Operator: Ladies and gentlemen thank you for standing by. I am Constantino, your Chorus Call operator. Welcome and thank you for joining the Turkcell's Conference Call and live Webcast to present and discuss the Turkcell's Fourth Quarter and Full Year 2020 Financial Results Conference Call. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session.

At this time, I would like to turn the conference over to Mr. Ali Serdar Yagci, Investor Relations and Corporate Finance Director. Please go ahead. Ali

Serdar Yagci: Thank you, Constantino. Hello everyone.

Welcome to Turkcell's fourth quarter and full year 2020 results call. Today's speakers are our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz. We will have a brief presentation and afterwards we will be taking your questions.

Before we take off, I would like to kindly remind you to review the last page of this presentation for our Safe Harbor statement.

Murat Erkan: Thank you, Serdar. Good morning and good afternoon. Welcome to Turkcell's fourth quarter and 2020 results call. We have concluded the year marked by challenges and uncertainties resulting in permanent change in every one's life.

Our results confirm that we have successfully weathered the storm. This was possible due to our diversified business model proved by our core competencies. Accordingly, we concluded the year on 15.8% revenue growth, generating TRY 19.1 billion with our 42.2% margin we exceeded our guidance level. Overall, we generated TRY 3.4 billion free cash flow in 2020 mainly through strong operational performance. All this was possible on the back of solid growth in subscriber base of 1.1 million strong -- and 1.1 million strong ARPU growth and rising contribution of our strategic focus area.

It is also worth to highlight that we exceeded our targeted 1 million net subscriber addition for 2020 despite the pandemic. I am glad to see that the focus on our digital strategy is paying off, both for our results and for the benefit of our customers. Next slide. Let's take a closer look at our fourth quarter performance. With good execution of our customer centric strategy, we delivered our best quarterly revenue growth for the year 2020 at 17.8%.

This corresponds to revenue of TRY 7.9 billion. EBITDA growth later was similar, resulting in 41.2% EBITDA margin. Our mobile subscriber base continued to grow in favor of postpaid with 464,000 additions. We have seen solid momentum in our fiber business with all time high net additions in a quarter with 65,000 . Our digital channels gained wider use this quarter over 14% of customer sales of Turkcell Turkey were generated through our website and digital operator application.

Overall, we generated TRY 780 million of free cash during the quarter on continues full platforms. Next slide. I am glad to see that we delivered full year results that are in line with our initial guidance in February, beating our revised guidance as well. As of the case with many companies, we had to revise our guidance in April with a more cautious approach as the pandemic brought about significant uncertainties. Yet, by November, we had greater visibility for the year-end revising our guidance upwards having displayed a healthy performance.

We owe this performance to our diversified business model, built on the – where the future lies . Our readiness to capture the rising demand for digital services and our ability to swiftly adapt to changing dynamics were integral to this success.

Osman Yilmaz: Thank you very much Murat. Now let's take a closer look into our financials. Our performance in the fourth quarter has been robust, and this growth of full year revenue and profitability levels above our initial guidance.

We recorded a TRY 7.9 million top line with an increase of 17.8% year-on-year in this quarter. Full year growth was 15.8% on the back of our diversified business model, suggesting residents have flexibility in addition to the contribution for ever increasing data demand. Our EBITDA reached TRY3.2 billion on a 17.8% increase with a 41.2 margin. The bottom line rose to TRY1.3 billion due to strong operations and effective financial risk management. Excluding the one off items in relation to Lifecell Ukraine's deferred tax income of TRY690 million and provision for legal cases, organic net income was around TRY1 billion.

For the year 2020, our net income reached TRY4 billion at 39% growth when one of impacts are excluded. We concluded the year with an operational CapEx to sales ratio of around 18.5% in line with our guidance. Next slide. In the fourth quarter, Group revenues rose an incremental TRY1.2 billion. Of this increase, TRY1 billion comes from Turkcell Turkey, thanks to a larger postpaid subscriber base, high growth in corporate segment and strong data demands.

Higher equipment revenues backed by sales through the digital channel and corporate projects were the other catalysts of growth. Turkcell International revenues increased by 33.2% to TRY750 million, mainly with the contribution of our Ukrainian operations and the positive impact of currency movements. For the full year, Group revenues rose 15.8% year-on-year to TRY21 million. Looking at the details, Turkcell revenues increased by 17.1%, contributing TRY3.7 billion. International subsidiaries contributed TRY540 million.

