Turkcell says Q2 net profit rises 56 pct yr/yr

Turkcell says Q2 net profit rises 56 pct yr/yr

Turkcell, the leading provider of mobile communications services in Turkey, today announced results for the second quarter ended June 30, 2008. All financial results in this press release are unaudited, prepared in accordance with International Financial Reporting Standards ("IFRS") and expressed in US$ unless otherwise stated.

Please note that all financial data is consolidated and comprises Turkcell Iletisim Hizmetleri A.S., (the "Company", or "Turkcell") and its subsidiaries and its associates (together referred to as the "Group"). All non-financial data is unconsolidated and comprises Turkcell only. The terms "we", "us", and "our" in this press release refer only to the Company, except in discussions of financial data, where such terms refer to the Group, and where context otherwise requires.

Highlights for the Second Quarter 2008

-- Revenue increased by 16.7% to US$1,755.0 million compared to Q2 2007 (US$1,503.5 million)

-- EBITDA* increased by 7.4% to US$641.0 million compared to Q2 2007 (US$596.9 million)

-- Net income increased by 55.8% to US$426.4 million compared to Q2 2007 (US$273.6 million)

-- Turkcell's subscriber base grew by 4.7% to 35.4 million compared to Q2 2007 (33.8 million) as of June 30, 2008. The postpaid subscriber base grew by 13.1% to 6.9 million (6.1 million)

-- On an annual basis, blended minutes of usage per subscriber ("MoU") increased by 3.6% to 92.6 minutes (89.4 minutes), and 25.8% on a quarterly basis.

-- Blended average revenue per user ("ARPU") increased by 5.7% to US$14.9 compared to Q2 2007 (US$ 14.1), while the prepaid ARPU grew by 8.0% to US$9.5 (US$8.8)

-- Astelit increased its revenues by 100.9% to US$110.1 million compared to Q2 2007 (US$54.8 million) and continued to build on positive EBITDA generation

*EBITDA is a non-GAAP financial measure. See below for the reconciliation of EBITDA to net cash from operating activities.

-- In this press release, a year on year comparison of our key indicators is provided and figures in brackets following the operational and financial results for the second quarter 2008 refer to the same item in the second quarter of 2007. For further details, please refer to our consolidated financial statements and notes as at and for the quarter ended June 30, 2008 which can be accessed via our web site in the investor relations section ( www.turkcell.com.tr).

Comments from the CEO, Sureyya Ciliv

"I am pleased to see that Turkcell improved its performance and financial results during the second quarter of 2008. We increased our consolidated revenue by 17% to US$1.8 billion and recorded US$641 million EBITDA and US$426 million net income in the second quarter of 2008. I am also satisfied with the recovery in our subscriber additions and the consumption increase as a result of our actions and new offers during the quarter.

We quickly differentiated ourselves from competition during the second quarter. This was primarily achieved through our well designed pricing offers for various segments supported by our new communication campaign. Combined with our new pricing initiatives, we believe our overall value propositions continued to stand out against competition. As a result, we have ensured the momentum we seek for the remainder of 2008.

We believe we are well positioned and focused to handle the competitive challenges coming up in second half of 2008 and remain committed to attaining our year end targets.

On the international front, we acquired an 80% stake in Belarusian Telecommunications Network ("BeST"). I believe the acquisition of BeST represents an opportunity for Turkcell to gain access to a market with growth potential. We believe we can use our complimentary skills and experience gained in Ukraine and CIS effectively in Belarus to start differentiating BeST against the competition as soon as possible.

I thank all the Turkcell employees and business partners for their continued hard work during this period."

Overview of the Second Quarter

During the second quarter, we continued operating in a difficult environment. This can be attributed to the weakening global macro environment, uncertainties in the local market as well as growing competition. We improved operational performance and as a result recorded better operational results in our subscriber base, ARPU and MoU in the second quarter as we have regained our marketing flexibility to launch new campaigns and offers and take necessary pricing actions at the end of February.

Since the end of February, we have been continuously rolling out strong offers while improving our subscribers' price perception. Improved price perception helped increase customer satisfaction, enhance customer retention and strengthen brand image while stimulating usage during the quarter.

We relaunched our successful Pomegranate campaign at the end of first quarter, which provided free on-net usage in return for airtime top ups, having an immediate positive impact on usage starting from March that continued into the second quarter of 2008. In the second quarter of 2008, we recorded better subscriber growth, with a focus on postpaid, corporate and premium customers. Additionally, we achieved higher customer satisfaction and retention rates through our segmented retention activities which we were limited to do during the previous quarter.

