Executive Summary / Key Takeaways

• Diversified Growth Engine: Turkcell ($TKC) is transforming beyond a traditional telecom operator into a diversified technology powerhouse, driven by robust growth in its core mobile and fixed broadband services, alongside high-potential Digital Business Services (especially Data Center & Cloud) and a rapidly expanding Techfin segment.
• Strategic Infrastructure Investments: The company is making significant capital expenditures in fiber infrastructure, 4.5G enhancements, and preparing for 5G deployment in 2026, while aggressively expanding its data center capacity to become a regional hub, underpinned by a strong commitment to renewable energy.
• Resilient Financial Performance: Despite a highly competitive and inflationary environment in Turkey, Turkcell has consistently delivered strong revenue growth and maintained solid EBITDA margins, supported by rational pricing strategies, effective cost management, and a focus on value-added postpaid and fiber subscribers.
• Strong Balance Sheet and Prudent Risk Management: Turkcell boasts a robust liquidity position, significantly bolstered by the 2024 Ukraine asset sale and a successful 2025 Eurobond issuance, enabling it to manage debt obligations and fund future strategic investments while proactively hedging foreign currency risk.
• Technological Leadership and ESG Focus: Turkcell differentiates itself through superior network quality, AI-powered tariff management, and a growing digital ecosystem, earning global recognition for its ESG sustainability efforts and positioning itself at the forefront of Turkey's digital transformation.

The Foundation of Connectivity: Turkcell's Strategic Evolution

Turkcell İletişim Hizmetleri A.Ş. ($TKC) has evolved from its inception in 1993 into a leading converged telecommunication and technology services provider, deeply embedded in Turkey's digital future. Celebrating its 25th IPO anniversary in 2025 and 30th company anniversary in 2024, Turkcell has consistently demonstrated market leadership, adapting to dynamic market conditions and technological shifts. The company's core business, Turkcell Turkiye, remains the primary growth engine, encompassing mobile and fixed broadband services. This foundation is increasingly complemented by strategic investments in high-growth areas like Digital Business Services, particularly Data Center & Cloud, and its burgeoning Techfin segment.

The Turkish telecommunications market, characterized by intense competition, has seen Turkcell differentiate itself not merely on price but through superior network quality, high-speed connectivity, and a strong customer experience focus. The company's strategic initiatives, such as its significant investment in the 4.5G tender in 2015 and subsequent launch in 2016, laid the groundwork for its current infrastructure prowess. More recently, Turkcell has embarked on an ambitious journey to lead Turkey's digital transformation, extending its vision beyond individual connectivity to enable digital solutions across devices, cities, and industries. This strategic pivot is crucial in a market that continues to see robust demand for fiber infrastructure from both corporate and individual segments, alongside the global surge in data center and cloud services driven by AI transformation.

Technological Edge: Powering the Digital Future

Turkcell's competitive advantage is deeply rooted in its technological differentiation and relentless pursuit of innovation. The company prides itself on offering superior network quality and high-speed connectivity, which are critical in a competitive mobile market. This commitment is evident in its ongoing investments to enhance its 4.5G capabilities and prepare for the imminent 5G era. Turkcell has already showcased its 5G readiness by providing live 5G coverage at significant venues like The Grand National Assembly of Turkey, major football stadiums, and Istanbul Airport, delivering impressive download speeds exceeding 1 gigabit per second to customers. This demonstrates a tangible performance metric that sets it apart from competitors.

Beyond core connectivity, Turkcell is embedding Artificial Intelligence (AI) into its operations, particularly for tariff management and segment-specific strategies, to better meet evolving customer expectations and drive higher retention. Its "Smart Control Service" now covers nearly half of its postpaid base, enhancing customer experience and loyalty. The company also launched "Tumbara," a digital loyalty program that has engaged 4 million customers, further strengthening retention and engagement.

A cornerstone of Turkcell's long-term strategy is its Data Center & Cloud services. The company is not just building capacity but designing, constructing, and operating these facilities to the highest global standards, as evidenced by its Uptime Institute certifications for design, facility, and operations. This ensures redundancy, reliability, and minimal downtime, making Turkcell a preferred choice for top enterprises. Turkcell plans to expand its data center capacity by an additional 8.4 megawatts by year-end 2025, reaching a total of 50 megawatts. This expansion is strategically vital, as the global data center market is projected to quadruple from 55 gigawatts to 220 gigawatts by 2030, with AI transformation expected to provide an additional boost to growth. Turkcell aims to make Turkey a regional data center hub, capitalizing on Turkish regulations that require data to be stored within the country, attracting large corporate clients in finance, healthcare, and banking, as well as the fast-growing startup ecosystem.

