SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Report on Form 6-K dated December 22, 2005
CELLCO FINANCE N.V.
Pareraweg 45
Curacao
Netherlands Antilles
(Address of Principal Executive Offices)
_______________
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
Form 20-F: |X| Form 40-F: |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes: |_| No: |X|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes: |_| No: |X|
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes: |_| No: |X|
Enclosure: Report: "Operating and Financial Review and Prospects for the
Nine-Month Period Ended September 30, 2005"
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELLCO FINANCE N.V.
By: Amicorp Curacao N.V.
Managing Director
By: /s/ PIETER COX
--------------
Name: Pieter Cox
Title: Managing Director
Dated: December 22, 2005
OPERATING AND FINANCIAL REVIEW AND PROSPECTS FOR THE NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005
Overview
This is the quarterly report for the nine-month period ended September
30, 2005 of Cellco Finance N.V. ("Cellco Finance"), a Netherlands Antilles
limited liability company ("naamloze vennootschap"). Cellco Finance's sole
business is to issue debt securities and lend the proceeds of those debt
securities to Turkcell Iletisim Hizmetleri A.S. ("Turkcell"), a joint stock
company organized and existing under the laws of the Republic of Turkey.
On July 23, 1998, Cellco Finance issued $300,000,000 of 15% Senior
Subordinated Notes due 2005 pursuant to an Indenture dated July 23, 1998 between
Cellco Finance and HSBC Bank USA (then known as Marine Midland Bank) (the "1998
Restricted Notes"). On December 22, 1999 Cellco Finance issued $400,000,000 of
12.75% Senior Notes due 2005 pursuant to an Indenture dated December 22, 1999
between Cellco Finance and HSBC Bank USA (the "1999 Restricted Notes"). Each of
the 1998 Restricted Notes and 1999 Restricted Notes were offered and sold in
private placements to a small number of institutions, which resold those Notes
pursuant to exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act") in transactions outside the United States in
reliance on Regulation S under the Securities Act and to "qualified
institutional buyers" under Rule 144A under the Securities Act.
Cellco Finance loaned the proceeds of the 1998 Restricted Notes and the
1999 Restricted Notes to Turkcell pursuant to a Subordinated Credit Agreement
dated July 23, 1998 and a Credit Agreement dated December 22, 1999, respectively
(such Credit Agreements being collectively herein called the "Credit
Agreements").
Pursuant to a Registration Statement filed with the Securities and the
Exchange Commission (the "SEC") and declared effective on October 13, 1999,
Cellco Finance offered to exchange notes that had been registered with the SEC
for the 1998 Restricted Notes. Pursuant to the exchange offer completed November
22, 1999, $285,036,000 in principal amount of Senior Subordinated Exchange Notes
were issued in exchange for a like principal amount of 1998 Restricted Notes
(such Senior Subordinated Exchange Notes being herein called the "1998 Exchange
Notes"). Pursuant to a Registration Statement filed with the SEC and declared
effective on July 10, 2000, Cellco Finance offered to exchange notes that had
been registered with the SEC for the 1999 Restricted Notes. Pursuant to the
exchange offer completed August 18, 2000, $385,038,000 in principal amount of
Senior Exchange Notes were issued in exchange for a like principal amount of
1999 Restricted Notes (such Senior Exchange Notes being herein called the "1999
Exchange Notes" and, together with the 1998 Exchange Notes, "Exchange Notes";
the Exchange Notes, the 1998 Restricted Notes and the 1999 Restricted Notes are
collectively referred to as the "Notes"). On October 8, 2003, Cellco Finance
announced that the holders of almost 90% in aggregate principal amount of its
outstanding 12.75% Senior Notes due 2005 have consented to the proposed
redemption of 15% Senior Subordinated Notes due 2005. The redemption price was
103.75% and the redemption was made on November 10, 2003.
The terms "we," "us," "our" and similar terms refer to Cellco Finance
and do not include or refer to Turkcell. We do not control Turkcell. However,
because our sole business is to issue debt securities and lend the proceeds of
those debt securities to Turkcell and our only significant assets are claims
against Turkcell under the Credit Agreements, the success of our business is
dependent entirely on the success of Turkcell's business, and our business is
subject to all risks and uncertainties to which Turkcell's business is subject.
The financial information contained in the following discussion and
analysis has been prepared and is presented in accordance with US GAAP in US
dollars. The following discussion and analysis should be read in conjunction
with the financial statements and related notes as of December 31, 2003 and
2004, and for the years ended December 31, 2002, 2003 and 2004 included in the
Cellco
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Finance Annual Report for the year ended December 31, 2004, and the financial
statements and related notes as of December 31, 2004 and September 30, 2005, and
for each of the nine-month periods ended September 30, 2004 and 2005 included
herein. The information as of and for each of the nine-month periods ended
September 30, 2004 and 2005 are not audited.