Among the new offers, our homezone offer, which remains unique in our market, and our prepaid campaigns were well perceived and as a result led to improved customer satisfaction.

In line with our focus on the youth segment, we continued to cater to the youth segment and have introduced new offers particularly addressing the needs and expectations of all the students and people below the age 25 during the quarter.

We continued to focus on ensuring retention of our customers especially in the premium and corporate segments. We focused on improving our value perception of our corporate customers through the launch of a new tariff, customized complete communication solutions along with co-branding campaigns, and the minute packages aimed at the corporate segment.

As part of our ongoing efforts, recently in July, we introduced the most attractive offer for the largest community for both the prepaid and postpaid subscribers. Prepaid subscribers are granted incentives based on higher unit top ups and the postpaid subscribes upon the purchase of minute packages.

Our VAS revenues constituted 12% of the group's consolidated revenue in the second quarter of 2008. During this period, we recorded high usage levels in corporate messaging, mobile internet usage as well as increased subscriptions to data lines. On the consumer segment, we have seen the positive impact of the SMS campaigns.

All in all, we can state that we have addressed all major segments with improved offers and supported by strong communication campaigns. We believe we will continue to see the benefits of our actions during the second half of 2008.

Financial and Operational Review of Second Quarter 2008

The following discussion focuses principally on the developments and trends in our business in the second quarter of 2008. Selected financial information for the second quarter of 2007, first quarter of 2008 and second quarter of 2008 is also included at the end of this press release.

Selected financial information in TRY prepared in line with the Capital Markets Board of Turkey's standards is also included at the end of this press release.

    Macro environment Information

                                                         Q2 2008-  Q2 2008-

                               Q2        Q1        Q2    Q2 2007   Q1 2008

                              2007      2008      2008     % Chg     % Chg

    TRY / US$ rate

    Closing Rate            1.3046    1.2765    1.2237    (6.2%)    (4.1%)

    Average Rate            1.3317    1.1898    1.2448    (6.5%)     4.6%

    INFLATION

    Consumer Price Index      1.5%      3.1%      2.8%       -         -

The uncertainty in the global markets continued into the second quarter of 2008. This, coupled with the rising political tension in Turkey, resulted in the depreciation of the TRY against USD during the first half of the year. The government raised its inflation target for the year and the consumer confidence index continued its downward trend. As for our operating environment, we believe that these developments in and out of Turkey although not quantifiable have, to some extent, impacted our operational, business and financial performance for the last two quarters.

As for the potential impact of increasing inflation on our financial results, so far we have not seen a material impact. However, we will continue to carefully monitor the global and local developments that may have an impact on our operating environment and our results of operations.

    Financial Review

    Profit & Loss Statement

    (million US$)

                                                         Q2 2008-   Q2 2008-

                             Q2         Q1        Q2     Q2 2007    Q1 2008

                            2007       2008      2008      % Chg      % Chg

    Total revenue        1,503.5    1,574.4   1,755.0      16.7%      11.5%

    Direct cost of

     revenue              (768.4)    (825.1)   (847.0)     10.2%       2.7%

      Depreciation and

      amortization        (197.8)    (192.5)   (172.5)    (12.8%)    (10.4%)

    Administrative

     expenses              (54.4)     (72.2)    (73.4)     34.9%       1.7%

    Selling and

     marketing expenses   (281.6)    (292.7)   (366.1)     30.0%      25.1%

    EBITDA                 596.9      577.0     641.0       7.4%      11.1%

    EBITDA Margin          39.7%      36.6%     36.5%   (3.2 p.p)  (0.1 p.p)

    Net finance income/

     (expense)            (110.2)     209.4      70.5    (164.0%)    (66.3%)

      Finance expense     (163.5)     (15.9)    (15.3)    (90.6%)     (3.8%)

      Finance income        53.3      225.3      85.8      61.0%     (61.9%)

    Share of profit of

     equity  accounted

     investees               8.4       19.9      29.3     248.8%      47.2%

    Income tax expense     (46.4)    (126.3)   (118.9)    156.3%      (5.9%)

    Net income             273.6      486.8     426.4      55.8%     (12.4%)

Revenue: We increased our revenues 16.7% in the second quarter of 2008 to US$1,755.0 million compared to the same quarter of 2007. This was mainly due to a 4.7% increase in our subscriber base, 6.5% appreciation of TRY against US$, and the price increase in 2007 as well as the contribution of our consolidated subsidiaries.

