For the fiscal year ended December 31, | Commission file number 1-14406 |
Name of each exchange on | ||||
Title of Each class | which registered | |||
American Depositary Shares representing Series B Shares, par value | New York Stock Exchange | |||
Series B Shares, par value | New York Stock Exchange** |
Series A Shares, par value | 1 | |
Series B Shares, par value |
* | Investor Relations Unit, Graha Citra Caraka, Jl. Gatot Subroto, No. 52, 5th Floor, Jakarta 12570. |
** | The Series B Shares were registered in connection with the registration of the American Depositary Shares. The Series B Shares are not listed for trading on the New York Stock Exchange. |
* | Omitted because the item is not applicable. |
i1
“ADS” | American Depositary Share, which is a certificate (known as an ADR) being traded on a U.S. securities market (such as New York Stock Exchange) representing a number of foreign shares. One ADS of TELKOM represents | |
“ADSL” | (Asymmetric Digital Subscriber Line) is a technology that allows combinations of services including voice, data and one way full motion video to be delivered over existing copper feeder distribution and subscriber lines. | |
“AMPS” | (Advanced Mobile Phone System) is an analog mobile cellular system standard. | |
“ARPU” | (Average Revenue Per User) serves as an evaluation statistic in connection with a network operator’s subscriber base. | |
“ASR” | (Answer to Seizure Ratio). See “Call Completion Rate”. | |
“ATM” | (Asynchronous Transfer Mode) is a transfer mode in which the information is organized into cells. It is asynchronous in the sense that the recurrence of cells containing information from an individual user is not necessarily periodic. | |
“B2B” | (Business-to-Business Electronic Commerce) is a technology-enabled application environment to facilitate the exchange of business information and automate commercial transaction designed to automate and optimize interactions between business partners. | |
“backbone” | refers to the main telecommunications network consisting of transmission and switching facilities connecting several network access nodes. The transmission links between nodes and switching facilities include microwave, submarine cable, satellite, optical fiber and other transmission technology. | |
“bandwidth” | refers to the capacity of a communications link. | |
“BTS” | (Base Transceiver Station) refers to equipment that transmits and receives radio telephony signals to and from other telecommunication systems. | |
“call completion rate” | is the percentage of calls that are successfully completed, as measured by the number of calls successfully answered divided by the number of call attempts that are recognized by the caller’s local exchange, in the case of call completion rates for local calls and call attempts that are recognized by the trunk exchange, in the case of call completion rates for long-distance calls. Call completion rate is measured by the answer to seizure ratio, or “ASR”. | |
“capacity utilization” | refers to the ratio of lines in service to local exchange capacity or installed lines. | |
“CDMA” | (Code Division Multiple Access) is a wide-band spread-spectrum network technology. |
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“DCS 1800” | (Digital Communication System) is a mobile cellular system using GSM technology operating in the 1800Mhz frequency band. | |
“DGPT” | is the Director General of Post and Telecommunications. | |
“distribution point” | is the point of interconnection between the dropwire and the secondary cable running to a cabinet and/or a local exchange. | |
“DLD” | refers to domestic long-distance telecommunications services such as long-distance telephone calls and leased lines services. | |
“downlink” | refers to the receiving portion of a satellite circuit extending from the satellite to the Earth. | |
“dropwire” | is the wire connecting the subscriber’s premises to the distribution point. | |
“DTR” | (Distributable TELKOM Revenues) is the monthly revenue share payable by each KSO Unit to TELKOM under the KSO Agreements, being a specified percentage of total KSO revenues in a KSO Unit after deduction of specified KSO operating expenses and MTR. | |
“dual band” | refers to the capability of a mobile cellular network and mobile cellular handsets to operate across two frequency bands, for example GSM 900 and GSM 1800. | |
“duopoly system” | is a system allowing only two national operators, which in Indonesia’s case are TELKOM and Indosat, to provide | |
“earth station” | is the antenna and associated equipment used to receive or transmit telecommunication signals via satellite. | |
“existing installations” | refer to telecommunications facilities, including telephone lines, network infrastructure and related assets in existence in each KSO Division as of the beginning of each KSO Period plus certain facilities and equipment constructed or installed by TELKOM in the KSO Units after such dates to be managed by a KSO Investor. | |
“fixed cellular” | refers to a form of fixed wireless technology which uses conventional cellular network configurations to link a subscriber at a fixed location to a local exchange. | |
“fixed wireless” | refers to a local wireless transmission link using cellular, microwave or radio technology to link a subscriber at a fixed location to a local exchange. | |
“fixed wireline” | refers to a fixed path (wire or cable) linking a subscriber at a fixed location to a local exchange, usually with an individual phone number. | |
“frame relay” | is a packet-switching protocol (in which messages are divided into packets before they are sent) for connecting devices on a computer network that spans a relatively large geographical area. |
3
“Government” | refers to the Government of the Republic of Indonesia. |
2
“GPRS” | (General Packet Radio Service) is a data packet switching technology that allows information to be sent and received across a mobile network and only utilizes the network when there is data to be sent. | |
“GSM” | (Global System for Mobile Telecommunication) is a European standard for digital cellular telephone. | |
“IDD” | (International Direct Dialing) is a service that allows a subscriber to make an international call without the assistance or intervention of an operator from any telephone terminal. | |
“installed lines” | refer to complete lines fully built-out to the distribution point and ready to be connected to subscribers. | |
“intelligent network” or “IN” | is a service-independent telecommunications network where the logic functions are taken out of the switch and placed in computer nodes distributed throughout the network. This provides the means to develop and control services more efficiently allowing new or advanced telephony services to be introduced quickly. | |
“ISDN” | (Integrated Services Digital Network) is a network that provides end-to-end digital connectivity and allows simultaneous transmission of voice, data and video and provides high-speed Internet connectivity. | |
“Kbps” | (Kilobits per second) is a measure of speed for digital signal transmission expressed in thousands of bits per second. | |
“KSO” | (Kerjasama Operasi) or Joint Operating Scheme, is a unique type of Build, Operate and Transfer arrangement with a consortium of partners in which the consortium invests and operates TELKOM facilities in regional divisions. The consortium partners are owned by international operators and private domestic companies, or in cases where TELKOM has acquired the consortium partner, by TELKOM. | |
“KSO Agreements” | refer to the agreements, as amended from time to time, governing the operation of the network in the relevant KSO region for the KSO Period. | |
“KSO Period” | refers to period covered by the KSO Agreement. | |
“KSO Unit” | refers to a regional division of TELKOM managed and operated — pursuant to the relevant KSO Agreement. | |
“leased line” | is a dedicated telecommunications transmissions line linking one fixed point to another, rented from an operator for exclusive use. | |
“lines in service” | refer to revenue-generating lines connected to subscribers, including payphones, but not including mobile cellular subscribers or lines used internally by TELKOM. | |
“local call” | is the call among subscribers in the same numbering area without any prefix number being required. |
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“local exchange capacity” | refers to the aggregate number of lines at a local exchange connected and available for connection to outside plant. |
3
“MHz” | (Megahertz) is a unit of measure of frequency. 1 MHz is equal to one million cycles per second. | |
“microwave transmission” | is a transmission consisting of electromagnetic waves in the radio frequency spectrum above 890 million cycles per second and below 20 billion cycles per second. | |
“MoC” | refers to the Ministry of | |
“MoCI” | refers to the Ministry of Communication and Information, to which telecommunications regulatory responsibility was transferred from the MoC in February 2005. | |
“Modern License” | is an operational license, contemplated in the Telecommunication Law, which replaces the existing operational license for basic telecommunications services. | |
“MoF” | refers to the Ministry of Finance. | |
“MTR” | (Minimum TELKOM Revenues) is the specified minimum amount payable monthly by each KSO Unit to TELKOM under the KSO Agreements. | |
“NMT-450” | (Nordic Mobile Telephone) is a form of analog mobile cellular service primarily installed in vehicles. | |
“optical fiber” | refers to cables using optical fiber and laser technology whereby modulating light beams representing data are transmitted through thin filaments of glass. | |
“outside plant” | is the equipment and facilities used to connect subscriber premises to the local exchange. | |
“PBH” or | (Pola Bagi Hasil) is a type of Build, Operate and Transfer arrangement scheme between TELKOM and domestic private companies. Under this scheme the private company invests in the telecommunication facilities to be operated by TELKOM. | |
“PSDN” | (Packet Switched Data Networks) is a network using a switch device and sending packets of data through the network to some remote location. | |
“PSTN” | (Public Switched Telephone Network) is a telephone network operated and maintained by TELKOM and the KSO Units for and on behalf of TELKOM. | |
“RUIM” or “RUIM card” | (Removable |
5
“satellite transponder” | is the radio relay equipment embedded on a satellite that receives signals from earth and amplifies and transmits the signal back to earth. | |
“SIM” or “SIM card” | (Subscriber Identity Module) is a “smart” card designed to be inserted into a mobile cellular telephone that uniquely identifies a GSM network subscription and that contains subscriber-related data such as phone numbers, service details and memory for storing messages. |
4
“SMS” | Short Messaging Service, a technology allowing the exchange of text messages between mobile cellular phones and between fixed wireless phones. | |
“switch” | is a mechanical, electrical or electronic device that opens or closes circuits, completes or breaks an electrical path, or selects paths or circuits, used to route traffic in a telecommunications network. | |
“trunk exchange” | is a switch that has the function of connecting one telephony switch to another telephony switch, which can be either a local or trunk switch. | |
“USO” | (Universal Service Obligation) is the service obligation imposed by the Government on all providers of telecommunications services for the purpose of providing public services in Indonesia. | |
“VoIP” | (Voice over Internet Protocol) is a means of sending voice information using the Internet Protocol. | |
“VPN” | (Virtual Private Network) is a secure private network connection, built on top of publicly-accessible infrastructure, such as the Internet or the public telephone network. VPNs typically employ some combination of encryption, digital certificates, strong user authentication and access control to provide security to the traffic they carry. They usually provide connectivity to many machines behind a gateway or firewall. | |
“VSAT” | (Very Small Aperture Terminal) is a relatively small antenna, typically 1.5 to 3.0 meters in diameter, placed in the user’s premises and used for two-way communications by satellite. | |
“WAP” | (Wireless Application Protocol) is an open and global standard of technology platform that enables mobile users to access and interact with mobile information services such as e-mail, Web sites, financial information, on-line banking, information and entertainment (infotainment), games and micro payments. |
56
67
TELKOM’s consolidated financial statements for the year 1999 were audited by KAP Prasetio, Utomo & Co., the member firm of Arthur Andersen & Co. SC in Indonesia.
Following the dissolution of Andersen Worldwide in 2002, KAP Prasetio, Utomo & Co. ceased business operations in Indonesia in August 2002. As a consequence, KAP Prasetio, Utomo & Co. has not reissued an audit opinion in respect of the 1999 consolidated financial statements and, therefore, the information included in the relevant selected financial information for 1999 is derived from unaudited consolidated financial statements.
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | (audited) | (audited) | (audited) | (audited) | 2000 | 2001 | 2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | (US$ million) | (US$ million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends and ADS) | dividends and ADS) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Income Statement Data | Consolidated Income Statement Data | Consolidated Income Statement Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indonesian GAAP | Indonesian GAAP | Indonesian GAAP | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(1) | Operating revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone | Telephone | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed lines | Fixed lines | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Local and domestic long-distance usage | 3,571 | 4,097 | 5,226 | 5,448 | 6,562 | 777 | Local and domestic long-distance usage | 4,097 | 5,226 | 5,448 | 6,562 | 7,439 | 801 | |||||||||||||||||||||||||||||||||||||||||||||
Monthly subscription charges | 799 | 887 | 998 | 1,475 | 1,949 | 231 | Monthly subscription charges | 887 | 998 | 1,475 | 1,949 | 2,935 | 316 | |||||||||||||||||||||||||||||||||||||||||||||
Installation charges | 68 | 75 | 98 | 130 | 223 | 27 | Installation charges | 75 | 98 | 130 | 223 | 201 | 22 | |||||||||||||||||||||||||||||||||||||||||||||
Others | 91 | 119 | 93 | 211 | 163 | 19 | Others | 119 | 93 | 211 | 163 | 70 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
Total fixed lines revenues | 4,529 | 5,178 | 6,415 | 7,264 | 8,897 | 1,054 | Total fixed lines revenues | 5,178 | 6,415 | 7,264 | 8,897 | 10,645 | 1,146 | |||||||||||||||||||||||||||||||||||||||||||||
Cellular | Cellular | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Air time charges | 1,458 | 2,484 | 3,988 | 5,454 | 7,678 | 910 | Air time charges | 2,484 | 3,988 | 5,454 | 7,678 | 9,826 | 1,058 | |||||||||||||||||||||||||||||||||||||||||||||
Monthly subscription charges | 236 | 356 | 581 | 593 | 581 | 68 | Monthly subscription charges | 356 | 581 | 593 | 581 | 448 | 48 | |||||||||||||||||||||||||||||||||||||||||||||
Features | 4 | 7 | 10 | 8 | 6 | 1 | Features | 7 | 10 | 8 | 6 | 91 | 10 | |||||||||||||||||||||||||||||||||||||||||||||
Connection fee charges | 51 | 43 | 129 | 172 | 194 | 23 | Connection fee charges | 43 | 129 | 172 | 194 | 56 | 6 | |||||||||||||||||||||||||||||||||||||||||||||
Total cellular revenues | 1,749 | 2,890 | 4,708 | 6,227 | 8,459 | 1,002 | Total cellular revenues | 2,890 | 4,708 | 6,227 | 8,459 | 10,421 | 1,122 | |||||||||||||||||||||||||||||||||||||||||||||
Total telephone revenues | 6,278 | 8,068 | 11,123 | 13,491 | 17,356 | 2,056 | Total telephone revenues | 8,068 | 11,123 | 13,491 | 17,356 | 21,066 | 2,268 | |||||||||||||||||||||||||||||||||||||||||||||
Joint Operation Schemes | Joint Operation Schemes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum TELKOM Revenues (MTR) | 1,453 | 1,557 | 1,474 | 1,320 | 900 | 107 | Minimum TELKOM Revenues (MTR) | 1,557 | 1,474 | 1,320 | 900 | 296 | 32 | |||||||||||||||||||||||||||||||||||||||||||||
Share in Distributable KSO Revenues (DKSOR) | 209 | 695 | 733 | 801 | 583 | 69 | Share in Distributable KSO Revenues (DKSOR) | 695 | 733 | 801 | 583 | 350 | 38 | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned initial investor payments | 15 | 15 | 13 | 7 | 3 | 0 | Amortization of unearned initial investor payments | 15 | 13 | 7 | 3 | 11 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
Total revenue under Joint Operation Schemes | 1,677 | 2,267 | 2,220 | 2,128 | 1,486 | 176 | Total revenue under Joint Operation Schemes | 2,267 | 2,220 | 2,128 | 1,486 | 657 | 71 | |||||||||||||||||||||||||||||||||||||||||||||
Interconnection — Net | 706 | 981 | 1,424 | 2,831 | 4,162 | 493 | Interconnection | 981 | 1,424 | 2,831 | 4,162 | 6,188 | 666 | |||||||||||||||||||||||||||||||||||||||||||||
Network | 343 | 340 | 415 | 316 | 518 | 62 | Network | 340 | 415 | 316 | 518 | 654 | 70 | |||||||||||||||||||||||||||||||||||||||||||||
Data and Internet | 54 | 108 | 673 | 1,552 | 3,109 | 368 | Data and Internet | 108 | 673 | 1,552 | 3,109 | 4,809 | 518 | |||||||||||||||||||||||||||||||||||||||||||||
Revenue-Sharing Arrangement | 360 | 288 | 264 | 264 | 258 | 31 | Revenue-Sharing Arrangements | 288 | 264 | 264 | 258 | 281 | 30 | |||||||||||||||||||||||||||||||||||||||||||||
Other telecommunications-related services | 19 | 138 | 165 | 221 | 227 | 27 | Other telecommunications services | 138 | 165 | 221 | 227 | 293 | 31 | |||||||||||||||||||||||||||||||||||||||||||||
Total Operating Revenues | 9,437 | 12,190 | 16,284 | 20,803 | 27,116 | 3,213 | Total Operating Revenues | 12,190 | 16,284 | 20,803 | 27,116 | 33,948 | 3,654 | |||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personnel | 1,349 | 1,770 | 2,281 | 4,388 | 4,440 | 526 | Personnel | 1,770 | 2,281 | 4,388 | 4,440 | 5,571 | 600 | |||||||||||||||||||||||||||||||||||||||||||||
Depreciation | 2,627 | 2,419 | 2,870 | 3,474 | 4,779 | 566 | Depreciation | 2,419 | 2,870 | 3,474 | 4,779 | 6,438 | 693 | |||||||||||||||||||||||||||||||||||||||||||||
Operations, maintenance and telecommunication services | 1,146 | 1,386 | 2,150 | 2,290 | 3,339 | 396 | Operations, maintenance and telecommunication services | 1,386 | 2,150 | 2,290 | 3,339 | 4,530 | 487 | |||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 571 | 872 | 1,343 | 1,146 | 2,079 | 246 | General and administrative | 872 | 1,343 | 1,146 | 2,079 | 2,600 | 280 | |||||||||||||||||||||||||||||||||||||||||||||
Marketing | 76 | 147 | 220 | 375 | 503 | 60 | Marketing | 147 | 220 | 375 | 503 | 882 | 95 | |||||||||||||||||||||||||||||||||||||||||||||
Total Operating Expenses | 5,769 | 6,594 | 8,864 | 11,673 | 15,140 | 1,794 | Total Operating Expenses | 6,594 | 8,864 | 11,673 | 15,140 | 20,021 | 2,155 | |||||||||||||||||||||||||||||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | (audited) | (audited) | (audited) | (audited) | 2000 | 2001 | 2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | (US$ million) | (US$ million) | ||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends and ADS) | dividends and ADS) | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating Income | Operating Income | 3,668 | 5,596 | 7,420 | 9,130 | 11,976 | 1,419 | Operating Income | 5,596 | 7,420 | 9,130 | 11,976 | 13,927 | 1,499 | ||||||||||||||||||||||||||||||||||||
Other income (expense) | Other income (expense) | Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | — | — | — | 3,196 | — | — | Gain on sale of long-term investment in Telkomsel | — | — | 3,196 | — | — | — | |||||||||||||||||||||||||||||||||||||
Interest expense | (1,492 | ) | (817 | ) | (1,330 | ) | (1,583 | ) | (1,383 | ) | (164 | ) | Interest expense | (817 | ) | (1,330 | ) | (1,583 | ) | (1,383 | ) | (1,270 | ) | (137 | ) | |||||||||||||||||||||||||
Interest income | 762 | 692 | 572 | 480 | 366 | 44 | Interest income | 692 | 572 | 480 | 366 | 318 | 34 | |||||||||||||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | 326 | (944 | ) | (379 | ) | 557 | 126 | 15 | Gain (loss) on foreign exchange — net | (944 | ) | (379 | ) | 557 | 126 | (1,221 | ) | (131 | ) | |||||||||||||||||||||||||||||||
Equity in net income (loss) of associated companies | 137 | (232 | ) | (86 | ) | 5 | 3 | 0 | Equity in net income (loss) of associated companies | (232 | ) | (86 | ) | 5 | 3 | 3 | 0 | |||||||||||||||||||||||||||||||||
Other — net | 101 | 313 | 353 | (36 | ) | 364 | 43 | Other — net | 313 | 353 | (36 | ) | 364 | 331 | 36 | |||||||||||||||||||||||||||||||||||
Other Income (Expense) — net | Other Income (Expense) — net | (166 | ) | (988 | ) | (870 | ) | 2,619 | (524 | ) | (62 | ) | Other Income (Expense) — net | (988 | ) | (870 | ) | 2,619 | (524 | ) | (1,839 | ) | (198 | ) | ||||||||||||||||||||||||||
Income Before Tax | Income Before Tax | 3,502 | 4,608 | 6,550 | 11,749 | 11,452 | 1,357 | Income Before Tax | 4,608 | 6,550 | 11,749 | 11,452 | 12,088 | 1,301 | ||||||||||||||||||||||||||||||||||||
Tax expense | Tax expense | (1,004 | ) | (1,520 | ) | (2,007 | ) | (2,899 | ) | (3,861 | ) | (458 | ) | Tax expense | (1,520 | ) | (2,007 | ) | (2,899 | ) | (3,861 | ) | (4,003 | ) | (431 | ) | ||||||||||||||||||||||||
Income before minority interest in net income of subsidiaries | Income before minority interest in net income of subsidiaries | 2,498 | 3,088 | 4,543 | 8,850 | 7,591 | 899 | Income before minority interest in net income of subsidiaries | 3,088 | 4,543 | 8,850 | 7,591 | 8,085 | 870 | ||||||||||||||||||||||||||||||||||||
Minority interest in net income of Subsidiaries | (162 | ) | (313 | ) | (475 | ) | (810 | ) | (1,503 | ) | (178 | ) | ||||||||||||||||||||||||||||||||||||||
Minority interest in net income of subsidiaries, net | Minority interest in net income of subsidiaries, net | (313 | ) | (475 | ) | (810 | ) | (1,504 | ) | (1,956 | ) | (210 | ) | |||||||||||||||||||||||||||||||||||||
Net Income | Net Income | 2,336 | 2,775 | 4,068 | 8,040 | 6,087 | 721 | Net Income | 2,775 | 4,068 | 8,040 | 6,087 | 6,129 | 660 | ||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding (millions) | 9,644 | 10,080 | 10,080 | 10,080 | 10,080 | |||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding (millions)(1) | Weighted average shares outstanding (millions)(1) | 20,160 | 20,160 | 20,160 | 20,160 | 20,160 | ||||||||||||||||||||||||||||||||||||||||||||
Net income per share | 242.26 | 275.30 | 403.61 | 797.59 | 603.89 | Net income per share(1) | 137.65 | 201.81 | 398.80 | 301.95 | 304.03 | |||||||||||||||||||||||||||||||||||||||
Net income per ADS | 4,845.29 | 5,505.96 | 8,072.20 | 15,951.80 | 12,077.83 | Net income per ADS(1) | 5,505.96 | 8,072.20 | 15,951.80 | 12,077.83 | 12,161.13 | |||||||||||||||||||||||||||||||||||||||
Dividend declared per share | 50.99 | 107.76 | 88.16 | 210.82 | 331.16 | Dividends declared per share(2) | 53.88 | 44.08 | 105.41 | 165.58 | 158.09 | |||||||||||||||||||||||||||||||||||||||
U.S. GAAP(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. GAAP(3) | U.S. GAAP(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 2,679 | 2,216 | 4,298 | 8,587 | 5,791 | Net income | 2,216 | 4,298 | 8,587 | 5,791 | 6,468 | |||||||||||||||||||||||||||||||||||||||
Net income per share | 277.80 | 219.87 | 426.41 | 851.91 | 574.47 | Net income per share(1) | 109.94 | 213.20 | 425.96 | 287.23 | 320.86 | |||||||||||||||||||||||||||||||||||||||
Net income per ADS | 5,555.90 | 4,397.47 | 8,528.17 | 17,038.21 | 11,489.40 | Net income per ADS(1) | 4,397.47 | 8,528.17 | 17,038.21 | 11,489.40 | 12,834.47 |
As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | (audited) | (audited) | (audited) | (audited) | ||||||||||||||||||||||||||||||||||||||||||||||
(US$ million) | ||||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in billion) | (US$ million) | (Rp. in billion) | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Balance Sheet Data | Consolidated Balance Sheet Data | Consolidated Balance Sheet Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Indonesian GAAP | Indonesian GAAP | Indonesian GAAP | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 28,574 | 32,019 | 33,036 | 44,307 | 50,283 | 5,957 | Total assets | 32,019 | 33,036 | 44,307 | 50,283 | 56,269 | 6,057 | |||||||||||||||||||||||||||||||||||||
Current liabilities(3) | 4,058 | 4,138 | 9,543 | 9,708 | 11,201 | 1,327 | Current liabilities(4) | 4,138 | 9,543 | 9,708 | 11,170 | 11,677 | 1,257 | |||||||||||||||||||||||||||||||||||||
Other liabilities | 2,630 | 3,048 | 3,447 | 5,383 | 6,227 | 738 | Other liabilities | 3,048 | 3,447 | 5,383 | 6,258 | 6,178 | 665 | |||||||||||||||||||||||||||||||||||||
Long-term debt | 8,541 | 9,546 | 9,730 | 12,006 | 11,834 | 1,402 | Long-term debts | 9,546 | 9,730 | 12,006 | 11,834 | 13,214 | 1,422 | |||||||||||||||||||||||||||||||||||||
Total liabilities | 15,229 | 16,732 | 22,720 | 27,097 | 29,262 | 3,467 | Total liabilities | 16,732 | 22,720 | 27,097 | 29,262 | 31,069 | 3,344 | |||||||||||||||||||||||||||||||||||||
Minority interest | 534 | 814 | 1,235 | 2,596 | 3,708 | 439 | Minority interest | 814 | 1,235 | 2,596 | 3,708 | 4,938 | 532 | |||||||||||||||||||||||||||||||||||||
Capital stock(4) | 5,040 | 5,040 | 5,040 | 5,040 | 5,040 | 597 | Capital stock(5) | 5,040 | 5,040 | 5,040 | 5,040 | 5,040 | 543 | |||||||||||||||||||||||||||||||||||||
Total stockholders’ equity | 12,810 | 14,473 | 9,081 | 14,614 | 17,313 | 2,051 | Total stockholders’ equity | 14,473 | 9,081 | 14,614 | 17,313 | 20,261 | 2,181 | |||||||||||||||||||||||||||||||||||||
U.S. GAAP(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. GAAP(3) | U.S. GAAP(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 27,236 | 30,900 | 32,449 | 44,623 | 51,347 | 6,084 | Total assets | 30,900 | 32,449 | 44,623 | 51,347 | 56,702 | 6,104 | |||||||||||||||||||||||||||||||||||||
Total stockholders’ equity | 11,419 | 12,928 | 7,766 | 13,911 | 16,285 | 1,929 | Total stockholders’ equity | 12,928 | 7,766 | 13,911 | 16,285 | 19,571 | 2,107 |
(1) |
10
(2) | Dividends declared per share in 2000, 2001, 2002 and 2003 represents dividends per share after adjusting for the stock split that was effected in 2004. Dividends declared per share in 2004 comprised cash dividends for 2003 of Rp.150.98 per share and interim cash dividends declared in December 2004 of Rp.7.11 per share. |
(3) | U.S. GAAP amounts reflect adjustments resulting from differences in the accounting treatment of termination benefits, foreign exchange differences capitalized to property under construction, interest capitalized on property under construction, revenue-sharing arrangements, revaluation of property, plant and equipment, pension, equity in net income or loss of associated companies, land rights, equipment to be installed, revenue recognition, goodwill, capital leases, acquisition of Dayamitra, reversal of difference due to change of equity in associated companies, asset retirement obligations, and deferred |
9
income taxes. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Summary of Significant Differences between Indonesian GAAP and U.S. GAAP” and Note |
Includes current maturities of long-term debt. | |
(5) | Issued and Paid-Up Capital Stock consists of one Series A Dwiwarna share having a par value of |
Prior to August 14, 1997, Bank Indonesia maintained the value of the Rupiah based on a basket of currencies of Indonesia’s main trading partners. In July 1997, the exchange rate band was widened and on August 14, 1997, Bank Indonesia announced it would no longer intervene in maintaining the exchange rate at any pre-determined level.
At period | At period | |||||||||||||||||||||||||||||||||
Year | Year | end | Average(1) | High(2) | Low(2) | Year | end | Average(1) | High(2) | Low(2) | ||||||||||||||||||||||||
(Rp. per US$1.00) | ||||||||||||||||||||||||||||||||||
(Rp. per US$1.00) | ||||||||||||||||||||||||||||||||||
1999 | 7,100 | 7,809 | 8,950 | 6,726 | ||||||||||||||||||||||||||||||
2000 | 2000 | 9,595 | 8,534 | 9,595 | 7,425 | 2000 | 9,595 | 8,534 | 9,595 | 7,425 | ||||||||||||||||||||||||
First Quarter | 7,590 | 7,507 | 7,590 | 7,425 | First Quarter | 7,590 | 7,507 | 7,590 | 7,425 | |||||||||||||||||||||||||
Second Quarter | 8,735 | 8,433 | 8,620 | 7,945 | Second Quarter | 8,735 | 8,433 | 8,620 | 7,945 | |||||||||||||||||||||||||
Third quarter | 8,780 | 8,691 | 9,003 | 8,290 | Third quarter | 8,780 | 8,691 | 9,003 | 8,290 | |||||||||||||||||||||||||
Fourth quarter | 9,595 | 9,507 | 9,595 | 9,395 | Fourth quarter | 9,595 | 9,507 | 9,595 | 9,395 | |||||||||||||||||||||||||
2001 | 2001 | 10,400 | 10,266 | 11,675 | 8,865 | 2001 | 10,400 | 10,266 | 11,675 | 8,865 | ||||||||||||||||||||||||
First Quarter | 10,400 | 9,895 | 10,400 | 9,450 | First Quarter | 10,400 | 9,895 | 10,400 | 9,450 | |||||||||||||||||||||||||
Second Quarter | 11,440 | 11,391 | 11,440 | 11,058 | Second Quarter | 11,440 | 11,391 | 11,440 | 11,058 | |||||||||||||||||||||||||
Third quarter | 9,675 | 9,355 | 9,675 | 10,350 | Third quarter | 9,675 | 9,355 | 9,675 | 10,350 | |||||||||||||||||||||||||
Fourth quarter | 10,400 | 10,422 | 10,435 | 10,400 | Fourth quarter | 10,400 | 10,422 | 10,435 | 10,400 | |||||||||||||||||||||||||
2002 | 2002 | 8,940 | 9,316 | 10,473 | 8,460 | 2002 | 8,940 | 9,316 | 10,473 | 8,460 | ||||||||||||||||||||||||
First Quarter | 9,655 | 10,192 | 10,473 | 9,542 | First Quarter | 9,655 | 10,192 | 10,473 | 9,542 | |||||||||||||||||||||||||
Second Quarter | 8,730 | 9,109 | 9,775 | 8,460 | Second Quarter | 8,730 | 9,109 | 9,775 | 8,460 | |||||||||||||||||||||||||
Third quarter | 9,015 | 8,949 | 9,218 | 8,695 | Third quarter | 9,015 | 8,949 | 9,218 | 8,695 | |||||||||||||||||||||||||
Fourth quarter | 8,940 | 9,058 | 9,326 | 8,815 | Fourth quarter | 8,940 | 9,058 | 9,326 | 8,815 | |||||||||||||||||||||||||
2003 | 2003 | 8,465 | 8,573 | 9,120 | 8,165 | 2003 | 8,465 | 8,573 | 9,120 | 8,165 | ||||||||||||||||||||||||
First Quarter | 8,919 | 8,907 | 9,120 | 8,836 | First Quarter | 8,919 | 8,907 | 9,120 | 8,836 | |||||||||||||||||||||||||
Second Quarter | 8,285 | 8,488 | 8,906 | 8,165 | Second Quarter | 8,285 | 8,488 | 8,906 | 8,165 | |||||||||||||||||||||||||
Third Quarter | 8,389 | 8,427 | 8,665 | 8,166 | Third Quarter | 8,389 | 8,427 | 8,665 | 8,166 | |||||||||||||||||||||||||
Fourth Quarter | 8,465 | 8,471 | 8,583 | 8,365 | Fourth Quarter | 8,465 | 8,471 | 8,583 | 8,365 | |||||||||||||||||||||||||
2004 | 2004 | 9,290 | 8,935 | 9,430 | 8,323 | |||||||||||||||||||||||||||||
First Quarter | 8,587 | 8,465 | 8,465 | 8,323 | ||||||||||||||||||||||||||||||
Second Quarter | 9,415 | 8,992 | 9,430 | 8,574 | ||||||||||||||||||||||||||||||
Third Quarter | 9,170 | 9,151 | 9,389 | 8,825 | ||||||||||||||||||||||||||||||
Fourth Quarter | 9,290 | 9,126 | 9,355 | 8,960 |
1011
At period | At period | |||||||||||||||||||||||||||||||||
Year | Year | end | Average(1) | High(2) | Low(2) | Year | end | Average(1) | High(2) | Low(2) | ||||||||||||||||||||||||
(Rp. per US$1.00) | ||||||||||||||||||||||||||||||||||
(Rp. per US$1.00) | ||||||||||||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||||||
2005 | 2005 | |||||||||||||||||||||||||||||||||
First Quarter | 8,587 | 8,460 | 8,645 | 8,323 | January | 9,165 | 9,204 | 9,305 | 9,133 | |||||||||||||||||||||||||
January | 8,441 | 8,386 | 8,574 | 8,323 | February | 9,260 | 9,245 | 9,300 | 9,166 | |||||||||||||||||||||||||
February | 8,447 | 8,425 | 8,452 | 8,390 | March | 9,480 | 9,371 | 9,520 | 9,250 | |||||||||||||||||||||||||
March | 8,587 | 8,569 | 8,645 | 8,442 | April | 9,570 | 9,539 | 9,755 | 9,475 | |||||||||||||||||||||||||
April | 8,661 | 8,608 | 8,661 | 8,574 | May | 9,495 | 9,480 | 9,545 | 9,435 | |||||||||||||||||||||||||
May | 9,210 | 8,965 | 9,225 | 8,679 | June | 9,713 | 9,616 | 9,713 | 9,528 | |||||||||||||||||||||||||
June 24, 2004 | 9,410 | — | — | — | July (through July 13, 2005) | 9,750 | 9,785 | 9,860 | 9,740 |
(1) | The average of the middle exchange rate announced by Bank Indonesia applicable for the period. |
(2) | The high and low amounts are determined based upon the daily middle exchange rate announced by Bank Indonesia during the applicable period. |
Source: | Bank Indonesia |
2004.
TELKOM did not file a fully compliant 2002 Annual Report on Form 20-F until February 9, 2004 and may face an SEC enforcement action, or other legal liability or adverse consequences. |
• | remove the 2002 reports of TELKOM’s prior auditors, KAP Eddy Pianto, and the auditors of TELKOM’s subsidiary, Telkomsel; |
1112
• | identify the consolidated financial statements therein for 2002 as “unaudited” and indicate that TELKOM’s consolidated financial statements therein for 2002 had not been audited by an independent accounting firm qualified in accordance with SEC requirements; | |
• | furnish an explanation of the foregoing; | |
• | describe the review by the SEC’s Division of Corporation Finance of TELKOM’s 2002 Annual Report on Form 20-F | |
• | discuss the material consequences of the deficiencies in its 2002 Annual Report on Form 20-F, of TELKOM’s public statements regarding such Annual Report and of an SEC enforcement action regarding the same; and | |
• | describe TELKOM’s plan to bring its 2002 Annual Report on Form 20-F into full compliance with applicable SEC regulations. |
Risks Relating to Indonesia13
TELKOM had a number of material weaknesses in its internal control over financial reporting and concluded that as of December 31, 2003 and 2004, its disclosures and controls were ineffective, which could cause investors to lose confidence in its reported financial results and have an adverse effect on the trading price of its securities. |
14
Current political and social events in Indonesia may adversely impact business activity in Indonesia. |
12
Recently, hostilities
During the years 2002 and 2003, several bombing incidents took place in Indonesia, including in Bali, at the JW Marriott hotel in Jakarta and at the airport, shopping centers and places of worship. Terrorist acts may be directed at foreigners in Indonesia or in relation to political matters such as the July 2004 Presidential and Vice-Presidential elections.
In April 5, 2004, Indonesians for the first time directly elected representatives to the Indonesian parliament via proportional votingtroubled regions with an open list of candidates. As of the date hereof, the tallying of votes and the overall results of the parliamentary election have been generally peaceful, and business and investment activity in Indonesia do not appear to have been adversely affected. We expect, however, that in the lead-up to the July 2004 Presidential and Vice-Presidential elections, increased political activity and campaigning may result in a degree of political and social uncertainty with regard to Indonesia and economic activity may be adversely affected, as both foreign and domestic investors may become cautious and scale down or postpone business activity during this period.
limited success.
Terrorist activities in Indonesia could destabilize Indonesia, which could adversely affect TELKOM’s business. |
15
Declines or volatility in Indonesia’s currency exchange rates can have a material adverse impact on business activity in Indonesia. |
13
Indonesia ended its Extended Financing Facility with the International Monetary Fund and the consequences thereof are unpredictable.
Indonesia no longer has access to the Paris Club but continues to rely on loans from official creditors.
16
Indonesia’s high level of sovereign debts may result in it being unable to service its debt obligations when they become due. |
14
Indonesia’s sovereign debt rating continues to be reviewed and revised by international rating agencies. |
Indonesia is vulnerable to natural disasters and other events beyond TELKOM’s control, which could severely disrupt the normal operation of TELKOM’s business and adversely affect TELKOM’s operating results. |
17
TELKOM’s expansion plans may strain key resources and thereby adversely affect its business, financial condition and prospects. |
Failure to amicably resolve KSO disputes may in some areas result in limited network expansion in some regions and impede TELKOM’s access to subscribers and ability to compete effectively.
As a result of the Indonesian economic crisis that began in 1997, certain KSO partners experienced substantial difficulties in fulfilling their obligations to TELKOM under the KSO Agreements, leading to disputes between TELKOM and certain KSO partners. TELKOM has explored various options to resolve the KSO issues and has negotiated the acquisition of all or a majority of shares of certain KSO partners. In 2001, TELKOM acquired a 90.32% equity interest in PT Dayamitra Telekomunikasi Indonesia (“Dayamitra”), the KSO partner for KSO VI. On April 19, 2002, TELKOM entered into a conditional sale and purchase agreement for the purchase of all of the outstanding equity interests in PT Pramindo Ikat Nusantara (“Pramindo”), the KSO partner for KSO I, to be completed in three stages. As part of the initial closing, it acquired legal ownership of 30% of the shares of Pramindo in August 2002 and obtained control over Pramindo, subject to certain conditions, including that TELKOM continues to meet its payment obligations under the terms of the promissory notes issued as consideration for the purchase price and the protective rights retained by the selling stockholders. Under the agreement, the legal ownership of TELKOM in Pramindo increased by a further 15% (from 30% to 45%) on September 30, 2003 and the legal ownership to the remaining 55% was transferred to TELKOM on March 15, 2004. On July 31, 2003, TELKOM purchased all of the outstanding equity interests in PT AriaWest International (“AriaWest”), the KSO partner for KSO III. As a result of these
15
On January 20, 2004, TELKOM and PT Mitra Global Telekomunikasi Indonesia (“MGTI”) entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV. Under this amendment agreement, for the remaining KSO period, TELKOM will be entitled at its sole discretion and expense to construct new telecommunications facilities in Regional Division IV and MGTI will receive fixed monthly payments derived from revenues generated by the Regional Division IV operations.
TELKOM continues to have a KSO partner for KSO VII, PT Bukaka SingTel International (“Bukaka SingTel”). As of the date of this Annual Report, there are no disputes between TELKOM and Bukaka SingTel. However, because Bukaka SingTel continues to be responsible for network development in KSO VII and has operational responsibility, should any issues or disputes arise that are not amicably resolved network expansion may be limited and this would impede TELKOM’s access to subscribers and its ability to compete effectively in KSO VII.
TELKOM’s controlling stockholder’s interests may differ from those of TELKOM’s other stockholders. |
MoC,Ministry of Communication and Information (“MoCI”), the Government also exercises regulatory power over the Indonesian telecommunications industry. There might be situations where the objectives of the Government, as TELKOM’s regulator and its controlling shareholder, conflict with TELKOM’s business goals. In addition, there can be no assurance that the Government will not direct opportunities to other telecommunications service providers in which it holds an interest.Certain systems failures could, if they occur, adversely affect TELKOM’s results of operations.
18
16
TELKOM may need to raise funds required for certain future expenditure requirements and the terms of any debt financing may subject TELKOM to restrictive covenants. |
terms.terms, if at all. Furthermore, any debt financing, if available, may involve restrictive covenants, which may limit TELKOM’s operating flexibility with respect to certain business matters. If adequate funds are not available on acceptable terms, TELKOM may be unable to develop or enhance its services. It may also be unable to take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on TELKOM’s business, results of operations and financial condition.TELKOM’s ability to develop adequate financing arrangements is critical to support its capital expenditures.