Certain statements contained below, including information with respect
to our plans and strategy for our business, are forward looking statements. The
statements contained in this discussion of operating results, which are not
historical facts, are forward looking statements with respect to our plans,
projections or future performance, the occurrence of which involves certain
risks and uncertainties.
Operating Results
Revenues. Our revenue consists primarily of interest and financing fees
from Turkcell paid pursuant to the Credit Agreements. Revenues for the
nine-month period ended September 30, 2005 decreased 22% to $30,998,000 from
$39,854,000 for the same period in 2004. The decrease in revenues is due to
Turkcell's repayment of its loan amounting to $400 million net of financing fees
on August 1, 2005.
Expenses. Expenses consist primarily of interest paid on the Notes and
taxes. Expenses for the nine-month period ended September 30, 2005 decreased 22%
to $30,998,000 from $39,854,000 for the same period in 2004 due to the
extinguishment of senior notes on August 1, 2005 which we issued in 1999.
Critical Accounting Policies
We have prepared our financials statements assuming we will continue as
a going concern. Turkcell has fully repaid outstanding balance of the senior
notes issued by us in 1999 on August 1, 2005.
Liquidity and Capital Resources
We are a special purpose finance vehicle formed to issue debt
instruments and lend the proceeds to Turkcell. All of our existing obligations
were matched by claims on Turkcell. We do not expect to incur additional
indebtedness other than to fund Turkcell's operations, and any such additional
indebtedness will be matched by claims on Turkcell.
Outstanding balance of the 12.75% Senior Notes has been fully paid on
its maturity, August 1, 2005. We do not have any major contractual obligations
at September 30, 2005.
Research and Development, Patents and Licenses
We have not had any research and development activities for the last
three years. We own no patents.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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Tabular Disclosure of Contractual Obligations
We do not have any major contractual obligations at September 30, 2005.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Exchange Risk Management
The following table sets forth as at December 31, 2004 and September
30, 2005 the principal and maturities of our indebtedness that are sensitive to
foreign currency exchange rate fluctuations
December 31, 2004 September 30, 2005
Carrying amount Fair value Carrying amount Fair value
$ $ $ $
- - - -
(in millions) (in millions) (in millions) (in millions)
Financial instrument
1999 Notes 400.0 417.0 - -
1999 Notes matured on August 1, 2005. Turkcell has fully repaid the outstanding
balance of the 1999 Notes on its maturity. We do not have market risk sensitive
instruments as of September 30, 2005.Interest Rate Risk Management
The following table sets forth as at December 31, 2004 and September 30, 2005
the principal and maturities of our indebtedness that is sensitive to interest
rate fluctuations:
December 31, 2004 September 30, 2005
Carrying amount Fair value Carrying amount Fair value
$ $ $ $
- - - -
(in millions) (in millions) (in millions) (in millions)
Financial instrument
1999 Notes 400.0 417.0 - -
1999 Notes has matured on August 1, 2005. Turkcell has fully repaid the
outstanding balance of the 1999 Notes on its maturity.
5
CELLCO FINANCE N.V.
Curacao, Netherlands Antilles
Financial Statements
September 30, 2005
Balance sheets at December 31, 2004
and September 30, 2005 (unaudited)
- ---------------------------------------------------------------------------------------------
December 31, September 30,
Assets 2004 2005
(unaudited)
- -------------------------------------------------------- ------------ -------------
(in thousands of US dollars)
Current assets
Cash and cash equivalents (note 4) 3 3
Accrued interest receivable (note 5) 21,250 -
Deferred financing costs (notes 3 and 5) 1,247 -
Loans receivables (notes 4 and 5) 400,000 -
Other current assets and receivables 308 238
------------ -------------
Total current assets 422,808 241
------------ -------------
422,808 241
============ =============
- ---------------------------------------------------------------------------------------------
December 31, September 30,
Liabilities and shareholders' equity 2004 2005
(unaudited)
- -------------------------------------------------------- ------------ -------------
(in thousands of US dollars)
Current liabilities
Accrued interest payable (note 5) 21,250 -
Taxes payable (notes 3 and 6) 299 229
Notes payable (notes 4 and 5) 400,000 -
Unearned financing fee income (notes 3 and 5) 1,247 -
------------ -------------
Total current liabilities 422,796 229
Shareholders' equity
Common stock
Par value US$1.00; authorized 60,000, issued and paid 12 12
12,000 shares (note 1)
Retained earnings - -
------------ -------------
Total shareholders' equity 12 12
------------ -------------
422,808 241
============ =============
See accompanying notes to the financial statements
2
Statements of operations for the nine-month periods
ended September 30, 2004 and 2005 (unaudited)
- ----------------------------------------------------------------------------------------------------
Nine months ended
September 30,
2004 2005
- ---------------------------------------------------------------- ------- -------
