6-K 1 ss253295_6k.htm
 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated May 3, 2021

Commission File Number: 001-15092

 

TURKCELL ILETISIM HIZMETLERI A.S.

(Translation of registrant’s name in English)

 

Aydınevler Mahallesi İnönü Caddesi No:20

Küçükyalı Ofispark

34854 Maltepe
Istanbul, Turkey

 

(Address of Principal Executive Offices)

 

 

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

Form 20-F x       Form 40-F ¨

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

Yes ¨       No x

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

Yes ¨       No x

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

Yes ¨       No x

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

Enclosure: A press release dated April 30, 2021 announcing Turkcell’s First Quarter 2021 results and Q1 2021 IFRS Report.

 

 
   

 

 

TURKCELL ILETISIM HIZMETLERI

FIRST QUARTER 2021 RESULTS

“STRONG START TO THE YEAR

WITH A SOLID SET OF RESULTS”

 

 

 

   

 

  

First Quarter 2021 Results

 

Contents

  HIGHLIGHTS  
  QUARTER HIGHLIGHTS   4
  COMMENTS BY CEO, MURAT ERKAN   5
     
  FINANCIAL AND OPERATIONAL REVIEW  
  FINANCIAL REVIEW OF TURKCELL GROUP   7
  OPERATIONAL REVIEW OF TURKCELL TURKEY 10
     
  TURKCELL INTERNATIONAL  
  lifecell 12
  BeST 13
  Kuzey Kıbrıs Turkcell 13
     
  TECHFIN  
  Paycell 14
  Financell 14
     
  TURKCELL GROUP SUBSCRIBERS 15
     
  OVERVIEW OF THE MACROECONOMIC ENVIRONMENT 15
     
  RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS 16
     
  Appendix A – Tables 18

 

 

·Please note that all financial data is consolidated and comprises that of Turkcell Iletisim Hizmetleri A.S. (the “Company”, or “Turkcell”) and its subsidiaries and associates (together referred to as the “Group”), unless otherwise stated.

 

·We have four reporting segments:

 

o“Turkcell Turkey” which comprises our telecom, digital services and digital business services related businesses in Turkey (as used in our previous releases in periods prior to Q115, this term covered only the mobile businesses). All non-financial data presented in this press release is unconsolidated and comprises Turkcell Turkey only figures, unless otherwise stated. The terms “we”, “us”, and “our” in this press release refer only to Turkcell Turkey, except in discussions of financial data, where such terms refer to the Group, and except where context otherwise requires.

 

o“Turkcell International” which comprises all of our telecom and digital services related businesses outside of Turkey.

 

o“Techfin” which comprises all of our financial services businesses.

 

o“Other” which mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.

 

·In this press release, a year-on-year comparison of our key indicators is provided and figures in parentheses following the operational and financial results for March 31, 2021 refer to the same item as at March 31, 2020. For further details, please refer to our consolidated financial statements and notes as at and for March 31, 2021, which can be accessed via our website in the investor relations section (www.turkcell.com.tr).

 

·Selected financial information presented in this press release for the first and fourth quarters of 2020 and the first quarter of 2021 is based on IFRS figures in TRY terms unless otherwise stated.

 

·In the tables used in this press release totals may not foot due to rounding differences. The same applies to the calculations in the text.

 

·Year-on-year and quarter-on-quarter percentage comparisons appearing in this press release reflect mathematical calculation.

 

 2  

 

  

First Quarter 2021 Results

 

SEGMENT INFORMATION

In accordance with our integrated communication and technology services strategy, we have reported our telecom related businesses in Turkey and outside of Turkey under Turkcell Turkey and Turkcell International reportable segments, respectively. All other businesses were reported under the Other segment until Q121.

 

Starting from Q121, our financial services businesses; Turkcell Finansman A.Ş., Turkcell Ödeme ve Elektronik Para Hizmetleri A.Ş., Turkcell Sigorta Aracılık Hizmetleri A.Ş., and Paycell LLC, will be reported under the new Techfin segment. In previous releases, these businesses were included under the Other segment. We made this change since these entities have similar business models, and to some extent have operations integrated with each other. Moreover, these businesses are subject to legislation and regulations, which differ from those applied to other entities reported under the Other segment.

 

Furthermore, operations of Turkcell Satış ve Dijital İş Servisleri Hizmetleri A.Ş. (“Turkcell Satış”), which are reported under Turkcell Turkey are separated as “Digital Business Services” and other Turkcell Satış operations: Integrated corporate business solutions, city hospitals, equipment and corporate terminal activities will continue to be reported under Turkcell Turkey as “Digital Business Services”, while other Turkcell Satış operations, which include retail channel operations, smart devices management and consumer electronics sales through digital channels, will be reported in the Other segment. We have made this change since other Turkcell Satış operations, which are reported under the Other segment, are now less connected with the integrated business model of Turkcell Turkey. Accordingly, these operations mainly comprise the procurement and sale of consumer electronics not limited to integrated telco products. They target non-Turkcell customers as well. Moreover, these operations also have different level of operating profitability compared to businesses reported under Turkcell Turkey.

 

There have been no changes to Turkcell International segment.

 

Starting from Q121, our reporting segments will be as follows:

 

“Turkcell Turkey” comprises “Turkcell İletişim Hizmetleri A.Ş.”, “Superonline İletişim Hizmetleri A.Ş.”, the group call center operations of “Global Bilgi Pazarlama Danışmanlık ve Çağrı Servisi Hizmetleri A.Ş.”, the abovementioned digital business services operations of “Turkcell Satış”, “Turktell Bilişim Servisleri A.Ş.”, “Turkcell Teknoloji Araştırma ve Geliştirme A.Ş.”, “Kule Hizmet ve İşletmecilik A.Ş.”, “Rehberlik Hizmetleri A.Ş.”, “Turkcell Gayrimenkul Hizmetleri A.Ş.”, “Lifecell Dijital Servisler ve Çözümler A.Ş.”, “Lifecell Bulut Çözümleri A.Ş.”, “Lifecell TV Yayın ve İçerik Hizmetleri A.Ş.”, “Lifecell Müzik Yayın ve İletim A.Ş.”, “BiP İletişim Teknolojileri ve Dijital Servisler A.Ş.” and “Turkcell Dijital İş Servisleri A.Ş.”. Hence, Turkcell Turkey comprises our telecom, digital services and digital business services related businesses in Turkey.

 

“Turkcell International” comprises “Kıbrıs Mobile Telekomünikasyon Limited Şirketi”, “East Asian Consortium B.V.”, “Lifecell LLC”, “Lifecell Ventures Coöperatief U.A.”, “Beltel Telekomünikasyon Hizmetleri A.Ş.”, “CJSC Belarusian Telecommunications Network”, “LLC UkrTower”, “LLC Global Bilgi”, “Turkcell Europe GmbH”, “Lifetech LLC”, “Beltower LLC”, “Lifecell Digital Limited”, “Yaani Digital BV” and “BiP Digital Communication Technologies B.V.”. Turkcell International comprises our telecom and digital services related businesses outside of Turkey.

 

“Techfin” comprises “Turkcell Finansman A.Ş.”, “Turkcell Ödeme ve Elektronik Para Hizmetleri A.Ş.”, “Turkcell Sigorta Aracılık Hizmetleri A.Ş.”, and “Paycell LLC”. Techfin comprises all our financial services businesses.

 

“Other” comprises the non-group call center operations of “Global Bilgi Pazarlama Danışmanlık ve Çağrı Servisi Hizmetleri A.Ş.”, “Turkcell Enerji Çözümleri ve Elektrik Satış Ticaret A.Ş.” and the abovementioned other operations of “Turkcell Satış”. The Other segment mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.

 

 3  

 

  

First Quarter 2021 Results

 

FINANCIAL HIGHLIGHTS

 

TRY million Q120 Q420 Q121 y/y% q/q%
Revenue 6,658 7,872 7,827 17.5% (0.6%)
EBITDA1 2,809 3,243 3,306 17.7% 2.0%
   EBITDA Margin (%) 42.2% 41.2% 42.2% - 1.0pp
EBIT2 1,437 1,608 1,651 14.9% 2.6%
   EBIT Margin (%) 21.6% 20.4% 21.1% (0.5pp) 0.7pp
Net Income 873 1,302 1,105 26.6% (15.1%)

 

FIRST QUARTER HIGHLIGHTS

·Strong set of financials:

 

oGroup revenues up 17.5% year-on-year mainly on Turkcell Turkey’s data and digital services revenue growth, larger subscriber base, as well as the increase in equipment revenues backed by digital channels

 

oRobust performance in strategic focus areas; standalone digital services revenues up 27.5%; digital business services revenues up 27.3%; Paycell revenues up 52.6%

 

oGroup EBITDA up 17.7% year-on-year leading to an EBITDA margin of 42.2%; EBIT up 14.9% year-on-year resulting in an EBIT margin of 21.1%

 

oNet income up 26.6% year-on-year mainly on solid operational performance and disciplined financial risk management

 

oLeverage at 0.9x, despite FX fluctuations; long FX position at US$183 million

 

·Robust operational performance:

 

oTurkcell Turkey subscriber base up by 705 thousand quarterly net additions, highest of the past three years; solid performance towards the target of 1 million net subscriber additions for the full year

 

o410 thousand quarterly mobile postpaid net additions; postpaid subscriber share at 66%

 

oQuarterly mobile prepaid customer net additions of 190 thousand

 

o50 thousand net quarterly fiber additions; 49 thousand quarterly IPTV net additions

 

oMobile ARPU3 growth of 8.7% year-on-year; fixed residential ARPU growth of 11.0% year-on-year

 

oAverage monthly data consumption of 4.5G users at 14.4 GB in Q121

 

oDigital channels’ share in Turkcell Turkey consumer sales (excluding fixed business) at 15.7%; up 8.5pp year-on-year

 

·General Assembly meeting held on April 15th:

 

oTRY2.6 billion dividend distribution in three equal installments was approved; payment of first installment was performed on April 30th

 

oAll board members, including independent ones, were appointed

 

 

 

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(2) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

(3) Excluding M2M

For further details, please refer to our consolidated financial statements and notes as at March 31, 2021 via our website in the investor relations section (www.turkcell.com.tr).

 

 4  

 

  

First Quarter 2021 Results

 

COMMENTS BY CEO, MURAT ERKAN

 

We began the year strongly with our customer-driven approach

Having made a strong start, we have concluded this quarter with strong operational and financial results matching up with our targets. In this period in which we managed our business successfully, in spite of the challenging conditions of the COVID-19 pandemic, we continued our strong growth and achieved successful results. This was made possible by offering enriched value offers to our customers with our “Customer First” focus, and reflective of our diversified business model with strategic focus areas.

Our consolidated revenues rose 17.5% year-on-year, reaching TRY7.8 billion. Consolidated EBITDA1 grew by 17.7% to TRY3.3 billion, resulting in an EBITDA margin of 42.2%. 26.6% growth in Turkcell International business contributed to the topline growth. Net income increased by 26.6% to TRY1.1 billion. These results, in line with our targets, have reinforced our confidence in reaching our guidance for the year 2021, despite the challenging environment due to the pandemic.

The highest subscriber additions of the past 3 years

Thanks to our value offers meeting changing customer needs and our innovative campaigns facilitating the lives of our customers, we recorded 410 thousand postpaid subscriber and 190 thousand prepaid subscriber net additions in this quarter. Including the fixed broadband and IPTV services, the total 705 thousand net subscriber addition marks our highest level of the past 3 years. Our strong and fast network, convenient digital sales channels and brand loyalty have been instrumental in customers opting for Turkcell. Our postpaid customer base reached 22.4 million, reflecting 66% of the total mobile base on a 3 point rise year-over-year. Mobile blended ARPU (except for M2M) has reached TRY49.9 on an annual 8.7% rise on the back of a larger postpaid subscription base, rising data and digital service use and upsell efforts, despite the negative effect of the pandemic. We enhanced our customer loyalty by combining our customer-driven approach and analytical competences; accordingly, the average monthly churn rate of 1.8% was the lowest level of the past 3 years.

The strong demand for fixed broadband has continued in this quarter, too, under the prevailing mobility restrictions within the scope of measures against the pandemic, and more widespread remote working. We gained a net 50 thousand fiber subscribers with our high-speed and unlimited fiber internet offers designed to meet the need for speed in homes where a large number of devices are connected at the same time. Accordingly, our fixed broadband customer base reached 2.5 million.