19
Employee unions may negatively affect TELKOM’s business. |
17
New technologies may adversely affect TELKOM’s ability to remain competitive. |
currently being developed or that may be developed in the future. New technologies, services or standards could require significant changes to its business model, the development of new products or the provision of additional services. In addition, TELKOM may need to substantially upgrade itsto a next generation network to implement convergent technologies and update and expandupgrade its billing and credit control systems to accommodate growth in its business and the adoption of new technologies and services. New products and services may be expensive to develop and may result in the introduction of additional competitors into the marketplace. TELKOM cannot accurately predict how emerging and future technological changes will affect its operations or the competitiveness of its services. Similarly, TELKOM cannot provide any assurances that the technologies it adopts will not soon thereafter become obsolete or subject to intense competition from new technologies in the future.TELKOM operates in a legal and regulatory environment that is undergoing significant reforms and such reforms may adversely affect TELKOM’s business.
• | Interconnection:TELKOM is obligated to allow other operators to interconnect their networks with those of TELKOM subject to entering into interconnection agreements with those other operators. |
20
any, of such adjustment on TELKOM’s business, financial condition, results of operations and prospects. | ||
• | Licenses: | |
• | Tariffs:In 1995, the Government implemented regulations providing a formula to establish the tariff adjustment for domestic fixed line telecommunications services. However, such annual tariff review adjustment has not been applied on a consistent basis. In addition, amendments to the current price cap policy allow operators to calculate yearly tariff adjustments beginning |
18
January 1, 2002, based on a formula to be stipulated by the Government. On January 29, 2002, the Government issued a letter to TELKOM stipulating a 45.49% increase in domestic fixed line telephone tariffs to be implemented over three years. For the year 2002 a tariff increase, with a weighted average of 15% increase, was implemented. In January 2003, the Government postponed the second tariff increase due to numerous public protests. However, on March 30, 2004, the Government, | ||
• | Indonesian Telecommunications Regulatory Body (“ITRB”):The Telecommunications Law | |
• | Competition in the Fixed Line Domestic Telecommunications Market:Historically, TELKOM |
21
2004. This greater competition in the fixed line market, including fixed wireless, could lead to a decline in TELKOM’s existing subscriber base as subscribers choose to receive services from other providers. | ||
• | DLD and IDD Services:On March 11, 2004, the MoC issued Decree No. 28/2004, Decree No. 29/2004 and Decree No. 30/2004 |
Competition in the market for DLD services could lead to a decline in TELKOM’s DLD revenues as subscribers choose to receive DLD services from other providers, such as Indosat. With regard to IDD services, on May 13, 2004 TELKOM received its commercial license from the Government to provide IDD services and began offering such services to customers on June 7, 2004. Nevertheless, competition among IDD service providers may limit TELKOM’s ability to generate significant IDD revenues. TELKOM is currently in the process of negotiating with Indosat to allow TELKOM’s customers to access Indosat’s DLD services, and for Indosat’s customers to access TELKOM’s IDD services. | |
On May 17, 2005, the MoCI issued decree No.6/2005. According to Decree No.6/2005, the three digit access code in the form of “01X” and “0” access code for access to DLD services may be used. The “0” access code is being used to accommodate customers who prefer not to choose their long-distance carrier, while the “01X” access code has to be implemented gradually in local areas in which TELKOM has technical capabilities to support such services. By April 1, 2010, the “01X” long-distance services must be commenced in all TELKOM’s local areas to accomodate customers who prefer to choose their long-distance carrier. TELKOM is in the process of negotiating with Indosat to allow TELKOM’s customers to access Indosat’s DLD services and for Indosat’s fixed and mobile customers to access TELKOM’s IDD services. |
• | Compensation Risk:The Telecommunications Law provides that TELKOM and Indosat will be compensated for the early termination of their exclusive rights. TELKOM previously had exclusive rights to provide fixed local and domestic long-distance services in Indonesia. |
22
TELKOM’s exclusive right to provide fixed local telecommunications services was terminated by the Government in August 2002 and TELKOM’s exclusive right to provide domestic long-distance services was terminated on March 30, 2004. The Government has determined the scheme of compensation for the termination of TELKOM’s exclusive rights, which will consist of |
19
(i) expedited issuance of an IDD license to TELKOM, which was issued on May 13, 2004; (ii) approval of the reissuance and transfer of TELKOM’s DCS 1800 license to Telkomsel, which took place on July 12, 2002; and (iii) a net cash payment to TELKOM and its KSO partners of Rp.478 billion (after taxes). While the amount of the compensation payable to TELKOM and its KSO partners has been determined, payment is contingent on appropriations to the State Budget for the | ||
• | USO Risk:All telecommunications network operators and service providers are bound by a Universal Service Obligation, or USO, which requires provision of certain telecommunications facilities and infrastructure in rural and remote areas. As a local network provider, TELKOM is obligated to build and operate telecommunications networks in the USO areas. Historically, TELKOM has been obligated to contribute 5% of its capital expenditures to its USO requirements. |
TELKOM’s increasingly important cellular operations face significant constraints and competitive pressures.
23
TELKOM’s satellites have a limited life and substantial risk exists for TELKOM-1, |
20
TELKOM is subject to Indonesian accounting and corporate disclosure standards that differ in significant respects from those applicable in other countries. |
58(1)56(1) to TELKOM’s consolidated financial statements.You are unable to pursue claims against Prasetio, Utomo & Co., a member firm of Arthur Andersen, which was the former auditor for Telkomsel.
Prasetio, Utomo & Co., formerly a member firm of Arthur Andersen, no longer exists as a legal entity in Indonesia following its dissolution in 2002. Accordingly, you will not be able to seek or recover damages from Prasetio, Utomo & Co. or Arthur Andersen in connection with its audit report for Telkomsel.
TELKOM is incorporated in Indonesia and it may not be possible for investors to effect service of process or to enforce judgments obtained in the United States against TELKOM. |
24
Forward-looking statements reflect current expectations and may not be correct. |
21
Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk. (“TELKOM” or the “Company”),
25
22
• | In 2001, TELKOM acquired 90.32% of the shares of its KSO partner for Regional Division VI, Dayamitra, purchased a call option and granted a put option with respect to the 9.68% remaining shares of Dayamitra and subsequently, on December 14, 2004, exercised the call option to acquire such remaining shares. | |
• | In 2002, TELKOM entered into an agreement to acquire 100% of the shares of its KSO partner in Regional Division I, Pramindo. Under the terms of its agreement with Pramindo, TELKOM agreed to acquire the shares of Pramindo in three tranches, beginning August 2002 (30%), with TELKOM also obtaining management control of Pramindo in August 2002. TELKOM acquired a further 15% in September 2003 and the remaining 55% was acquired on March 15, 2004. As of the date of this Annual Report, TELKOM legally owns 100% of Pramindo. | |
• | In 2003, TELKOM acquired 100% of the shares of its KSO partner for Regional Division III, AriaWest and settled its arbitration proceeding with AriaWest. | |
• | On January 20, 2004, TELKOM and PT Mitra Global Telekomunikasi Indonesia (“MGTI”) entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV. Under the amended and restated KSO agreement, the rights to operate fixed-line telecommunication services in KSO IV region are transferred to TELKOM and KSO IV is operated under the management, supervision, control and responsibility of TELKOM. In addition, for the remaining KSO period, TELKOM is entitled at its sole discretion and expense to construct new telecommunication facilities in Regional Division IV. MGTI receives fixed monthly payments, while TELKOM is entitled to the balance of the KSO revenues after the monthly amounts due to MGTI and operating expenses. If the KSO IV unit is unable to or does not for any reason pay MGTI the fixed monthly payments due to it, TELKOM is obligated to make up any deficiency. At the end of the KSO period (December 31, 2010), all rights, title and interest of MGTI in existing property, plant and equipment (including new additional installations) and inventories shall be transferred to TELKOM at no cost. As a result of the amended and restated KSO agreement, TELKOM obtained the legal right to control financial and |
26
operating decisions of Regional Division IV for a purchase price of US$390.7 million, or Rp.3,285 billion, which represents the present value of the fixed monthly payments (totaling US$517 million) to be paid by TELKOM to MGTI from 2004 through 2010 plus direct cost of the business combination. |
23
27
• | ||
• | Cellular; | |
• | Joint Operation | |
• | Interconnection; | |
• | Network; | |
• | Data and Internet; | |
• | ||
• | Other |
These revenue categories are all reported as part of the “Fixed Line”
“Other” comprising the telephone directories and building management businesses.
Fixed-line
24
Fixed-line
28
active period in which only incoming calls are allowed.
25
IDD Services
Customers generally have all features offered by cellular services except roaming to other local area codes and internationally. In June 2004, TELKOM launched a “FlexiCombo” service which allows each subscriber to have up to three telephone numbers, with each number assigned for use in one of three different cities, but without local area code or international roaming. As of December 31, 2004, the “Flexicombo” service was available in 130 cities.
IDD Services |
29
Cellular Services
|
30
As of or for the | |||||||||||||
Year Ended December 31, | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Cellular subscribers(1) | |||||||||||||
KartuHALO (Postpaid) | 923,005 | 1,007,034 | 1,327,549 | ||||||||||
SimPATI (Prepaid) | 5,087,767 | 8,581,773 | 11,557,758 | ||||||||||
Kartu As (Prepaid) | — | — | 3,405,201 | ||||||||||
Deactivations(2) | |||||||||||||
KartuHALO (Postpaid) | 279,648 | 265,355 | 317,020 | ||||||||||
SimPATI (Prepaid) | 470,298 | 2,823,025 | 8,470,819 | ||||||||||
Kartu As (Prepaid) | — | — | 824,489 | ||||||||||
Average monthly churn rate(3) | |||||||||||||
KartuHALO (Postpaid) | 2.5 | % | 2.3 | % | 2.3 | % | |||||||
SimPATI (Prepaid) | 1.1 | % | 4.0 | % | 6.8 | % | |||||||
Kartu As (Prepaid) | — | — | 5.0 | % | |||||||||
ARPU(4) | |||||||||||||
KartuHALO (Postpaid) (Rp.’000) | 298 | 314 | 304 | ||||||||||
SimPATI (Prepaid) (Rp.’000) | 103 | 95 | 84 | ||||||||||
Kartu As (Prepaid) | — | — | 48 |
(1) | Prepaid subscribers may purchase SIM-cards and refill vouchers with values ranging from Rp.20,000 to as much as Rp.1,000,000. For Kartu As,
The following table
(4) | Refers to Average Revenue per User which |
|
31
TELKOM and its KSO partner, PT Mitra Global Telekomunikasi Indonesia, provide fixed-line and other services in Regional Division IV and TELKOM and its KSO partner, PT Bukaka SingTel International, provide fixed-line and other services in Regional Division VII. Until July 31, 2003, when TELKOM acquired AriaWest, TELKOM and AriaWest provided fixed-line and other services in Regional Division III. In 2003, TELKOM’s
TELKOM’s portion of KSO revenuesprepaid cellular subscribers for the last three years (2001 — 2003) are indicated in the following table:
2001 | 2002 | 2003 | |||||||||||||||||||||||
KSO Division | MTR | DTR | MTR | DTR | MTR | DTR | |||||||||||||||||||
(Rp. in billion) | (Rp. in billion) | (Rp. in billion) | |||||||||||||||||||||||
Division I (Sumatera)(1) | 497.9 | 259.8 | 296.3 | 197.3 | — | — | |||||||||||||||||||
Division III (West Java and Banten)(2) | 366.3 | 117.8 | 390.1 | 157.8 | 242.4 | 90.0 | |||||||||||||||||||
Division IV (Central Java) | 371.3 | 133.6 | 387.5 | 183.2 | 404.3 | 184.6 | |||||||||||||||||||
Division VI (Kalimantan)(3) | — | — | — | — | — | — | |||||||||||||||||||
Division VII (Eastern Indonesia) | 238.7 | 221.8 | 245.8 | 262.7 | 253.2 | 308.4 | |||||||||||||||||||
Total | 1,474.2 | 733.0 | 1,319.7 | 801.0 | 899.9 | 583.0 | |||||||||||||||||||
Joint Operation Scheme |
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2002 | 2003 | 2004 | ||||||||||||||||||||||
KSO Division | MTR | DTR | MTR | DTR | MTR | DTR | ||||||||||||||||||
(Rp. in billion) | (Rp. in billion) | (Rp. in billion) | ||||||||||||||||||||||
Division I (Sumatera)(1) | 296.3 | 197.3 | — | — | — | — | ||||||||||||||||||
Division III (West Java and Banten)(2) | 390.1 | 157.8 | 242.4 | 90.0 | — | — | ||||||||||||||||||
Division IV (Central Java)(3) | 387.5 | 183.2 | 404.3 | 184.6 | 35.2 | 15.7 | ||||||||||||||||||
Division VI (Kalimantan)(4) | — | — | — | — | — | — | ||||||||||||||||||
Division VII (Eastern Indonesia) | 245.8 | 262.7 | 253.2 | 308.4 | 260.8 | 333.8 | ||||||||||||||||||
Total | 1,319.7 | 801.0 | 899.9 | 583.0 | 296.0 | 349.5 | ||||||||||||||||||
(1) | TELKOM consolidated Regional Division I (Sumatera) from August 2002, following an agreement |
TELKOM entered into agreements to establish the KSOs in 1995 and pursuant to such agreements transferred the right to operate Regional Divisions I, III, IV, VI and VII to private sector consortia, each of which involved one or more prominent international telecommunications operators. TELKOM retained the right to operate divisions II and V, its two largest divisions. The KSO Agreements provided for the relevant KSO partner to manage and operate the Regional Division for a fixed term, undertake the construction of a specified number of fixed lines and, at the end of the fixed term, transfer the existing and new telecommunications facilities in the region to TELKOM for a pre-determined agreed amount of compensation. The KSO Agreements also provided for TELKOM and the KSO partner to share revenues generated during the term of the agreement.
Following the Indonesian economic crisis that began in mid-1997, certain KSO partners experienced difficulties in fulfilling their obligations to TELKOM. In order to assist the KSO partners in meeting their obligations and to maintain the continuity of the KSO Agreements, all of the KSO partners entered into a Memorandum of Understanding with TELKOM on June 5, 1998 which reduced the minimum line construction obligations of the KSO partners, decreased TELKOM’s share of KSO revenues for 1998 and 1999 and cancelled TELKOM’s option to purchase the assets of the KSO before the end of the KSO period. Beginning January 1, 2000, the parties reverted to the terms of the original KSO agreements with respect to MTR and DTR payments. Due to the severity of the crisis, these
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On May 17, 2001, TELKOM acquired 90.32% of the shares of its KSO partner for Regional Division VI, PT Dayamitra Telekomunikasi (“Dayamitra”) and purchased a call option and granted a put option with respect to the remaining shares of Dayamitra, for an aggregate consideration of approximately US$130.8 million (excluding consultants’ fees of approximately US$3.3 million, which was capitalized as part of the acquisition cost). An initial payment of US$18.3 million was made on May 17, 2001, US$8.9 million was paid on August 10, 2001 as a post-closing, working capital adjustment to the purchase price and the balance of US$103.6 million was paid in eight quarterly installments of approximately US$13.0 million between August 17, 2001 and May 17, 2003.
On April 19, 2002, TELKOM entered into a Conditional Sale and Purchase Agreement to acquire 100% of the issuedequity interest in and paid up share capitalcontrol of its KSO partnerPramindo on August 15, 2002. For 2002, the numbers included in this table for Regional Division I PT Pramindo Ikat Nusantara (“Pramindo”). Underrepresent the termsMTR and DTR generated by Regional Division I from January 1, 2002 to July 31, 2002. TELKOM consolidated Rp.364.4 billion, Rp.2,022.5 billion and Rp.2,176.8 billion of the agreement,operating revenues from Regional Division I in 2002, 2003 and 2004, respectively.
On July 31, 2003 following the acquisition of a 100% equity interest in AriaWest on July 31, 2003. TELKOM acquired 100%consolidated Rp.377.9 billion of the shares of its KSO partner foroperating revenues from Regional Division III PT AriaWest International (“AriaWest”) for an aggregate consideration of US$38.67 million in cash (US$20 million of which was paid when the purchase agreement was signed on May 8, 2002(West Java and the remaining US$18.67 million was paid on July 31, 2003) and US$109.1 million in promissory notes. The promissory notes, which are interest-free, are payable in 10 semi-annual installments. At the same time, in consideration of the release of AriaWest’s outstanding obligations to its lenders, TELKOM also repaid approximately US$99 million of AriaWest’s debt (including interest of US$25.0 million) on behalf of AriaWest and entered into a new loan agreement for approximately US$197 million with AriaWest’s lenders. TELKOM and AriaWest also entered into a settlement agreement pursuant to which TELKOM and AriaWest irrevocably settled, discharged and released claims and counterclaims in their ICC arbitration proceeding and TELKOM agreed to pay a settlement amount of US$20 million. As a result of the acquisition of AriaWest and the settlement of the ICC arbitration in 2002, for the year ended December 31, 2002 TELKOM reversed the provision of Rp.511.9 billion which was previously made with respect to certain receivablesBanten) from KSO Unit III and accrued the settlement amount of Rp.179.0 billion in its consolidated financial statements for the year ended December 31, 2002.
The ICC arbitration proceeding, which was settled as of July 31, 2003 involved claims by AriaWest that TELKOM was in material breach of provisions of the KSO Agreement with AriaWest based on, among other things, (i) the alleged loss of certain exclusive rights granted to AriaWest by the Government with respect to the provision of certain telecommunication services in West Java; (ii) the
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In 2001, TELKOM entered into an agreement with Indosat pursuant to which Indosat agreed, subject to the satisfaction of certain conditions precedent, to acquire TELKOM’s assets in Regional Division IV for US$375 million. This agreement was part of the cross-ownership transaction in 2001. In February of 2002, TELKOM and Indosat announced the cancellation of the acquisition as certain conditions precedent had not been satisfied. As a result of the cancellation of the acquisition, TELKOM paid US$198 million to Indosat.
2004.
On June 11, 2002, TELKOM and its KSO partner for Regional Division VII, PT Bukaka SingTel International (“Bukaka SingTel”), entered into a Memorandum of Understanding pursuant to which they agreed to cooperate in providing infrastructure for fixed wireless access using CDMA 2000 IX in KSO VII region. On January 14, 2003, TELKOM and Bukaka SingTel entered into a Co-Operation Agreement on Fixed Wireless CDMA Facilities Construction in KSO Regional Division VII (the “Co-Operation Agreement”) that implemented the terms of the Memorandum of Understanding. Under the terms of the Co-Operation Agreement, TELKOM, through its Fixed Wireless Division, will invest US$30.2 million and Rp. 28.4 billion for the construction of fixed wireless CDMA facilities for 146,700 line units in Denpasar, Makasar, Manado, Kupang and Mataram, which facilities will be managed, operated and maintained by Bukaka SingTel. The new facilities are expected to be completed by 2006, with TELKOM and Bukaka SingTel sharing the revenues generated by these new facilities.(Central Java). See Item 1010. “Additional Information — C. Material Contracts.Contracts — PT Mitra Global Telekomunikasi Indonesia.”
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The following table sets forth certain information regarding the KSOs as of December 31, 2003, which has been derived from the KSO Agreements, amendments to the KSO Agreements and other related sources.
Division I(1) | Division III | Division IV | Division VI | Division VII(3) | ||||||
KSO Partner | Pramindo Ikat Nusantara | AriaWest International | Mitra Global Telekomunikasi Indonesia | Dayamitra Telekomunikasi | Bukaka SingTel International | |||||
Shareholders in the KSO: | ||||||||||
Foreign | ||||||||||
telecommunications | ||||||||||
operator | France Cables et Radio SA (22%) | N/A | Telstra Global Ltd. (20.37%); Nippon Telegraph and Telephone Corporation (15.27%) | TM Communications (H.K.) Ltd. (9.68%) | Singapore Telecom International Pte. Ltd. (40.00%) | |||||
Indonesian and Other | ||||||||||
Shareholders | PT Telekomunikasi Indonesia, Tbk (45.00%); PT Astratel Nusantara (19.25%); Indosat (7.15%); Marubeni Corporation (4.40%); International Finance Corporation (1.65%); NMP Singapore Pte. Ltd. (0.55%) | PT Telekomunikasi Indonesia, Tbk (100.00%) | PT Widya Duta Informindo (31.31%); Indosat (30.55%); Itochu Corporation (1.25%); Sumitomo Corporation (1.25%) | PT Telekomunikasi Indonesia, Tbk (90.32%) | PT Bukaka Telekomindo International (60.00%) | |||||
MTR (in Rp. billions)(2) | 518.0 | 415.5 | 404.3 | 143.4 | 253.2 | |||||
Revenue Sharing | ||||||||||
(TELKOM: KSO | ||||||||||
Partners) | 30 : 70 | 95 : 5 | 30 : 70 | 30 : 70 | 35 : 65 | |||||
End of KSO Period | 2010 | 2010 | 2010 | 2010 | 2010 |
The KSO Agreements provide for the relevant KSO partner to manage and operate the Division until the end of the KSO period, undertake the construction of a specified number of fixed lines and, at the end of the fixed term, transfer the new telecommunications facilities in the Regional Division to TELKOM for an agreed amount of compensation. The KSO Agreements also provide for TELKOM to receive the following: (a) a one-time initial payment from the KSO partners; (b) guaranteed minimum monthly payments or Minimum TELKOM Revenues (“MTR”); and (c) additional monthly revenue sharing payments or Distributable TELKOM Revenues (“DTR”) from the revenues of the KSO Unit after payment of MTR and certain operating expenses. The KSO partners were granted licenses to enter into KSO arrangements with TELKOM to provide fixed-line services in the respective regions.
TELKOM receives revenues from other telecommunications operators providing fixed-line, cellular, international long-distance and other services that interconnect with TELKOM’s network. In 2003,
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TELKOM enters into interconnection agreements with one- to three-year terms with other telecommunications network operators, including Indosat and Satelindo, Indonesia’s IDD service providers and cellular operators, establishing the fees payable by the respective operators and the procedures for routing calls through the networks of the respective operators. Most of the short term (one-year) interconnection agreements are entered into with telecommunications network operators. Beginning in 2004, following the merger of Indosat, Indosat Multi Media Mobile (“IM3”) and Satelindo in 2003, Indosat assumed the obligations of Satelindo and IM3 under their respective interconnection agreements with TELKOM.
In 2004, as a result of new regulations regarding DLDthe amended and IDD services,restated KSO agreement, TELKOM acquired Regional Division IV. TELKOM consolidated Rp.1,398.0 billion of operating revenues from Regional Division IV (Central Java) from February 1, 2004 through December 31, 2004. For 2004, MTR and DTR for Regional Division IV represent MTR and DTR generated by Regional Division IV in January 2004.
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TELKOM’s interconnection traffic volumes are set forthRp.802.4 billion of operating revenues from Regional Division VI (Kalimantan) in the following table for the periods indicated:
Year ended December 31, | ||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | ||||||||||||||||||
(millions of minutes) | ||||||||||||||||||||||
Mobile Cellular Interconnection(1) | ||||||||||||||||||||||
Digital | ||||||||||||||||||||||
Incoming paid minutes | 1,396.8 | 1,968.6 | 2,284.9 | 2,757.9 | 3,357.7 | |||||||||||||||||
Outgoing paid minutes | 873.2 | 1,687.1 | 2,645.8 | 3,807.5 | 4,848.7 | |||||||||||||||||
Analog | ||||||||||||||||||||||
Incoming paid minutes | 62.9 | 71.8 | 70.5 | 73.0 | 106.0 | |||||||||||||||||
Outgoing paid minutes | 24.7 | 34.0 | 43.5 | 47.0 | 23.4 | |||||||||||||||||
Subtotal | 2,357.6 | 3,761.5 | 5,044.7 | 6,685.4 | 8,335.8 | |||||||||||||||||
Fixed Wireless Interconnection(2) | ||||||||||||||||||||||
Incoming paid minutes | 41.9 | 72.5 | 83.7 | 100.2 | 107.3 | |||||||||||||||||
Outgoing paid minutes | 33.1 | 39.3 | 30.5 | 36.3 | 29.6 | |||||||||||||||||
Subtotal | 75.0 | 111.8 | 114.2 | 136.5 | 136.9 | |||||||||||||||||
Fixed Wireline Interconnection | ||||||||||||||||||||||
Incoming paid minutes | 26.1 | 30.1 | 31.9 | 28.2 | 22.8 | |||||||||||||||||
Outgoing paid minutes | 2.9 | 3.3 | 4.2 | 3.3 | 1.3 | |||||||||||||||||
Total paid minutes | 29.0 | 33.4 | 36.1 | 31.5 | 24.1 | |||||||||||||||||
Satellite Phone Interconnection | ||||||||||||||||||||||
Incoming paid minutes | — | — | 2.4 | 12.6 | 16.1 | |||||||||||||||||
Outgoing paid minutes | — | — | 0.5 | 5.6 | 7.5 | |||||||||||||||||
Total paid minutes | — | — | 2.9 | 18.2 | 23.6 | |||||||||||||||||
International Interconnection(3) | ||||||||||||||||||||||
Incoming paid minutes | 403.2 | 345.8 | 286.8 | 303.3 | 444.1 | |||||||||||||||||
Outgoing paid minutes | 251.1 | 250.6 | 241.9 | 200.3 | 149.7 | |||||||||||||||||
Total paid minutes | 654.3 | 596.4 | 528.7 | 503.6 | 593.8 | |||||||||||||||||
Total | ||||||||||||||||||||||
Incoming paid minutes | 1,930.9 | 2,488.8 | 2,760.2 | 3,275.2 | 4,054.0 | |||||||||||||||||
Outgoing paid minutes | 1,185.0 | 2,014.3 | 2,966.4 | 4,100.0 | 5,060.2 | |||||||||||||||||
Total paid minutes | 3,115.9 | 4,503.1 | 5,726.6 | 7,375.2 | 9,114.2 | |||||||||||||||||
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Year ended December 31, | ||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | ||||||||||||||||
(millions of minutes) | ||||||||||||||||||||
Incoming paid minutes | 706.0 | 1,025.0 | 1,289.9 | 1,672.6 | 2,011.8 | |||||||||||||||
Outgoing paid minutes | 430.0 | 771.0 | 1,266.0 | 2,001.6 | 2,610.3 |
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On June 7, 2004, TELKOM began offering IDD fixed-line services under the brand name “TIC 007.” Revenues from IDD services will be reported as international interconnection revenues.
TELKOM provides satellite transponder leasing, satellite broadcasting, VSAT, audio distribution, satellite-based leased lines, terrestrial-based leased lines, VPN Frame Relay Networks and VPN IPs as network services. In 2003, revenues from network services contributed Rp.517.9 billion (US$61.4 million), or 2.0% of total operating revenues. TELKOM’s customers for network services include businesses and other telecommunications operators. Customers may enter into agreements that can be for services as brief as a few minutes in the case of broadcasts or long-term agreements for services over the course of one to five years.
TELKOM provides SMS for fixed line, fixed wireless and cellular phones, multimedia dial-up Internet access and other multimedia services, VoIP services for international calls and ISDN lines. In 2003, revenues from data and Internet services contributed Rp.3,108.6 billion (US$368.3 million), or 11.5% of total operating revenues. TELKOM is also developing a broadband access network utilizing ADSL, hybrid fiber coaxial cables and satellites.
In 2003, an average of 366,130 telephone subscribers accessed our TELKOMNet Instant dial-up Internet service per month, representing an increase of 23% over the prior year, with the number of subscribers accessing this service reaching 408,026 during December 2003. Subscribers utilized a total of 1.95 billion minutes of dial-up service in 2003.
In September 2002, TELKOM began offering a premium VoIP international calling service under the name “TELKOMGlobal-017” and a standard VoIP international calling service under the name “TELKOMSave” and TELKOM is currently providing both services in several cities in Indonesia. Its VoIP services currently allow subscribers access to 633 destination points in 235 countries through agreements which TELKOM has entered into with six global carriers and wholesalers that allow TELKOM to access their international networks. VoIP is a low-cost phone service that is accessed by dialing a special international long-distance prefix. Currently, the access code for TELKOM’s VoIP service is “017.” On March 11, 2004, the MoC issued Decree No. 28/2004 and Decree No. 31/2004, which stated that VoIP access codes must be changed from three digits to five digits (“010XY”), although the MoC has given operators, such as TELKOM, up to 2005 to comply with this requirement.
The Company plans to increase the number of access points in Indonesia and abroad from which its customers are able to access its VoIP services. In 2003, an average of 214,600 telephone subscribers used either TELKOMSave or TELKOMGlobal each month, representing an increase of 225% over the prior year.
Certain information about TELKOM VoIP services is set forth in the following table:
US$’million | ||||
Acquisition of Telkomsel by Telkom | (945 | ) | ||
Sale of Satelindo to Indosat | 186 | |||
Sale of Lintasarta to Indosat | 38 | |||
Amount paid in advance by Telkom for acquisition and sales of the above entities | 523 | |||
Net amount to be settled by Telkom | (198 | ) | ||
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35
Division VII | ||
KSO Partner | PT Bukaka SingTel International | |
Shareholders in the KSO partner: Foreign telecommunications operator | Singapore Telecom International Pte. Ltd. (40.00%) | |
Indonesian and other shareholders | PT Bukaka Telekomindo International (51.50%); Transpac Capital (8.50%) | |
Revenue Sharing (TELKOM: KSO Partner) | 35 : 65 | |
End of KSO Period | 2010 |
Interconnection Services | ||||
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Year Ended December 31, | ||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||
(millions of minutes) | ||||||||||||||||||||||
Mobile Cellular Interconnection(1) | ||||||||||||||||||||||
Incoming paid minutes | 2,040.4 | 2,355.4 | 2,830.9 | 3,463.7 | 4,235.1 | |||||||||||||||||
Outgoing paid minutes | 1,721.1 | 2,689.3 | 3,854.5 | 4,872.1 | 6,448.0 | |||||||||||||||||
Subtotal | 3,761.5 | 5,044.7 | 6,685.4 | 8,335.8 | 10,683.1 | |||||||||||||||||
Fixed Line Interconnection(2) | ||||||||||||||||||||||
Incoming paid minutes | 102.6 | 115.6 | 128.4 | 130.1 | 136.7 | |||||||||||||||||
Outgoing paid minutes | 42.6 | 34.7 | 39.6 | 30.9 | 51.1 | |||||||||||||||||
Subtotal | 145.2 | 150.3 | 168.0 | 161.0 | 187.8 | |||||||||||||||||
Satellite Phone Interconnection | ||||||||||||||||||||||
Incoming paid minutes | — | 2.4 | 12.6 | 16.1 | 14.7 | |||||||||||||||||
Outgoing paid minutes | — | 0.5 | 5.6 | 7.5 | 8.2 | |||||||||||||||||
Total paid minutes | — | 2.9 | 18.2 | 23.6 | 22.9 | |||||||||||||||||
International Interconnection(3) | ||||||||||||||||||||||
Incoming paid minutes | 345.8 | 286.8 | 303.3 | 444.1 | 247.1 | |||||||||||||||||
Outgoing paid minutes | 250.6 | 241.9 | 200.3 | 149.7 | 99.6 | |||||||||||||||||
Total paid minutes | 596.4 | 528.7 | 503.6 | 593.8 | 346.7 | |||||||||||||||||
Total | ||||||||||||||||||||||
Incoming paid minutes | 2,488.8 | 2,760.2 | 3,275.2 | 4,054.0 | 4,633.5 | |||||||||||||||||
Outgoing paid minutes | 2,014.3 | 2,966.4 | 4,100.0 | 5,060.2 | 6,606.9 | |||||||||||||||||
Total paid minutes | 4,503.1 | 5,726.6 | 7,375.2 | 9,114.2 | 11,240.4 | |||||||||||||||||
In 2003, revenues from revenue sharing arrangements amounted to Rp.258.5 billion (US$30.6 million)
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Year Ended December 31, | ||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||
(millions of minutes) | ||||||||||||||||||||
Incoming paid minutes | 1,025.0 | 1,289.9 | 1,672.6 | 2,011.8 | 2,354.1 | |||||||||||||||
Outgoing paid minutes | 771.0 | 1,266.0 | 2,001.6 | 2,610.3 | 3,422.1 |
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Network Services |
Data and Internet Services |
Item | TELKOMGlobal 017 | TELKOMSave | ||
Tariff | Up to | Up to 60% of | ||
Dial | One stage | Two stage | ||
Quality/ Technology | Premium VoIP | Standard VoIP |
Revenue-Sharing Arrangements (PBHs) |
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Other |
• | telephone directory, which TELKOM provides through its majority-owned subsidiary, Infomedia; | |
• | cable and pay television and related services, which it provides through its majority-owned subsidiary, Indonusa; and | |
• | telex and telegram services. |
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35
As of or for the Year Ended December 31, | As of or for the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
1999(1) | 2000(1) | 2001(2) | 2002(3) | 2003(4) | 2000(1) | 2001(2) | 2002(3) | 2003(4) | 2004(5) | |||||||||||||||||||||||||||||||||||||
Operating Statistics | Operating Statistics | Operating Statistics | ||||||||||||||||||||||||||||||||||||||||||||
Exchange capacity | Exchange capacity | Exchange capacity | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 4,449,552 | 4,515,615 | 5,135,108 | 6,643,688 | 8,476,816 | Non-KSO Divisions | 4,515,615 | 5,135,108 | 6,643,688 | 8,476,816 | 10,739,531 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 3,909,179 | 3,946,407 | 3,669,336 | 2,459,950 | 1,670,005 | KSO Divisions(10) | 3,946,407 | 3,669,336 | 2,459,950 | 1,670,005 | 1,134,165 | |||||||||||||||||||||||||||||||||||
Total | 8,358,731 | 8,462,022 | 8,804,444 | 9,103,638 | 10,146,821 | Total | 8,462,022 | 8,804,444 | 9,103,638 | 10,146,821 | 11,873,696 | |||||||||||||||||||||||||||||||||||
Installed lines | Installed lines | Installed lines | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 3,957,815 | 4,086,298 | 4,725,268 | 6,165,770 | 7,894,532 | Non-KSO Divisions | 4,086,298 | 4,725,268 | 6,165,770 | 7,894,532 | 10,556,211 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 3,471,447 | 3,581,779 | 3,316,406 | 2,234,892 | 1,664,220 | KSO Divisions(10) | 3,581,779 | 3,316,406 | 2,234,892 | 1,664,220 | 1,111,716 | |||||||||||||||||||||||||||||||||||
Total | 7,429,262 | 7,668,077 | 8,041,674 | 8,400,662 | 9,558,752 | Total | 7,668,077 | 8,041,674 | 8,400,662 | 9,558,752 | 11,667,927 | |||||||||||||||||||||||||||||||||||
Lines in service(5) | ||||||||||||||||||||||||||||||||||||||||||||||
Lines in service(6) | Lines in service(6) | |||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 3,256,992 | 3,610,363 | 4,270,243 | 5,710,427 | 7,030,049 | Non-KSO Divisions | 3,610,363 | 4,270,243 | 5,710,427 | 7,030,049 | 9,032,650 | |||||||||||||||||||||||||||||||||||
KSO Divisions | 2,823,201 | 3,052,242 | 2,948,695 | 2,039,608 | 1,449,066 | KSO Divisions(10) | 3,052,242 | 2,948,695 | 2,039,608 | 1,449,066 | 956,068 | |||||||||||||||||||||||||||||||||||
Total | 6,080,193 | 6,662,605 | 7,218,938 | 7,750,035 | 8,479,115 | Total | 6,662,605 | 7,218,938 | 7,750,035 | 8,479,115 | 9,988,718 | |||||||||||||||||||||||||||||||||||
Lines in service per 100 inhabitants | Lines in service per 100 inhabitants | Lines in service per 100 inhabitants | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 5.7 | 5.6 | 4.6 | 4.4 | 4.3 | |||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 5.3 | 5.7 | 5.6 | 4.64 | 4.36 | KSO Divisions(10) | 2.0 | 2.0 | 2.0 | 1.9 | 2.9 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 1.9 | 2.0 | 2.0 | 2.00 | 1.85 | |||||||||||||||||||||||||||||||||||||||||
Combined | 3.1 | 3.3 | 3.5 | 3.5 | 4.1 | |||||||||||||||||||||||||||||||||||||||||
Combined | 2.9 | 3.1 | 3.25 | 3.45 | 3.54 | |||||||||||||||||||||||||||||||||||||||||
Subscriber lines | Subscriber lines | Subscriber lines | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 3,101,885 | 3,394,075 | 4,005,106 | 5,394,940 | 6,679,173 | Non-KSO Divisions | 3,394,075 | 4,005,106 | 5,394,940 | 6,679,173 | 8,636,544 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 2,709,066 | 2,923,223 | 2,831,168 | 1,952,226 | 1,392,152 | KSO Divisions(10) | 2,923,223 | 2,831,168 | 1,952,226 | 1,392,152 | 928,641 | |||||||||||||||||||||||||||||||||||
Total | 5,810,951 | 6,317,298 | 6,836,274 | 7,347,166 | 8,071,325 | Total | 6,317,298 | 6,836,274 | 7,347,166 | 8,071,325 | 9,565,185 | |||||||||||||||||||||||||||||||||||
Public telephones | Public telephones | Public telephones | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 155,107 | 216,288 | 265,137 | 315,487 | 350,876 | Non-KSO Divisions | 216,288 | 265,137 | 315,487 | 350,876 | 395,368 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 114,135 | 129,019 | 117,527 | 87,382 | 56,914 | KSO Divisions(10) | 129,019 | 117,527 | 87,382 | 56,914 | 28,165 | |||||||||||||||||||||||||||||||||||
Total | 269,242 | 345,307 | 382,664 | 402,869 | 407,790 | Total | 345,307 | 382,664 | 402,869 | 407,790 | 423,533 | |||||||||||||||||||||||||||||||||||
Leased lines in service | Leased lines in service | Leased lines in service | ||||||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions(6) | 2,446 | 3,300 | 4,973 | 8,193 | 8,213 | Non-KSO Divisions(7) | 3,300 | 4,973 | 8,193 | 8,213 | 8,887 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 2,143 | 2,702 | 2,631 | 1,879 | 1,162 | KSO Divisions(10) | 2,702 | 2,631 | 1,879 | 1,162 | 382 | |||||||||||||||||||||||||||||||||||
Total | 4,589 | 6,002 | 7,604 | 10,072 | 9,375 | Total | 6,002 | 7,604 | 10,072 | 9,375 | 9,269 | |||||||||||||||||||||||||||||||||||
Subscriber Pulse | ||||||||||||||||||||||||||||||||||||||||||||||
Fixed wireline subscriber pulse production(8)(millions) | Fixed wireline subscriber pulse production(8)(millions) | |||||||||||||||||||||||||||||||||||||||||||||
Production(7)(8)(millions) | Non-KSO Divisions | 28,231 | 34,342 | 44,340 | 50,848 | 58,314 | ||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 25,077 | 28,231 | 34,342 | 44,340 | 51,062 | KSO Divisions(10) | 24,628 | 24,047 | 16,788 | 11,413 | 6,838 | |||||||||||||||||||||||||||||||||||
KSO Divisions(9) | 22,182 | 24,628 | 24,047 | 16,788 | 11,417 | |||||||||||||||||||||||||||||||||||||||||
Total | 52,859 | 58,389 | 61,128 | 62,261 | 65,152 | |||||||||||||||||||||||||||||||||||||||||
Total | 47,259 | 52,859 | 58,389 | 61,128 | 62,479 | |||||||||||||||||||||||||||||||||||||||||
Call completion rate (%) | ||||||||||||||||||||||||||||||||||||||||||||||
Fixed wireless subscriber pulse production/ minutes(8)(11)(millions) | Fixed wireless subscriber pulse production/ minutes(8)(11)(millions) | |||||||||||||||||||||||||||||||||||||||||||||
Local | Non-KSO Divisions | — | — | 14 | 214 | 1,020 | ||||||||||||||||||||||||||||||||||||||||
Non-KSO Divisions | 72.0 | 77.0 | 75.8 | 75.8 | 76.8 | KSO Divisions(10) | — | — | — | 4 | 128 | |||||||||||||||||||||||||||||||||||
KSO Divisions | 70.1 | 71.4 | 72.5 | 75.5 | 78.4 | |||||||||||||||||||||||||||||||||||||||||
Total | — | — | 14 | 218 | 1,148 | |||||||||||||||||||||||||||||||||||||||||
Combined | 70.6 | 73.0 | 73.9 | 75.6 | 77.3 |
3640
As of or for the Year Ended December 31, | ||||||||||||||||||||||
1999(1) | 2000(1) | 2001(2) | 2002(3) | 2003(4) | ||||||||||||||||||
Domestic long-distance | ||||||||||||||||||||||
Non-KSO Divisions | 64.0 | 69.3 | 65.4 | 65.5 | 67.5 | |||||||||||||||||
KSO Divisions | 62.4 | 64.5 | 85.6 | 68.1 | 74.7 | |||||||||||||||||
Combined | 63.0 | 65.8 | 65.7 | 66.6 | 69.5 | |||||||||||||||||
Fault rate(8) | ||||||||||||||||||||||
Non-KSO Divisions | 0.39 | 0.42 | 0.8 | 4.6 | 4.4 | |||||||||||||||||
KSO Divisions | 2.02 | 1.69 | 3.1 | 8.9 | 3.5 | |||||||||||||||||
Combined | 4.25 | 4.08 | 3.94 | 5.19 | 4.11 | |||||||||||||||||
Lines in service per employee | ||||||||||||||||||||||
Non-KSO Divisions | 171 | 191 | 209 | 233 | 290 | |||||||||||||||||
KSO Divisions(9) | 149 | 163 | 174 | 201 | 220 | |||||||||||||||||
Combined | 160 | 177 | 193 | 223 | 275 |
As of or for the Year Ended December 31, | |||||||||||||||||||||||
2000(1) | 2001(2) | 2002(3) | 2003(4) | 2004(5) | |||||||||||||||||||
Call completion rate (%) | |||||||||||||||||||||||
Local | |||||||||||||||||||||||
Non-KSO Divisions | 77.0 | 75.8 | 75.8 | 76.8 | 78.6 | ||||||||||||||||||
KSO Divisions(10) | 71.4 | 72.5 | 75.5 | 78.4 | 77.9 | ||||||||||||||||||
Combined | 73.0 | 73.9 | 75.6 | 77.3 | 78.5 | ||||||||||||||||||
Domestic long-distance | |||||||||||||||||||||||
Non-KSO Divisions | 69.3 | 65.4 | 65.5 | 67.5 | 70.9 | ||||||||||||||||||
KSO Divisions(10) | 64.5 | 85.6 | 68.1 | 74.7 | 74.9 | ||||||||||||||||||
Combined | 65.8 | 65.7 | 66.6 | 69.5 | 71.5 | ||||||||||||||||||
Fault rate(9) | |||||||||||||||||||||||
Non-KSO Divisions | 0.4 | 0.8 | 4.6 | 4.4 | 3.4 | ||||||||||||||||||
KSO Divisions(10) | 1.7 | 3.1 | 8.9 | 3.5 | 1.9 | ||||||||||||||||||
Combined | 4.1 | 3.9 | 5.2 | 4.1 | 3.2 | ||||||||||||||||||
Lines in service per employee | |||||||||||||||||||||||
Non-KSO Divisions | 191 | 209 | 233 | 290 | 350 | ||||||||||||||||||
KSO Divisions(10) | 163 | 174 | 201 | 220 | 270 | ||||||||||||||||||
Combined | 177 | 193 | 223 | 275 | 340 |
(1) | For | |
(2) | For 2001, Non-KSO Divisions refer to Divisions II, V and VI, while KSO Divisions refer to Divisions I, III, IV and VII. | |
(3) | For 2002, Non-KSO Divisions refer to Divisions I, II, V and VI, while KSO Divisions refer to Divisions III, IV and VII. | |
(4) | For 2003, Non-KSO Divisions refer to Divisions I, II, III, V and VI, while KSO Divisions refer to Divisions IV and VII. | |
(5) | For 2004, Non-KSO Divisions refer to Divisions I, II, III, IV, V and VI, while KSO Divisions refer to Division VII. | |
(6) | Lines in service comprise subscriber lines (including fixed wireless) and public telephone lines and include the following number of lines in service operated by TELKOM pursuant to | |
(7) | Excludes leased lines for TELKOM’s network and multimedia businesses. | |
(8) | Consists of pulses generated from local and domestic long-distance calls, excluding calls made from pay phones and mobile cellular phones. | |
(9) | Faults per 100 connected lines per month. The calculation formula was changed in January 2002 to include indoor installation and mass fault. The previous measure of fault consisted of exchange and outdoor cable fault. |
(10) | Divisions classified as KSO Divisions |
(11) | Fixed wireless use was measured in subscriber pulse before 2004, and |
fixed-linefixed line network in each of its operating divisions as of December 31, 2003:2004:
Division I | Division II | Division III | Division IV | Division V | Division VI | Division VII | ||||||||||||||||||||||||||
(West Java | ||||||||||||||||||||||||||||||||
and | (Central | (East | (East | |||||||||||||||||||||||||||||
(Sumatera) | (Jakarta) | Banten) | Java) | Java) | (Kalimantan) | Indonesia) | Total | |||||||||||||||||||||||||
Local Exchange Capacity | 1,467,674 | 3,697,273 | 976,854 | 770,289 | 1,875,112 | 459,903 | 899,716 | 10,146,821 | ||||||||||||||||||||||||
Total Lines in Service | 1,239,409 | 3,036,372 | 733,462 | 668,261 | 1,594,827 | 425,979 | 780,805 | 8,479,115 | ||||||||||||||||||||||||
Capacity Utilization (%) | 84.45 | 82.12 | 75.08 | 86.75 | 85.05 | 92.62 | 86.78 | 83.56 | ||||||||||||||||||||||||
Installed Lines(1) | 1,428,831 | 3,429,529 | 867,912 | 792,527 | (5) | 1,714,351 | 453,909 | 871,693 | 9,558,752 | |||||||||||||||||||||||
Utilization Rate | 86.74 | 88.54 | 84.51 | 84.32 | 93.16 | 97.50 | 89.70 | 88.90 | ||||||||||||||||||||||||
Employees(2) | 4,689 | 7,527 | 2,308 | 2,802 | 3,470 | 1,218 | 3,812 | 25,826 | ||||||||||||||||||||||||
Population (millions)(3) | 53.53 | 29.83 | 26.15 | 45.53 | 37.75 | 14.11 | 32.74 | 239.66 | ||||||||||||||||||||||||
Line Penetration(%)(4) | 2.32 | 10.18 | 2.80 | 1.47 | 4.22 | 3.02 | 2.38 | 3.54 |
Division | ||||||||||||||||||||||||||||||||
Division I | Division II | Division III | IV | Division V | Division VI | Division VII | ||||||||||||||||||||||||||
(West Java | (Central | (East | (East | |||||||||||||||||||||||||||||
(Sumatra) | (Jakarta) | and Banten) | Java) | Java) | (Kalimantan) | Indonesia) | Total | |||||||||||||||||||||||||
Local exchange capacity | 1,712,845 | 4,086,004 | 1,142,816 | 1,027,529 | 2,198,677 | 571,660 | 1,134,165 | 11,873,696 | ||||||||||||||||||||||||
Total lines in service | 1,450,512 | 3,314,659 | 872,455 | 874,583 | 2,018,409 | 501,294 | 956,806 | 9,988,718 | ||||||||||||||||||||||||
Capacity utilization (%) | 84.68 | 81.12 | 76.34 | 85.12 | 91.80 | 87.69 | 84.36 | 84.12 | ||||||||||||||||||||||||
Installed lines(1) | 1,765,940 | 3,910,413 | 1,120,743 | 1,009,495 | 2,120,910 | 628,710 | 1,111,716 | 11,667,927 | ||||||||||||||||||||||||
Utilization rate | 82.14 | 84.76 | 77.85 | 86.64 | 95.17 | 79.73 | 86.07 | 85.61 | ||||||||||||||||||||||||
Employees(2) | 3,947 | 6,805 | 2,117 | 2,170 | 2,990 | 1,011 | 3,538 | 22,578 | ||||||||||||||||||||||||
Population (millions)(3) | 54.33 | 30.27 | 26.54 | 46.21 | 38.32 | 14.32 | 33.23 | 243.23 | ||||||||||||||||||||||||
TELKOM line penetration (%)(4) | 2.67 | 10.95 | 3.29 | 1.89 | 5.27 | 3.50 | 2.88 | 4.11 |
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(1) | Total for |
(2) | Includes employees seconded to |
(3) | Source:Indonesian Central Bureau of Statistics (estimated figures). |
(4) | |
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Capacity | Percentage | Capacity | Percentage | |||||||||||||||
(number of | of total | (number of | of total | |||||||||||||||
Transmission medium | Transmission medium | circuits) | capacity | Transmission medium | circuits) | capacity | ||||||||||||
Optical fiber cable | Optical fiber cable | 253,050 | 50.5 | Optical fiber cable | 369,270 | 66.5 | ||||||||||||
Microwave | Microwave | 194,100 | 38.8 | Microwave | 109,980 | 19.8 | ||||||||||||
Submarine cable | Submarine cable | 24,180 | 4.8 | Submarine cable | 46,860 | 8.4 | ||||||||||||
Satellite | Satellite | 29,590 | 5.9 | Satellite | 29,590 | 5.3 | ||||||||||||
Total | 500,920 | 100.0 | Total | 555,700 | 100.0 | |||||||||||||
WirelessMobile Cellular Network
Surabaya.