We increased our revenues in the second quarter of 2008 by 11.5% compared to a quarter ago. This was mainly attributable to the 25.8% increase in usage despite a 4.6% depreciation of TRY against US$ and decrease in interconnection revenue due to the downward revision in interconnection rates as of April 1, 2008.

On June 25th, we introduced an upward price adjustment of 3.66% on a blended basis in line with the trends in the general operating environment as well as customer behavior and trends in our competitive environment. However, the impact of this adjustment is not reflected in the second quarter results, yet.

Direct cost of revenue: Our direct cost of revenues, including depreciation and amortization, was realized at US$847.0 million with a 10.2% year on year increase. However, the share of direct cost of revenues in total revenues decreased to 48.3% from 51.1% a year ago. This was mainly due to lower depreciation and amortization expenses as a percent of revenues.

In the second quarter of 2008, direct cost of revenue including depreciation and amortization increased slightly by 2.7% compared to the previous quarter. The share of direct cost of revenue in total revenues in the second quarter of 2008 decreased to 48.3% from 52.4% in the first quarter of 2008. This was mainly due to the lower depreciation and amortization expenses as a percent of revenues and the decrease in interconnection costs due to the downward revision in interconnection rates as of April 1, 2008.

Selling and marketing expenses: In the second quarter of 2008 selling and marketing expenses increased by 30.0% compared to the same period of last year. The proportion of selling and marketing expenses in total revenue rose to 20.9% in the second quarter of 2008 from 18.7% a year ago. This stemmed from higher marketing expenses due to higher campaign activities and higher selling expenses with increased dealer and distributor activities in an active competitive environment.

Selling and marketing expenses increased 25.1% in the second quarter of 2008 compared to the first quarter of 2008. Selling and marketing expenses in total revenues also increased to 20.9% from 18.6% compared to the previous quarter. This was down to the increase in selling expenses due to higher gross acquisitions as well as the increase in marketing expenses due to higher campaign activities along with new offers introduced since the end of February that continued into this quarter.

General and Administrative expenses: In the second quarter of 2008, general and administrative expenses in nominal terms increased by 34.9% on an annual basis, however remaining flat on a quarterly basis. The increase on an annual basis was mainly due to an increase in wages and salaries as well as an average 6.5% appreciation of TRY against US$.

Share of profit of equity accounted investees: In the second quarter of 2008, our equity in net income of unconsolidated investees increased to US$29.3 million from US$8.4 million in the second quarter of 2007. This was mainly due to the solid operational growth in Fintur's operations.

Our 50% owned subsidiary A-Tel impacted two items in the financial statements. A-Tel's revenue generated from Turkcell, amounting to US$12.0 million, is netted from the selling and marketing expenses in our consolidated financial statements. The difference between the total net impact of A-Tel and the amount netted from selling and marketing expenses amounted to US$9.8 million and is recorded in the share of profit of equity accounted investees line of our financial statements.

Net finance income/(expense): We recorded a net finance income of US$70.5 million in the second quarter of 2008 compared to a financial loss of US$110.2 million in the second quarter of 2007. This was mainly attributable to the translation loss of US$19.4 million recorded in the second quarter of 2008, compared to a translation loss of US$139.9 million in the second quarter of 2007. The translation loss recorded in the second quarter of 2007 was mainly due to the forward contracts we engaged at the beginning of 2007. Our interest income for the second quarter of 2008, as compared to the second quarter of 2007, also rose due to an increase in our cash balance.

Net finance income in the second quarter of 2008 decreased from US$209.4 to US$70.5 million compared to the previous quarter. This was mainly due to US$19.4 million translation loss recognized in the second quarter of 2008 as opposed to US$125.8 million translation gain in the first quarter of 2008.

Income Tax Expense: The total taxation charge in the second quarter of 2008 increased by 156.3% year on year to US$118.9 million, mainly due to an increase in profit before tax.

Of the total tax charge in second quarter of 2008, US$112.6 million was related to current tax charges in the second quarter of 2008 and US$6.3 million deferred tax expense, which was realized during the quarter.