Interest in our digital services is rising daily

We continue pioneering the digital transformation of Turkey with the instant messaging, TV and music platforms, personal cloud services, search engine and e-mail services developed by Turkcell engineers. Enjoying increasing recognition, BiP, our instant messaging application, saw 32 million new downloads in this quarter. With its total downloads reaching 77 million, BiP has been the most downloaded local application in Turkey. With no imposition or discriminating among its users in terms of data privacy, BiP has reached 40 million three-month active users, approximately one third of which are outside of Turkey. TV+, our web-based digital TV platform, has been another outstanding service this quarter. Both IPTV and the OTT TV+ service users have accelerated in this quarter thanks to enriched content, as well as its accessibility through smart televisions. With the addition of net 49 thousand IPTV customers, we now offer IPTV services to 61 out of every 100 households among our residential fiber customers.

We launched GAMEPLUS, our new gaming platform on which we have been focusing recently, in March in collaboration with NVIDIA GeForce NOW, a cloud-based gaming service. Thanks to the cloud-based gaming technology eliminating the need for particular hardware to play games, users can access over 950 games. We believe that the strong interest in this platform, which has reached 10.4 thousand premium users within just 15 days will continue in the coming periods.

Overall, the stand-alone revenue of our digital services business reached TRY367 million with an increase of 28% year-over-year in this quarter, mainly on the back of these developments. We aim at more diversified monetization with the launch of the B2B models of fizy business, lifebox business and BiP Meet services over the coming months.

 5  

 

Turkcell Digital Business Services continues pioneering the digital transformation of companies

The total revenues of Digital Business Services through which we offer a wide range of new generation technologies to our corporate customers, from access to cyber security, from cloud technologies to data centers, and from managed services to the internet of things, reached TRY452 million on an annual increase of 27% in this quarter. We have supported corporates on their digitalization journey by signing over 700 new contracts. As of the end of the first quarter, we have put into practice 1,589 system integration and managed services projects to date; from these projects we have a contract value (backlog) of TRY1.1 billion to be realized after the first quarter of 2021. We have continued to strengthen our ecosystem by increasing the number of our global partnerships. In the first quarter we launched the SOAR (Security Orchestration Automation and Response) Service allowing for instantaneous actions to be taken over security components against incidents of cyber-attack, a Forensics service enabling corporations to learn about the trajectory of events taking place, including the weaknesses being exploited and likely remedial methods to be employed following probable cyber-attacks, as well as the Turkcell Digital Facility, our first IoT Platform service. Along with these, we continued enriching our portfolio by relaunching Kopilot Filom and a brand-new user experience on turkcellbulut.com.tr.

Growth of the Techfin sector’s rising star, Paycell, gains speed

Paycell, our innovative payment services platform in the field of techfin, marked a successful quarter with its rising users and growing mobile payment volume. As the number of three-month active Paycell users reached 5.3 million, mobile payment volume reached TRY351 million, doubling on an annual basis. During the same period, the Paycell Card transaction volume quadrupled. Overall, Paycell revenues grew by 53% on an annual basis in this quarter; non-group revenue increased 81%. In the forthcoming period, we aim at the widespread use of our Android POS service, an increased number of member merchants, and reaching more customers with our new services.

We have set our sustainability targets

We, as Turkcell Group, have prioritized the use of renewable sources towards our goal of maximizing the efficient use of natural resources, reflective of our business model which is sensitive to the environment and based on shaping technology according to the needs of society. As we have also shared at the ‘GSMA Mobile Net Zero’ event on April 20, we aim to meet 100% of our electricity consumption through renewable resources by 2030.

Also this quarter, as a pioneer in mobile working in Turkey, we have put into practice our “Flexible Working Model” designed together with our employees. Accordingly, our employees, reflecting their preferences and planning, can work remotely or at our offices if need be, for an indefinite period without any limitation on location. With this model, we aim at enhancing the comfort and productivity of our employees, while at the same time offering the best working experience.

Dividend of TRY 2.6 billion approved at the Ordinary General Assembly

As part of our disclosure about the change in our shareholding structure, we had stated that the number of seats on the Board of Directors was increased to nine. At the Turkcell Ordinary General Assembly meeting held on April 15, these appointments were realized and the number of members set forth in our articles of association has been completed. At the same meeting, the distribution of the dividend of TRY2.6 billion, corresponding to 61% of the net distributable period profit, in three equal installments was approved. We are pleased to have distributed the first installment on the same day as this earnings disclosure.

We will continue to serve our country and people with sustained investments in the upcoming period

In firm hopes that the COVID-19 pandemic may finally be behind us in the near future, I believe wholeheartedly that we will achieve new successes, while serving our country and people in the quarters ahead.

I extend my thanks to all our colleagues for their contribution that has enabled our strong start to the year, and to our Board of Directors for their confidence in us and their invaluable support. I also express our gratitude to our customers and business partners, ever with us on our journey to success.

 

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

 

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First Quarter 2021 Results

 

FINANCIAL AND OPERATIONAL REVIEW

Financial Review of Turkcell Group

 

Profit & Loss Statement (million TRY) Q120 Q420 Q121 y/y% q/q%
Revenue 6,658.2 7,872.2 7,826.5 17.5% (0.6%)
Cost of revenue1 (3,197.4) (3,938.1) (3,913.0) 22.4% (0.6%)
Cost of revenue1/Revenue (48.0%) (50.0%) (50.0%) (2.0pp) -
Gross Margin1 52.0% 50.0% 50.0% (2.0pp) -
Administrative expenses (188.3) (210.7) (199.4) 5.9% (5.4%)
Administrative expenses/Revenue (2.8%) (2.7%) (2.5%) 0.3pp 0.2pp
Selling and marketing expenses (348.7) (400.8) (358.2) 2.7% (10.6%)
Selling and marketing expenses/Revenue (5.2%) (5.1%) (4.6%) 0.6pp 0.5pp
Net impairment losses on financial and contract assets (114.8) (79.5) (49.5) (56.9%) (37.7%)
EBITDA2 2,809.0 3,243.0 3,306.5 17.7% 2.0%
EBITDA Margin 42.2% 41.2% 42.2% - 1.0pp
Depreciation and amortization (1,372.1) (1,634.6) (1,656.0) 20.7% 1.3%
EBIT3 1,437.0 1,608.4 1,650.5 14.9% 2.6%
EBIT Margin 21.6% 20.4% 21.1% (0.5pp) 0.7pp
Net finance income / (costs) (221.4) (381.8) (207.1) (6.5%) (45.8%)
    Finance income4 621.5 (316.0) 1,601.9 157.7% n.m
    Finance costs4 (842.9) (65.8) (1,809.0) 114.6% n.m
Other income / (expense) (94.0) (366.9) (12.1) (87.1%) (96.7%)
Non-controlling interests (1.2) - (0.0) (100.0%) -
Share of profit of equity accounted investees (3.2) (5.2) 17.7 n.m n.m
Income tax expense (244.4) 447.6 (344.1) 40.8% (176.9%)
Net Income 872.7 1,302.0 1,104.9 26.6% (15.1%)

 

(1) Excluding depreciation and amortization expenses.

(2) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(3) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

(4) Fair value loss and interest expense regarding derivative instruments and the respective fair value gain and interest income regarding derivative instruments are represented on a net basis. Starting from Q219, interest income on financial assets and interest expenses for financial liabilities, both measured at amortized cost, are represented on a net basis. Historical periods were restated to reflect this change.

 

Revenue of the Group grew by 17.5% year-on-year in Q121. This resulted mainly from Turkcell Turkey’s revenue growth supported by a larger subscriber base, price adjustments, higher data consumption and digital services usage. Turkcell International’s strong revenue growth and equipment sales backed by digital channels also assisted the Group revenue rise.

 

Turkcell Turkey revenues, comprising 76% of Group revenues, rose 13.3% year-on-year to TRY5,979 million (TRY5,276 million).

 

-Consumer segment revenues grew 11.3% driven mainly by a larger subscriber base, increased data consumption and digital services usage.

 

-Corporate segment revenues rose 19.6% backed by robust performance on digital business services, which grew 27.3%.

 

-Standalone digital services revenues registered as part of consumer and corporate segments grew 27.5% year-on-year in Q121 supported by the increase in the number of paid users.

 

-Wholesale revenues grew 22.0% to TRY340 million (TRY279 million), mainly with data capacity upgrades of customers and the positive impact of currency movements, despite lower roaming revenues impacted by limited mobility.

 

Turkcell International revenues, comprising 9% of Group revenues, increased 26.6% to TRY708 million (TRY560) million. This was mainly driven by strong revenue growth in Ukrainian operations and the positive impact of currency movements.

 

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First Quarter 2021 Results

 

Total techfin segment revenues, comprising 3% of Group revenues, were at TRY223 million (TRY220 million). The decline in the finance company’s revenues, which was due mainly to loan portfolio contraction, was more than offset by the increase in Paycell revenues. Please refer to the Techfin section for details.

 

Other subsidiaries’ revenues, at 12% of Group revenues, which mainly includes non-group call center and energy business revenues, and consumer electronics sales revenues rose 52.2% to TRY917 million (TRY603 million). This was driven mainly by the increase in equipment revenues supported by digital channels.

 

Cost of revenue (excluding depreciation and amortization) rose to 50.0% (48.0%) as a percentage of revenues in Q121. This was due mainly to the increase in cost of goods sold (2.9pp), despite the decline in treasury share expense (0.6pp) and other cost items (0.3pp) as a percentage of revenues.

 

Administrative Expenses declined to 2.5% (2.8%) as a percentage of revenues in Q121, driven mainly by lower office overhead costs and travel expenses.

 

Selling and Marketing Expenses declined to 4.6% (5.2%) as a percentage of revenues in Q121. This was driven mainly by the decline in selling expenses (0.6pp) as a percentage of revenues.

 

Net impairment losses on financial and contract assets declined to 0.6% (1.7%) as a percentage of revenues in Q121 mainly with the better collection performance.

 

EBITDA1 rose by 17.7% year-on-year in Q121 leading to an EBITDA margin of 42.2% (42.2%), driven mainly by

strong revenue growth. 

-Turkcell Turkey’s EBITDA rose 14.4% year-on-year to TRY2,731 million (TRY2,388 million) leading to an EBITDA margin of 45.7% (45.3%).

 

-Turkcell International EBITDA grew 37.9% year-on-year to TRY345 million (TRY250 million) with an EBITDA margin of 48.6% (44.6%). This performance was led by strong revenue growth and disciplined cost controls.

 

-Techfin segment EBITDA was at TRY138 million (TRY137 million) with an EBITDA margin of 62.0% (62.1%).

 

-The EBITDA of other subsidiaries stood at TRY93 million (TRY35 million).

 

Depreciation and amortization expenses increased 20.7% year-on-year in Q121.

 

Net finance expense declined to TRY207 million (TRY221 million) in Q121. This was driven mainly by higher interest income, despite a higher net FX loss after hedging, and a larger interest expense on financial assets and liabilities.

 

See Appendix A for the details of net foreign exchange gain and loss.

 

Income tax expense increased to TRY344 million (TRY244 million) due mainly to a higher deferred tax expense incurred in Q121.

 

Please see Appendix A for details.

 

Net income of the Group rose 26.6% to TRY1,105 million (TRY873 million) in Q121, mainly due to robust operational profitability and higher interest income on time deposits, despite a higher net FX loss after hedging.

 

Total cash & debt: Consolidated cash as of March 31, 2021 increased to TRY13,467 million from TRY11,861 million as of December 31, 2020, driven by cash flow generation and the positive impact of currency movements. Excluding FX swap transactions, 78% of our cash is in US$, 8% in EUR, 13% in TRY and the remaining in other currencies.

 

Consolidated debt as of March 31, 2021 increased to TRY24,896 million from TRY21,586 million as of December 31, 2020 mainly due to the impact of currency movements and new borrowings. Please note that TRY2,248 million of our consolidated debt is comprised of lease obligations.

 

Consolidated debt breakdown excluding lease obligations:

 

-Turkcell Turkey’s debt was at TRY20,467 million, of which TRY11,816 million (US$1,419 million) was denominated in US$, TRY6,693 million (EUR685 million) in EUR, TRY572 million (CNY454 million) in CNY, and the remaining TRY1,387 million in TRY.

 

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate adjusted EBITDA and its reconciliation to net income

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First Quarter 2021 Results

 

-The finance company had a debt balance of TRY1,089 million, of which TRY234 million (US$28 million) was denominated in US$, and TRY467 million (EUR48 million) in EUR with the remaining TRY388 million in TRY.

