Turkcell Iletisim Hizmetleri A.S. Reports First Quarter 2003 Results; Solid Fundamental Business Performance Despite Fragile Economic Climate.Business Editors ISTANBUL Istanbul (ĭs'tănb  l`, ĭstan`bl), city (1990 pop. 6,748,435), capital of Istanbul prov. , Turkey--(BUSINESS WIRE)--May 1, 2003Turkcell | Turkcell (NYSE: TKC) is a mobile phone operator in Turkey, currently the country's largest. With circa 32 million customers, it has a market share approaching 60 percent. Company background In February 1994, Turkcell started Turkey's first GSM network. (NYSE NYSE See: New York Stock Exchange :TKC TKC tightly-knit community TKC Tom Kita Chara (scouting) TKC Thomas Kvamme Consulting (Norway) , ISE Ise (ē`sā), city (1990 pop. 104,164), Mie prefecture, S Honshu, Japan, on Ise Bay. It is one of the foremost religious centers of Shinto, the site of the shrines of Ise. :TCELL) (www.turkcell.com.tr), the leading provider of mobile communications services in Turkey, announced results as of and for the quarter ended March 31, 2003. All financial results in this press release are unaudited and reported in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Figures in brackets brackets: see punctuation. following the operational and financial results of the first quarter of 2003 refer to the same item in the fourth quarter of 2002(a). Highlights -- Revenues slightly decreased 3% to US$491.1 million (US$504.9 million) for the first quarter of 2003. -- Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (b) before the impact of translation gain/loss ("Pre-FX EBITDA") increased 46% to US$198.3 million (US$135.7 million). Adjusted EBITDA after the impact of translation gain/loss ("Post-FX EBITDA") increased 43% to US$197.2 million (US$138.3 million) in the first quarter of 2003, due to a higher pre-FX EBITDA base. -- Turkcell's net income improved to US$39.5 million (loss of US$17.6 million) in the first quarter of 2003. -- Turkcell added approximately 589,000 (843,000) net new subscribers during the first quarter of 2003, increasing Turkcell's number of subscribers to 16.3 million (15.7 million) subscribers as of March 31, 2003. -- Turkcell paid a total of US$313.3 million of principal and interest including the redemption of the 1999 bank facility in the first quarter of 2003. -- Akbank agreed to extend the maturity of its outstanding loan to Turkcell, a total of US$125 million, due in May and June June: see month. 2003 to be repaid in two equal installments in 2004 and 2005. -- At March 31, 2003 Turkcell had US$308.9 million (US$394.1 million) in cash. -- Turkcell accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. approximately US$21.4 million in its Q1 2003 financials due to the frequency usage fees payment. Note (a) Please note that some of the Q4 2002 financials are amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. for the impact of the development related to the frequency usage fees. See page 5. Note (b) EBITDA is a non-GAAP financial measure. See page 9 for the reconciliation of EBITDA to net cash used for operating activities.
