Good day and welcome to the Second Quarter 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. Nihat Narin, Director of Investor Relations and Business Developments. Please go ahead, sir.

Thank you, Trish. Thank you for your participation. And I would like to say, welcome to our call on behalf of the management team here. We will start today with the presentation by our CEO, Kaan Terzioglu, followed by a presentation by CFO, Bülent Aksu. And then we will go into the Q&A session. Just before we start the presentation, I would like to remind you of the brief legal notice that presentation, we will make statements that are forward-looking about our future targets and expectations and these are based on our current views and assumptions which may of course change in the future and our actual results may be different. Mr. Terzioglu, please, go ahead sir.

Thank you, Nihat. Good afternoon and good evening everyone and welcome to Turkcell second quarter 2016 results call. Today we have a full house here including our recently appointed executives, Chief Financial Officer, Bülent Aksu, Chief Marketing Officer, İsmail Bütün and our Chief Strategy Officer Ilter Terzioglu as well as Chief Sales Officer, Murat Erkan; Chief Technology Officer, Ilker Kuruöz; Chief Legal and Regulation Officer, Serhat Demir; and Chief Business Support Officer, Seyfettin Sağlam. Before getting into the numbers, I should highlight that Turkey has overcome a major challenge to its democracy by successfully averting a coup attempt. Our people and business community have firmly demonstrated their continued commitment to the civil rule and democratic institutions. We are confident that this clear and swift rejection of an anti democratic course safeguards Turkeys’ political and macroeconomic future. In short, now it is time to look forward to a brighter future for Turkey as Turkey and Turkcell has toughened and our sector demonstrated success. While recent events might have some short term business implications the prudent steps that we have already taken provided buffer against potential currency risk and strengthened our liquidity. Therefore we are fully funded and committed to our business run for the next three years. Our CFO will expand on this further. In addition, today we announced our Board of Directors decision to buy back our shares in order to protect our small investors against market volatility and to purchase or redeem our company’s bonds. Moreover, we marked a milestone in the telecommunication sector today serving today’s Turkey’s broader 2023 economic targets. With a view of an efficient use of our resources while establishing a fair and competitive environment we have taken significant steps towards forming an infrastructure company together with Vodafone, Turksat and Union of small ISE [ph]…

Thank you. [Operator Instructions] We will now take our first question which comes from Ivan Kim of VTB Capital. Please go ahead.

Yes. Good evening. Two questions from my side please. Firstly, on the cost of sales, the cost of sales increased quite a bit. Can you please elaborate on the reasons behind that and what should we expect for the second half of the year? And secondly, what are the reasons for relative to the first quarter slowdown of mobile revenue in Turkey? And maybe some couple of forwards on the competitive environment in the mobile space and the price action following the launch of 4.5G in line with your expectations? Thank you.

Ivan, thank you very much. First of all, thanks a lot of asking the question around mobile revenue and as well as the cost of sales issues. Now, frankly speaking, 4.5G launch marks an important turn into our service commitments to our customers. The 10 customer commitments we have provided which actually aligned with the 4.5G launch has significant issues related to our revenue growth potential. And these are temporary issues and they were deliberately taking by us in order to accelerate the 4.5G deployment. One, was we doubled the quotas of all of our users which actually put a cut to the potential over utilization revenues, which was again done specifically based on the five time commitments we have given to the customers. Second issue was about our roaming strategy in terms of cost of the roaming. We make changes to our roaming strategy to make sure that we had favorable roaming rates to our customers basically repositioning us as the most competitive player in this particular area. This had potentially impact close to about TRY30 million in terms of the revenue potential this quarter. With regard to the cost of sales, there are two main issues there which I would like to explain. One, we have stopped the practice of subsidizing tax for new established lines. This actually allowed us to focus on high revenue potential customers eliminating unnecessary cost related to taking on new customers with very low or no revenue potential at all. This was a reduction in our sales expense which we have actually used as a further budget for marketing expenses for the 4.5G. So, these elements increased our cost of sales in terms of the total marketing expenses while giving us more headroom in terms of reducing our sales acquisition costs. Both of these transactions actually as I mentioned were actions we have taken knowing the results and also we are enjoying now the positive market impact. You have also asked the question about the market. Since six quarters we are seeing consisting rationalization of the Turkish market. The market competition replacing actually by healthy inflationary pricing, this is visible, not only in our numbers but in the numbers of the competition which was announced recently.