Consumer finance revenues contracted by TRY333 million given the decline in loan portfolio. Excluding consumer finance and our sports betting business that we exited last year, Group revenue yearly growth would have been around 18.4% in 2020. Next slide. In the fourth quarter, EBITDA rose 17.8% year-on-year to TRY3.2 billion, thanks to strong revenue increase and lower G&A expenses. Increasing low margin equipment sales led to a flat margin on yearly basis.

For the full year, EBITDA increased by 17.7% to TRY12.3 billion with a margin of 42.2%. The EBITDA margins were 0.8% improvement. The factors contributing to this increase are as follows; 2 percentage improvement in OpEx with lower overhead costs, travel and marketing expenses 0.2 percentage point improvement in doubtful receivables against 1.5 percentage point decline in gross margin impacted by the rising cost of goods sold mainly due to higher costs of new growth business. Turkcell International also contributed positively to the Group with a 0.9 point improvement in its EBITDA margin. EBIT rose 17% year-on-year to TRY6.3 billion, with a margin of 21.6%.

Next slide. Now more details on our free cash flow generation. On this slide, you will clearly note the positive trend and strengthening of our cash flow generation over the years. In 2020, we registered TRY3.4 billion free cash flow mainly on the back of rising EBITDA generation. Strong operational performance was the key driver of this success while the declining consumer loan portfolio also contributed on a working capital in a yearly basis.

The major items of the TRY3.4 billion of cash flow increase includes, EBITDA of TRY12.3 billion, acquisition of tangible and intangible assets of TRY7.3 billion, change in working capital of positive TRY300 million with improved collection performance and higher payable days, payment of lease liabilities around TRY1.3 billion, and income tax payment of TRY634 million. Our aim is to continue free cash flow generation in this year as well. Next slide. Now, some highlights from our balance sheet and leverage. As at the end of 2020, our total cash position decreased to TRY11.9 billion from TRY13.5 billion to in Q3 and due to mainly dividend payment of TRY800 million and currency appreciation.

In Q4, 6% decline in dollar-TRY and the 1.3% decline in euro-TRY lead to around TRY500 million in our total cash position. As of 2020 year end, Group net debt was around TRY9.7 billion with a 0.8 times leverage ratio. Excluding the tax in business, this was at 0.7 times the same level as the previous quarter and the lowest in the sector. Next slide. Let me provide you some color on foreign currency risk management and our liquidity strength.

Our done balance sheet remains robust with some $1.6 billion equivalent cash in hand with a long FX position of US$132 million. We continue to hold the bulk of our cash in hard currency as a natural hedging tool. This is sufficient to cover our repayments until 2025. In addition, we have secured committed lines of around $700 million in total in this year, which may be utilized in euro, dollar or RMB over the next three years. With hedging instruments in place, the share of FX had declined from 78% to 43% as of the year end.

Our average debt maturity is around four years. Next slide. Now let's take a closer look at our Techfin company's performance and first with consumer finance business and access. In the fourth quarter, financial stability declined by 28.1% to TRY145 million on a shrinking loan portfolio. EBITDA fell to under 3.8% to TRY96 million.

The EBITDA margin was up almost 4% year-on-year thanks to an improving bad debt ratio this quarter. In 2020, the very challenging environment led to fluctuations in the cost of risk ratio, although it ultimately declined to a normalized level of 2.4%. For the full year, net income increased by about 29% to TRY241 million, thanks to recovery on costs of risk and lower expenditures on the back of process improvements. Next slide. Paycell's remarkable performance has continued in Q4 monetizing the rising preference for e-commerce and cashless payment methods.

Three months active users of Paycell hugely popular for its convenience and secure payment infrastructure, which 4.7 million. Generating revenues of TRY80 million in the fourth quarter, Paycell ended the year at TRY285 million on a 13% annual growth rate. With 62% growth, the non-GAAP revenue share reached 66% in total. Paycell EBITDA margin was at 52% in 2020. The largest revenue generator, mobile payments business, more than doubled in volume in the fourth quarter.

The number of active Paycell cards doubled to 473,000. Accordingly, transaction volume tripled. Ready-to-Use limit service has gained traction. Our customers have made purchases by transferring their mobile payment limits to their Paycell cards. On the merchant side Paycell POS is set to grow over the coming period.

