Operator: Good day and welcome to the fourth quarter and full year 2016 results conference call. For your information, today's conference is being recorded. At this time, I would like to turn the call over to Mr. Korhan Bilek, Director of Investor Relations. Please go ahead, sir.

Korhan Bilek: Thank you, Kevin. Hello, everyone. Welcome to Turkcell's fourth quarter and full year 2016 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 very much, Korhan. Good afternoon and good evening, everyone and welcome to Turkcell's fourth quarter and full year 2016 results call. This is Kaan, Chief Executive Officer of Turkcell. Today, I'm excited to share with you the fourth quarter performance of Turkcell Group.

We generated all-time high revenue and EBITDA level based on record breaking performance in many areas of our businesses such as highest customer gains, both in mobile and fixed, surpassing million subscriber threshold in fiber-to-the-home business, surpassing million subscriber threshold on TV business, significant growth in our digital services penetration, more than doubling the share of multi-play customers in mobile, increased consumption of data and services via upsell strategy and attractive digital services enabled by 4.5G, doubling the data usage versus 3G to reach 5 gigabytes in December. Combination of all these factors resulted in record mobile ARPU of TRY30.9 on 18% yearly growth, all-time high revenue and EBITDA growth of the past 10 years, up revenues 21% and EBITDA 30% respectively. Looking at the operational figures, behind this remarkable performance, we have registered our highest customer retention level in mobile and in the last quarter, we saw 291,000 net adds, the highest level since 2013. On the fixed side, the quarterly gain of 147,000 subscribers was the highest ever, while fiber subscribers exceeded 1 million. The great interest in our digital services continued to rise this quarter as well.

Our TV subscriber base exceeded 1 million, while customers who downloaded our core digital applications reached 44.2 million from 21.4 million in the previous year. Overall, I must say that our 4.5G investment generated the highest growth of the past 10 years. Moving on to the next page, briefly summarizing where we stand in terms of our guidance, given this robust performance, allow me to note that for revenues, we promised 10% to 12% growth to the investor community and we delivered 11.9%, reaching the higher end of our guidance. On the EBITDA front, we promised a margin between 32% to 33% and we realized 32.3%. For CapEx over sales ratio, we provided guidance of 22% to 24% and we recorded 23%.

And please also note that these guidances I refer to are the revised guidances, which were upwards adjusted in December 2016. Further details on the contributors to our 2016 performance, I would like to continue saying that 4.5G was one of the key developments of 2016 in our home country Turkey and we have achieved population coverage of around 82.5% in 81 cities, reaching 23 million customers. The pickup rate of our digital services proved the validity of our digital services based approach. On the mobile side, 42% of our mobile subscribers signed up one of our triple play offers and 36% of our fiber customers migrated to multi-play with TV. With our global all user approach, we also made our digital services available to the customers to all operators around the world as well.

Our consumer finance company launched in the first quarter of 2016 made great progress within a short period of time. As of the year-end, we have reached almost 2 million customers and extended its loan portfolio to TRY2.4 billion. In Q4, total of 741,000 contracts were signed fueling the growth of our multi-play customers. Another important development of 2016 was the initiation of talks with sector players towards establishing common infrastructure for efficient use of resources and ensuring fair competition within the scope of Turkey's fiber mobilization. Moving to the next page.

Let me start getting into the details with a brief evaluation of fourth quarter results. In Q4, Turkcell Group recorded 21% revenue and 30% EBITDA growth, the highest of the past 10 years. Our figures also correspond to all-time high quarterly revenue and EBITDA in nominal terms, both at the Group and Turkcell Turkey level. Coming to our annual performance in 2016, our Group revenues grew by 11.9% to reach TRY14.3 billion. We recorded 11.6% growth in our EBITDA, which reached TRY4.6 billion.

