Operator: Good day everyone and welcome to the First Quarter 2017 Results Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the conference over to Korhan Bilek, Director of Investor Relations and Mergers and Acquisitions. Please go ahead, sir.

Korhan Bilek: Thank you, April.

Hello, everyone. Welcome to Turkcell's first quarter 2017 results call. Today's speakers are our CEO, Mr. Kaan Terzioglu and our CFO, Mr. Bulent Aksu.

Our C-level executives and IR team are also participating in the call. We have a brief presentation and afterwards we will be taking your questions. Before we start, I would like to remind you to review the disclaimer of our presentation. Now, I hand over to Mr. Terzioglu.

Kaan Terzioglu: Thank you, Korhan. Good afternoon and good evening everyone. Welcome to Turkcell’s first quarter 2017 results call. We are pleased to share the steps we have taken towards our goal of digital transformation set in 2015. Over the past two years, we have evolved into a digital services company creating our own technologies and providing our services globally, while maintaining our leading position in the telecommunications sector.

We continue to up the benefits of our efforts and vision. This quarter we have beaten our previous at both the top line and at EBITDA levels. In-line with our plans, our digital products and services became our gateway to the world. And as the Turkcell family, we have made a strong start to 2017 having transformed from Turkey’s GSM operator to work global digital services company with our pioneering technology. Reflecting this transformation as the first quarter, 18% of Turkcell revenue now comes from digital services.

I will talk more on this in the upcoming slides. Let me briefly summarize the highlights of this quarter. Following the previous quarter's record results, we saw new highs in revenue and EBITDA growth, the highest of the past 10 years, both at group and Turkcell Turkey level. We also saw all-time high quarterly revenue and EBITDA at the group level. An EBITDA margin of 34.5 was the highest since 2009.

In April, we completed the first year of 4.5G and are happy to see that our investments are paying off as the customers receptiveness to a services remain at very high levels. On the back of our investments and growing customer demands, our data and digital services revenues registered 94% growth from the first quarter of 2016. The share of multiplay customers using our mobile, voice, data, and digital services doubling yearly reached 42%. Meanwhile, the total downloads of our digital services applications exceeded 53 million. Our balance sheet focus remains intact and short FX position under control at just 91 million USD.

In April, our consumer finance company, Financell, made a notable contribution to this focus achieving a first, issuing an asset-backed security in the non-banking sector. Financell also supported our Smartphone penetration, which reads 68% on the 4 percentage point quarterly increase. In short, we have made a strong start and we progress in-line with our 2017 targets. Last but not the least, to date our board has decided to propose 1.8 billion TL to be exact 1.791 billion gross cash dividends to the approval of our upcoming general assembly meeting to be held on May 25. This figure is perfectly in-line with our payout ratio stated in our dividend policy.

Please note that the dividend distribution will be subject to the approval of the general assembly. Let me get into the details with a brief overview of the first quarter results. In Q1, Turkcell Group recorded 25.6% revenue and 39.8% EBITDA growth, the highest of the past 10 years. This set of growth rates may also be a world record among the well-established telecom companies of this quarter. This clearly sets us apart from the rather flat nature of the Telco business.

Our figures also spell all-time high quarterly revenue and EBITDA in nominal terms at the group level. Our net income is 459 million TL, meeting the market consensus. As you are well aware, this year's results include amortization expenses of the 4.5G license and also higher interest expenses. Our capital expenditures remain under control at 13% of revenues. Now, I will go further into the details of Turkcell Turkey, which constitutes 88% of group revenues.

Moving to the next page. Coming to our Turkcell Turkey performance in the first quarter, our revenues grew by 21.7% to 3.6 billion TL. We recorded 38.5% growth in EBITDA to 1.3 billion TL. Revenue growth, including financial services was at 25.4%. In first quarter, we had the 65 million TL contribution of the universal service project, which is aimed at building and operating infrastructure in unserved rural areas, contractually this project is financed by universal service fund on a net cost basis.

Net of this impact, our Q1 EBITDA margin will be 35.9%. Moving to the next page. Let’s elaborate further on Turkcell Turkey's operational performance. We have seen 496,000 total net adds in Turkey with a balanced portfolio growth. On the mobile side, we registered 351,000 net additions, 298,000 in postpaid and 53,000 in prepaid.

