Strategy TTG Istanbul Data Hub Model Methodology 20150704

21 June 2015 Model Documentation Turk Telekom Group
Turkey Regional Data

Hub Strategy
Data Hub Model Methodology
& Assumptions
TTG Play Option Definitions
TTG Play Option Impact Analysis
Model Methodology & Assumptions
Strategy& Prepared for TTG

We have considered the four alternative strategic plays
that TTG can adopt at any point in time
TTG play options narrative
Carrier Specific Mix Carrier Neutral
0: “Reactive” 1: “Proactive” 2: “Hybrid” 3: “Liberal”
 TTG does not participate in  TTG starts its own carrier-  TTG operates a dedicated  TTG partners with global
an open data hub in an specific data hub targeting carrier neutral datacenter1 players for datacenter and for
attempt to limit its ICPs, carriers and regional serving international players IXP activities to create a
Strategic Intent & Tactics
attractiveness, keep global operators in a controlled as well as local MNOs / ISPs carrier-neutral data hub
carriers at bay and hence environment that protects TT open to everyone
 Enterprise clients of TTG not
protect TT’s domestic from corporate customer
allowed in TTG’s data center  TTG aims to attract a
revenues cannibalization
maximum of international
 TTG generates upside from
 TTG peers with content  TTG generates upside from players to create IP Gravity in
connectivity and colocation
providers abroad and ensures int’l backhaul to and TT’s data hub, in order to
while limiting enterprise
high quality connectivity with collocation in own hub, while substitute cannibalized
customer cannibalization
them limiting the attractiveness of domestic Corporate and
an open data hub  Carrier-neutrality enhances Wholesale revenues with new
 TTG serves int’l demand only
value proposition to and wholesale revenue streams,
reactively – no proactive  TTG fully serves int’l and
uptake of tenants, but international and domestic
efforts to bring traffic to Turkey domestic connectivity demand
introduces wholesale
undertaken from a potential “parallel” open
competition
data hub
Examples
today
1) Data center can be owned by a separate TTG-owned entity not subject to regulation
Note: Etisalat’s and Omantel’s business model are more “closed” and less conducive to carriers than the business model for “Proactive” considered here
Sources: Strategy& analysis
Strategy& Confidential June 2015 Prepared for TTG 2
In “reactive”, TTG does not participate in the “data hub”
ecosystem in an attempt to limit its attractiveness
TTG play options illustration – “Reactive”
TTG Competing Data Hub
TTG Carrier–Specific Data Center Competing Carrier Neutral DC
Content Int’l Telcos

Providers (Carriers)
1
IXP
IXP Int’l Telcos
(Business)
Traffic Content Upstream
Providers
Demand Traffic
Int’l Telcos
(Carriers) Regional
2 Incentives
Corporates
Operators
Int’l Telcos Operated &
Owned by
to Go to (Business) 3
Neighbor TTG & Others
Local Telcos
Hubs Local ISPs
Local
Telcos
Local ISPs
IXP in DC DC
Corporates connectivity
TTG DCs for Corporates: Carrier

Other IXPs Other IXPs
Specific
Key 1 TTG does not participate in the data hub 3 TTG serves traffic demand to other DCs but reactively
Highlights 2 TTG peers with content providers abroad

FOR DISCUSSION
In “proactive”, TTG aims to attract anchor tenants on its

own carrier-specific data center
TTG play options illustration – “Proactive”
TTG Data Hub Competing Data Hub in Turkey
TTG Carrier–Specific Data Center 3 Competing Carrier Neutral DC
Content Int’l Telcos Content Int’l Telcos

Selective Providers (Carriers) Providers (Carriers)
Peering
IXP Int’l Telcos IXP Int’l Telcos

(Business) (Business)
Traffic Upstream
Demand Traffic
2 Regional Regional
Corporates Corporates
Operated & Operators Operated & Operators
Owned by Owned by
1 TTG Only TTG & Others
Local Local
Local ISPs Local ISPs
Telcos Telcos
DC IXP hosted in TTG DC1 IXP in DC DC

connectivity connectivity
Local Telcos and ISPs can be

included without inducing Other IXPs Other IXPs
Specific cannibalization
Key 1 TTG’s DC is carrier specific 3 TTG hub potentially competes with “open” alternative
Highlights 2 Designated area not including corporates

In “hybrid”, TTG renders its DC carrier neutral its DC, and
keeps it exclusive to telcos & content providers
TTG play options illustration – “Hybrid”
Turkey Data Hub
Carrier–Neutral DC with TTG presence Other Carrier Neutral DC
4
Int’l Telcos
Regulatory Int’l Telcos
Content Content
Selective Providers (Carriers) Freezone Providers (Carriers)
Peering

Traffic Upstream
TTG & Others Connectivity
Demand Traffic
2
Regional Regional
Owned by 3 Owned by
1TTG & Others TTG & Others
Local Local
Telcos Telcos


Specific
Key 1 TTG’s DC becomes carrier neutral 3 TTG DC becomes integral part of a unified Turkey DH
Highlights 2 Designated area not including corporates 4 TTG DC potentially within a regulatory “free zone”

“Liberal” provides an carrier-neutral environment that is
accessible to everyone, including Corporates
TTG play options illustration – “Liberal”
Turkey Data Hub
TTG Carrier–Neutral Data Center Other Carrier Neutral DC
Content Int’l Telcos Content Int’l Telcos

Providers (Carriers) Providers (Carriers)

Traffic Upstream
Demand TTG & Others Connectivity Traffic
1
Regional Regional
Owned by Owned by
TTG & Others TTG & Others
Local Local
Telcos Telcos
TTG Data Centers for Corporates:

Carrier Neutral
Key 1 TTG’s DCs are all becoming carrier neutral

Highlights


The analysis of financial impact of each option requires due
consideration of a number of external factors
TTG play options assessment sensitivities
Hub Competition
Turkey, Russia & Turkey & Bulgaria Turkey only Comments

Cross-Country
Bulgaria Become Hubs Become Hubs establishes a data hub

• Different plays better cater
All main competing From the main competing
emerging hubs in the
Neither Bulgaria nor for different scenarios
emerging hubs in the region, Russia establish major
region are well Bulgaria is well established hubs. Only Turkey does
regarding the external
established as a hub but Russia is not environment including the”
– regulatory environment,
No Change Moderate Change
Data Hub Friendly – competition with other
Regulation emerging data hubs
Regulatory
Limited presence of major All major players and – competition between

Scenario
Google, Akamai,
ICPs. Some T1s setup large base of smaller
presence. No IP gravity
Facebook, and most T1
players setup presence.
hubs in Turkey, in the
setup presence. Turkey
becomes a moderately- Turkey becomes a major case of the “proactive”
sized regional hub hub with global reach play
• Subsequent analysis
Hub Competition
Competing Hub Own and Competing

considers these scenario to
(for proactive play)
Own Hub Dominates

Dominates Hub Coexist
derive insights as to which
In-Country
Competing hub attracts Traffic is split between Own hub attracts Google, play is better fit under
Google, Akamai and the two hubs with Akamai and Facebook different scenarios
Facebook and majority of and majority of regional
regional demand demand
Strategy& Confidential May 2015 Prepared for TTG 8
Base Case in results shown (unless otherwise mentioned)