Our pro forma net income rose by 7.4% year-on-year and reached TRY2.5 billion, while net income according to IFRS, was recorded as TRY1.5 billion. We consider our pro forma net income as excluding the impact of interest foreign currency Fintur, 4.5G license amortization, expenses related to tax amnesty, and free emergency packages given after the Coup attempt of July 15. Previously we have stated that we were exploring our strategic alternatives regarding Fintur. In accordance with our strategic approach, and IFRS requirements, we have classified Fintur as an asset held for sale and we are reporting it as discontinued operations as of October 2016. Moving to the next page.

Focusing on Turkcell Turkey in fourth quarter. Revenues rose 19.3%, the highest growth rate in the market. On top of that, revenue growth is 22.3% including our consumer finance business. Our EBITDA margin reached 34.3%, recording an increase of 2.4 percentage points year-on-year. Turkcell Turkey's fourth quarter pro forma net income rose 12.5% year-on-year to TRY656 million.

Coming to the highlights of Turkcell Turkey's annual performance in 2016, revenues rose 11.4% to TRY12.8 billion. Excluding the impact of free emergency communication packages provided in the third quarter, full-year revenue growth would have been 11.9% with an EBITDA margin of 32.9%. Pro forma net income was recorded as TRY2.4 billion on a 4.1% year-on-year rise. Moving to the next page. What are the components of our growth? Turkcell Turkey remains our main growth engine, accounting for 88% of Group revenues.

Turkcell Turkey recorded 19.3% growth in the fourth quarter. The main driver of growth in Turkcell Turkey is the consumer segment, which recorded 19.9% revenue increase, thanks to higher data and digital services demand and disciplined pricing. Corporate revenues also contributed to the nominal top line increase, while wholesale revenues continued to grow with the rise of carrier traffic. Turkcell International revenues comprising 6% of Group revenues grew by 12.4%. I will elaborate on this further in the following pages.

Other Business is the third component in our reporting. Our revenues in this line recorded a significant leap of 91.1% revenue growth, mainly due to the contribution of Turkcell consumer finance business. With this leap in Q4, Other Business accounted for 5% of Group revenues. Moving to the next page, elaborating further on Turkcell Turkey's outstanding financial performance from an operational perspective. On the mobile side in Q4, we registered 291,000 net additions, the highest quarterly net add since 2013.

As of end of 2016, we served 33 million customers in mobile. Over the course of the year, our postpaid subscribers expanded by 797,000 to 17.4 million and the share of postpaid customers reached 53%. On the fixed side, we registered solid growth with all-time high quarterly net additions of 147,000. Our fixed customers reached 1.9 million, while fiber customers exceeded 1 million, an important threshold which cements our market leadership in fiber. Our TV platform exceeded 1 million subscribers.

Looking at the year-on-year performance, we can observe that IPTV customers grew more than 60% to reach 360,000, while those who benefit from TV+ as an OTT service more than doubled to reach 776,000. Next page. At Turkcell Turkey, our differentiator continues to be the quality of service. According to the Speedtest Intelligence Markets Report by OOKLA, Turkcell is by far the leader with the high speeds, both in mobile and fixed broadband in Turkey. Since the launch of 4.5G at the beginning of Q2, our net promoter score improved dramatically.

We have been the only operator to improve net promoter score between Q3 and Q4, while our competitors recorded declined scores. This is the result of our overall quality of service, customer-centric approach, and the variety and quality of our offers. As a reflection of this in our operations, our mobile churn rate decreased from 7.9% to 5.6% which is the lowest level since 2007. Now let's look at our growth engines in the next page, data and services. Data and digital service revenues in total demonstrated a 94.1% year-on-year growth to approximately TRY2.2 billion.

Following the launch of 4.5G, mobile data revenues rose by 89%. Higher smartphone penetration, increased number of data users, higher consumption per user, and the positive impact of the abolishment of retail price control have contributed to this result. Meanwhile, fixed data revenues were up 27% due to the increase in customer numbers and higher usage. Revenues in digital services, our key priority and strategic focus, tripled to TRY537 million. The growth comes mainly from the increased usage of Turkcell TV+, Turkcell's digital publishing service Dergilik, our music platform fizy, our personal cloud service Lifebox, and other mobile services.