On the fix side, our customer base continues to grow to 2 million customers on 103,000 quarterly net adds, of which 42,000 were fiber and 62,000 were ADSL. IPTV customers reached 402,000 on 42,000 quarterly net additions. Mobile blended ARPU rose 30.5 TL registering record high year-on-year growth of 17.3% in first quarter. This performance came on top of 10% rise from Q1 2015 to Q1 2016 confirming the consistent growth trend. Mobile ARPU growth was mainly driven by our upsell efforts, a favorable change in customer mix, and increased data and digital services usage enabled by our 4.5G network.

This also confirms our strategy of reflecting inflationary pricing to our tariffs. A higher triple play ratio of 42%, positively impacted the ARPU rise as well. Fixed residential ARPU rose 5.6% in Q1 with the rise of multiplay customers of TV to 39% of total residential fiber customers along with upsell efforts. Mobile churn declined 2.5 percentage points in Q1 year-on-year, thanks to our value focused customer strategy and digital services driven value proposition that meets customer needs. Moving to the next page.

We have concluded the first year of 4.5G in April successfully with a fast roll out of investments and we have reached 83% population coverage across all 81 cities of Turkey. Over 21 million customers subscribed to our 4.5G services. Today, around 12 million Smartphones on our network are 4.5G compatible. This picture represents an untapped potential of more than doubling 4.5G customers in our network. Existing 4.5G user’s data consumption reached 5.1 gigabytes in March 2017 boosting for a capital data consumption of all users.

Our average data consumption per user has reached 69% year-on-year to 3 gigabytes. Over the past 10 days, we had three more record days in data consumption. Our Smartphone penetration in Turkey continue to rise reaching 68% at the end of first quarter, while the share of 4.5G compatible Smartphones reached 57%. Next slide. Our 4.5G enabled customers to benefit a greater extent from our services.

And they started enjoying the experience, digital service take-up rates continue to rise. On the mobile side, the increased penetration of our digital services has led to consistent growth of our triple play customers. Today, doubling the level a year ago, 42 out of every 100 mobile customers uses at least one of our digital services. The main campaign that introduces our services to our customers is the phenomenal shake and win campaign of my account application. The success of this campaign was evident in Q4 and we plan to continue in 2017.

On the fixed side, our multiplay ratio in total fiber residential customers, which includes voice data and TV plus users rose 9 percentage points to 39% year-on-year. This multiplay ratio represents a great potential for a significant ARPU uplift and continued decrease in churn rates. Our triple play customers generate almost 3 times higher ARPU than single play customers. Next page. Both OTT TV and IPTV are important components of our convergence strategy and the number of subscribers actively using both platforms has been rising.

In the first quarter, TV users reached 1.3 million, doubling from a year ago. As of April, the Turkcell TV mobile app has been downloaded 2.9 million times. On the back of our wide spectrum and technology offering, Turkcell TV Plus has cemented its [indiscernible] TV viewing experience on mobile devices. Mobile TV viewing duration has increased from 7 minutes to 40 minutes since its launch and it is steadily rising. In 2017, we continue to expand our rich TV content, TV plus packages will be enriched with movies and TV shows, as well as sports content.

Next slide. Digital services are a key component of our strategy. In the first quarter, total downloads of our core digital services reached 51.4 million, compared to 26.1 million the previous year. As of April, total downloads reached $53.3 million. Our new generation communication platform BiP, continued its rapid rise surpassing 12.9 million downloads to date.

In March 2.3 million voice and video calls were made through BiP. Turkey's largest digital music provider Fizy, broadcasted Turkey's high school music competition and enabled the online audience to vote. The competition boosted daily users in the first quarter of 2017. To date, Fizy downloads have reached 9.1 million. On a daily basis, 4.9 million songs are listened on Fizy and 1.9 millions are streamed per month.

Our customer service app, my account has been downloaded 17.4 million times to date with the catalytic effect of shake and win campaign. To date our customers have participated 44 million times in the campaign. Turkey's most widely used personal cloud Lifebox rose 4.3 million downloads. Our digital publishing service Dergilik, which has 300 magazines have reached 1.3 million downloads. We have radically changed the calling experience with UPCALL.