Summary of Financial and Operational Data
Amended
Q1 2002 Q4 2002 Q1 2003
Number of total subscribers (million) 12.7 15.7 16.3
Number of post-paid subscribers (million) 4.6 4.7 4.7
Number of pre-paid subscribers (million) 8.1 11.0 11.6
Average revenue per user, blended (US$) 11.5 10.9 10.1
Average revenue per user, postpaid (US$) 20.9 22.4 20.7
Average revenue per user, prepaid (US$) 6.0 5.9 5.7
Churn (%) 3.1 3.9 4.5
Minutes of usage, blended, per month 52.7 52.9 50.8
Revenue (US$ million) 437.2 504.9 491.1
Adjusted Pre-FX EBITDA (US$ million) 157.0 135.7 198.3
Adjusted Post-FX EBITDA (US$ million) 160.3 138.3 197.2
Translation Gain/(Loss) (US$ million) 3.3 2.6 (1.1)
Net Income/(Loss) (US$ million) 0.6 (17.6) 39.5
Editor's Note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : All figures are quarterly other than subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. numbers. Comments from the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Muzaffer Akpynar "The first quarter of 2003 was another period of uncertainty and caution for Turkey and for its economy. Unlike previous periods, the source of uncertainty was mainly outside Turkey. The military operation in Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. created both political and economic tension in Turkey as it did in the rest of the world. The Turkish economy was vulnerable to the potential consequences of a prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. war in the region, and the financial markets remained nervous during the war. This also had a negative impact on the already fragile fragile - brittle consumer confidence in Turkey. "Nevertheless, we are pleased to report that the impact of the war on Turkcell was limited. Although we observed some downside Downside The dollar amount by which the market or a stock has the potential to fall. Notes: You might hear someone say that the downside on stock XYZ is $10. What that means is that the stock could fall by this amount if things got bad. during the quarter, in general our business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets performed well in the first quarter of 2003 and fundamentals remained strong. Subscriber growth continued despite the decline in consumer confidence and our margins improved significantly due to our cost-conscious business management. As a result, we improved our bottom line during the quarter. "With the threat of war behind us, we are more optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op now. Although the situation in Iraq has not yet been fully resolved, we believe it now presents less of a risk for our business. As the armed conflict ended relatively quickly we have not seen the need to revise our year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. expectations. While we remain cautious, we hope the rest of 2003 will bring stability to our economy, providing a more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. for Turkcell." Overview Financial Results: Significant Improvement in EBITDA Margins Relatively stable revenues and reduced costs resulted in the improvement of Turkcell's bottom line in the first quarter of 2003. Revenues slightly declined 3% to US$491.1 million (US$504.9 million). Decrease in revenues from the seasonal decline in usage was partially offset by gains from a larger subscriber base and the partial impact of the tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic increase in the first quarter of 2003. Post-FX EBITDA increased 43% to US$197.2 million (US$138.3 million) in the first quarter of 2003 mainly due to a higher pre-FX EBITDA base. Post-FX margins increased to 40% (27%) for the quarter. Post-FX EBITDA was negatively effected by translation loss of US$1.1 million (gain of US$2.6 million). EBITDA margins showed significant improvement in the quarter due to an overall decline in costs. There are two main reasons for the improvement. First, the annual frequency usage fees for 2002 were expensed fully in the fourth quarter of 2002, increasing the sales and marketing costs and creating a higher cost base for the quarter. Second, the impact came from the improvement in the operational costs compared to the fourth quarter of 2002, when the company recorded a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. cost related to the transmission lines dispute with Turk See Mechanical Turk. Telekom. Turkcell's net income improved to US$39.5 million (loss of US$17.6 million) in the first quarter of 2003 as a result of relatively stable revenues and improved margins. Turkcell ended the quarter with US$308.9 million (US$394.1 million) in cash and cash equivalents. Subscriber Growth Continued Although consumer confidence in Turkey was negatively affected by the war in Iraq, Turkcell continued to increase its subscriber base in the first quarter of 2003. Turkcell increased its customer base 4% to 16.3 million (15.7 million) during the period. Total new gross additions acquired in the first quarter of 2003 consisted of approximately 91% prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. and 9% postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. subscribers. The number of Turkcell's prepaid subscribers increased to 11.6 million (11.0 million) and the number of Turkcell's postpaid subscribers remained stable at 4.7 million (4.7 million) in the first quarter of 2003. Turkcell believes that it continued to acquire more new subscribers than its competitors in the Turkish mobile market in the first quarter of 2003. Turkcell's market leadership is based on number of factors such as its well-established brand name, customer-focused approach, nationwide network coverage, extensive distribution channels and large base of existing customers. Turkcell's acquisition cost per subscriber (SAC Sac: see Sac and Fox. SAC - 1. An early system on the Datatron 200 series. [Listed in CACM 2(5):16 (May 1959)]. ) remained stable at US$23.1 (US$23.0) during the first quarter of 2003. Usage and ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. Turkcell's blended monthly minutes of usage (MoU) declined 4% to 50.8 minutes (52.9 minutes) in the first quarter of 2003. Turkcell believes that both seasonality and the decline in consumer confidence in Turkey resulting from the regional tension during the quarter negatively impacted mobile usage of its customers. Despite negative sentiment in the market, Turkcell was able to keep usage almost stable among prepaid customers through emphasis on marketing activities and sales campaigns Noun 1. sales campaign - an advertising campaign intended to promote sales ad blitz, ad campaign, advertising campaign - an organized program of advertisements sales campaign n → campaña de venta . In line with the decline in usage, postpaid ARPU decreased to US$20.7 (US$22.4) in the first quarter of 2003. Prepaid ARPU remained relatively stable at US$5.7 (US$5.9), which was consistent with stable prepaid usage. Blended ARPU declined 7% to US$10.1 (US$10.9) in 2002 due to the negative impact of lower postpaid ARPU and changes in the call traffic pattern. Competition In the first quarter of 2003, Turkcell maintained its leadership position in the Turkish mobile market in terms of both overall market share and its share of new subscriber acquisitions. Competition continued to be focused on price in the first quarter of 2003. Some of Turkcell's competitors continued their lower tariff campaigns throughout the quarter where further sacrifices from their "future" revenues were made. Naturally, competition was not as aggressive on new subscriber acquisitions, which would require cash outlay in the form of operator subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. . Therefore, competitors generally followed the price increases of Turkcell on its starter packs A starter pack (or starter deck) is a sealed package of cards or figurines, designed to serve as the beginning of a collection, in collectible card games and collectible miniature wargames. Starter packs usually contain a fairly large number of items. during the quarter. This explains how Turkcell could lower its subscriber acquisition cost per subscriber without sacrificing significant loss of market share in new acquisitions. Despite the pressure from its competitors, Turkcell increased its tariffs This is a list of tariffs and trade legislation:
adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time strategy, Turkcell continued to focus on promoting volume-based discounts to selective segments such as high-usage customers, emphasizing its loyalty programs and high quality services. Turkcell's churn churn: see butter. level increased 15% to 4.5% (3.9%) in the first quarter of 2003. The increase in churn is due to the increased competition and the decline in disposable income disposable income Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also as a result of economic difficulties of the last two years. Turkcell's priority remains to focus on its high-value subscriber base and keep its market-leading position in new subscriber additions. Turkcell is also focused on increasing loyalty and usage through innovations such as the recent launch of Mobile Payment services, which enable users to pay for certain goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. with their mobile phone. Turkcell believes that its strong positive brand image, the variety and quality of its product portfolio, its strong distribution channels, and its high-quality network remain key factors in maintaining its leading position in the Turkish mobile market. Debt Repayment Turkcell's strong business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point enabled it to generate solid cash flow from its operations in the first quarter of 2003. During the period, Turkcell paid a total of US$313.3 million of debt in principal and interest, including the outstanding balance of US$244.4 million of the 1999 Bank Facility. As of 31 March 2003, Turkcell's total outstanding financial debt was reduced to approximately US$1.0 billion from US$1.3 billion at the end of 2002. In the first quarter of 2003, Turkcell agreed