42
In 2003, Telkomsel expanded its network capacity by adding, among other equipment, 1,337 BTSs and 10,563 transmitting and receiving exchanges. As of December 31, 2003,2004, Telkomsel’s digital network had 4,8206,205 BTSs, 5184 cellular switching centers, (with the capacity to handle 14.5 million subscribers), 166195 base station controllers and 38,62449,332 transmitting and receiving exchanges.
exchanges, with an overall network capacity capable of supporting 17.9 million subscribers.
38
respectively.
CDMA Fixed Wireless.TELKOM began offering a limited mobility CDMA-based fixed wireless phone service under the brand name “TELKOMFlexi” in December 2002. As of December 31, 2003, TELKOMFlexi service was available in 38 cities. TELKOM’s rollout of this limited mobility fixed wireless service is occurring concurrent with its use of CDMA fixed wireless technology for the development of its fixed-line network. CDMA-based fixed wireless technology enables rapid development of telephone networks and the reduction of capital expenditures per line by reducing and often eliminating the need for layout of cables. TELKOM intends to continue to rapidly develop its CDMA-based fixed wireless network.
As of December 31, 2003, TELKOM had 396 BTSs and 815,647 line units deployed, of which 380 BTSs and 775,647 line units were financed by TELKOM and 16 BTSs and 40,000 line units were established under the BOT scheme (instead of the 53,900 that were originally planned). As of December 31, 2003, TELKOM had achieved sales of 467,933 TELKOMFlexi Line Units (consisting of 459,725 Line Units in non-BOT areas and 8,208 Line Units in BOT areas).
Data Networks
Data Networks |
International Network |
Other Network Infrastructure43
The
Other Network Infrastructure |
• | Network backbone transmission; | |
• | Rural telecommunications services; | |
• | Back-up transmission capacity for the national telecommunications network; | |
• | Satellite broadcasting, VSAT and multimedia services; |
39
• | Satellite transponder capacity leasing; | |
• | Satellite-based lease line; and | |
• | Teleport (earth station satellite uplinking and downlinking services to and from other satellites). |
Fixed-line Network Development
Fixed line Network Development |
In 2004, TELKOM also hassubstantially completed the expansion of its Java fiber optic backbone. TELKOM entered into an agreement on June 10, 2005 with a consortium consisting of NEC and Siemens AG to further develop its Java-Sumatra-Kalimantan network by the end of 2006.
• | fiber optic backbone infrastructure in Sumatera to provide additional backbone capacity and to extend the backbone to the island of Batam, which will facilitate connections in the future from Batam to nearby | |
• | fiber optic backbone infrastructure in Kalimantan (Borneo) | |
• | fiber optic backbone infrastructure in Sulawesi from Makasar to Palu; |
44
• | fiber optic regional junction in greater Jakarta, Surabaya (East Java) and Bandung — Cirebon (West Java) |
• | ||
• | ||
• |
Data Network Development
Mobile Cellular Network Development |
Data Network Development |
IDD Network Development
TELKOM received its commercial license from the Government to provide IDD services on May 13, 2004. TELKOM began offering IDD fixed-line services under the brand name “TIC 007” on June 7, 2004. TELKOM has also upgraded switches in Batam, Jakarta and Surabaya to have international gateway capabilities. Since 2002, TELKOM has operated microwave links to connect Batam Island (Indonesia), Sentosa Island (Singapore) and Johor (Malaysia). Due to the high demand for international bandwidth in the ASEAN region, TELKOM, Singapore Telecom (“SingTel”) and CAT Telecom agreed to build a submarine fiber optic cable to connect Indonesia (Batam), Singapore (Changi) and Thailand (Songkhla), which is known as TIS Cable System and the cable was ready for
40
TELKOM-2 Satellite |
TELKOM-2 Satellite
TELKOM has signed a US$73.1473.1 million contract with Orbital Sciences Corporation to build the TELKOM-2 satellite based on Orbital’s STAR-2 platform, to replace TELKOM’s existing Palapa B-4 satellite, whosewhich is expected to be taken out of service after the TELKOM-2 satellite is launched and the operational lifespan expiresof which expired in late 2004. The TELKOM-2 satellite is to havehas a capacity of 24 standard C-band transponders, with transponder specifications similar to those of the TELKOM-1 satellite. TELKOM-2 is to be designed forhas a 15 years in-orbit life and is expected to provide increased coverage of the Asian region and the Indian subcontinent compared to Palapa B-4. TELKOM believes that the satellite will support TELKOM’s network for voice, video and data communications.
The Company plans
45
Capital Expenditures |
41
Strengthening the |
As of December 31, fixed-line penetrationsfixed line penetration rates in Southeast Asia. The following table sets forth the penetration rate for each Division as of December 31, 2003: Division I Division II Division III Division IV Division V Division VI Division VII Total LIS 1,239,409 3,036,372 733,462 668,261 1,594,827 425,979 780,805 8,479,115 Population (millions) 53.53 29.83 26.15 45.53 37.75 14.11 32.74 239.66 Penetration (per 100) 2.32 10.18 2.80 1.47 4.22 3.02 2.38 3.54 2003, approximately 51%2004, a majority of total lines in service were in the major metropolitan areas of Jakarta, Surabaya, Semarang, Bandung, Medan and Denpasar.fixed-linefixed line business by: • increasing its fixed-linefixed line penetration rate more quickly and with lower capital expenditure per line through the rapid roll-out of fixed wireless technology, revenue sharing arrangements, new partnership agreements and pay as you grow schemes; • increasing ARPU through the use of TELKOMFlexi and value added services; • concentrating on its top 20 products in the top 40 cities and targeting the top 20% of its customers with ARPUs of more than Rp.150,000 by providing multiservice bundling,bundled services, broadband access, a customer care service center for business customers price packaging and other benefits; • strengthening its interconnection business by establishing a service center dedicated to telecommunications operators and other interconnection customers, opening more gateways to other telecommunications operators, offering more attractive pricing and providing enhanced billing services; • strengthening PlasaTELKOM as a point of sale for TELKOM’s services; and • developing and expanding its IDD fixed-linefixed line business, which TELKOM began offering to customers on June 7, 2004.Strengthening its Backbone Network
reachcoverage and quality of its network by, among other things, using an optical network for high speed backbone transmission infrastructure such as its Java optical backbone, HPBT Sumatera (2002-2003), Trans Borneo and Trans Sulawesi (2004-2005) and by launchingits planned launch of the new TELKOM-2 satellite to replace the existing Palapa B-4 satellite (which ends its operational life around the end of 2004).satellite. In addition, TELKOM aims to manage
46
Maintaining Telkomsel’s |
42
Singapore Telecom Mobile Pte Ltd (“SingTel Mobile”) has a 35% interest in Telkomsel. TELKOM believes that SingTel Mobile’s equity interest in Telkomsel increases Telkomsel’s ability to access SingTel Mobile’s technological and commercial expertise in the cellular business and increases opportunities for cooperation between Telkomsel and SingTel Mobile in the development of new products, thereby strengthening and better positioning Telkomsel to face competition from other mobile cellular operators.
• | taking advantage of commercial, operational and network synergies with TELKOM and sharing best-practices and know-how with SingTel Mobile; | |
• | ||
• | maintaining or improving market share | |
• | ensuring that Telkomsel has the IT infrastructure in place to fulfill its vision and mission, with special focus on areas such as billing, service delivery and customer service; and | |
• | achieving service levels at par with world class mobile service providers through its call center footprint and aggressive pursuit of service oriented goals. |
Developing its Fixed Wireless Business |
2003,2004, was available in 38192 cities throughout Indonesia, including Jakarta, Malang, Batam, Makasar, Banjarmasin, Medan and Palangkaraya. TELKOM plans to continue to expand its CDMA-based fixed wireless networks in all of its regional divisions by constructing CDMA-based fixed wireless networks. Compared to fixed wireline networks, CDMA-based networks are generally faster and easier to construct and provide customers with greater flexibility and mobility. TELKOM believes the deployment of a CDMA-based fixed
47
Developing its Data and Internet Business |
• | increased investment in TELKOM’s broadband infrastructure (such as ADSL, Hybrid Fiber/ | |
• | focusing on retaining and acquiring customers with high demand for data services by offering competitive pricing for high-speed data and Internet services (including value-added services) and full VPN IPs, and by expanding TELKOM’s backbone and network access technology; |
43
• | giving customers greater Internet access options, such as through wireless hotspot technology and the bundling of Internet access services with TELKOMFlexi and Telkomsel products; | |
• | developing and offering new value-added services and products, such as e-payment services for banks and other financial institutions and wireless data content for GPRS and MMS users; | |
• | expanding the international coverage of TELKOM’s data and Internet services by entering into agreements with additional global carriers and | |
• | expanding the coverage and quality of its Internet Protocol backbone to increase data and Internet traffic capacity. |
Reducing Cost of Capital |
• | share investment risks with its suppliers; | |
• | reduce its asset base and outsource non-core businesses; and | |
• | mitigate financing, commercial, operational, technical and capacity risks. |
TELKOM calls such financing techniques “pay as you grow.” As currently formulated, “pay
Customer Service
Increasing TELKOM and Telkomsel Synergy |
48
• | joint corporate account handling to be able to offer a complete suite of services to relevant corporate customers; | |
• | utilizing the group’s combined customer base to deliver each other’s relevant products (such as the offering of TELKOM’s 007 IDD service to Telkomsel’s customers with specific benefits and joint promotion campaign); | |
• | joint promotion and marketing activities on case by case basis whenever this generates additional benefits to the group; | |
• | consolidated procurement program and processes to obtain competitive prices for common purchases and implement an e-auction process as a standard price bid mechanism; | |
• | sharing of operational facilities (such as sites, towers, mechanical and electrical facilities); and | |
• | information sharing and in certain cases joint deals with content providers for mobile data services. |
TELKOM |
services through:
• | Walk-in customer services points.Customer service points provide convenient and comprehensive access to TELKOM’s customer services and handle product and service information requests and complaints, activation of services, customer billing, payments, account suspensions, service features and marketing promotions. As of December 31, 2004, TELKOM | |
• | Call centers and Internet.TELKOM operates call centers in many cities in Indonesia, including in the KSO regions. Customers are provided a | |
• | Enterprise |
44
49
and network monitoring and controlling services. TELKOM has also set up similar account management teams at the regional level to focus on corporations with regional operations within Indonesia. As of December 31, 2004, TELKOM | ||
• | TELKOM has had a service level guarantee program for its |
Telkomsel |
services through:
• | GraPARI Customer Services Centers: | |
• | Caroline:“Caroline”, or Customer Care On-Line, is a 24 hour toll-free telephone service. Telkomsel’s customers may speak directly to customer service operators who are trained to handle customer requests and complaints and to provide up-to-date information on matters such as customer bills, payments, promotions and service features. | |
• | Anita:“Anita”, or Aneka Informasi dan Tagihan, is an SMS service available only to Telkomsel’s KartuHALO subscribers. |
TELKOM |
• | Walk-in customer service points.Customers have access to certain products and services in these walk-in customer service points. See “— Customer Service” above. | |
• | Account management teams.Account management teams promote TELKOM’s products and services in an integrated manner to TELKOM’s larger business customers. See “— Customer Service” above. | |
• | Public telecommunications kiosks.Small businesses in cooperation with TELKOM have established public telecommunications kiosks throughout Indonesia. Customers can access basic telecommunications services, including local, domestic long-distance and international telephony, send facsimiles, telex and telegrams, access the Internet and purchase |
45
subscriber telephone rates. Kiosks operate on a non-exclusive basis and may provide products and services of other operators. |
50
• | Authorized dealers and retail outlets.These are located throughout Indonesia and primarily sell phone-cards and TELKOMFLexi | |
• | Website.Through its website, customers can obtain information on TELKOM’s major products and services and gain access to certain of its multimedia products. | |
• | Public telephones.Customers can make local, domestic long-distance and international telephone calls through public telephones. |
developingcontinuing to develop its marketing communications program to promote all of its core businesses as it seeks to evolve into a full service telecommunications provider.Telkomsel
(i) | its 62 GraPARI centers (as of December 31, 2004), | |
(ii) | a network of authorized dealers (operating over 12,000 retail outlets throughout Indonesia) selling primarily prepaid SIM cards and vouchers, and | |
(iii) | other outlets such as banks and photo shops. Independent dealers and other outlets pay a discount to face value for all products they receive, such as starter packs and prepaid vouchers. Independent dealers sell Telkomsel’s cellular services on a non-exclusive basis and may also sell products and services of other cellular operators. |
51
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Stage | Overdue Payment | Charge | Penalty | |||
I | 1-10 days | 5% of the total outstanding receivables, subject to the minimum charge of Rp.5,000 | Not isolated | |||
II | 11-40 days | 10% of overdue bill subject to minimum charge of Rp.10,000 | Out-going isolation (i.e., restricted to receiving incoming calls only) | |||
III | 41-70 days | 15% of overdue bill subject to minimum charge of Rp.15,000 | ||||
IV | More than 70 days | Customer must fulfill overdue payment, 100% of installation fee | Terminated |
bill, although it may start billing directly after Indosat enters the domestic market and when TELKOM enters the IDD market.bill.Management of Customer Receivables
its receivables is reasonably assured.
Telkomsel |
52
47
Telkomsel |
Overview |
53
Fixed-line
48
from the Indonesian Central Bureau of Statistics.
• | Continued growth.TELKOM believes the telecommunications industry will continue to grow, as continued development of Indonesia’s economy is expected to increase demand for telecommunications services. | |
• | Migration to wireless networks.TELKOM anticipates that wireless services will become increasingly popular as a result of wider coverage areas and improving wireless network quality, declining handset costs and the proliferation of prepaid services. | |
• | Increasing competition.TELKOM anticipates an increasingly competitive Indonesian telecommunications market as a result of the Government’s regulatory reforms. |
Overview |
54
• | Deregulation; | |
• | Promoting competition; | |
• | Liberalization; | |
• | Restructuring; | |
• | Improving market access; and | |
• | Introducing market-oriented regulations. |
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• | Increase the sector’s performance in the era of globalization; | |
• | Liberalize the sector with a competitive structure by removing monopolistic controls; | |
• | Increase transparency and predictability of the regulatory framework; | |
• | Create opportunities for national telecommunications operators to form strategic alliances with foreign partners; | |
• | Create business opportunities for small and medium enterprises; and | |
• | Facilitate new job opportunities. |
Telecommunications Law |
DGPT.
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New Service Categories |
50
Modern License |
Underwill beis in the process of being replaced with the so-called “Modern License.”Licenses”. In addition to granting the license holder the right to provide telecommunication services, the Modern License also imposes certain mandatory obligations on the license holder. These obligations include, among others, construction obligations, service obligations, network performance obligations and contributing 0.75% of their gross revenues for Universal Service Obligations (“USO”). The license holder is required to fulfill the mandatory obligations set forth in its Modern License and the failure to comply with such obligations may result in the revocation of its Modern License. The draft implementation regulations relating to the Modern License have been proposed but not yet enacted. Once the regulations have been enacted, TELKOM’s separate licenses to provide fixed-line fixed line
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Exclusivity |
As of the date of this annual report, TELKOM has not received any payments of the Rp.478 billion compensation. See “Item 3. Key Information — D. Risk Factors — Risks Relating to TELKOM and its Subsidiaries — TELKOM operates in a legal and regulatory environment that is undergoing significant reforms and such reforms may adversely affect TELKOM’s business.”
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Competition |
by the MoC based on factors such as their scope of business, coverage area of services and whether they control a particular market. Specifically, the Decree prohibits a dominant provider from engaging in practices such as dumping, predatory pricing, cross-subsidies, compelling consumers to use such provider’s services (to the exclusion of competitors) and hampering mandatory interconnection (including discriminating against specific providers).Interconnection
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DLD and IDD Services |
• | DLD and IDD network operators may offer DLD and IDD service as part of basic telephony service; | |
• | Each DLD and IDD operator must use a distinct 3-digit access code for its DLD and IDD service; | |
• | Customers may freely select their DLD and IDD providers; and | |
• | DLD and IDD fixed telecommunication network operators (currently only TELKOM and Indosat) may now provide DLD and IDD basic telephony |
52
58
Indonesian Telecommunications Regulatory Body |
Consumer Protection |
Universal Service Obligations
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53
Implementing Regulations |
MoCMoCI and DGPT are in the process of finalizing a number of additional ministerial decrees that are intended to implement other aspects of the Telecommunications Law, including decrees relating to special telecommunications operations and implementation of the cost-based interconnection system.Satellite regulation
Fixed Wireless Access regulation
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On August 1, 2001,Telecommunications Law, the Government through the MoC, announced the early termination ofterminated TELKOM’s exclusivity rights for local and domestic-long distancemonopoly in providing fixed line domestic telecommunications services. The
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In June 2004,telephone services. Indosat launched its own CDMA fixed wireless access service under the brand name “StarOne.”“StarOne” in Surabaya on May 29, 2004 and in Jakarta on July 25, 2004, thereby creating a “duopoly system” in Indonesia’s fixed line domestic telecommunications market. As of the date ofDecember 31, 2004, Indosat only offers this Annual Report, Indosat was only offering this new service in Jakarta, Surabaya, but wasMalang and their surrounding areas. Based on amendment to the interconnection agreement between TELKOM and Indosat dated March 31, 2005, TELKOM has agreed to open interconnection with Indosat’s local fixed line service in certain areas such as Batam, Bandung, Medan, Balikpapan and Malang. Therefore, Indosat is expected to expand its service coverage to other Indonesian cities.
The end of TELKOM’s exclusive right to provide fixed-linecities in Indonesia. Indosat also commenced offering limited domestic long-distance services is expected to resultfor calls within its network in direct competition between TELKOM and Indosat for fixed-line customers and over time reduce the need for other telecommunications operators to interconnect with TELKOM’s fixed-line network.
late 2004.
Cellular |
The
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55
Operator | Operator | |||||||||||||||
Telkomsel | Indosat | Excelcomindo | Telkomsel | Indosat | Excelcomindo | |||||||||||
Launch date | May 1995 | November 1994(2) | October 1996 | May 1995 | November 1994(2) | October 1996 | ||||||||||
Licensed frequency bandwidth (GSM 900 & 1800) | 30 MHz | 15 MHz | 15 MHz | 30 MHz | 30 MHz | 25 MHz | ||||||||||
Licensed coverage | Nationwide | Nationwide | Nationwide | Nationwide | Nationwide | Nationwide | ||||||||||
Network coverage | Nationwide | Major cities in Significantly populated areas of Java and Bali, as well as major cities in Sumatera, Sulawesi and Kalimantan | Jakarta and primary business cities in Java, Bali, Lombok, Medan and Batam | Nationwide | Information not available | Information not available | ||||||||||
Market share (as of December 31, 2003)(1) | 51.0% | 31.9% | 15.7% | |||||||||||||
Subscribers (as of December 31, 2003)(1) | 9.6 million | 5.99 million | 2.95 million | |||||||||||||
Market share (as of December 31, 2004)(1) | 54% | 32% | 13% | |||||||||||||
Subscribers (as of December 31, 2004)(1) | 16.3 million | 9.8 million | 3.9 million |
(1) | |
(2) | In November 2003, Indosat and Satelindo merged, and Indosat has taken over Satelindo’s cellular operations. |
IDD |
fixed-linefixed line services to customers. TELKOM has upgraded some switching to have International Gateway capabilities in Batam, Jakarta and Surabaya. These gateways have received certificates of operation (sertifikat ULO) from the DGPT. In order to connect with overseas operators, TELKOM has built two microwave links to connect Batam-Singapore and Batam-Pangerang (Malaysia). In addition, TELKOM, SingTel and CAT developed the TIS submarine cable system in 2003 connecting Batam, Singapore and Thailand. TELKOM has also signed an agreement with Telekom Malaysia Berhad for the deployment and maintenance of a new submarine optical cable to connect Dumai (Indonesia) to Melaka (Malaysia), which is expected to bewas completed by the end ofin December 2004. TELKOM also extended its international cable by purchasing bandwidth capacity to connect with Hong Kong and TELKOM utilizes this capacity to connect to other countries, such as the United States. TELKOM isalso completed developing the ground segment to connect to the Intelsat Satellite.Satellite in December 2004. As a new player in IDD, TELKOM cooperates with some global operators to get direct or indirect connection to reach all offshore destinations. All these preparations have allowed TELKOM to begin offering customers IDD fixed-linefixed line services on June 7, 2004.VoIP
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56
Satellite
Other
63
57
also permits TELKOM to provide data communications services.
• | Tariffs for the provision of telecommunications services; and | |
• | Tariffs for provision of telecommunications networks. |
Tariffs for the Provision of Telecommunications Services |
MoC setsMoCI regulates prices and the maximum tariffs thatamount TELKOM can be chargedcharge is based on a tariff formula for telecommunications services in Indonesia. Telecommunications operators may charge customers at rates belowset the maximum tariff, although most operators tend to charge at the maximum rate.amount of tariff. In this regard, TELKOM’s operating divisionsbusiness units have authority to make adjustments to prices based on specific guidelines fixed by the MoC.directors of TELKOM.Fixed-lineFixed line Tariffs
Fixed-line
The Government establishes fixed-linefixed line tariffs by reference to a price cap formula that calculates the maximum average percentage increase in fixed-linefixed line tariffs for a particular year. The maximum increase typically equals the Indonesian Consumer Price Index (CPI) for the preceding year, as published by the Indonesian Central Bureau of Statistics, minus an efficiency factor (the “X-factor”), which the Government determines by taking into consideration certain factors including improvements in the cost efficiency of the services resulting from technological improvements, management efficiency, changes in the Rupiah-U.S. Dollar exchange rate, the interests of affected telecommunications operators and the purchasing power of customers.
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The actual tariffs chargeable by See Item 3. “Key Information — D. Risk Factors — Risks relating to TELKOM from February 1, 2002 to March 31, 2004, were:
Tariff Rate Structure (February 1, 2002 to March 31, 2004):
Installation and Monthly Charges:
its subsidiaries — TELKOM operates in a legal and regulatory environment that is undergoing significant reforms and such reforms may adversely affect TELKOM’s business.” | ||||||||||||
Usage charges:
On March 30, 2004, the Government through the ITRB, announced that it would allow operators to rebalance their tariffs, with the resulting weighted average of tariffs increasing by 9%. As a result, TELKOM has adjusted its fixed-linefixed line and fixed wireless tariffs, with local charges increasing by 28.2%, DLD tariffs decreasing by an average of 10%10.6% and monthly subscription charges increasing by varying amounts from 12%12.1% to 25%25.1%.
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Access charges | Business | Residential | Social | |||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||
Installation | 175,000 – 450,000 | 75,000 – 295,000 | 50,000 – 205,000 | |||||||||
Monthly Subscription | 38,400 – 57,600 | 20,600 – 32,600 | 12,500 – 18,500 |
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Price per Pulse | Pulse Duration | |||||||||
(Rp.) | ||||||||||
Local | ||||||||||
Up to 20 km | 250 | 3 min (off peak) | ||||||||
and 2 min (peak) | ||||||||||
Over 20 km | 250 | 2 min (off peak) | ||||||||
and 1.5 min (peak) |
Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Domestic Long-distance | ||||||||
0-20 km | 83 – 122 | 1 minute | ||||||
20-30 km | 122 – 163 | 1 minute | ||||||
30-200 km | 325 – 1,290 | 6 sec | ||||||
200-500 km | 460 – 1,815 | 6 sec | ||||||
Over 500 km | 570 – 2,270 | 6 sec |
ThereMoC whether fixed-line tariffs will be increased after 2004 or whetherMoCI when the Government intends to carry out its plan to increase fixed-line tariffs by 45.49% within three years of January 2002.the plan.CDMA Fixed Wireless Tariffs
Price Per Pulse | Pulse Duration | |||||
(Rp.) | ||||||
Local | 250 | 2 min (off peak) and 1.5 min (peak) |
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Rounding Time | ||||||||
Block Duration |
(Rp.) | ||||||||
Domestic | ||||||||
0-200 km | 325 – 1,290 | 6 sec | ||||||
200-500 km | 460 – 1,815 | 6 sec | ||||||
Over 500 km | 570 – 2,270 | 6 sec |
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Postpaid subscribers who use Public Data Network based dedicated lines for Internet access is Rp.5 per KBps.
Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Flexi to Flexi/Fixed Wireline: | ||||||||
Local | 260 | 30 sec | ||||||
Domestic Long-distance | ||||||||
0-200 km | 700 – 1,100 | 30 sec | ||||||
Over 200 km | 1,600 – 2,500 | 30 sec | ||||||
Flexi to mobile cellular: | ||||||||
Local | 650 – 810 | 30 sec | ||||||
Domestic Long-distance | ||||||||
0-200 km | 1,100 – 1,540 | 30 sec | ||||||
Over 200 km | 2,250 – 3,150 | 30 sec |
IDD Tariffs
Rounding Time | ||||||||||
Region | Price Per Minute | Block Duration | ||||||||
(Rp.) | ||||||||||
Africa | 5,090 – 6,440 | 6 sec | ||||||||
Americas and Caribbean | 5,090 – 7,470 | 6 sec | ||||||||
Asia and Oceania | 4,410 – 9,630 | 6 sec | ||||||||
Europe | 5,090 – 9,630 | 6 sec | ||||||||
Middle East | 5,090 – 8,460 | 6 sec |
Cellular Tariffs |
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61
ITRB has submitted a regulation draft to MoCI, and it is expected that the Government will announce the proposed framework in the near future. As cellular operators generally need a lead time of approximately six months to prepare for such a change, it is expected that the new regulation will likely be implemented in January 2006.
Activation | Rp.200,000 | ||
Monthly Charge (including frequency charge) | Rp.65,000/month | ||
Usage Charge: | |||
Air Time | Rp.325/minute | ||
Roaming | Rp.1,000/call plus incoming charge/minute | ||
Local Cellular Conversation | PSTN local tariff | ||
DLD Cellular Conversation | PSTN DLD tariff |
Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Mobile cellular to mobile cellular: | ||||||||
Local | 650 – 938 | 1 min | ||||||
Domestic Long-distance | ||||||||
30-200 km | 1,110 – 2,628 | 1 min | ||||||
Over 200 km | 1,220 – 3,083 | 1 min | ||||||
Mobile cellular to fixed line: | ||||||||
Local | 450 – 531 | 1 min | ||||||
Domestic Long-distance | ||||||||
30-200 km | 650 – 1,696 | 1 min | ||||||
200-500 km | 785 – 2,221 | 1 min | ||||||
Over 500 km | 895 – 2,676 | 1 min | ||||||
International Long-distance: | ||||||||
Group I | 7,500 – 8,000 | 1 min | ||||||
Group II | 11,000 – 12,000 | 1 min |
6267
Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Calls to mobile cellular: | ||||||||
Local | 1 min | |||||||
Domestic Long-distance | ||||||||
Zone 1 | 300 – 4,000 | 1 min | ||||||
Zone 2 | 300 – 4,500 | 1 min | ||||||
Calls to fixed line: | ||||||||
Local | 400 – 950 | 1 min | ||||||
Domestic Long-distance | ||||||||
30-200 km | ||||||||
1 min | ||||||||
200-500 km | 1 min | |||||||
Over 500 km | 1 min | |||||||
International Long-distance: | ||||||||
Group I | 7,500 – 8,000 | 1 min | ||||||
Group II | 11,000 – 12,000 | 1 min |
Leased Line Tariffs |
Maximum Tariff | |||||||
(Rp.) | |||||||
Installation charge | |||||||
Customer access | 600,000 – 700,000(1) | ||||||
Other operator access | 900,000 | ||||||
Monthly subscription charge | |||||||
Analog line | |||||||
Local (or up to 25 km) | 60,000 – 250,000(2) | ||||||
Inter-local (over 25 km) | 779,400 – 3,557,750(3) | ||||||
Digital line | |||||||
Local (or up to 25 km) | 380,000 – 172,268,000(4) | ||||||
Inter-local (over 25 km) | 1,009,850 – 2,308,628,250(5) |
(1) | Price differs by equipment provided by TELKOM. |
(2) | Price differs by user (private, other licensed operator, or government) and equipment provided by TELKOM. |
(3) | Price differs by user (private, other licensed operator, or government) and distance. |
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(4) | Price differs by user (private, other licensed operator, or government) and speed. |
(5) | Price differs by user (private, other licensed operator, or government), speed and distance. |
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VoIP Tariffs |
operators.operators, based on cost. TELKOM has launched its VoIP services, which currentlyas of the date of this Annual Report consists of TELKOM Global-017 and its cheaper alternative, TELKOMSave. TELKOM believes that the tariff for TELKOM Global-017 service and the TELKOMSave service are approximately 40% and 60%, respectively, of the tariff charged by IDD operators in Indonesia.Kiosk phone Tariffs
Satellite Tariffs |
1.251.15 million to US$1.5 million per transponder, although in some instances TELKOM may offer a discounted tariff.tariffs for long-term commitments or loyal customers.Broadband Access
TELKOMLink ADSL(1) | Activation Fee | Monthly Fee | Free Usage | |||||||||||||||||||||||||
Fees for Usage in | ||||||||||||||||||||||||||||
Monthly | Excess of | |||||||||||||||||||||||||||
SpeedyLink ADSL(1) | Activation Fee | Monthly Fee | Usage Allowance(1) | Monthly Allowance | ||||||||||||||||||||||||
(Rp.) | (Rp.) | (Rp.) | (Rp.) | (Rp.) | ||||||||||||||||||||||||
Limited 384 kbps | 250,000 | 250,000 | 500 MB | 200,000 | 200,000 | 500 MB – 1.0 GB | (2) | 500/MB | ||||||||||||||||||||
Limited 512 kbps | 250,000 | 300,000 | 1.0 GB | 200,000 | 350,000 | 2.0 GB | 500/MB | |||||||||||||||||||||
Unlimited 512 kbps | 500,000 | 1,200,000 | Unlimited | |||||||||||||||||||||||||
Unlimited 384 kbps | 2,500,000 | 1,520,000 | Unlimited | — |
AstiNet MMA(2) | Activation Fee | Monthly Fee | Free Usage | |||||||||
(Rp.) | (Rp.) | |||||||||||
Limited 384 kbps | 500,000 | 350,000 | 500 MB | |||||||||
Limited 512 kbps | 600,000 | 1,100,000 | 1.0 GB | |||||||||
Unlimited Silver | 2,500,000 | 3,800,000 | Unlimited | |||||||||
Unlimited Gold | 4,000,000 | 11,500,000 | Unlimited |
Fees for Usage in | ||||||||||||||||
Monthly | Excess of | |||||||||||||||
Speedy High Speed ADSL Internet Access | Activation Fee | Monthly Fee | Usage Allowance | Monthly Allowance | ||||||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||||||
Limited 384 kbps | 200,000 | 300,000 | 500 MB | 1,200/MB | ||||||||||||
Limited 384 kbps | 200,000 | 450,000 | 1.0 GB | 1,200/MB | ||||||||||||
Limited 512 kbps | 200,000 | 800,000 | 2.0 GB | 1,200/MB | ||||||||||||
Unlimited 384 kbps | 2,500,000 | 3,800,000 | Unlimited | — |
(1) | |
(2) |
Tariffs for Other Services |
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Tariffs for Interconnection and Access |
The
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Interconnection with |
Currently, theroutingnumbering plans for interconnection of the networks of various telecommunications operators among themselves and with TELKOM’s fixed-linefixed line network. Under the National Fundamental Technical Plan, all operators are permitted to interconnect with TELKOM’s fixed-linefixed line network for access thereto and to other networks, such as international gateways and the networks of other cellular operators. In addition, cellular operators may interconnect directly with other networks without connecting to TELKOM’s fixed-linefixed line network. TheAs of the date of this Annual Report, the fees for interconnection within TELKOM’s fixed-linefixed line network are currently set forth in Decree No. 506/1997, Decree No. 46/1998, Decree No. 37/1999 and Decree No. 30/2000, although cost-based2000.feesof local calls, the operator of the network on which the calls terminate receives an agreed amount per minute. In addition, with respect to interconnection for domestic long-distance calls from or to Indosat, pending the implementation of the duopoly system for long-distance calls, the retail revenue is kept by TELKOM and Indosat will receive for the local originating or local terminating calls an agreed amount per minute.to be charged beginning Januaryoperated on a “sender-keeps-all” basis. For DLD calls that originate on PT Bakrie Telecom’s network and terminate on TELKOM’s fixed line network, TELKOM receives 35% of the prevailing DLD tariff from such calls. For DLD calls that originate on TELKOM’s fixed line network, TELKOM retains 65% of the revenue from such calls. Since April 1, 2005, the interconnection scheme for interconnection has been changed to:• Local calls. The operator of the network on which the calls terminate receives an agreed amount per minute. • DLD calls that originate on TELKOM’s fixed line network. TELKOM shall pay certain amount per minute to PT Bakrie Telecom.