This app provides caller ID’s even if the caller is not recorded in the user's phone book, UPCALL has been downloaded 700,000 times to date. This app reveals not only on our true OTT capability, but also on Telco infrastructure. It is one of the cornerstones of our strategy of reinforcing our digital services with our Telco muscle creating a new experience that other digital service providers cannot match. Next page. Now let’s look into the growth engines, data and digital services.

Data and digital services revenues, which comprised 67% of Turkcell Turkey's revenues saw 94.2% year-on-year growth to 2.4 billion TL. In the first anniversary of 4.5G, mobile data revenues continued their solid growth rising 89%. Higher Smartphone penetration and increased number of data users, higher consumption per user, and the positive impact of the abolishment of the retail price control have contributed to this result. Meanwhile fixed data revenues were up 32%, due to the rise in the customer number and greater usage. Revenues from digital services almost tripled to 631 million TL.

This growth comes from mainly from Turkcell TV plus. Turkcell's digital publishing service Dergilik and our music platform Fizy, as well as personal cloud service Lifebox and other mobile services. Next page. Our evolution into a service company is a continuous process, while adding new digital services we are also expanding our services portfolio into Fintech and lately to energy. In the Fintech area, through Financell active since March 2016, we gave our customers financing options for their smart devices purchases.

Financell enables Turkcell to manage cash flow efficiently and boost its revenue stream and meanwhile the increase Smartphone penetration help sustain the growth of data and digital services. Paycell gives our customers differentiated payment options. In the first quarter, 3.4 million customers used mobile payment, and we observed close to four-fold increase in transaction volume. We plan to introduce our new generation prepaid comments payments card, Paycell card following the regulatory approval. Within three years of following this launch, we aim at 10 million Paycell Card users.

Next, I want to elaborate further on our newly established energy company. Let me briefly discuss our plans regarding the energy business. As experts in telecom industry you may be familiar with the global conversion trends of the telecom and energy sectors. Once again, Turkcell with its customer centric approach is at the forefront of this trend. With our expertise and customer service and billing and our dynamic sales channel all underpinned our strong brand equity, we will leverage our key capability to provide superior customer experience in the energy area.

This way we will also be complimenting our partners in the energy distribution market. This model will offer new value propositions to improve customer experience through our smart solutions and uninterrupted services. As a one-stop shop meeting all our customers’ needs, we will surely increase loyalty while attracting new customers. Moving to the next slide. On the first anniversary, our consumer finance business Financell continues its steady growth.

We have made available 3 billion TL of credit lines to our customers. Financell upheld Turkey's long market leader tradition granting 85% of total loans, number of loans in the consumer finance sector. Thanks to Financell, there was a strong demand for contracted smart devices. This enables the rise in the Smartphone penetration of our subscriber base, and we expect the high demand for Smartphones to continue, coupled with more frequent replacement. This will support our loan volume as well.

In order to fund this expected growth in-line with our active balance sheet management focus we started securitizing our receivables in April. We will further discuss this in the financial section Bulent will explore further. Bulent it’s yours. Sorry. For the Turkcell International.

Now we turn to the Turkcell International, which comprises 6% of our group revenues. Our international operations grew by 26% year-on-year to 248 million TL for the quarter with an EBITDA margin of 24.3%. Lifecell in Ukraine is the major component of our international business, with a 64% in sales. Lifecell revenues rose 24.3% in TL terms, positively impacted by the rise in mobile data revenues enabled by higher data usage on the 3G network. Where Lifecell is the leader in geographic coverage in the country favorable foreign currency rates also contribute to the top line growth in TL terms.

The EBITDA margin came in 27.1%, excluding the impact of the tower business sales and leaseback operation, the margin will be 30.1%. In the first quarter Belarus operations were impacted by one-off items, mainly inventory cleaning, excluding these revenues grew 50.6% with an EBITDA margin of 7.5%. BeST continued to offer 4G services in Minsk while adding Vitebsk and Grodno to its coverage area at the end of the quarter. Part of Turkcell's digital services strategy BeST launches mobile TV and gaming services. Our Northern Cyprus operation recorded 12% year-on-year growth with 36% EBITDA margin.