to extend the principal payments of the loan from Garanti Bank Garanti Bank is the third largest-private bank in Turkey with USD$24.4 billion in assets as of September 30, 2005. Garanti provides retail, commercial, corporate and private banking services to over five million customers. , totaling US$75 million. This amount is scheduled to be paid in installments until 2006. The payment of the 1999 Bank Facility removed certain covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the restrictions on Turkcell and the extension of the Garanti Bank loan increased Turkcell's financial flexibility. Turkcell continues to evaluate different options to improve its debt structure by decreasing the cost of funding and extending the average maturity. In line with this policy, Turkcell agreed to extend the maturity of the loan from Akbank, a total of US$125 million, due in May and June 2003 to be repaid in two equal installments in 2004 and 2005. In the remainder of 2003, Turkcell plans to pay approximately US$181.0 million of outstanding debt, including principal and interest, with cash generated from operations. Turkcell anticipates that it will have no difficulty in meeting its repayment obligations in 2003. Key Developments In Legal Issues Dispute on the Frequency Usage Fees of Prepaid Subscribers: In January January: see month. 2002, Turkcell applied to the Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. Authority (the Authority) requesting it to review the protocol obligating Turkcell to collect frequency usage fees from its subscribers on the grounds that it was impossible to collect these fees from prepaid subscribers. Upon the request of the Authority in February February: see month. 2002 to pay the frequency usage fees, Turkcell filed a lawsuit lawsuit: see procedure; tort. against the Authority requesting cancellation of the protocols obligating it to collect the frequency usage fees from the prepaid subscribers. In July July: see month. 2002, the court decided in favor of upon the side of; favorable to; for the advantage of. See also: favor Turkcell. However, the Authority appealed the decision and the Supreme Court accepted the Authority's appeal and annulled the decision of the lower court on March 29, 2003. Turkcell had not provided for such fees in its financials as of December December: see month. 31, 2002 due to the favorable decision gained previously. Turkcell received a payment order for the annual frequency usage fee of TL86.6 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. (US$54.9 million, as of April 30, 2003), in principal and interest, for the year 2003. Turkcell will make the payment in seven days, however it provided US$14.7 million for principal and accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. in the first quarter of 2003. The remaining balance of the 2003 annual frequency usage fee will be expensed in three equal quarterly installments during the rest of the year. No such accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. was made in the first quarter of 2002. Turkcell did not pay the fees for 2002, since the legal process regarding the dispute is ongoing but it amended its year-end 2002 financial statements by providing TL52.3 trillion (US$33.0 million) in principal and TL36.6 trillion (US$23.1 million) of interest. This provision significantly impacted the selling and marketing cost and net interest expense items in the fourth quarter of 2002. Additionally, accrued interest of TL10.9 trillion (US$6.6 million) for the unpaid principal amount was expensed in the first quarter of 2003. For your information a table showing the items amended in the year-end 2002 financial statements has been included at the end of this press release. Update on Tax Amnesty Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period or periods and without fear of criminal prosecution. Law: In February 2003, the Turkish government passed the Tax Amnesty Law in order to accelerate the collection of disputed or unpaid tax liabilities from companies. In its press release for the 2002 year end financial results, Turkcell announced that it will benefit from the new law in terms of the ongoing dispute relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc VAT VAT See: Value-added tax VAT See value-added tax (VAT). on upfront license fee. Under the same law, Turkcell also applied for a settlement in its dispute relating to VAT on the ongoing license fee. Turkcell's application was accepted and accordingly, it benefited from the new law in respect to VAT on the ongoing license fee. International Operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. Fintur's GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. businesses in Azerbaijan Azerbaijan, country, Asia Azerbaijan (ä'zərbījän`, ă'zər–), Azeri Azərbaycan, officially Republic of Azerbaijan, republic (2005 est. pop. 7,912,000), 33,428 sq mi (86,579 sq km), in Transcaucasia. , Kazakhstan Kazakhstan or Kazakstan (kä'zäkstän`), officially Republic of Kazakhstan, republic (2005 est. pop. 15,186,000), c.1,050,000 