“Proactive” and “Hybrid” are the most attractive plays,
with the former giving an upside if TTG secures CP deals
 Liberal scenario can occur only if
Strategic Option Impact Comparison (10-year NPV in TL Mn) (2025) TTG decides to open up all its
Under TTG Control data centers to be Carrier Neutral
Regulations  The regulator cannot force TTG to
in Turkey Reactive Proactive Hybrid Liberal go to Liberal
30 1 24 12
Insights
No
Change -24  Regulation has a critical
-131 -146 impact on the upside that can
-279 be realized from the data hub
opportunity
 In the “Proactive” play, TTG
265
Moderate 181 166 can capture a significant
36 97 upside if it successfully
Change 23 8
attracts key tenants such as
-125 Google and Akamai (High
scenario)
548
 In a “Hybrid” play, TTG
362 limits cannibalization, and
277
Data Hub 209 219 204 still captures a significant
114 71
Friendly upside
High1 Low1 Expected High2 Low2 Expected  “Liberal” play is subject to

significant cannibalization
Note: Numbers based on Turkey becoming a regional data hub and should be avoided
1) High = Own TTG Hub Dominates (secures Google & Akamai and creates snowball effect), Low = Competing Hub Dominates
2) High = 50% churn of DC related corporate conn. in 2 years, Low = 100% churn of DC related corporate conn. in 2 years
PRELIMINARY
In the “Reactive” scenario, TTG would minimize

cannibalization and realize an upside of up to TL 114 mn
Scenario Impact Analysis
0: “Reactive”
Incremental Net Impact - NPV Incremental Net Impact – NPV Breakup by Category
(TL Millions) (2015-2025) (TL Millions) (2025)
No change
Xyz Data hub-friendly
105 17 -2
114 -7 114
1 0 0 17 2 0
95 7 1 0 0
0: Status Quo 129
0: Status Quo
6
-2 -14 -24
2016 2020 2025

Int’l IP Transit Int’l Corporate DC DC Metro ICT Total
Detailed Connectivity Cann. Backhaul Conn. Colocation Conn.
Breakup
Key Highlights
 In the data hub-friendly regulatory scenario, a data hub is established in Turkey even without TTG’s participation
 While TTG does not incur cannibalization, it looses significant market share and upside from international and DC
metro connectivity

PRELIMINARY
In “Proactive”, TTG would minimize cannibalization and

capture significant upside from int’l and metro connectivity
1: “Proactive”
(TL Millions) (2016 - 2025) (TL Millions) (2025)
No change
Xyz Data hub-friendly 544 -8 10 0 -4 5 1 548
1 6 10 0 5 1 0 5 1 2
548
30
302 Quo
0: Status 0: Status Quo
14 510
10
-1
2016 2020 2025 34
Detailed Int’l IP Transit Int’l Corporate DC DC Metro ICT Total

Connectivity Cann. Backhaul Conn. Colocation Conn.
Breakup
Key Highlights
 Int’l Connectivity revenues and DC metro connectivity are the main drivers of the total upside
 IP Transit cannibalization is limited as transit share of TTG is already very low and mainly concerns national
access to its own eyeballs
 No Corporate Connectivity cannibalization occurs in this scenario as competitors are not in TTG’s data centers

PRELIMINARY
“Hybrid” also minimizes cannibalization and captures

upsides from int’l and metro connectivity
2: “Hybrid”
(TL Millions) (2016 - 2025) (TL Millions) (2025)
No change
Xyz Data hub-friendly 50 1 362
-2 0 1
362 313 -9 10 0 48
12 4 4 10 0 7 4 2
262
8
0: Status Quo 0: Status Quo
9 294
-3
2016 2020 2025

Detailed 19
Breakup
Connectivity Cann. Backhaul Conn. Colocation Conn.
Key Highlights
 Hybrid behaves similarly to the “Proactive scenario”
 International connectivity upside capture is somewhat lower than in the “Proactive” option because TTG does not
benefit from a ‘boost’ in its market share to the carrier specificity of its data center

PRELIMINARY
In “Liberal”, while TTG captures the connectivity upside, it

also incurs cannibalization
3: “Liberal”
(TL Millions) (2015-2025) (TL Millions) (2025)
No change
Xyz Data hub-friendly 313 -9 10 -291
4 0
71
147
3 0: Status Quo 0: Status Quo

291
-9
-107
-279 50 1 71
1
-2
2016 2020 2025 19 7 2
Detailed
Breakup Connectivity Cann. Backhaul Conn. Colocation Conn.
Key Highlights
 DC-related corporate connectivity incurs full cannibalization within 2 years


The model assesses options considering their financial
upside and exposure to risks
Data Hub Ecosystem and TTG Upside and Risks
Regulation 1. International Connectivity TTI/TT
3 Incremental international backhaul and IP
transit revenues from regional traffic uptake
1 Content Int’l Telcos 4
(Carriers)
2. DC Metro Connectivity TT
Providers
Incremental revenues from providing
7 7 Upstream connectivity among DCs in the data hub
Traffic Demand Int’l Telcos
Local ISPs Traffic
(Business) 3. Data Center Collocation TTI/TT
6 Cash flows from accommodating data center
Traffic generated Traffic to other data collocation demand from data hub tenants
Local
by the ‘eyeballs’ Telcos 5 Corporates hubs to ‘fetch’ 4. Backhaul savings TTI/TT
of regional telcos content when not
in target countries Internet eXchange Point available locally Backhaul CapEx / OpEx savings for TTG due
(Balkans, CIS, to sourcing content locally
(IXP) hosted in TTG DC1
Middle East and 5. Corporate Connectivity TT
beyond)
2 Cannibalization from customer churning to
competitors for DC-related connectivity srvs
Other Other 6. Cloud & ICT TT

2
IXPs IXPs Increased competition from business
services arms of international telcos
Turkey Data Hub
7. IP Transit TT
• Regulation has significant impact across all benefits and risks as elaborated later
• For each benefit / risk, there are associated revenues, OpEx and CapEx investments Cannibalization of IP transit revenues from
1) Own DC or partner DC that TTG endorses local ISPs due to localization & competition
Strategy& Confidential April 2015 Prepared for TTG 15
Benefits Risks
1. International Connectivity
The key drivers of int’l connectivity traffic captured by TTG

are Turkey’s and TTG’s market shares as well as prices
Int’l Connectivity
Forecast traffic
Split traffic demand by Forecast TTG’s market Calculate TTG’s
demand attracted from
type share Revenues
the region
1.1 1.2 1.3
% Turkey % Traffic TTG
TTG Prices
share Split Market Share
Total
Total Int’l
TotalInt’l
Int’l Total
Traffic
Traffic
Traffic Int’l TTG IP
X Traffic X X X Transit
Volume
(per
Volume Revenues
(per to
country)
(per Turkey
country)
country)
 Forecast traffic demand  Split traffic into: Int’l  Forecast TTG’s market  Calculate TTG revenues,
based on connectivity, backhaul, IP Transit, and share based on regulatory costs, and cash flows
plays, and regulatory levers Peering levers as well as the play
adopted by TTG1
Input Calculation Assumption Intermediate Output Final Output
1) For example, play 1 enables TTG to lock-in demand and increase its market share
Turkey’s market share vary depending on the considered

regulatory scenario
1.1
Turkey Share – Regulatory Impact
No Change Moderate Change Data Hub Friendly Regulation
• Google, Akamai, and Facebook • All major ICPs and T1s as well as
• Limited presence of major ICPs as well as most T1 setup a large base of smaller players
Impact • Some T1s setup presence presence setup presence
• No IP gravity • Turkey becomes a moderately- • Turkey becomes a major regional
sized regional hub hub with global reach
% of Potential
Traffic Captured
10% 40% 100%
• No special fiscal incentives to • Incentive programs for foreign

