Strategic Management 436

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Turkcell Sec I

• Current Situation• D. Shepley

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Current Situation

• End of year 2002, Turkcell had total assets of $3.2 billion, revenues of $1.97 billion, net income of $101 million, and more than 2000 employees. They also held More than 60% of the Turkish market with 16.3 million subscribers as of March 31, 2003.

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Strategic Posture Mission

• No stated mission statement but the implied mission of the company is to continue to hold the majority of the growing Turkish market while expanding to more European countries by differentiating the services provided from competition and maintaining a loyal customer base.

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Objectives

• Increase customer base• Retain its current customers• Increase the amount of usage per customer (amount

of usage dropped from an average of 100 minutes per month to 56.2 because of Turkey’s economic crisis in 2001.)

• Maintain Good customer relations and social responsibility

• Expand to other European Countries

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Policies

• Have large amounts of consumer services• Stay on the forefront of technology• Promotion from within (Turkcell provides extensive employee training

which increases employee loyalty which in turn helps to provide better service because of more experience and a will to do a good job.)

• Pay slightly above industry average (This also helps to maintain employee loyalty and provide better service.)

• Proactive approach• Result oriented• Minimum hierarchy• Full accountability• Simplicity

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Exhibit 5

2002 2003 2004Revenues 1,973,850 2,219,237 3,200,765

Direct cost of revenues -1,366,899 -1,613,150 -2,001,223

Gross profit 606,951 606,087 1,199,542

General and administrative expesnses -104,523 -137,222 -137,315

Selling and marketing expenses -223,496 -294,611 349,249

Operating income 278,932 174,254 712,978

Income (expense) from related parties -225 3,738 1,919

Interest income 95,548 117,240 152,751

Interest expense -302,335 -483,622 -121,500

Other income, net 13,560 6,190 7,113

Equity in net (loss) income of unconsolidated investees -20,392 18,927 43,646

Minority interest in income of consolidated subsidiaries 333 3,558 7,466

Translation loss -18,045 -102,403 -11,192

Income (loss) before taxes 47,376 -262,118 793,181

Income tax benefit (expense) - 477,285 -281,360

Net income 47,376 215,167 511,821

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Turkcell Sec II

• Corporate Governance• J. Brayall

Turkcell Management

• NYSE (2000) Symbol TKC // Istanbul Stock Exchange - TCELL

• ADRs / ADSs traded on the NYSE- Turkcel's # for its ADSs is 900111204.– American Depositary Receipt- (ADRs) are receipts for the shares of a foreign corp held by a

U.S. depositary bank. American depository share (ADS) = certificates representing portions of foreign shares held by the bank, usually by a branch in the country of issue.

• Governance Compliance– Turkcell Board is composed of 7 members elected by the Annual General

Meeting for max terms of three yrs.

• General Assembly Mtgs-– held during April. Turkcell's fiscal year is the 12-month calendar yr Jan - Dec.

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Turkcell Shares

• Disclosure Policy– IAW the Capital Markets Board of Turkey (SPK) and its US counterpart, the Securities and

Exchange Commission (SEC), Turkcell continues its implementation of Corporate Governance Principles. The company’s “Disclosure Policy” regarding public announcements as prepared IAW domestic and international capital markets regulations.

• Dividend Policy– The Board may decide whether or with the amount of dividend if any not to recommend

a distribution of profits together and the shareholders, through the general assembly, may accept or reject such proposal.

• Financial Rights– Board members receive no special rights or privileges & receive no compensation for their

board service. – Nor are they eligible for credits or other special favors such as surety-ships .

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Turkcell Board

• Board of Directors & Independent Members– As of Apr 05, no independent members sit on Turkcell’s Board of Directors.– Information is presented in the “Investor Relations” section of Turkcell’s website.