sq mi (2,719,500 sq km), central Asia. , Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. and Moldova Moldova (məldō`və), officially Republic of Moldova, republic (2005 est. pop. 4,455,000), c.13,000 sq mi (33,670 sq km). Chişinău (formerly Kishinev) is the capital and largest city. added approximately 113,000 (110,000) new subscribers in the first quarter of 2003, bringing the total subscriber numbers to approximately 1.7 million (1.6 million) subscribers as of 31 March 2003. The combined revenue of the business was US$65 million (US$65 million) for the first quarter of 2003 and the business was EBITDA positive in all countries. Turkcell owns 41.45% of Fintur and accounts for its investment in Fintur using the equity method. Shareholder Issues On June 18, 2002, the Banking Regulation and Supervision Agency (the BRSA BRSA British Rope Skipping Association BRSA Baton Rouge Soccer Association BRSA Banking Regulatory and Supervision Agency (Turkey) BRSA Blue Ridge Soccer Association (Virginia) ) transferred the management and supervision of Pamukbank, one of Turkcell's shareholders to the Savings Deposit Insurance Fund of Turkey (the SDIF SDIF SGML Document Interchange Format SDIF Saving Deposit Insurance Fund (Turkey) SDIF Sony Digital Interface Format SDIF Standard Document Interchange Format SDIF Sequential Difference SDIF Sound Description Interface Format ) citing, among other things, a failure to meet capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . On January 31, 2003, the BRSA announced that it reached an agreement with the Cukurova Group, the controlling shareholder of Pamukbank. On April 25, 2003, all Turkcell shares directly owned by Pamukbank and Pamuk Factoring, were transferred to the Cukurova Group by the SDIF, in line with the agreement between the Cukurova Group and the BRSA. Financial and Operational Review The following discussion focuses principally on the developments and trends in Turkcell's business in the first quarter of 2003 compared to the fourth quarter of 2002. For your information, selected financial information for the first quarter of 2002 is included at the end of this press release. 1. SUBSCRIBERS Turkcell acquired approximately 589,000 (843,000) net new subscribers in the first quarter of 2003. New gross subscribers acquired in the first quarter of 2003 consisted of 91% prepaid and 9% postpaid subscribers. Turkcell's subscriber base increased 4% to 16.3 million (15.7 million) at March 31, 2003. The overall subscriber base at March 31, 2003 consisted of 11.6 million prepaid and 4.7 million postpaid subscribers. 2. REVENUES Total revenues slightly decreased to US$491.1 million (US$504.9 million) in the first quarter of 2003. Decrease in revenues created by the seasonal decline in usage was partially offset by the revenue gain from a larger subscriber base and the partial impact of the tariff increase in the first quarter of 2003. 3. ARPU Turkcell's blended average monthly revenue per customer per month (ARPU) declined 7% to US$10.1 (US$10.9) in the first quarter of 2003 due to the decline in usage and changes in the call traffic pattern. Turkcell's average revenue per postpaid customer per month declined 8% to US$20.7 (US$22.4) in the first quarter of 2003 mainly due to the decline in usage during the quarter. Turkcell's average revenue per prepaid customer per month remained almost stable at US$5.7 (US$5.9) in the first quarter of 2003 due to Turkcell's continued intensive volume-based campaigns to encourage prepaid usage. 4. MoU Turkcell's average monthly minutes of use (MoU) per user decreased 4% to 50.8 minutes (52.9 minutes) in the first quarter of 2003. MoU decreased mainly due to the negative sentiment in the market. The usage of new additions had no material dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). on average postpaid and average prepaid MoU during the first quarter of 2003. 5. EBITDA Post-FX EBITDA increased 43% to US$197.2 million (US$138.3 million) in the first quarter of 2003 mainly due to a higher pre-FX EBITDA base. Post-FX margins increased to 40% (27%) for the quarter. Post-FX EBITDA was negatively effected by translation loss of US$1.1 million (gain of US$2.6 million). Pre-FX EBITDA increased 46% to US$198.3 million (US$135.7 million) in the first quarter of 2003 due to stable revenues and lower cost base. Pre-FX EBITDA margin improved to 40% (27%) for the same period. 6. TRANSLATION LOSS Turkcell posted a translation loss of US$1.1 million (gain of US$2.6 million) in the first quarter of 2003 resulting from the 4% depreciation (1% appreciation) of the Turkish Lira against the US Dollar in the first quarter of 2003. 