(in thousands of US dollars, except share data) (unaudited)
Income
Interest income (notes 3 and 5) 38,250 29,750
Financing fee income (notes 3 and 5) 1,604 1,248
------- -------
Total revenue 39,854 30,998
Expenses
Interest expense (notes 3 and 5) (38,250) (29,750)
Financing cost (notes 3 and 5) (1,604) (1,248)
Operating and other expenses re-charged (note 1) 57 47
------- -------
Income before taxes 57 47
Taxes on income (notes 3 and 6) (57) (47)
------- -------
Net income - -
======= =======
Basic and diluted earnings per common share - -
======= =======
Weighted average number of common shares outstanding 12,000 12,000
======= =======
See accompanying notes to the financial statements
3
Statements of cash flows for the nine-month periods
ended September 30, 2004 and 2005 (unaudited)
- ----------------------------------------------------------------------------------------------------
Nine months ended
September 30,
2004 2005
- ---------------------------------------------------------------- ------- -------
(in thousands of US dollars) (unaudited)
Cash flows from operating activities:
Net income - -
Changes in assets and liabilities:
Accrued interest receivable 12,750 21,250
Other current assets and receivables 59 70
Accrued interest payable (12,750) (21,250)
Accrued income taxes (59) (70)
------- -------
Net cash used in operating activities - -
Cash flows from investing activities:
Proceeds from loans granted - 400,000
Cash flows from financing activities:
Payment on notes - (400,000)
Deferred financing costs 1,604 1,247
Unearned financing fees (1,604) (1,247)
------- -------
Net cash provided by financing activities - -
------- -------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at the beginning of period 3 3
------- -------
Cash and cash equivalents at the end of period 3 3
======= =======
Supplemental cash flow information:
Interest paid (51,000) (51,000)
Interest received 51,000 51,000
Taxes paid 116 117
See accompanying notes to the financial statements
4
Cellco Finance N.V.
Notes to the financial statements as of December 31, 2004 and for the nine
months period ended September 30, 2004 and 2005 (unaudited).
(1) Activities and ownership
Cellco Finance N.V. (the "Company") was incorporated on January 27, 1998 as
a limited liability company under the laws of the Netherlands Antilles. The
Company has its registered office at Pareraweg 45, Curacao, the Netherlands
Antilles, and is registered with the trade registry of the Chamber of
Commerce and Industry in Curacao. The authorized share capital of the
Company is divided into 60,000 ordinary shares with a par value of one US
Dollar each, of which 12,000 fully-paid shares have been issued. The sole
shareholder is Cellco Stichting, a stichting, or foundation, organized
under the laws of the Netherlands Antilles (the "Foundation"). The sole
beneficiary of the Foundation is a Netherlands Antilles charitable
foundation. The Foundation has a single member board of directors,
consisting of Amicorp Curacao N.V., a Netherlands Antilles trust company
(the "Trust Company"). The Company is managed by a Board of Managing
Directors comprised of a single managing director, appointed by the General
Meeting of Shareholders. The Trust Company is also the sole managing
director. The Company has no officers, the managing director carries out
the functions of the executive officers, consistent with the Netherlands
Antilles law.
The Company was formed for the purpose of issuing debt securities and
lending the proceeds thereof to Turkcell Iletisim Hizmetleri A.S.
("Turkcell"). The Company issued $300,000,000 15% Senior Subordinated Notes
(the "Senior Subordinated Notes") due 2005 (which was redeemed on November
10, 2003) and $400,000,000 12.75% Senior Notes (the "Senior Notes") due
2005, and entered into Issuer Credit Agreements with Turkcell, under which
the proceeds of these Notes were loaned to Turkcell. The Company has
conducted no operations since it was established other than the issuance of
these Notes and will have no subsidiaries or significant business
activities and is not expected to produce any revenues except payments
received from Turkcell under the Issuer Credit Agreements and under any
similar agreements which may be required upon any additional debt
issuances. Pursuant to the Issuer Credit Agreements, any operating and
other expenses of the Company are payable by Turkcell.
Shareholders' equity consists of the following at December 31, 2004 and
September 30, 2005 (unaudited):
-----------------------------------------------------------------------------------------------------------
Common stock Total
-------------------------- Shareholders'
Shares Amount equity
-----------------------------------------------------------------------------------------------------------
(in thousands of US dollars, except share data)
Balance at December 31, 2004 and September 30, 2005 (unaudited) 12,000 12 12
------------------------------------------
The Company had no comprehensive income for the nine months ended September
30, 2004 and 2005 (unaudited).
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(2) Basis of preparation of financial statements
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
The Company's year-end is December 31. These financial statements cover the
nine month-period ended September 30, 2005. The comparative figures for
2004 in the statements of operations and cash flows cover the nine
month-period ended September 30, 2004.