The users of digital brand Lifecell in Cyprus with 1% penetration generate 45% more ARPU than a postpaid customer and customers who will switch to Lifecell increase their data consumption by 25%. Now, I will hand over to Bulent for the financial section.

Bulent Aksu: Thank you, Kaan. Good afternoon and good evening to all participants. Let's take a closer look into the financials.

In the first quarter, group revenues rose by 26% corresponding to 827 million TL in nominal terms. This growth came mainly from the strong ARPU platforms of Turkcell Turkey, driven by solid data and digital services. Turkcell International EBITDA and incremental 51 million TL to our revenues and Turkcell consumer finance company is one of the strong contributors to growth with an additional 114 million TL. EBITDA rose by 40% year-on-year to 1.4 billion TL. This was mainly due to a solid rise in revenues and an effective OPEX management program.

As a result, the EBITDA margin improved by 3.4 percentage points to 34.5%. Moving onto the next page. The first quarter presented net income of 459 million TL. 398 million TL higher EBITDA was partly offset by a 174 million TL higher amortization expense, related to the 4.5G investments. Additionally, net income was negatively impacted by increased interest expense related to loans and 102 million TL rising translation losses, including the impact of swap contracts.

Fintech’s contribution to our net income was 50 million TL in quarter one of 2016, yet had expected it made no P&L impact in this quarter. That is why we see a negative 15 million TL change from last year on the chart. Moving on to the next page. Now, I would like to talk about our balance sheet and leverage details. In the first quarter, our net debt position was at 4.3 billion TL compared to the previous quarter.

This represents a rise of 551 million TL, almost fully led by the increase in our consumer finance company's step. In line with our active balance sheet management, we securitized 100 million TL of our receivables in effort [ph] as Turkey's first asset backed security of a non-bank institution. This will augment our cash generation capability at the group level, as managed our working capital requirement more efficiency, and there is more to come, which will further boost cash generation. With the improvement in EBITDA, we maintained a low net debt to EBITDA ratio of 0.9 times in the first quarter. Moving onto the next page.

During the quarter, our cash position rose to 6.5 billion TL. The major cash flow of the items of the quarter include an EBITDA of 1.5 billion TL, capital expenditure of 571 million TL, of which 533 million TL was related to Turkcell Turkey, decrease in trade receivables of 698 million TL, increasing trade receivables of 277 million TL. Prepaid subscribers for the country usage fee payment of 309 million TL. And the positive impact of 293 million TL change in other working capital items. Moving onto the next page.

Now, I will go into the management of foreign currency risk. We continue to reduce our short FX position turning to below US$ 100 million, which is negligible when compared to the size of our balance sheet. As a hedging mechanism, we hold 69% of our cash in hot currency. Our short FX position of 91 million USD also takes into account the advance payments of purchases and assumes payment of the final 4.5G rise of installments in key terms. In fact today, we made the final installment payment for our 4.5G license.

In addition to our existing hedging strategy, we have taken important steps towards diversifying [indiscernible] in our capital expenditures. Over the first quarter, we have signed contract in Chinese RMB instead of US dollars with one of our major suppliers. We are planning to increase the share of trade agreements in local currencies, which will help us manage our currency risk more efficiently. This is the end of our presentation today and we can start the Q&A session.

Kaan Terzioglu: April, we are ready to take the questions.

Operator: Thank you. [Operator Instructions] Roman Arbuzov of UBS. Please go ahead.

Roman Arbuzov: Good evening. Thank you very much for taking my questions.

I have actually three, if that is okay. First one is a simple one on the guidance, you are presenting today very impressive results, I'm just wondering why you know perhaps it has been more positive on the guidance and if, could you share with us if there is anything in particular that is making you concerned in terms of the remainder of the year, that is the first one. The second one is just an observation on market share dynamics, so if you look over the last couple of quarters or even three quarters, you are taking in customers and sort of stabilizing and even growing a little bit your subscriber market share, if that has not been the case historically, so I was just wondering if you could share please some thoughts on what’s allowing you to reverse those trends and stabilize your market share. And just thirdly on OPEX please that’s one of the key reasons why your profitability performance is very strong this quarter so could you please elaborate a little bit more on what exactly you are doing to keep your OPEX flat please? Thank you very much.