7. CHURN RATE (1) The percentage of customers who cancel their online, cellphone or other subscription service during a certain time period. (2) The percentage of employees who leave the company during a certain time period. See churning. Churn refers to disconnected subscribers, both voluntary and involuntary involuntary adj. or adv. without intent, will, or choice. Participation in a crime is involuntary if forced by immediate threat to life or health of oneself or one's loved ones, and will result in dismissal or acquittal. INVOLUNTARY. . For the first quarter of 2003, Turkcell disconnected approximately 43,000 subscribers for non-payment non-payment Noun failure to pay money owed non-payment n → Nichtzahlung f, Zahlungsverweigerung f non-payment n of bills. Turkcell's quarterly churn rate increased 15% to 4.5% (3.9%) in the first quarter of 2003. Turkcell believes that it has an adequate bad debt provision in its financial statements for such non-payments and disconnections. 8. PROFIT & LOSS AND BALANCE SHEET STATEMENTS Net Income Turkcell posted net income of US$39.5 million (loss of US$17.6 million) for the first quarter of 2003. Increase in net income was due to relatively stable revenues and lower costs. Direct Cost of Revenues Direct cost of revenues declined 15% to US$326.7 million (US$363.4 million) for the first quarter of 2003. Direct cost of revenues declined mainly due to the absence of the one time cost recorded in the fourth quarter of 2002, related to the transmission lines dispute with Turk Telekom. Depreciation and Amortization Depreciation and amortization expenses remained almost stable at US$105.1 million (US$102.2 million) for the first quarter of 2003. Selling and Marketing Expenses Selling and marketing expenses decreased 39% to US$49.0 million (US$80.7 million) for the first quarter of 2003. The decline was significant as the annual frequency usage fees for 2002 were expensed fully in the fourth quarter of 2002, increasing the sales and marketing costs and creating a higher cost base for the quarter. Turkcell recorded US$33.0 million of the annual frequency usage fees for the year 2002 in the fourth quarter of 2002 and US$11.5 million of the principal portion for the first quarter of 2003. Acquisition cost per subscriber remained stable at US$23.1 (US$23.0) in the first quarter of 2003. General and Administrative Expenses General and administrative expenses decreased 18% to US$22.2 million (US$27.2 million) for the first quarter of 2003 mainly as a result of decrease in bad debt expense. Bad debt expense, before deducting collections, as a percentage of revenues, was 2.6% (3.3%) for the first quarter of 2003. Equity in Net Income of Unconsolidated Investees Equity in net income of unconsolidated investees was US$2.2 million (US$3.0 million) for the first quarter of 2003. Equity in net income/(loss) of unconsolidated investees figure is not comparable to the previous year's figure as the business area and ownership of Fintur has changed due to the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of Fintur completed in August 2002. Net Interest Income (expense) Net interest expense decreased 11% to US$60.2 million (US$67.4 million) for the first quarter of 2003. Net interest expense decreased as the interest charges expensed in the fourth quarter of 2002 related to the frequency usage fees inflated the interest expense in the fourth quarter of 2002. Turkcell recorded US$23.0 million for the interest of the annual frequency usage fees for the year 2002 in the fourth quarter of 2002 and US$9.8 million in the first quarter of 2003. Total Assets In the first quarter of 2003, Turkcell's total assets decreased by 5% to US$3.071.9 million (US$3,233.5 million) at March 31, 2003. Capex (CAPital EXpenditures) Refers to the cost of developing a product or system. OPEX (operating expenditures) are the ongoing costs for running it. For example, the purchase of a printer is the CAPEX, and the annual paper and ink cost is the OPEX. Capital expenditures in the first quarter of 2003 were US$50.6 million (US$10.8 million). Debt As of March 31, 2003, Turkcell had a total indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. of US$1,048.9 million (US$1,308.2 million). Reconciliation of Non-GAAP Financial Measures Adjusted Post-FX EBITDA equals net income (loss) before net interest, minority interest, income(loss) from related parties, other income (expense), equity in net income (loss) of unconsolidated investees, income tax benefit (expense), depreciation and amortization. Adjusted Pre-FX EBITDA equals net income (loss), before net interest, minority interest, income from related parties, other income (expense), equity in net income (loss) of unconsolidated investees, income tax benefit (expense) depreciation and amortization and translation gain (loss). Adjusted Post-FX and adjusted Pre-FX EBITDA are not measurements of liquidity or financial performance under US GAAP and should not be construed as substitutes for cash flow from operating activities as a measure for liquidity. The SEC recently adopted new rules regarding the use of non-GAAP financial measures. We believe Post-FX and Pre-FX EBITDA, measures commonly used in the telecommunications industry, can enhance the understanding of our operating results. We are continuing to monitor developments in the interpretation of these new rules and will make adjustments to the use of non-GAAP measures as may be required.
