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Turkcell(TKC) - 2024 Q4 - Annual Report

FORM 20-F Filing Information Filing Details Turkcell's FY2024 Annual Report on Form 20-F, prepared under IFRS, classifies the company as a well-known seasoned issuer - The registrant is Turkcell İletişim Hizmetleri A.Ş., incorporated in the Republic of Türkiye3 - The report is an Annual Report for the fiscal year ended December 31, 20242 - Turkcell is a well-known seasoned issuer and a large accelerated filer67 - Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB7 Securities Listing Details | Class of Security | Trading Symbol | Exchange Registered On | | :---------------- | :------------- | :--------------------- | | American Depositary Shares, each representing 2.5 ordinary shares | TKC | New York Stock Exchange | - As of period-end, 2.2 billion Ordinary Shares are outstanding, including 330 million Group A shares and 1.87 billion Group B shares6 Introduction Company and Financial Reporting Context Turkcell's consolidated financial statements for the three-year period ended December 31, 2024, are prepared under IFRS, applying IAS 29 due to Türkiye's hyperinflationary economy - Turkcell's consolidated financial statements are prepared in accordance with IFRS as issued by the IASB for the three-year period ended December 31, 202415 - Türkiye has been classified as a high-inflation economy under IAS 29 since June 30, 2022, necessitating inflationary adjustments to financial statements for all reported periods, expressed in terms of the Turkish Lira's purchasing power as of December 31, 202416 - Certain historical figures (e.g., investigations, lawsuits, dividends) are disclosed without IAS 29 restatements and are explicitly labeled as 'not restated for IAS 29'16 - Performance measures like subscriber numbers, ARPU, and churn rates are not standardized across the telecommunications industry, making direct comparisons difficult20 Forward-Looking Statements and Risk Factors Forward-Looking Statements Forward-looking statements in this report are subject to risks and uncertainties, and actual results may differ materially - The report contains forward-looking statements identifiable by terms like 'may,' 'will,' 'expect,' 'intend,' 'estimate,' 'anticipate,' 'believe,' 'continue,' or similar expressions23 - Actual results could differ materially from expectations due to uncertainties and risk factors detailed in the report24 Non-IFRS Measures This section defines non-IFRS measures, Adjusted EBITDA and Adjusted EBITDA Margin, used by management to monitor performance and clarifies their limitations - Adjusted EBITDA is defined as profit before finance income, finance costs, monetary gain/loss, income tax, other operating income/expenses, discontinued operations, equity-accounted investees, and depreciation/amortization28 - Adjusted EBITDA is used by management as a key indicator for financial performance and facilitates period-to-period and company-to-company comparisons, but it is not an IFRS measure and has limitations282930 - Limitations of Adjusted EBITDA include not reflecting cash expenditures for capital, working capital needs, interest/debt payments, or non-cash income/expense items, and potential calculation differences across companies313240 - Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenues33 - ARPU (Average Revenue Per User) is an operational metric calculated by dividing subscriber or network-driven revenues in Turkcell Türkiye by twelve and then by the average number of subscribers, excluding certain revenue streams35 ITEM 1. Identity of Directors, Senior Management and Advisers Not applicable. This item is marked as 'Not applicable' in the report ITEM 2. Offer Statistics and Expected Timetable Not applicable. This item is marked as 'Not applicable' in the report ITEM 3. Key Information 3.A Reserved This sub-item is reserved and contains no information 3.B Capitalization and Indebtedness This sub-item is marked as 'Not applicable' in the report 3.C Reasons for the Offer and Use of Proceeds This sub-item is marked as 'Not applicable' in the report 3.D Risk Factors This section outlines the principal material risks faced by Turkcell and its subsidiaries, categorized into risks relating to Türkiye, the telecom industry, the company's business, and its American Depositary Shares - The majority of Turkcell's business and assets are in Türkiye, making it highly susceptible to deterioration in the Turkish economy, Turkish Lira devaluation, or political instability4647 - Continuing high inflation in Türkiye (peaked at 85.51% in Oct 2022, ended 2024 at 44.38%) and the application of IAS 29 for hyperinflationary economies significantly affect financial statements and could adversely impact profitability and business operations455660 - Foreign exchange rate risks, particularly the devaluation of the Turkish Lira (19.7% against USD in 2024), significantly affect operations, financial position, and increase borrowing and hedging costs, especially as capital expenditures and borrowings are largely denominated in foreign currencies456365 - Competition in the Turkish telecommunications market is intense, with regulatory actions often favoring competitors, potentially affecting business growth and financial condition459798 - Rapid technological changes, including the emergence of 5G, eSIM, and AI, require significant capital expenditures and pose risks of commercial failure or obsolescence if the company fails to adapt effectively45919394 - Regulatory decisions and changes in the regulatory environment, including pricing, data protection, taxation, and license obligations, can adversely affect Turkcell's business and financial condition, potentially leading to fines or increased costs457797111113114115116119120121122 - The company's growth strategy relies partly on investments in new opportunities outside core telecom activities (e.g., techfin, data centers, renewable energy), which may not be successful or provide expected returns45102104105 - Turkcell's business is heavily dependent on the continuity and security of its IT and network technology services, making it susceptible to physical and cybersecurity threats, which could lead to service disruptions, reputational harm, or financial losses45158159160161162163164 - The presence of two major shareholders (TWF and IMTIS Holdings) whose interests may not align with other shareholders, and the potential exposure to international sanctions due to IMTIS Holdings' indirect beneficiaries, pose significant risks50189[191](