Fiscal • Clear tax regime that reinforces
data hub actors and unclear tax ICT companies to attract them to
Incentives certainty to international players
regime for international players Turkey
Content • Current Law no. 5651 curbs • Regulated Free Zone where DCs • Removal of the restrictive
Regulation demand from affected tenants are exempted from 5651 legislation
• Establishment of unit and budget

Copyright • International cooperation and
• Ineffective enforcement system with increased legal capacity and
Protection enforcement
effective enforcement structure
Strategy& Confidential property Date here Prepared for TTG 17
Assumptions
1. International Connectivity PRELIMINARY
Turkey’s share is based on regulatory impact and TTG’s

ability to attract traffic based on country wise assumptions
1.1
Turkey Share – Overall Impact
Share by TTG Play

Regulatory Impact X
Option
TTG’s play affects Turkey’s Turkey's 2025 Market Share

attainable market share of the total
international traffic of target 0: “Reactive” 1: “Proactive” 2: “Hybrid” 3: “Liberal”
countries, as TTG represent today
the majority of “eyeballs” in the Turkey’s Maximum Share by TTG Play Option in 2025
country.
10.0% 12.5% 14.3% 14.3%
No Change 10% 1.00% 1.25% 1.43% 1.43%
Reg. Moderate
40% 4.0% 5.0% 5.7% 5.7%
Impact Change
Hub Friendly 100% 10.0% 12.5% 14.3% 14.3%
• Table above shows the Turkey’s share of the total target country demand
• The share driving the model is the product of regulatory impact and the share by play option under a hub-friendly environment
Assumptions Calculation
TTG’s backhaul market share depends on the share of

regional traffic directed to the own hub and regulation
1.2
TTG Backhaul Market Share – Methodology
Comments
• In the most general case, regional traffic to
Turkey will be split between TTG’s own hub
A (%) and the competing data hub
Regional
• TTG is a backhaul connectivity provider to
1 Traffic to the competing “open” data hub. TTG’s
Own Carrier-Specific
Data Hub Turkey market share in the long term is driven by
the number of players in the market,
• This in turn is heavily dependent on the
2 attractiveness / size market and hence the
regulatory environment
1- A (%)
Open Carrier-
• TTG’s gets 100% Market Share (MS) of the
traffic intended for its own carrier-specific
Neutral Data Hub
data hub
• Considering the above, the effective market
share of TTG will be:
Traffic to own data hub is A % of the total traffic to Turkey. TTG’s share of – TTG market share =
1
backhaul is 100%. A is non-zero only in the “Proactive” play = [A x 100% +
+ (1 - A) x MS for Open Data Hub] x adj
Traffic to competing data hub is (1 – A) % of the total traffic to Turkey. TTG’s
2 • An adjustment is applied for “reactive” to
share of backhaul for that portion of the traffic depends on regulation reflect attempts limit the data hub

Regulation is defining the # of int’l connectivity players

and hence drives TTG’s share in an open environment
1.2
TTG Backhaul Market Share – Regulatory Impact
Regulatory Impact: TTG Market Share in “Open” Environment

# of Int’l
2015A 2025F
Connectivity
Market Market Rationale
Players
Share Share
(2025)
In addition to SOL and Vodafone, 1 additional player enters

No Change 70% 28% 4 the market by 2025. TTG maintains a market share that is
slightly higher than its market share

Moderate
70% 23% 5 the market by 2025. TTG maintains a market share that is
Change

Hub
70% 18% 6 the market by 2025. TTG maintains a market share that is
Friendly
Strategy& Prepared for TTG 20
Turkey’s share is based on regulatory impact and TTG’s

ability to attract traffic based on country wise assumptions
1.2
TTG Backhaul Market Share – Overall Impact
A B C
% TTG Own Carrier- TTG Market Share in
X 100 % + (1 - TTG Own-Hub Traffic) X X adj
Specific Hub Traffic “Open” Environment
Turkey's 2025 Market Share
0: “Reactive” 1: “Proactive” 2: “Hybrid” 3: “Liberal”

TTG Own Carrier-Specific Traffic (% total traffic to Turkey)
C 0.7 1.0 1.0 1.0
A 0% 20% (example) 0% 0%
B
No Change 28% 14% 42% 28% 28%
Reg. Moderate
23% 12% 38% 23% 23%
Impact Change
Hub Friendly 18% 9% 34% 18% 18%
A• Non-zero only for “proactive”. TTG’s Hub traffic depends on with which players TTG secures deals. A sensitivity
Comments
is conducted as part of assessment of the “proactive”. Multiplied with 100% market share as TTG is the de-
facto backhaul supplier in this case
C• Adjustment factor of 0.7 applied for “reactive”. This is to reflect TTG’s attempts to limit the attractiveness of the
data hub
TTG’s can maximize its market share in the IP Transit

market with the Hybrid and Liberal plays
1.2
TTG IP Transit Market Share
Regulatory Impact – Market Share Evolution

2015A Market 2025F Market
Rationale
Share Share
Regulations inhibit the rise of competition in IP transit. Assuming 5 p.p. increase in market share versus “moderate
No Change 11% 23%
change”, for which assumptions have been align with TTI
Moderate Regulations foster a moderate competitive environment with the entrance of several players in the market, inhibiting
11% 18%
Change TTG’s market share potential. Assumption aligned with TTI
Open data hub friendly regulation intensifies competition. Assuming 5p.p. drop in market share versus “moderate
Hub Friendly 11% 13%
change”, for which assumptions have been align with TTI
Scenario Impact - % Conserved of Optimal MS
2016
2025
adjustment Rationale
% adjustment
coefficient
TTG is not part of the Data Hub ecosystem, and grabs only 20% of its market share potential with more players
0: “Reactive” 90% 20%
entering the market, and its ongoing efforts as an international IP Transit provider
1: “Proactive” 100% 100% TTG will be able to participate in all data hubs and capture its potential market share
2: “Hybrid” 100% 100% TTG will be able to participate in all data hubs and capture its potential market share
3: “Liberal” 100% 100% TTG will be able to participate in all data hubs and capture its potential market share
Overall Impact = Regulatory Impact x Scenario Impact

TTG IP Transit Market Share in 2025
Regulatory Share by TTG 0: “Reactive” 1: “Proactive” 2: “Hybrid” 3: “Liberal”
X
Impact Play Option
Scenario Impact
20% 100% 100% 100%
No Change 23% 5% 23% 23% 23%
Reg. Moderate Change 18% 4% 18% 18% 18%
Impact
Hub Friendly 13% 3% 13% 13% 13%
Yearly price erosions are averaging ~10% -15% in the next

10 years Assumed price digression
1.3 in line with historic
TTG Prices trends1
Int’l Backhaul Prices - Lease IP Transit Prices

(2016 – 2025) (TL / Mbps / Year) (2015 – 2020) (TL / Mbps / Year)
-12%
99 90
-10%
60 1G
36 -12%
10G
100
2016 2020 2025