70
• | DLD calls that terminate on TELKOM’s network. TELKOM receives a certain percentage of the prevailing DLD tariff. |
Cellular Interconnection |
Fixed wireless networks may interconnect to TELKOM’s fixed-line network at TELKOM’s gateway. Currently, PT Bakrie Telecom (formerly Ratelindo) is the only other fixed wireless operators in Indonesia. Local calls between TELKOM’s fixed-line network and Ratelindo’s network are operated on a “sender keeps all” basis. For DLD calls that originate on Ratelindo’s network and transit TELKOM’s fixed-line network, TELKOM receives 35% of the prevailing DLD tariff from such calls. For DLD calls that originate
65
Since September 1, 1998, TELKOM has been receiving a share in Batam Bintan Telekomunikasi (“BBT”), which is a local operator with a special coverage area on Batam Island, for each successful call that transits or terminates on TELKOM’s fixed-line network. Under the interconnection agreement, TELKOM receives 75% of the prevailing DLD tariff for DLD calls that originate and terminate on TELKOM’s fixed-line network. For local interconnection calls, revenues are shared on a “sender keeps all” basis. For calls originating from BBT and terminating at a cellular network and vice versa which transit through TELKOM’s fixed-line network, TELKOM receives 50% of the local interconnection call tariff which amounts to 50% of the prevailing tariff for local pulse per minute for local calls and 60% of the prevailing DLD tariff for DLD calls. For DLD calls that originate from BBT terminating at a fixed cellular network which transit through TELKOM’s fixed-line network, TELKOM receives 50% of the prevailing DLD tariff. In addition, BBT is to receive 50% of TELKOM’s interconnection revenue (access and usage), for all incoming and outgoing international calls from and to BBT that transit through TELKOM’s fixed-line network. As discussed above, however, cost-based interconnection fees will be charged beginning on January 1, 2005 and TELKOM expects that the current fees may be adjusted.
Interconnection for international calls consists of access charges, usage charges and charges for Universal Service Obligations. The following table sets forth the current international interconnection tariff, effective as of December 1, 1998, for IDD calls which are routed through Indosat’s international gateways and which originate, transit or terminate on TELKOM’s fixed-linedomestic fixed line network, pursuant to Ministerial Decree No. 37 of 1999:
Description | Tariff | |||
Access Charge | Rp.850/successful call | |||
Usage Charge | Rp.550/ | |||
USO | Rp.750/ |
Pursuant71
In September 2002, TELKOM and INDOSAT signed an agreement for local fixed-line interconnection. Pursuant to the Agreement, for interconnection local calls, the operator of the network on which the calls terminate receives Rp.57 per minute. In addition, with respect to interconnection long distance calls from or to Indosat, pending the implementation of the duopoly system for long distance calls, the retail revenue is kept by TELKOM and Indosat will receive for the local originating or local terminating calls, Rp.240 per minute.
Satellite Phone Interconnection |
fixed-linefixed line network. However, cost-based interconnection charges will be imposed beginning on January 1, 2005 and TELKOM expects that the current fees may be adjusted.VoIP Interconnection
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As of December 31, 2003,2004, TELKOM had ownership interests in 16 companies, ten of which are10 consolidated subsidiaries and the remaining 6 aresix unconsolidated associated companies. The business activities of the ten consolidated subsidiaries (as further described below) are described as part of TELKOM’s business in this Form 20-F.20-F, as well as in Note 1c to the consolidated financial statements. For a description of the activities of TELKOM’s unconsolidated associated companies, please see “Unconsolidated Associated Companies” below.below and Note 10 to the consolidated financial statements.
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2003.2004. TELKOM’s ownership interests in associated companies may be increased or diluted as a result of TELKOM’s planned restructuring of its legal ownership interests in these companies to focus on phone, mobile and multimedia businesses.
Legal | ||||||||||||||||||||
Ownership (%) | ||||||||||||||||||||
Legal Ownership (%) | As of | |||||||||||||||||||
As of | December 31, | |||||||||||||||||||
Company | December 31, 2003 | Notes | Business Operations | 2004 | Notes | Business Operations | ||||||||||||||
Where TELKOM owns more than 50% or fully controls the company: | ||||||||||||||||||||
Consolidated subsidiaries: | ||||||||||||||||||||
PT AriaWest International (“AriaWest”) | 100.00 | (1) | Fixed-phone (KSO-III W. Java & Banten) | 100 | (1) | Fixed-phone (KSO-III West Java & Banten) | ||||||||||||||
PT Multimedia Nusantara (“Metra”) | 100.00 | (2) | Multimedia, special pay TV | 100 | (2) | Multimedia, pay TV | ||||||||||||||
PT Graha Sarana Duta (“GSD”) | 99.99 | Real estate, construction and services | 100 | Real estate, construction and services | ||||||||||||||||
PT Indonusa Telemedia (“Indonusa”) | 90.39 | (3) | Interactive multimedia, special pay TV | 90 | (3) | Interactive multimedia, special pay TV | ||||||||||||||
PT Dayamitra Telekomunikasi (“Dayamitra”) | 90.32 | Fixed-phone (KSO-VI Kalimantan) | 100 | (4) | Fixed-phone (KSO-VI Kalimantan) | |||||||||||||||
PT Telekomunikasi Selular (“Telkomsel”) | 65.00 | �� | GSM cellular phone services | 65 | GSM cellular phone services | |||||||||||||||
PT Napsindo Primatel Internasional (“Napsindo”) | 60.00 | (4) | Network Access Point | 60 | (5) | Network Access Point, Voice Over Data | ||||||||||||||
PT Infomedia Nusantara (“Infomedia”) | 51.00 | Telephone directory and other information services (electronic based business, call center and data segment) | 51 | Telephone directory and other information services (electronic based business, call center and data segment) | ||||||||||||||||
PT Pro Infokom Indonesia (“PII”) | 51.00 | (5) | Telecommunication & information services, especially e-Government, e-Indonesia programs and B2B | 51 | (6) | Telecommunication & information services, especially e-Government, e-Indonesia programs and B2B | ||||||||||||||
PT Pramindo Ikat Nusantara (“Pramindo”) | 45.00 | (6) | Fixed-phone (KSO-I Sumatera) | 100 | (7) | Fixed-phone (KSO-I Sumatera) | ||||||||||||||
Where TELKOM owns between 20% to 50%: | Where TELKOM owns between 20% to 50%: | |||||||||||||||||||
PT Patra Telekomunikasi Indonesia (“Patrakom”) | 30.00 | VSAT services | 30.00 | VSAT services | ||||||||||||||||
PT Citra Sari Makmur (“CSM”) | 25.00 | VSAT and other telecommunications services | 25.00 | VSAT and other telecommunications services | ||||||||||||||||
PT Pasifik Satelit Nusantara (“PSN”) | 22.57 | (7) | Satellite transponder & communications | 43.69 | (8) | Satellite transponder & communications | ||||||||||||||
Where TELKOM owns less than 20%: | Where TELKOM owns less than 20%: | Where TELKOM owns less than 20%: | ||||||||||||||||||
PT Mobile Selular Indonesia (“Mobisel”) | 7.44 | (8) | NMT-450 cellular and CDMA services | |||||||||||||||||
PT Batam Bintan Telekomunikasi (“Babintel”) | 5.00 | Fixed-phone (in Batam & Bintan islands) | ||||||||||||||||||
PT Pembangunan Telekomunikasi Ind. (“Bangtelindo”) | 3.18 | Construction and consulting | ||||||||||||||||||
PT Mandara Selular Indonesia (previously PT Mobile Selular Indonesia) (“Mobisel”) | 3.63 | (9) | NMT-450 cellular and CDMA services |
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Legal Ownership (%) | ||||||||||
As of | ||||||||||
Company | December 31, 2003 | Notes | Business Operations | |||||||
PT Telekomindo Selular Raya (“Telesera”) | 0.00 | (9) | AMPS cellular phone services | |||||||
PT Komunikasi Selular Indonesia (“Komselindo”) | 0.00 | (10) | AMPS cellular services | |||||||
PT Menara Jakarta (“MJ”) | 0.00 | (11) | Infrastructure for multimedia services | |||||||
PT Metro Selular Nusantara (“Metrosel”) | 0.00 | (12) | AMPS cellular services |
Legal | ||||||||||
Ownership (%) | ||||||||||
As of | ||||||||||
December 31, | ||||||||||
Company | 2004 | Notes | Business Operations | |||||||
PT Batam Bintan Telekomunikasi (“Babintel”) | 5.00 | Fixed-phone (in Batam & Bintan islands) | ||||||||
PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) | 3.18 | Construction and consulting | ||||||||
Bridge Mobile Pte. Ltd | 14.29 | Regional mobile services |
(1) | On July 31, 2003, TELKOM and the shareholders of | |
(2) | On April 8, 2003, TELKOM increased its ownership in | |
(3) | On August 8, 2003, TELKOM and PT Centralindo Pancasakti Cellular (“CPSC”) signed a | |
(4) | On December 14, 2004, TELKOM acquired 9.68% shares of Dayamitra from TM Communications (HK) Ltd., which increased TELKOM’s ownership in Dayamitra from 90.32% to 100%. One share in Dayamitra was transferred to Mr. Robby Rubama in order to comply with the legal requirement that Indonesian limited liability companies should have more than one shareholder. | |
(5) | TELKOM increased its ownership in | |
In January 2003, TELKOM, PT Indonesia Comnets Plus, | ||
On April 19, 2002, TELKOM and the shareholders of | ||
As part of the agreement signed on August 8, 2003 between TELKOM and |
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Pursuant to an Extraordinary General Meeting held on July 28, 2003, the shareholders of Mobisel agreed to restructure Mobisel. The restructuring program includes: (i) a debt to equity conversion involving accrued interconnection expenses owed by Mobisel to TELKOM; (ii) a new class of Series B shares being issued to the new shareholders while shares held by the existing shareholders are reclassified as Series A shares; and (iii) an equity investment of approximately US$2 million by PT Multi Investama. Following the completion of this restructuring program, TELKOM’s ownership in Mobisel was diluted from 25% to 7.44%. Effective on December 22, 2003, PT Mobile Selular Indonesia changed its corporate name to PT Mandara Selular Indonesia. In January 2004, Mobisel’s shareholders enacted resolutions approving the conversion of Mobisel’s debt to PT Property Java, Boston Investment Limited and Inquam (Indonesia) Limited Company to Series B shares. As a result, TELKOM’s ownership in Mobisel | ||
Unconsolidated Associated Companies |
PT Patra Telekomunikasi Indonesia |
currently owned by TELKOM (30%), Indosat (10%), PT Elnusa (40%) and PT Tanjung Mustika (20%). Patrakom provides satellite communication (VSAT) and related services and facilities to companies in various industries. As part of a continuous process of evaluation and restructuring by TELKOM of the status of its affiliates, as well as the Government’s policy to eliminate cross-ownership between TELKOM and Indosat, TELKOM is in the process of negotiation with other shareholders regarding a possible decrease or increase of ownership in Patrakom.PT Citra Sari Makmur (“CSM”)
19961986 and as of the date of this Annual Report is currently owned by TELKOM (25%), PT Tigatra (38.29%) and Media Trio (L) Inc. Malaysia (36.71%). CSM is incorporated in Indonesia and provides telecommunications services relating to VSAT applications and other telecommunications technology and related facilities.PT Pasifik Satelit Nusantara (“PSN”)
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Currently
PT Mandara Selular Indonesia (previously PT Mobile Selular |
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Effective December 22, 2003, Mobisel’s corporate name was changed to PT Mandara Selular Indonesia (“MSI”).
PT Batam Bintan Telekomunikasi |
currently owned by TELKOM (5%) and Batamindo Investment (95%). BBT provides telephony fixed line telecommunications services at Batamindo Industrial Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island which are special economic and tourist development zones on those islands. As at December 31, 2003,2004, Babintel had approximately 2,5752,590 subscribers.PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”)
D. PT Komunikasi Selular Indonesia (“Komselindo”)Property, Plant and Equipment
Komselindo was established on January 25, 1995 by TELKOM (35%) and PT Elektrindo Nusantara (“Elektrindo”) (65%) to operate an AMPS mobile cellular network which was previously operated pursuant to a revenue sharing arrangement between TELKOM and Elektrindo.
On June 14, 2002, Komselindo proposed a settlement plan to its creditors for debt restructuring through a debt to equity conversion. The debt to equity conversion included Komselindo liabilities to TELKOM amounting to Rp19.4 billion. Pursuant to an Extraordinary General Meeting held on August 30, 2002, the shareholders of Komselindo agreed to a rights issue. TELKOM did not exercise its right to subscribe for additional shares pursuant to the rights issue and as such, its ownership in Komselindo has been reduced to 14.20%.
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Following a share swap agreement signed on August 8, 2003 between TELKOM and PT Centralindo Pancasakti Cellular (“CPSC”), TELKOM transferred its 14.20% shareholding in Komselindo to CPSC. As a result of such transfer, TELKOM no longer owns any shares in Komselindo.
Metrosel was established in November 1995. As of December 31, 2002, Metrosel was owned by TELKOM (20.17%), CPSC (37.03%), Asia Link BV (35.00%), TELKOM’s Pension Fund (3.00%) and PT Dwimarga Dwi Utama (4.80%). Metrosel provides the AMPS services previously provided by TELKOM and CPSC pursuant to a revenue sharing arrangement in Central and East Java.
TELKOM transferred its switching operations to Metrosel in 1996 as payment for the purchase price of its equity interest in the company. Prior to 1996, TELKOM and Metrosel had a revenue sharing arrangement. Following the transfer in 1996, the revenue sharing arrangement was terminated. Under an agreement dated August 8, 2003 between TELKOM and CPSC, TELKOM transferred its 20.17% stake in Metrosel to CPSC. As a result of such transaction, TELKOM no longer owns any shares in Metrosel.
MJ was established on November 29, 1996. As of December 31, 2002, MJ was owned by TELKOM (21.34%), PT Indocitra Grahabawana (“Indocitra”) (54.44%), PT Indosat Mega Media (21.34%) and Yayasan Televisi Republik Indonesia (2.88%). MJ planned to construct and operate building towers and related telecommunications facilities. Since 1999, MJ has terminated its construction projects, pending improvement in the economic and social situation in Indonesia.
TELKOM sold its 21.34% ownership in MJ to Indocitra through a share-swap transaction in exchange for Indocitra’s 69.0% equity interest in Metra. The process was completed on April 8, 2003. As a result, TELKOM no longer owns any shares in MJ.
TELKOM increased its ownership interest in Telesera to 100% by acquiring 30.23% of Telesera shares from TELKOM Pension Fund on September 29, 2002. On August 8, 2003, TELKOM and CPSC signed a share-swap agreement pursuant to which TELKOM delivered 100% (25,000) of its shares in Telesera to CPSC. As a result of this share swap, TELKOM no longer owns any shares in Telesera.
D. Property, Plant and Equipment
Except for ownership rights granted to individuals in Indonesia, the title to land rests with the Indonesian State under the Basic Agrarian Law No. 5/1960. Land use is accomplished through landrights, notably rights to build (Hak Guna Bangunan) and rights to use (Hak Pakai), whereby the holder of the landright enjoys the full use of the land for a stated period of time, subject to renewal and extensions. In most instances, the landrights are freely tradeable and may be pledged as security under loan agreements.
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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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A. | Operating Results |
Overview
2002 |
• | the general economic situation in Indonesia, particularly continued high interest rates during 2002; | |
• | an increase in fixed line tariffs by 15%; | |
• | the growth in the Indonesian mobile cellular market and the corresponding increase in Telkomsel’s revenues; | |
• | the growth in TELKOM’s revenues from interconnection, data and Internet services; | |
• | the sale of a 12.72% equity interest in Telkomsel to SingTel; | |
• | the acquisition and subsequent consolidation of Pramindo (KSO I) in August 2002; and | |
• | the implementation of an early retirement program. |
2003 |
• | the increase in TELKOM’s interconnection revenues; | |
• | the continued growth of the Indonesian mobile cellular market and the corresponding increase in Telkomsel’s revenues; | |
• | the growth in TELKOM’s revenues from interconnection, data and Internet services; | |
• | the acquisition and subsequent consolidation of AriaWest (KSO III) in July 2003; | |
• | the continuation of TELKOM’s early retirement program; and |
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• | increased depreciation expense and operations and maintenance expenses associated with Telkomsel’s expansion of its network capacity. |
2004 |
2004 were significantly affected by:
• | the general economic situation in Indonesia, particularly the devaluation of the Rupiah during 2004; | |
• | an increase in fixed line tariffs by 9%; | |
• | increased competition among cellular operators, particularly in the prepaid market; | |
• | the growth in the Indonesian cellular market and the corresponding increase in Telkomsel’s revenues; | |
• | the growth in TELKOM’s revenues from interconnection, data and Internet services; | |
• | the amendment of KSO agreement with MGTI on January 20, 2004 which resulted in TELKOM obtaining the legal right to control financial and operating decisions of KSO IV, and subsequent consolidation of KSO IV; | |
• | the continuation of TELKOM’s early retirement program; and | |
• | increased depreciation expense and operations and maintenance expenses associated with Telkomsel’s expansion of its network capacity and an increase in TELKOM’s fixed assets due to TELKOM’s aggressive deployment of fixed wireless. |
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Economic Situation in Indonesia |
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• | in 2002, an appreciation from Rp.10,400 per US Dollar at December 31, 2001 to Rp.8,940 per US Dollar at December 31, 2002; | |
• | in 2003, an appreciation from Rp.8,940 per US Dollar at December 31, 2002 to Rp.8,465 per US Dollar at December 31, 2003; | |
• | in 2004, a depreciation from Rp.8,465 per US Dollar at December 31, 2003 to Rp.9,290 per US Dollar at December 31, 2004; |
Limited Increases in Tariffs |
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TELKOM’s interconnection revenues accounted for approximately 15.3% of TELKOM’s consolidated operating revenues for the year ended December 31, 2003, compared to 13.6% for the year ended December 31, 2002. The increase in interconnection revenues was primarily due to a 64.0% increase in interconnection charges paid to TELKOM by mobile cellular operators to Rp.3,908.3 billion. This more than offset a 46.6% decline in interconnection revenue from international calls to Rp.184.1 billion.
Growth of Indonesian Cellular Market and Increase in Telkomsel’s revenues |
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Increase in TELKOM’s interconnection revenues |
Increase in TELKOM’s data and Internet revenues |
for the year ended December 31,increased by 54.7% from 2003 were Rp.3,108.6 billion, anto 2004 and by 100.3% from 2002 to 2003. The increase of approximately 100.3% overin data and Internet revenues in 2004 was primarily due to a 61.6% increase in revenues generated from SMS services and a 64.4% increase in revenues for the year ended December 31, 2002. Thisfrom multimedia services. The increase in 2003 was primarily due to a 121.1% increase in revenues generated from SMS services and a 115.7% increase in revenues from TELKOM’s international VoIP services. Data and Internet revenues accounted for approximately 11.5% of TELKOM’s consolidated operating revenues for the year ended December 31, 2003, compared to 7.5% for the year ended December 31, 2002.
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Sale of 12.72% equity interest in Telkomsel to SingTel |
Singapore Telecom Mobile Pte Ltd (“SingTel Mobile”).Mobile. Following the sale, TELKOM’s ownership in Telkomsel reduced from 77.72% to 65%, while SingTel Mobile’s ownership interest increased from 22.28% to 35%. TELKOM received US$429 million in cash for the sale. As a result, TELKOM booked an accounting gain of Rp.3,196.4 billion related to the transaction, representing the difference between transaction value over the book value of the shares in Telkomsel. The taxable gain from this transaction was much lower than the accounting gain as the shares sold to SingTel Mobile had a tax basis equal to their market value at the time such shares were acquired from Indosat in 2001 as part of the cross-ownership transaction.Acquisition and Consolidation of KSO IV, III and I Early Retirement Program
Depreciation Expense and Operations and Maintenance Expense |
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began an aggressive deployment of fixed wireless in KSO III and KSO IV following TELKOM’s acquisitions of KSO III in July 2003 and KSO IV in January 2004.
The adjustments to our Indonesian GAAP consolidated financial statements for the years ended December 31, 2001 and 2002 set forth in Amendment No. 2 to our 2002 Annual Report on Form 20-F primarily related to the accounting for long service awards, deferred income taxes, and business acquisitions, as well as the assumptions underlying TELKOM’s post-retirement healthcare plan. As a result of the adjustments to our Indonesian GAAP financial statements, as set forth in Amendment No. 2 to our 2002 Annual Report on Form 20-F, our consolidated net income for the year ended December 31, 2001 was adjusted downward from Rp.4,250.1 billion to Rp.4,068.4 billion, while consolidated net income for the year ended December 31, 2002 was adjusted downwards from Rp.8,345.3 billion to Rp.8,039.7 billion. We also restated the amount of our stockholders’ equity as of December 31, 2001 from Rp.9,323.6 billion to Rp.9,081.0 billion, and as of December 31, 2002 from Rp.15,899.2 billion to Rp.14,613.6 billion.
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In addition to the restatements to TELKOM’s Indonesian GAAP financial statements described above, certain additional adjustments were required for U.S. GAAP purposes primarily relating to our accounting for revenue recognition, deferred income taxes, revenue sharing arrangements and business acquisitions, these adjustments are set forth in Amendment No. 2 to our 2002 Annual Report on Form 20-F. As a result of such adjustments, our consolidated net income under U.S. GAAP for the year ended December 31, 2001 was adjusted from Rp.4,036.6 billion to Rp.4,298.2 billion, while consolidated net income for the year ended December 31, 2002 was adjusted from Rp.9,274.2 billion to Rp.8,587.3 billion. Our stockholders’ equity under U.S. GAAP as of December 31, 2001 was adjusted from Rp.8,240.6 billion to Rp.7,765.5 billion, and as of December 31, 2002 from Rp.15,745.2 billion to Rp.13,910.9 billion.
Reclassifications
WeTELKOM also described in Amendment No. 2 to our 2002 Annual Report on Form 20-F20-F/ A the reclassification of certain accounts to conform with Indonesian GAAP and U.S. GAAP presentation requirements, but these reclassifications did not affect ourTELKOM’s consolidated net income for the yearsyear ended 2001 and 2002. Please refer to Amendment No. 2 to our 2002 Annual Report on Form 20-F for further information.
see “Item 15. Controls and Procedures — Reclassifications.”
Consolidation of TELKOM’s Financial Statements |
Foreign Exchange Translations |
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Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||
Operating Revenues | Operating Revenues | Operating Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone | Telephone | Telephone | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed lines | 6,415.1 | 39.4 | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 1,054.1 | Fixed lines | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 1,145.9 | |||||||||||||||||||||||||||||||||||||||||||
Cellular | 4,708.0 | 28.9 | 6,226.8 | 29.9 | 8,458.8 | 31.2 | 1,002.2 | Cellular | 6,226.8 | 29.9 | 8,458.8 | 31.2 | 10,421.3 | 30.7 | 1,121.8 | |||||||||||||||||||||||||||||||||||||||||||
Revenue under Joint Operation Schemes | 2,219.5 | 13.6 | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 176.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interconnection revenues | 1,423.7 | 8.7 | 2,831.3 | 13.6 | 4,162.1 | 15.3 | 493.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Joint Operation Schemes | Joint Operation Schemes | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 656.6 | 1.9 | 70.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interconnection | Interconnection | 2,831.3 | 13.6 | 4,162.1 | 15.3 | 6,188.0 | 18.2 | 666.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Data and Internet | Data and Internet | 673.2 | 4.1 | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 368.3 | Data and Internet | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 517.6 | ||||||||||||||||||||||||||||||||||||||||||
Network | Network | 415.0 | 2.6 | 316.1 | 1.5 | 517.9 | 1.9 | 61.4 | Network | 316.1 | 1.5 | 517.9 | 1.9 | 654.3 | 1.9 | 70.4 | ||||||||||||||||||||||||||||||||||||||||||
Revenue sharing arrangement | 264.3 | 1.6 | 263.8 | 1.3 | 258.5 | 1.0 | 30.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other telecommunications-related services | 165.0 | 1.1 | 221.0 | 1.1 | 226.9 | 0.8 | 26.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue-sharing arrangements | Revenue-sharing arrangements | 263.8 | 1.3 | 258.5 | 1.0 | 280.6 | 0.8 | 30.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other telecommunications services | Other telecommunications services | 221.0 | 1.1 | 226.9 | 0.8 | 293.2 | 0.9 | 31.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total Operating Revenues | 16,283.8 | 100.0 | 20,802.8 | 100.0 | 27,116.0 | 100.0 | 3,212.7 | Total Operating Revenues | 20,802.8 | 100.0 | 27,116.0 | 100.0 | 33,947.8 | 100.0 | 3,654.2 | |||||||||||||||||||||||||||||||||||||||||||
fixed-linefixed line services on May 13, 2004. As a result of the termination of TELKOM’s exclusive right to provide local and domestic long-distance service, Indosat, a competitor of TELKOM, will be entering the domestic long-distance market and on May 13, 2004 Indosat received its commercial license to provide domestic long-distance services.services on May 13, 2004 and began offering fixed wireless services in August 2004. TELKOM believes Indosat will enter the domestic long-distance market in the future. TELKOM expects that revenues from providing interconnection services to new entrants in the domestic local and domestic long-distance markets will increase and its market share of fixed line services will decrease slightly in the future because of the liberalization of these market.markets. With regard to IDD fixed-linefixed line services,
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Fixed Line Telephone Revenues |
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Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Line Telephone Revenues | Fixed Line Telephone Revenues | Fixed Line Telephone Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Local and domestic long-distance usage | Local and domestic long-distance usage | 5,225.7 | 32.1 | 5,447.9 | 26.2 | 6,561.8 | 24.2 | 777.5 | Local and domestic long-distance usage | 5,447.9 | 26.2 | 6,561.8 | 24.2 | 7,439.3 | 21.9 | 800.8 | ||||||||||||||||||||||||||||||||||||||||||
Monthly subscription charges | Monthly subscription charges | 997.7 | 6.2 | 1,474.8 | 7.1 | 1,948.8 | 7.2 | 230.9 | Monthly subscription charges | 1,474.8 | 7.1 | 1,948.8 | 7.2 | 2,934.9 | 8.6 | 315.9 | ||||||||||||||||||||||||||||||||||||||||||
Installation charges | Installation charges | 98.0 | 0.6 | 130.2 | 0.6 | 223.1 | 0.8 | 26.4 | Installation charges | 130.2 | 0.6 | 223.1 | 0.8 | 201.3 | 0.6 | 21.7 | ||||||||||||||||||||||||||||||||||||||||||
Phone cards | Phone cards | 25.4 | 0.1 | 29.3 | 0.1 | 34.4 | 0.1 | 4.1 | Phone cards | 29.3 | 0.1 | 34.4 | 0.1 | 15.6 | 0.1 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||
Others | Others | 68.3 | 0.4 | 181.9 | 0.9 | 128.8 | 0.5 | 15.2 | Others | 181.9 | 0.9 | 128.8 | 0.5 | 53.9 | 0.2 | 5.8 | ||||||||||||||||||||||||||||||||||||||||||
Total | 6,415.1 | 39.4 | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 1,054.1 | Total | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 1,145.9 | |||||||||||||||||||||||||||||||||||||||||||
Cellular Telephone Revenues |
charges and features.
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Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
Cellular Telephone Revenues | Cellular Telephone Revenues | Cellular Telephone Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Air time charges | Air time charges | 3,987.8 | 24.4 | 5,453.6 | 26.1 | 7,677.9 | 28.3 | 909.7 | Air time charges | 5,453.6 | 26.2 | 7,677.9 | 28.3 | 9,825.7 | 28.9 | 1,057.7 | ||||||||||||||||||||||||||||||||||||||||||
Monthly subscription charges | Monthly subscription charges | 581.6 | 3.6 | 593.3 | 2.9 | 580.5 | 2.2 | 68.8 | Monthly subscription charges | 593.3 | 2.9 | 580.5 | 2.2 | 448.5 | 1.3 | 48.3 | ||||||||||||||||||||||||||||||||||||||||||
Connection fee charges | Connection fee charges | 128.5 | 0.8 | 172.3 | 0.8 | 194.1 | 0.7 | 23.0 | Connection fee charges | 172.3 | 0.8 | 194.1 | 0.7 | 55.8 | 0.2 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||
Features | Features | 10.1 | 0.1 | 7.6 | 0.1 | 6.3 | 0.0 | 0.7 | Features | 7.6 | 0.0 | 6.3 | 0.0 | 91.3 | 0.3 | 9.8 | ||||||||||||||||||||||||||||||||||||||||||
Total | 4,708.0 | 28.9 | 6,226.8 | 29.9 | 8,458.8 | 31.2 | 1,002.2 | Total | 6,226.8 | 29.9 | 8,458.8 | 31.2 | 10,421.3 | 30.7 | 1,121.8 | |||||||||||||||||||||||||||||||||||||||||||
Joint Operation Scheme (“KSO”) Revenues |
• | Initial payment made by the KSO partners, which is amortized over the life of the KSO Agreement; | |
• | Minimum TELKOM Revenues (“MTR”), being a specified minimum payment, which is payable monthly; and | |
• | Distributable TELKOM Revenues (“DTR”), being a specified percentage of KSO revenues after deduction of operating expenses and MTR obligation, which is payable monthly. |
20012002 through 20032004 are set out below, with each item also expressed as a percentage of operating revenues:
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
KSO Revenues | KSO Revenues | KSO Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum TELKOM Revenues | Minimum TELKOM Revenues | 1,474.2 | 9.0 | 1,319.7 | 6.3 | 899.9 | 3.3 | 106.6 | Minimum TELKOM Revenues | 1,319.7 | 6.3 | 899.9 | 3.3 | 296.0 | 0.9 | 31.9 | ||||||||||||||||||||||||||||||||||||||||||
Share in distributable KSO Revenues | Share in distributable KSO Revenues | 732.9 | 4.5 | 801.0 | 3.9 | 583.0 | 2.2 | 69.1 | Share in distributable KSO Revenues | 801.0 | 3.9 | 583.0 | 2.2 | 349.5 | 1.0 | 37.6 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | Amortization of unearned initial investor payments under Joint Operation Schemes | 12.4 | 0.1 | 7.4 | 0.0 | 3.4 | 0.0 | 0.4 | Amortization of unearned initial investor payments under Joint Operation Schemes | 7.4 | 0.0 | 3.4 | 0.0 | 11.1 | 0.0 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||
Total | 2,219.5 | 13.6 | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 176.1 | Total | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 656.6 | 1.9 | 70.7 | |||||||||||||||||||||||||||||||||||||||||||
Interconnection Revenues |
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adjusted as a result of the new cost-based interconnection scheme but TELKOM can give no assurance regarding the impact, if any, of such adjustment on TELKOM’s business, financial condition, results of operations and prospects.