Kaan Terzioglu: Roman thank you very much.

Let me start with your first question about the guidance. We have really, as you say a very strong start to the year. We would like to actually see the rest of the year in terms of making changes to our guidance. At the time, we would like to be cautiously optimistic about the process and we're thinking that we are in-line moving onwards with or plan. In terms of market share, we are actually seeing all time role churn rates and I actually attribute to these digital services pickup in our customers.

So that was from intake perspective in terms of number of customer additions, as well as ARPU increases, both from a subscriber base perspective and revenue share perspective, we are steadily increasing our market shares and we are happy to see that. This is a combination of higher customer adds, the all-time low churn rates and ARPU increases in the mix. With regard to the OPEX, we are really having a very strong OPEX deduction program and we are progressing on the plans that we have set in the beginning of 2016, Bulent anything you would like to add there?

Bulent Aksu: As you mentioned that we established a project management office and approached this topic structurally. We run a companywide project for OPEX management to include all areas of potential improvement. These areas range from head office processes to operating cost in the field.

We reviewed all main procurement and OPEX items to create synergies amount to businesses.

Roman Arbuzov: Thank you so much.

Kaan Terzioglu: Thank you Roman. Actually as Bulent said this companywide program has contributions over 1000 people in the company in terms of saving ideas, and I am very happy to see that it has turned into a companywide initiative, really a good execution on that side.

Roman Arbuzov: Thank you very much.

Operator: [Operator Instructions] Next we will hear from Herve Drouet of HSBC.

Herve Drouet: Yes, good evening, thanks again as well for taking the questions. I've got three quick questions as well. The first one, just on the regulation, I was wondering has there personally been any change in regulations in the short-term, especially on [indiscernible] tariff, looking forward do you think it would be just on the broadband fixed line or can it be as well on the mobile as well, can we see any potential change there to come in the future as well on taxes and especially Telecom tax? Second question is on your FX loss, you pushed it and your reduction of your FX exposure felt in US dollar, your average use, I was wondering, I mean looking forward obviously depending on the currency movement, I mean should be expect gradually these FX less that has been booked to gradually disappear being less and less sensitive to currency movement? And finally just on the dividend proposed, I mean you still have this 50% of distributable income, what prevents you to propose a higher percentage of distributable income than 50%, is it linked with your balance sheet gearing, currently you in net-to-EBITDA of 0.9 and I was wondering if you securitized a part of your loans built, could that push you to increase as a percentage of the distributable income in dividend? Thank you.

Kaan Terzioglu: Thank you, Herve.

Let me start with your regulation question. As you know Turkey is the highest taxed country in terms of Telecom industry. I do expect certain regulatory changes, especially on the fixed side with regard to the port transmission [ph] costs and I think the regulatory office is looking into cost based pricing models on that side, and this will be potentially a positive change to our cost structure. With regard to other regulatory changes, I do not want to speculate, but given the nature of very high taxation of the telecoms industry and government policy in terms of fiscal relaxation, I do expect if any changes in the positive side. With regard to the foreign currency losses, as you know we have an active hedging strategy.

We have borrowed in foreign currency, long term and we have swapped these loans into Turkish Lira. So, actually our foreign currency position as of end of quarter is only 91 million, but maybe Bulent maybe you can add some more color to that.

Bulent Aksu: Yes, as you mentioned that we have a very, very limited low stock position and due to this reason we did not affect for the FX loss in this quarter. This is directly related with the cost of converting our FX loans into the TL loans and this will be classified in foreign, classified as interest expenses, yes there is a very limited amount of FX cost in this quarter. We expect that this amount will be decreased in the coming terms.

Kaan Terzioglu: And with regard to your question about dividends, we believe economically and operationally, we are a growth company and it is the amount we will be [indiscernible] this is a proposal for the general assembly and any decision that can come out from there is not under our capability to impact, but I think this is a sound and in-line policy proposal to our general assembly.