The financial statements and related notes for the nine month periods ended
September 30, 2004 and 2005 are unaudited and in the opinion of management,
such interim financial statements include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
results for such periods. The results of operations for the nine months
ended September 30, 2005 are not necessarily indicative of the results to
be expected for the full year or any other interim period.
The Company is considered a Variable Interest Entity ("VIE") under the
guidance of FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51", as revised in December 2003
("FIN 46 (R)") and consolidated in the consolidated financial statements of
Turkcell.
The Company received all payments timely from Turkcell on its Note
receivable which had maturity on August 1, 2005.
(3) Summary of significant accounting policies
Significant accounting policies followed in the preparation of the
financial statements referred to above are set out below:
(a) Revenue and expense recognition
The accrual basis of accounting is followed for the recognition of revenue
and expenses.
(b) Deferred financing cost and unearned financing fees
Financing costs incurred in connection with the issuance of the Notes,
which were recharged by the Company to Turkcell, are deferred and are
amortized over the terms of the Notes as an adjustment to financing fee
income and financing costs. Other costs relating to the issuance of the
Notes are paid directly by Turkcell.
(c) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
6
(d) Earnings per share
The Company adopted SFAS No. 128, "Earnings Per Share". In accordance with
this statement, basic earnings per share is computed by dividing net
earnings by the weighted averaged number of common shares outstanding.
Diluted earnings per share do not differ from basic earnings per share, as
the Company has no common stock equivalents.
(e) Foreign currency transactions
Transactions denominated in currencies other than US Dollar are recorded at
the exchange rates prevailing at the date of the transactions. Assets and
liabilities denominated in currencies other than US Dollar are converted
into US Dollar at the exchange rates ruling at the balance sheet date with
the resulting exchange differences recognized in the determination of
income.
(4) Fair value of financial instruments
The Company's financial instruments consist of cash and cash equivalents as
of September 30, 2005 (December 31, 2004: cash and cash equivalents, loans
receivable and notes payable).
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and cash equivalents
The carrying amounts approximate fair value because of the short maturity
of those instruments.
Loans receivable and notes payable
The fair values of loans receivable and notes are estimated based on the
quoted market prices.
The estimated fair values of the Company's financial instruments are as
follows:
-----------------------------------------------------------------------------------------------------------
December 31, 2004 September 30, 2005
---------------------- -----------------------
Carrying Fair Carrying Fair
amount value amount Value
------------------------------------------------------------------- ---------- ----------- -----------
(in thousands of US dollars)
Cash and cash equivalents 3 3 3 3
Loans receivable 400,000 417,000 - -
Notes payable 400,000 417,000 - -
7
(5) Loans receivable, accrued interest receivable, notes payable, accrued
interest payable and premium on redemption of notes.
12.75% Senior Notes due 2005
The Company issued $400,000,000 aggregate principal amount of 12.75% Senior
Notes matured on August 1, 2005 on December 22, 1999.
Under an Issuer Credit Agreement dated December 22, 1999, the Company has
loaned to Turkcell US$400,000,000 net of financing fees. Turkcell fully
paid all of its obligations amounting to US$400,000,000 net of financing
fees related to this Issuer Credit Agreement.
Turkcell and the Company have agreed, for the benefit of all holders of the
Senior Notes, that, after the issuance of the Senior Notes, they will file
a registration statement to register exchange offer under the Securities
Act of 1933 for 12.75% Senior Notes of the Company (the "Senior Notes"). A
registration statement for the exchange offer was declared effective on
July 11, 2000 and completed on August 14, 2000.
Principal, maturity and interest:
The Senior Notes are limited in aggregate amount to $500,000,000,
$400,000,000 of which was issued in the offering, and $100,000,000 of which
may be offered from time to time in the future. In the event of such a
future offering, the notes offered thereby would have the same terms as the
Senior Notes. The Senior Notes matured and fully paid on August 1, 2005
including the accrued interest.
Interest accrued at the rate of 12.75% per annum from their date of
original issuance and was payable semi-annually on each February 1 and
August 1 commencing on February 1, 2000, to the registered holders at the
close of business on the preceding January 15 and July 15.
(6) Taxes on income
The Company is subject to taxation in the Netherlands Antilles based on the
Profit Tax Ordinance and a tax ruling obtained from the Tax Inspector of
Netherlands Antilles. In accordance with such tax ruling, the Company's
taxable income is equal to 1% of the average daily principal amount of the
notes outstanding during the period. A rate of 0.5% is applicable for
average daily principal amount of notes outstanding in excess of
$80,000,000.
(7) Management agreement
On January 27, 1998, the Company signed a management agreement with Amicorp
Curacao N.V., a Netherlands Antilles trust company. Under this agreement,
Amicorp Curacao N.V. shall be managing director of the Company and will be
responsible for the operations of the Company.
8