 

-The debt balance of lifecell was TRY1,092 million, fully denominated in UAH.

 

TRY1,203 million of lease obligations is denominated in TRY, TRY69 million (US$8 million) in US$, TRY211 million (EUR22 million) in EUR, and the remaining balance in other local currencies (Please note that the figures in parentheses refer to US$ or EUR equivalents).

 

Net debt as of March 31, 2021 was at TRY11,429 million with a net debt to EBITDA ratio of 0.9 times. Excluding finance company consumer loans, our telco only net debt was at TRY9,534 million with a leverage of 0.8 times.

 

Turkcell Group had a long FX position of US$183 million as at the end of first quarter. (Please note that this figure takes advance payments into account).

 

Capital expenditures: Capital expenditures, including non-operational items, amounted to TRY2,257 million in Q121. In the same period operational capital expenditures (excluding license fees) at the Group level were at 18.8% of total revenues.

 

Capital expenditures (million TRY) Q120 Q420 Q121
     Operational Capex 836.7 1,904.2 1,467.9
     License and Related Costs 28.1 9.3 -
     Non-operational Capex (Including IFRS15 & IFRS16) 695.2 971.2 789.4
Total Capex 1,560.0 2,884.7 2,257.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

Summary of Operational Data Q120 Q420 Q121 y/y% q/q%
Number of subscribers (million) 36.3 36.7 37.4 3.0% 1.9%
Mobile Postpaid (million)   21.0 22.0 22.4 6.7% 1.8%
   Mobile M2M (million) 2.7 2.8 2.9 7.4% 3.6%
Mobile Prepaid (million) 12.2 11.5 11.6 (4.9%) 0.9%
Fiber (thousand) 1,518.4 1,664.3 1,714.3 12.9% 3.0%
ADSL (thousand) 695.6 707.6 716.3 3.0% 1.2%
Superbox (thousand)1 399.5 591.2 614.6 53.8% 4.0%
Cable (thousand) 58.7 67.7 64.9 10.6% (4.1%)
IPTV (thousand) 747.3 871.3 920.7 23.2% 5.7%
Churn (%)2          
Mobile Churn (%)3 2.0% 3.0% 1.8% (0.2pp) (1.2pp)
Fixed Churn (%) 2.1% 1.9% 1.6% (0.5pp) (0.3pp)
ARPU4 (Average Monthly Revenue per User) (TRY)          
Mobile ARPU, blended 42.6 46.8 46.0 8.0% (1.7%)
   Mobile ARPU, blended (excluding M2M) 45.9 50.5 49.9 8.7% (1.2%)
Postpaid 56.1 59.8 57.8 3.0% (3.3%)
   Postpaid (excluding M2M) 63.6 67.8 65.8 3.5% (2.9%)
Prepaid 19.9 23.4 23.4 17.6% -
Fixed Residential ARPU, blended 66.6 72.6 73.9 11.0% 1.8%
   Residential Fiber ARPU 68.3 73.6 74.3 8.8% 1.0%
Average mobile data usage per user (GB/user) 9.8 13.0 12.6 28.6% (3.1%)
Mobile MoU (Avg. Monthly Minutes of usage per subs) blended 458.2 548.6 532.0 16.1% (3.0%)

 

(1) Superbox subscribers are included in mobile subscribers.

 

(2) Churn figures represent average monthly churn figures for the respective quarters.

 

(3) In Q117, our churn policy was revised to extend from 9 months to 12 months (the period at the end of which we disconnect prepaid subscribers who have not topped up above TRY10). Additionally, under our revised policy, prepaid customers who last topped up before March is disconnected at the latest by year-end. As a regulatory requirement, we started to disconnect prepaid lines in accordance with the new ICTA regulation, which requires deactivation of prepaid lines which lack residency documents by the 6th month of subscription starting from 2019. Furthermore, as required by the ICTA, the line of a deceased customer should either be transferred to a successor/another user or terminated. Lines, which are not transferred or terminated, are to be disconnected at the end of seven months.

 

(4) We historically recorded all TV-related revenue under Turkcell Superonline and presented the related ARPU under fixed residential ARPU. As previously announced, our TV business has become a separate standalone subsidiary. In order to reflect this change in our organization, we decided to shift mobile OTT TV ARPU from fixed residential ARPU into mobile ARPU starting from Q320. We note that mobile TV revenues are generated by mobile subscribers. IPTV revenues will continue to be recorded under Turkcell Superonline and included under residential fixed ARPU. Moreover, starting from Q121, as a consequence of the change in reportable segments, commission revenues resulting from devices and accessories sales have been excluded from mobile ARPU of Turkcell Turkey since these commissions are now reported under the Other segment. In order to maintain comparability, we provide ARPU data for the last three years, revised to reflect this change on our investor relations website in the financial and operational data spreadsheet.

 

 

We started the year registering a strong subscriber net addition performance. Accordingly, the Turkcell Turkey subscriber base expanded by 705 thousand quarterly net additions, reaching 37.4 million. This robust performance was driven mainly by our offerings with rich value propositions, customer-oriented campaigns and retention focus. This also confirms our commitment to achieving 1 million subscriber net additions for the full year.

 

On the mobile front, our subscriber base expanded by 599 thousand quarterly net additions, reaching 34.0 million in total. This was mainly driven by 410 thousand quarterly net additions to the postpaid subscriber base, which reached 65.8% (63.2%) of total mobile subscribers. Meanwhile, we registered 190 thousand quarterly net prepaid subscriber additions.

 

On the fixed front, our subscriber base continued to grow, reaching 2.5 million subscribers on 56 thousand total quarterly net additions. Fiber subscribers exceeded 1.7 million on 50 thousand quarterly net additions. Superbox, our fixed-wireless access offering alternative to fiber, reached 615 thousand subscribers on 23 thousand quarterly

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First Quarter 2021 Results

 

net additions in Q121. Our cable subscribers were at 65 thousand by the end of the quarter. Meanwhile, our IPTV customers rose to 921 thousand on 49 thousand quarterly net additions.

 

The average monthly mobile churn rate declined to 1.8% in Q121, which was the lowest churn rate since Q118. Our customer experience approach supported by analytical capabilities resulted in a better customer retention performance. The average monthly fixed churn rate declined to 1.6% mainly driven by proactive retention actions.

 

Our mobile ARPU (excluding M2M) rose 8.7% year-on-year in Q121 on the back of price adjustments and a higher postpaid subscriber share, as well as increased data consumption and digital services usage, despite lower roaming revenues.

 

Our residential fiber ARPU growth was 8.8% year-on-year in Q121. This was driven mainly by price adjustments, upsell efforts and the acquisition of higher revenue generating subscribers.

 

Average monthly mobile data usage per user rose 28.6% year-on-year to 12.6 GB with the increasing number and data consumption of 4.5G users. Accordingly, the average mobile data usage of 4.5G users reached 14.4 GB in Q121 on 24.1% year-on-year rise. The increasing number of Superbox subscribers also had a positive impact on data consumption.

 

Total smartphone5 penetration on our network reached 84% in Q121 on a 5.9pp year-on-year increase. 91% of those smartphones are 4.5G compatible smartphones. The number of 4.5G subscriptions reached 32.4 million, while only 70% of these subscriptions have 4.5G compatible smartphones.

 

(5) Smartphone penetration was positively impacted by approximately 700 thousand smartphone net additions in Q121 that resulted from an algorithm improvement to detect devices which were not previously classified as smartphones.

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

TURKCELL INTERNATIONAL

 

lifecell1 Financial Data Q120 Q420 Q121 y/y% q/q%
Revenue (million UAH) 1,580.1 1,913.8 1,899.2 20.2% (0.8%)
EBITDA (million UAH) 798.2 1,042.9 1,076.8 34.9% 3.3%
EBITDA margin (%) 50.5% 54.5% 56.7% 6.2pp 2.2pp
Net income / (loss) (million UAH) (150.9) 2,736.7 83.2 n.m (97.0%)
Capex (million UAH) 635.3 1,545.7 572.4 (9.9%) (63.0%)
Revenue (million TRY) 386.4 531.4 508.8 31.7% (4.3%)
EBITDA (million TRY) 195.2 289.6 288.6 47.8% (0.3%)
EBITDA margin (%) 50.5% 54.5% 56.7% 6.2pp 2.2pp
Net income / (loss) (million TRY) (37.0) 731.9 22.4 n.m (96.9%)

 

(1) Since July 10, 2015, we hold a 100% stake in lifecell.

 

lifecell (Ukraine) had another quarter with strong revenue growth performance. Accordingly, revenues rose 20.2% year-on-year in local currency terms, driven mainly by subscriber base growth, price adjustments and higher mobile data revenues. This was despite lower roaming revenues in Q121 due to the pandemic, which have yet to be restored. lifecell also registered robust EBITDA growth of 34.9%, which resulted in a 6.2pp EBITDA margin improvement to 56.7%. This was mainly the result of strong revenue growth, lower operational expenditures as a percentage of revenues led by savings in the pandemic environment and disciplined cost controls. The decline in MTR rates also supported lifecell’s solid EBITDA performance. Moreover, lifecell continued to report positive net income in Q121 on the back of strong operational performance.

 

lifecell revenues in TRY terms rose 31.7% year-on-year in Q121, which reflected the solid operational performance and positive impact of currency movements. lifecell’s EBITDA in TRY terms grew by 47.8% leading to an EBITDA margin of 56.7%.

 

lifecell Operational Data Q120 Q420 Q121 y/y% q/q%
Number of subscribers (million)2 8.9 9.3 9.2 3.4% (1.1%)
    Active (3 months)3 7.5 8.1 8.0 6.7% (1.2%)
MOU (minutes) (12 months) 162.8 185.5 177.2 8.8% (4.5%)
ARPU (Average Monthly Revenue per User), blended (UAH) 59.2 69.6 68.1 15.0% (2.2%)
    Active (3 months) (UAH) 69.5 79.9 78.7 13.2% (1.5%)

 

(2) We may occasionally offer campaigns and tariff schemes that have an active subscriber life differing from the one that we normally use to deactivate subscribers and calculate churn.

 

(3) Active subscribers are those who in the past three months made a revenue generating activity.

 

lifecell’s three-month active subscriber base grew by 6.7% year-on-year to 8.0 million. This was driven mainly by lifecell’s regional offers, tariffs with rich content and customer retention focus. lifecell’s 3-month active ARPU rose 13.2% year-on-year to UAH78.7, driven mainly by price adjustments and increased data consumption.

 

lifecell continued to increase the penetration of its 4.5G users within its customer base in Q121. Accordingly, the 3-month active 4.5G subscribers grew 40% year-on-year reaching 66% of total data users as at the end of Q121. The increase in 4.5G users continued to support data consumption. Average data consumption per user rose 31% year-on-year in Q121 on the back of 4.5G users, the data usage of which rose 22% year-on-year to 13GB per month. Meanwhile, lifecell continued its leadership of the Ukrainian market in smartphone penetration, which had reached 82% as of the end of Q121.

 

lifecell continued its focus on increasing the penetration of its digital services within its customer base in Q121.

 

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First Quarter 2021 Results

 

BeST1 Q120 Q420 Q121 y/y% q/q%
Number of subscribers (million) 1.5 1.4 1.4 (6.7%) -
    Active (3 months) 1.0 1.1 1.1 10.0% -
Revenue (million BYN) 32.5 37.8 38.0 16.9% 0.5%
EBITDA (million BYN) 8.4 10.3 9.2 9.5% (10.7%)
EBITDA margin (%) 26.0% 27.4% 24.2% (1.8pp) (3.2pp)
Net loss (million BYN) (8.1) (7.1) (8.1) - 14.1%
Capex (million BYN) 11.1 11.0 18.0 62.2% 63.6%
Revenue (million TRY) 89.1 114.1 109.4 22.8% (4.1%)
EBITDA (million TRY) 23.1 31.1 26.5 14.7% (14.8%)
EBITDA margin (%) 26.0% 27.3% 24.2% (1.8pp) (3.1pp)
Net loss (million TRY) (22.2) (21.7) (23.3) 5.0% 7.4%

 

(1) BeST, in which we hold an 80% stake, has operated in Belarus since July 2008.