Moving to the next page. More and more customers are using our digital services. On the mobile side, the increased penetration of our digital services has led to the consistent growth of our triple play customers. Today, 42 out of every 100 mobile customers uses digital service as opposed to only 17 just a year ago. This is an increase of 25 percentage points.

This represents great potential for a significant ARPU uplift. Our double play customers generate almost two times higher ARPU than single play customers. This ratio goes up to three times with triple play customers. On the fixed side, our multi-play ratio with total fiber residential subscribers, which includes voice data and TV users, rose 10 percentage points to 36% year-on-year. We are not yet offering the IPTV services to our ADSL customers and this potential is yet there to be explored.

Moving to the next page. Digital services are key components of our future positioning. By our calculations amid heavy use of these services, we observed a positive impact on both ARPU and customer retention. By the end of 2016, total downloads of our core digital services have reached 44.2 million compared to 21.4 million the previous year. Our new generation communication platform BiP continued its rapid rise, surpassing 11.7 million downloads to-date.

Global downloads of BiP have exceeded 1.2 million, while non-Turkcell users reached 38% of total BiP users. Our leading music platform fizy, which has faced recent facelift to reflect its global digital services strategy, remains Turkey's largest digital music provider with 8.3 million downloads. On a daily basis, more than 3.5 million songs are listened in fizy, 1.8 million videos were streamed in a month, and in 2016 nine live concerts were viewed by 1.6 million customers. The most widely used personal cloud service Lifebox geared up to reach 3.8 million downloads. We have boosted our My Account application with the phenomenal shake and win campaign.

To date, it has been downloaded 15 million times. Our digital publishing service Dergilik has reached 1 million downloads. We are planning to expand our digital publishing services to include daily newspapers in 2017. Moving to the next page. Spanning both mobile and fixed side, our TV service deserves further elaboration.

Both OTT TV and IPTV are important components of our convergence strategy and the number of subscribers actively using both platforms have been rising steadily. As of year-end 2016, TV users have reached 1.1 million and as of today, Turkcell TV+ mobile app has been downloaded 2.5 million times. In the fourth quarter, we continued to expand our rich TV content to enhance our customer experience. TV+ is the official exclusive mobile broadcaster of the UK Premier League, one of the world's most prestigious football leagues. We have also added Eurosport, Bundesliga, NBA TV, and Formula 1 for sports fans.

Premium global documentary channels such as Discovery, Discovery Science and Animal Planet are also included in TV+ packages. Prior to launching 4.5G, we had said that we would transform the video watching experience on small screen. We are delivering on that goal as our customers' mobile TV viewing duration has increased from 7 minutes to 34 minutes and counting. As of today, it is 39 minutes. This has been made possible by high quality 4.5G technology built on the largest spectrum assets and the seamless experience that TV+ provides between four screens.

Moving to the next page. Let me wrap up Turkcell Turkey's performance with further details on the mobile technology, which has enabled us to perform so strongly that is 4.5G. With the upsurge in data use and digital services, I can confidently say that we have been able to monetize 4.5G since its introduction in April 2016. The smartphone penetration on our network increased to 64%. This means 3.1 million yearly net additions supported and accelerated by our consumer finance business.

Mobile data usage per user rose 68% year-on-year to 2.8 gigabytes in Q4. Becoming the main driver of this increase, 4.5G users consumed an average of 4.3 gigabytes per month on a quarterly basis. They continue to demonstrate their appetite for further data as this number reached 5 gigabytes end of December. The share of 4.5G users in total mobile data users rose 3 percentage points to reach 30% of our entire mobile customer pool in December. 4.5G users generate almost two times more ARPU than overall mobile subscribers.

As a result, we have been able to generate increasing ARPU since the second quarter reaching TRY31.4 as of December 2016. Moving to the next page. Now coming to Turkcell International, which comprises 6% of our Group revenues, grew by 12.4% year-on-year to reach TRY252 million whereby the EBITDA margin realized at 27.2% in the fourth quarter. LifeCell in Ukraine is the major component of our International business with 66% share in total International revenues. LifeCell revenues rose 13.4% in local currency terms, generating record quarterly revenue.