Furthermore, Turkcell is actively exploring disruptive technologies such as 6G, satellite systems, and Quantum Technologies through R&D collaborations with global industry leaders. These initiatives underscore its commitment to maintaining a technological lead and shaping the future of connectivity. The "so what" for investors is clear: these technological differentiators and strategic R&D efforts contribute directly to Turkcell's competitive moat, enabling higher average selling prices (ASPs), lower operational costs through efficiency, better margins, and a strong market positioning for long-term growth in an increasingly digital world.

Operational Momentum and Financial Strength

Turkcell has consistently demonstrated robust financial performance, reflecting its strategic focus and operational effectiveness. In the second quarter of 2025, the company reported a top line of TRY 53 billion, marking a remarkable 12% year-on-year growth. This was primarily fueled by strong ARPU (Average Revenue Per User) performance and a significant expansion of its mobile postpaid subscriber base. Group EBITDA for the same period rose by 15% year-on-year to TRY 23 billion, achieving a solid margin of 43.5%, largely due to strong operational leverage. Net income from continuing operations saw an impressive 37% year-on-year increase, reaching TRY 4.4 billion, underscoring effective financial risk management alongside operational profitability.

The first quarter of 2025 also showcased strong results, with a top line of TRY 48 billion (12.7% year-on-year growth) and an EBITDA of TRY 21 billion, representing a 19% year-on-year increase and a robust 43.7% margin—the highest first-quarter margin in a decade. Net profit for Q1 2025 stood at TRY 3.1 billion. For the full year 2024, Turkcell's top line reached TRY 166.67 billion, an 8% year-over-year growth, exceeding its guidance. EBITDA for 2024 surged by 10.2% to TRY 70 billion, with the EBITDA margin expanding by 0.9 percentage points year-on-year. Net income for 2024 increased by 30%, surpassing TRY 23.5 billion.

Key operational highlights further illustrate this strength:

• Mobile Segment: Turkcell added 816,000 postpaid net subscribers in Q2 2025, its highest in over five years, bringing yearly net additions to 2 million. The postpaid share of total mobile subscribers reached 78% in Q2 2025, up from 76% in Q1 2025 and 72% a year prior. Mobile ARPU consistently grew, increasing by 9.8% year-over-year in Q2 2025 and 15.9% in Q1 2025, reflecting successful upselling and price adjustments. The company has delivered real ARPU growth for nine consecutive quarters.
• Fixed Broadband: The fixed subscriber base remained stable at 3.3 million in Q2 2025, with residential fiber ARPU increasing by 17.5% year-on-year, driven by higher penetration of high-speed plans and effective pricing. Turkcell expanded its fiber footprint by 67,000 new homepasses in Q2 2025, reaching 6.1 million pure fiber connections, with an impressive take-up rate of 42.7%.
• Digital Business Services: This segment delivered 39% growth in Q2 2025, with revenues exceeding TRY 4.9 billion, primarily from recurring service revenues. Data Center & Cloud services, a high-potential area, surged by 53% in Q2 2025 and 48% in Q1 2025, reflecting successful monetization of capacity investments and expanding customer base.
• Techfin Segment: Paycell, Turkcell's mobile payment platform, recorded 36% year-on-year revenue growth in Q2 2025, driven by rising demand for POS and digital store transactions. Financell, the consumer financing arm, generated TRY 1.3 billion in revenues in Q2 2025, with its net interest margin improving to 4.9% due to favorable funding costs.

Turkcell's liquidity position is robust, with cash reaching TRY 117 billion in Q2 2025. The company's net debt stood at TRY 25 billion, resulting in a low net leverage ratio of 0.3x, well below its long-term target of 1x. This strong position was significantly bolstered by the sale of its Ukraine assets in 2024 and a successful US$1 billion Eurobond issuance in January 2025, which secured financing for future growth initiatives like 5G and data center investments. Turkcell maintains a prudent foreign exchange risk management strategy, with 87% of its cash holdings in hard currency, naturally hedging 83% of its hard currency debt.

Competitive Landscape and Strategic Positioning

Turkcell operates in a highly competitive telecommunications market in Turkey, primarily contending with Turk Telekom and Vodafone's (VOD) local operations. While Turk Telekom (TTKOM) boasts an extensive network and a strong position in wholesale services, Turkcell differentiates itself through its integrated digital ecosystem and customer-centric approach. Turkcell's proprietary digital platforms, such as its BiP communication app, fizy for music, and TV+ for entertainment, foster stronger user engagement and loyalty, potentially leading to more robust growth and better capital efficiency by reducing customer acquisition costs. This focus on value-added digital services allows Turkcell to maintain a premium positioning and potentially higher pricing power in certain segments, contrasting with competitors who may rely more heavily on price competition. Turkcell's Net Promoter Score (NPS) leads its closest competitor by 17%, a testament to its customer orientation.