Year ended December 31, | |||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | ||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | |||||||||||||||||||||||
(billion) | (billion) | (billion) | |||||||||||||||||||||||||||
Interconnection Revenues | |||||||||||||||||||||||||||||
TELKOM(1) | 1,212.3 | 7.4 | 2,740.7 | 13.3 | 4,069.1 | 15.0 | 482.1 | ||||||||||||||||||||||
Telkomsel(2) | 211.4 | 1.3 | 90.6 | 0.3 | 93.0 | 0.3 | 11.0 | ||||||||||||||||||||||
Total | 1,423.7 | 8.7 | 2,831.3 | 13.6 | 4,162.1 | 15.3 | 493.1 | ||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Interconnection Revenues | |||||||||||||||||||||||||||||
Cellular | 2,241.5 | 10.8 | 3,908.3 | 14.4 | 5,351.6 | 15.7 | 576.1 | ||||||||||||||||||||||
International | 389.3 | 1.9 | 184.1 | 0.7 | 641.2 | 1.9 | 69.0 | ||||||||||||||||||||||
Other | 200.5 | 0.9 | 69.7 | 0.2 | 195.2 | 0.6 | 21.0 | ||||||||||||||||||||||
Total | 2,831.3 | 13.6 | 4,162.1 | 15.3 | 6,188.0 | 18.2 | 666.1 | ||||||||||||||||||||||
Data and Internet Revenues |
20012002 through 20032004 are set out below, with each item also expressed as a percentage of operating revenues:
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
Data and Internet Revenue | Data and Internet Revenue | Data and Internet Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SMS | SMS | 344.6 | 2.1 | 997.2 | 4.9 | 2,205.1 | 8.2 | 261.3 | SMS | 997.2 | 4.9 | 2,205.1 | 8.2 | 3,562.7 | 10.5 | 383.5 | ||||||||||||||||||||||||||||||||||||||||||
Multimedia | Multimedia | 218.3 | 1.3 | 337.8 | 1.6 | 494.7 | 1.8 | 58.6 | Multimedia | 337.8 | 1.6 | 494.7 | 1.8 | 813.3 | 2.4 | 87.5 | ||||||||||||||||||||||||||||||||||||||||||
VoIP | VoIP | 25.6 | 0.2 | 152.2 | 0.7 | 328.3 | 1.2 | 38.9 | VoIP | 152.2 | 0.7 | 328.3 | 1.2 | 318.9 | 0.9 | 34.3 | ||||||||||||||||||||||||||||||||||||||||||
ISDN | ISDN | 84.7 | 0.5 | 64.4 | 0.3 | 80.5 | 0.3 | 9.5 | ISDN | 64.4 | 0.3 | 80.5 | 0.3 | 113.9 | 0.4 | 12.3 | ||||||||||||||||||||||||||||||||||||||||||
Total | 673.2 | 4.1 | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 368.3 | Total | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 517.6 | |||||||||||||||||||||||||||||||||||||||||||
Network Revenues |
20012002 through 20032004 are set out below, with each item also expressed as a percentage of operating revenues:
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
Network Revenue | Network Revenue | Network Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Satellite transponder lease | Satellite transponder lease | 203.6 | 1.3 | 190.2 | 0.9 | 270.9 | 1.0 | 32.1 | Satellite transponder lease | 190.2 | 0.9 | 270.9 | 1.0 | 210.9 | 0.6 | 22.7 | ||||||||||||||||||||||||||||||||||||||||||
Leased line | 211.4 | 1.3 | 125.9 | 0.6 | 247.0 | 0.9 | 29.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Leased lines | Leased lines | 125.9 | 0.6 | 247.0 | 0.9 | 443.4 | 1.3 | 47.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 415.0 | 2.6 | 316.1 | 1.5 | 517.9 | 1.9 | 61.4 | Total | 316.1 | 1.5 | 517.9 | 1.9 | 654.3 | 1.9 | 70.4 | |||||||||||||||||||||||||||||||||||||||||||
8086
Revenues under |
RevenueRevenue Sharing Arrangementsrevenue-sharing arrangements are net share in revenue earned under revenue-sharing arrangements and amortization of unearned income under revenue-sharing arrangements. Revenues under revenue-sharing arrangements for the three years 20012002 through 20032004 are set out below, with each item also expressed as a percentage of operating revenues:
Year ended December 31, | |||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | ||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | |||||||||||||||||||||||
(billion) | (billion) | (billion) | |||||||||||||||||||||||||||
Revenues Under Revenue Sharing Arrangements | |||||||||||||||||||||||||||||
Net share in revenue earned under Revenue Sharing Arrangement | 191.5 | 1.2 | 211.5 | 1.0 | 200.1 | 0.8 | 23.7 | ||||||||||||||||||||||
Amortization of unearned income under Revenue Sharing Arrangement | 72.8 | 0.4 | 52.3 | 0.3 | 58.4 | 0.2 | 6.9 | ||||||||||||||||||||||
Total | 264.3 | 1.6 | 263.8 | 1.3 | 258.5 | 1.0 | 30.6 | ||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Revenues Under Revenue-Sharing Arrangements | |||||||||||||||||||||||||||||
Net share in revenue earned under Revenue-Sharing Arrangements | 211.5 | 1.0 | 200.1 | 0.8 | 198.6 | 0.6 | 21.4 | ||||||||||||||||||||||
Amortization of unearned income under Revenue-Sharing | |||||||||||||||||||||||||||||
Arrangements | 52.3 | 0.3 | 58.4 | 0.2 | 82.0 | 0.2 | 8.8 | ||||||||||||||||||||||
Total | 263.8 | 1.3 | 258.5 | 1.0 | 280.6 | 0.8 | 30.2 | ||||||||||||||||||||||
Other |
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating Expenses | Operating Expenses | Operating Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation | Depreciation | 2,869.8 | 17.6 | 3,473.4 | 16.7 | 4,779.5 | 17.6 | 566.3 | Depreciation | 3,473.4 | 16.7 | 4,779.5 | 17.6 | 6,438.5 | 19.0 | 693.1 | ||||||||||||||||||||||||||||||||||||||||||
Operations, maintenance and telecommunications services | Operations, maintenance and telecommunications services | 2,149.9 | 13.2 | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 395.6 | Operations, maintenance and telecommunications services | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 487.6 | ||||||||||||||||||||||||||||||||||||||||||
Personnel | Personnel | 2,281.2 | 14.0 | 4,387.6 | 21.1 | 4,440.1 | 16.4 | 526.1 | Personnel | 4,387.6 | 21.1 | 4,440.1 | 16.4 | 5,570.8 | 16.4 | 599.7 | ||||||||||||||||||||||||||||||||||||||||||
General and administrative | General and administrative | 1,343.5 | 8.3 | 1,146.3 | 5.5 | 2,078.8 | 7.7 | 246.3 | General and administrative | 1,146.3 | 5.5 | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 279.8 | ||||||||||||||||||||||||||||||||||||||||||
Marketing | Marketing | 220.0 | 1.3 | 375.1 | 1.8 | 502.9 | 1.9 | 59.6 | Marketing | 375.1 | 1.8 | 502.9 | 1.8 | 881.9 | 2.6 | 94.9 | ||||||||||||||||||||||||||||||||||||||||||
Total Operating Expenses | 8,864.4 | 54.4 | 11,672.6 | 56.1 | 15,140.0 | 55.8 | 1,793.9 | Total Operating Expenses | 11,672.6 | 56.1 | 15,140.0 | 55.8 | 20,020.6 | 59.0 | 2,155.1 | |||||||||||||||||||||||||||||||||||||||||||
Depreciation Expense |
87
81
Operations, Maintenance and Telecommunications Services |
expenseexpenses for the three years 20012002 through 20032004 are set out below, with each item also expressed as a percentage of operating revenues:
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | (million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations, Maintenance and Telecommunications Services Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations, Maintenance and Telecommunications Services Expenses | Operations, Maintenance and Telecommunications Services Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations and maintenance | Operations and maintenance | 891.4 | 5.5 | 1,042.6 | 5.0 | 1,744.8 | 6.4 | 206.7 | Operations and maintenance | 1,042.6 | 5.0 | 1,744.8 | 6.4 | 2,398.2 | 7.1 | 258.1 | ||||||||||||||||||||||||||||||||||||||||||
Radio frequency usage charges | Radio frequency usage charges | 101.3 | 0.6 | 292.7 | 1.4 | 371.7 | 1.4 | 44.1 | Radio frequency usage charges | 292.7 | 1.4 | 371.7 | 1.4 | 492.6 | 1.5 | 53.0 | ||||||||||||||||||||||||||||||||||||||||||
Electricity, gas and water | Electricity, gas and water | 157.1 | 1.0 | 219.9 | 1.1 | 300.4 | 1.1 | 35.6 | Electricity, gas and water | 219.9 | 1.1 | 300.4 | 1.1 | 385.7 | 1.1 | 41.5 | ||||||||||||||||||||||||||||||||||||||||||
Cost of phone cards | Cost of phone cards | 173.4 | 1.1 | 197.7 | 1.0 | 181.3 | 0.7 | 21.5 | Cost of phone cards | 197.7 | 1.0 | 181.3 | 0.7 | 366.7 | 1.1 | 39.5 | ||||||||||||||||||||||||||||||||||||||||||
Concession fees | Concession fees | 63.6 | 0.4 | 163.9 | 0.8 | 239.0 | 0.9 | 28.3 | Concession fees | 163.9 | 0.8 | 239.0 | 0.9 | 314.7 | 0.9 | 33.9 | ||||||||||||||||||||||||||||||||||||||||||
Insurance | Insurance | 67.8 | 0.4 | 142.9 | 0.7 | 157.1 | 0.6 | 18.6 | Insurance | 142.9 | 0.7 | 157.1 | 0.6 | 151.3 | 0.4 | 16.3 | ||||||||||||||||||||||||||||||||||||||||||
Leased line | 82.9 | 0.5 | 103.6 | 0.5 | 127.0 | 0.5 | 15.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Motor vehicles | 38.2 | 0.2 | 80.0 | 0.3 | 115.7 | 0.4 | 13.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Travel | 15.7 | 0.1 | 16.5 | 0.1 | 29.8 | 0.1 | 3.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone kiosks’ commissions | 520.9 | 3.2 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Leased lines | Leased lines | 103.6 | 0.5 | 127.0 | 0.5 | 132.8 | 0.4 | 14.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Vehicles and supporting facilities | Vehicles and supporting facilities | 80.0 | 0.3 | 115.7 | 0.4 | 181.7 | 0.5 | 19.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Traveling | Traveling | 16.5 | 0.1 | 29.8 | 0.1 | 42.2 | 0.1 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Others | Others | 37.6 | 0.2 | 30.4 | 0.1 | 71.9 | 0.2 | 8.5 | Others | 30.4 | 0.1 | 71.9 | 0.2 | 63.7 | 0.2 | 6.9 | ||||||||||||||||||||||||||||||||||||||||||
Total | 2,149.9 | 13.2 | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 395.6 | Total | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 487.6 | |||||||||||||||||||||||||||||||||||||||||||
Personnel |
88
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | (million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Personnel Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and related allowances | 883.4 | 5.4 | 1,410.7 | 6.8 | 1,574.2 | 5.8 | 186.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Vacation pay, incentives and other allowances | 364.7 | 2.2 | 655.5 | 3.2 | 816.1 | 3.0 | 96.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Severance for early retirement plan | 140.0 | 0.9 | 717.3 | 3.4 | 355.7 | 1.3 | 42.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Personnel Expenses | Personnel Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and related benefits | Salaries and related benefits | 1,410.7 | 6.8 | 1,574.2 | 5.8 | 1,796.9 | 5.3 | 193.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Vacation pay, incentives and other benefits | Vacation pay, incentives and other benefits | 655.5 | 3.2 | 816.1 | 3.0 | 1,156.1 | 3.4 | 124.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Early retirements | Early retirements | 717.3 | 3.4 | 355.7 | 1.3 | 243.5 | 0.7 | 26.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Long service awards | Long service awards | 94.5 | 0.6 | 289.9 | 1.4 | 207.1 | 0.8 | 24.5 | Long service awards | 289.9 | 1.4 | 219.2 | 0.8 | 159.3 | 0.5 | 17.2 | ||||||||||||||||||||||||||||||||||||||||||
Net periodic pension cost | Net periodic pension cost | 86.2 | 0.5 | 362.3 | 1.7 | 190.9 | 0.7 | 22.6 | Net periodic pension cost | 362.3 | 1.7 | 191.0 | 0.7 | 1,034.8 | 3.1 | 111.4 | ||||||||||||||||||||||||||||||||||||||||||
Employee income tax | Employee income tax | 132.9 | 0.8 | 201.5 | 1.0 | 468.8 | 1.7 | 55.5 | Employee income tax | 201.5 | 1.0 | 468.8 | 1.7 | 523.8 | 1.5 | 56.4 | ||||||||||||||||||||||||||||||||||||||||||
Net periodic post-retirement benefit cost | Net periodic post-retirement benefit cost | 374.5 | 2.3 | 616.5 | 3.0 | 641.4 | 2.4 | 76.0 | Net periodic post-retirement benefit cost | 616.5 | 3.0 | 641.4 | 2.4 | 492.2 | 1.5 | 53.0 | ||||||||||||||||||||||||||||||||||||||||||
Housing | Housing | 93.3 | 0.6 | 89.5 | 0.4 | 116.9 | 0.4 | 13.9 | Housing | 89.5 | 0.4 | 116.9 | 0.4 | 103.5 | 0.3 | 11.2 | ||||||||||||||||||||||||||||||||||||||||||
Medical | Medical | 81.7 | 0.5 | 28.2 | 0.1 | 9.7 | 0.0 | 1.2 | Medical | 28.2 | 0.1 | 9.7 | 0.1 | 12.2 | 0.0 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||
Other employee benefits | Other employee benefits | — | — | 4.4 | 0.0 | 11.5 | 0.0 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Others | Others | 30.0 | 0.2 | 16.2 | 0.1 | 59.3 | 0.2 | 7.0 | Others | 16.2 | 0.1 | 42.7 | 0.2 | 37.0 | 0.1 | 4.0 | ||||||||||||||||||||||||||||||||||||||||||
Total | 2,281.2 | 14.0 | 4,387.6 | 21.1 | 4,440.1 | 16.3 | 526.1 | Total | 4,387.6 | 21.1 | 4,440.1 | 16.4 | 5,570.8 | 16.4 | 599.7 | |||||||||||||||||||||||||||||||||||||||||||
82
General and Administrative |
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | (million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and Administrative Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and Administrative Expenses | General and Administrative Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for doubtful accounts and inventory obsolescence | Provision for doubtful accounts and inventory obsolescence | 342.9 | 2.1 | 31.1 | 0.1 | 326.4 | 1.2 | 38.7 | Provision for doubtful accounts and inventory obsolescence | 31.1 | 0.1 | 326.4 | 1.2 | 357.7 | 1.1 | 38.5 | ||||||||||||||||||||||||||||||||||||||||||
Professional fees | Professional fees | 325.3 | 2.0 | 219.0 | 1.0 | 115.6 | 0.4 | 13.7 | Professional fees | 219.0 | 1.0 | 115.6 | 0.4 | 137.3 | 0.4 | 14.8 | ||||||||||||||||||||||||||||||||||||||||||
Collection expenses | Collection expenses | 181.9 | 1.1 | 224.8 | 1.1 | 273.8 | 1.0 | 32.4 | Collection expenses | 224.8 | 1.1 | 273.8 | 1.0 | 359.0 | 1.1 | 38.6 | ||||||||||||||||||||||||||||||||||||||||||
Training, education and recruitment | Training, education and recruitment | 147.3 | 0.9 | 122.1 | 0.6 | 126.9 | 0.5 | 15.0 | Training, education and recruitment | 122.1 | 0.6 | 126.9 | 0.5 | 228.5 | 0.7 | 24.6 | ||||||||||||||||||||||||||||||||||||||||||
Travel | Travel | 92.8 | 0.6 | 111.4 | 0.5 | 144.7 | 0.5 | 17.1 | Travel | 111.4 | 0.5 | 144.7 | 0.6 | 192.6 | 0.6 | 20.7 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 55.7 | 0.4 | 188.0 | 0.9 | 730.7 | 2.7 | 86.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | Amortization of goodwill and other intangible assets | 188.0 | 0.9 | 730.7 | 2.7 | 872.3 | 2.6 | 93.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Security and screening | Security and screening | 48.8 | 0.3 | 77.1 | 0.4 | 110.3 | 0.4 | 13.1 | Security and screening | 77.1 | 0.4 | 110.3 | 0.4 | 143.9 | 0.4 | 15.5 | ||||||||||||||||||||||||||||||||||||||||||
Printing and stationery | Printing and stationery | 37.6 | 0.2 | 43.5 | 0.2 | 50.5 | 0.2 | 6.0 | Printing and stationery | 43.5 | 0.2 | 50.5 | 0.2 | 81.0 | 0.2 | 8.7 | ||||||||||||||||||||||||||||||||||||||||||
Meetings | Meetings | 26.5 | 0.2 | 31.7 | 0.2 | 42.8 | 0.2 | 5.1 | Meetings | 31.7 | 0.2 | 42.8 | 0.2 | 58.3 | 0.2 | 6.3 | ||||||||||||||||||||||||||||||||||||||||||
Research and development | Research and development | 39.5 | 0.2 | 10.5 | 0.1 | 9.1 | 0.0 | 1.1 | Research and development | 10.5 | 0.1 | 9.1 | 0.0 | 13.2 | 0.0 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||
General and social contribution | General and social contribution | 36.8 | 0.2 | 69.4 | 0.3 | 113.8 | 0.4 | 13.5 | General and social contribution | 69.4 | 0.3 | 113.8 | 0.4 | 111.8 | 0.3 | 12.0 | ||||||||||||||||||||||||||||||||||||||||||
Others | Others | 8.4 | 0.3 | 17.7 | 0.1 | 34.2 | 0.1 | 4.1 | Others | 17.7 | 0.1 | 34.2 | 0.1 | 44.2 | 0.1 | 4.8 | ||||||||||||||||||||||||||||||||||||||||||
Total | 1,343.5 | 8.3 | 1,146.3 | 5.5 | 2,078.8 | 7.6 | 246.3 | Total | 1,146.3 | 5.5 | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 279.8 | |||||||||||||||||||||||||||||||||||||||||||
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Marketing |
expense consistsexpenses consist of advertising, customer education promotions and customer researchother marketing expenses.
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||||||||||||||||||||||||||
Rp. | % | Rp. | % | Rp. | % | US$ | ||||||||||||||||||||||||||||||||||||||||||||||||||
(billion) | (billion) | (billion) | (million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing Expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising | 169.8 | 1.0 | 310.3 | 1.5 | 381.7 | 1.4 | 45.2 | 310.3 | 1.5 | 381.7 | 1.4 | 699.6 | 2.1 | 75.3 | ||||||||||||||||||||||||||||||||||||||||||
Customer education | 40.6 | 0.2 | 52.3 | 0.2 | 102.2 | 0.4 | 12.1 | 52.3 | 0.2 | 102.2 | 0.3 | 152.4 | 0.4 | 16.4 | ||||||||||||||||||||||||||||||||||||||||||
Others | 9.6 | 0.1 | 12.5 | 0.1 | 19.0 | 0.1 | 2.3 | 12.5 | 0.1 | 19.0 | 0.1 | 29.9 | 0.1 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||
Total | 220.0 | 1.3 | 375.1 | 1.8 | 502.9 | 1.9 | 59.6 | 375.1 | 1.8 | 502.9 | 1.8 | 881.9 | 2.6 | 94.9 | ||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2004 compared to year ended December 31, 2003 |
Operating Revenues. |
• | The consolidation of KSO IV revenues following the acquisition of KSO IV in January 2004, which contributed Rp.969.2 billion (US$104.3 million) to the increase in fixed lines revenues. | |
• | The 439.8% growth in the number of subscribers for fixed wireless, from 264,787 subscribers as of December 31, 2003 to 1,429,368 subscribers as of December 31, 2004, particularly the 454.2% growth in the number of lines in service in the non-KSO regions, resulting from the introduction of post-paid fixed wireless services only in the first quarter of 2003 and pre-paid fixed wireless service only in the third quarter of 2003. | |
• | TELKOM’s increase in fixed line tariffs in 2004 by a weighted average increase of 9%, with local charges increasing 28.2%, DLD tariffs decreasing by an average of 10% and monthly subscription charges increasing by varying amounts from 12.1% to 25.1%. |
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91
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• | salaries and related benefits increased by Rp.222.7 billion, or 14.2%, from Rp.1,574.2 billion in 2003 to Rp.1,796.9 billion in 2004; and | |
• | vacation pay, incentives and other benefits increased by Rp.340.0 billion, or 41.7%, from Rp.816.1 billion in 2003 to Rp.1,156.1 billion in 2004. |
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• | an increase in operations and maintenance expenses by Rp.653.4 billion to Rp.2,398.2 billion, an increase of 37.5%, due to an increase in Telkomsel’s operations and maintenance expenses arising from the growth in the Telkomsel’s overall capacity from 10.8 million subscribers as of December 31, 2003 to 17.9 million subscribers as of December 31, 2004. The number of Telkomsel’s BTSs grew by 28.7% from 4,820 units in 2003 to 6,205 units in 2004. Telkomsel also increased the number of its transmitting and receiving stations and switching and Intelligent Network equipment; | |
• | cost of phone cards increased by Rp.185.4 billion to Rp.366.7 billion in 2004, an increase of 102.3%, due to increases in expenses for TELKOM and Telkomsel prepaid cards. TELKOM’s prepaid card expenses included cost of fixed wireless cards (staterpack/voucher/replacement) of Rp.32.9 billion that contributed Rp.26.5 billion to the increase in cost of phone cards after TELKOM began its TELKOMFlexi prepaid program in September 2003. Telkomsel’s prepaid card expenses of Rp.316.5 billion contributed Rp.143.6 billion to the increase in cost of phone cards due to a substantial increase in subscribers, particularly prepaid subscribers; | |
• | total radio frequency usage charges increased by Rp.120.9 billion to Rp.492.6 billion in 2004, an increase of 32.5%, primarily due to a 22.0% increase in frequency usage charges by Telkomsel of Rp.77.8 billion from Rp.353.6 billion in 2003 to Rp.431.4 billion in 2004, in line with the 28.7% increase in the number of BTSs from 4,820 in 2003 to 6,205 in 2004; | |
• | electricity, gas and water charges increased by Rp.85.3 billion, or 28.4%, from Rp 300.4 billion in 2003 to Rp 385.7 billion in 2004, reflecting primarily the consolidation of the gas electricity and water charges of KSO IV, as well as an increase in electricity and gas rates in 2004 compared to 2003; and | |
• | total concession fees increased by Rp.75.7 billion to Rp.314.7 billion in 2004, an increase of 31.7%, which is in line with the increase in operating revenues. |
• | amortization of goodwill and other intangible assets increased by Rp.141.6 billion to Rp.872.3 billion, or 19.4%, mainly due to amortization of additional intangible assets arising from the acquisitions of AriaWest in July 2003, KSO IV and the remaining 9.68% interest in Dayamitra; | |
• | training, education and recruitment expenses increased by Rp.101.6 billion to Rp.228.5 billion, or 80.1%, following an increase in employees training programs. TELKOM increased its employee training programs primarily due to an organizational transformation towards more of a customer centric approach, additional training to improve internal controls as discussed in Item 15, “Controls and Procedures”, additional training and education expenses resulting from the acquisition of KSO IV and the necessary training because of new technologies; | |
• | collection expenses increased by Rp.85.2 billion to Rp.359.0 billion, an increase of 31.1%, generally in line with the growth in TELKOM’s fixed line subscriber base and Telkomsel’s mobile cellular subscriber base, but also reflecting higher fees charged by third party collection agents used in some regional divisions; |
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• | travel expenses increased by Rp.47.9 billion, or 33.1%, to Rp 192.6 billion in 2004, primarily due to an increase in domestic travel cost by Rp.35.2 billion; | |
• | security and screening expenses increased by Rp.33.6 billion, or 30.5%, to Rp.143.9 billion in 2004, primarily due to an increase in the salary of security guards by Rp.29.3 billion; | |
• | provision for doubtful accounts and inventory obsolescence increased by Rp.31.3 billion, or 9.6%, to Rp.357.7 billion in 2004, primarily due to an increase in TELKOM and Telkomsel customer defaults as subscriber numbers increased; and | |
• | printing and stationery expenses increased by Rp.30.5 billion, or 60.4%, to Rp.81.0 billion in 2004, primarily due to an increase in printing and photocopy expenses by Rp.20.0 billion, as well as an increase in stationery expenses by Rp.10.0 billion. |
Operating Income and Operating Margin |
Other Income (Charges) |
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Income Before Tax and Pre-Tax Margin |
Income Tax Expense |
Minority Interest in Net Income of Subsidiaries |
Net Income |
Equity |
96
Year ended December 31, 2003 compared to year ended December 31, 2002 |
Operating Revenues. |
83
• | increases of 18.0% and 13.0% in usage for DLD and local call services, respectively, which generate revenue based on number of pulses. | |
• | 9.4% growth in the number of fixed lines in service in the non-KSO and KSO regions, including kiosk phones, from 7,750,035 lines as of December 31, 2002 to 8,479,115 lines as of December 31, 2003, particularly 23.1% growth in the number of fixed lines in service in the non-KSO regions, which led to a 71.3% increase in installation fees, to Rp.223.1 billion. | |
• | the consolidation of KSO III Unit revenues, as a result of TELKOM’s acquisition of AriaWest on July 31, 2003, which contributed Rp.482.3 billion |
97
84
85
98
• | salaries and related benefits increased by Rp.163.5 billion to Rp.1,574.2 billion, | |
• | vacation pay, incentives and other | |
• | employee income tax increased by Rp.267.3 billion to Rp.468.8 billion, |
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99
Expenses.
• | an increase in operations and maintenance expenses by Rp.702.2 billion to Rp.1,744.8, | |
• | total radio frequency usage charges increased by Rp.79.0 billion to Rp.371.7 billion | |
• | total concession fees increased by Rp.75.1 billion to Rp.239.0 billion | |
• | electricity, gas |
Expenses.
• | amortization of goodwill and other intangible assets increased by Rp.542.7 billion to Rp.730.7 billion, | |
• | provision for doubtful accounts and inventory obsolescence increased by Rp.295.3 billion to Rp.326.4 billion | |
• | collection | |
• | general and social contribution increased by Rp.44.4 billion to Rp.113.8 billion, | |
• | security and screening increased by Rp.33.2 billion to Rp.110.3 billion, |
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• | professional fees decreased by Rp.103.4 billion, or 47.2%, to Rp.115.6 billion |
100
Expenses.
Operating Income and Operating Margin |
(US$1,419.0 million) in 2003. TELKOM’s operating margin increased from 43.9% in 2002 to 44.2% in 2003 due to the higher growth of operating revenues (30.4%) compared to the growth of operating expense (29.7%).Other Income (Expense)(Charges)
billion.
88
101
• | Rp.248.6 billion | |
• | gain on sale of fixed assets (net), primarily property, plant and equipment, amounting to Rp.182.9 |
Income Before Tax and Pre-Tax Margin
(US$1,356.9 million) in 2003. Pre-tax margin decreased from 56.5% in 2002 to 42.2% in 2003.Income Tax Expense
(US$457.5 million) in 2003. The effective tax rate increased from 24.7% of income before tax in 2002 to 33.7% of income before tax in 2003. The increase in the effective tax rate was mainly attributable to the absence in 2003 of the one-time adjustment to TELKOM’s taxable income arising from the sale by TELKOM to SingTel in 2002 of a 12.72% interest in Telkomsel. Without the adjustment, TELKOM’s effective tax rate for 2002 would have been 32.9%.Minority Interest in Net Income of Subsidiaries
(US$178.1 million) in 2003. The increase was primarily due to the significant increase in the net income of Telkomsel for 2003.Net Income
As a result of the foregoing, net income declined by Rp.1,952.5 billion, or 24.3%, from Rp.8,039.7 billion in 2002 to Rp.6,087.2 billion (US$721.2 million) in 2003. TELKOM’s margin decreased from 38.7% in 2002 to 22.5% in 2003. The lower net income resulted in a decrease in basic earnings per share from Rp.797.6Rp.398.8 in 2002 to Rp.603.9Rp.302.0 in 2003. The basic earnings per share for 2003 and the previous years have been restated to reflect a two-for-one stock split as resolved in the AGMS on July 30, 2004.
billion.
89102
Total operating revenues grew by Rp.4,519.0 billion, or 27.8%, from Rp.16,283.8 billion in 2001 to Rp.20,802.8 billion in 2002. Operating revenues increased for fixed line, cellular, interconnection and data and Internet. The decline in KSO revenue was primarily due to the elimination of MTR and DTR revenue recognized by TELKOM for the KSO I Unit as a result of TELKOM’s acquisition and consequent consolidation of Pramindo in 2002.
Fixed Line Telephone Revenues.
Fixed line revenues grew by Rp.848.9 billion, or an increase of 13.2%, from Rp.6,415.1 billion in 2001 to Rp.7,264.1 billion in 2002. Local and domestic long distance revenue for 2002 increased by Rp.222.2 billion, or an increase of 4.3%, from Rp.5,225.7 billion in 2001 to Rp.5,447.9 billion in 2002. Monthly subscription charges increased by Rp.477.2 billion, or an increase of 47.8%, from Rp.997.7 billion in 2001 to Rp.1,474.8 billion in 2002. Installation charges increased by Rp.32.2 billion, or an increase of 32.9%, from Rp.98.0 billion in 2001 to Rp.130.2 billion in 2002.
The increases were primarily attributable to:
Revenues from phone cards for 2002 increased by Rp.3.8 billion to Rp.29.3 billion, an increase of 15.0% compared to 2001. The increase in phone card revenues was primarily due to a one-time expense incurred by TELKOM in 2001 for the termination of a revenue sharing arrangement with a vendor that previously issued phone cards on behalf of TELKOM, as well as the consolidation of the revenues of Regional Division I in 2002. Revenue from others increased by Rp.113.5 billion to Rp.181.9 billion, an increase of 166.1% compared to 2001. Revenue from others increased significantly due to an increase in revenue from premium-paid calls.
Cellular Telephone Revenues.
Cellular telephone revenues grew by Rp.1,518.8 billion, or an increase of 32.3%, from Rp.4,708.0 billion in 2001 to Rp.6,226.8 billion in 2002. Air time charges for 2002 increased by Rp.1,465.8 billion to Rp.5,453.6 billion, an increase of 36.8% compared to 2001. Monthly subscription charges increased by Rp.11.8 billion to Rp.593.3 billion, an increase of 2.0%. Connection fee charges increased by Rp.43.8 billion to Rp.172.3 billion, an increase of 34.0%.
The increases were primarily attributable to:
As a result of the higher rate of growth in the number of prepaid subscribers, the proportion of prepaid subscribers increased from 73.4% in 2001 to 84.6% in 2002. As a result of the change in the
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Interconnection Revenues.
Net interconnection revenues grew by Rp.1,407.6 billion, or an increase of 98.9%, from Rp.1,423.7 billion in 2001 to Rp.2,831.3 billion in 2002. Net interconnection revenues comprises net interconnection revenues from TELKOM’s fixed line network (after eliminating net interconnection revenues for interconnections with Telkomsel’s mobile cellular network) and net interconnection revenues from Telkomsel’s mobile cellular network (after eliminating net interconnection expense from interconnections with TELKOM’s fixed line network).
Net interconnection revenues from TELKOM’s fixed line network increased by Rp.1,528.4 billion to Rp.2,740.7 billion, an increase of 126.1% compared to 2001. This increase primarily resulted from an increase in cellular phone traffic and the consolidation of Pramindo. Net interconnection revenue from Telkomsel’s mobile cellular network decreased by Rp.120.8 billion to Rp.90.6 billion, a decrease of 57.1%, due to the additional elimination of revenues related to consolidation of KSO I.
In 2002 as compared to 2001, interconnection revenues involving international direct dialing IDD calls increased by 195.0%, from Rp.116.8 billion to Rp.344.5 billion primarily due to an increase in incoming IDD traffic.
KSO Revenues.
KSO revenues declined by Rp.91.5 billion, or 4.1%, from Rp.2,219.5 billion in 2001 to Rp.2,128.1 billion in 2002. MTR decreased by Rp.154.5 billion, or 10.5%, from Rp.1,474.2 billion in 2001 to Rp.1,319.7 billion in 2002. DTR increased by Rp.68.0 billion, or 9.3%, from Rp.732.9 billion in 2001 to Rp.801.0 billion in 2002. Amortization of unearned initial payments decreased by Rp.5.0 billion to Rp.7.4 billion, a decrease of 40.3%.
The decrease in KSO revenues was attributable to the acquisition of Pramindo (KSO Unit I) in 2002 as well as the acquisition of Dayamitra (KSO Unit VI) in May 2001 and primarily reflected consolidated KSO revenues from these KSO units that were consolidated to TELKOM under fixed line revenues rather than under KSO revenues.
Fixed lines in service in the KSO regions increased 7.0%, from 3,269,033 lines at December 31, 2001 to 3,497,819 lines at December 31, 2002, if KSO I Unit and KSO VI Unit are included, or 5.1%, from 1,941,227 lines to 2,039,608 lines, if KSO I Unit and KSO VI are excluded.
Data and Internet Revenues.
Data and Internet revenues grew by Rp.878.4 billion, or 130.5%, from Rp.673.2 billion in 2001 to Rp.1,551.6 billion in 2002, mainly attributed from the significant growth in SMS and VoIP services. SMS revenues for 2002 increased by Rp.652.6 billion to Rp.997.2 billion, an increase of 189.4%. Multimedia revenues for 2002 increased by Rp.119.5 billion to Rp.337.8 billion, an increase of 54.7% compared to 2001 that was driven by additional subscribers. VoIP revenues for 2002 increased by Rp.126.6 billion to Rp.152.2 billion, an increase of 494.8% compared to 2001 as TELKOM only introduced its VoIP services at the end of 2001.
Network Revenues.
Network revenues declined by Rp.98.8 billion, or 23.8%, from Rp.415.0 billion in 2001 to Rp.316.1 billion in 2002. Satellite transponder revenues for 2002 declined by Rp.13.3 billion to Rp.190.2 billion, a decline of 6.6% compared to 2001, primarily due to a reduction in the number of subscribers resulting from an over-supply of satellite transponders, as well as the impact of Rupiah appreciation against the U.S. Dollar in the U.S. Dollar-denominated tariff. Leased line revenues for 2002 declined by Rp.85.5 billion to Rp.125.9 billion, a decline of 40.5% compared to 2001, as a result of further
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Revenues under Revenue Sharing Arrangements (“PBH”).
Revenues under Revenue Sharing Arrangements decreased by Rp.0.5 billion, or 0.2%, from Rp.264.3 billion in 2001 to Rp.263.8 billion in 2002, mainly due to the termination of certain revenue sharing arrangements. Net share for revenue earned under revenue sharing arrangement for 2002 increased by Rp.20.0 billion to Rp.211.5 billion, an increase of 10.5% compared to 2001 due to an increase in the number of lines in service and the applicable tariffs during 2002. Amortization of unearned income under revenue sharing arrangements for 2002 decreased by Rp.20.5 billion to Rp.52.3 billion, a decline of 28.2% compared to 2001, due to the termination of certain revenue sharing arrangements.
Other Telecommunications-related Services Revenues.
Other telecommunications-related service revenues increased by Rp.56.0 billion, or 33.9%, from Rp.165.0 billion in 2001 to Rp.221.0 billion in 2002 mainly due to an increase in revenue from call centers, as well as an increase in revenue from telephone directory services. In addition, there was also a decrease in telex and telegram usage due to the increase usage of facsimile.
Operating Expenses.
Total operating expenses grew by Rp.2,808.2 billion, or 31.7%, from Rp.8,864.4 billion in 2001 to Rp.11,672.6 billion in 2002. The increase was mainly attributable to a substantial increase in personnel expense, as well as increases in marketing, depreciation and operation, maintenance and telecommunications services expense, slightly offset by a decline in general and administrative expense.
Personnel Expenses.
Personnel expenses grew by Rp.2,106.3 billion, or 92.3%, from Rp.2,281.2 billion in 2001 to Rp.4,387.6 billion in 2002. The main contributor to the increase are:
(i) The increase of non-recurring employee expenses:
(ii) The increase of recurring employee expenses:
Meanwhile, employee income tax increased by Rp.68.6 billion to Rp.201.5 billion, an increase of 51.7%, reflecting primarily increase in salary and the benefits paid under the early-retirement program.
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Other components of personnel expenses did not contribute significantly to operating expenses in 2002.
Depreciation Expense.
Depreciation expenses grew by Rp.603.6 billion, or 21.0%, from Rp.2,869.8 billion in 2001 to Rp.3,473.4 billion in 2002, primarily as a result of the consolidation of Pramindo’s depreciation expense amounting to Rp.93.2 billion, as well as the increase of Telkomsel’s depreciation expense amounting to Rp.467.9 billion reflecting continued capital expenditures.
Operations, Maintenance and Telecommunications Services Expense.
Operation, maintenance and telecommunications services expenses grew by Rp.140.3 billion, or 6.5%, from Rp.2,149.9 billion in 2001 to Rp.2,290.2 billion in 2002. The increase was mainly attributable to:
Distributors and telephone kiosk’ commissions decreased by Rp.520.9 billion due to the change in the Company’s policy for sales through distributors and telephone kiosks. Previously, the Company compensated through the payment of commissions which were proportional to the revenues earned through the kiosk phones. In 2002, the Company changed its policy and implemented the MoC Decree No. KM 46/2002 that provides a maximum of 70% of the phone kiosk basic tariff for domestic calls and up to 92% for international calls.
Other components of operation, maintenance and telecommunications service expense did not contribute significantly to operating expenses in 2002.
General and Administrative Expense.
General and administrative expense declined by Rp.197.2 billion, or 14.7%, from Rp.1,343.5 billion in 2001 to Rp.1,146.3 billion in 2002. In particular, the following events took place in 2002:
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Other components of general and administrative expenses did not contribute significantly to operating expenses in 2002.
Marketing Expense.
Marketing expense grew by Rp.155.1 billion, or 70.5%, from Rp.220.0 billion in 2001 to Rp.375.1 billion in 2002. The main contributors to the increase were the TELKOM Group marketing campaign which also included Telkomsel and Infomedia, the consolidation of Pramindo marketing expense that amounted to Rp.6.1 billion and the increase of marketing expense in several subsidiaries such as Telkomsel, which increased by Rp.59.1 billion, or 70.0% and in Infomedia from zero in 2001 to Rp.87.4 billion in 2002.
As a result of the foregoing, operating income grew by Rp.1,710.8 billion, or 23.1%, from Rp.7,419.4 billion in 2001 to Rp.9,130.2 billion in 2002. TELKOM’s operating margin decreased from 45.6% in 2001 to 43.9% in 2002 due to the higher growth of operating expense (31.7%) compared to the growth of operating revenue (27.8%).
Other income (net) grew by Rp.3,488.2 billion from a net charge of Rp.869.5 billion in 2001 to a net income of Rp.2,618.7 billion in 2002. The main components of other income and charges are gain on sale of long-term investment in Telkomsel and interest expense. TELKOM’s interest expense increased in 2002 from Rp.1,329.6 billion to Rp.1,582.7 billion, an increase of Rp.253.1 billion, or 19.0%, but this increase was offset by a gain on sales of long-term investment in Telkomsel of Rp.3,196.4 billion in 2002 compared to nil in 2001 and a gain on foreign exchange-net of Rp.556.6 billion in 2002 compared to a loss on foreign exchange-net of Rp.378.7 billion in 2001 primarily due to the impact of Rupiah appreciation to TELKOM’s net liability position in foreign currency. There is no assurance that future interest expense will be similarly offset by these gains.
Gain on Sale of Long Term Investment in Telkomsel.
Gain on sale of long term investment represents the gain by TELKOM on the sale of a 12.72% shareholding in Telkomsel, which amounted to Rp.3,196.4 billion, for which there was no comparable amount in 2001.
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Interest Income.
Interest income declined by Rp.91.8 billion, or 16.1%, from Rp.571.6 billion in 2001 to Rp.479.8 billion in 2002, reflecting primarily lower average interest rates offered in 2002 compared to 2001.
Interest Expense.
Interest expenses grew by Rp.253.1 billion, or 19.0%, from Rp.1,329.6 billion in 2001 to Rp.1,582.7 billion in 2002, reflecting primarily: (i) additional interest payable on promissory notes issued to the selling stockholders of Pramindo; (ii) additional interest expense from issuance of IDR bonds, guaranteed notes and other credit facilities obtained, in each case by TELKOM and Telkomsel in 2002; and (iii) interest expense related to the outstanding purchase price owed to Indosat in connection with the cross-ownership transaction.
Gain (Loss) on Foreign Exchange-net.
Gain (loss) on foreign exchange-net increased by Rp.935.3 billion from a net loss of Rp.378.7 billion in 2001 to a net gain of Rp.556.6 billion in 2002, reflecting primarily Rupiah appreciation during 2002 compared to 2001.
Equity in Net Income (Loss) of Associated Companies.
TELKOM’s equity in net income (loss) of associated companies increased by Rp.90.3 billion from a net loss of Rp.85.7 billion in 2001 to a net gain of Rp.4.6 billion in 2002. In 2001, TELKOM recognized a loss reflecting the reduction in the value of TELKOM’s investment in Komselindo.
Other components of equity in net income (loss) of associated companies did not contribute significantly to Other Income and Charges in 2002.
Others (Net).
Others (net) decreased by Rp.388.9 billion, or 110.2%, from other income (net) of Rp.352.9 billion in 2001 to other expense (net) of Rp.36.0 billion in 2002. In 2002, Others (net) included the following significant income and expense items:
Other components of Others (Net) did not contribute significantly to Other Income (Charges) in 2002.
As a result of the foregoing, income before tax grew by Rp.5,199.0 billion, or 79.4%, from Rp.6,549.9 billion in 2001 to Rp.11,748.9 billion in 2002. Pre-tax margin increased from 40.2% in 2001 to 56.5% in 2002.
Income tax expense grew by Rp.892.1 billion, or 44.5%, from Rp.2,006.9 billion in 2001 to Rp.2,899.0 billion in 2002. The effective tax rate declined from 30.6% of income before tax in 2001 to 24.7% of income before tax in 2002. The decrease in effective tax rate was mainly attributable to a low
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Minority interest in the net income of subsidiaries increased by Rp.335.6 billion, or 70.7%, from Rp.474.6 billion in 2001 to Rp.810.2 billion in 2002. The increase was primarily due to the decrease in ownership of Telkomsel as a result of the sale by TELKOM of a 12.72% shareholding in Telkomsel, increasing the minority interest in Telkomsel.
Net Income.
As a result of the foregoing, net income grew by Rp.3,971.3 billion, or 97.6%, from Rp.4,068.4 billion in 2001 to Rp.8,039.7 billion in 2002 principally due to the gain of Rp.3,196.4 billion through the sale of a 12.72% shareholding in Telkomsel. TELKOM’s margin increased from 25.0% in 2001 to 38.7% in 2002. The higher net income resulted in an increase in basic earnings per share from Rp.403.6 in 2001 to Rp.797.6 in 2002.
Equity.
Total shareholders’ equity increased by Rp.5,532.6 billion, or 60.9%, from Rp.9,081.0 billion in 2001 to Rp.14,613.6 billion in 2002. The increase in total shareholders’ equity was attributable primarily to net income for the year 2002 of Rp.8,039.7 billion and a decrease in the difference in value of restructuring transactions between entities under common control of Rp.296.0 billion related to the agreement by TELKOM to acquire 100% of Pramindo. In June 2002, TELKOM declared a cash dividend of Rp.2,125.1 billion.
Retained Earnings.
Appropriated and unappropriated retained earnings grew by Rp.5,944.6 billion, or 64.5%, from Rp.9,214.2 billion in 2001 to Rp.15,128.9 billion in 2002.
Reconciliation to U.S. GAAP
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||||||||||||||
Net income in accordance with | ||||||||||||||||||||||||||||||||
Indonesian GAAP | 4,068.4 | 8,039.7 | 6,087.2 | 721.2 | 8,039.7 | 6,087.2 | 6,129.2 | 659.8 | ||||||||||||||||||||||||
U.S. GAAP | 4,298.2 | 8,587.3 | 5,790.6 | 686.1 | 8,587.3 | 5,790.6 | 6,468.6 | 696.3 |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2003 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||||||||||||||
Equity in accordance with | ||||||||||||||||||||||||||||||||
Indonesian GAAP | 9,081.0 | 14,613.6 | 17,312.9 | 2,051.3 | 14,613.6 | 17,312.9 | 20,261.3 | 2,181.0 | ||||||||||||||||||||||||
U.S. GAAP | 7,765.5 | 13,910.9 | 16,284.7 | 1,929.5 | 13,910.9 | 16,284.7 | 19,570.9 | 2,106.7 |
96
Termination Benefits |
Foreign Exchange Differences Capitalized to Property under Construction |
Interest Capitalized on Property under Construction |
for qualifying assets. Qualifying assets areshould be those that take a substantial period of time to constructget ready for theirits intended use or sale (i.e., minimum of 12 months).months. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying
103
Revenue-Sharing Arrangements |
97
revenue sharingrevenue-sharing arrangements under U.S. GAAP and Indonesian GAAP, the Company’s consolidated income before tax under U.S. GAAP would have been Rp.44.0 billion higher in 2001, Rp.68.0 billion higher in 2002, and Rp.23.2 billion higher in 2003 respectively.and Rp.155.4 billion higher in 2004.Revaluation of Property, Plant and Equipment
Pension |
104
Equity in Net Income |
Land rights |
98
Equipment to be Installed |
Revenue Recognition |
105
Goodwill |
Capital Leases |
99
and Rp.6.9 billion higher in 2003.2003 and Rp.3.4 billion lower in 2004.Acquisition of Dayamitra
The
expense since May 17, 2001.
106
Reversal of Difference Due to Change of Equity in Associated Companies |
Asset Retirement Obligations |
The Company and its subsidiaries identified their Asset Retirement Obligations by reviewing contractual agreements to identify whether the Company and its subsidiaries are required to settle any obligations as a result of the prevailing laws, statute, ordinance, written or by legal construction of a contract under the doctrine of promissory estoppel.
Deferred Income Taxes |
100
Impairment of Assets |
107
Gain |
2004, respectively, due to the inclusion of the gain (loss) on disposal of property, plant and equipment in the determination of operating income.