• Board responsibilities:– Building the vision of the Company, local & international business strategies &

determining short- and long-term goals; – Approving the Company's annual budget & business plans; – Monitoring & controlling the strategic & financial performance of the Company

• Participation of Stakeholders in Mgmt– Currently, there is no provision for the participation of the stakeholders in

management. – However, info is shared with our business partners & stakeholders.

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Board Makeup

• Turkcell’s board is comprised of members from their business partners, such as holding companies & those from the inner working of company.

• Experience backgrounds range from those that have just joined the organization to those that were there at the inception. This shows the company is dedicated to joining tried and true methods & external / multi- functional competencies.

• There is an intentional strong influence of representation gained from the international telecom sector, financial & consumer services industries.

• Specifically, there is an exceptionally strong experience base represented from the Nordic based telecom partnerships.

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Turkcell Managers

• Personal Development of Managers : Mandatory training tracks provide continuous improvements to customer value

& Turcell’s brand placement & market share enhancement.

– Development Program for Leadership and Mgmt (Lider Yönetici Yetifltirme Program)

– Coaching / Mentorship– Assessment Center – Human Resources Training

The DIYET program puts corrective and improvement activities, creativity, effectiveness and teamwork into practice.

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Turkcell Human Resources

• Turkcell touts highly-skilled & highly-motivated team of employees.

• States continuous investment in human resource development as a top priority for the company.

• Mgmt’s goal is- promote a leading, trustworthy, success-oriented, productive, respectful and customer-driven corporate culture.

• Continuous investments to ensure that the employees work in an environment that is flexible, responsive, democratic and supportive of change.

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Founding Shareholders

• Turkcell's founding shareholders are Sonera Holding, formerly known as Telecom Finland Ltd. & currently owned by TeliaSonera, Çukurova Group and MV Holding.

• Çukurova Group is one of Turkey 's leading conglomerates, active in insurance, media, trade, industrial services, communications, IT & tourism.

• TeliaSonera was formed in Dec 02 with the merger of Sonera Corporation, a Finnish telecom provider, and Telia, a telecom operator in Scandinavia. It is a major GSM operator in Scandinavia .

• Combins the expertise of Sonera in building GSM networks and Çukurova's local mkt knowledge & experience in marketing / distribution.

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Dominant Shareholders

Shareholder Number of shares Share (%)

Turkcell Holding A.Ş. 752,066,074,110 51.00

Çukurova Investments N.V. 43,230,288,153 2.93

Çukurova Holding A.Ş. 109,195,314,495 7.40

Yapı ve Kredi Bankası A.Ş. 42,807,402,352 2.90

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Shareholder Structure

• Turkcell shares are listed on the Istanbul Stock Exchange & on the NYSE as ADS. Currently 2 ADS = 5 tradable shares.

• Shareholder Value of Stake (TRY) % Share

• Turkcell Holding A.Ş. 1,122,000,000 51.00%

• Çukurova Holding A.Ş. 995.509 0.05%

• Sonera Holding B.V. 287,632,179 13.07%

• MV Holding A.Ş. 51,021,712 2.32%

• Other 137,199,575 0.01%

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Turkcell Sec III

• External Environment:– Opportunities / Threats (SWOT)• J. Taylor

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Natural Physical Environment: Sustainability Issues

• - No mention in the case of any sustainability issues

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Societal Environment

• The demise of the Lira in 2000 created a large deficit to repay, $1.0 B (T)

• 25 year GSM license to operate in Turkey (O)• Marketing campaigns may be too expensive (T)• Possibility of ten year payoff to raise profit from 3G

technology (T)• GPRS advancement created faster mobile services, allowing

postpaid users full-time access to their e-mail (O)• MMIS creation allows for Outlook and Exchange access for

Turkcell users (O)• Future challenge to offer 1st 3G services to Turkey (T)

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Societal Environment cont.

• Taxation of GSM businesses are 66% (T) • Entrance into the European Union (O)• Government hasn’t issued license for 3G

advancement • Rural users still uncertain how mobile

communication may benefit (T)

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Societal Environment cont.