This was mainly driven by the rise in mobile data revenues enabled by higher data usage on the 3G+ network and the higher contribution of mobile device sales. The EBITDA margin fell to 27.6% mainly due to higher network related costs and tower related leasing expenses as well as higher marketing costs. In Belarus, revenues rose 14.2% year-on-year driven by subscriber base growth as well as increased voice and mobile device sales. EBITDA margin improved by 2.4 percentage points continuing the positive trend in fourth quarter mainly due to top line growth and better operational expense management. Our operation in Northern Cyprus recorded 6.9% year-on-year growth and the EBITDA margin realized at 34.4%.

Next slide. Delivering on our 2016 guidance, we have full confidence in our ability to continue the upward momentum in 2017. For 2017, we expect 13% to 15% revenue growth for the Group mainly driven by growth in data and digital service revenues as well as an improved contribution from our consumer finance business and International operations. With double-digit topline growth and operational efficiency, we also target an EBITDA margin of 32% to 34%. Now that we have successfully executed our plan to accelerate and bring forward our 4.5G investment this calendar, we aim to lower our operational CapEx over sales ratio to around 20%.

Our mid-term target for the period of 2017 to 2019 is revenue growth of 12% to 14% and an EBITDA margin of 33 to 35 [ph] percentage points and CapEx over sales ratio around 16% by 2019. Now, I would like to hand over to Bulent for the financial review. Bulent?

Bulent Aksu: Thank you, Kaan. Good afternoon and good evening to all participants. I will now talk in more detail about our financial results.

In the fourth quarter, group revenues rose to TRY4 billion with a strong performance from Turkcell Turkey, driven by solid data and digital services growth. Turkcell International added an incremental TRY28 million to our revenues, while Turkcell consumer finance company's contribution to our topline growth in the fourth quarter was TRY90 million. For the full year, Group revenues rose 11.9% year-on-year. The main growth driver was once again our operations in Turkey. Next page.

In the fourth quarter, consolidated EBITDA increased by 29.6% year-on-year to reach TRY1.4 billion. This was mainly due to a solid drive in revenues partially offset by direct cost of revenues. Additionally, operational efficiency efforts have resulted in a limited rise in G&A and even a nominal decrease in S&M expenses. As a result, EBITDA margin improved by 2.2 percentage points to 33.9% seasonally cost level since 2007. For the full year, consolidated EBITDA rose by 11.6% to TRY4.6 billion.

Direct cost of revenues was impacted by higher year-on-year retail sales, related device costs, and consumer finance company funding costs. However, thanks to a limited S&M expense increase, the EBITDA margin was in line with the previous year at 32.3%. Turkcell Group delivered an all-time high full-year revenue and EBITDA in 2016. Moving on to the next page. In the fourth quarter, pro forma net income increased by 15.7% to TRY706 million.

As per IFRS, net income was recorded as TRY351 million. Despite TRY145 million higher EBITDA and a favorable change in net interest income of TRY43 million, net income was negatively impacted by a negative contribution from Fintur amounting to TRY143 million and translation losses of TRY253 million after taking swap contracts into consideration. Full-year 2016 Group pro forma net income was [indiscernible] on a 7.4% increase and net income as per IFRS was TRY1.5 billion. Negative contributors include one-off items such as the impact of Fintur amounting to TRY410 million and other expenses such as TRY136 million settlement costs incurred in relation to the tax amnesty. Moving on to the next slide.

As of the end of 2016, our net debt position stood at TRY3.7 billion. Compared to the previous quarter, this represents an increase of TRY1.2 billion. The change is mainly due to the TRY1.4 billion payment of third instalments of our 4.5G license payments. Despite the credit portfolio of Turkcell consumer finance company growth, our operations were able to generate positive cash in the fourth quarter. With stronger EBITDA excluding our 4.5G license payment, our net debt to EBITDA ratio has [indiscernible] compared to the previous quarter.