 

BeST revenues grew by 16.9% year-on-year in local currency terms. This was driven mainly by growth in voice, data, messaging and handset sales revenues, despite lower roaming revenues due to the pandemic. BeST’s EBITDA grew 9.5% year-on-year resulting in an EBITDA margin of 24.2%. BeST’s revenues in TRY terms grew by 22.8% in Q121 year-on-year, while its EBITDA margin was at 24.2%.

 

BeST continued to expand its 4G coverage in Belarus in Q121. Accordingly, it leads the market in terms of 4G geographical coverage. Furthermore, BeST started to provide LTE800 service over beCloud’s network in 2 regions, which enabled higher coverage and positively impacted customer satisfaction. All these efforts supported the increase of 4G services penetration as reflected by the number of 4G users, which reached 65% of its 3-month active subscriber base. This led to higher average monthly data consumption of subscribers, which reached 12.7 GB on 35% year-on-year growth.

 

BeST continued its efforts to promote its digital services in Q121, as digital services usage leads to higher loyalty and increased ARPU generation. Accordingly, 33% of 3-month active subscribers use at least one digital service. Moreover, subscriber acquisitions through digital subscription, which was introduced in Q320, reached 10% of total subscriptions.

 

Kuzey Kıbrıs Turkcell2 (million TRY) Q120 Q420 Q121 y/y% q/q%
Number of subscribers (million) 0.5 0.5 0.5 - -
Revenue 54.5 65.6 61.9 13.6% (5.6%)
EBITDA 20.3 21.8 24.5 20.7% 12.4%
EBITDA margin (%) 37.3% 33.2% 39.6% 2.3pp 6.4pp
Net income 6.9 9.3 9.9 43.5% 6.5%
Capex 16.3 23.0 15.7 (3.7%) (31.7%)

(2) Kuzey Kıbrıs Turkcell, in which we hold a 100% stake, has operated in Northern Cyprus since 1999

 

Kuzey Kıbrıs Turkcell revenues grew 13.6% year-on-year in Q121, driven by higher data and handset sales revenues. The EBITDA of Kuzey Kıbrıs Turkcell rose 20.7% year-on-year leading to an EBITDA margin of 39.6%. This was driven by the revenue growth as well as savings achieved in the pandemic environment.

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

TECHFIN

 

Paycell Financial Data (million TRY) Q120 Q420 Q121 y/y% q/q%
Revenue 64.3 79.8 98.1 52.6% 22.9%
EBITDA 36.4 37.0 53.3 46.4% 44.1%
EBITDA Margin (%) 56.6% 46.4%   54.4% (2.2pp) 8.0pp
Net Income 28.5 26.1 40.2 41.1% 54.0%

 

Paycell registered a remarkable performance in Q121 achieving 52.6% year-on year revenue growth. This performance was positively impacted by the increasing demand for e-commerce transactions through cashless payment methods. Paycell was able monetize this demand with its mobile payment solutions; particularly direct carrier billing and e-money. Paycell’s EBITDA rose 46.4% year-on-year leading to an EBITDA margin of 54.4%. With a focus on expanding its business, Paycell concentrated its efforts on growing non-group driven revenues. Accordingly, non-group revenues rose 81.4% year-on-year this quarter. The strong operational performance resulted in a robust net income rise of 41.1% to TRY40.2 million.

 

On the operational front, Paycell’s 3-month active users numbered 5.3 million. The increase in active users was driven mainly by increased digital content consumption, an expanding merchant channel and functionality of the Paycell application. Paycell serves 13 thousand contracted merchants as at the end of the quarter. The total transaction volume of TRY2.4 billion for the quarter was a result of the increase in active users and their increased consumption. The DCB transactions volume (non-group) rose 106% year-on-year, while Paycell card transaction volume was up by 291%. Meanwhile, Paycell also continues its efforts to increase the penetration of its android POS, which will facilitate expanding the merchant channel, as well as support payment facilitator revenues.

 

Financell Financial Data (million TRY) Q120 Q420 Q121 y/y% q/q%
Revenue 162.6 144.7 130.0 (20.0%) (10.2%)
EBITDA 99.4 96.0 85.3 (14.2%) (11.1%)
EBITDA Margin (%) 61.1% 66.3% 65.6% 4.5pp (0.7pp)
Net Income 62.8 61.3 95.0 51.3% 55.0%

 

Financell revenues continued to contract in Q121 due mainly to the lower loan portfolio compared to the same period of the previous year and lower average interest rate on loan portfolio. Meanwhile, the decline in Financell’s EBITDA was slower compared to revenues which resulted in 4.5pp rise in EBITDA margin. This was driven mainly by the customer portfolio improvement with better credit scoring, successful collection performance and sale of doubtful receivables that led to a decline in bad debt expenses. Net income increased 51.3% year-on-year to TRY95.0 million, driven mainly by lower FX loss after hedging.

 

Financell’s loan portfolio declined from TRY2.1 billion as of Q120 to TRY1.9 billion as of Q121. This was due mainly to the installment limitation on consumer loans for telecom devices. Moreover, sales volume was affected by the negative impacts of COVID-19 measures. Compared to the previous quarter, Financell had a more stable loan portfolio. In the meantime, Financell’s cost of risk declined to 1.0% from 2.3% in Q420, due mainly to a successful collection performance, customer portfolio improvement, as well as the sale of doubtful receivables. Please also note that 81% of the loans granted by Financell over the last year is covered by an insurance product.

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

Turkcell Group Subscribers

 

Turkcell Group registered subscribers amounted to approximately 48.6 million as of March 31, 2021. This figure is calculated by taking the number of subscribers of Turkcell Turkey, and of each of our subsidiaries. It includes the total number of mobile, fiber, ADSL, cable and IPTV subscribers of Turkcell Turkey, and the mobile subscribers of lifecell and BeST, as well as those of Kuzey Kıbrıs Turkcell.

 

Turkcell Group Subscribers Q120 Q420 Q121 y/y% q/q%
Mobile Postpaid (million)   21.0 22.0 22.4 6.7% 1.8%
Mobile Prepaid (million) 12.2 11.5 11.6 (4.9%) 0.9%
Fiber (thousand) 1,518.4 1,664.3 1,714.3 12.9% 3.0%
ADSL (thousand) 695.6 707.6 716.3 3.0% 1.2%
Superbox (thousand)1 399.5 591.2 614.6 53.8% 4.0%
Cable (thousand) 58.7 67.7 64.9 10.6% (4.1%)
IPTV (thousand) 747.3 871.3 920.7 23.2% 5.7%
Turkcell Turkey subscribers (million)2 36.3 36.7 37.4 3.0% 1.9%
lifecell (Ukraine) 8.9 9.3 9.2 3.4% (1.1%)
BeST (Belarus) 1.5 1.4 1.4 (6.7%) -
Kuzey Kıbrıs Turkcell  0.5 0.5 0.5 - -
lifecell Europe3 0.2 - - n.a n.a
Turkcell Group Subscribers (million) 47.3 47.9 48.6 2.7% 1.5%

(1) Superbox subscribers are included in mobile subscribers.

(2) Subscribers to more than one service are counted separately for each service.

(3) The marketing partnership between Turkcell Europe and Telekom Deutschland Multibrand GmbH, the subsidiary of Deutsche Telekom, has ended on April 30, 2020 pursuant to the respective agreement. Turkcell Europe was rebranded as lifecell Europe on January 15, 2018.

 

 

OVERVIEW OF THE MACROECONOMIC ENVIRONMENT

 

The foreign exchange rates used in our financial reporting, along with certain macroeconomic indicators, are set out below.

 

  Q120 Q420 Q121 y/y% q/q%
GDP Growth (Turkey) 4.5% 5.9% n.a n.a n.a
Consumer Price Index (Turkey) (yoy) 11.9% 14.6% 16.2% 4.3pp 1.6pp
US$ / TRY rate          
   Closing Rate 6.5160 7.3405 8.3260 27.8% 13.4%
   Average Rate 6.1419 7.8933 7.5086 22.3% (4.9%)
EUR / TRY rate          
   Closing Rate 7.2150 9.0079 9.7741 35.5% 8.5%
   Average Rate 6.7901 9.3551 9.0683 33.6% (3.1%)
US$ / UAH rate          
   Closing Rate 28.06 28.27 27.89 (0.6%) (1.3%)
   Average Rate 25.12 28.40 28.07 11.7% (1.2%)
US$ / BYN rate          
   Closing Rate 2.6023 2.5789 2.6242 0.8% 1.8%
   Average Rate 2.2433 2.6088 2.6112 16.4% 0.1%

 

 

 

 

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First Quarter 2021 Results

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS: We believe 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. 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 of tangible assets (affecting relative depreciation expense). We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties in evaluating the performance of other mobile operators in the telecommunications industry in Europe, many of which present Adjusted EBITDA when reporting their results.

 

Our Adjusted EBITDA definition includes Revenue, Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses, Administrative expenses and Net impairment losses on financial and contract assets, but excludes translation gain/(loss), finance income, finance expense, share of profit of equity accounted investees, gain on sale of investments, minority interest and other income/(expense).

 

Nevertheless, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of our results of operations, as reported under IFRS. The following table provides a reconciliation of Adjusted EBITDA, as calculated using financial data prepared in accordance with IFRS as issued by the IASB, to net profit, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS as issued by the IASB.

 

Turkcell Group (million TRY) Q120 Q420 Q121 y/y% q/q%
Adjusted EBITDA 2,809.0 3,243.0 3,306.5 17.7% 2.0%
Depreciation and amortization (1,372.1) (1,634.6) (1,656.0) 20.7% 1.3%
EBIT 1,437.0 1,608.4 1,650.5 14.9% 2.6%
Finance income 621.5 (316.0) 1,601.9 157.7% n.m
Finance costs (842.9) (65.8) (1,809.0) 114.6% n.m
Other income / (expense) (94.0) (366.9) (12.1) (87.1%) (96.7%)
Share of profit of equity accounted investees (3.2) (5.2) 17.7 n.m n.m
Consolidated profit before income tax & minority interest 1,118.3 854.5 1,449.1 29.6% 69.6%
Income tax expense (244.4) 447.6 (344.1) 40.8% (176.9%)
Consolidated profit before minority interest 873.9 1,302.0 1,104.9 26.4% (15.1%)

 

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

NOTICE: This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. This includes, in particular, our targets for revenue, EBITDA and capex for 2021. More generally, all statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding the launch of new businesses, 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, among others, “will,” “expect,” “intend,” “estimate,” “believe”, “continue” and “guidance”.

Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2020 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company makes no representation as to the accuracy or completeness of the information contained in this press release, which remains subject to verification, completion and change. No responsibility or liability is or will be accepted by the Company or any of its subsidiaries, board members, officers, employees or agents as to or in relation to the accuracy or completeness of the information contained in this press release or any other written or oral information made available to any interested party or its advisers.

 

ABOUT TURKCELL: Turkcell is a digital operator headquartered in Turkey, serving its customers with its unique portfolio of digital services along with voice, messaging, data and IPTV services on its mobile and fixed networks. Turkcell Group companies operate in 4 countries – Turkey, Ukraine, Belarus, Northern Cyprus. Turkcell launched LTE services in its home country on April 1st, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. Turkcell offers up to 10 Gbps fiber internet speed with its FTTH services. Turkcell Group reported TRY7.8 billion revenue in Q121 with total assets of TRY56.0 billion as of March 31, 2021. It has been listed on the NYSE and the BIST since July 2000, and is the only NYSE-listed company in Turkey. Read more at www.turkcell.com.tr.

 

For further information please contact Turkcell

 

Investor Relations

Tel: + 90 212 313 1888

investor.relations@turkcell.com.tr

Corporate Communications:

Tel: + 90 212 313 2321

Turkcell-Kurumsal-Iletisim@turkcell.com.tr

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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First Quarter 2021 Results

 

Appendix A – Tables

 

Table: Net foreign exchange gain and loss details

 

Million TRY Q120 Q420 Q121 y/y% q/q%
Net FX loss before hedging (688.3) 254.7 (1,618.1) 135.1% (735.3%)
Swap interest income/(expense)1 (121.9) (97.8) (114.5) (6.1%) 17.1%
Fair value gain on derivative financial instruments1 709.1 (400.3) 1,456.1 105.3% n.m
Net FX gain / (loss) after hedging (101.1) (243.4) (276.5) 173.5% 13.6%

(1) Swap interest income / (expense) which was included in fair value gain on derivative financial instruments line in previous quarters has been presented separately.