Merchants will benefit from cost advantage and efficiency by means of managing processes such as collection, inventory monitoring, and e-invoice over a single platform using the Paycell POS device. Next slide. I would like to end my presentation by recalling our approach to value creation at Group level. As our results have shown, our business model plays out well under different macro economic cycles. This diversified business model, built on growing individual businesses, today not only generates a strong free cash flow, but also unleashed a strong potential for actions towards unlocking the hidden values.

These businesses have the potential to generate their own funding for future growth. For now, we see our fiber business, our payment service business, and our travel business as likely candidates to take on the spotlight for strategic actions as we have already mentioned at our Capital Markets Day in London in 2019. Superonline is a unique diversified fiber company suggesting strong growth potential. Given its size and potential, it stands out as the most likely candidate for an equity capital markets action, as long as the market conditions remain favorable. As we plan to start working on this in the upcoming period we will keep the market informed on developments in this regard in a timely manner.

This concludes my presentation. We are ready for your questions. Thank you very much.

Operator: The first question is from the line of Cabejsek Ondrej with UBS. Please go ahead.

Ondrej Cabejsek: Hello and thank you for taking my questions and congratulations on a strong year. I have a question around CapEx mainly and probably going into fiber, but so you are guiding for an increased CapEx and sales intensity for 2021. Can you just break down for us a bit what part of that is driven by the fiber plan to pass another 0.5 million homes, what part of that would be driven by some of the ICT initiatives that you've been highlighting over the past couple of quarters? And then on fiber itself, is this an indication of you going into more, rather reaching more homes say in organically rather than through regulatory means? So is this the kind of new normal for Turkcell growing homespass over the next couple of years? Thank you.

Osman Yilmaz: Ondrej, thank you very much. For the CapEx side, there are multiple elements for the CapEx.

Let us start with the mobile side. We will invest in capacity increase in Turkey. We continued the strong demand for our data and digital services. This is driven by the increasing number of data consumption for our house users. We will continue to provide high-speed and quality household internet services over Superbox in 2021, which is well appreciated by our customers.

Please note that Superbox service will lead to additional TRY1 billion annual revenue. We will also invest into our 4.5G network in Ukraine, while expanding our network deployment in Belarus. Furthermore, fiber penetration in Turkey is too low compared to other developed markets. Majority of the broadband connection in the country are based on ADSL technology. That is copper.

It is not sufficient to meet the quality connection needs of customers, especially in the pandemic area. As we believe that there is additional need for fiber investment and we will increase our fiber footprint in 2021 by 500,000 homepasses. Meanwhile, as you mentioned for the ICTA investment, we will continue to invest our data center investment in 2021, this is for the CapEx and the CapEx portfolio. Regarding fiber footprint, actually this is -- instead of calling them inorganically, we call it organic approach. So obviously, joint fiber investment is important for Turkey to be able to reach every place in Turkey.

While this joint fiber company is going to establish, we would like to invest in our fiber area and this is going to be organically and obviously what you say, this is new normal for Turkcell, we want to continue adding more homepass year-over-year, especially next, maybe three, four years level.

Ondrej Cabejsek: Thank you very much. And can you maybe just elaborate a bit on the 0.5 million and what kind of homes are these? Are they untapped entirely currently or are they -- where there are some kind of networks already in place that will you be, pricing for market share in these areas, and is 0.5 million per year the kind of run rate that we should be expecting over the next four years as you say?

Murat Erkan: Yes, first of all, we would like to expect 0.5 million run rate. If we issue more than 0.5 million, it's very welcome. Regarding what kind of homepass, there are three types of homepass.

One of them, the existing zone that we invest, this is expansion for the existing zones, we already deployed. There will be totally new, Greenfield areas, also possible but probably at least half of them will come from existing zones. Maybe one third of them will come from the new Greenfield area and the other will be using new technologies, which we call e-homepass. That we have fiber at the base station level, I mean mobile base station, we can expand this through this base station area with an e-homepass investment.

Osman Yilmaz: If I will, I would like to give you some more breakdown into our coverage, probably 35% of them will go to the fiber, 5% for the data center, 50% for the mobile and 10% other.

Ondrej Cabejsek: That's very clear. Thank you very much.

Operator: The next question is from the line of none of Mishra Nikhil with HSBC. Please go ahead.

Nikhil Mishra: Yes, thank you for the presentation.