Herve Drouet: Alright thank you very much for the answer.

Kaan Terzioglu: What was the question?

Operator: Herve, did you have anything further?

Herve Drouet: No, but I think that [indiscernible] one question I had, maybe on leasing income maybe just a bit of a follow-up I would say just on the dividend as I was asking, if in the scenarios where the net EBITDA reduced, I mean do you think there is room to increase the proposed percentage of distributable income to be put in cash dividend. So currently I think you had 50%, I was wondering if your net debt-to-EBITDA is reduced, can they lead you to propose in the future higher percentage, so is it linked to your balance sheet currently gearing or not?

Kaan Terzioglu: Well Herve we are - as I mentioned, we are in an important investment cycle both in Turkey and in other operations in Ukraine. We are about to consider launching 4G in Belarus and Ukraine.

So we consider our free cash flow positions and we believe applying the current policy in terms of dividends is the right thing to do for the company. I do not want to speculate how this could change in the future, as long as the policy is set as 50% of net income.

Herve Drouet: Okay, well understood. Thank you.

Kaan Terzioglu: Thank you.

Operator: [Operator Instructions] Okay it appears there are no further questions at this time. I will turn the conference back over to our presenters for any additional or closing comments.

Kaan Terzioglu: On the online questions.

Operator: Roman has signaled for another question, please go ahead Roman.

Roman Arbuzov: Thank you very much, just a quick follow-up, just taking the opportunity.

Any update on Fintur please, anything you can say on that side? And also just a question, a bit more technical on the working capital please, so thinking, thinking about working capital for 2017 overall, what should we be looking for from that line and also maybe going forward as long as you could comment that would be very helpful.

Kaan Terzioglu: Sure, thank you Roman. Fintur as you know, we classified Fintur as an asset for sale and we are in the process of jointly selling with our partners Telia and we will be informing you about the progress, but there is no change in terms of our position there. And I hope that during this year we will come to a conclusion on that process. Bulent on the working capital?

Bulent Aksu: On the working capital side, as we mentioned in OPEX management side we focus on the working capital side and working together with different departments and different business units to effectively manage the working capital and we are expected more efficient working capital in 2017.

Roman Arbuzov: Okay so it is a positive working capital inflow in 2017, and is that how you think about the medium term as well, I mean I appreciate you try to common with position, but any thing you can say on how we should think about the working capital is generally given how quickly the consumer finance company is growing, but then on the other hand you are experimenting with the securitization instruments, so balance those two things off, do you think you can continue to have positive working capital?

Kaan Terzioglu: As you know, we have successfully done our first asset-backed transaction of 100 million. This was a starting point, I do expect this trend to continue actually, I think this is a very positive trend from my perspective in terms of keeping the asset life position as well, but what is important is our OPEX reduction focus is now also focusing on inventory efficiency and all these will have a very positive impact on 2017 based on our plans.

Bulent Aksu: And maybe we can add that. The main reason of establishing a consumer finance company to manage the working capital side efficiently and to sell or securitize our receivables from the consumer finance side and we achieved one important milestone and we will continue the next deals for securitizing our [indiscernible].

Roman Arbuzov: Thank you so much.

Kaan Terzioglu: Thanks Roman.

Operator: [Operator Instructions]

Kaan Terzioglu: So I guess, if no other questions, I want to thank all of you for - okay Herve, one more question.

Operator: Absolutely Herve, please go ahead.

Herve Drouet: Just a very quick one. Just back on your securitization of your [indiscernible], I mean looking forward do you have any timeframe on what you can securitize our any ideas on when that can happen and for which amount?

Bulent Aksu: We are planning to realize the next one in the second quarter and for the amount we cannot give a specific amount at that stage, but it will be higher than the first one.

Herve Drouet: Okay, thank you.

Kaan Terzioglu: Thank you.

Operator: And there are no further questions at this time.

Kaan Terzioglu: Well thank you very much for your participation and also providing the guidance in terms of our operations. I appreciate all the questions and also feedback.

Thank you very much.

Operator: That does conclude today's conference. Thank you all for your participation. You may now disconnect.