 

 

Table: Income tax expense details

 

Million TRY Q120 Q420 Q121 y/y% q/q%
Current tax expense (161.5) (136.2) (163.2) 1.1% 19.8%
Deferred tax income / (expense) (82.8) 583.7 (181.0) 118.6% (131.0%)
Income Tax expense (244.4) 447.6 (344.1) 40.8% (176.9%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 18  

 

 

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

   Note  31 March 2021  31 December 2020
Assets         
Property, plant and equipment   9    14,495,362    13,902,730 
Right-of-use assets   11    2,484,994    2,380,174 
Intangible assets   10    12,780,562    12,367,784 
Investment properties        13,447    13,675 
Trade receivables        241,044    222,451 
Receivables from financial services        93,904    75,717 
Contract assets        119,566    128,114 
Deferred tax assets        910,744    836,608 
Investments in equity accounted investees        225,291    103,926 
Other non-current assets        790,791    883,842 
Total non-current assets        32,155,705    30,915,021 
                
Inventories        380,414    203,715 
Trade receivables        3,875,847    3,465,797 
Due from related parties        22,881    16,476 
Receivables from financial services        1,826,507    1,886,381 
Contract assets        1,015,319    972,052 
Derivative financial instruments   15    1,912,017    917,437 
Financial asset at amortized cost        165,864    172,363 
Financial asset at fair value through other comprehensive income   13    270,463    529,610 
Cash and cash equivalents   12    13,466,964    11,860,555 
Other current assets        895,247    558,986 
Total current assets        23,831,523    20,583,372 
                
Total assets        55,987,228    51,498,393 
                
Equity               
Share capital        2,200,000    2,200,000 
Share premium        269    269 
Treasury shares        (147,914)   (147,914)
Additional paid-in capital        35,026    35,026 
Reserves        2,155,705    2,400,000 
Remeasurements of employee termination benefit        (94,684)   (94,684)
Retained earnings        17,585,666    16,392,070 
Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS (“the Company”)        21,734,068    20,784,767 
                
Non-controlling interests        195    171 
                
Total equity        21,734,263    20,784,938 

 

 

 

The above condensed consolidated interim statement of financial position should be read in conjunction with the accompanying notes.

 

 1  

 

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

          
   Note  31 March 2021  31 December 2020
Liabilities         
Borrowings   14    19,074,457    16,353,685 
Employee benefit obligations        405,073    381,923 
Provisions        452,381    411,931 
Deferred tax liabilities        1,478,178    1,337,831 
Contract liabilities        179,299    164,764 
Other non-current liabilities        527,183    498,059 
Total non-current liabilities        22,116,571    19,148,193 
                
Borrowings   14    5,821,317    5,232,737 
Current tax liabilities        159,249    134,175 
Trade and other payables        5,148,341    4,976,605 
Due to related parties        55,492    40,355 
Deferred revenue        134,106    116,921 
Provisions        396,285    630,288 
Contract liabilities        325,332    315,070 
Derivative financial instruments   15    96,272    119,111 
Total current liabilities        12,136,394    11,565,262 
                
Total liabilities        34,252,965    30,713,455 
                
Total equity and liabilities        55,987,228    51,498,393 

 

 

The above condensed consolidated interim statement of financial position should be read in conjunction with the accompanying notes.

 

 2  

 

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS

For the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

     

 

Three months ended
31 March

   Note  2021  2020
          
Revenue   8    7,613,517    6,438,517 
Revenue from financial services   8    212,995    219,680 
Total revenue        7,826,512    6,658,197 
                
Cost of revenue        (5,512,477)   (4,534,266)
Cost of revenue from financial services        (56,456)   (35,200)
Total cost of revenue        (5,568,933)   (4,569,466)
                
Gross profit        2,101,040    1,904,251 
Gross profit from financial services        156,539    184,480 
Total gross profit        2,257,579    2,088,731 
                
Other income        43,295    32,861 
Selling and marketing expenses        (358,178)   (348,697)
Administrative expenses        (199,351)   (188,286)
Net impairment losses on financial and contract assets        (49,531)   (114,767)
Other expenses        (55,435)   (126,883)
Operating profit        1,638,379    1,342,959 
                
Finance income   6    1,601,903    621,509 
Finance costs   6    (1,808,961)   (842,913)
Net finance costs        (207,058)   (221,404)
                
Share of profit of equity accounted investees        17,739    (3,248)
Profit before income tax        1,449,060    1,118,307 
                
Income tax expense   7    (344,147)   (244,393)
Profit from continuing operations        1,104,913    873,914 
                
Profit for the year        1,104,913    873,914 
                
Profit for the year is attributable to:               
Owners of the Company        1,104,889    872,722 
Non-controlling interests        24    1,192 
Total        1,104,913    873,914 
                
Basic and diluted earnings per share for profit attributable to owners of the Company (in full TL)        0.51    0.40 
Basic and diluted earnings per share for profit from continuing operations attributable to owners of the Company (in full TL)        0.51    0.40 
Basic and diluted earnings per share for profit /(loss) from discontinued operations attributable to owners of the Company (in full TL)        —      —   
                

 

 

 

The above condensed consolidated interim statement of profit or loss should be read in conjunction with the accompanying notes.

 

 3  

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

For the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

 

 

           
             
  

 

Three months ended
31 March

   2021  2020
       
Profit for the year   1,104,913    873,914 
           
Other comprehensive income/(expense):          
Items that may be reclassified to profit or loss:          
Exchange differences on translation of foreign operations   394,462    (76,878)
Fair value reserve   (2,163)   (6,568)
Cash flow hedges - effective portion of changes in fair value   677,977    420,282 
Cash flow hedges - reclassified to profit or loss   (530,822)   (443,546)
Cost of hedging reserve - changes in fair value   (572,777)   (263,277)
Cost of hedging reserve - reclassified to profit or loss   53,038    50,389 
Loss on hedges of net investments in foreign operations   (188,165)   (89,318)
Income tax relating to these items   12,862    172,501 
-Income tax relating to exchange differences   (99,764)   99,452 
-Income tax relating to fair value reserve   476    1,445 
-Income tax relating to cash flow hedges   (29,431)   5,118 
-Income tax relating to cost of hedging reserve   103,948    46,836 
-Income tax relating to hedges of net investments   37,633    19,650 
Other comprehensive income/(loss) for the  year, net of income tax   (155,588)   (236,415)
Total comprehensive income for the year   949,325    637,499 
           
Total comprehensive income for the year is attributable to:          
Owners of the Company   949,301    636,312 
Non-controlling interests   24    1,187 
Total   949,325    637,499 
           
Total comprehensive income for the year attributable to owners of the Company arises from:          
Continuing operations   949,301    636,312 
Discontinued operations   —      —   
Total   949,301    636,312 

 

 

 

 

The above condensed consolidated interim statement of comprehensive income should be read in conjunction with the accompanying notes.

 

 4  

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

   Share capital  Treasury shares  Additional paid-in capital  Share premium  Legal Reserve (*)  Fair value Reserve (*)  Net investment Hedge (*)  Hedging reserve  Cost of hedging reserve  Foreign currency translation reserve (*)  Remeasurements of employee
termination benefit
  Retained
earnings
  Total  Non-controlling interests  Total
equity
                                              
Balance at 1 January 2020   2,200,000    (144,152)   35,026    269    2,773,105    3,472    (43,203)   (155,002)   (212,159)   450,146    (63,539)   13,202,526    18,046,489    36,455    18,082,944 
Profit for the period   —      —      —      —      —      —      —      —      —      —      —      872,722    872,722    1,192    873,914 
Other comprehensive income, net of income tax   —      —      —      —      —      (5,123)   (69,668)   (18,146)   (166,052)   22,579    —      —      (236,410)   (5)   (236,415)
Total comprehensive income/(loss)   —      —      —      —      —      (5,123)   (69,668)   (18,146)   (166,052)   22,579    —      872,722    636,312    1,187    637,499 
Transfer to legal reserves   —      —      —      —      117,418    —      —      —      —      —      —      (117,418)   —      —      —   
Acquisition of treasury shares (-)   —      (9,994)   —      —      —      —      —      —      —      —      —      —      (9,994)   —      (9,994)
Dividend paid   —      —      —      —      —      —      —      —      —      —      —      —      —      (32,856)   (32,856)
Balance at 31 March 2020   2,200,000    (154,146)   35,026    269    2,890,523    (1,651)   (112,871)   (173,148)   (378,211)   472,725    (63,539)   13,957,830    18,672,807    4,786    18,677,593 
                                                                            
                                                                            
Balance at 1 January 2021   2,200,000    (147,914)   35,026    269    3,009,025    1,985    (339,478)   (151,045)   (607,714)   487,227    (94,684)   16,392,070    20,784,767    171    20,784,938 
Profit for the period   —      —      —      —      —      —      —      —      —      —      —      1,104,889    1,104,889    24    1,104,913 
Other comprehensive income, net of income tax   —      —      —      —      —      (1,687)   (150,532)   117,724    (415,791)   294,698    —      —      (155,588)   —      (155,588)
Total comprehensive income/(loss)   —      —      —      —      —      (1,687)   (150,532)   117,724    (415,791)   294,698    —      1,104,889    949,301    24    949,325 
Transfer to legal reserves   —      —      —      —      (88,707)   —      —      —      —      —      —      88,707    —      —      —   
Acquisition of treasury shares (-)   —      —      —      —      —      —      —      —      —      —      —      —      —      —      —   
Dividend paid   —      —      —      —      —      —      —      —      —      —      —      —      —      —      —   
Balance at 31 March 2021   2,200,000    (147,914)   35,026    269    2,920,318    298    (490,010)   (33,321)   (1,023,505)   781,925    (94,684)   17,585,666    21,734,068    195    21,734,263 

 

(*) Included in Reserves in the condensed consolidated interim statement of financial position.

 

 

 

The above condensed consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes.

 

 5  

 

TURKCELL ILETISIM HIZMETLERI AS

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

       
     

Three months ended

31 March

   Note  2021  2020
Cash flows from operating activities:               
Profit before income tax from               
Continuing operations        1,104,913    873,914 
Discontinued operations        —      —   
Profit before income tax including discontinued operations        1,104,913    873,914 
                
Adjustments for:               
Depreciation and impairment of property, plant and equipment and investment properties   9    672,725    537,997 
Amortization of intangible assets and right of use assets   10,11    983,229    834,053 
Net finance expense        60,259    253,669 
Fair value adjustments to derivatives   15    (1,456,053)   (709,059)
Income tax expense        344,147    244,393 
Gain on sale of property, plant and equipment        (16,272)   (15,738)
Unrealized foreign exchange losses on operating assets        1,853,759    1,255,213 
Provisions        215,957    245,324 
Share of equity accounted investees        (17,739)   3,248 
Non-cash other adjustments        (4,140)   (3,567)
         3,740,785    3,519,447 
Change in operating assets/liabilities               
Change in trade receivables        (451,204)   (456,910)
Change in due from related parties        (6,405)   2,600 
Change in receivables from financial services        41,768    318,910 
Change in inventories        (176,699)   (77,439)
Change in other current assets        (304,814)   (183,855)
Change in other non-current assets        (24,186)   (1,192)
Change in due to related parties        15,127    (7,201)
Change in trade and other payables        (35,251)   (105,368)
Change in other non-current liabilities        —      (547)
Change in employee benefit obligations        (8,754)   (6,980)
Change in deferred revenue        13,895    6,291 
Change in short term contract asset        (44,750)   28,381 
Change in long term contract asset        8,548    671 
Change in short term contract liability        10,262    6,095 
Change in long term contract liability        14,535    24,783 
Changes in other working capital        (396,922)   (315,866)
Cash generated from operations        2,395,935    2,751,820 
                
Interest paid        (88,041)   (149,437)
Income tax paid        (135,592)   (133,627)
Net cash inflow from operating activities        2,172,302    2,468,756 

 

Cash flows from investing activities:

               
Acquisition of property, plant and equipment   9    (1,025,161)   (473,056)
Acquisition of intangible assets   10    (894,599)   (774,004)
Proceeds from sale of property, plant and equipment        19,412    27,466 
Proceeds from advances given for acquisition of property, plant and equipment        117,237    32,118 
Contribution of increase of share capital in joint ventures/associates        (103,626)   (38,950)
Cash inflows from sale of shares or borrowing instruments of other enterprises or funds        267,360    2,111 
Cash outflows from sale of shares or borrowing instruments of other enterprises or funds        —      (219,735)
Payments for financial assets at amortized cost        (14,998)   (72,996)
Interest received        299,472    101,545 
Net cash outflow from investing activities        (1,334,903)   (1,415,501)
                
Cash flows from financing activities:               
Proceeds from derivative instruments        169,728    546,914 
Repayments of derivative instruments        (293,173)   (239,269)
Proceeds from issues of loans and borrowings        2,309,397    11,044,824 
Proceeds from issues of bonds        92,157    175,000 
Repayment of borrowings        (1,569,607)   (13,287,568)
Repayment of bonds        (50,000)   (180,878)
Dividends paid to non-controlling interest        —      (32,856)
Payments of lease liabilities        (353,210)   (375,050)
Acquisition of treasury shares        —      (9,994)
Other cash outflows from financing activities        (21,912)   —   
Net cash inflow/(outflow) from financing activities        283,380    (2,358,877)
                
Net increase/(decrease) in cash and cash equivalents        1,120,779    (1,305,622)
                
Cash and cash equivalents at 1 January        11,860,555    10,238,715 
                
Effects of exchange rate changes on cash and cash equivalents        439,405    279,072 
                
Cash and cash equivalents at 31 March   12    13,420,739    9,212,165 
                

 

The above condensed consolidated interim statement of cash flows should be read in conjunction with the accompanying notes. 