In the fixed broadband segment, Turkcell is expanding its fiber infrastructure, aiming for 6.1 million pure fiber connections, and actively pursuing fiber subscriber growth. While facing competitive offers from smaller ISPs, its focus on high-speed plans and 12-month contracts supports consistent ARPU expansion. Turkcell clarifies that its use of competitors' fiber is a reselling operation, not infrastructure sharing, emphasizing its commitment to its own fiber investments.

The company is also strategically positioning itself in the burgeoning Data Center & Cloud market, where it is the market leader. This segment's strong growth (53% in Q2 2025) is driven by increasing demand from both public and private sectors, including anticipated investments from hyperscaler cloud providers and the exponential growth fueled by AI transformation. Turkcell's commitment to "keeping Turkey's data in Turkey" provides a regulatory advantage and a strong value proposition for corporate clients.

A potential new entrant, Türksat, has been mentioned in the press as possibly entering the mobile market. However, Turkcell's management notes that building a large-scale mobile network requires significant capital and advanced technological capabilities, which is not easily accomplished in the short term. Turkcell, with its 30-year history and solid financial structure, believes it is well-positioned to remain competitive and lead the mobile market. The company's investment in TOGG, the e-mobility ecosystem, further diversifies its strategic footprint, integrating its Paycell payment solutions and digital content into smart vehicles.

Outlook and Forward Guidance

Turkcell's management reiterates its full-year 2025 guidance, anticipating a moderation in performance during the second half of the year, consistent with initial projections. This outlook factors in a forecast year-on-year inflation rate of 30.5%. The company's strong first-half performance provides some headroom, but the positive impact of price adjustments from July of the previous year is expected to taper off in Q3 2025, coupled with a high base effect from strong growth in the latter half of 2024. Management maintains a prudent approach, preferring to await Q3 results for a clearer view of inflation dynamics and market conditions before considering any adjustments to the guidance.

For the full year 2025, Turkcell expects:

• Top line revenue growth: 7% to 9%.
• Data Center & Cloud revenue growth: 32% to 34%.
• EBITDA margin: 41% to 42%.
• CapEx intensity: Around 24%.

Approximately 65% of the 2025 CapEx budget will be allocated to mobile and fixed networks, enhancing 4.5G capabilities and preparing for 5G, which is expected to go live in 2026. An additional 13% of CapEx is earmarked for data center investments, with 7% allocated to renewable energy projects, aiming to cover 65% of Turkcell's total electricity consumption from green energy by 2026. The company's net leverage ratio is targeted to remain below 1x by year-end 2025.

Risks and Challenges

Despite its strong position, Turkcell faces several risks. The highly competitive market continues to exert pressure, leading to intensified campaigns and high mobile number portability activity, which can impact churn rates. The inflationary environment in Turkey remains a significant factor, influencing pricing strategies and cost bases. While Turkcell has demonstrated effective management of inflation through rational pricing, a higher cost base is anticipated in the second half of 2025.

The TOGG investment, while strategic for e-mobility, is a long-term project and is not expected to generate short-term profits, having contributed to a TRY 1.2 billion loss in Q2 2025. The automotive industry's cyclical nature and macroeconomic pressures on consumer demand pose ongoing challenges. Furthermore, FX volatility is a constant concern, though Turkcell actively manages its foreign currency risk through hedging strategies and maintaining a significant portion of its cash in hard currencies. Differences in inflationary accounting principles between local and IFRS standards can also lead to significant fluctuations in deferred tax expenses.

Conclusion

Turkcell stands as a compelling investment proposition, demonstrating resilience and strategic foresight in a dynamic market. Its core investment thesis is anchored in its ability to leverage a robust telecommunications infrastructure, drive growth through diversified digital services, and maintain financial discipline amidst competitive and macroeconomic pressures. The company's consistent focus on value-added postpaid and fiber subscribers, coupled with aggressive expansion in high-growth areas like Data Center & Cloud, positions it favorably for sustained revenue and EBITDA expansion.

Turkcell's commitment to technological leadership, from 5G readiness to AI integration and ambitious data center expansion, forms a critical moat against competition. Its strong balance sheet, enhanced by strategic divestments and proactive financial management, provides the necessary capital for these transformative investments. While challenges such as intense competition and inflation persist, Turkcell's proven track record, clear strategic roadmap, and strong management execution suggest a continued trajectory of growth and value creation for discerning investors.