TRY 0.0086 per SMS and for TT Mobil TRY 0.0094.

  MMS (TRY Kurus)  


    0.86     0.86     0.94  

cc.    Agreements Concluded with the Fixed Telecommunication Services Operators

(i)    Interconnection/Call Termination Agreements

        Turkcell, as an "operator holding significant market power", entered into interconnection/call termination agreements with fixed telecommunication service operators that applied to Turkcell for an agreement. Interconnection rates are regulated by the ICTA. Turkcell pays fixed-line operators TRY 0.0320 per minute and fixed-line operators pay Turkcell TRY 0.0250 per minute for national voice call traffic. However, it was decided to remove the cost-based price obligations for SMS/MMS services by October 1, 2021.

(ii)   International Transit Traffic Services Agreements

        Turkcell entered into International Transit Traffic Services Agreements with operators who applied to Turkcell for an agreement. 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


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these calls on the relevant network. These operators charge us at various prices identified within the scope of the agreement for calls directed to numerous networks around the globe.

(iii) SMS Termination Agreements

        During 2011, Turkcell entered into SMS Termination Agreements with alternative operators who applied to Turkcell for an agreement. In accordance with the ICTA regulations on SMS Termination Rates on Turkcell's network, Fixed Telephony Service Operators pay Turkcell TRY 0.0043 per SMS.

        As of December 31, 2020, operators which originate message services are obliged to establish direct interconnection with mobile network operators where the calls will be terminated in accordance with the ICTA Board Decision dated March 24, 2020.

dd.   MVNO Services

        The ICTA designated Turkcell as the operator having significant market power in the mobile access and call origination markets, which had implications such as mandatory MVNO access and cost-oriented call origination and termination rates.

        The ICTA decision dated April 12, 2017, stating that an ex-ante regulation was no longer needed for Mobile Access Call Origination Market, and that Turkcell's SMP designation was to be lifted after a period of one year, has been cancelled following the ICTA's new decision dated April 4, 2018 stating that the transition period had been extended for an additional year until April 12, 2019. A new ICTA decision taken on April 3, 2019 has for the last time extended the transition period until December 31, 2019. Accordingly, Mobile Access and Call Origination Market is deregulated and Turkcell's SMP designation is lifted as of January 1, 2020.

        A full MVNO agreement was signed between Turkcell and Netgsm, a local telecommunications company, on November 5, 2020. The scope of the agreement is to wholesale mobile communication services including data, voice and SMS. The term of the agreement is two years.

ee.   Agreements Concluded with Directory Service Providers

        Turkcell entered into agreements relating to the provision of directory services with 12 Directory Service Providers, which are licensed by the ICTA to provide directory services. These agreements determine the principles and procedures related to the access of companies to the Turkcell database, the provision of directory services to subscribers and the 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.

ff.    Other regulations affecting our Company

(i)    Recent Amendments to the Turkish Insolvency and Restructuring Regime

        The Enforcement and Bankruptcy Law No. 2004 prevents a contractual arrangement by which a contractual event of default clause is stipulated to be triggered in case of any application is made by a Turkish company for debt restructuring upon settlement within the scope of Turkish Enforcement and Bankruptcy Law No. 2004. In addition to this, on March 15, 2018, changes were introduced to the Turkish Enforcement and Bankruptcy Law No. 2004. Among other changes, one of them states that the contractual termination, default and acceleration clauses of an agreement cannot be triggered in case the debtor makes a concordat application and such application does not constitute a breach of such agreement.


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(ii)   Communiqués on Management and Audit of Information Systems

        The CMB's Communiqué on Information Systems Management numbered VII-128.9 and Communiqué on Independent Audit of Information Systems numbered III-62.2, which entered into force on 5 January 2018, introduced new obligations with regards to information systems for certain legal persons, including our Company.

        The Communiqué on Information Systems Management defines the technical procedures for sustainability and secure operation of information systems in a very detailed way. Notably, with regards to data protection; specific measures are to be taken as precautions to protect the secrecy of the data received, processed and stored with regard to information system operations. This Communiqué sets out various methods to be used for physical and environmental safety, network security, identity verification, limited access through authorized persons, data integrity, preserving the confidentiality of the data stored in information systems.

        The Communiqué on Independent Audit of Information Systems provides the rules, policies and principles on the independent audit of the information systems. The Communiqué provides that CMB certified independent auditor companies shall audit and report to the entities whether the audited entity is in line with the information system management principles in terms of its operations, equipment and software pursuant to the Communiqué. The frequency of the audits to be conducted by CMB certified independent auditors varies for each entity subject to CMB regulations. The Communiqué on Independent Audit of Information Systems is expected to be applicable to publicly listed companies, such as Turkcell, only in 2022 as a result of a delay in the CMB independent audit firm licence and certification process in the context of the COVID-19 pandemic.

        Although the Communiqués do not include specific penalties in the event of non-compliance, Article 103 (General Principles) of the Capital Markets Law will apply.

        In order to strengthen the control environment, the Information Systems Compliance Committee has been established as an oversight body.

hh.  Commercial Electronic Message Management System

        A new commercial electronic message management system, named Commercial Electronic Message Management System ("CMMS"), has been introduced in early 2020. The CMMS, which is similar to "Robinson list" practices across the world, is a new centralized system enabling individuals to monitor and manage their consents relating to commercial electronic messages from service providers. All service providers wishing to send commercial electronic messages must register with and upload their existing databases to the CMMS. Further, service providers and intermediary service providers initiating the commercial electronic message transmission on behalf of service providers are obliged to verify the consent status of the recipients over the CMMS.

ii.     Major regulations affecting our Subsidiaries


        Financell is a finance company and is thereby subject to the Financial Leasing, Factoring, and Financial Institutions Law No. 6361. The objective of this law is to regulate the establishment and operating principles of financial leasing, factoring and financing companies operating as financial institutions as well as the principles and procedures relating to financial leasing, factoring and financing contracts.

        The Regulation on the Financial Leasing, Factoring, and Financing Companies Establishment and Operation Principle also regulates the duration of the loan and other financing principles. Although Financell has to abide by the Banking Regulation and Supervision