Q1 2003 Q1 2002 Q4 2002
EBITDA 232.3 176.6 168.4
Minority interest 0.4 0.1 0.2
Income (loss) from related parties, net 2.0 0.0 (0.3)
Other income (expense), net 3.0 2.7 10.7
Equity in net (income) loss of
unconsolidated investees 2.2 (19.3) 3.0
Interest Income 27.5 32.8 16.5
ADJUSTED EBITDA (POST-FX) 197.2 160.3 138.3
Translation gain (loss) (1.1) 3.3 2.6
ADJUSTED EBITDA (PRE-FX) 198.3 157.0 135.7
Translation gain (loss) (1.1) 3.3 2.6
Net interest expense (60.2) (40.7) (67.4)
Other income (expense), net 3.0 2.7 10.7
Income (loss) from related parties, net 2.0 0.0 (0.3)
Net increase (Decrease) in assets and
liabilities 74.2 5.2 131.3
NET CASH USED FOR OPERATING ACTIVITIES 216.2 127.5 212.7
Forward Looking Statements This release may include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the US Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. All statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue." 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. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by reference to these cautionary statements.
SELECTED FINANCIALS
Quarter Quarter Quarter
Ended Ended Ended
March 31, December 31, March 31,
2002 2002 2003
-------------------------------
Consolidated Statement of Operations Data
Revenues
Communication fees 417.3 489.6 475.9
Monthly fixed fees 11.4 9.4 9.0
Subscription fees 0.0 0.0 0.0
SIM card sales 5.8 4.1 4.3
Call center revenues 2.5 1.6 1.6
Other 0.2 0.2 0.3
Total revenues 437.2 504.9 491.1
Direct cost of revenues (312.7) (363.4) (326.7)
-------------------------------
Gross profit 124.5 141.5 164.4
General & administrative expenses (25.2) (27.2) (22.2)
Selling & marketing expenses (44.8) (80.7) (49.0)
-------------------------------
Income from operations 54.5 33.6 93.2
Income (loss) from related parties,
net 0.0 (0.3) 2.0
Net interest expense (40.7) (67.4) (60.2)
Other Income (expense), net 2.7 10.7 3.0
Equity in net income (loss) of
unconsolidated investees (19.3) 3.0 2.2
Minority interest 0.1 0.2 0.4
Translation Gain/Loss 3.3 2.6 (1.1)
-------------------------------
Income (loss) before taxes 0.6 (17.6) 39.5
Income tax benefit (expense) 0.0 0.0 0.0
-------------------------------
Net income (loss) 0.6 (17.6) 39.5
-------------------------------
Net income (loss) per share 0.000001 (0.000035) 0.000079
Other Financial Data
Gross margin 28.5% 28.0% 33.5%
Adjusted EBITDA(c) 160.3 138.3 197.2
Adjusted EBITDA margin 36.7% 27.4% 40.2%
Capital expenditures 13.1 10.8 50.6
Consolidated Balance Sheet Data (at
period end)
Cash and cash equivalents 289.7 394.1 308.9
Total assets 3,546.6 3,233.5 3,071.9
Long term debt 1,165.2 925.0 922.7
Total debt 1,567.5 1,308.2 1,048.9
Total liabilities 2,260.9 1,903.0 1,701.3
Total shareholders' equity/ Net
Assets 1,285.7 1,330.5 1,370.6
Capital stock 636.1 636.1 636.1
Consolidated Cash Flow Information
Net cash (used in) provided by
operating activities 127.5 212.7 216.2
Net cash used in by investing
activities (13.1) (10.8) (60.1)
Net cash (used in) provided by
financing activities (67.8) (113.2) (241.2)
Note (c) Please refer to the notes on reconciliation of Non-GAAP
financial measures
TURKCELL ILETISIM HIZMETLERI A.S.