Without the effect of the 4.5G license fee payments in the fourth quarter, the net debt to EBITDA ratio would be 0.5 times. With our disciplined financial management, we are committed to maintaining a low net debt to EBITDA ratio. Despite the downgrades of Turkey sovereign ratings, Turkcell is the only company in Turkey to sustain three investment grade ratings from rating agencies, thanks to its resilient financial and operational portfolio. Next page. Now, I would like to highlight the management of foreign currency risk.

In the consecutive quarters, we lowered our FX position to an almost negligible amount compared to the size of our balance sheet and operations. As of the end of the year, we calculate our net FX position $125 million compared to $2 billion as of third quarter of 2016. This calculation includes the advance payments for fixed assets purchases and the assumption of paying the final instalment of the 4.5G license in TL terms. Besides utilizing hedging in 2016 to mitigate foreign currency risk, we also benefit from a natural hedge through our cash position which is [Technical Difficulty]. We had 70% cash in foreign currency against the 75% foreign exchange denominated debt.

Lastly, as Kaan has stated at the beginning of our call, we were exploring our strategic alternatives regarding Fintur. In accordance with our strategic efforts and IFRS requirements, Fintur is classified as held for sale and reported as discontinued operation as of October 2016. We believe that an exit from Fintur is highly probable in one year. During discontinued operation classification period, our P&L will not be impacted by Fintur results. This brings us to the end of our presentation today.

Thank you very much for being with us and now we are ready to take your questions.

Korhan Bilek: Thank you, Bulent. Kevin, we are ready to take questions.

Operator: Thank you. [Operator Instructions] We will take our first question from Roman Arbuzov with UBS.

Go ahead please.

Roman Arbuzov: First of all, congratulations on the very strong results. I had a few questions actually, but all of them relate to special communications tax and the abolishment of the retail price control. So firstly, can you please clarify whether you have now completed the transition of the shift from voice to data, which is specifically driven by the retail price control abolishment bit? Of course naturally your revenues are moving to data from an underlying perspective as well driven by 4G, 4.5G et cetera, et cetera. But in terms of the regulatory bit and the introduction of new tariffs that we were talking about last quarter and the impact on your revenue composition from that perspective.

Is that process complete this quarter or not? So, that's first bit of it. And then secondly, I guess asking a very similar thing but maybe just another way. In terms of your digital services as a percentage of your total Turkcell Turkey revenues, which is I believe currently just over 60%, what do you expect that to be by the end of 2017? If you just give us a rough estimate, that would be very helpful as well. And then also basically carrying on on the same topic. If I look at your EBITDA growth, which was very impressive and at 28% in the quarter, can you just please help us understand the drivers behind that? Clearly you went through some of the drivers, but could you perhaps break it down into firstly, the impact from reallocation of your revenues from voice to data? Because if I look at regulatory disclosure and your disclosure, it's different so it's a bit tricky to work backwards.

But if you could just roughly say of the 28%, x percent is underlying growth and then basically x percent is actually driven by the shift from voice to data? If you could do that, that would be extremely helpful. Thank you very much.

Kaan Terzioglu: First of all, let me clarify that 95% of our investments today are actually in data, 91% of our operational costs are attributable to data. So if you look to our Q4 results, you will see that 62% of our revenues are from data and digital services. I do expect the reality of revenue shift actually to converge into our cost base and investment base over the next three years.

With regard to transitioning into our new digital strategy, if you look to our numbers, we have systematically after the introduction of 4.5G prepared ourselves with digital services. And with the abolishment of retail price control, we have started to correctly price actually our digital services and data offerings and we have completed this transition for our consumer customers and we are in the process of completing this transition for our corporate segment. So starting from August, the acceleration of our digital business and data business has started to take place. I expect this trend to continue in 2017 in line and convergence of our investment dynamics. Looking to the EBITDA growth, you will see that part of our EBITDA growth has arised from our increased ARPU, increased levels of multi-play customers both on mobile and fixed business.