Great. Thank you very much.

Thank you, Ivan.

Thank you. We'll now move to our next question from Vyacheslav Degtyarev of Goldman Sachs. Please go ahead.

Yes. Thank you very much for the presentation. Two questions from my side. Firstly, can you please elaborate on your medium term revenue and EBITDA guidance? Does this sustain tax as you didn't present in this quarter presentation. And also how do you view your long-term CapEx to sales ratio and given the recent change in the 2016 guidance. That's the first question. And the second one is, can you estimate the impact of lower incoming tourist into Turkey in the third quarter. So, what is their roaming exceeded their high summer season as well as the amount of SIM cards purchases by tourists? Thank you.

Thank you, Vyacheslav. First of all, I think I made a exclusive comment about reiterating our short and midterm revenue and EBITDA guidance and there no changes in that. If you look to the guidance we have provided on at the end of the 2015 for 2016, we said, our EBITDA margin would be in between 31% to 33%. As you can imagine this was lower than 2015 EBITDA margin which was 32.4%. So the change you see in Q2 numbers reflecting this actually prediction. In terms of long-term CapEx to sales ratio, our three-year plan has not changed. We have accelerated some of our CapEx investments and this will be reflected in this year taking our CapEx to sales ratio to 25%, but long-term we remain committed to 17%, 16% range in terms of our CapEx to sales ratio. The last period, the six months, Turkey has seen a lower number of incoming tourists. We see almost a 30% decline in the total tourist population and this is of course reflected in our revenues as well.

Okay. Thank you.

Thank you.

Thank you. [Operator Instructions] We seem to have no further questions on the phone at this time.

Trish, there is a couple of questions through website. Let me actually ask my CEO to respond some of those.

Sure.

Kaan, then could you just tell us that what's your plan about TRY150 million that you disclosed about the buyback. Are you going to buy the shares or share bonds? This question comes from Barrick [ph] right, Barrick [Indiscernible] from Global Securities.

That's correct.

Yes. Today's Board Meeting we decided that we would do share buybacks or bond buybacks up to TRY150 million and this will be of course an action that will be done in case of high volatility in terms of protecting minority shareholders interest as well as benefiting from potential volatility in the bond market prices.

Thank you, sir. And another question again from Barrick [ph] asking about how do we read outlook revision of the CapEx after the corporation decision in development fiber network and/or just avoid application of infrastructure?

Sure. The acceleration of our investment plans with regard to 4.5G is really about the mobile network deployment. We already reached 82% population coverage and the demand that we see in the marketplace justifies speedier execution on deployment of the network. So, the joint fiber investment company that we have announced today together with Vodafone, Turksat, the major Cable TV provider of Turkey as well as the alternative ISPs in the country they are related to the fiber deployment that needs to be done in the future. And the objective of this is really to make sure that 21 million households all reach at fiber-to-the-home solution and this will be regarding to the mostly fixed infrastructure projects.

Thank you, sir. I think the [Indiscernible] is quite generous and asking another question, while we're having another question on the line. Could you tell us the number of mobile Tuksat TV subscriber is of Q2? Let me answer this question. As of Q2 we had a mobile TV about 400,000, TV Web 74,000 and IPTV around 300,000, so that is answering the full answer of Barrick’s [ph] questions. So maybe we have another question is coming from the line. Trish?

Yes. We do we have another question that comes from [Indiscernible]. Please go ahead.

Hi, guys. Thank you for the call. Two quick questions. First one, can you guys give us a breakdown please on prepaid versus post-paid ARPU for the quarter. And second question is looking at your customer statement we see net operating cash flow going into the negative mostly due to working capital changes. Can you please give us some more color on what's going on there? Why the giant drop? Thank you.

