Turkcell Iletisim Hizmetleri A.S.

The stable outlook on Turkcell reflects our stable outlook on Turkey, and our expectation of continued solid operational performance. Our stand-alone credit profile (SACP) assessment reflects our expectation that Turkcell's leverage ratio will be at or below 2.25x in 2018 and 2019 and that FOCF to debt will recover to about 5% in 2019. If we took a negative rating action on the sovereign, we could downgrade Turkcell. Given that we cap the rating at the level of the T&C assessment, we would also lower our rating on Turkcell if we revised down our T&C assessment on Turkey, for example due to deterioration in Turkish corporations' access to domestic and external liquidity, or if we believed the business risk of

...Lira fluctuation to weigh primarily on capex (and to a lesser extent on debt and opex), while inflationary pressure may strengthen revenues and pricing. We expect the weaker lira to translate into higher debt and capital expenditure (capex) levels, and to some extent, albeit marginally, higher operating expenditure (opex). This is because the majority of the capex is denominated in hard currencies, compared with less than 10% of the opex. Moreover, despite Turkcell's prudent foreign exchange (FX) management, the portion of hedged debt (total lira exposure) has weakened to 52% compared with 58% in second quarter (Q2) 2018. However, we think Turkcell could pass on the inflationary pressure to customers, albeit with some delay. Superior network quality and differentiating strategy to support market share, and translate into stable margins.We expect Turkcell will maintain its leading position in the Turkish mobile market (44% subscriber and 47% revenue share as of Q2 2018), despite increasing...

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