• Their philosophy includes good customer relations and social responsibility (O)

• Sabbit possibly appeals to family values through marketing campaign (O)

• There is no mention of Turkcell advancing into foreign mkts. They do have contracts w/neighboring and EU companies for roaming services.

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Task Environment

• Threat of new entrants – Medium• Bargaining powers of buyers – Medium• Threat of substitute products or service – Low• Bargaining power of suppliers – High• Rivalry among competing firms – Low• Power of unions, government, special interest groups

– High

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Turkcell Sec IV

• Internal Environment:– Strengths / Weaknesses (SWOT)• J. Taylor

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Corporate Structure

• Centralized structure. CEO is a visionary who is always moving forward with technology and expects his managers to implement his ideas.

• Turkcell is a part of the Board of Directors of the GSMA (Association of the worlds mobile service providers).

• To keep employees on the same page, corporate puts together a major Turkcell information day to offer training on multiple company issues and policies to the staff.

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Corporate Culture

• Executives and workers alike share Turkcell’s five structural principles: Proactive approach, result orientation, minimum hierarchy, full accountability, and simplicity.

• A majority of the corporate culture is based on the ideas of the original CEO and visionary, Cuneyt Turktan. He had a vigorous approach to giving the best service possible, providing the best coverage and technology, and obtaining the largest portion of the market.

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Corporate ResourcesMarketing

• Turkcell created a character called the Snabbit that is an icon in Turkish homes.

• Main objectives are to increase two things: the number of subscribers, and the number of call minutes per subscriber.

• Launched a very successful “Signal Tour” project in 2000 to educate people on mobile communication.

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Finance

• They bought an additional 16.45% of Fintur Holdings B.V., owner of GSM and technology businesses, increasing their stake to 41.45%.

• In 2001, the Turkish Lira plummeted in value causing an inflation of 114%.

• Turkcell is the only Turkish company on the NYSE.

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Research and Development

• They are watching mobile operators; Orange, Vodafone, and Telecom Italia as these companies expand their borders.

• Turkcell is considering the option of offering 3G technology to their customers but still researching the associated costs and length of time to see a return.

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Operations and Logistics

• In Maletape they have a $10 million Network Control Center offering 24/7 coverage.

• They have 7,500 strategically located base situations offering 100% coverage of Turkish cities with populations of over 5,000.

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Human Resources Management

• Turkcell has more than 2,000 employees divided into 49% technical, 26% customer care, 16% finance and administration, and 9% marketing.

• They pay employees slightly above the industry average.

• Over 80% of the employees have a college education.

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Information Technology

• They are on top of the IT field with over 40% ownership of mobile communications IT companies.

• They are able to troubleshoot issues when alerted by a red light on an intricate grid from any 1 of 7,500 base stations.

• They are 100% efficient in areas with a 5,000+ population.

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Turkcell Sec IV

• External Environment: – Strengths / Weaknesses (SWOT)• J. Austin

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Turkcell Sec V

• Analysis of Strategic Factors – (SWOT)• J. Taylor

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External Factors

D. Summary of External Factors

External Factors Weight Rating Weighted ScoreComments

Opportunities        

25 yr GSM license to operate in Turkey 0.05 3.6 0.18Ensures stability

GPRS advancement 0.05 3.2 0.16Established standards

MMIS for Outlook 0.05 3.9 0.2PDA like access

Entrance into the EU 0.1 3 0.3Economic reliability

customer relation and social responsibility 0.15 4.4 0.66

Essential for businesses

Threats  

Debt created by Lira nosedive 0.15 2.9 0.44Slows profit margin

Taxation of 66% 0.2 2.5 0.5Decreases income

Possible ten year wait for 3G profit 0.1 2 0.2Long wait for profit

Rural users uncertainty 0.05 4.1 0.21Need everyone onboard

Marketing campaigns too expensive 0.1 3.8 0.38

Develop simpler ads

Totals 1   3.23