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Rp. million | Rp. million | Rp. million | Rp. million | Rp. million | Rp. million | |||||||||||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP | 4,068,391 | 8,039,709 | 6,087,227 | 8,039,709 | 6,087,227 | 6,129,209 | ||||||||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||||||||||||
Termination benefits | 140,000 | 530,981 | (670,981 | ) | 530,981 | (670,981 | ) | — | ||||||||||||||||
Capitalization of foreign exchange differences, net of related depreciation of (76,732) million, (79,797) million and (76,756) million, respectively | 74,987 | 107,365 | 76,756 | |||||||||||||||||||||
Capitalization of foreign exchange differences, net of related depreciation of (Rp.79,797) million, (Rp.76,756) million and (Rp.75,870) million, respectively | 107,365 | 76,756 | 1,587 | |||||||||||||||||||||
Interest capitalized on property under construction, net of related depreciation of (Rp.3,061) million, (Rp.8,787) million and (Rp.13,392) million, respectively | 43,045 | 39,077 | 26,802 | |||||||||||||||||||||
Revenue-sharing arrangements | 67,959 | 23,159 | 155,369 | |||||||||||||||||||||
Revaluation of property, plant and equipment | 3,929 | — | — | |||||||||||||||||||||
Pension | 111,415 | (109,334 | ) | 313,870 | ||||||||||||||||||||
Equity in net income (loss) of associated companies | (182 | ) | (170 | ) | (177 | ) | ||||||||||||||||||
Amortization of land rights | (11,781 | ) | (10,212 | ) | (13,907 | ) | ||||||||||||||||||
Depreciation of equipment to be installed | 9,706 | — | — | |||||||||||||||||||||
Revenue recognition | (89,274 | ) | (53,226 | ) | 54,159 | |||||||||||||||||||
Goodwill | 21,269 | 21,270 | 21,270 | |||||||||||||||||||||
Capital leases | 14,241 | 6,882 | (3,435 | ) | ||||||||||||||||||||
Adjustment for consolidation of Dayamitra | (9,270 | ) | (24,476 | ) | (72,361 | ) | ||||||||||||||||||
Reversal of difference due to change of equity in associated companies | (65,158 | ) | (38,425 | ) | — | |||||||||||||||||||
Asset retirement obligations | — | (848 | ) | (848 | ) |
101108
2001 | 2002 | 2003 | |||||||||||
Rp. million | Rp. million | Rp. million | |||||||||||
Interest capitalized on property under construction, net of related depreciation of (nil), (3,061) million and (8,787) million, respectively | 19,690 | 43,045 | 39,077 | ||||||||||
Revenue-sharing arrangements | 43,999 | 67,959 | 23,159 | ||||||||||
Revaluation of property, plant and equipment | 4,095 | 3,929 | — | ||||||||||
Pension | (19,640 | ) | 111,415 | (109,334 | ) | ||||||||
Equity in net income/(loss) of associated companies | (3,786 | ) | (182 | ) | (170 | ) | |||||||
Amortization of landrights | (6,409 | ) | (11,781 | ) | (10,212 | ) | |||||||
Depreciation of equipment to be installed | — | 9,706 | — | ||||||||||
Revenue recognition | 81,429 | (89,274 | ) | (53,226 | ) | ||||||||
Goodwill | — | 21,269 | 21,270 | ||||||||||
Capital leases | — | 14,241 | 6,882 | ||||||||||
Adjustment for Dayamitra accounted at 100% | (4,191 | ) | (9,270 | ) | (24,476 | ) | |||||||
Reversal of difference due to change of equity in associated companies | — | (65,158 | ) | (38,425 | ) | ||||||||
Asset retirement obligations | — | — | (848 | ) | |||||||||
Deferred income tax: | |||||||||||||
Deferred income tax on equity method investments | — | — | 119,456 | ||||||||||
Deferred income tax effect on U.S. GAAP adjustments | (100,942 | ) | (220,724 | ) | 323,089 | ||||||||
229,232 | 513,521 | (297,983 | ) | ||||||||||
Minority interest | 577 | 34,029 | 1,396 | ||||||||||
Net adjustments | 229,809 | 547,550 | (296,587 | ) | |||||||||
Net income in accordance with U.S. GAAP | 4,298,200 | 8,587,259 | 5,790,640 | ||||||||||
Net income per share — in full Rupiah amount | 426.41 | 851.91 | 574.47 | ||||||||||
Net income per ADS (20 Series B shares per ADS) — in full Rupiah amount | 8,528.17 | 17,038.21 | 11,489.40 | ||||||||||
2002 | 2003 | 2004 | |||||||||||
Rp. million | Rp. million | Rp. million | |||||||||||
Deferred income tax: | |||||||||||||
Deferred income tax on equity method investments | — | 119,456 | (11,234 | ) | |||||||||
Deferred income tax effect on U.S. GAAP adjustments | (220,724 | ) | 323,089 | (113,712 | ) | ||||||||
513,521 | (297,983 | ) | 357,383 | ||||||||||
Minority interest | 34,029 | 1,396 | (18,019 | ) | |||||||||
Net adjustments | 547,550 | (296,587 | ) | 339,364 | |||||||||
Net income in accordance with U.S. GAAP | 8,587,259 | 5,790,640 | 6,468,573 | ||||||||||
Net income per share — in full Rupiah amount(1) | 425.96 | 287.23 | 320.86 | ||||||||||
Net income per ADS (40 Series B shares per ADS) — in full Rupiah amount(1) | 17,038.21 | 11,489.40 | 12,834.47 | ||||||||||
(1) The prior years’ net income per share has been restated to reflect a two-for-one stock split as resolved in the AGMS on July 30, 2004. 20022003 and 20032004 are shown below:
2002 | 2003 | 2003 | 2004 | |||||||||||||||
Rp. million | Rp. million | Rp. million | Rp. million | |||||||||||||||
Equity according to the consolidated balance sheets prepared under Indonesian GAAP | Equity according to the consolidated balance sheets prepared under Indonesian GAAP | 14,613,617 | 17,312,877 | Equity according to the consolidated balance sheets prepared under Indonesian GAAP | 17,312,877 | 20,261,342 | ||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | U.S. GAAP adjustments — increase (decrease) due to: | U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||||
Early retirement benefits | 670,981 | — | ||||||||||||||||
Capitalization of foreign exchange differences — net of related depreciation | Capitalization of foreign exchange differences — net of related depreciation | (627,229 | ) | (550,473 | ) | Capitalization of foreign exchange differences — net of related depreciation | (550,473 | ) | (548,886 | ) | ||||||||
Interest capitalized on property under construction — net of related depreciation | Interest capitalized on property under construction — net of related depreciation | 62,735 | 101,812 | Interest capitalized on property under construction — net of related depreciation | 101,812 | 128,614 | ||||||||||||
Revenue-sharing arrangements | Revenue-sharing arrangements | (470,855 | ) | (447,696 | ) | Revenue-sharing arrangements | (447,696 | ) | (292,327 | ) | ||||||||
Revaluation of property, plant and equipment: | Revaluation of property, plant and equipment: | Revaluation of property, plant and equipment: | ||||||||||||||||
Increment | (664,974 | ) | (664,974 | ) | Increment | (664,974 | ) | (664,974 | ) | |||||||||
Accumulated depreciation | 664,974 | 664,974 | Accumulated depreciation | 664,974 | 664,974 | |||||||||||||
Pension | Pension | 231,490 | 122,156 | Pension | 122,156 | 436,026 | ||||||||||||
Equity in net loss of associated companies | (18,082 | ) | (18,252 | ) | ||||||||||||||
Equity in net income (loss) of associated companies | Equity in net income (loss) of associated companies | (18,252 | ) | (18,429 | ) | |||||||||||||
Amortization of land rights | Amortization of land rights | (65,211 | ) | (79,118 | ) | |||||||||||||
Revenue recognition | Revenue recognition | (768,548 | ) | (714,389 | ) | |||||||||||||
Goodwill | Goodwill | 42,539 | 63,809 | |||||||||||||||
Capital leases | Capital leases | 21,123 | 17,688 | |||||||||||||||
Adjustment for consolidation of Dayamitra | Adjustment for consolidation of Dayamitra | (38,718 | ) | (61,728 | ) | |||||||||||||
Asset retirement obligations | Asset retirement obligations | (848 | ) | (1,696 | ) |
102109
2002 | 2003 | ||||||||
Rp. million | Rp. million | ||||||||
Amortization of land rights | (54,999 | ) | (65,211 | ) | |||||
Revenue recognition | (715,322 | ) | (768,548 | ) | |||||
Goodwill | 21,269 | 42,539 | |||||||
Capital leases | 14,241 | 21,123 | |||||||
Adjustment for Dayamitra accounted at 100% | (14,242 | ) | (38,718 | ) | |||||
Asset retirement obligations | — | (848 | ) | ||||||
Deferred income tax: | |||||||||
Deferred income tax on equity method investments | — | 52,186 | |||||||
Deferred income tax effect on U.S. GAAP adjustments | 132,736 | 455,825 | |||||||
(767,277 | ) | (1,094,105 | ) | ||||||
Minority interest | 64,524 | 65,920 | |||||||
Net adjustments | (702,753 | ) | (1,028,185 | ) | |||||
Equity in accordance with U.S. GAAP | 13,910,864 | 16,284,692 | |||||||
2003 | 2004 | ||||||||
Rp. million | Rp. million | ||||||||
Deferred income tax: | |||||||||
Deferred income tax on equity method investments | 52,186 | 39,343 | |||||||
Deferred income tax effect on U.S. GAAP adjustments | 455,825 | 334,900 | |||||||
(1,094,105 | ) | (696,193 | ) | ||||||
Minority interest | 65,920 | 5,763 | |||||||
Net adjustments | (1,028,185 | ) | (690,430 | ) | |||||
Equity in accordance with U.S. GAAP | 16,284,692 | 19,570,912 | |||||||
B. Liquidity and Capital Resources
B. | Liquidity and Capital Resources |
• | capital expenditures for existing and new network and backbone infrastructure, including a backbone transmission network on Ring JASUKA (Jawa, Sumatra and Kalimantan), the expansion of TELKOM’s CDMA | |
• | debt service requirements relating to existing indebtedness, including two-step loans, | |
• | installment payments of the purchase price for shares of | |
• | payments | |
• | fixed monthly payments to MGTI pursuant to the amended and restated agreement for KSO IV, commencing | |
• | payment of call option price through monthly payment beginning in December 2004 and ending March 2006 relating to the acquisition of 9.68% shares of Dayamitra. |
While still uncertain, liquidity
103
110
Defaults and Waivers of Defaults under our Debt Facilities |
104111
Year Ended December 31, | |||||||||||||||||
2001 | 2002 | 2003 | 2003 | ||||||||||||||
Rp. | Rp. | Rp. | US$ | ||||||||||||||
(billion) | (billion) | (billion) | (million) | ||||||||||||||
Net cash flows: | |||||||||||||||||
from operating activities | 7,012.6 | 10,864.5 | 12,852.5 | 1,522.8 | |||||||||||||
from investing activities | (6,115.8 | ) | (6,050.0 | ) | (7,305.9 | ) | (865.6 | ) | |||||||||
from financing activities | (1,662.8 | ) | (2,670.2 | ) | (6,177.4 | ) | (731.9 | ) | |||||||||
Change in cash and cash equivalents | (766.0 | ) | 2,144.3 | (630.8 | ) | (74.7 | ) | ||||||||||
Effect of foreign exchange changes | 76.6 | (89.5 | ) | 26.2 | 3.1 | ||||||||||||
Cash and cash equivalents, beginning of period | 4,333.7 | 3,644.3 | 5,699.1 | 675.2 | |||||||||||||
Cash and cash equivalents, end of Period | 3,644.3 | 5,699.1 | 5,094.5 | 603.6 |
Year Ended December 31, | |||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | ||||||||||||||
Net cash flows: | |||||||||||||||||
from operating activities | 10,864.5 | 12,852.5 | 16,051.5 | 1,727.8 | |||||||||||||
from investing activities | (6,050.0 | ) | (7,305.9 | ) | (9,598.1 | ) | (1,033.2 | ) | |||||||||
from financing activities | (2,670.2 | ) | (6,177.4 | ) | (6,904.9 | ) | (743.2 | ) | |||||||||
Change in cash and cash equivalents | 2,144.3 | (630.8 | ) | (451.5 | ) | (48.6 | ) | ||||||||||
Effect of foreign exchange changes on cash and cash equivalents | (89.4 | ) | 26.2 | 213.1 | 22.9 | ||||||||||||
Cash and cash equivalents, beginning of year | 3,644.2 | 5,699.1 | 5,094.5 | 548.4 | |||||||||||||
Cash and cash equivalents, end of year | 5,699.1 | 5,094.5 | 4,856.1 | 522.7 |
Net Cash Flows from Operating Activities |
Rp.7,012.6 billion in 2001, Rp.10,864.5 billion in 2002, and Rp.12,852.5 billion in 2003 and Rp.16,051.5 billion (US$1,522.81,727.8 million) in 2003. The2004. In 2003, the growth in operating cash flows principally resulted from higher cash receipts from operating revenues as a result of the expansion of TELKOM’s fixed wireline business, growth in its mobile cellular business conducted through Telkomsel, higher interconnection revenues from mobile cellular operators and greater data and Internet revenues due to increased SMS usage, as well as the acquisitionsacquisition of Dayamitra in 2001, Pramindo in 2002 and AriaWest in 2003. TheseIn 2004, the growth in operating cash flows principally resulted from higher cash receipts from operating revenues as a result of an increase in other services (data and Internet revenues), the expansion of TELKOM’s fixed wireline business as well as the acquisition of KSO IV, growth in its mobile cellular business conducted through Telkomsel and higher interconnection revenues from mobile cellular operators. In both 2003 and 2004, these higher cash receipts were partially offset by rising cash payments for operating expenses.Year ended December 31, 2004 compared to year ended December 31, 2003. • an increase of Rp.2,731.4 billion, or 69.5%, in cash receipts from other services, primarily due to an increase in cash receipts from data and Internet services, particularly from greater SMS usage among Telkomsel subscribers; • an increase of Rp.1,882.7 billion, or 23.0%, in cash receipts from fixed lines telephone services, primarily from the increase in the number of subscribers for fixed wireline and fixed wireless services, as well as from the acquisition of KSO IV; • an increase of Rp.1,562.6 billion, or 37.2%, in cash receipts from interconnection, primarily due to an increase in interconnection fees collected from mobile cellular operators; and • an increase of Rp.1,572.3 billion, or 17.6%, in cash receipts from cellular, due to growth in mobile cellular business conducted through Telkomsel.
112
• | an increase of Rp.3,408.8 billion, or 38.5%, in cash payments for operating expenses, which is in line with the increase in operating expenses (excluding depreciation); and | |
• | a decrease of Rp.648.1 billion, or 54.2%, in cash receipts from joint operation schemes, primarily due to the acquisition of KSO IV. |
Year ended December 31, 2003 compared to year ended December 31, 2002. |
• | an increase of Rp.2,798.5 billion, or 19.5%, in cash receipts from telephone services, primarily from the increase in the number of subscribers for cellular and fixed wireless services, as well as from the acquisition of AriaWest; | |
• | an increase of Rp.2,506.7 billion, or 147.7%, in cash receipts from interconnection, primarily due to an increase in interconnection fees collected from mobile cellular operators; and | |
• | an increase of Rp.2,800.0 billion, or 247.3%, in cash receipts from other services, primarily due to an increase in cash receipts from data and Internet services, particularly from greater SMS usage among Telkomsel |
• | an increase of Rp.3,061.3 billion, or 52.8%, in cash payments for operating expenses, which had the effect of increasing cash outflows from operating activities. |
In 2002 compared to 2001, net cash flows from operating activities increased by Rp.3,929.1 billion, or 56.0%, primarily due to:
105
On balance, the foregoing movements in cash flows were partially attributable to the consolidation of Dayamitra’s cash flows into TELKOM’s consolidated financial statements in 2001 and Pramindo’s in 2002. Cash inflows in 2002 were also partly offset by a reduction in interest received of Rp.110.7 billion, or 18.7%.
Net Cash Flows from Investing Activities |
Year ended December 31, 2004 compared to year ended December 31, 2003. |
• | a decrease of Rp.1,609.9 billion, or 84.9%, in the cash proceeds from investments and the maturity of time deposits; and | |
• | an increase of Rp.1,063.4 billion for payments of advances for purchase of property, plant and equipment. |
113
Year ended December 31, 2003 compared to year ended December 31, 2002. |
• | an increase of Rp.2,381.9 billion, or 36.0%, in cash used for capital expenditures; | |
• | an increase of Rp.397.3 billion, or 26.5%, in the cash proceeds from investments and the maturity of time deposits; and | |
• | a decrease of Rp.1,542.7 billion, or 69.4%, in cash used for the purchase of marketable securities and placements in time deposits. |
In the year ended December 31, 2002 compared to the year ended December 31, 2001, net cash flows used in investment activities slightly decreased by Rp.65.8 billion, or 1.1%, primarily due to:
106
In 2002, payment of advance for investment in shares of stock of Rp.230.2 billion reflects the payment for option of Tomen’s share in Dayamitra (Rp.33.7 billion) and payment to AriaWest’s shareholders related to the CSPA (Rp.196.5 billion) for the acquisition of AriaWest.
Net Cash Flows from Financing Activities |
Rp.1,662.8 billion, Rp.2,670.2 billion, and Rp.6,177.4 billion and Rp.6,904.9 (US$731.9743.2 million) in 2001, 2002, 2003 and 2003,2004, respectively. In all three years, net cash flows from financing activities were driven primarily by repaymentrepayments of currentoutstanding indebtedness and by payments of cash dividends. In 2003,2004, cash flow used in financing activities increased by Rp.3,507.2Rp.727.5 billion, or 131.4%11.8%, primarily resulting from a 96.2%288.0% increase in the payment for promissory notes to Rp.1,513.1 billion and a 60.6% increase in paymentrepayment of cash dividends to Rp.3,738.6 billion. These increases offset a Rp.956.8 billion decrease in payment for long-term indebtedness to Rp.1,536.9Rp.5,963.7 billion. This increase was partially offset by a Rp.2,453.0 billion increase in proceeds from borrowings and a Rp.1,080.0 billion increase in proceeds from medium-term notes.RepaymentRepayments of Current Indebtedness.
In 2001, 2002 and depreciation of the Rupiah in 2004 compared to 2003.
• | two-step loans of Rp.2,180.2 billion; | |
• | liabilities of business acquisitions of AriaWest, Pramindo, Dayamitra and KSO IV of Rp.1,893.4 billion; | |
• | Rp.3,293.9 billion for payment of bank loans; | |
• | Rp.172.5 billion for payment of Dayamitra’s suppliers’ credit loans; | |
• | Rp.52.5 billion for payment of Dayamitra’s bridging loan; and | |
• | Rp.9.1 billion for payment of other long-term debts. |
114
Payment of Cash Dividends and General Reserve. |
company’sCompany’s annual shareholder meeting, as follows:
Dividend | Total Cash | Dividend | General | |||||||||||||
Date of AGM | Year | Dividend | per Share | Reserve | ||||||||||||
(Rp. Billion) | (Rp.) | (Rp. Billion) | ||||||||||||||
May 10, 2001 | 2000 | 888.654 | 88.16 | 127.0 | ||||||||||||
June 21, 2002 | 2001 | 2,125.055 | 210.81 | 425.0 | ||||||||||||
May 9, 2003 | 2002 | 3,338.109 | 331.16 | 813.7 |
Dividend | Total Cash | Dividend | General | |||||||||||||
Date of AGMS | Year | Dividends | per Share(1) | Reserve | ||||||||||||
(Rp. Billion) | (Rp.) | (Rp. Billion) | ||||||||||||||
June 21, 2002 | 2001 | 2,125.1 | 210.81 | 425.0 | ||||||||||||
May 9, 2003. | 2002 | 3,338.1 | 331.16 | 813.7 | ||||||||||||
July 30, 2004 | 2003 | 3,043.6 | 301.95 | 121.7 |
In(1) Dividend per share for 2001, 2002 and 2003 were prior to the two-for-one stock split as resolved in the AGMS on July 30, 2004. Escrow Account.Accounts.
107
CDMA project starting in July 2004.
Current Assets |
• | an increase in trade accounts receivable from third parties of Rp.478.0 billion, or 19.7%, from Rp.2,422.0 billion at December 31, 2003 to Rp.2,900.0 billion (US$312.2 million) at December 31, 2004; | |
• | an increase in prepaid expenses of Rp.198.4 billion, or 46.2%, from Rp.429.7 billion at December 31, 2003 to Rp.628.1 billion (US$67.6 million) at December 31, 2004; and | |
• | an increase in inventories of Rp.49.1 billion, or 31.9%, from Rp.154.0 billion at December 31, 2003 to Rp.203.1 billion (US$21.9 million) at December 31, 2004; |
115
• | a decrease in cash and cash equivalents of | |
• | a decrease in | |
• | a decrease in other |
The decrease in cash and cash equivalents, temporary investments and other current assets primarily reflected use of the proceeds from the sale by TELKOM of a 12.72% shareholding in Telkomsel and the issuance by TELKOM of IDR bonds for the payment of a cash dividend to TELKOM shareholders, capital expenditures and disbursements related to TELKOM’s early retirement program.
2001, 2002, 2003 and 2003,2004, approximately 13.3%34.0%, 34.0%19.4% and 18.8%22.3%, respectively, of TELKOM’s current assets were denominated in foreign currencies, principally the U.S. Dollar in 2002 and 2003 and the Euro in 2004, such that the movements of Rupiah exchange rate against U.S. dollarDollar and Euro across these years would affect TELKOM’s current assets.Trade Accounts Receivable.
IV.
108
At December 31, 2003 compared to December 31, 2002, the allowance for doubtful accounts for trade receivables from third parties decreased Rp.74.3increased Rp.124.1 billion, or 18.2%37.3%, from Rp.407.3Rp.333.0 billion to Rp.333.0Rp.457.1 billion (US$39.549.2 million), primarily due to the effectan increase in number of a significant write-off in 2003delinquent accounts of receivables from defaulted customers.third parties.
Other Current |
2003, Rp.45.12004, Rp.44.6 billion (US$5.34.8 million) of TELKOM’s deposits were restricted for security interests in favor of other parties and for bank guarantees, of which US$Rp.42.7 billion (US$4.6 millionmillion) was used to secure Napsindo’s borrowings, an associated companya subsidiary, and recorded as other current assets. TELKOM also had a balance of Rp.239.7 billion (US$28.4 million) in escrow account to be funded from time to time for payments of the purchase price for the 90.32% equity interest in Dayamitra acquired in 2001 and for the repayment of indebtedness owed by Dayamitra to former shareholders and a balance of Rp.276.4 billion (US$32.8 million) for payments of the purchase price for a 100% equity interest in Pramindo acquired in 2002. See “— Indebtedness — Acquisition Indebtedness and Option Purchase Price — Dayamitra”.Current Liabilities
(c) unearned income.
116
Current Maturities of Long-term Liabilities. |
increaseddecreased by Rp.853.3Rp.1,142.7 billion, or 32.9%33.2%, from Rp.2,590.2Rp.3,443.5 billion at December 31, 20022003 to Rp.3,443.5Rp.2,300.8 billion (US$408.0247.7 million) at December 31, 2003.2004. This increasedecrease was primarily due to current maturitythe decrease in liabilities of bank loans and amounts due on the acquisition of Pramindo and AriaWest.business acquisitions.Accrued Expenses.
109
2004.
At December 31, | |||||||||||||||||
2001(1) | 2002(1) | 2003(1) | 2003(1) | ||||||||||||||
(Rp. in billion) | (US$ in million) | ||||||||||||||||
Indonesian Rupiah | 6,805.7 | 4,294.1 | 4,485.1 | 531.4 | |||||||||||||
U.S. Dollar(2),(3) | 5,660.7 | 8,766.4 | 8,764.7 | 1,038.5 | |||||||||||||
Japanese Yen(4) | 1,452.1 | 1,358.9 | 1,377.7 | 163.2 | |||||||||||||
French Franc(5) | 190.9 | — | — | — | |||||||||||||
NLG(6) | 70.3 | — | — | — | |||||||||||||
EURO(7) | — | 215.7 | 890.7 | 105.5 | |||||||||||||
Total | 14,179.7 | 14,635.1 | 15,518.2 | 1,838.6 | |||||||||||||
At December 31, | |||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(US$ in million) | |||||||||||||||||
(Rp. in billion) | |||||||||||||||||
Indonesian Rupiah(1) | 4,294.1 | 4,485.1 | 4,550.0 | 489.8 | |||||||||||||
U.S. Dollar(2),(3) | 8,766.4 | 8,562.2 | 9,904.2 | 1,066.1 | |||||||||||||
Japanese Yen(4) | 1,358.9 | 1,377.7 | 1,512.4 | 162.8 | |||||||||||||
EURO(5) | 215.7 | 890.7 | 649.7 | 69.9 | |||||||||||||
Total | 14,635.1 | 15,315.7 | 16,616.3 | 1,788.6 | |||||||||||||
(1) | |
(2) | Amounts at December 31, |
(3) | Amounts at December 31, 2002 includes imputed interest on |
(4) | Amounts at December 31, |
(5) | |
Amounts at December 31, 2002, 2003 and |
2005 and 2006, respectively.
117
110
• | ||
• | ||
• | ||
• | ||
• | Rp.127.9 billion (US$13.8 million) from exercising the call option agreement with TM Communication (HK) Ltd. to purchase 9.68% of | |
• | Rp.3,366.4 billion (US$362.4 million) representing the present value of fixed monthly payments to be paid to MGTI in respect of the acquisition of KSO IV; and | |
• | Rp.1,077.7 billion (US$116.0 million) medium-term notes (net of debt issuance costs and TELKOM’s MTN owned by Telkomsel) issued by TELKOM. |
• | ||
• | ||
• | ||
• | Rp.549.5 billion (US$59.1 million) from The Export-Import Bank of Korea to finance the CDMA procurement from the Samsung Consortium; and | |
• | Rp.1,060.2 billion (US$114.1 million) from ABN AMRO and Bank Central Asia short-term loan facilities. |
Two-Step Loans |
118
111
• | Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1 for two-step loans originating from World Bank and Asian Development Bank (“ADB”), respectively; and | |
• | Internal financing (earnings before depreciation and interest expenses) should exceed 50% and 20% compared to capital expenditures for loans originally from the World Bank and ADB, respectively. |
2003,2004, the Company was in compliance with the above covenants. Also see “— Guaranteed Notes”.Guaranteed Notes
IDR Bond Issuance |
119
billion.
112
• | Debt service coverage ratio must exceed 1.5:1; | |
• | Debt to equity ratio must not exceed (i) 3:1 for the period January 1, 2002 to December 31, 2002; (ii) 2.5:1 for the period January 1, 2003 to December 31, 2003; and (iii) 2:1 for the period January 1, 2004 to the date the bonds are redeemed; and | |
• | Debt to EBITDA ratio must not exceed 3:1. |
2003,2004, the Company was in compliance with these covenants.Medium-Term Notes Acquisition Indebtedness and Option Purchase Price Dayamitra
LtdLtd. (“TM Communications”) for the right to purchase the remaining 9.68% equity interest in Dayamitra held by TM Communications. As of December 31, 2003,2004, TELKOM no longer had any obligations relating to the acquisition of its 90.32% equity interest in Dayamitra.
120
Pramindo |
Pramindo, representing the unpaid portion of the purchase price for France Cable et Radio, Astratel, Indosat, Marubeni, IFC USA and NMP Singapore.
113
The final installment payment was made in December 2004.
AriaWest |
AfterAs of December 31, 2004, TELKOM has repaid the paymententire outstanding balance using the proceeds from the issuance of TELKOM’s medium-term notes.KSO IV first installment onKSO revenues after the monthly amounts due to MGTI and operating expenses. If the KSO IV unit is unable to or does not for any reason pay MGTI the fixed monthly payments due to it, TELKOM is obligated to make up any deficiency. At the end of the KSO period (December 31, 2010), all rights, title and interest of MGTI in existing property, plant and equipment (including new additional installations) and inventories shall be transferred to TELKOM at no cost. As a result of the amended and restated KSO agreement, TELKOM obtained the legal right to control financial and operating decisions of Regional Division IV for a purchase price of US$390.7 million, or Rp.3,285 billion, which represents the present value of the fixed monthly payments (totaling US$517.1 million) to be paid by TELKOM to MGTI from 2004
121
Sumatera backbone network |
2003,2004, all of these facilities have been fully or partially utilized, with the US$6,950,000 loan to Citibank, N.A. being fully repaid in May 2003.Regional Division V Junction Project
2003, the facility had not been drawn down. As of May 31, 2004, TELKOM had drawn down a total of Rp.114.6Rp. 148.9 billion and Japanese Yen 428.9 million (Rp.34.3 billion) of this loan. As of December 31, 2004, the outstanding amount of the loan was Rp.117.2 billion.Telkomsel’s Indebtedness (including facilities)
122
2004, the loan had been repaid.
114
Hermes Export Facility |
EKN-Backed Facility |
ArrangerOriginal Lender and Agent) covering a total facility amount of US$70.5 million divided into several tranches. In December 2004, the agreement was amended to reduce the total facility to US$68.9 million. The interest rate on the facility is fixed atbased on the aggregate of the applicable margin, commercial interest reference rate and mandatory cost, if any (i.e., 4.27% per annum.and 4.02% as of December 31, 2003 and 2004, respectively). Interest is paid semi-annually, starting on the date amounts are drawn. As of December 31, 2003,2004, Telkomsel hashad drawn down US$21.769.0 million from this facility.facility and the outstanding balance was US$56.1 million.
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Dayamitra’s Indebtedness |
• | ||
In 2003, Dayamitra paid in full the US$7.0 million (Rp.62.7 billion) long-term bank loan payable by Dayamitra to the Export-Import Bank of Japan.
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• | Infrastructure, which consists of the transmission network, access network (including fixed wireless networks), data backbone and fixed line network backbone infrastructure; | |
• | Phone, which is essentially fixed wireline and fixed wireless; | |
• | Mobile, which consists of GSM mobile wireless telephone services and is presently conducted | |
• | Multimedia, which consists of | |
• | Service-Net, which consists of various commercial services intended to increase traffic on TELKOM’s network, including interconnection, Internet network and third-party call centers. |
Year ended December 31, | ||||||||||||||||||||||
2001(1) | 2002(1) | 2003(1) | 2004(2) | 2005(2) | ||||||||||||||||||
Rp. (billion) | ||||||||||||||||||||||
TELKOM: | ||||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||||
Transmission Network and Backbone(3) | 78.2 | 337.1 | 1,767.4 | 1,653.4 | 3,363.3 | |||||||||||||||||
Access Network | 661.0 | 862.9 | 1,849.6 | 2,517.4 | 1,530.9 | |||||||||||||||||
Subtotal Infrastructure | 739.2 | 1,200.0 | 3,617.0 | 4,170.8 | 4,894.2 | |||||||||||||||||
Commercial Services: | ||||||||||||||||||||||
Phone(4) | 285.5 | 523.6 | 161.9 | 305.6 | 381.3 | |||||||||||||||||
Mobile Cellular(5) | 263.9 | — | — | — | — | |||||||||||||||||
Multimedia(6) | 113.7 | 154.7 | 76.2 | 197.4 | 179.4 | |||||||||||||||||
Services-Net | 275.6 | 59.8 | 99.9 | 32.2 | 235.4 | |||||||||||||||||
Subtotal Commercial Services | 938.7 | 738.1 | 338.0 | 535.2 | 796.1 | |||||||||||||||||
Supporting Services | 196.3 | 140.2 | 151.1 | 313.8 | 433.3 | |||||||||||||||||
Subtotal TELKOM | 1,874.2 | 2,078.3 | 4,106.1 | 5,019.8 | 6,123.6 | |||||||||||||||||
Long Term Investment(7) | 12,614.6 | 3,752.1 | 3,914.6 | 3,906.0 | — | |||||||||||||||||
Subtotal for TELKOM (unconsolidated) | 14,488.8 | 5,830.4 | 8,020.7 | 8,925.8 | 6,123.6 | |||||||||||||||||
TELKOM’s Subsidiaries: | ||||||||||||||||||||||
Telkomsel | 2,964.0 | 4,531.0 | 5,348.8 | 5,000.0 | 5,000.0 | |||||||||||||||||
Dayamitra | 30.2 | 40.6 | 109.5 | 76.5 | 157.3 | |||||||||||||||||
Infomedia Nusantara | — | 25.9 | 44.6 | 78.0 | 61.0 | |||||||||||||||||
Pramindo Ikat Nusantara | — | 109.4 | 37.4 | 25.0 | — | |||||||||||||||||
Indonusa Telemedia | — | 2.6 | 0.8 | 3.4 | — |
Year Ended December 31, | ||||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005(2) | 2006(3) | ||||||||||||||||||
Rp. (billion) | ||||||||||||||||||||||
TELKOM: | ||||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||||
Transmission Network and Backbone | 337.0 | 1,595.1 | 560.4 | 752.1 | 2,989.0 | |||||||||||||||||
Access Network | 863.0 | 1,849.6 | 1,831.2 | 2,247.7 | 1,515.0 | |||||||||||||||||
Subtotal Infrastructure | 1,200.0 | 3,444.7 | 2,391.6 | 2,999.8 | 4,504.0 | |||||||||||||||||
Commercial Services: | ||||||||||||||||||||||
Phone | 523.6 | 161.9 | 901.5 | 683.7 | 1,196.5 | |||||||||||||||||
Mobile Cellular | — | — | — | — | — | |||||||||||||||||
Multimedia | 154.7 | 76.2 | 92.7 | 802.4 | 563.2 | |||||||||||||||||
Services-Net | 59.8 | 99.9 | 34.2 | 164.5 | 738.3 | |||||||||||||||||
Subtotal Commercial Services | 738.1 | 338.0 | 1,028.4 | 1,650.6 | 2,498.0 | |||||||||||||||||
Supporting Services | 140.2 | 151.1 | 295.6 | 922.0 | 564.0 | |||||||||||||||||
Subtotal for TELKOM (unconsolidated) | 2,078.3 | 3,933.8 | 3,715.6 | 5,572.4 | 7,566.0 | |||||||||||||||||
116124
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005(2) | 2006(3) | ||||||||||||||||||||||||||||||||||||
2001(1) | 2002(1) | 2003(1) | 2004(2) | 2005(2) | ||||||||||||||||||||||||||||||||||||
Rp. (billion) | ||||||||||||||||||||||||||||||||||||||||
Rp. (billion) | ||||||||||||||||||||||||||||||||||||||||
TELKOM’s Subsidiaries: | ||||||||||||||||||||||||||||||||||||||||
Telkomsel | 4,531.0 | 5,348.8 | 4,982.7 | 7,153.0 | 5,323.9 | |||||||||||||||||||||||||||||||||||
Dayamitra | 40.6 | 109.5 | 50.4 | 108.9 | 95.8 | |||||||||||||||||||||||||||||||||||
Infomedia Nusantara | 25.9 | 44.6 | 63.0 | 63.5 | 11.6 | |||||||||||||||||||||||||||||||||||
Pramindo Ikat Nusantara | 109.4 | 37.4 | 1.7 | 38.5 | 23.1 | |||||||||||||||||||||||||||||||||||
Indonusa Telemedia | 2.6 | 0.8 | 1.4 | — | 4.1 | |||||||||||||||||||||||||||||||||||
Graha Sarana Duta | — | 0.8 | 17.0 | 19.2 | 21.2 | 0.8 | 17.0 | 3.7 | 21.3 | 28.7 | ||||||||||||||||||||||||||||||
PT Pro Infokom Indonesia | — | — | 0.6 | 9.0 | — | — | 0.6 | 0.6 | — | 10.8 | ||||||||||||||||||||||||||||||
PT Metra (Holding) | — | — | 6.1 | 0.2 | 88.4 | — | 6.1 | 0.9 | 12.6 | — | ||||||||||||||||||||||||||||||
AriaWest | — | — | 0.2 | — | — | — | 0.2 | 0.1 | 0.1 | — | ||||||||||||||||||||||||||||||
Napsindo | — | — | 53.8 | 2.2 | 2.9 | — | 53.8 | 0.3 | 1.3 | — | ||||||||||||||||||||||||||||||
Subtotal for subsidiaries | 2,994.2 | 4,710.3 | 5,618.8 | 5,213.5 | 5,330.8 | 4,710.3 | 5,618.8 | 5,104.8 | 7,399.2 | 5,498.0 | ||||||||||||||||||||||||||||||
Total for TELKOM (consolidated) | 17,483.0 | 10,540.7 | 13,639.5 | 14,139.3 | 11,454.4 | 6,788.6 | 9,552.6 | 8,820.4 | 12,971.6 | 13,064.0 | ||||||||||||||||||||||||||||||
(1) | Amounts for |
(2) | Amounts for |
(3) | |
an innovative approach to financing, which TELKOM refers to asincluding “pay as you grow”. See Item 3.D. “Risk Factors — Capital Expenditures — Financing” and Item 4.B. “Business Overview — Business Strategy — Reducing Cost of Capital.”Planned Investments in 20042005
2004,2005, TELKOM plans to make capital investments in infrastructure, commercial services and supporting services.Planned Investments in Infrastructure
• | ||
• |
117125
Planned Investments in Commercial Services |
• | ||
• | ||
• |
Planned Investments in Supporting Services |
Rp.313.8Rp.922.0 billion in 20042005 for capital investments in supporting services, including research and development, building facilities and office facilities.• investments in BTS stations to expand network coverage and TRX and microcells to improve quality; • switching equipment; • IN equipment used for prepaid products; and • fiber optic transmission for large cities in Java. Financing
tenormaturity of five years with fixed interest rate of 17% per annum. On December 15, 2004, TELKOM issued unsecured medium-term notes (“MTN”) in the principal amount of Rp.1.125 trillion in four series with interest rates ranging from 7.7% to 9.4% per annum. TELKOM is presently in the process of exploring alternative sources of financing for capital investment, including vendor-procured and other bank financing, as well as other potential sources of borrowed funds.Two-Step Loans
126
Revenue Sharing |
118
Direct |
As of December 31, 2004, the outstanding amount under these facilities were Rp.117.2 billion.
127
Pay as You Grow |
See Item 4.B. “Business Overview — Business Strategy — Efficient Use of Capital Liquidity through New Term of Payment Alternatives with Lower Risk.”IDR Bond Issuance
Medium-Term Notes |
119
Consolidation/ Equity method |
128
120
Revenue Recognition |
Revenue from usage charges are recognized as customers incur the charges.
129
• | Sales of starter packs are recognized as revenue upon delivery of the starter packs to distributors, dealers or directly to customers; and | |
• | Sales of pulse reload vouchers are recognized initially as unearned income and recognized proportionately as revenue based on successful calls made by the subscribers or whenever the unused stored value of the voucher has expired. |
an accrual basis).
TELKOM’s share of distributable KSO revenue (revenue earned under Joint Operation Schemes) includes
Allowances for Doubtful Accounts |
TELKOM provides services to certain of its customers on credit terms. We maintain allowancesfor estimatedis the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on our expected levelhistorical write-off experience. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days for retail customers are fully provided, and past due balance for non-retail customers over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of recoverability of accounts receivable, collection have been exhausted and
130
121
Acquisitions and Business Divestitures |
Pension and Post-retirement Benefits |
131
122
1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | 128,311 | (99,603 | ) | |||||
Effect on post-retirement benefit obligation | 916,961 | (720,657 | ) |
Income Taxes |
The actual tax we pay on our profits is determined according to complex tax laws and regulations. Where the effect of these laws and regulations is unclear, we use estimates in determining the liability for the tax to be paid on our past profits which we recognize in our financial statements.
132
Legal Contingencies |
We
123
for 2002 by the June 30, 2003 filing deadline. See Item 3. “Risk Factors — TELKOM did not file a fully compliant 2002 Annual Report on Form 20-F until February 9, 2004 and may face an SEC enforcement action, or other legal liability or adverse consequences.”C. Research and Development and Intellectual Property
2004. In 2004, these expenditures related to video conferencing, SMS development, CMS system and CDMA lab.
D. Trend information
D. | Trend information |
• | ongoing consequences related to TELKOM’s failure to file a compliant Form 20-F for 2002 by June 30, 2003; | |
• | upgrading of the network with soft switching technology; | |
• | increasing relative contribution of Telkomsel to our consolidated revenues; | |
• | higher domestic fixed line tariffs beginning in 2004 and ability of Government to implement additional planned tariff increases; | |
• | the ability of the Government to implement regulatory changes regarding interconnection, access codes and licenses for 3G services; | |
• | changes in foreign exchange rates and interest rates; | |
• | implementation of TELKOM’s early retirement program; | |
• | ||
acquisition of |
133
• | acquisition of AriaWest; | |
• | acquisition of KSO IV; | |
• | competition in the market for DLD services; | |
• | commencement of TELKOM’s IDD | |
• | fixed wireless development and deployment; | |
• | implementation of competence-based human resource management; and | |
• | acquisition of the remaining 9.68% shares in Dayamitra. |
E. Off-Balance Sheet Arrangements
During 2002, TELKOM entered into two foreign exchange facilities agreements with the intention of hedging its foreign currency liabilities. These agreements were made with Bank Mandiri and HSBC to cover TELKOM’s foreign exchange liabilities for US$120 million and US$1 million, respectively. The Bank Mandiri agreement expired on April 4, 2004 while the HSBC agreement will expire on August 31, 2004.