 6  

 

TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

Notes to the condensed consolidated interim financial statements

  Page
1. Reporting entity 8
2. Basis of preparation 8
3. Significant accounting policies 9
4. Segment information 10
5. Seasonality of operations 12
6. Finance income and costs 13
7. Income tax expense 13
8. Revenue 14
9. Property, plant and equipment 16
10. Intangible assets 17
11. Right of use assets 18
12. Cash and cash equivalents 19
13. Financial assets 19
14. Loans and borrowings 20
15. Derivative financial instruments 22
16. Financial instruments 29
17. Guarantees and purchase obligations 33
18. Commitments and contingencies 33
19. Related parties 36
20. Subsidiaries 40
21. Subsequent events 41

 

 7  

 

TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

1.Reporting entity

Turkcell Iletisim Hizmetleri Anonim Sirketi (the “Company” or “Turkcell”) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The address of the Company’s registered office is Maltepe Aydinevler Mahallesi Inonu Caddesi No: 20, Kucukyali Ofispark / Istanbul. The Company operates under a 25-year GSM license granted in and effective from April 1998, a 20-year 3G license granted in and effective from April 2009 and a 13-year 4.5G license granted in August 2016 and effective from April 2016. The Company’s shares are listed on Borsa Istanbul A.Ş. (“BIST”) and New York Stock Exchange (“NYSE”).

The condensed consolidated interim financial statements of the Company as at and for the three months ended 31 March 2021 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate.

These condensed consolidated interim financial statements were approved for issue on 30 April 2021.

The Group’s immediate and ultimate parents are TVF Bilgi Teknolojileri Iletisim Hizmetleri Yatirim Sanayi ve Ticaret Anonim Sirketi (“TVF BTIH”) and Turkiye Varlik Fonu (“TVF”) as of 31 March 2021, respectively. TVF has been established with the Law No. 6741 and published in the Official Gazette dated 26 August 2016.

The Company’s board of directors consists of a total of six non-executive members including three independent members as of 31 March 2021.

2.Basis of preparation

These condensed consolidated interim financial statements for the three months ended 31 March 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting.

These condensed consolidated interim financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual financial statements for the period ended 31 December 2020 and any public announcements made by the Company during the interim reporting period.

The accounting policies, presentation and methods of computation are consistent with those of the previous financial year and corresponding interim reporting period.

The Group divided its reporting segment into two groups according to its previous assessment. Relevant groups had been established within the framework of an integrated communication and technology service delivery strategy and in a way to ensure economic integrity. Considering current developments, the Management has made an evaluation regarding the updating of the reportable segments according to the strategies of the Company, and has planned to add the Techfin operational group. Turkcell Finansman A.Ş.(“ Turkcell Finansman”), Turkcell Odeme Hizmetleri A.S. (“Turkcell Odeme”), Paycell LLC (“Paycell”) and Turkcell Sigorta Aracilik Hizmetleri A.S (“Turkcell Sigorta”) will be included in Techfin segment. The operating results of the mentioned companies were disclosed in the “Other” section within the scope of the previous reporting framework. In addition to the mentioned changes, Turkcell Satis ve Dijital Is Servisleri Hizmetleri A.S. (“Turkcell Satis”), which are reported under Turkcell Turkey is separated as digital business services and other Turkcell Satis operations: integrated corporate business solutions, city hospitals, equipment and corporate terminal activities will be continued to be reported under Turkcell Turkey as digital business services, while other Turkcell Satis operations which include retail channel operations, smart devices management and consumer electronics sales through digital channels will be reported in the “Other” reportable segment.

The Company has presented financials of 31 March 2020 accordingly. These classifications have no impact on operating profit, profit for the year and cash flow statement.

 8  

 

TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

3.Significant changes in accounting policies

New standards and interpretations

i)Standards, amendments and interpretations that are issued but not effective as at 31 March 2021:
-Amendment to IFRS 16, ‘Leases’ – Covid-19 related rent concessions; as of March 2021, this amendment extended till June 2022 and effective from 1 April 2021.As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments. On 28 May 2020, the IASB published an amendment to IFRS 16 that provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs.
-Amendments to IAS 1, ‘Presentation of financial statements’ on classification of liabilities; effective from 1 January 2022. These narrow-scope amendments to IAS 1, ‘Presentation of financial statements’, clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (for example, the receipt of a waiver or a breach of covenant). The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability.
-Amendments to IFRS 17 and IFRS 4, ‘Insurance contracts’, deferral of IFRS 9; effective from annual periods beginning on or after 1 January 2021. These amendments change the fixed date of the temporary exemption in IFRS 4 from applying IFRS 9, Financial Instrument until 1 January 2023.

The Company does not expect material impact of new standards and interpretations on Company’s accounting policies.

 9  

 

TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

4. Segment Information

In accordance with its integrated communication and technology services strategy, Group has reportable segments which are Turkcell Turkey, Turkcell International and Techfin. While some of these strategic segments offer the same types of services, they are managed separately because they operate in different geographical locations and are affected by different economic conditions.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker function is carried out by the Board of Directors, however Board of Directors may transfer the authorities, other than recognized by the law, to the General Manager and other directors.

Turkcell Turkey reportable segment includes the operations of Turkcell, Turkcell Superonline Iletisim Hizmetleri A.S. (“Turkcell Superonline”), group call center operations of Global Bilgi Pazarlama Danismanlik ve Cagri Servisi Hizmetleri A.S. (“Turkcell Global Bilgi”), Turktell Bilisim Servisleri A.S. (“Turktell”), Turkcell Teknoloji Arastirma ve Gelistirme A.S. (“Turkcell Teknoloji”), Kule Hizmet ve Isletmecilik A.S. (“Global Tower”), Rehberlik Hizmetleri Servisi A.S. (“Rehberlik”), Turkcell Gayrimenkul Hizmetleri A.S. (“Turkcell Gayrimenkul”), Lifecell Dijital Servisler ve Cozumler A.S. (“Lifecell Dijital Servisler”), Lifecell Bulut Cozumleri A.S. (“Lifecell Bulut”), Lifecell TV Yayin ve Icerik Hizmetleri A.S. (“Lifecell TV”), Lifecell Muzik Yayin ve Iletim A.S. (“Lifecell Muzik”), BiP Iletisim Teknolojileri ve Dijital Servisler Anonim Sirketi (“BiP A.S.”), Turkcell Satis’s digital business services (Note 2) and Turkcell Dijital Is Servisleri A.S. (“Turkcell Dijital”).

Turkcell International reportable segment includes the operations of Lifecell LLC (“lifecell”), CJSC Belarusian Telecommunications Network (“Belarusian Telecom”), Kibris Mobile Telekomunikasyon Limited Sirketi (“Kibris Telekom”), East Asian Consortium B.V. (“Eastasia”), Lifecell Ventures Cooperatief U.A (“Lifecell Ventures”), Beltel Telekomunikasyon Hizmetleri A.S. (“Beltel”), LLC UkrTower (“UkrTower”), LLC Global Bilgi (“Global LLC”), Turkcell Europe GmbH (“Turkcell Europe”), Lifetech LLC (“Lifetech”), Beltower LLC (“Beltower”), Lifecell Digital Limited (“Lifecell Digital”), Yaani Digital BV (“Yaani”) and BiP Digital Communication Technologies B.V (“BiP B.V.”).

Techfin reportable segment includes the operations of Turkcell Finansman, Turkcell Odeme, Paycell and Turkcell Sigorta. The operations of these legal entities aggregated into one reportable segment as the nature of services are similar and most of them share similar economic characteristics.

Other reportable segment mainly comprises the information and entertainment services in Turkey, non-group call center operations of Turkcell Global Bilgi, Turkcell Enerji Cozumleri ve Elektrik Satis Ticaret A.S (“Turkcell Enerji”) and Turkcell Satis’s other operations (Note 2).

The Board primarily uses adjusted EBITDA to assess the performance of the operating segments. Adjusted EBITDA definition includes revenue, cost of revenue excluding depreciation and amortization, selling and marketing expenses and administrative expenses.

Adjusted EBITDA is not a financial measure defined by IFRS as a measurement of financial performance and may not be comparable to other similarly-titled indicators used by other companies. Reconciliation of Adjusted EBITDA to the consolidated profit for the year is included in the accompanying notes.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

4. Segment Information (continued)

   Turkcell Turkey  Turkcell International  Techfin  All other segments  Intersegment eliminations  Consolidated
   2021  2020  2021  2020  2021  2020  2021  2020  2021  2020  2021  2020
                                     
Total segment revenue   5,978,636    5,276,294    708,197    559,569    222,569    219,800    1,125,250    762,504    (208,140)   (159,970)   7,826,512    6,658,197 
Inter-segment revenue   (45,525)   (24,776)   (19,377)   (21,159)   (9,574)   (120)   (133,664)   (113,915)   208,140    159,970    —      —   
Revenue from external customers   5,933,111    5,251,518    688,820    538,410    212,995    219,680    991,586    648,589    —      —      7,826,512    6,658,197 
Adjusted EBITDA   2,731,195    2,388,006    344,500    249,845    137,929    136,515    111,076    40,236    (18,227)   (5,571)   3,306,473    2,809,031 

 

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

4. Segment Information (continued)

   2021  2020
       
Profit for the period   1,104,913    873,914 

 

Add(Less):

          
Income tax expense   344,147    244,393 
Finance income   (1,601,903)   (621,509)
Finance costs   1,808,961    842,913 
Other income   (43,295)   (32,861)
Other expenses   55,435    126,883 
Depreciation and amortization   1,655,954    1,372,050 
Share of loss of equity accounted investees   (17,739)   3,248 
Consolidated adjusted EBITDA   3,306,473    2,809,031 

 

5.Seasonality of operations

The Turkish mobile communications market is affected by seasonal peaks and troughs. Historically, the effects of seasonality on mobile communications usage had positively influenced the Company’s results in the second and third quarters of the fiscal year and negatively influenced the results in the first and fourth quarters of the fiscal year. Recently, however, due to changing market dynamics, such as the Information Technologies and Communications Authority (“ICTA”)’s intervention in tariffs and increasing competition in the Turkish telecommunications market, the effects of seasonality on the Company’s subscribers’ mobile communications usage has decreased.

 

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

6.Finance income and costs
   2021  2020
Net fair value gains on derivative financial instruments and interest   863,745    193,976 
Cash flow hedges – reclassified to profit or loss   477,784    393,157 
Interest income   256,476    31,282 
Other   3,898    3,094 
Finance income   1,601,903    621,509 
           
Net foreign exchange losses   (1,618,058)   (688,278)
Net interest expenses for financial assets and liabilities
measured at amortized cost
   (186,092)   (149,413)
Other   (4,811)   (5,222)
Finance costs   (1,808,961)   (842,913)
Net finance costs   (207,058)   (221,404)

 

7.Income tax expense

Income tax expense is recognized based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the three months ended 31 March 2021 is 24%, compared to 22% for the three months ended 31 March 2020. The increase is mainly due to the Presidential Decree No. 3490 published in the Official Gazette dated February 4, 2021, the financing expenses (expenses and costs incurred under the titles of interest, commission, interest, dividend, exchange difference, etc.) limitation rate was set at 10% starting from the 2021 fiscal year. Credit institutions, financial institutions, financial leasing, factoring and finance companies are excluded from the legislation. Financial expenses and costs which will be capitalized of investment are also exempted from the legislation.