Sure. Let me start on the second question. Actually, excluding our spectrum payments we had a cash mutual position despite the fact that we have accelerated our CapEx investments in the first half. And we do feel comfortable with our alignment with the original plan. In terms of the breakdown of ARPU and the changes on the ARPU we have seen increased ARPU levels of 7.1% reaching to TRY25.1 and I'm just asking my team on the details. Excuse me, at least you can give us.

Unfortunately we are not giving the breakdown of the ARPU major on the pre or post. But as you know there is a significant parties coming from data recently, but if you're asking for the peer ARPU on the prepaid and the post-paid, let me just rephrase. On the mobile post-paid ARPU is TRY25.7 was 24 last year in the same quarters. On the post-paid TRY28, now we disclosed 27.7. On the prepaid side 12.2 is up to 13.3. And all are actual disclosed in our press release.

Maybe in terms of consumer ARPU the way I look at it has been up 11% which actually makes us very comfortable considering the increase penetration of our digital services driving the ARPU up for our consumer line of business.

Okay. Fair enough. Thank you very much.

Thank you.

Thank you. [Operator Instructions] We'll now take a follow-up question from Vyacheslav Degtyarev of Goldman Sachs. Please go ahead.

Hi. Yes. Couple of more questions, please. So, firstly, what’s the reason for disappointing performance or seem to impact your willingness or the target valuation of the assets that you offered to [Indiscernible]. And secondly again the question on the buyback, maybe you might disclose some limit of the volumes that you might be pitched in within one one B [ph] or any timing for this share buyback. How long maybe that last? And also does this 150 million amount include bonds and shares combined? Thank you.

So, Vyacheslav, thank you very much. With regard to performance of Fintur of course we are closely monitoring. We would – we got 8 million lost instead of 120 million gain as per our plan. So we are very concerned about the performance of Fintur and naturally this will be reflected in all our discussion in terms of our process in the acquisitions. With regard to the buyback the 150 million includes bond and also shares. I do not want to give any timing with regard to this. And bond acquisitions will be subject to capital market board's approval, but if in case that doesn't happen it will be all used for the share buyback. And the timing is really subject to as long as it is needed to keep the necessary measures for avoiding volatility.

Okay. Thank you.

Thank you.

Trish there is couple of more questions through website. I'm going to ask again to my CEO, if I may. While we are waiting others question. I think infrastructure companies becoming quite popular now. We are getting more questions from there. Could you just tell us that if you're going to change your CapEx guidance going forward. If you established infrastructure companies. That's question comes from [Indiscernible] and their common question is coming [Indiscernible] from Global Securities.

I think the infrastructure company, the joint company should be operational based on this action plan in next year 2017, clearly it will have an impact on our fixed investment CapEx, but I would like to mention that our short term guidance of accelerated investments with regard to 4.5G will not be impacted by this.

Thank you, sir. Trish, I guess I have no more question on the website, but if you have any questions standing on the line, please let's have it. If not we are ready to actually terminate the call.

There are no -- oh sir apologizes, we do have a popup question just coming up. Do you wish to take it?

Please do.

Okay. The question comes from Barrick [Indiscernible] of Global Securities. Please go ahead.

Thank you for the presentation and for the answers. I would like to ask a question about your customer base. Right now we see a notable subscriber lost in post-paid segment. And what is your expectation about customer base? What is your red line about it? Right now, your post-paid customer reached 52%. Do you expect more subscriber losses at post-paid segment? Thanks for the answers?

Thank you, Barrack [ph]. We are very comfortable with the pace of our customer acquisition and the mix of our subscriber base. As I mentioned before we stop the best practice of subsidizing practice for establishing new customers and we will continue sticking to that strategy. This only drives higher customer acquisition cost and no significant revenue impact. I suspect this practice will be also come only advisable for all the players in the market. I think the amount of customer acquired via this method has been extremely detrimental to the valuations.

Thank you.

Thank you. Trish, I understand that there are no any questions, neither on the web or online. Sir, do you have any remarks?

Well thank you very much for your interest and confidence in our company. I look forward to talking to you over the next investor calls and our next quarterly call. Thank you very much.

Thank you...

Well thank you for all. Thank you Trish, just to remind anybody would like to listen [audio gap].

Thank you. That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.