E. | Off-Balance Sheet Arrangements |
124
F. Tabular Disclosure of Contractual Obligations
20032004 and the effect such obligations are expected to have on liquidity and cash flow in future periods:
Payments Due by Period | Payments Due by Period | |||||||||||||||||||||||||||||||||||||||||
Less than | Less than | |||||||||||||||||||||||||||||||||||||||||
Contractual Obligations | Contractual Obligations | Total | 1 year | 1-3 years | 4-5 years | After 5 years | Contractual Obligations | Total | 1 year | 1-3 years | 4-5 years | After 5 years | ||||||||||||||||||||||||||||||
(Rp. billion) | ||||||||||||||||||||||||||||||||||||||||||
(Rp. in billion) | ||||||||||||||||||||||||||||||||||||||||||
Short Term Loans(1) | 37.6 | 37.6 | — | — | — | |||||||||||||||||||||||||||||||||||||
Long Term Debt(2) | 15,480.7 | 3,563.4 | 3,511.6 | 4,276.3 | 4,129.4 | |||||||||||||||||||||||||||||||||||||
Short Term Loans(1)(5) | Short Term Loans(1)(5) | 1,101.6 | 1,101.6 | — | — | — | ||||||||||||||||||||||||||||||||||||
Long Term Debts(2)(5) | Long Term Debts(2)(5) | 15,514.7 | 2,300.8 | 6,215.4 | 2,822.3 | 4,176.2 | ||||||||||||||||||||||||||||||||||||
Capital Lease Obligations(3) | Capital Lease Obligations(3) | — | — | — | — | — | Capital Lease Obligations(3) | — | — | — | — | — | ||||||||||||||||||||||||||||||
Operating Leases(3) | Operating Leases(3) | 219.0 | 101.1 | 107.9 | — | — | Operating Leases(3) | 247.5 | — | 247.5 | — | — | ||||||||||||||||||||||||||||||
Unconditional Purchase Obligations(4) | Unconditional Purchase Obligations(4) | 12,797.8 | 12,138.1 | 659.6 | — | — | Unconditional Purchase Obligations(4) | 4,373.2 | 3,500.3 | 872.9 | — | — | ||||||||||||||||||||||||||||||
Other Long Term Obligations(5) | 2,536.9 | 2,536.9 | — | — | — | |||||||||||||||||||||||||||||||||||||
Total Contractual Cash Obligations | 31,072.0 | 18,377.1 | 4,279.1 | 4,276.3 | 4,129.4 | Total | 21,237.0 | 6,902.7 | 7,335.8 | 2,822.3 | 4,176.2 | |||||||||||||||||||||||||||||||
(1) | Relates to |
(2) | See “— Liquidity and Capital Resources — Indebtedness” and Notes 22, 23, 24, 25, 26 |
(3) | Relates primarily to leases of motor vehicles and computers. |
(4) | Relates to commitments of |
(5) |
134
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. Directors and Senior Management
A. | Directors and Senior Management |
125
135
Age as of | ||||||||
Name | January 1, 2005 | Title | Since | |||||
Tanri Abeng | 63 | President Commissioner | ||||||
P. Sartono | Independent Commissioner | June 21, 2002 | ||||||
Arif Arryman | ||||||||
At the Extraordinary General Meeting of TELKOM’s shareholders held on March 10, 2004, three new Commissioners were elected, replacing Messrs. Ruru, Haryanto and Sirat. As such, the members of the Board of Commissioners as of the date of this Annual Report are as follows:
Independent Commissioner | June 21, 2002 | |||||||
Anggito Abimanyu | Commissioner | March 10, 2004 | ||||||
Gatot Trihargo | Commissioner | March 10, 2004 |
Tanri Abeng |
126
P. Sartono |
currently serves as the Senior Adviser of the Board of Commissioners of PT Telekomindo Primabhakti and as a Commissioner of PT Excelcomindo. Mr. P. Sartono became an employee of TELKOM in 1972 and has served in various management positions, including as Corporate Secretary from 1991 to 1995, until his retirement in 2000. During his tenure at TELKOM, he also held various positions at Directorate General of Post and Communications from 1972 to 1985 and served as President Director of PT Telekomindo Primabhakti. Mr. P. Sartono holds a degree in law from the University of Indonesia and a Master of Management (Marketing) degree from IPWI Jakarta and a Master of Law degree from the Institute Business Law and Management (Sekolah Tinggi Ilmu Hukum IBLAM) in Jakarta.Arif Arryman
Ph.Ddoctoral degree in Economics from University of Paris-IX Dauphine France.Anggito Abimanyu
HeAs of the date of this Annual Report, he is currently the Acting Head of the Agency for Fiscal Analysis of the Ministry of Finance and has been a member of the expert staff to the Finance Minister since 2000. Mr. Abimanyu previously served as a member of the Board of Commissioners of Bank Lippo and of Bank Internasional Indonesia. Mr. Abimanyu is also a lecturer in the Faculty of Economics of Gadjah Mada University. Mr. Abimanyu holds both a bachelor and a master degree in economics from Gadjah Mada University, a master in science degree in International Development from the University of Pennsylvania and a Ph.D. degree in Environmental Economics from the University of Pennsylvania.
136
Gatot Trihargo |
The
127
Thethis Annual Report, the Audit Committee of the Board of Commissioners is currently composed of sixseven members: (i) Mr. Arif Arryman, an Independent Commissioner and the Chairman; (ii) Mr. P. Sartono, an Independent Commissioner; (iii) Mr. Mohammad Ghazali Latief; (iv) Mr. Salam; (v) Mr. Dodi Syaripudin; and (vi) Mr. Sahat Pardede.Pardede and (vii) Mr. Gatot Trihargo. All of the members of the Audit Committee (except for Mr. Arif Arryman, Mr. Sartono and Mr. Sartono)Trihargo) are independent external members and Mr. Pardede is an accounting and financefinancial expert. An Audit Committee Charter (the “Charter”) that has been adopted by the Board of Commissioners and the Board of Directors governs the committee. The Charter outlines the committee’s purpose, function and responsibilities and specifies that the committee is responsible for:
• | Overseeing the Company’s financial reporting process on behalf of the Board of Commissioners. As part of its responsibilities, the committee will recommend to the Board of Commissioners, subject to shareholder approval, the selection of TELKOM’s external auditor; | |
• | Discussing with TELKOM’s internal and external auditors the overall scope and specific plans for their respective audits. The committee will also discuss TELKOM’s consolidated financial statements and the adequacy of TELKOM’s internal controls; | |
• | Meeting regularly with TELKOM’s internal and external auditors, without management present, to discuss the results of their examinations, their evaluation of TELKOM’s internal controls and the overall quality of TELKOM’s financial reporting; and | |
• | Carrying out additional tasks that are assigned by the Board of Commissioners, especially on financial and accounting related matters. |
137
Directors based on fairness and performance.
128
138
At the Extraordinary General Meeting of TELKOM’s shareholders held on March 10, 2004, three new Directors were elected, replacing Messrs. Utoyo, Siregar and Sugardo, and Mr. Setiawan was
129
Age as of | ||||||||||
Name | January 1, 2005 | Title | Since | |||||||
Arwin Rasyid | 47 | President Director | June | |||||||
55 | Chief Operating Officer and Vice President Director | June 24, 2005 | ||||||||
Rinaldi Firmansyah | 44 | Director of Finance | March 10, 2004 | |||||||
Arief Yahya | 43 | Director of Enterprise & Wholesale | June 24, 2005 | |||||||
Abdul Haris | 49 | Director of | March 10, 2004 | |||||||
Director of | ||||||||||
Guntur Siregar | 53 | Director of | ||||||||
Kristiono has beenRasyid was appointed the President Director of TELKOM on June 24, 2005. He previously served as Deputy President Director of PT Bank Negara Indonesia from 2003 to 2005, President Director of Bank Danamon Indonesia from 2000 to 2003, Deputy Head of Badan Penyehatan Perbankan Nasional (the Indonesian Banks Restructuring Agency) in 2000, Deputy President Director of Bank Niaga from 1988 to 1999 as well in several positions in Bank Niaga since 1987. Mr. Rasyid graduated with a degree in economy from the University of Indonesia. He also holds a Master of Arts degree in International Economics and a Master of Business Administration degree in International Business from University of Hawaii, USA.21, 2002.24, 2005. He joined TELKOM in 19781977 and has held several positions in various departments. He previously served as Senior Consultant Marketing in the Management Consulting Center of TELKOM, Director of Technology and Planning of TELKOM and Head of Regional Division V Surabaya. Mr. Kristiono graduated with a degree in electrical engineering from Surabaya Institute of Technology.Woeryanto SoeradjiMr. Soeradji has been Director of Human Resources and SupportTelecommunication Service Business of TELKOM since March 10, 2004. He joined TELKOM in 1990from 2002 to 2004, Director of Operation and has held several positions in various departments. He previously served as TELKOM’s Vice President for Marketing, headTechnical of TELKOM’s Business Development Group and Corporate Secretary of TELKOM,Indosat as well as Directora number of Marketing for Telkomsel.positions in TELKOM from 1977-2000. Mr. Soeradji hasSugardo graduated with a degree in Electrical Engineering from the Bandung InstituteUniversity of Technology and a masters degree in business administration from the Indonesian Institute of Management Development, Jakarta.Indonesia.Rinaldi Firmansyah
Mr. Firmansyah has been Director of Finance of TELKOM since March 10, 2004. He currentlyAs of the date of this Annual Report, he serves as the Vice President Commissioner of PT Bahana Securities and is also a Commissioner and headHead of the Audit Committee of PT Semen Padang. He previously served as the Vice President for Finance of PT Tirtamas Comexindo. Mr. Firmansyah graduated with a degree in electrical engineering from the Bandung Institute of Technology and a mastersMasters degree in business administration from the Indonesian Institute of Management Development, Jakarta. Mr. Firmansyah is also a Chartered Financial Analyst (CFA).
Mr. Setiawan has beenYahya was appointed the Director of Telecommunications Service BusinessEnterprise & Wholesale of TELKOM since March 10, 2004.on June 24, 2005. He joined TELKOM in 1986 and has held several positions in various departments. Previously, he served as headTELKOM’s Head of TELKOM’s Research and Information TechnologyRegional Division from 1995 to 2000 and as Director of Telecommunications and Network Business from June 2002 to March 2004. In addition,V (East Java). Mr. Setiawan previously served as the President Commissioner for Telkomsel. Mr. SetiawanYahya graduated with a degree in electrical engineering from Bandung Institute of Technology.Technology and a Masters degree in Telecommunication Engineering from University of Surrey.
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TELKOM regions | KSO regions | TELKOM regions | KSO region VII | |||||||||||||||
as at | as at | as at | as at | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||
2003 | 2003(1) | 2004 | 2004 | |||||||||||||||
Senior management | Senior management | 175 | — | Senior management | 154 | — | ||||||||||||
Middle management | Middle management | 2,027 | 164 | Middle management | 2,136 | 87 | ||||||||||||
Supervisors | Supervisors | 6,445 | 1,478 | Supervisors | 7,982 | 796 | ||||||||||||
Others | Others | 15,559 | 4,972 | Others | 15,551 | 2,669 | ||||||||||||
Total | 24,206 | 6,614 | Total | 25,823 | 3,552 | |||||||||||||
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Pursuant to TELKOM’s Initial Public Offering116,667,000 shares of Common Stock were reserved for mandatory sale to employees of the Company. The Company paid for such shares (which were sold at the same per share price as the public offering price of shares of Common Stock sold in Indonesia pursuant to the Initial Public Offering (i.e., Rp.2,050 per share)) on behalf of its employees as follows: 90% of the purchase price was deducted from employee cash bonuses that had been previously allocated but not paid; the Company paid the balance of the purchase price plus taxes payable by its employees on the purchase of such shares (amounting to approximately 15% of the purchase price) and reported those payments as additional vacation pay, employee incentives and other allowances. TELKOM does not otherwise maintain an employee share scheme for any of its employees or senior management.Upon reaching 56, employees and their dependents are entitled to a pension underTELKOM sponsors a defined benefit pension plan depending on their length of serviceand a defined contribution pension plan. The defined benefit pension plan is for permanent employees hired prior to TELKOM.July 1, 2002. The amount of the pension entitlement under the defined benefit pension plan is based on the employee’s years of service and salary level upon retirement and is transferable to dependents upon the employee’s death. The main sources of pension fund are the contributions from the employees and TELKOM. The participating employees contribute 18% of basic salary (prior to March 2003 the employee contribution rate was 8.4%) and TELKOM contributes the remaining amount required to fund the plan. TELKOM’s contributions to the pension fund were Rp.129.3 billion, Rp.297.4 billion, Rp.486.3 billion and Rp.460.6Rp.840.0 billion (US$54.690.4 million), for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively. See Note 4644 to the consolidated financial statements.
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The post-retirement health care plan for employees hired after November 1, 1995 is accounted for in accordance with U.S. GAAP (SFAS 106). TELKOM’s actuary, in consultation with management, re-evaluated the key assumptions used in previous calculations, principally the medical cost trend projections and determined that it was necessary to make adjustments to original reports because the previous calculations contained certain errors and the assumptions used did not provide for all of the assumptions required to calculate TELKOM’s obligation. TELKOM, therefore, determined that adjustments were required to be made to its 2001, 2002 and prior years consolidated financial statements.
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A. Major stockholders
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Title of Class | Identity of Person or Group | Amount Owned | Percent of Class | Identity of Person or Group | Amount Owned | Percent of Class | ||||||||||||||
Series A | Government | 1 | 100.00% | Government | 1 | 100.00% | ||||||||||||||
Series B | Government | 5,160,235,355 | 51.19% | Government | 10,320,470,711 | 51.19% | ||||||||||||||
Series B | JPMCB US Resident (Norbax Inc.) | 896,045,651 | 8.89% | JPMCB US Resident (Norbax Inc.) | 1,378,468,925 | 6.84% | ||||||||||||||
Series B | The Bank of New York (BoNY) | 657,263,408 | 6.52% | The Bank of New York (BoNY) | 1,568,517,736 | 7.78% | ||||||||||||||
Series B | Board of Directors and Commissioners | 63,180 | 0.0006% | Board of Directors and Commissioners | 82,728 | <0.01% |
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shares at that time.
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In
Government as Shareholder
Government as Shareholder |
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Government as Regulator |
MoC.MoCI. In particular, the MoCMoCI has authority to issue decrees implementing laws, which are typically broad in scope, thereby giving the Ministry considerable latitude in implementing and enforcing regulatory policy. Pursuant to such decrees, the MoCMoCI defines the industry structure, determines the tariff formula, determines TELKOM’s USO obligations and otherwise controls many factors that may affect TELKOM’s competitive position, operations and financial condition. Through the DGPT, the Government regulates frequency and bandwidth allocation and TELKOM must obtain a license from the DGPT for each of its services as well as the utilization of frequency and bandwidths. The Company and other operators are also required to pay radio frequency usage fees. Telkomsel also holds several licenses issued by the MoCMoCI (or previously issued by the MoC) for the provision of its cellular services and from the Indonesian Investment Coordinating Board relating to investment by Telkomsel for the development of cellular phone line services with national coverage, including the expansion of its network coverage. The Government through the MoC,MoCI, as regulator has the power to grant new licenses for the establishment of new joint ventures and other arrangements, particularly in the telecommunications sector.Government as Lender
2003,2004, the Government had sub-loaned borrowings from foreign lenders to TELKOM as “two-step loans” amounting to Rp.7,691.0Rp.6,018.7 billion (US$911.3647.9 million), including current maturities. TELKOM is obligated to pay to the Government interest and principal repayment that is
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Government as Customer |
Proportion of securities of TELKOM held in Indonesia and outside Indonesia |
2003, 13,807 people,2004, 15,947 persons, including the Government, were registered as holders of 10,079,999,64020,159,999,279 Series B shares of TELKOM’s Common Stock in Indonesia. There were a total of 38,317,04645,126,420 ADSs held by 169154 registered holders as of December 31, 20032004. The ADSs are traded on the NYSE and the LSE.Change in Control
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Government of the Republic of Indonesia |
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Indosat |
• | The Company provides a local network for customers to make or receive international calls. Indosat provides the international network for the customers, except for certain border towns, as determined by the Director General of Post and Telecommunication of the Republic of Indonesia. The international telecommunication services include telephone, telex, telegram, package switched data network, television, teleprinter, Alternate Voice/Data Telecommunication (AVD), hotline and teleconferencing. The Company receives compensation for the services, based on the interconnection tariff determined by the Minister of | |
• | The Company has also entered into an interconnection agreement between the Company’s PSTN network and Indosat’s | |
• | The Company’s compensation relating to leased lines/ channel services, such as | |
• | The Company has been handling customer billing and collection for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record. |
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• | Telkomsel’s GSM mobile cellular telecommunication network is connected with Indosat’s international gateway exchanges to make outgoing or receive incoming international calls through Indosat’s international gateway exchanges; | |
• | Telkomsel receives as compensation for the interconnection, a specific percentage of Indosat’s revenues from the related services made through Indosat’s international gateway exchanges; | |
• | Billings for international calls made by Telkomsel’s customers of GSM mobile cellular telecommunication are handled by Telkomsel. Telkomsel is obliged to pay Indosat’s share of revenue | |
• | The agreement dated March 29, 1996, was initially valid for one year, but extendable for one-year periods as agreed by both parties. The latest extension expired on February 29, 2004. Pending negotiations on a new agreement, Telkomsel and Indosat have entered into an interim agreement with terms similar to those set forth above. Under the terms of the interim agreement, Telkomsel will receive 27% of the applicable tariff for outgoing international calls from Telkomsel subscribers and Rp.800 per minute for incoming international calls to Telkomsel subscribers. The interim agreement will be effective from March 1, 2004 until such date that Telkomsel and Indosat enter into a new agreement. |
Agreement on Construction and Maintenance for the Jakarta-Surabaya Cable System (“J-S Cable System”)
Agreement on Construction and Maintenance for the Jakarta-Surabaya Cable System (“J-S Cable System”) |
Indefeasible Right of Use Agreement
Indefeasible Right of Use Agreement |
Interconnection Agreement
On November 1, 2001, Telkomsel entered into an interconnection agreement with Indosat (on behalf of IM3, a subsidiary of Indosat). Based on this agreement, Telkomsel’s GSM cellular mobile network is connected to IM3’s network and through this arrangement, Telkomsel’s customers can make or receive calls from or to IM3’s customers.
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Based on the amendment upon the above agreement, since December 14, 2001, Telkomsel’s customers are able to send and receive short message services from IM3’s customers.
The Company and its subsidiaries earned net interconnection revenue from IM3 of Rp.156.9 million and Rp.50.9 billion in 2001 and 2002, respectively. Interconnection revenues earned from IM3 in 2003 are included in the total amount of interconnection revenues earned from Indosat in 2003. See “Interconnection Revenues” below.
Agreements with Satelindo
On November 20, 2003, Indosat, IM3, Satelindo and PT Bimagraha Telekomindo merged, with Indosat as the surviving entity. Pursuant to the terms of the merger, all the rights and obligations of Satelindo and IM3, respectively, arising from their agreements with TELKOM and Telkomsel, as the case may be, were assumed by Indosat.
The Company has an agreement with Satelindo, a subsidiary of Indosat, whereby both parties agreed, among other matters, on the following:
The Company also has an agreement with Satelindo for the interconnection of Satelindo’s GSM mobile cellular telecommunication network with the Company’s PSTN, enabling the Company’s customers to make outgoing calls to or receive incoming calls from Satelindo’s customers.
Telkomsel also has an agreement with Satelindo for interconnection on substantially the same terms as TELKOM.
Interconnection revenues earned from Satelindo were Rp.293.7 billion and Rp.625.1 billion in 2001 and 2002, respectively, reflecting 1.8% and 3.0% of total operating revenue for 2001 and 2002, respectively. Interconnection revenues earned from Satelindo in 2003 are included in the total amount of interconnection revenues earned from Indosat in 2003. See “Interconnection Revenues” below.
The Company leases international circuits from Satelindo. Payments made in relation to the lease amounted to (2003 payments were made to Indosat) Rp.28.1 billion, Rp.32.9 billion and Rp.30.2 billion in 2001, 2002 and 2003, respectively, which was 0.3%, 0.3% and 0.2% of total operating expenses for 2001, 2002 and 2003, respectively.
Based on an agreement entered into among the Company, PT Bimagraha Telekomindo and Indosat in 1993, at the time of Satelindo’s establishment, the Company agreed to transfer to Satelindo, its so-called B-2P, B-2R and B-4 Palapa satellites and other assets relating to the Company’s satellite control station located in Jakarta. These transfers are to be covered in a separate agreement between Satelindo and the Company. The separate agreement regarding the transfers of these satellites and other assets has not been made. However, the useful life of the B-2P and B-2R Palapa satellites had expired. In November 2000, the Company entered into an agreement with a third party, in which the Company agreed to sell the expired B-2R Satellite, or to lease the satellite to such third party if the sale is not consummated.
In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta that had been previously leased to Telekomindo, an associated company. Based on
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Interconnection Revenues
The Company and its subsidiaries earned net interconnection revenues from Indosat (including Satelindo and IM3 in 2003)before their merger with Indosat) of Rp.54.0Rp.950.7 billion, Rp.274.7 billion and Rp.235.7 billion in 2001, 2002 and 2003, respectively, reflecting 0.3%, 1.3%or 4.6% and 0.9% of total operating revenues in 2001, 2002 and 2003, respectively. The
Agreement149
Leased Lines |
Satellite Transponder Lease |
Data communication network |
Agreement with Government agencies and associated companies |
agencies.
The Company provides a data communication network system for Lintasarta, an Indosat subsidiary and operates a telemetry tracking and command station for PSN. Revenues earned by the Company from these transactions amounted to Rp.28.0 billion in 2001, which was 0.2%, of total operating revenues in 2001. There was no revenue earned from these transactions in 2002 and 2003.
2004, respectively.
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141
income, respectively.
In 1991, the Company granted loans to Koperasi Telekomunikasi (“Koptel”) amounting to Rp.1 billion to support Koptel’s activities in providing housing loans to the Company’s employees. The balance of the loans amounted to Rp.0.2 billion, as of December 31, 2001, Rp.0.1 billion as of December 31, 2002 and nil as of December 31, 2003, which is immaterial to the Company’s total assets as of December 31, 2001, 2002 and 2003.
2004.
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C. | Interest of experts and counsel |
ITEM 8. FINANCIAL INFORMATION A. Consolidated statements and other financial information
Aria West |
KAP Eddy Pianto |
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Apart from the above, TELKOM is not a party to any other litigation or legal proceedings which it believes would, individually or taken as a whole, have a material adverse effect on its business, financial condition and results of operations.
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investigation.
B. | Significant changes |
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ITEM 9. | THE OFFER AND LISTING |
A. | Offer and listing details |
Price per | ||||||||||||||||
Price per Share | Share* | |||||||||||||||
Calendar Year | High | Low | High | Low | ||||||||||||
(in Rupiah) | ||||||||||||||||
(in Rupiah) | ||||||||||||||||
1999 | 4,629 | 2,407 | ||||||||||||||
2000 | 4,350 | 2,025 | 4,350 | 2,025 | ||||||||||||
First Quarter | 4,350 | 3,325 | 4,350 | 3,325 | ||||||||||||
Second Quarter | 3,775 | 2,675 | 3,775 | 2,675 | ||||||||||||
Third Quarter | 3,325 | 2,600 | 3,325 | 2,600 | ||||||||||||
Fourth Quarter | 2,890 | 2,025 | 2,890 | 2,025 | ||||||||||||
2001 | 3,400 | 1,825 | 3,400 | 1,825 | ||||||||||||
First Quarter | 3,150 | 1,775 | 3,150 | 1,775 | ||||||||||||
Second Quarter | 3,200 | 2,175 | 3,200 | 2,175 | ||||||||||||
Third Quarter | 3,525 | 2,650 | 3,525 | 2,650 | ||||||||||||
Fourth Quarter | 3,250 | 2,425 | 3,250 | 2,425 | ||||||||||||
2002 | ||||||||||||||||
First Quarter | 4,300 | 2,825 | 4,300 | 2,825 | ||||||||||||
Second Quarter | 4,725 | 3,700 | 4,725 | 3,700 | ||||||||||||
Third Quarter | 3,900 | 3,125 | 3,900 | 3,125 | ||||||||||||
Fourth Quarter | 4,000 | 2,350 | 4,000 | 2,350 | ||||||||||||
2003 | ||||||||||||||||
First Quarter | 3,725 | 3,225 | 3,725 | 3,225 | ||||||||||||
Second Quarter | 4,950 | 3,650 | 4,950 | 3,650 | ||||||||||||
Third Quarter | 6,000 | 4,125 | 6,000 | 4,125 | ||||||||||||
Fourth Quarter | 6,750 | 5,650 | 6,750 | 5,650 | ||||||||||||
2004 | ||||||||||||||||
First Quarter | 4,025 | 3,300 | ||||||||||||||
Second Quarter | 4,350 | 3,300 | ||||||||||||||
Third Quarter | 4,225 | 3,650 | ||||||||||||||
Fourth Quarter | 5,200 | 4,175 | ||||||||||||||
October | 4,400 | 4,175 | ||||||||||||||
November | 5,100 | 4,350 | ||||||||||||||
December | 6,900 | 5,850 | 5,200 | 4,600 | ||||||||||||
2004 | ||||||||||||||||
2005 | ||||||||||||||||
January | 8,050 | 6,700 | 5,125 | 4,800 | ||||||||||||
February | 7,800 | 7,000 | 4,825 | 4,425 | ||||||||||||
March | 7,550 | 6,350 | 4,625 | 4,300 | ||||||||||||
April | 8,800 | 7,000 | 4,725 | 4,275 | ||||||||||||
May | 8,100 | 6,600 | 4,600 | 4,175 | ||||||||||||
June 24, 2004 | 7,250 | 7,100 | ||||||||||||||
June | 5,350 | 4,700 | ||||||||||||||
July (through July 13, 2005) | 5,250 | 4,950 |
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Price per ADS | Price per ADS | Price per ADS | Price per ADS | |||||||||||||||||||||||||||||
(NYSE) | (LSE) | (NYSE) | (LSE) | |||||||||||||||||||||||||||||
Calendar Year | High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||
(in US Dollars) | (in US Dollars) | |||||||||||||||||||||||||||||||
(in US Dollar) | (in US Dollar) | |||||||||||||||||||||||||||||||
1999 | 13.63 | 5.27 | 13.17 | 5.37 | ||||||||||||||||||||||||||||
2000 | 12.00 | 4.13 | 12.15 | 4.27 | 12.00 | 4.13 | 12.15 | 4.27 | ||||||||||||||||||||||||
First Quarter | 12.00 | 9.1 | 12.1 | 9.2 | 12.00 | 9.1 | 12.1 | 9.2 | ||||||||||||||||||||||||
Second Quarter | 9.7 | 6.4 | 9.6 | 6.4 | 9.7 | 6.4 | 9.6 | 6.4 | ||||||||||||||||||||||||
Third Quarter | 8.0 | 5.9 | 7.9 | 6.1 | 8.0 | 5.9 | 7.9 | 6.1 | ||||||||||||||||||||||||
Fourth Quarter | 6.3 | 4.1 | 6.4 | 4.3 | 6.3 | 4.1 | 6.4 | 4.3 | ||||||||||||||||||||||||
2001 | 7.06 | 3.65 | 7.05 | 3.80 | 7.06 | 3.65 | 7.05 | 3.80 | ||||||||||||||||||||||||
First Quarter | 6.7 | 4.0 | 6.5 | 3.9 | 6.7 | 4.0 | 6.5 | 3.9 | ||||||||||||||||||||||||
Second Quarter | 5.6 | 3.7 | 5.6 | 3.8 | 5.6 | 3.7 | 5.6 | 3.8 | ||||||||||||||||||||||||
Third Quarter | 7.1 | 5.5 | 7.1 | 5.5 | 7.1 | 5.5 | 7.1 | 5.5 | ||||||||||||||||||||||||
Fourth Quarter | 5.8 | 4.7 | 6.1 | 4.8 | 5.8 | 4.7 | 6.1 | 4.8 | ||||||||||||||||||||||||
2002 | 9.77 | 5.56 | 9.82 | 5.27 | 9.77 | 5.56 | 9.82 | 5.27 | ||||||||||||||||||||||||
First Quarter | 8.6 | 5.5 | 8.6 | 5.5 | 8.6 | 5.5 | 8.6 | 5.5 | ||||||||||||||||||||||||
Second Quarter | 9.8 | 8.4 | 9.8 | 8.4 | 9.8 | 8.4 | 9.8 | 8.4 | ||||||||||||||||||||||||
Third Quarter | 8.7 | 7.0 | 8.7 | 7.1 | 8.7 | 7.0 | 8.7 | 7.1 | ||||||||||||||||||||||||
Fourth Quarter | 8.9 | 5.6 | 8.9 | 5.3 | 8.9 | 5.6 | 8.9 | 5.3 | ||||||||||||||||||||||||
2003 | 8.44 | 7.30 | 8.53 | 7.27 | 8.44 | 7.30 | 8.53 | 7.27 | ||||||||||||||||||||||||
First Quarter | 8.44 | 7.30 | 8.53 | 7.27 | 8.44 | 7.30 | 8.53 | 7.27 | ||||||||||||||||||||||||
Second Quarter | 12.09 | 8.19 | 11.78 | 8.33 | 12.09 | 8.19 | 11.78 | 8.33 | ||||||||||||||||||||||||
Third Quarter | 13.73 | 9.85 | 13.90 | 9.60 | 13.73 | 9.85 | 13.90 | 9.60 | ||||||||||||||||||||||||
Fourth Quarter | 16.42 | 13.13 | 16.05 | 13.40 | 16.42 | 13.13 | 16.05 | 13.40 | ||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||||
First Quarter | 19.45 | 15.13 | 18.97 | 15.29 | ||||||||||||||||||||||||||||
Second Quarter | 19.91 | 14.13 | 20.27 | 14.08 | ||||||||||||||||||||||||||||
Third Quarter | 18.55 | 15.81 | 19.00 | 15.73 | ||||||||||||||||||||||||||||
Fourth Quarter | 23.33 | 18.30 | 23.21 | 19.37 | ||||||||||||||||||||||||||||
October | 19.66 | 18.30 | 19.70 | 18.38 | ||||||||||||||||||||||||||||
November | 22.45 | 19.30 | 23.21 | 19.37 | ||||||||||||||||||||||||||||
December | 16.42 | 13.64 | 16.05 | 14.35 | 23.33 | 19.35 | 22.96 | 19.64 | ||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||||
January | 19.48 | 16.60 | 18.50 | 16.15 | 21.96 | 20.60 | 21.95 | 20.47 | ||||||||||||||||||||||||
February | 18.58 | 16.75 | 18.15 | 16.95 | 20.95 | 19.21 | 20.88 | 19.05 | ||||||||||||||||||||||||
March | 17.75 | 15.00 | 17.55 | 14.75 | 19.40 | 18.11 | 20.05 | 18.66 | ||||||||||||||||||||||||
April | 20.19 | 17.10 | 19.95 | 16.55 | 19.82 | 17.75 | 20.24 | 18.02 | ||||||||||||||||||||||||
May | 19.15 | 15.15 | 18.55 | 14.55 | 19.75 | 16.85 | 20.18 | 18.01 | ||||||||||||||||||||||||
June 24, 2004 | 15.65 | 14.85 | 14.95 | 14.95 | ||||||||||||||||||||||||||||
June 30, 2005 | 21.96 | 19.46 | 22.36 | 19.86 | ||||||||||||||||||||||||||||
July (through July 13, 2005) | 21.30 | 20.29 | 21.42 | 20.55 |
B. Plan of distribution155
B. | Plan of distribution |
C. Markets
C. | Markets |
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Currently
Overview of the JSX |
There is only one cash market trading session from Monday to Thursday, 9.30 a.m. to 12.00 noon, and on Friday, 9.30 a.m. to 11.30 a.m.
• | for shares with previous price under Rp.500, in multiples of Rp.5 and each price movement should be no more than Rp.50; | |
• | for shares with previous price between the range of Rp.500 up to Rp.5,000, in multiples of Rp.25 and each price movement should be no more than Rp.250; and | |
• | for shares with previous price of Rp.5,000 or more, in multiples of Rp.50 and each price movement should be no more than Rp.500. |
lots.
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Theapplicable regulations. Furthermore, the JSX board of directors may cancel a transaction if proof exists of fraud, market manipulation or the use of insider information. The JSX board of directors may also suspend trading if there are indications of bogusfraudulent transactions or jacking upartificial inflation of share prices, misleading information, use of insider information,
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Exchange members maythe JSX charge a brokerage fee for their services, based on an agreement with the clientstheir client, up to a maximum of 1%1.0% of the transaction value. When conducting stockshare transactions on the JSX, exchange members are required to pay a transaction fee equal tocost in the cumulativeamount of 0.03% of the transaction value for each month(for transactions in the regular and cash markets) and a transaction cost in the amount of 0.03% of the transaction value or based on 0.04% (subjectthe exchange policy (for transactions in the negotiated markets). The transaction cost is minimum Rp.2 million per month as contribution for the provision of stock exchange’s facilities (which continues to apply for stock exchange members in suspension). The clients are also responsible for paying a minimum10.0% value added tax on the amount of brokerage fee and transaction cost. Also, Indonesian sellers are required to pay a withholding tax of Rp.250,000)0.1% (0.6% for founder shares) of the total transaction for stocksvalue. Additionally, stamp duty of Rp.3,000 is payable on any transaction with a value between Rp.250,000 and other registered securities.
StockholdersRp.1,000,000 and stamp duty of Rp.6,000 is payable on every transaction with a value of more than Rp.1,000,000.
Trading on the NYSE and LSE |
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ITEM 10. | ADDITIONAL INFORMATION |
A. Share capital
148
• | dividend rights.Dividends are to be paid based upon the financial condition of TELKOM and in accordance with the resolution of the stockholders in a general meeting, which will also determine the form of and time for payment of the dividend; | |
• | voting rights.The holder of each voting share is entitled to one vote at a general meeting of stockholders; | |
• | rights to share in the Company’s profits.See dividend rights; | |
• | rights to share in any surplus in the event of liquidation.Stockholders are entitled to surplus in the event of liquidation in accordance with their proportion of shareholding, provided the nominal value of the Common Stock that they hold is fully paid-up; |
158
• | redemption provisions.There are no stock redemption provisions in the Articles. However, based on Article 30 of Indonesian Company Law, TELKOM may buy back at the maximum 10% of its issued shares; | |
• | reserved fund provisions.Retained earnings up to a minimum of 20% of the issued capital of the Company is to be set aside to cover potential losses suffered by the Company. If the amount in the reserved fund exceeds 20% of the issued capital of the Company, general meeting of stockholders may authorize the Company to utilize such excess funds as dividends; | |
• | liability to further capital calls.Stockholders of the Company may be asked to subscribe for new shares in the Company from time to time. Such right is to be offered to stockholders prior to being offered to third parties and may be transferred at the option of the shareholder. The Board of Directors of the Company is authorized to offer the new shares to third parties in the event that the existing shareholder is unable or unwilling to subscribe for such new shares; and | |
• | provisions discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares.The Articles do not contain any such provision. |
149
159
Overview of Indonesia law |
150
Composition of Board of Directors; Independence
160
Committees |
TELKOM’s BoC
151
Disclosure regarding corporate governance |
161
Code of Business Conduct and Ethics |
Prior to 2002, TELKOM had been working on the construction of a DCS 1800 network and the setting up of a DCS 1800 mobile cellular business through its TELKOM Mobile unit and had been granted 15 MHz of radio frequency bandwidth in the 1800 MHz band. On April 3, 2002, TELKOM and Telkomsel entered into an agreement for the sale and purchase of TELKOM’s assets relating to the
152
Acquisition of AriaWest
On July 30, 2002, TELKOM sold a 12.72% shareholding in Telkomsel to Singapore Telecom Mobile Pte, Ltd (“SingTel Mobile”), a wholly-owned subsidiary of SingTel, for US$429 million in cash pursuant to a Sale and Purchase Agreement dated April 3, 2002. As a result of this transaction, TELKOM reduced its ownership in Telkomsel to 65%, while SingTel Mobile increased its ownership to 35%.
Acquisition of Pramindo
162
153
a partial launch failure.
163
154
On March 31, 2004, the parties amended the contract with respect to the work schedule and location, and agreed to an increased Rupiah portion of the consideration from Rp.144.7 billion to Rp.157.7 billion.
164
On March 4, 2004, the parties amended the agreement with respect to the scope of work and work schedule, and agreed to reduce the Rupiah portion of the consideration to Rp.2.2 billion.
155
In June 2005, the parties agreed to amend this agreement further for some additional minor works.
Supply Contract for Thailand-Indonesia-Singapore (TIS) Cable Network165
On November 27, 2002, TELKOM entered into a supply contract with NEC Corporation, the Communication Authority of Thailand (the “CAT”) and Singapore Telecommunications Limited (“SingTel”) whereby NEC Corporation has agreed to construct a submarine fiber optic network linking Thailand, Indonesia and Singapore. Under the terms of this agreement, TELKOM, SingTel and the CAT were to contribute equally to a payment of US$32.7 million (inclusive of value-added tax). Due to several contract variations entered into during 2003, the total amount payable by TELKOM, SingTel and CAT was increased to US$33.4 million.
156
On December 14, 2004, TELKOM exercised its call option to purchase, and acquired, the remaining 9.68% of the shares of Dayamitra, for an aggregate consideration of approximately US$22.1 million which represents the present value of the option strike price of US$16.2 million plus the option purchase price of US$6.3 million and payment for Dayamita’s adjusted working capital of US$1.0 million. TELKOM is required to pay the option strike price less funds available in the escrow account on November 30, 2004 in 16 equal installments, the last of which is required to be made on March 26, 2006.
for a purchase price of US$390.7 million, or Rp.3,285 billion, which represents the present value of the fixed monthly payments (totaling US$517 million) to be paid by TELKOM to MGTI from 2004 through 2010 plus direct cost of the business combination.
166
on Form 20-F/A.
157167
158168
Dividends |
currentlywhich, as of the date of this Annual Report is at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the stockholders’ proportional share of the value of the distribution. A lower rate provided under double taxation treaties may be applicable provided the recipient is the beneficial owner of the dividend and has provided to the Company (with a copy to the Indonesian Office of Tax Services where the Company is registered) a Certificate of Tax Residence issued by the competent authority, or its designee, of the jurisdiction where the Non-Indonesian Holder is domiciled (the “Certificate of Residence”). Indonesia has concluded double taxation treaties with a number of countries, including Australia, Belgium, Canada, France, Germany, Japan, Malaysia, Mauritius, The Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United States of America. Under the U.S.-Indonesia double taxation treaty, the withholding tax on dividends is generally, in the absence of a 25% voting interest, reduced to 15%.Capital Gains
169
159
Stamp Duty |
160170
Taxation of Distributions |
The
Taxation of Capital Gains |
The
171
161
Passive Foreign Investment Company Status |
Special adverse
In general, an “excess distribution” is any distribution with respect to the Company’s ADSs or shares of Common Stock to the extent it exceeds 125% of the average annual distributions with respect to such ADSs or shares of Common Stock received by the U.S. Holder over the prior three years or, if shorter, the U.S. Holder’s holding period for the ADSs or shares of Common Stock.
Further, if the Company is classified as a PFIC, a U.S. Holder would not be eligible for a reduced tax rate on dividends paid on, and on gain realized with respect to dispositions of, ADSs or shares of Common Stock. See “Taxation of Distributions” above.