 

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

8.Revenue

   31 March 2021
   Turkcell Turkey  Turkcell International  Techfin  Other  Intersegment eliminations  Consolidated
   2021  2020  2021  2020  2021  2020  2021  2020  2021  2020  2021  2020
Telecommunication services   5,690,465    5,077,689    642,768    510,352    —      —      —      —      (13,097)   (12,223)   6,320,136    5,575,818 
Equipment revenues   246,794    166,241    32,837    23,926    —      —      734,097    442,615    (14,556)   (1,206)   999,172    631,576 
Revenue from financial services   —      —      —      —      222,569    219,800    —      —      (9,574)   (120)   212,995    219,680 
Call center revenues   10,233    10,243    10,503    7,318    —      —      123,418    96,862    (14,810)   (14,439)   129,344    99,984 
Other   31,144    22,121    22,089    17,973    —      —      267,735    223,027    (156,103)   (131,982)   164,865    131,139 
Total   5,978,636    5,276,294    708,197    559,569    222,569    219,800    1,125,250    762,504    (208,140)   (159,970)   7,826,512    6,658,197 

 

 

 

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

8.Revenue (continued)

 

   31 March 2021
   Turkcell Turkey  Turkcell International  Techfin  Other  Intersegment eliminations  Consolidated
Telecommunication Services   5,690,465    642,768    —      —      (13,097)   6,320,136 
At a point in time   103,367    4,166    —      —      —      107,533 
Over time   5,587,098    638,602    —      —      (13,097)   6,212,603 
Equipment Related   246,794    32,837    —      734,097    (14,556)   999,172 
At a point in time   184,940    32,837    —      734,097    (14,556)   937,318 
Over time   61,854    —      —      —      —      61,854 
Revenue from financial operations   —      —      222,569    —      (9,574)   212,995 
At a point in time   —      —      82,968    —      (9,574)   73,394 
Over time   —      —      139,601    —      —      139,601 
Call Center   10,233    10,503    —      123,418    (14,810)   129,344 
At a point in time   —      —      —      —      —      —   
Over time   10,233    10,503    —      123,418    (14,810)   129,344 
All other segments   31,144    22,089    —      267,735    (156,103)   164,865 
At a point in time   998    300    —      11,135    (997)   11,436 
Over time   30,146    21,789    —      256,600    (155,106)   153,429 
Total   5,978,636    708,197    222,569    1,125,250    (208,140)   7,826,512 
At a point in time   289,305    37,303    82,968    745,232    (25,127)   1,129,681 
Over time   5,689,331    670,894    139,601    380,018    (183,013)   6,696,831 

 

   31 March 2020
   Turkcell Turkey  Turkcell International  Techfin  Other  Intersegment eliminations  Consolidated
Telecommunication Services   5,077,689    510,352    —      —      (12,223)   5,575,818 
At a point in time   71,942    2,754    —      —      —      74,696 
Over time   5,005,747    507,598    —      —      (12,223)   5,501,122 
Equipment Related   166,241    23,926    —      442,615    (1,206)   631,576 
At a point in time   148,039    23,926    —      442,615    (1,206)   613,374 
Over time   18,202    —      —      —      —      18,202 
Revenue from financial operations   —      —      219,800    —      (120)   219,680 
At a point in time   —      —      49,941    —      (120)   49,821 
Over time   —      —      169,859    —      —      169,859 
Call Center   10,243    7,318    —      96,862    (14,439)   99,984 
At a point in time   —      —      —      —      —      —   
Over time   10,243    7,318    —      96,862    (14,439)   99,984 
All other segments   22,121    17,973    —      223,027    (131,982)   131,139 
At a point in time   666    1,862    —      12,881    (598)   14,811 
Over time   21,455    16,111    —      210,146    (131,384)   116,328 
Total   5,276,294    559,569    219,800    762,504    (159,970)   6,658,197 
At a point in time   220,647    28,542    49,941    455,496    (1,924)   752,702 
Over time   5,055,647    531,027    169,859    307,008    (158,046)   5,905,495 

 

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

9.Property, plant and equipment

Cost  Balance as at 1 January 2021  Additions  Disposals  Transfers  Impairment expenses/ (reversals)  Effects of movements in exchange rates  Balance as at
31 March 2021
Network infrastructure (All operational)   24,923,118    185,351    (12,036)   506,553    —      694,843    26,297,829 
Land and buildings   1,485,249    4,539    (235)   169    —      5,497    1,495,219 
Equipment, fixtures and fittings   955,894    8,789    (4,161)   2,084    —      10,513    973,119 
Motor vehicles   44,999    61    (2,332)   —      —      871    43,599 
Leasehold improvements   342,093    218    —      113    —      1,829    344,253 
Construction in progress   681,299    828,651    (17)   (511,258)   —      39,577    1,038,252 
Total   28,432,652    1,027,609    (18,781)   (2,339)   —      753,130    30,192,271 
                                    
Accumulated depreciation                                   
Network infrastructure (All operational)   13,090,823    629,440    (10,655)   —      3,378    496,589    14,209,575 
Land and buildings   354,312    20,101    (35)   —      —      3,257    377,635 
Equipment, fixtures and fittings   717,871    16,823    (3,042)   —      —      8,523    740,175 
Motor vehicles   40,027    858    (2,332)   —      —      847    39,400 
Leasehold improvements   326,889    1,897    —      —      —      1,338    330,124 
Total   14,529,922    669,119    (16,064)   —      3,378    510,554    15,696,909 
                                    
Net book amount   13,902,730    358,490    (2,717)   (2,339)   (3,378)   242,576    14,495,362 

 

Depreciation expense for the three months ended 31 March 2021 amounting to TL 672,497 including impairment losses are recognized in cost of revenue.

The impaired network infrastructure mainly consists of damaged or technologically inadequate mobile and fixed line infrastructure investments. Impairment losses on property, plant and equipment for the three months ended 31 March 2021 amounting to TL 3,378 are included in depreciation expense.

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

10.Intangible assets
Cost  Balance at 1 January 2021  Additions  Disposals  Transfers  Impairment expenses/ (reversals)  Effects of movements in exchange rates 

Balance at

31 March 2021

Telecommunication licenses   9,188,733    1,978    (489)   6    —      263,420    9,453,648 
Computer software   11,835,827    461,819    (4,755)   17,542    —      86,116    12,396,549 
Transmission line software   88,499    58    —      —      —      —      88,557 
Indefeasible right of usage   159,995    1,028    —      —      —      —      161,023 
Brand name   9,483    244    —      279    —      208    10,214 
Customer base   15,512    —      —      —      —      —      15,512 
Goodwill (*)   40,010    —      —      —      —      —      40,010 
Subscriber acquisition cost   4,787,853    403,352    —      —      —      17,531    5,208,736 
Other   186,743    6,198    —      (279)   —      867    193,529 
Construction in progress   1,142    19,922    (406)   (15,209)   —      136    5,585 
Total   26,313,797    894,599    (5,650)   2,339    —      368,278    27,573,363 
                                    
Accumulated amortization                                   
Telecommunication licenses   4,253,203    158,772    (489)   —      26    65,923    4,477,435 
Computer software   7,304,194    303,044    (4,738)   —      211    78,196    7,680,907 
Transmission line software   79,073    206    —      —      —      —      79,279 
Indefeasible right of usage   56,974    2,839    —      390    —      —      60,203 
Brand name   7,040    3    —      179    —      —      7,222 
Customer base   13,085    109    —      —      —      —      13,194 
Subscriber acquisition cost   2,133,755    222,494    —      —      —      11,610    2,367,859 
Other   98,689    11,527    —      (569)   —      (2,945)   106,702 
Total   13,946,013    698,994    (5,227)   —      237    152,784    14,792,801 
                                    
Net book amount   12,367,784    195,605    (423)   2,339    (237)   215,494    12,780,562 

 

Amortization expense on intangible assets other than goodwill for the three months ended 31 March 2021 amounting to TL 699,231 are recognized in cost of revenues.

Impairment losses on intangible assets for the three months ended 31 March 2021 amounting to TL 237 are included in depreciation expense.

Computer software includes internally generated capitalized software development costs that meet the definition of an intangible asset. The amount of internally generated computer software is TL 72,550 for the three months ended 31 March 2021.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

11.Right of use assets

Closing balances of right of use assets as of 31 March 2021 and depreciation and amortization expenses for the related period is stated as below:

   Tangible  Intangible   
   Site Rent  Building  Network equipment  Vehicle  Other  Total  Right of way  License  Total  Total
Balance at 1 January 2021   1,182,847    306,343    218,104    159,769    111,462    1,978,525    24,956    376,693    401,649    2,380,174 
Depreciation and amortization charge for the year   (142,467)   (16,545)   (73,074)   (12,140)   (22,463)   (266,689)   (5,148)   (12,161)   (17,309)   (283,998)
Balance at 31 March 2021   1,190,671    312,582    251,900    161,717    111,395    2,028,265    30,650    426,079    456,729    2,484,994 
                                                   

As at 31 March 2021, additions to right of use assets amount to TL 335,175, interest expense on lease liabilities is TL 81,834 and amortization expense is TL 283,998 recorded in the cost of revenue.

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

12.Cash and cash equivalents

   31 March
2021
  31 December
2020
Cash in hand   102    179 
           
Banks   13,384,265    11,858,067 
- Demand deposits   1,114,054    975,753 
- Time deposits   12,270,211    10,882,314 
Other cash and cash equivalents   89,273    8,354 
Impairment loss provision   (6,676)   (6,045)
Cash and cash equivalents   13,466,964    11,860,555 

 

As of 31 March 2021, the net amount of cash and cash equivalents is TL 13,420,739 excluding the interest income accrual amounting to TL 46,225.

13.Financial Assets

Debt investments at fair value through other comprehensive income

Debt investments at fair value through other comprehensive income comprise the following investments in listed and unlisted securities:

   31 March  31 December
Current Assets  2021  2020
Listed debt securities   270,463    529,610 
    270,463    529,610 

 

 

  Fair values
   
  31 March
2021
31 December 2020 Fair value hierarchy Valuation technique
         
Financial assets at fair value through other comprehensive income - 272,334 Level 2 Present value of the estimated future cash flows based on observable yield curves and period end FX rates
270,463 257,276 Level 1 Pricing models based on quoted market prices at the end of the reporting period.
         
Total 270,463 529,610    

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

13.Financial Assets (continued)

As of 31 March 2021, the nominal and fair value amounts of financial assets are as follows:

31 March 2021
Currency Nominal amount (original currency)

Fair value

(in TL)

Maturity
       
EUR 20,000 195,612 17 December 2021
EUR 2,000 19,449 16 February 2026
TL 25,000 23,560 2 March 2022
TL 25,000 23,492 2 March 2022
USD 996 8,350 10 August 2024
Total financial assets                                      270,463  

 

During the year, the following losses were recognized in other comprehensive income.

   31 March  31 March
   2021  2020
Losses recognized in other comprehensive income          
Related to debt securities   (1,687)   (5,123)
    (1,687)   (5,123)

 

14.Loans and borrowings

   31 March
2021
  31 December
2020
Non-current liabilities          
Unsecured bank loans   9,456,983    7,779,354 
Secured bank loans   113,972    151,543 
Lease liabilities   1,559,178    1,521,713 
Debt securities issued   7,944,324    6,901,075 
    19,074,457    16,353,685 
Current liabilities          
Unsecured bank loans   4,446,393    4,049,824 
Secured bank loans   120,078    144,261 
Lease liabilities   688,572    577,173 
Debt securities issued   566,274    461,479 
    5,821,317    5,232,737 

 

The company has used loans in accordance with the loan agreement previously signed with J.P.Morgan and AB Svensk Exportkredit under the Swedish Export Credit Organization (“EKN”) insurance. As of 31 March 2021, the Company has used USD 20,248 loan on 26 February 2021, respectively, with a fixed interest rate of 3.84%.

The company has used loans in accordance with the loan agreement previously signed with China Development Bank. As of 31 March 2021, the Company has used CNY 147,286 and EUR 57,124 loan on 18 March 2021 and 19 March 2021, respectively, with a fixed interest rate of 5.15% for CNY loan and Euribor+2.29% for the EUR.