Int’l Backhaul Prices - IRU 48 -11%
(2016 – 2025) (TL / Mbps / Year)
-12% 30
238 27
-8% 21
144 16
96 11 9
6
2016 2020 2025 2015 2020 2025

1) Based on input from Turk Telekom Group, ~20% current erosion which goes down to 10% in 2020
2. DC Metro Connectivity
We have projected incremental cash flows from DC metro

connectivity based on a tree-step methodology
DC metro connectivity
Forecast metro Calculate market Forecast TTG’s market Calculate TTG’s Cash
capacity revenues share Flows
1.2 1.3 1.4

TTG
Technical Market
Detailed in Appendix
Revenue TTG Costs

Parameters Prices
Share
1.1
Capacity Metro TTG

Market TTG
Capa X Rev X Rev - Cash
Dimensioning city Flows
Total Int’l
Traffic to
Turkey
 Forecast purchased metro  Determine an appropriate  Forecast TTG’s market  Calculate TTG OpEx,
required BW for the different pricing level and calculate share and calculate TTG’s CapEx and cash flows
type of links emerging in the DC metro connectivity metro connectivity revenues
data hub revenue
Input Assumption Intermediate Output Final Output

2. DC Metro Connectivity DETAILED METHDOLOGY IN APPENDIX
The capacity dimensioning model forecast the bandwidth

requirements of different type of tenants and links
1.1
Capacity Dimensioning
CP: Content Provider Link types

RO: Regional Operator
T1: T1 Carrier •1 Data exchange through the IXP. The IXP links
form the ‘fabric’ of the data hub which connects
2c 2b
IXP demand with supply. Most traffic is between ROs
Intra-CP Node CP – T1 and CPs
A •2 Direct peering links: When the bandwidth
requirements between two players that are not
collocated in the same DC is high, the two typically
connect via point-point direct peering links:
– CP–RO links needed for ROs to access content
2a
1
IXP
– CP–T1 links needed for CPs to ‘fetch’ content
2b
from their servers other data hubs
IXP IXP – Intra–CP links need for CPs to ‘mirror’ the content
2c
Node Node
uploaded in one server to geo-redundant servers
B C
2a CP – RO – T1–RO links needed for ROs to access the
2d
servers of CPs not present in the data hub
Model Overview
• Model calculates the capacity required by type of link
2d T1 – RO
• Assumptions include % share of traffic by CP,
Data exchange through direct peering peering as % content traffic tenant is not collocated
Data exchange through the IXP in the same IXP node with other type of tenants

Purchased DC metro bandwidth is forecast to reach up to

8.2 Tbps by 2025
1.1
Metro capacity output: DC metro connectivity purchased bandwidth forecast (Gbps)(2017-2025)
Showing results for:

8,227 Comments
Data hub friendly
• The chart is showing the total
purchased bandwidth across the
5,815 different TTG play options for data
hub friendly regulation and
assuming only Turkey becomes a
data hub
3,798
• The traffic increase is driven by
2,612
2,810 traffic demand from target countries
in the region
• Differences in the forecast for each
1,107
play mainly reflect differences in the
178 129 72 expected traffic demand for the
corresponding play
2017 2020 2025
Hybrid / Liberal Proactive Reactive

Market prices are forecast to reach lower end of

benchmarks by 2025 in the data hub friendly scenario
1.2
Market prices: Turkey Metro Ethernet price forecast and benchmarks (EUR 000s / Gbps MRC) (2015-2025)
-17% 1G 10G 100

9.0 In line with historical trend1
-17%
No change
3.6 3.4 9.0

1.8 1.4 0.7 1.3 0.5 0.3
2015 2020 2025
3.4
Moderate change
9.0 -28%
-10%
3.6 2.5
1.8 1.7 2.3 Benchmark average
0.7 0.3 1.0 0.4 0.2
1.9 for 1G in 2015
1.7 1.7
2015 2020 2025 1.5
1.2 1.1 1.1 1.5
Data hub friendly
0.8
-34% 0.6
9.0
-11%
3.6
1.8 1.1 0.5 0.2 0.6 0.3 0.1 TR TR ES BE FR TR AT SE DE IE TR NL UK
(15’) (20’) (20’) (20’)
2015 2020 2025
1) Prices have been decreasing over the previous years at a sustained 15%-20% rate
Revenue share for “hybrid” and “liberal” is forecast to

decline to competitive market levels
1.2
TTG revenue share of DC metro connectivity (% market revenues) (2015-2025)
Comments
-10%
• Competition in the leased line market is
65% -23% expected to strengthen over time
59%
56%
-40% • Accordingly, for the “hybrid” and
“liberal” plays, TTG’s market share is
45% expected to decline and reach more
43%
competitive levels
• For the “reactive” and “proactive” plays,
27%
TTG is not actively facilitating DC
metro connectivity needs of the
competing hub
• As a consequence, competing
infrastructure players supporting the
DCs are expected over time to capture
2016 2020 2025
a higher market share
Reactive / Proactive Hybrid / Liberal

2. DC Metro Connectivity PRELIMINARY
OpEx to revenue ratio is expected to increase over time as a

result of price pressures
1.2
TTG costs (2015-2025)
Comments
OpEx as % Revenues (%)
• Assumed incremental OpEx / Revenues
27% ratio for P2P metro Ethernet service half
27%
26% than reported OpEx / Rev, which is
25% 25%
23%
calculated on a fully allocated basis
• Trend for “no change” scenario is in line
20% 20% 20%
with historical data. For other scenarios
we are assuming a further increase to
account for the effect of decreased prices
• A CapEx of USD 16,000 per Gbps for
upgrading metro capacity is assumed
based on a high-level model from
Strategy& accounting for metro switch
and edge CapEx
• The model considers that extra dig, duct
and fiber costs are not required
2016 2020 2025
No Change Data Hub Friendly

Moderate Change

3. Data Center Collocation
We have projected incremental cash flows from DC metro

connectivity based on a tree-step methodology
Data Center collocation
1.1 1.2 1.3 1.4

Forecast collocation Calculate market Forecast TTG’s market Calculate TTG’s Cash
demand revenues share Flows
Sizing Market TTG

TTG Costs
Parameters Prices Market Share
Capacity Metro TTG

Market TTG
Capa X Rev X Rev - Cash
Dimensioning city Flows
Total Int’l
Traffic to
Turkey
 Forecast collocation  Determine pricing level and  Forecast TTG’s market  Calculate TTG OpEx,
demand from content calculate DC collocation share and calculate TTG’s CapEx and cash flows
providers, carriers and other revenue collocation revenues
types of tenants

Collocation market demand by scenario, methodology and

key assumptions
1.1
Collocation demand – Collocation demand (in square meters) (2015-2025)
Showing results for:

Comments
Data hub friendly &
liberal play 2,331 • Market demand for colocation is projected to
grow to ~2,300 square meters or ~1,100 racks in
2025
• This reflects demand from a well-defined
1,559
segment of data hub tenants that includes
content providers, carriers and regional
operators and is consistent with experience from
the launch of data hubs in emerging markets
533
• Projection is based on a bottom-up calculation of
racks by type of player. Big names (e.g. Google,
Level-3) are listed individually
2016 2020 2025 • For each type of player, the model projects racks
based on # eyeballs and racks per eyeballs, as
Collocation demand in # racks further elaborated in the next slide
242 709 1,060