Moreover we have implemented a significant cost take-out project, which started to deliver this year and will continue its impact over 2017. So it is both coming from revenue increases, ARPU increases, increased number of customers, and increased data consumption levels also coupled with cost savings on our operational side. So, all these things have contributed to the EBITDA growth and I expect this trend to continue as we target for 13% to 15% revenue growth in 2017 and EBITDA moving towards 33%.

Roman Arbuzov: You've actually answered the question so efficiently and quickly that I may allow myself just one more follow-up please. When we think about the special communications tax over the medium term, clearly the industry is undergoing a very rapid change as very well demonstrated by Turkcell.

So with that in mind, do you see any signals currently or do you expect over the medium term the regulator to potentially review the special communications tax to basically reflect this new reality of the industry going digital?

Kaan Terzioglu: I do not want to speculate about the potential regulatory changes. However, if you look to monetary and fiscal economy policies of Turkish government, there is a clear message saying that the fiscal taxation hikes will not happen over 2017. Having said that, whatever changes will happen will be level playing for all players in the industry unlike the retail price control, which was single-handedly on Turkcell. So, we are very comfortable in competing in this level playing field with any kind of changes to happen if there is any change to happen.

Operator: We’ll take our next question from Ivan Kim with VTB Capital.

Please go ahead.

Ivan Kim: First on your services and solutions revenue which has been booming in the fourth quarter, what do you attribute this growth acceleration to? 200% is a lot so I'm just wondering which services exactly have performed so well and why is it just pick up of the service; more customers or is it some changes in the pricing, changes in the maybe revenue distribution with content provider, et cetera. And then secondly on your churn, so your churn has come down materially in the fourth quarter and in the second half of this year generally. So I was wondering what are the drivers behind that. Is it digital engagement, is it something else? So, any color on that would be helpful.

Thank you.

Kaan Terzioglu: So, the services and solution revenues booming is actually a result of a couple of different dynamics coming together. One, we are actually acquiring net adds on both mobile and fixed side. Secondly, the penetration of smartphones have increased significantly now to 64% and our consumer finance business doing on a daily basis 10,000 contracts adds to our customer portfolio for postpaid customers with very high quality. The contribution margin of multi-play customers, customers who are using our voice data services and additional one digital service minimum, has increased significantly as well from 17% to 42%.

All these things have a positive impact on ARPU level, number of customers increasing have a positive impact on the growth level, and also usage of digital services has a significant impact on reducing the churn rate which also has a positive impact on the revenues. Our TV business particularly on both IPTV platform and OTT side, our music business are generating significant increases year-on-year and this is coupled with our Lifebox consumer cloud service as well as our digital publishing business. These are all key drivers of our digital service growth and I expect this growth momentum to continue as our offers become all access as well as becoming best in class even compared with global competitors.

Operator: Thank you. We will take our next question from Herve Drouet with HSBC.

Please go ahead.

Herve Drouet: Congratulation for those really good results. Firstly on CapEx, it looks like when I looked at the guidance and some mid-term targets you're projecting and if we assume obviously depending on where the Turkish lira currency will go. I was wondering do you believe there will be much more CapEx sharing with some of your competitors looking forward? It looks like some of your competitors are quite keen in doing much more sharing and even potentially active sharing. So I was wondering what is your view on that and do you think that may help potentially on the IPO of your tower business? And just wanted to know as well if there is anything you can update us on potentially that front.

And the second question is as well on taxes and back to the previous questions on how taxation may evolve over time especially in terms of the telecommunications tax or special telecommunication tax. Do you think the tax is going to be considered as individual tax or there could be a new approach to the overall tax being paid by telecom operators and it's going to be more kind of a global tax rather than different layers of tax adding to each other and do you think there is currently some talk about that potentially with the tax authorities? And maybe a final question will be with the regulator, I was wondering in terms of the 2G spectrum, any update on when some of those spectrum will need to be renewed? Is there any agreement or any framework that has been agreed on and in term as well if you can give us a bit of an update on the timing of that? Thank you.

Kaan Terzioglu: With regard to the CapEx, our guidance for the next three years are CapEx to decline towards 16% of our sales. And I truly believe that sharing of infrastructure whether mobile or fixed is a must for the industry. We do not believe the competition to happen on the infrastructure.