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

14.Loans and borrowings (continued)

Terms and conditions of outstanding loans are as follows:

         31 March 2021  

31 December 2020

   Currency  Interest rate type  Nominal interest rate  Payment
period
  Carrying amount

Nominal interest

Rate

  Payment period  Carrying amount
Unsecured bank loans   EUR   Floating   Euribor+1.9%-Euribor+2.3%    2021-2028    6,692,589     Euribor+2.0%-Euribor+2.2%    2021-2026   5,624,277
Unsecured bank loans   USD   Floating   Libor+2.1%-Libor+2.4%    2021-2028    2,703,266     Libor+2.1%-Libor+2.4%    2021-2028   2,384,622
Unsecured bank loans   TL   Fixed   5.0%-19.7%    2021    1,681,116     6.5%-16.9%    2021   1,627,198
Unsecured bank loans   UAH   Fixed   6.7%-10.9%    2021-2023    1,091,780     6.0%-10.9%    2021-2023   980,207
Unsecured bank loans   USD   Fixed   3.8%   2021-2030    695,815     3.8%   2021-2030   501,036
Unsecured bank loans   RMB   Fixed   5.2%-5.5%    2021-2028    571,860     5.2%-5.5%    2021-2026   283,273
Unsecured bank loans   EUR   Fixed   1.5%-1.8%    2021-2022    466,950     1.5%-1.8%    2021-2022   428,565
Secured bank loans   USD   Floating   Libor+1.9%    2021-2023    234,050     Libor+1.7%    2021-2023   259,427
Secured bank loans   EUR   Floating   —      —      —       Euribor+1.3%    2021   36,377
Debt securities issued   USD   Fixed   5.8%   2021-2028    8,417,011     5.8%   2021-2028   7,311,688
Debt securities issued   TL   Fixed   17.8%   2021    93,587     15.0%   2021   50,866
Lease liabilities   TL   Fixed   9.8%-45.0%    2021-2048    1,203,036     9.8%-45.0%    2021-2048   1,201,988
Lease liabilities   UAH   Fixed   8.0%-24.0%    2021-2069    657,770     8.1%-24.0%    2021-2069   555,597
Lease liabilities   EUR   Fixed   1.0%-10.0%    2021-2034    211,206     1.0%-10.0%    2021-2034   185,557
Lease liabilities   BYN   Fixed   11.5%-14.0%    2021-2028    107,115     11.5%-15.0%    2021-2028   99,259
Lease liabilities   USD   Fixed   3.9%-10.1%    2021-2028    68,623     3.9%-10.9%    2021-2028   56,485
                      24,895,774              21,586,422

 

 

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments

Fair value of derivative financial instruments at 31 March 2021 and 31 December 2020 are attributable to the following:

   31 March 2021  31 December 2020
             
    Assets    Liabilities    Assets    Liabilities 
                     
Held for trading   1,278,485    30,557    360,047    41,132 
Derivatives used for hedging   814,165    52,873    642,623    66,851 
Total   2,092,650    83,430    1,002,670    107,983 
                     

 

At 31 March 2021, the total held for trading derivative financial assets of TL 1,912,017 (31 December 2020: TL 917,437) also includes a net accrued interest expense of TL 180,633 (31 December 2020: TL 85,233) and the total held for trading derivative financial liabilities of TL 96,272 (31 December 2020: TL 119,111) also includes a net accrued interest expense of TL 12,842 (31 December 2020: TL 11,128).

Derivatives used for hedging

Participating cross currency swap and cross currency swap contracts

The notional amount and the fair value of participating cross currency swap and cross currency swap contracts for hedging purposes at 31 March 2021 are as follows:

Sell   Buy    
Currency Notional amount Currency Notional amount Fair Value Maturity
             
Participating cross currency swap contracts      
TL  1,903,692   EUR  366,800  280,092 23 October 2025
TL  220,735   EUR  48,012  12,841 22 April 2026
TL  118,650   EUR  17,146  38,635 22 April 2026
TL  224,536   USD  40,010  64,682 22 April 2026
TL  220,055   USD  40,010  59,538 22 April 2026
TL  184,622   USD  32,008  50,200 22 April 2026
TL  159,500   USD  28,007  49,283 22 April 2026
TL  156,999   USD  24,006  32,479 22 April 2026
TL  125,231   USD  20,005  37,213 22 April 2026
TL  92,887   USD  16,004  22,620 22 April 2026
TL  78,660   USD  16,004  34,708 22 April 2026
Cross currency swap contracts      
TL 99,127   RMB  162,121 131,874 22 April 2026
Derivatives used for hedge accounting financial assets    814,165      
                     

 

EUR 414,812 participating cross currency swap contracts includes TL 1,083,063 guarantees after CSA agreement (31 December 2020: 1,121,303 TL).

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments (continued)

Derivatives used for hedging (continued)

Interest rate swap contracts

The notional amount and the fair value of interest rate swap contracts for hedging purposes at 31 March 2021 are as follows:

Sell   Buy    
Currency Notional amount Currency Notional amount Fair Value Maturity
             
Interest rate swap contracts      
USD  80,020   USD  80,020  (25,594) 22 April 2026
USD  40,010   USD  40,010  (12,021) 22 April 2026
USD  32,008   USD  32,008  (8,132) 22 April 2026
USD  28,007   USD  28,007  (7,126) 22 April 2026
Derivatives used for hedge accounting financial liabilities    (52,873)       
                     

 

Held for trading

Cross currency swap, interest rate swap, FX swap and participating cross currency swap contracts

The notional amount and the fair value of Cross currency swap, interest rate swap, FX swap and participating cross currency swap contracts held for trading at 31 March 2021 are as follows:

Sell   Buy    
Currency Notional amount   Currency Notional amount Fair Value Maturity
             
FX swap contracts      
TL  754,130   USD 100,000  79,017 2 April 2021
TL  574,028   USD 75,000  53,738 9 April 2021
TL  382,685   USD 50,000  35,825 9 April 2021
TL  373,420   USD 50,000  45,036 9 April 2021
TL  372,700   USD 50,000  45,752 9 April 2021
TL  372,190   USD 50,000  46,259 9 April 2021
TL  803,210   USD 100,000  826 16 April 2021
TL  200,303   USD 25,000  204 16 April 2021
TL  119,288   USD 15,000  8,063 30 April 2021
TL  189,065   USD 23,000  887 10 May 2021
TL  728,685   USD 90,000  46,953 24 May 2021
TL  441,408   USD 60,000  74,605 26 May 2021
TL  368,125   USD 50,000  61,896 26 May 2021
TL  367,663   USD 50,000  62,341 26 May 2021
TL  367,325   USD 50,000  62,666 26 May 2021
TL  328,298   USD 45,000  58,608 26 May 2021
TL  219,030   USD 30,000  38,913 26 May 2021
RMB  10,500   USD 1,618  188 15 April 2021
               

 

 

 

 23  

 

TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments (continued)

Held for trading (continued)

Cross currency swap, interest rate swap, FX swap and participating cross currency swap contracts (continued)

Interest rate swap contracts      
USD 20,833   USD 20,833  2,632 29 September 2028
USD 16,667   USD 16,667  3,339 29 September 2028
Cross currency swap contracts      
TL 22,752   EUR 3,600 14,297 23 September 2021
TL 188,851   EUR 19,900 17,141 2 December 2021
TL 224,100   EUR 24,000 35,793 21 December 2022
TL 79,323   USD 13,714 45,574 20 March 2023
TL 78,830   USD 13,714 45,890 20 March 2023
TL 146,870   USD 19,000 30,411 20 November 2025
TL 30,707   RMB 38,801 24,072 22 April 2026

 

Participating cross currency swap contracts

     
TL 218,295   EUR 32,008  77,972 22 April 2026
TL 148,117   EUR 24,006  66,611 22 April 2026
TL 146,677   EUR 24,006  86,780 22 April 2026
TL 73,747   EUR 10,861  21,007 22 April 2026
TL 186,058   USD 23,750  12,042 20 November 2025
TL 147,573   USD 19,000  10,580 20 November 2025
TL 95,944   USD 16,004  24,145 22 April 2026
TL 90,743   USD 16,004  29,814 22 April 2026
Held for trading derivative financial assets  1,269,877  

 

FX swap and option contracts

The notional amount and the fair value of FX swap and option contracts held for trading at 31 March 2021 are as follows:

Sell   Buy    
Currency Notional amount   Currency Notional amount Fair Value Maturity
             
FX swap contracts      
USD  25,000   TL 187,588  (20,194) 19 April 2021

 

Option contracts

     
RMB 65,000   TL 73,775  (8,770) 15 April 2021
USD 10,000   XAU 6,061 ounce  (548) 10 May 2021
USD 11,780   EUR 10,000  (877) 10 May 2021
Held for trading derivative financial liabilities  (30,389)  
               

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments (continued)

Held for trading (continued)

Currency forward contracts

The notional amount and the fair value of currency forward contracts for trading purposes at 31 March 2021 are as follows:

Buy      
Currency Notional amount   Fair Value Maturity
USD              1,000       18 1 April 2021
USD                 500       158 30 April 2021
USD                 500       443 30 April 2021
USD                 500       203 29 May 2021
USD                 500       491 29 May 2021
USD                 500       250 30 June 2021
USD                 500       540 30 June 2021
USD                 500       292 31 July 2021
USD                 500       584 31 July 2021
USD                 500       335 31 August 2021
USD                 500       629 31 August 2021
USD                 500       375 30 September 2021
USD                 500       672 30 September 2021
USD                 500       415 30 October 2021
USD                 500       715 30 October 2021
USD                 500       447 30 November 2021
USD                 500       751 30 November 2021
USD                 500       484 31 December 2021
USD                 500       789 31 December 2021
RMB            10,000       17 1 April 2021
Held for trading derivative financial assets 8,608  

 

 

Buy      
Currency Notional amount   Fair Value Maturity
USD              1,000       (15) 20 April 2021
RMB            10,000       (113) 1 April 2021
RMB            10,000       (38) 7 April 2021
RMB            10,000       (2) 7 April 2021
Held for trading derivative financial liabilities (168)  

 

 

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments (continued)

Fair value of derivative instruments and risk management

This section explains the judgments and estimates made in determining the fair values of the financial instruments that are recognized and measured at fair value in the financial statements. To provide an indication of the reliability of the inputs used in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level is as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

    Fair values
                   
    31 March
 2021
    31 December
2020
    Fair Value hierarchy   Valuation Techniques
                   
a) Participating cross currency swap contracts (*)   1,011,242    797,060    Level 3   Pricing models based on discounted cash Present value of the estimated future cash flows based on unobservable yield curves and end period FX rates
-Held for trading   328,951    251,666         
-Derivatives used for hedging   682,291    545,394         
                   
b) Cross currency swap, interest swap, FX swap and option contracts   989,538    100,440    Level 2   Present value of the estimated future cash flows based on observable yield curves and end period FX rates
-Held for trading   910,537    70,062         
-Derivatives used for hedging   79,001    30,378         
                   
c) Currency forward contracts   8,440    (2,813)   Level 2   Forward exchange rates at the balance sheet date
-Held for trading   8,440    (2,813)        

 

(*) Since the bid-ask spread is unobservable input; in the valuation of participating cross currency swap contracts, prices in the bid- ask price range that were considered the most appropriate were used instead of mid prices. If mid prices were used in the valuation the fair value of participating cross currency swap contracts would have been TL 171,929 lower as at 31 March 2021 (31 December 2020: TL 168,882).

There were no transfers between fair value hierarchy levels during the year.

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TURKCELL ILETISIM HIZMETLERI AS

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at and for the three months ended 31 March 2021

(All amounts disclosed in the condensed consolidated interim financial statements and notes have been rounded off to the nearest thousand currency units and are expressed in Turkish Liras unless otherwise stated.)

15.Derivative financial instruments (continued)

Fair value of derivative instruments and risk management (continued)

The following table presents the Group’s financial assets and financial liabilities measured and recognized at fair value at 31 March 2021 and 31 December 2020 on a hedge accounting basis:

    Fair values
Currency   Nominal Value   Maturity Date   31 March 2021   31 December 2020   Fair Value hierarchy   Hedge Ratio
                         
Participating cross currency swap contracts                
EUR Contracts   366,800   23 October 2025    280,092    221,937   Level 3   1:1
EUR Contracts   65,158   22 April 2026   51,476    53,142   Level 3   1:1
USD Contracts   216,054   22 April 2026    350,723     270,315   Level 3   1:1