Collocation market demand by scenario, methodology and

key assumptions
1.1
Collocation demand – Collocation demand key sizing parameters
Average # racks by player Comments

Geo-
# Players
Player Type redundancy
(2025) For 10 mn For 100 mn • # racks by player are
multiplier
eyeballs eyeballs increasing non-linearly
from their base applicable
Big Content
8 3.4 13.5 2.0 for 10 mn eyeballs to
Providers
their level for 100 mn
Other eyeballs
Content 60 - 7.5 1.4 • A geo-redundancy
Providers multiplier is applied
Tier-1 • Assumed space per rack
9 2.1 8.4 2.0 is 2.2 sqm
Carriers
Tier-2
10 1.0 4.0 1.5
Carriers
Regional
44 1.0 4.0 1.2
Operators
Assumed collocation prices are in line with international

benchmark average
1.2
Market Revenues – Pricing Assumptions and Benchmarks
Data Center Costs for Rack Space Rental Comments

(Euro per Month per SqM, excluding power) (2015)
 We assume a EUR 404 per
SqM monthly rate for
Leading DHs
collocation, plus EUR 514
Competing DHs per month for power
 We understand that prices
currently in Turkey are lower
than those indicated above
498
 We believe that these lower
409 423 404
351 prices are subsidized from
315 Ø 386
304 other services and are not
applicable for the DC
business model required for
a data hub play
 Assumed prices are in line
with the expectation of
international player, as
indicated by the benchmark
Model
TTG market share is assumed to grow to 25% for the

“hybrid’ and “liberal” plays
1.3
TTG market share – share of new space (% of square meter additions) (2015-2025)
Comments
Proactive (Own hub dominates subscenario)
• For “hybrid” and “liberal”, TTG’s DC is assumed
Hybrid / Liberal
to become the 3rd DC in size with market share
increase to 25% of new space annually in the, in
58% 58% light of that:
– TTG does not have spare capacity,
– DE-CIX announced their first DC in Turkey
and is soon to announce a second one
• For “proactive”, TTG’s share of new “data hub”
29% space in Turkey is significantly higher in the case
25%
that TTG’s own hub dominates, offering access
to a unique tenant ecosystem that includes the
15%
likes of Google and Akamai
10%
2016 2017 2018 onwards

TTG DC cost assumptions
1.3
TTG’s Cash Flows – Cost assumptions
Parameter Value Justification

Electricity
KW per rack 3.5 Previous experience
Unit Cost (TR per MWh) 290 Based on TTG DC plan
Personnel
# FTEs 151 Very conservative based on benchmarks
Gross Salaries (TR/month) ~8,000 Based on TTG DC plan
FTE overhead (% gross salaries) 30% Typical ratio
Maintenance
Shell (% shell CapEx) 3.3% In line with depreciation for 30 years lifetime
POD (% POD CapEx) 5.0% In line with depreciation for 20 years lifetime
Other OpEx (% revenues) ~1.5% Estimated bottom-up2
CapEx
POD unit cost (USD/sqm) 18,864 Based on TTG DC plan and in line with previous experience
Shell unit cost (USD/sqm) 2,000 Based on TTG DC plan
Land cost (USD/sqm of land) 918 In line with the TTG DC plan (USD 2,300 / sqm of whitespace)
Land Area (sqm) 1,2001 Estimated bottom-up3
1) For 400 sqm rack space needed for hybrid / liberal plays under the data hub friendly environment
2) Includes facility management, insurance, office power and other
3) Assuming 1 DC floor, 60% rack space to technical space ratio, 14 sqm of office space per FTE and 20 sqm of parking space per FTE
4. Backhaul Savings
Backhaul costs are impacted by localization of traffic as

well as an increase in capacity unit costs
Effects of Data Hub in Backhaul Purchased Volume and Unit Costs
Purchased A Purchased Capacity Decrease due to Localization:
Capacity
As CPs come to Turkey, IP traffic will be localized over
Volume
time, reducing over time TTG’s backhaul capacity
needs for sourcing content from other European hubs
V0
In the schematic: capacity reduces from V0 to V1
B Increase in capacity unit costs:

A Localization will reduce the TTG’s purchasing volume,
while IP transit traffic captured by TTG from the region
will increase purchasing volume. Overall, the net effect
is a decrease in purchasing volumes. This is likely to
V1 lead in an increase in capacity unit cost
In the schematic: unit cost increases from UC0 to UC1
Capacity
Unit Cost Net Effect on Backhaul Costs:
UC0 UC1
B Δ(C) = V0 * UC0 – V1 * UC1 
Δ(C) = Δ(V) * UC0 – V1 * Δ(UC)

4. Backhaul Savings
The backhaul cost savings module forecasts the net impact

of those two effects
Int’l Cost Savings
Forecast Backhaul Cost Savings Due to Traffic Localization Calculate Net Savings
4.1 4.2
Current All calculation done by
% Localized
Capacity upstream route to Europe
TTG Capacity
Localize Capacity Cost
Own X Needs X Savings
d Traffic Decrease Savings
Traffic
A 4.2
Capacity Unit Cost / Volume Net
Relationship - Savings
TTG Total Cost

Traffic Unit Cost Increase Increase
Int’l Post Due to Localization
X from Unit
Traffic Localiz. Rate Incr.
Forecast Cost Increase Due to Increase in Capacity Unit Cost Calculate Net Savings
Input Calculation Assumption Intermediate Output Final Output

4. Backhaul Savings
Critical assumptions include % localization, current

capacity levels and capacity unit cost
Localization (% CP traffic) Current Capacity (Tbps) IRU Cost (USD 000s / Gbps)
75% 75%
74% 74% 10G 100G
71% 2.6 -11%
2.4
3.3
• Showing % for
data hub friendly -4%
scenario. Time
to reach 75% 2.3 -30%
takes longer in
1.2
other scenarios 1.0 1.0 1.0 1.9
• IP transit is not 1.6
localized (TT 1.3
47% continue to buy 1.1
IP transit abroad
to avoid
cannibalization
Vienna
Milan
London
Frankfurt
Sofia
Amsterdam
of existing IP
transit revenues)
34% 2015 2020 2025
• Based on data provided by TTG • Starting point and forecast are

16 17 18 19 20 21 22 based on data provided by TTG

5. Corporate Connectivity
The establishment of a data hub can cannibalize part of TTG’s

corporate connectivity revenues related to data centres
Corporate Connectivity
Calculate DC related Revenues Forecast Churn Rate Assess Cannibalization Impact
3.1 3.2
% DC Inputs from TT Additional Inputs from TT
TTG
Share Corporate Churn Corporate Prices
Total
Total
Total Int’l
TT
Int’l TotalTTInt’l TotalTTInt’l
Total Int’l
Corporate Total Int’l
Corporate Incremental
Traffic
Corporate
Traffic Traffic
Traffic Traffic
Traffic
Volume X DC
Volume x DC
Volume X Revenues /
Connectivity
Volume Volume Volume
Related Losses
Related
(per (per
(per
Lines
(per (per (per
Lines
country)
Lines
country) country)
country)
country) country)
 Calculate DC related revenues that  Forecast additional churn on total DC  Forecast cannibalization impact based
would be affected by the TRDH related lines on additional churn and revenues
 No incremental price erosion vs. the
base case (“reactive”, “no change”) is
assumed1
1) Decreasing prices to fight churn of DC-related connectivity services would have an averse impact on non-DC related services
5. Corporate Connectivity
Corporate connectivity churn affects mainly net additional