We believe the competition should happen on the services side and we feel very comfortable to make a differentiation, this would need to happen. We are actively talking on sharing of infrastructure with the players in the industry and we have come to actually a great collaboration in this area, which I do expect to see results this year. Having said that, our guidance excludes this type of positive potential changes to our investment structure. Within our current existing plans, we still believe that we can reduce our CapEx to sales ratio to 16%. And if in case there are foreign currency fluctuations, we are going to be disciplined in terms of sticking to our 20% guidance this year.

Sharing of the infrastructure could potentially be a big upward valuation for our tower business. We are actively also talking with sharing of our towers with the other two players in the market. On the tax side, you have to realize that Turkey is the highest taxed country in communications in the world. With 68.2% taxation over topline, Turkey is really the Number 1 country. I do expect changes in this regime in terms of optimization and simplification of the processes, but I do not want to speculate to what extent these changes will happen or when they will happen.

In terms of renewing the 2G spectrum and license, I again expect that Turkey's overall concession agreement will be discussed and reviewed to optimize and make sure that the industry is capable of investing at the speeds that are required for economic growth. So any potential changes I think in the acceleration of the growth potential of the economy, but again I do not want to give any timing perspectives on that since these are regulatory issues which will require long deliberations.

Operator: [Operator Instructions] We’ll take our next question from Vyacheslav Degtyarev with Goldman Sachs. Go ahead please.

Vyacheslav Degtyarev: Sorry if I missed, but do you plan to propose dividends for 2016 and if so, when? Thank you.

Kaan Terzioglu: Our dividend policy as has been stated over time has not changed. As management, we will exactly follow that policy which is 50% of our net profits. As you know the distribution of dividends require general assembly approval and I do not want to make speculations on that. But as a policy as an intention of the management team, there are no changes.

Vyacheslav Degtyarev: So basically it's 50%, I suppose previously you proposed slightly higher amount.

Kaan Terzioglu: This is our policy. Of course we will elaborate and come up with a proposal. It's too early to speculate on.

Operator: [Operator Instructions] We’ll take our next question from Ondrej Cabejsek with Berenberg. Go ahead please.

Ondrej Cabejsek: The first one I would like to return to the special communications tax. So in the fourth quarter despite the underlying growth in data traffic, et cetera, it seems like you've allocated less data within mobile service revenues overall than you did in the third quarter and if I understood correctly, you sort of aim to attribute up to what you say your attributable cost basis. So, if you could please explain this discrepancy that I think is there? Second question is if you could comment on your net FX position. So previously I think you targeted about TRY500 million and now you are at a level of TRY125 million. Is this a level where you are comfortable going forward or will you be diversifying a bit back to FX exposure? And third question please is whether you could just elaborate a bit on the breakdown, somehow of your ARPU growth in terms of obviously there's upsizing, but there's also some sort of churn of low ARPU customers that's contributing to the ARPU growth, et cetera.

So, if you could please elaborate a bit on that. Thank you.

Kaan Terzioglu: First of all for the first question about special communication tax. With the retail price control over voice services that Turkcell provided, there has been an artificial allocation of revenues to voice which was unfair competition in the marketplace. So abolishment of this rule gave us the advantage to really charge for what customers consumed and what technology costed to us.

So, this is just alignment and realistic and rightful pricing strategy and I expect this to continue. So rather than making an allocation change, I would name this as the proper pricing of digital services and data which customers actually pay our services really for. With regard to the net foreign currency position, as you know in end of 2015 we had tapped into international financial markets and got $2.9 billion of financing to fund for three-year plan growth projections. We have successfully concluded this round of financing at very favorable terms to us on an average of 6.6 years and 3.4% interest rate. Now during the time thanks to our dialogs with yourselves, we have been often asked the question how to hedge this risk and we have successfully hedged our risk in terms of applying systematic hedging tools with cross currency swaps as well as keeping our currency and cash generated in hard currency, but most importantly with disciplined pricing, inflationary pricing.