    Income tax expense

    (million US$)

                                                          Q2 2008-  Q2 2008-

                                 Q2        Q1        Q2   Q2 2007   Q1 2008

                                2007      2008      2008    % Chg     % Chg

    Current Tax expense       (79.4)   (146.9)   (112.6)    41.8%   (23.3%)

    Deferred Tax income/

    (expense)                  33.0      20.6      (6.3)  (119.1%) (130.6%)

    Income Tax expense        (46.4)   (126.3)   (118.9)   156.3%    (5.9%)

EBITDA: In the second quarter of 2008 EBITDA, in nominal terms, increased 7.4% on annual basis. However, EBITDA margin decreased from 39.7% to 36.5% in the second quarter of 2007 mainly due to higher selling and marketing expenses in an increasingly competitive environment.

EBITDA, in nominal terms, increased 11.1% on a quarterly basis while the EBITDA margin remained almost flat.

Net income: In the second quarter of 2008, our net income increased 55.8% to US$426.4 million on an annual basis. The year on year growth was mainly attributable to a US$139.9 million translation loss that we recorded in the second quarter of 2007 while during the second quarter of 2008 we recorded only US$19.4 million translation loss. Net income margin increased to 24.3% in the second quarter of 2008 from 18.2% last year.

Net income in the second quarter of 2008 decreased by 12.4% on a quarterly basis. This mainly resulted from US$19.4 million translation loss in the second quarter of 2008 compared to the US$125.8 million translation gain in the previous quarter. Additionally, we realized a one-off payment in an amount of approximately US$19.8 million, which also adversely impacted net income. The net income margin in the first quarter of 2008 was 30.9% compared to 24.3% in the second quarter of 2008.

    Total Debt: Our consolidated debt amounted to US$638.4 million as of June

30, 2008. Of this total amount, US$535.6 million was related to our Ukraine

operations.

    Consolidated Cash Flow

    (million US$)

                                               Q2         Q1         Q2

                                              2007       2008       2008

    EBITDA                                    596.9      577.0      641.0

    LESS:

    Capex and License                        (190.7)    (192.5)    (229.4)

      Turkcell                                (94.6)     (97.4)     (99.2)

      Ukraine                                 (53.0)     (55.5)     (57.8)

    Investment & Marketable Securities            -      (25.0)      (7.1)

    Net Interest Income                        29.6       83.6       89.9

    Other                                    (282.5)    (456.5)    (198.4)

    Net Change in Debt                         68.4        7.5       (6.9)

    Dividend Paid                            (411.9)         -     (502.3)

    Cash Generated                           (190.2)      (5.9)    (213.2)

    Cash Balance                            1,672.5    3,089.4    2,876.2

Cash Flow Analysis: Capital expenditures in the second quarter of 2008 amounted to US$229.4 million of which US$57.8 million was related to our Ukrainian operations.

As for the other item, major cash outflow in second quarter of 2008 was US$378 million, which mainly composed of corporate tax payments belonging to the first quarter of 2008 and 2007. On the other hand, major cash inflows were the US$89 million from bank overdraft and US$65 million frequency usage fee, which was paid in the first quarter of 2008 and recorded as expense in the second quarter.

Consequently, our cash position at the end of the second quarter of 2008 is US$2,876.2 million.

Although the capex budget planned for 2008 remains the same, we revised the planned capex for Astelit and Tellcom as US$300 million and US$135 million, respectively.

    Operational Review

    Summary of Operational Data

                                                          Q2 2008- Q2 2008-

                                       Q2     Q1     Q2   Q2 2007  Q1 2008

                                      2007   2008   2008    % Chg    % Chg

    Number of total subscribers

     (million)                        33.8   35.1   35.4     4.7%     0.9%

    Number of postpaid subscribers

     (million)                         6.1    6.6    6.9    13.1%     4.5%

    Number of prepaid subscribers

     (million)                        27.7   28.6   28.5     2.9%    (0.3%)

    ARPU (Average Monthly Revenue

     per User), blended (US$)         14.1   13.2   14.9     5.7%    12.9%

      ARPU, postpaid (US$)            38.2   37.4   37.6    (1.6%)    0.5%

      ARPU, prepaid (US$)              8.8    7.8    9.5     8.0%    21.8%

    ARPU, blended (TRY)               18.8   15.7   18.5    (1.6%)   17.8%

      ARPU, postpaid (TRY)            50.9   44.5   46.7    (8.3%)    4.9%

      ARPU, prepaid (TRY)             11.7    9.2   11.8     0.9%    28.3%

    Churn (%)                         4.7%   7.2%   6.9%    2.2pp   (0.3pp)

    MOU (Average Monthly Minutes of

     usage per subscriber), blended   89.4   73.6   92.6     3.6%    25.8%

Subscribers: Our total subscriber base reached 35.4 million as of June 30, 2008, representing a 4.7% year on year increase. In the second quarter of 2008, we continued to record strong gross additions and led the market in a comparatively slower growing market. We recorded a net addition of approximately 202,000 during the second quarter of 2008.