A couple of questions. First is on your back end device e-commerce platform Pasaj, can you give us what are your ambitions regarding that? And how big do you see it becoming let's say next three to four years? And secondly, again on asset monetization, apart from the three key areas you mentioned, like Global Towers, ADSL and Superonline, which other areas do you see in the future? Which other assets do you see yourself monetizing in the future?

Murat Erkan: Okay, first of all, regarding our e-commerce platform, we would like to establish marketplace for electronic and technology markets specifically, because this is where we have expertise, where our customer has strong trust on us. So, we would like to be number one player in this technology and IoT area of marketplace. This is how big obviously, during the pandemic, we see strong demand and increase. We were planning to have 12%, total face of consumer will come from digital side, but what we see that it has already reached 14% end of 2020.

So, we're going to revisit our targets. So, we want to go as much as we can. And in this aspect, I think sky is the limit. We'll push more on the e-commerce platform on the marketplace side. For the asset monetization, obviously Superonline, we already declared that couple of years ago, what we can do, but there are other potential.

So, as I said before, we have diversified business model comparing operation, driving growth and strong cash generation. We believe that the growth business in our portfolio has the potential to finance their operation. In this context, we may consider strategic option including capital market action, as well as private equity. For now, we see our fiber business, our payments services business Fintech and power business as likely candidates for such a strength strategic action. In your question, the payment services is probably the next one for this candidate.

We will keep the market informed and the development in this regard in a timely manner. We also see that the established companies from digital services. So these companies are also potential for the further possibilities like BiP, Lifebox, fizy, TV+. These are more long run things.

Nikhil Mishra: Okay, thank you.

And any timeline for these -- particular these three assets – not these three assets monetization is Superonline, is there any timeline for this?

Murat Erkan: I mean, the timeline is not definite yet, because we are discussing with our Board and our shareholder, the best timing for this. So as soon as we finalize the timeline with the Management with the Board of Directors we will come at the right time. Obviously, market condition is strongly depend on this timing. So we'll see, but we want to see something in this year.

Nikhil Mishra: Okay, thank you.

Murat Erkan: We - going to get ready anyway, so but, it depends on market conditions as well.

Nikhil Mishra: Sure. Thank you.

Operator: Next question is from the line of Jonathan with J.P Morgan. Please go ahead.

Unidentified Analyst: Good afternoon. Three questions from me, if I may. Could you comment on potential impacts of continued upsell opportunities on Turkish ARPU growth? Obviously very strong ARPU growth last year, just trying to understand if as economy is opening up, we could see expect ARPU growth ahead of inflation again. And then, second of all, could you comment on how much CapEx is required to support Superonline as it stands at the moment? And then finally, perhaps if you could comment on some of the developments in the prepaid pricing markets and how that is developing from a competitive perspective?

Murat Erkan: Okay, thank you, everyone for the first question. As, inflationary pricing is a key pillar of our strategy and business model, our price actions are reflected in pricing with a lack due to the contracted nature of our business.

We expect our ARPU growth to be in reasonable range around inflation level. And as everybody knows, inflation is the trend of decreasing mode. So while the inflation is in decreasing mode is really difficult to increase. Increase the pricing level, but we would like to be in line with plus or minus a couple of percentage around as the upcoming quarter. So we don't want to be above the inflation too much above the inflation or too much below the inflation.

So we're going to stick inflation and pricing as a strategy. And our upsell performance was remarkable so far, and we had the right action on raising the price with customized offer using our analytical capabilities. This resulted in a solid ARPU growth in prepaid segments in the fourth quarter as well. It is also worth noting that this collection of inactive scripted lines had a positive impact on prepaid ARPU growth. So, there are demands, especially when the economy gets better.

It creates opportunity to increase upsell and other things as well. So, regarding Superonline, how much CapEx is required, is 35% of the total CapEx in 2021 will be made to support our Superonline fiber business in total CapEx. So, I believe, I already response regarding prepaid pricing market and shipping comprehensive in a first question level. So, for the market size, everybody, all the companies that are focusing on postpaid market, and clearly shows that we are the winner of postpaid markets so far and we would like to keep this going.

Unidentified Analyst: Thank you.

Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell management for any closing comments. Thank you.

Murat Erkan: Thank you. Thank you, everyone.

This is the end of our call. Thank you all for taking the time to participate in our call. Thank you very much.

Osman Yilmaz: Thank you very much. Bye-bye.

Operator: Ladies and gentlemen, the conference has now concluded and you may disconnect your telephones. Thank you for calling and have a pleasant evening.