Amended Full Year 2002 Financials
Announced on Amended
13 March 2003
---------------------- -----------------------
Quarter Year Quarter Year
Ended Ended Ended Ended
December December December December
31, 2002 31, 2002 31, 2002 31, 2002
----------- ---------- ------------ ---------
Consolidated Statement
of Operations Data
Revenues
Communication fees 489.6 1,911.0 489.6 1,911.0
Monthly fixed fees 9.4 40.9 9.4 40.9
Subscription fees 0.0 0.0 0.0 0.0
SIM card sales 4.1 13.3 4.1 13.3
Call center
revenues 1.6 7.9 1.6 7.9
Other 0.2 0.8 0.2 0.8
Total revenues 504.9 1,973.9 504.9 1,973.9
Direct cost of revenues (363.4) (1,366.9) (363.4) (1,366.9)
----------- ---------- ------------ ---------
Gross profit 141.5 607.0 141.5 607.0
General & administrative
expenses (27.2) (104.5) (27.2) (104.5)
Selling & marketing
expenses (47.7) (190.5) (80.7) (223.5)
----------- ---------- ------------ ---------
Income from operations 66.6 312.0 33.6 278.9
Income (loss) from
related parties, net (0.3) (0.2) (0.3) (0.2)
Net interest expense (44.3) (183.7) (67.4) (206.8)
Other Income (expense),
net 10.7 13.6 10.7 13.6
Equity in net income
(loss) of
unconsolidated
investees 3.0 (20.4) 3.0 (20.4)
Minority interest 0.2 0.3 0.2 0.3
Translation Gain /
Loss 0.9 (19.8) 2.6 (18.0)
----------- ---------- ------------ ---------
Income (loss) before
taxes 36.8 101.8 (17.6) 47.4
Income tax benefit
(expense) 0.0 0.0 0.0 0.0
----------- ---------- ------------ ---------
Net income (loss) 36.8 101.8 (17.6) 47.4
----------- ========== ============ =========
Net income (loss) per
share 0.00007 0.00020 (0.00004) 0.00009
Other Financial Data
Adjusted EBITDA(a) 169.6 703.8 138.3 672.5
Adjusted EBITDA margin 33.6% 35.7% 27.4% 34.1%
Consolidated Balance
Sheet Data (at period end)
Cash and cash
equivalents 394.1 394.1 394.1 394.1
Total assets 3,233.5 3,233.5 3,233.5 3,233.5
Long term debt 800.0 800.0 925.0 925.0
Total debt 1,308.2 1,308.2 1,308.2 1,308.2
Total liabilities 1,848.6 1,848.6 1,903.0 1,903.0
Total shareholders'
equity / Net Assets 1,384.9 1,384.9 1,330.5 1,330.5
Differences
--------------------------------------
Quarter Ended Year Ended
December 31, December 31,
Consolidated Statement
of Operations Data
Revenues
Communication fees 0.0 0.0
Monthly fixed fees 0.0 0.0
Subscription fees 0.0 0.0
SIM card sales 0.0 0.0
Call center revenues 0.0 0.0
Other 0.0 0.0
Total revenues 0.0 0.0
Direct cost of revenues 0.0 0.0
----------- ----------
Gross profit 0.0 0.0
General & administrative
expenses 0.0 0.0
Selling & marketing
expenses (33.0) (33.0)
----------- ----------
Income from operations (33.0) (33.0)
Income (loss) from
related parties, net 0.0 0.0
Net interest expense (23.1) (23.1)
Other Income (expense), net 0.0 0.0
Equity in net income
(loss) of unconsolidated
investees 0.0 0.0
Minority interest 0.0 0.0
Translation Gain /
Loss 1.7 1.7
----------- ----------
Income (loss) before
taxes (54.4) (54.4)
Income tax benefit
(expense) 0.0 0.0
----------- ----------
Net income (loss) (54.4) (54.4)
=========== ==========
Other Financial Data
Adjusted EBITDA(*) (31.3) (31.3)
Consolidated Balance
Sheet Data (at period end)
Cash and cash
equivalents 0.0 0.0
Total assets 0.0 0.0
Long term debt 125.0 125.0
Total debt 0.0 0.0
Total liabilities 54.4 54.4
Total shareholders'
equity / Net Assets (54.4) (54.4)
* Please refer to the notes on reconciliation of Non-GAAP
financial measures.
Please note that some of the Q4 2002 Financials are amended for the
impact of the development related to the frequency usage fees.
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