We recorded the highest postpaid acquisitions in our history and our postpaid subscriber base grew by 13.1% compared to last year. This was achieved through our acquisition campaigns for postpaid and corporate as well as offers incentivizing switches from prepaid to postpaid subscriptions.

We also sustained growth on the prepaid front with 2.9% growth during the same period. On a quarterly comparison basis, our total subscriber base grew slightly by 0.9% while postpaid subscriber base grew by 4.5%. We also continued with our loyalty programs and churn prevention activities for the prepaid subscriber base.

Churn Rate: Churn refers to disconnected subscribers, whether disconnected voluntarily or involuntarily. In the second quarter of 2008, our churn rate was realized at 6.9%. This represented a 2.2 percentage points increase from 4.7% a year ago, reflecting an active competitive environment and the negative effect of the Telecom Authority's retail pricing decision of October 2007. However, this quarter the churn rate slightly decreased to 6.9% from 7.2% in the first quarter of 2008. The majority of the churn rate during the quarter was due to involuntary churn of the low ARPU generating prepaid subscribers who were acquired during previous quarters through periodical campaigns.

MoU: Our blended minutes of usage per subscriber ("MoU"), was realized at 92.6 minutes in the second quarter of 2008, which is the highest MoU since 2004. The 25.8% increase on a quarterly basis was due to the Pomegranate campaign for the individual subscribers, the redesigned newstudent tariff "Bizbize Kampus" for students younger than 25, our Homezone campaign, as well as the increase in the number of subscriptions to our simplified tariff options.

On an annual basis, MoU increased 3.6% compared to the second quarter of 2007, where usage had been boosted by the Pomegranate Campaign launched during that quarter. We decided to relaunch this successful campaign with a new incentive scheme at the end of February 2008, resulting in an improved MoU performance.

ARPU: Our blended average revenue per user ("ARPU") increased by 5.7% to US$14.9 in the second quarter of 2008. This was a result of a 6.5% appreciation of TRY against US$ and the price increase in 2007.

In TRY terms ARPU decreased slightly by 1.6%. Postpaid ARPU decreased by 8.3% in TRY terms with higher subscriptions to new tariff launches offering usage incentives and the increase in data lines on track with our focus on Value Added Services. Prepaid ARPU increased 0.9% in TRY terms as a result of our effective usage incentives such as the Pomegranate campaign.

On a quarterly basis, ARPU increased 12.9% in US$ and 17.8% in TRY terms mainly due to the positive effect of the Pomegranate campaign, despite a 4.6% depreciation of TRY against US$.

We expect to increase TRY ARPU during the second half of 2008 compared to the first half of 2008. For the whole year, we expect flat TRY ARPU compared to 2007, due to the adverse impact of the macroeconomic developments and a downward revision in interconnection rates.

Regulatory and Legal Developments

Telecommunications Authority's on retail pricing decision

On December 18, 2007 Turkcell announced the commencement of litigation at the Highest Administrative Court and requested the suspension and annulment of the Telecommunications Authority ("TA")'s decision to control retail pricing for mobile operators. The TA's decision implied setting a lower ceiling for off-net calling prices (the tariffs that Turkcell charges its subscribers for calls that are terminated outside of its network-on other mobile operators' networks) for all operators and asking Turkcell to set its on-net prices (the tariffs that Turkcell charges its subscribers for calls terminated on its network) to be not lower than its lowest interconnect rate.

As we believe to be in compliance with the Telecommunications Authority's decision regarding retail pricing decision, since the end of February, we have been relaunching new campaigns and offers and taking pricing actions that were halted between October 2007 and February 2008.