DC related lines in the liberal scenario
3.1
Churn Rate – TTVPN Product (85% of DC-related connectivity revenues)
Sensitivity for
Churn
Scenario Impact - Churn
Additional Churn
Rationale
(2025)
No additional churn is expected as corporate clients and local competitors in the data hub are not
0: “Reactive” 0%
collocated in the same data center
1: “Proactive” 0%
2: “Hybrid” 0%
In pursuing an open data hub, TTG will incur significant churn from its net additions of data center
3a: “Liberal” 50% of total base
related connectivity, as customer switching costs are significantly reduced, loses 50% of DC base
3b: “Liberal” 70% of total base 70% of DC related revenues lost within 2 years of operations
3c: “Liberal” 100% of total base 100% of DC related revenues lost within 2 years of operations
3.2
Price – TTVPN Product (85% of DC-related connectivity revenues)
TTVPN Blended Prices  Revenues, lines, and prices are as per the
business plan
(2016 – 2025) (TL Thousands / Line / Year)
 This assumes an upsell in TTVPN, which results
+10% in price increase per line
 Price evolution will remain the same across
538 738
303 scenarios due to the small portion of revenues
affected, which does not warrant a reduction in
overall prices from TTG
2016 2020 2025
Assumptions
6. Enterprise Cloud
We have projected incremental cash flows from Enterprise

cloud based on a three-step methodology
Enterprise Cloud
Forecast Turkey & Regional

Forecast TTG’s market share Calculate TTG’s Revenues
Demand
5.1
% Enterprise TTG TTG Costs
Market Share
Total
Total
Int’l
Int’l
Traffic
Traffic
ICT Addressable
X Cloud X TTG X TTG Cash
Volume
Volume
Market Cloud Flows
Market
(per
(per
countr
countr
y)
y)
 Forecast Addressable Cloud market  Forecast TTG’s market share of  Calculate TTG revenues, costs, and cash
demand for Turkey and Region enterprise cloud market in Turkey and flows
Region

6. Enterprise Cloud PRELIMINARY
TTG can increase its Enterprise cloud market share from

3% in 2015 to 29% in 2025
5.1
TTG Market Share - Turkey

Rationale
Share Share
No Change 3% 23% Based on business plan (extrapolated by two years)
Moderate
Change
3% 18% Increased competition would reduce market share potential for TTG
Hub Friendly 3% 14% Open data hub maximizes competition and further reduces TTG’s potential market share
TTG Play Impact: % Adjustment on Market Share for “Open” Environment

2016 2025
Rationale
% adjustment % adjustment
0: “Reactive” 100% 100% TTG is not part of the Data Hub ecosystem, and fully optimizes its market share potential
TTG potential market share will be boosted by successfully locking in the big cloud players to build capabilities and
1: “Proactive” 100% 125%
better provide cloud services in the Turkish market
In pursuing an open data hub, TTG will be able to participate in all data hubs, however, more regional players
2: “Hybrid” 100% 80%
would increase the overall competition for cloud inside Turkey
In pursuing an open data hub, TTG will be able to participate in all data hubs, however, more regional players
3: “Liberal” 100% 80%
would increase the overall competition for cloud inside Turkey
Overall Impact = Regulatory Impact x TTG Play Impact
Resulting market share for 2025 under different regulatory scenarios and TTG plays
X
Impact Play Option TTG Play Impact
100% 125% 80% 80%
No Change 23% 23% 29% 18% 18%
Impact
Hub Friendly 14% 14% 18% 11% 11%
6. Enterprise Cloud PRELIMINARY
TTG can capture up to 10% of the regional enterprise cloud

market in 2025 in the Proactive play
1.2
TTG Market Share - Regional

Rationale
Share Share
No Change 0% 0% No active efforts to go after regional markets
Moderate Change in regulation will enable regional operators to open up more and thus access to these markets would be
0% 2%
Change easier
Hub Friendly 0% 4% Open data hub optimizes competition and further reduces TTG’s potential market share
TTG Play Impact: % Adjustment on Market Share for “Open” Environment

2016 2025
Rationale
% adjustment % adjustment
TTG is not part of the Data Hub ecosystem, and thus tends to have limited connectivity to regional operators, thus
0: “Reactive” 100% 100%
capturing only 50% of addressable cloud market
TTG potential market share will be boosted by successfully capturing further demand and developing strategic
1: “Proactive” 100% 125%
alliances from regional operators to offer enterprise cloud services for regional enterprises
In pursuing an open data hub, regional operators would be able to participate in all data hubs and capture further
2: “Hybrid” 100% 80%
market share potential
In pursuing an open data hub, regional operators would be able to participate in all data hubs and capture further
Liberal 100% 80%
market share potential
Overall Impact = Regulatory Impact x TTG Play Impact
Resulting market share for 2025 under different regulatory scenarios and TTG plays
X
Impact Play Option
TTG Play Impact
50% 125% 80% 80%
No Change 0% 0% 0% 0% 0%
Impact
Hub Friendly 4% 2% 5% 3% 3%
7. IP Transit
IP Transit is already cannibalized today
IP Transit Situation Analysis – Superonline example
Internet Comments
at large
• Turkcell / Superonline have an
aggregate internet traffic estimated at
~1.5 Tbps
• Turkcell / Superonline are currently
purchasing over 600 Gbps of IP Transit,
of which only 30 Gbps from TT
0.5 Gbps
~ 600 Gbps • The totality of IP Transit purchased by
Superonline is used to reach TT
eyeballs. Virtually none of it (0.5 Gbps)
transits TT to the internet
• Accordingly, the IP transit module
30 Gbps
assumed that 90% of current TTG’s IP
transit traffic is for own eyeballs and
hence shielded from cannibalization

Appendix 1 – Detailed TTG Play Option Definitions
Appendix 2 – DC metro traffic forecast methodology

In “Reactive”, TTG does not participate in the “data hub”
ecosystem in an attempt to limit its attractiveness
TTG Option Definition – “Reactive”
• TTG does not participate in the “data hub” ecosystem in an attempt to limit its
Strategic Intent attractiveness, keep global carriers corporate and wholesale arms at bay and hence
protect TT’s domestic revenues
• TTG does not actively attract tenants in the hub

Target Tenants • TTG offers incentives to Tier-1 carriers, their Corporate arms and International Content
Providers to collocate in other neighboring hubs
Data Center Strategy • No data center play
IXP Strategy • No IXP play
• TTG lobbies with the regulator to elevate the disadvantages of a data hub and counter
Regulatory Strategy
efforts aimed at creating a more hub-friendly regulatory environment

“Proactive” derives an int’l connectivity upside and inhibits
growth of the competing DH while limiting cannibalization
TTG Option Definition – “Proactive Data Hub”
• Attract ICPs, carriers and regional operators within a controlled environment that protects
TT from revenue cannibalization and with the objective to not only generate a financial
Strategic Intent
upside but also to inhibit the growth of the ecosystem of competing data hub. Offer
incentives to players that TTG cannot capture to stay outside the country
• Tier-1 carriers looking to sell IP Transit to the region