So all these elements helped us to limit the exposure on foreign currency, which proved to be a very important resiliency factor for our Company. At the end of the year, our foreign currency exposure was only $125 million and we do expect to keep it a close and strong grasp on our foreign currency position as we move onwards. Bulent, anything you would like to add?

Bulent Aksu: Maybe we can say that according to our hedging policy, the ARPU limit for 2017 for FX position will be around $500 million.

Kaan Terzioglu: With regard to the ARPU growth, the ARPU has shown significant growth and there are a couple of important drivers for that. One of them is higher percentage of postpaid customers.

During the year, we have systematically moved to higher value customers by doing the right pricing models and segmentation model. Second, higher penetration of digital services. We increased our digital service penetration from 17% to 42% for triple play customers. Triple play customers generate three times more ARPU. Third, we increased 4.5G customers.

This has also increased to 30% of our customer base and 4.5G customers generate twice as much revenues and ARPU. So, all these factors with addition of more smartphone penetration helped us increase ARPU to the levels to TRY31.4 end of December.

Ondrej Cabejsek: Can I just get back to the first question please because don't think my first question has been answered? So in the fourth quarter basically your mobile data revenues went down quarter-over-quarter despite mobile revenues overall growing up. So if you could explain why the overall share of mobile data revenues in the quarter?

Kaan Terzioglu: So, practically our strategy is not to sell raw data to our customers. We would like to sell processed data.

What is processed data? It's music, TV, digital publishing, consumer cloud services. So when you look to our mobile and digital services, you need to look into both the 200% increase in Q4 on digital services as well as the mobile data. So, a combination of those two things are real comparators when you want to look into our mobile data revenues. And this trend will continue because selling just gigabytes is not a differentiator and we will convert our gigabytes into proper music, TV, cloud services and this will keep the trend as you see here. Is this clear?

Operator: And we have a follow-up from Ivan Kim with VTB Capital, if you’d like to take that question.

Ivan Kim: When you are selling cloud services, music services, et cetera; do you pay any tax on that, I mean special communications tax? Thank you.

Kaan Terzioglu: The answer is yes, we do. It's similar to the data levels.

Operator: And there are no further questions at this time. I'll turn the conference back over to your presenters for additional or closing comments.

Korhan Bilek: We have one more question online from Alper, Oyak Securities. I will repeat the question so that our speakers may answer. Could we say that you have faced easier competition in M&T market in fourth quarter as you resumed growth in subscriber base after four quarters? And do you expect this gains to be sustained in the coming quarters?

Kaan Terzioglu: I would not say we have faced easier competition, I would probably say competitors faced a more difficult competition. But I have our Chief Marketing Officer here. Ismail, would you like to add something to this?

Ismail Butun: I think in the fourth quarter nothing has changed for us, the refreshment of the brand.

There was a new launch in the market with a new face. That combined with a very strong retention campaign which is [indiscernible] that has been very successful in the marketplace in terms of the number of participants and the number of kits. That's the highest probably ever in services. And the number of increasing valuable customers where we are also focusing on with more than 50% growth of [indiscernible] which all together handed us with better positioning.

Kaan Terzioglu: And we have to keep in mind that while our strategy is to focus on digital services, we never forget about the importance of the network.

That's why we added the slide showing the OOKLA test results in terms of speed and capacity differentiation of Turkcell. So all these things coming together with elimination of the anti-really competitive retail price controls on us allows us to properly charge for digital services and the quality of data services we provide on mobile and that all led into a more effective customer acquisition. And do we expect this to continue, I think we do expects this to continue.

Korhan Bilek: Kevin, do we have any more questions in the line?

Operator: Not at this time. [Operator Instructions]

Kaan Terzioglu: Thank you very much again for being with us today and listening our explanation and call.

This brings us to the end of our presentation today. I would like to thank everyone of you for continued support and guidance in these type of calls, your questions are always an inspiration to us and looking forward to our next call. Thank you.

Operator: This concludes today's call. Thank you for your participation, you may now disconnect.