In June, the Highest Administrative Court suspended the TA's decision stating that Turkcell should set its on-net prices to be not lower than its lowest interconnection rate until the lawsuit ends. On the other hand, the High Administrative Court rejected Turkcell's request regarding the suspension of the decision about the off-net calling prices.

Electronic Communications Law

The Electronic Communications Law prepared by the Turkish Ministry with the aim of establishing a similar legislative system to the EU regulatory framework and existing Telecommunications Authority regulations, has been approved by the Parliament on July 31, 2008. While we believe this development is an improvement for the better regulation of the Telecommunications sector in Turkey, it will result in an expansion of the Telecommunications Authority's powers and could lead to an increase in our current obligations.

    International and Domestic Operations

Fintur

We hold a 41.45% stake in Fintur and through Fintur we hold interests in GSM operations in Kazakhstan, Azerbaijan, Moldova and Georgia.

                                                  Q2    Q1     Q2

                                                 2007  2008   2008     Q2

     FINTUR   Q2 2007  Q1 2008 Q2 2008           Rev-  Rev-   Rev-    2008-

      as of     Sub-    Sub-    Sub-   Q2 2008-  enue  enue   enue     Q2

     June 30, scriber scriber scriber  Q2 2007   (US$  (US$  (US$     2007

      2008     (mio)   (mio)   (mio)    %Chg     mio)  mio)   mio)    %Chg

    Kazakhstan  4.5    6.5      6.9     53.3%    199    225    242    21.6%

    Azerbaijan  2.6    3.2      3.3     26.9%    104    117    134    28.8%

    Moldova     0.5    0.5      0.6     20.0%     13     14     16    23.1%

    Georgia     1.1    1.4      1.4     27.3%     39     48     54    38.5%

      TOTAL     8.7   11.6     12.2     40.2%    355    404    446    25.6%

Fintur's operations continued to deliver positive operational performance during the second quarter of 2008. The total number of subscribers in Fintur's operations increased by 40.2% to 12.2 million in the second quarter of 2008. The consolidated revenues of Fintur reached US$446 million as of June 30, 2008.

We account for our investment in Fintur using the equity method. Fintur's contribution to income increased 78% to US$39.2 million in the second quarter of 2008.

Astelit

Astelit, in which we hold a 55% stake through Euroasia, has operated in Ukraine since February 2005 under the brand "life:)".

During the second quarter of 2008;

-- Astelit continued to grow its net subscriber additions capturing the largest market share in net additions during the quarter

-- Astelit's market share grew from 12% to 18% compared to the same period of last year.

-- Astelit grew its subscriber base by 58.7% to 10.0 million

-- Approximately 60% of the total subscriber base is active and they generate US$6.3 ARPU, which is quite in line with the weighted average ARPU in the market

    -- Astelit recorded US$110.1 million in revenues with a 100.9% year on

year increase

    Summary Data for Astelit

                                                         Q2 2008-   Q2 2008-

                                 Q2     Q1       Q2      Q2 2007    Q1 2008

                                2007   2008     2008        %Chg      %Chg

    Number of subscribers

     (million)

      Total                      6.3    9.4     10.0       58.7%       6.4%

      Active (3 months)(1)       4.0    5.8      5.9       47.5%       1.7%

    Average Revenue per User

     (ARPU) in US$

      Total                      3.0    3.3      3.8       26.7%      15.2%

      Active (3 months)          5.0    5.4      6.3       26.0%      16.7%

    Revenue                     54.8   90.2    110.1      100.9%      22.1%

    EBITDA(2)                   (9.6)   2.1      3.6      137.5%      71.4%

    Net Loss                   (46.1) (32.4)   (18.7)      59.4%      42.3%

    Capex                       53.0   55.5     57.8        9.1%       4.1%

    (1) Active subscribers are those who in the past three months made a

        transaction which brought revenue to the Company.

    (2) EBITDA is a non-GAAP financial measure. See below for the

        reconciliation of Euroasia's EBITDA to net cash from operating

        activities. Eurasia holds 100% stake in Astelit.

Inteltek

Inteltek is our 55% owned subsidiary that operates in the sports betting business. Inteltek is operating under Fixed Odds Betting and Central Betting System contracts until a new tender is held by Spor Toto and operations start under the new tender. The new tender is announced to take place on August 12, 2008. Inteltek intends to participate to the new tender.