Target Tenants • Global Telco corporate arms looking to partner with TTG to better serve Turkish market
• International Content Providers: OTTs, CDNs, Cloud Providers, etc. looking to peer with TT
• Use TT’s own Carrier-Specific data center, by reserving space in TT’s data centers –
hence, mixed-use space for corporate / wholesale domestic / global customers
Data Center Strategy
• Carve out space for “data hub” use in both Istanbul and Ankara data centers while
providing competitive backhaul service between the data centers
• Create an interconnect mechanism within own DC with clear business rules to start with
IXP Strategy • If interconnect demand grows substantially with smaller players in the DC, start TT’s own
IXP, which may be either self-managed or managed by an international IXP operator
• TT sells domestic services to ISPs and Corporates exclusively with its published, regulated
pricing, while TTI serves the ecosystems of global players in the hub
Regulatory Strategy
• Show the regulator consistency in treating all tenants, and negate the need to peer with
ISPs on a third-party IXP by ensuring the ecosystem exists in TT’s own data center
“Hybrid” improves tenant value prop by adding carrier
neutrality but limits DC accessibility to telcos and CPs
TTG Option Definition – “Hybrid”
• Attract global carriers and content players to Turkey to serve the region and increase the
Strategic Intent country’s IP Gravity, while ensuring that the presence of these global players does not
substantially affect the local market
• Tier-1 carriers looking to sell IP Transit to the region

• Global Corporate Connectivity providers looking to serve the region
Target Tenants
• International Content Providers: OTTs, CDNs, Cloud Providers, etc. looking to serve the
region
• Set up a data center owned and operated by a non-regulated third party, as a dedicated
data hub ; a carrier hotel only
• Carrier neutral facility: besides international players, it will accept only domestic
infrastructure operators (Vodafone, Turkcell, Turk Telekom). Not ISPs, etc.
• The data center owner invites any independent IXP to join the data center.
IXP Strategy
• TTG may also look at partnering with a global IXP to introduce them into this data center
• TT sells domestic connectivity services from/to the data center using its published,
regulated pricing, and competing with Superonline and Vodafone on that front
Regulatory Strategy
• TTI serves the ecosystems of global players in the hub internationally
• TT requests special subsidized prices from the regulator to interconnect “data hub” facilities
“Liberal” aims to maximize the attractiveness of TTG’s
value prop to ICPs and hence int’l connectivity revenues
TTG Option Definition – “Setup Liberal”
• Attract a maximum of international players to create data Gravity in TT’s data hub, in order
Strategic Intent to substitute cannibalized domestic Corporate and Wholesale revenues with new
wholesale revenue streams, international and domestic
• Tier-1 carriers looking to sell IP Transit to regional ISPs and MNOs directly
• Global Corporate Connectivity providers looking to serve regional Corporates
Target Tenants
• International Content Providers: OTTs, CDNs, Cloud Providers, etc. looking to peer with
regional ISPs and MNOs directly
• Partner with a global name to project world-class neutral management, while retaining
equity in the data center and a substantial share of its revenues
• Purchase / repurpose / build two locations in Istanbul to cater for the demand of space that
is close to submarine global routes and to the country’s largest city at once
• Encourage an independent international IXP to run in your data center in order to attract a
maximum number of content providers and regional operators (incumbents as well as
IXP Strategy
alternatives) into the location
• Create a virtuous cycle of ecosystem tenants to further increase the location’s IP Gravity
• Position TT as a partner of the government, fully aligned to the country’s strategy

Regulatory Strategy • Lobby the regulator for specific breaks in return for an open data center approach and for
competitive pricing to TT’s data hub locations (position pricing as being subsidized)

Appendix 1 – Detailed TTG Play Option Definitions
Appendix 2 – DC metro traffic forecast methodology

The establishment of the data hub creates a market for
metro connectivity between different hub players
Intro to the DC metro connectivity market
CP: Content Provider Link types

RO: Regional Operator
T1: T1 Carrier •1 CP – RO data exchange through the IXP. The IXP links
form the ‘fabric’ of the data hub which connects demand
2c 2b with supply. Most of the related traffic is between Regional
IXP Operators (ROs) and CPs
Intra-CP Node CP – T1
•2 Direct peering links: When the bandwidth requirements
A between two players that are not collocated in the same
DC is high, the two typically connect via point-point direct
peering links. These include:
– CP–RO links needed for ROs to access content from
2a
CPs in the data hub
1 – CP–T1 links needed for CPs to ‘fetch’ data from their
2b
IXP servers other data hubs
– Intra–CP links need for CPs to ‘mirror’ the content
2c
IXP IXP uploaded in one server to another geo-redundant server
Node Node – T1–RO links needed for ROs to access the servers of
2d
B C CPs not present in the data hub
2a CP – RO
TTG’s Role
• As Turkey’s main telco infrastructure provider, TTG can
have an important stake in this market
2d T1 – RO • However, current regulated TTG prices are high - the
Data exchange through direct peering establishment of the hub could exert downward pressure
• This is an important risk that is examined separately from
Data exchange through the IXP the upside that is the focus of this section
Summary slide on the mechanics
METHODOLOGY DETAILS IN APPENDIX
1.1
Capacity dimensioning: Calculation methodology summary
Link Type Capacity Dimensioning Methodology Main Assumptions
CP-RO direct • Model splits CP traffic from regional countries1 by CP and RO. If the traffic
• % share of traffic by CP
for a given CP-RO pair exceeds a certain threshold, then the CP and RO
peering • # ROs by target country in hub
will peer directly as opposed to exchanging traffic through the IXP. Total
traffic • Direct peering threshold
traffic is the sum of all direct peering traffic across all CP-RO pairs
• If the traffic for a given CP-RO pair is below threshold (see above), then the
• Same as above, plus: IXP
IXP traffic CP and RO will exchange traffic through the IXP. IXP also accommodates
peering as % content traffic
peering traffic, which is calculated as a % of total content traffic
• CPs buy connectivity from T1s to ‘fetch’ content from other data hubs when • Miss ratio
this is not available locally. This occurs with a low probability, the so called • Probability of CP being
CP-T1 traffic ‘miss’ ratio. Assuming that the CP and T1 are located in different DCs with located in a different DC than
probability A, it is CP-T1 traffic = CP-RO traffic x miss ratio x A its T1 vendor
• Intra–CP links are needed for CPs to ‘mirror’ the content uploaded in one
Intra-CP server to another geo-redundant server. Uploading of content represent a • Upload traffic as % of total CP
traffic small portion of the total traffic U (%) that depends on the upload : traffic
download ratio. Hence, intra-CP traffic = CP-RO traffic x U (%)
• The model calculates average IP transit traffic by T1-RO pair = IP transit • # ROs and # T1s
traffic1 / average # ROs per T1, where the latter is = ROs * T1 vendors per • T1 vendors per RO
T1-RO traffic RO / T1s. The model then multiplies the result with the probability of T1 • Prob. of RO being located in
being in different DC than an RO to get average T1-RO traffic different DC that its T1 vendor
1) Input from international connectivity module
Summary slide on the mechanics
1.1
Technical parameters
Link Type Assumption Value and Justification
• 37.1%, 32.3% and 19.2% for Google, Akamai and Facebook respectively –
% share of traffic by CP
partially based on TTG data
• Varies from 1-3 by target country depending on Turkey’s share the
CP-RO direct # ROs by target country in hub
considered country; total # of operators grows accordingly to 46 over time
peering and
• 80 Gbps of traffic – if more than one 100G port is needed, the CP and RO will
IXP traffic Direct peering threshold
typically peer directly
IXP peering as % content traffic • 20% – typical ratio based on project experience
Miss ratio • 15% – miss ratio is typically in the 15%-20% range

CP-T1 traffic
Prob. of CP being located in a • 5% – it should be a low probability given that both CPs and T1 typically put at
different DC than its T1 vendor least two nodes for geo-redundancy purposes
Upload as % of total CP traffic • 9.1% – based on a typical upload : download ratio of 1:10
Intra-CP
traffic • Grows to 19 over time – fed from the DC colocation module which assesses
# T1s
the entry of different T1s based on # addressable eyeballs considerations
• 2 – ROs typically maintain IP transit relationships with 3-4 T1s, of which 2 can
# T1 vendors per RO
be assumed to be in the Turkish data hub
T1-RO traffic
Prob. of RO being located in a • 40% – based on that T1s will most often collocate in 2 out of 3 nodes of the
different DCs than its T1 vendor hub
1) Input from international connectivity module
The establishment of a data hub creates a market for
connectivity between different hub players
DC metro connectivity module methodology – CP-RO direct peering traffic
Methodology
IXP • Input: Country- traffic forecast to CPs

Node
A • Step 1: Split country traffic by CP based
on % CP traffic share (based on TTG data
partially)
• Step 2: Calculate average traffic by CP
and RO pair based on # ROs from each
given country present in the hub
IXP IXP • Step 3: If traffic for each given ICP and
Node Node RO pair > 70 Gbps, then it is direct
B C peering traffic
2a CP – RO
Country traffic to CPs

Data exchange through direct peering from int’l connectivity
Data exchange through the IXP module

DC metro connectivity module methodology – IXP traffic
Methodology
IXP • Input: CP traffic forecast split for each pair

Node of CP- RO (from previous step)
A
• Step 1: If traffic for each given CP and RO
pair > 70 Gbps, then it is IXP traffic
• Step 2: To the above, add peering traffic
1 through the IXP (20% of content traffic) to
IXP get the total IXP traffic
• Step 3: Split IXP total traffic between IXP
IXP IXP
Node Node nodes using a 50:50:0 ratio for 2016 that
B C changes to 40:40:20 ratio from 2018
• Explanation
• Step 4: Calculate traffic that needs to flow
from one IXP node to another considering:
– % of eyeballs “connected” to each IXP node
– % of CPs without geo-redundant nodes
Country traffic to CPs
Data exchange through direct peering from int’l connectivity
Data exchange through the IXP module

DC metro connectivity module methodology – CP-T1 traffic
Methodology
2b
IXP • CP–T1 links needed for CPs to ‘fetch’ data
Node CP – T1 from their servers other data hubs
A
• This occurs with a probability 15%-20% (so
called ‘miss’ ratio)
• Traffic will flow through a metro link only if
the CP / T1 are collocated in different DCs
• The calculation methodology is accordingly
as described below
IXP IXP
Node Node • Input: Total CP-RO traffic as calculated
B C previously
• Step 1: CP-T1 traffic = CP-RO traffic x
Internet miss ratio x probability T1 is in a different
location than the CP
Data exchange through direct peering

Data exchange through the IXP
DC metro connectivity module methodology – Intra-CP traffic
Methodology
4 IXP • Intra–CP links are needed for CPs to

Intra-CP Node ‘mirror’ the content uploaded in one server
A to another geo-redundant server
• Uploading of content represent
approximately 1/11 of the total traffic
(upload : download ratio is ~1:10)
• The calculation methodology is accordingly
as described below
IXP IXP
Node Node • Input: Total CP-RO traffic as calculated
B C previously
• Step 1: Intra-CP traffic = CP-RO traffic x
(1 / 11)

DC metro connectivity module methodology – T1-RO traffic
Methodology
IXP • T1–RO links are needed for Regional

Node Operators (ROs) to access the servers of
Internet A content providers not present in the data
hub. These are typically direct peering links
as related bandwidth requirements are
high
• Input: total IP transit traffic as calculated
for the int’l connectivity revenues module
IXP IXP • Step 1: Divide total IP transit traffic by the
Node Node average number of ROs per T1 to find
B C
average traffic by T1-RO pair, where:
– ROs per T1 = ROs * T1 relationships
per RO / T1s (all model inputs)
3 T1 – RO • Step 2: Multiply with probability of T1 being
in different node than RO (model input)


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21 June 2015 Model Documentation Turk Telekom Group

Turkey Regional Data

Strategy& Prepared for TTG

0: “Reactive” 1: “Proactive” 2: “Hybrid” 3: “Liberal”

Content Int’l Telcos

TTG DCs for Corporates: Carrier

Strategy& Confidential June 2015 Prepared for TTG 3

In “proactive”, TTG aims to attract anchor tenants on its

Content Int’l Telcos Content Int’l Telcos

IXP Int’l Telcos IXP Int’l Telcos

DC IXP hosted in TTG DC1 IXP in DC DC

Local Telcos and ISPs can be

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IXP Int’l Telcos IXP Int’l Telcos

DC IXP hosted in TTG DC1 IXP in DC DC

TTG DCs for Corporates: Carrier

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Content Int’l Telcos Content Int’l Telcos

IXP Int’l Telcos IXP Int’l Telcos

TTG Data Centers for Corporates:

Key 1 TTG’s DCs are all becoming carrier neutral

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Strategy& Prepared for TTG

Turkey, Russia & Turkey & Bulgaria Turkey only Comments

Bulgaria Become Hubs Become Hubs establishes a data hub

Limited presence of major All major players and – competition between

Competing Hub Own and Competing

Own Hub Dominates

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Base Case in results shown (unless otherwise mentioned)

High1 Low1 Expected High2 Low2 Expected  “Liberal” play is subject to

In the “Reactive” scenario, TTG would minimize

2016 2020 2025

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In “Proactive”, TTG would minimize cannibalization and

2016 2020 2025 34

Detailed Int’l IP Transit Int’l Corporate DC DC Metro ICT Total

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“Hybrid” also minimizes cannibalization and captures

2016 2020 2025

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In “Liberal”, while TTG captures the connectivity upside, it

3 0: Status Quo 0: Status Quo

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Strategy& Prepared for TTG

Other Other 6. Cloud & ICT TT

The key drivers of int’l connectivity traffic captured by TTG

Turkey’s market share vary depending on the considered

No Change Moderate Change Data Hub Friendly Regulation

• No special fiscal incentives to • Incentive programs for foreign

• Establishment of unit and budget

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Turkey’s share is based on regulatory impact and TTG’s

Share by TTG Play

TTG’s play affects Turkey’s Turkey's 2025 Market Share

No Change 10% 1.00% 1.25% 1.43% 1.43%

Hub Friendly 100% 10.0% 12.5% 14.3% 14.3%

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TTG’s backhaul market share depends on the share of

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Regulation is defining the # of int’l connectivity players

Regulatory Impact: TTG Market Share in “Open” Environment

In addition to SOL and Vodafone, 1 additional player enters

In addition to SOL and Vodafone, 2 additional player enters