Acquisition of BeST in Belarus

As we announced on July 29, 2008, we signed a Share Purchase Agreement ("SPA") to acquire an 80% stake in Belarusian Telecommunications Network ("BeST") for a consideration of US$500 million. The payment is expected to be realized in 3 tranches whereas US$300 million is expected to be paid on the closing date and an additional US$100 million tranches are expected to be paid on December 31, 2009 and 2010 respectively. An additional payment of US$100 million shall be made when BeST records a full-year positive net income for the first time. The transaction is expected to close in 30 days from the SPA's signature date.

Reconciliation of Non-GAAP Financial Measures

We believe that EBITDA is a measure commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our operating results and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors.

Beginning from the 2006 fiscal year, we have revised the definition of EBITDA which we use and we report EBITDA using this new definition starting from the first quarter of 2006 results announcement to provide a new measure to reflect solely cash flow from operations.

    EUROASIA (Astelit)

    US$ million

                                                         Q2 2008-  Q2 2008-

                                  Q2       Q1      Q2    Q2 2007   Q1 2008

                                 2007     2008    2008     % Chg     % Chg

    EBITDA                      (9.6)     2.1     3.6   (137.5%)     71.4%

    Other operating income/

     (expense)                     -      0.1    (0.1)       -     (200.0%)

    Financial income             0.4      0.8     1.8    350.0%     125.0%

    Financial expense          (17.2)    (9.1)  (12.5)   (27.3%)     37.4%

    Net increase/(decrease) in

     assets and liabilities    (11.0)    26.6    37.4   (440.0%)     40.6%

    Net cash from operating

     activities                (37.4)    20.5    30.2   (180.7%)     47.3%

The EBITDA definition used in our previous press releases and announcements had included Revenues, Direct Cost of Revenues excluding depreciation and amortization, Selling and Marketing expenses, Administrative expenses, translation gain/(loss), financial income, income on unconsolidated subsidiaries, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense). Our new EBITDA definition includes Revenues, Direct Cost of Revenues excluding depreciation and amortization, Selling and Marketing expenses and Administrative expenses, but excludes translation gain/(loss), financial income, income on unconsolidated subsidiaries, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense).

EBITDA is not a measure of financial performance under IFRS and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity.

The following table provides a reconciliation of EBITDA, which is a non- GAAP financial measure, to net cash provided by operating activities, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS.

    TURKCELL

    US$ million

                                                          Q2 2008-   Q2 2008-

                               Q2        Q1         Q2    Q2 2007    Q1 2008

                              2007      2008       2008     % Chg      % Chg

    EBITDA                   596.9     577.0      641.0      7.4%      11.1%

    Income Tax Expense       (46.4)   (126.4)    (118.9)   156.3%      (5.9%)

    Other operating

     income/(expense)          3.1       1.4       (1.6)  (151.6%)   (214.3%)

    Financial income           3.8       3.2       10.0    163.2%     212.5%

    Financial expense         (8.3)     (2.4)     (12.7)    53.0%     429.2%

    Net (decrease)/increase

     in assets and

     liabilities            (236.5)   (292.9)    (252.9)     6.9%     (13.7%)

    Net cash from

     operating activities    312.6     159.9      264.9    (15.3%)     65.7%

Turkcell Group Subscribers

We have approximately 48.6 million proportionate GSM subscribers as of June 30, 2008. This is calculated by taking the number of GSM subscribers in Turkcell and each of our subsidiaries and multiplying the number of unconsolidated investees by our percentage ownership interest in each subsidiary. This figure includes the proportionate rather than total number of Fintur's GSM subscribers. However, it includes the total number of GSM subscribers in Astelit and in our operations in the Turkish Republic of Northern Cyprus ("Northern Cyprus") because the financial statements of our subsidiaries in Ukraine and Northern Cyprus are consolidated with Turkcell's financial statements.

    Turkcell Group Subscribers

    (million).

                                                        Q2 2008-    Q2 2008-

                               Q2       Q1      Q2      Q2 2007     Q1 2008

                              2007     2008    2008       % Chg       % Chg

    Turkcell                  33.8     35.1    35.4        4.7%        0.9%

    Ukraine                    6.3      9.4    10.0       58.7%        6.4%

    Fintur (pro rata)          2.1      2.8     3.0       42.9%        7.1%

    Northern Cyprus            0.3      0.3     0.2      (33.3%)     (33.3%)

    TURKCELL GROUP            42.5     47.6    48.6       14.4%        2.1%