162
172
Interest Rate Risk |
163
173
Outstanding Balance as at | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Balance as at | December 31, 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2003 | Expected Maturity Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected Maturity Date | Foreign | Rp. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | Currency | Equivalent | Rate | 2005 | 2006 | 2007 | 2008 | 2009 | 2010-2024 | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Currency | Equivalent | Rate | 2004 | 2005 | 2006 | 2007 | 2008 | 2009-2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Rp. in | million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousand) | (Rp. in million) | (%) | (Rp. in million) | (in millions) | million) | (%) | (Rp. in million) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASSETS | ASSETS | ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Rate | Fixed Rate | Fixed Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash equivalents | Cash and Cash equivalents | Cash and Cash equivalents | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time deposit Rupiah | Time deposit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 3,253,587 | 3,253,587 | — | — | — | — | — | Rupiah | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 6.90 | — | — | — | — | — | Principal | — | 2,564,200 | 2,564,200 | — | — | — | — | — | 2,564,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | Interest | 6.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 118,903 | 1,002,349 | 1,002,349 | — | — | — | — | — | U.S. Dollar | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 1.00 | — | — | — | — | — | Principal | 66.79 | 620,452 | 620,452 | — | — | — | — | — | 620,452 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Euro | Interest | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 39,454 | 420,726 | 420,726 | — | — | — | — | — | Euro | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 1.90 | — | — | — | — | — | Principal | 85.49 | 1,081,568 | 1,081,568 | — | — | — | — | — | 1,081,568 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 1.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Investments | Temporary Investments | Temporary Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time deposits Rupiah | Time deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | — | 4,006 | 4,006 | — | — | — | — | — | Rupiah | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 6.00 | — | — | — | — | — | Principal | — | 5,065 | 5,065 | — | — | — | — | — | 5,065 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale | Interest | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | Available-for-Sale Securities Rupiah | — | 14,884 | 14,884 | — | — | — | — | — | 14,884 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES | LIABILITIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short Term Bank Loan | Short Term Bank Loan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Rate | Variable Rate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rupiah | — | — | — | — | — | — | — | — | — | U.S. Dollar | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 118.46 | 1,101,633 | 1,101,633 | — | — | — | — | — | 1,101,633 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 5.0 | 24,161 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt(1) | Long-term debt(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Rate | Variable Rate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | — | 2,319,218 | 364,086 | 301,631 | 249,265 | 189,326 | 190,831 | 1,024,079 | 2,482,933 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 8.5 | 185,951 | 155,459 | 129,941 | 112,662 | 96,827 | 427,816 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 232.83 | 2,164,717 | 321,752 | 317,660 | 290,713 | 290,713 | 134,840 | 809,039 | 2,460,961 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 5.3 | 109,664 | 94,646 | 80,301 | 66,408 | 54,246 | 156,711 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Euro | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 51.24 | 649,751 | 185,645 | 185,645 | 139,234 | 139,227 | — | — | 659,090 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 3.0 | 17,419 | 11,918 | 6,876 | 2,750 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Rate | Fixed Rate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | — | 2,230,739 | 565,925 | 170,087 | 1,461,060 | 9,097 | 8,806 | 15,764 | 2,515,573 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 12.5 | 264,155 | 220,857 | 126,966 | 166 | 70 | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 713.68 | 6,637,829 | 759,726 | 1,134,305 | 1,758,460 | 913,916 | 789,127 | 1,282,295 | 7,634,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 6.4 | 423,814 | 402,260 | 273,636 | 181,782 | 116,466 | 161,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Japanese Yen | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 16,670.50 | 1,512,396 | 103,688 | 103,688 | 103,688 | 86,677 | 69,666 | 1,044,989 | 1,934,863 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | 3.1 | 46,191 | 42,943 | 39,695 | 36,446 | 34,014 | 251,058 |
164174
Outstanding Balance as at | ||||||||||||||||||||||||||||||||||||||
December 31, 2003 | ||||||||||||||||||||||||||||||||||||||
Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | |||||||||||||||||||||||||||||||||||||
Currency | Equivalent | Rate | 2004 | 2005 | 2006 | 2007 | 2008 | 2009-2025 | ||||||||||||||||||||||||||||||
(In thousand) | (Rp. in million) | (%) | (Rp. in million) | |||||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||
Short Term Bank | ||||||||||||||||||||||||||||||||||||||
Loan | ||||||||||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||
Principal | 4,455 | 37,642 | — | 37,642 | — | — | — | — | — | |||||||||||||||||||||||||||||
Interest | 3.00 | 753 | — | — | — | — | — | |||||||||||||||||||||||||||||||
Long-term debt(1) | ||||||||||||||||||||||||||||||||||||||
Variable Rate | ||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||
Principal | — | 2,535,279 | 335,721 | 347,732 | 257,531 | 190,058 | 189,326 | 1,214,911 | ||||||||||||||||||||||||||||||
Interest | 11.90 | 301,766 | 261,449 | 219,506 | 189,083 | 166,543 | 144,088 | |||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||
Principal | 388,836 | 3,285,660 | 800,190 | 579,577 | 574,678 | 351,090 | 122,516 | 857,609 | ||||||||||||||||||||||||||||||
Interest | 5.69 | 186,965 | 146,126 | 117,173 | 88,409 | 69,687 | 60,976 | |||||||||||||||||||||||||||||||
Euro | ||||||||||||||||||||||||||||||||||||||
Principal | 64,765 | 690,646 | 153,477 | 153,477 | 153,477 | 153,477 | 76,738 | |||||||||||||||||||||||||||||||
Interest | 2.98 | 20,581 | 16,008 | 11,434 | 6,860 | 2,287 | ||||||||||||||||||||||||||||||||
Fixed Rate | ||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||
Principal | — | 1,949,838 | 160,353 | 113,968 | 72,688 | 1,053,966 | 72,688 | 476,175 | ||||||||||||||||||||||||||||||
Interest | 15.40 | 298,803 | 273,678 | 256,351 | 246,852 | 70,535 | 61,035 | |||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||
Principal | 643,954 | 5,441,410 | 2,013,056 | 515,943 | 471,450 | 1,524,910 | 311,985 | 604,066 | ||||||||||||||||||||||||||||||
Interest | 7.29 | 211,647 | 194,175 | 175,458 | 159,431 | 38,013 | 30,945 | |||||||||||||||||||||||||||||||
Japanese Yen | ||||||||||||||||||||||||||||||||||||||
Principal | 17,429,464 | 1,377,726 | 55,266 | 90,183 | 90,183 | 90,183 | 75,361 | 976,550 | ||||||||||||||||||||||||||||||
Interest | 3.13 | 43,169 | 41,437 | 38,611 | 35,786 | 32,960 | 30,599 | |||||||||||||||||||||||||||||||
Euro | ||||||||||||||||||||||||||||||||||||||
Principal | 18,756 | 200,014 | 45,333 | 45,333 | 45,333 | 37,968 | 26,047 | — | ||||||||||||||||||||||||||||||
Interest | 7.64 | 15,285 | 11,821 | 8,356 | 4,892 | 1,991 | — |
(1) | Long-term debt consists of loans which are subject to interest; namely two-step loans, |
Exchange Rate Risk |
165
Outstanding Balance as at | ||||||||||||||||||||||||||||||||||
December 31, 2003 | ||||||||||||||||||||||||||||||||||
Expected Maturity Date | ||||||||||||||||||||||||||||||||||
Foreign | Rp. | |||||||||||||||||||||||||||||||||
Currency | Equivalent | 2004 | 2005 | 2006 | 2007 | 2008 | 2009-2025 | |||||||||||||||||||||||||||
(in thousand) | (Rp. in million) | (Rp. in million) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 123,536 | 1,043,400 | 1,043,400 | — | — | — | — | — | ||||||||||||||||||||||||||
Japanese Yen | 454 | 35 | 35 | — | — | — | — | — | ||||||||||||||||||||||||||
Euro | 39,583 | 421,288 | 421,288 | — | — | — | — | — | ||||||||||||||||||||||||||
Trade accounts receivable | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 13,332 | 112,559 | 112,559 | — | — | — | — | — | ||||||||||||||||||||||||||
Other accounts receivable | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 12,605 | 106,258 | 106,258 | — | — | — | — | — | ||||||||||||||||||||||||||
Japanese Yen | 5,441 | 429 | 429 | |||||||||||||||||||||||||||||||
French Franc | 4,805 | 5,447 | 5,447 | |||||||||||||||||||||||||||||||
Netherland Guilder | 814 | 2,745 | 2,745 | |||||||||||||||||||||||||||||||
Euro | 21 | 224 | 224 | |||||||||||||||||||||||||||||||
Other current assets | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 4,658 | 39,269 | 39,269 | — | — | — | — | — | ||||||||||||||||||||||||||
Advances and other noncurrent assets | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 12,290 | 103,651 | 103,651 | — | — | — | — | — | ||||||||||||||||||||||||||
Escrow account | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 61,302 | 516,128 | 516,128 | — | — | — | — | — | ||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||
Trade accounts payable | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 106,544 | 900,408 | 900,408 | — | — | — | — | — | ||||||||||||||||||||||||||
Japanese Yen | 126,925 | 10,033 | 10,033 | — | — | — | — | — | ||||||||||||||||||||||||||
Great Britain Pound | ||||||||||||||||||||||||||||||||||
Sterling | 61 | 916 | 916 | — | — | — | — | — | ||||||||||||||||||||||||||
Euro | 2,768 | 29,463 | 29,463 | — | — | — | — | — | ||||||||||||||||||||||||||
Singapore Dollar | 144 | 717 | 717 | — | — | — | — | — | ||||||||||||||||||||||||||
Other accounts payable | ||||||||||||||||||||||||||||||||||
U.S. Dollar | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Accrued expenses | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 28,946 | 244,925 | 244,925 | — | — | — | — | — | ||||||||||||||||||||||||||
Japanese Yen | 14,135 | 1,117 | 1,117 | — | — | — | — | — | ||||||||||||||||||||||||||
Euro | 40,698 | 433,155 | 433,155 | — | — | — | — | — | ||||||||||||||||||||||||||
French Franc | 710 | 808 | 808 | |||||||||||||||||||||||||||||||
Great Britain Pound | ||||||||||||||||||||||||||||||||||
Sterling | 46 | 689 | 689 | — | — | — | — | — | ||||||||||||||||||||||||||
Netherland Guilder | 482 | 1,631 | 1,631 | — | — | — | — | — | ||||||||||||||||||||||||||
Singapore Dollar | 189 | 940 | 940 | — | — | — | — | — | ||||||||||||||||||||||||||
Advance from customers and suppliers | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 3,041 | 25,701 | 25,701 | — | — | — | — | — | ||||||||||||||||||||||||||
Japanese Yen | 23,940 | 1,892 | 1,892 | |||||||||||||||||||||||||||||||
Great Britain Pound | ||||||||||||||||||||||||||||||||||
Sterling | 1 | 7 | 7 | — | — | — | — | — | ||||||||||||||||||||||||||
Short term bank loans | ||||||||||||||||||||||||||||||||||
U.S. Dollar | 4,462 | 37,642 | 37,642 | — | — | — | — | — |
Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||
December 31, 2004 | |||||||||||||||||||||||||||||||||||||
Expected Maturity Date | |||||||||||||||||||||||||||||||||||||
Foreign | |||||||||||||||||||||||||||||||||||||
Currency | Rp. Equivalent | 2005 | 2006 | 2007 | 2008 | 2009 | 2010-2024 | Fair Value | |||||||||||||||||||||||||||||
(in millions) | (Rp. in million) | ||||||||||||||||||||||||||||||||||||
(Rp. in million) | (Rp. in | ||||||||||||||||||||||||||||||||||||
million) | |||||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 74.80 | 694,116 | 694,116 | — | — | — | — | — | 694,116 | ||||||||||||||||||||||||||||
Japanese Yen | 0.98 | 89 | 89 | — | — | — | — | — | 89 | ||||||||||||||||||||||||||||
Euro | 88.10 | 1,114,704 | 1,114,704 | — | — | — | — | — | 1,114,704 | ||||||||||||||||||||||||||||
Trade accounts receivable | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 20.11 | 186,598 | 186,598 | — | — | — | — | — | 186,598 | ||||||||||||||||||||||||||||
Other accounts receivable | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 1.12 | 10,355 | 10,355 | — | — | — | — | — | 10,355 | ||||||||||||||||||||||||||||
Other current assets | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 4.61 | 42,792 | 42,792 | — | — | — | — | — | 42,792 | ||||||||||||||||||||||||||||
Euro | 0.01 | 157 | 157 | — | — | — | — | — | 157 | ||||||||||||||||||||||||||||
Advances and other non current assets | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 6.90 | 64,056 | 64,056 | — | — | — | — | — | 64,056 | ||||||||||||||||||||||||||||
Escrow account | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 3.24 | 30,059 | 30,059 | — | — | — | — | — | 30,059 |
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Outstanding Balance as at | |||||||||||||||||||||||||||||||||
December 31, 2003 | |||||||||||||||||||||||||||||||||
Expected Maturity Date | |||||||||||||||||||||||||||||||||
Foreign | Rp. | ||||||||||||||||||||||||||||||||
Currency | Equivalent | 2004 | 2005 | 2006 | 2007 | 2008 | 2009-2025 | ||||||||||||||||||||||||||
(in thousand) | (Rp. in million) | (Rp. in million) | |||||||||||||||||||||||||||||||
Long term debt(1) | |||||||||||||||||||||||||||||||||
U.S. Dollar | 1,032,526 | 8,727,070 | 2,813,246 | 1,095,520 | 1,046,128 | 1,876,000 | 434,501 | 1,461,675 | |||||||||||||||||||||||||
Japanese Yen | 17,429,464 | 1,377,726 | 55,266 | 90,183 | 90,183 | 90,183 | 75,361 | 976,550 | |||||||||||||||||||||||||
Euro | 83,647 | 890,660 | 198,810 | 198,810 | 198,810 | 191,444 | 102,786 | — |
Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||
December 31, 2004 | |||||||||||||||||||||||||||||||||||||
Expected Maturity Date | |||||||||||||||||||||||||||||||||||||
Foreign | |||||||||||||||||||||||||||||||||||||
Currency | Rp. Equivalent | 2005 | 2006 | 2007 | 2008 | 2009 | 2010-2024 | Fair Value | |||||||||||||||||||||||||||||
(in millions) | (Rp. in million) | ||||||||||||||||||||||||||||||||||||
(Rp. in million) | (Rp. in | ||||||||||||||||||||||||||||||||||||
million) | |||||||||||||||||||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||||||||||||||
Trade accounts payable | |||||||||||||||||||||||||||||||||||||
Related parties | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 19.13 | 177,892 | 177,892 | — | — | — | — | — | 177,892 | ||||||||||||||||||||||||||||
Myanmar | 0.01 | 20 | 20 | — | — | — | — | — | 20 | ||||||||||||||||||||||||||||
Singapore Dollar | — | 1 | 1 | — | — | — | — | — | 1 | ||||||||||||||||||||||||||||
Third parties | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 49.57 | 460,969 | 460,969 | — | — | — | — | — | 460,969 | ||||||||||||||||||||||||||||
Great Britain Pound Sterling | 0.06 | 1,092 | 1,092 | — | — | — | — | — | 1,092 | ||||||||||||||||||||||||||||
Japanese Yen | 7.88 | 715 | 715 | — | — | — | — | — | 715 | ||||||||||||||||||||||||||||
Singapore Dollar | 0.03 | 146 | 146 | — | — | — | — | — | 146 | ||||||||||||||||||||||||||||
Accrued expenses | �� | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 24.08 | 223,931 | 223,931 | — | — | — | — | — | 223,931 | ||||||||||||||||||||||||||||
Japanese Yen | 20.41 | 1,852 | 1,852 | — | — | — | — | — | 1,852 | ||||||||||||||||||||||||||||
Singapore Dollar | 0.37 | 2,135 | 2,135 | — | — | — | — | — | 2,135 | ||||||||||||||||||||||||||||
Australian Dollar | 0.07 | 507 | 507 | — | — | — | — | — | 507 | ||||||||||||||||||||||||||||
Netherland Guilder | 0.48 | 1,795 | 1,795 | — | — | — | — | — | 1,795 | ||||||||||||||||||||||||||||
Euro | 26.54 | 336,572 | 336,572 | — | — | — | — | — | 336,572 | ||||||||||||||||||||||||||||
Advance from customers and suppliers | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 0.42 | 3,947 | 3,947 | — | — | — | — | — | 3,947 | ||||||||||||||||||||||||||||
Short term bank loans | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 118.46 | 1,101,633 | 1,101,633 | — | — | — | — | — | 1,101,633 | ||||||||||||||||||||||||||||
Long term debt(1) | |||||||||||||||||||||||||||||||||||||
U.S. Dollar | 946.51 | 8,802,546 | 1,081,478 | 1,451,965 | 2,049,173 | 1,204,629 | 923,967 | 2,091,334 | 10,095,950 | ||||||||||||||||||||||||||||
Japanese Yen | 16,670.50 | 1,512,396 | 103,688 | 103,688 | 103,688 | 86,677 | 69,666 | 1,044,989 | 1,934,863 | ||||||||||||||||||||||||||||
Euro | 51.24 | 649,751 | 185,645 | 185,645 | 139,234 | 139,227 | — | — | 659,090 |
(1) | Long-term debt for the purpose of this table consists of loans denominated in foreign currencies namely, two-step loans, |
Equity Price Risk |
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Not applicable.
PART II
Not applicable.
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15.CONTROL AND PROCEDURES
Our principal executive officer and principal These errors were identified during the seven-month period ended on January 29, 2004, resulting in TELKOM’s making adjustments during that seven-month period to its consolidated financial officer carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”))statements as of and for the years ended December 31, 2003.
In making this evaluation, our principal executive officer2000 and principal financial officer considered matters relating2001. The identified errors and adjustments made to the restatement of our previously issuedTELKOM’s consolidated financial statements as of and for the years ended December 31, 2000, 2001 and 2002 includingare outlined below.
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(a) | Changes in Indonesian GAAP Information Previously Reported |
2000 | 2001 | 2002 | |||||||||||||
Rp. million | Rp. million | Rp. million | |||||||||||||
Net income under Indonesian GAAP as previously reported | 3,010,003 | 4,250,110 | 8,345,274 | ||||||||||||
Adjustments: | |||||||||||||||
Long service awards | (i) | (19,116) | (65,675) | (151,773) | |||||||||||
Post-retirement healthcare benefits | (ii) | (141,160) | (186,758) | (414,564) | |||||||||||
Deferred income taxes | (iii) | (54,027) | 66,723 | (286,213) | |||||||||||
Acquisition accounting | (iv) | — | (2,008) | (55,763) | |||||||||||
Operating revenues | (v) | (20,695) | (27,359) | 18,975 | |||||||||||
Trade accounts payable | (vi) | — | 36,323 | 22,167 | |||||||||||
Correction of loan balance | (vii) | — | — | 117,078 | |||||||||||
Correction of taxes payable | (viii) | — | — | 75,796 | |||||||||||
Telkomsel equity transactions | (ix) | — | — | 65,158 | |||||||||||
Other items | (x) | — | — | (65,503) | |||||||||||
Corporate tax | (xi) | — | (2,965) | 36,144 | |||||||||||
Subsequent event: | |||||||||||||||
AriaWest | (xii) | — | — | 332,933 | |||||||||||
Net adjustments | (234,998) | (181,719) | (305,565) | ||||||||||||
Net income under Indonesian GAAP as restated | 2,775,005 | 4,068,391 | 8,039,709 | ||||||||||||
Basic earnings per share (full amount) | |||||||||||||||
As previously reported | 298.61 | 421.64 | 827.90 | ||||||||||||
As restated | 275.30 | 403.61 | 797.59 | ||||||||||||
Basic earnings per ADS (full amount) | |||||||||||||||
As previously reported | 5,972.23 | 8,432.76 | 16,558.08 | ||||||||||||
As restated | 5,505.96 | 8,072.20 | 15,951.80 |
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2000 | 2001 | 2002 | |||||||||||||
Rp. million | Rp. million | Rp. million | |||||||||||||
Stockholders’ equity under Indonesian GAAP as previously reported | 14,909,176 | 9,323,575 | 15,899,183 | ||||||||||||
Adjustments: | |||||||||||||||
Long service awards | (i) | (210,159) | (275,834) | (427,607) | |||||||||||
Post-retirement healthcare benefits | (ii) | (341,106) | (527,864) | (942,428) | |||||||||||
Deferred income taxes | (iii) | 83,588 | 525,528 | (136,875) | |||||||||||
Acquisition accounting | (iv) | — | (2,008) | (353,810) | |||||||||||
Operating revenues | (v) | 31,565 | 4,206 | 23,181 | |||||||||||
Trade accounts payable | (vi) | — | 36,323 | 58,490 | |||||||||||
Correction of loan balance | (vii) | — | — | 117,078 | |||||||||||
Correction of taxes payable | (viii) | — | — | 75,796 | |||||||||||
Telkomsel equity transactions | (ix) | — | — | — | |||||||||||
Other items | (x) | — | — | (65,503) | |||||||||||
Corporate tax | (xi) | — | (2,965) | 33,179 | |||||||||||
Subsequent event: | |||||||||||||||
AriaWest | (xii) | — | — | 332,933 | |||||||||||
Net adjustments | (436,112) | (242,614) | (1,285,566) | ||||||||||||
Stockholders’ equity under Indonesian GAAP as restated | 14,473,064 | 9,080,961 | 14,613,617 |
(i) | Long service awards. TELKOM’s employees are entitled to receive certain cash awards, such as long service, housing, transport and other allowances, based on length of service. Depending on the type of award, they are either paid at the time an employee reaches a certain anniversary date or upon termination or retirement if the employee has met the requisite number of years of service. TELKOM had not previously made provision for these liabilities and was only accounting for the awards at the time payments were made to the employees. TELKOM determined that these awards should have been accounted for under the accrual method. | |
(ii) | Post-retirement healthcare benefits. TELKOM provides a post-retirement healthcare plan for pensioners who were employed by TELKOM for over 20 years. As described in Notes 2r and 47 to the consolidated financial statements in Item 18 of Amendment No. 2 to 2002 Annual Report on Form 20-F/ A, these costs are accounted for in accordance with U.S. GAAP applying SFAS 106. TELKOM had been recognizing the benefit obligations and the related benefit costs based on actuarial calculations. |
179
(iii) | Deferred income taxes. TELKOM identified the need to make adjustments to correct errors to prior calculations of deferred income taxes to reflect certain temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. TELKOM also concluded it should remove the deferred tax liability previously recorded in relation to the undistributed earnings of its subsidiaries and associates, principally those relating to Telkomsel, because the Company did not correctly determine the amount of the temporary difference. (See “Adjustments related to Stockholders’ Equity” below). | |
(iv) | Acquisition accounting. In respect of the acquisition of Pramindo in August 2002, the Company previously consolidated a 30% interest in Pramindo in accordance with the 30% legal ownership interest in the shares held by the Company. The Company had not, however, previously considered other factors affecting its ability to exercise control over Pramindo and its right to obtain all of the future economic benefits of ownership as though the Company owned 100% of the shares. The factors that the Company now considered include, among others, the fact that the selling price is fixed, its ability to vote 100% of the shares at general stockholders meetings, subject to certain protective rights retained by the selling stockholders, its ability to appoint all of the board members and management and its consequent ability to exclusively determine the financial and operating policies of Pramindo subject to certain protective rights, its issuance of irrevocable and unconditional promissory notes in settlement of the purchase consideration to the selling stockholders, the placement of the 70% of Pramindo shares not yet transferred to the Company in an escrow account by the selling stockholders, the protective provisions in the various agreements for the Company to take over all shares (including powers of attorney issued by the selling stockholders) or collapse the KSO arrangement once the full amount payable for the shares has been paid. (See Note 6b to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A). As a consequence, the Company determined that consolidation of a 100% interest in Pramindo from the date of acquisition is appropriate. |
(v) | Operating revenues. As a result of a review of certain terms of the revenue sharing agreements and other telecommunication service agreements, TELKOM determined that there were certain errors in previous calculations relating to the amortization of unearned revenue which resulted in a net overstatement of revenues recorded in the consolidated financial statements for 2001 and an understatement of such revenue in 2002. | |
(vi) | Trade accounts payable. As a result of the reconciliation of balances with other telephone operators in 2002, TELKOM determined that there were some errors in trade accounts |
180
payable balances that resulted in an overstatement of the payables recorded in the consolidated financial statements for 2001 and 2002. | ||
(vii) | Correction of loan balance. As a result of reconciliation of outstanding loans at the end of 2002, TELKOM determined that there was a double recording of a loan balance which had a corresponding effect of overstating the foreign exchange loss in the consolidated financial statements for 2002. | |
(viii) | Correction of taxes payable. As a result of reconciliation of taxes payable at the end of 2002, TELKOM determined that there was an over-accrual of value-added tax payable. | |
(ix) | Telkomsel equity transactions. As a result of the sale of a 12.72% interest in Telkomsel (see Note 1b to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A) in 2002, an adjustment should have been made to stockholders’ equity to reflect the realization of a gain in the 2002 statement of income attributable to past equity transactions in Telkomsel. | |
(x) | Other items. Other adjustments represented individually insignificant adjustments to correct errors as a result of understatement of depreciation expenses, understatement of allowance for doubtful accounts and amortization of deferred interest and other issues. | |
(xi) | Corporate tax. Certain of the above adjustments also impacted the corporate tax calculation for the 2001 and 2002 tax years. As a result, TELKOM reflected the related adjustments to the corporate tax charge in the restated consolidated financial statements for the respective years. |
(xii) | AriaWest. Subsequent to the date on which TELKOM issued the 2002 consolidated financial statements, TELKOM settled its dispute with AriaWest. In the previously issued consolidated financial statements for 2002, TELKOM had made provisions against its trade receivables relating to the dispute with AriaWest and recorded Rp.830 billion received from KSO III as “Advances from customers and suppliers” in the balance sheet pending settlement of the dispute. As a result of the settlement, the Company reversed these provisions (see Notes 9 and 56d to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A), applied the advance received against the outstanding trade receivable and accrued the settlement amount (see Note 56d to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A). |
a. | TELKOM incorrectly recorded an adjustment directly to stockholders’ equity in the previously issued 2002 consolidated financial statements to reverse the deferred tax liability TELKOM had previously recorded in relation to the undistributed earnings of Telkomsel. This balance should have been reversed as part of the accounting for the cross ownership transactions in 2001 (see Note 5 to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A) and was adjusted as part of the corrections to the Company’s deferred tax accounting referred to in (iii) above. | |
b. | At the time TELKOM acquired Pramindo in August 2002, 13% of the issued and paid up share capital of Pramindo was owned by Indosat, a company that, at that time, was majority owned and controlled by the Government, the Company’s major stockholder. In the previously issued consolidated financial statements for 2002, the Company did not account for the acquisition of Pramindo recognizing that a portion of the transaction was between entities under common control. As a result, TELKOM made an adjustment as a result of accounting for the acquisition of 13% of Pramindo as a transaction between entities under common control by debiting the “Difference in value from restructuring transactions of |
181
entities under common control” in stockholders’ equity to reflect the excess of the purchase price over the proportional historical book value of the net assets of Pramindo that were acquired from Indosat. |
a. | Reclassification of completed constructions in progress of Rp.765,753 million and advances and other non-current assets of Rp.83,608 million to fixed assets in 2002. | |
b. | Reclassification in 2002 of intangible assets amortization of Rp.166,721 million (2001: Rp.42,643 million) and amortization of goodwill of Rp.21,269 million (2001: Rp.13,066 million) from other charges to operating expenses. | |
c. | Reclassification of other accounts receivable to trade accounts receivable of Rp.82,174 million in 2002. | |
d. | Reclassification of related party trade accounts receivable to third party trade accounts receivable of total Rp.27,677 million in 2002. | |
e. | Reclassification of restricted time deposits from non-current assets to current assets of Rp.46,027 million in 2002. | |
f. | Reclassification of billing processing fees revenue of Rp.30,359 million from other income to other operating revenue in 2002. | |
g. | Reclassification of restricted time deposits from temporary investments to other current assets of Rp.500,000 million in 2002. | |
h. | Reclassification of provision for post-retirement benefits from accrued expenses of Rp.1,602,494 million in 2002 (2001: Rp.1,045,525 million). | |
i. | Reclassification in 2002 of revenue of certain subsidiaries from other income (charges) to operating revenues amounting to Rp.98,877 million, Rp.144,055 million and Rp.217,567 million in 2000, 2001 and 2002. |
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2000 | 2001 | 2002 | |||||||||||||||||||||||
As | As | As | |||||||||||||||||||||||
Previously | Previously | Previously | |||||||||||||||||||||||
Reported | As Restated | Reported | As Restated | Reported | As Restated | ||||||||||||||||||||
Rp. Million | Rp. Million | Rp. Million | Rp. Million | Rp. Million | Rp. Million | ||||||||||||||||||||
Temporary investments | 3,870,990 | 3,870,990 | 348,915 | 348,915 | 1,073,000 | 573,000 | |||||||||||||||||||
Trade accounts receivable | |||||||||||||||||||||||||
Related parties | 694,074 | 694,074 | 1,037,154 | 1,055,387 | 1,308,102 | 886,763 | |||||||||||||||||||
Third parties | 919,569 | 919,569 | 1,415,686 | 1,389,246 | 1,890,679 | 1,919,904 | |||||||||||||||||||
Other current assets | — | — | 139,075 | 139,075 | 145,761 | 691,788 | |||||||||||||||||||
Total current assets | 10,299,704 | 10,299,704 | 7,308,519 | 7,300,312 | 10,980,544 | 10,547,030 | |||||||||||||||||||
Property, plant and equipment — net | 20,019,464 | 20,019,464 | 22,288,766 | 22,891,039 | 27,645,780 | 28,448,606 | |||||||||||||||||||
Advances and other non-current assets | 867,653 | 867,653 | 694,879 | 677,519 | 528,568 | 299,474 | |||||||||||||||||||
Intangible assets — net | — | — | 1,356,144 | 1,327,868 | 2,052,126 | 3,898,817 | |||||||||||||||||||
Total non-current assets | 21,719,236 | 21,719,236 | 25,161,761 | 25,735,758 | 31,341,623 | 33,760,066 | |||||||||||||||||||
Total assets | 32,018,940 | 32,018,940 | 32,470,280 | 33,036,070 | 42,322,167 | 44,307,096 | |||||||||||||||||||
Trade accounts payable | |||||||||||||||||||||||||
Related parties | 685,891 | 685,891 | 721,009 | 719,626 | 1,032,942 | 790,227 | |||||||||||||||||||
Third parties | 939,435 | 939,435 | 1,056,644 | 1,039,937 | 2,356,284 | 2,272,624 | |||||||||||||||||||
Other accounts payable | 26,357 | 26,357 | 49,392 | 49,392 | 58,708 | 215,775 | |||||||||||||||||||
Taxes payable | 732,218 | 732,218 | 1,875,023 | 1,877,988 | 1,212,575 | 1,109,632 | |||||||||||||||||||
Accrued expenses | 993,109 | 621,506 | 1,437,575 | 919,914 | 2,510,402 | 1,949,914 | |||||||||||||||||||
Advances from customers and suppliers | 123,832 | 123,832 | 213,432 | 213,432 | 1,132,319 | 293,522 | |||||||||||||||||||
Current maturities of long-term liabilities | 818,516 | 818,516 | 1,542,600 | 1,542,600 | 2,012,251 | 2,590,227 | |||||||||||||||||||
Total current liabilities | 4,509,355 | 4,137,752 | 10,075,323 | 9,542,537 | 10,854,981 | 9,708,181 | |||||||||||||||||||
Deferred tax liabilities — net | 1,787,214 | 1,703,627 | 1,767,759 | 1,818,236 | 1,521,209 | 3,083,166 | |||||||||||||||||||
Unearned income on revenue-sharing arrangement | 299,409 | 267,843 | 225,714 | 195,068 | 165,978 | 142,797 | |||||||||||||||||||
Provision for long service award | — | 210,159 | — | 275,834 | — | 489,231 | |||||||||||||||||||
Provision for post-retirement benefits | — | 712,709 | — | 1,045,525 | — | 1,602,494 | |||||||||||||||||||
Liabilities for acquisition of subsidiaries | — | — | 260,840 | 260,840 | — | 1,618,979 | |||||||||||||||||||
Total non-current liabilities | 11,786,375 | 12,594,090 | 11,836,048 | 13,177,238 | 12,124,440 | 17,389,499 | |||||||||||||||||||
Difference in value of restructuring transactions between entities under common control | — | — | (7,402,343 | ) | (6,992,233 | ) | (7,032,455 | ) | (7,288,271 | ) | |||||||||||||||
Difference due to change of equity in associated companies | 426,397 | 609,139 | 342,425 | 489,178 | 342,425 | 424,020 | |||||||||||||||||||
Translation adjustment | 177,114 | 253,020 | 179,672 | 256,674 | 164,966 | 235,665 | |||||||||||||||||||
Unappropriated retained earnings | 6,777,522 | 6,082,762 | 9,770,303 | 8,893,824 | 15,565,511 | 14,383,466 | |||||||||||||||||||
Total stockholders’ equity | 14,909,176 | 14,473,064 | 9,323,575 | 9,080,961 | 15,899,183 | 14,613,617 | |||||||||||||||||||
Total liabilities and stockholders’ equity | 32,018,940 | 32,018,940 | 32,470,280 | 33,036,070 | 42,322,167 | 44,307,096 |
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2000 | 2001 | 2002 | ||||||||||||||||||||||
As | As | As | ||||||||||||||||||||||
Previously | Previously | Previously | ||||||||||||||||||||||
Reported | As Restated | Reported | As Restated | Reported | As Restated | |||||||||||||||||||
Rp. Million | Rp. Million | Rp. Million | Rp. Million | Rp. Million | Rp. Million | |||||||||||||||||||
Operating revenues | 12,111,996 | 12,190,178 | 16,130,789 | 16,283,807 | 21,399,737 | 20,802,818 | ||||||||||||||||||
Operating expenses | (6,433,843 | ) | (6,594,119 | ) | (8,515,089 | ) | (8,864,400 | ) | (11,998,053 | ) | (11,672,603 | ) | ||||||||||||
Other income/(charges) | (888,953 | ) | (987,830 | ) | (928,411 | ) | (869,516 | ) | 2,940,890 | 2,618,687 | ||||||||||||||
Income before tax | 4,789,200 | 4,608,229 | 6,687,289 | 6,549,891 | 12,342,574 | 11,748,902 | ||||||||||||||||||
Tax expense | (1,466,267 | ) | (1,520,294 | ) | (2,070,654 | ) | (2,006,895 | ) | (2,745,857 | ) | (2,898,971 | ) | ||||||||||||
Pre-acquisition loss (income) | — | — | 108,080 | — | (142,817 | ) | — | |||||||||||||||||
Minority interest | (312,930 | ) | (312,930 | ) | (474,605 | ) | (474,605 | ) | (1,108,626 | ) | (810,222 | ) | ||||||||||||
Net income | 3,010,003 | 2,775,005 | 4,250,110 | 4,068,391 | 8,345,274 | 8,039,709 | ||||||||||||||||||
Basic and diluted earnings per share (full amount) | 298.61 | 275.30 | 421.64 | 403.61 | 827.90 | 797.59 | ||||||||||||||||||
Earnings per ADS (full amount) | 5,972.23 | 5,505.96 | 8,432.76 | 8,072.20 | 16,558.08 | 15,951.80 |
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2000 | 2001 | 2002 | ||||||||||||||||
Rp. million | Rp. million | Rp. million | ||||||||||||||||
Net income under U.S. GAAP as previously reported | 2,952,133 | 4,036,641 | 9,274,249 | |||||||||||||||
Impact of Indonesian GAAP restatements on U.S | ||||||||||||||||||
GAAP net income: | ||||||||||||||||||
Aggregate Indonesian GAAP restatements | (234,998 | ) | (181,719 | ) | (305,565 | ) | ||||||||||||
Amount which are not restatements for U.S. GAAP | (i | ) | 16,663 | (10,632 | ) | (66,456 | ) | |||||||||||
(218,335 | ) | (192,351 | ) | (372,021 | ) | |||||||||||||
Effect of restatements on previously reported U.S GAAP net income: | ||||||||||||||||||
Installation revenue: | (ii | ) | ||||||||||||||||
Cumulative effect of accounting change | (814,799 | ) | — | — | ||||||||||||||
Current year amortization | 107,322 | 81,429 | (22,870 | ) | ||||||||||||||
Revenue-sharing arrangements | (iii | ) | (27,041 | ) | 37,650 | 67,959 | ||||||||||||
Deferred taxes | (iv | ) | 214,108 | 347,333 | (337,864 | ) | ||||||||||||
Acquisition of Dayamitra | (v | ) | — | (12,809 | ) | (9,374 | ) | |||||||||||
Others | (vi | ) | 2,937 | 307 | (12,820 | ) | ||||||||||||
Net adjustments | (517,473 | ) | 453,910 | (314,969 | ) | |||||||||||||
Net income under U.S. GAAP as restated | 2,216,325 | 4,298,200 | 8,587,259 | |||||||||||||||
Basic earnings per share (full amount) | ||||||||||||||||||
As previously reported | 292.87 | 400.46 | 920.06 | |||||||||||||||
As restated | 219.87 | 426.41 | 851.91 | |||||||||||||||
Basic earnings per ADS (full amount) | ||||||||||||||||||
As previously reported | 5,857.41 | 8,009.21 | 18,401.29 | |||||||||||||||
As restated | 4,397.47 | 8,528.17 | 17,038.21 | |||||||||||||||
Stockholders’ equity under U.S. GAAP as previously reported | 14,146,168 | 8,240,598 | 15,745,181 | |||||||||||||||
Impact of Indonesian GAAP restatements on U.S | ||||||||||||||||||
GAAP stockholders’ equity: | ||||||||||||||||||
Aggregate Indonesian GAAP restatements | (436,112 | ) | (242,614 | ) | (1,285,566 | ) | ||||||||||||
Amounts which are not restatements for U.S. GAAP | (i | ) | (598 | ) | (11,229 | ) | (12,527 | ) | ||||||||||
(436,710 | ) | (253,843 | ) | (1,298,093 | ) | |||||||||||||
Effect of restatements on previously reported U.S. GAAP equity: | ||||||||||||||||||
Installation revenue | (ii | ) | (707,477 | ) | (626,048 | ) | (648,918 | ) | ||||||||||
Revenue-sharing arrangements | (iii | ) | (166,575 | ) | (128,925 | ) | (60,966 | ) | ||||||||||
Deferred taxes | (iv | ) | 119,561 | 421,243 | 93,284 | |||||||||||||
Acquisition of Dayamitra | (v | ) | — | 139,342 | 129,968 | |||||||||||||
Others | (vi | ) | (27,174 | ) | (26,867 | ) | (49,592 | ) | ||||||||||
Net adjustments | (781,665 | ) | (221,255 | ) | (536,224 | ) | ||||||||||||
Stockholders’ equity under U.S. GAAP as restated | 12,927,793 | 7,765,500 | 13,910,864 |
The restatements to the financial position and results of operations under Indonesian GAAP as described above, had the same impact on consolidated stockholders’ equity and net |
185
income presented under U.S. GAAP, except for restatements with respect to revenue sharing arrangements and related deferred taxes. Accordingly, no restatement of stockholders’ equity or net income under U.S. GAAP was required with respect to these items. |
TELKOM was required to adopt the provisions of the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements” in 2001, and retroactively apply its provisions as of January 1, 2000. TELKOM did not initially record the full impact of SAB No. 101 on its results. SAB 101 requires TELKOM to defer certain non-recurring fees, such as service activation and installation fees, and recognize those revenues over the expected term of the customer relationship. For 2000, the adjustment presented included an amount which represents the initial impact of adopting SAB 101. For U.S. GAAP purposes this should have been recorded as a cumulative effect of an accounting change. |
Based on further review, TELKOM concluded that the accounting provided for the revenue sharing arrangements under Indonesian GAAP required an adjustment to conform to U.S. GAAP. A discussion of the differences in accounting for the revenue sharing arrangements under the respective GAAPs may be found in Note 57(1)d to the consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A. |
As discussed above, the deferred tax liability related to investments in consolidated subsidiaries was adjusted in the restated Indonesian GAAP financial statements to conform to SFAS 109. Accordingly, an adjustment was made to eliminate the U.S. GAAP and Indonesian GAAP difference related to the deferred tax liability on the undistributed earnings of subsidiaries and associates. | |
TELKOM also made adjustments in relation to other restated amounts. |
The adjustment reflected the U.S. GAAP requirement, as described in Note 57(1) to the Company’s consolidated financial statements for 2000, 2001 and 2002 filed in Amendment No. 2 to 2002 Annual Report on Form 20-F/ A, to record the Dayamitra acquisition as an acquisition of 100% of the outstanding interest during the year ended December 31, 2001, and the effect of the reversal of foreign exchange capitalized by Dayamitra as the related assets were carried at fair value upon application of purchase accounting. |
Effect on | ||||||||
Net Income | Equity | |||||||
Rp. million | Rp. million | |||||||
Option | 2,050 | 2,050 | ||||||
Foreign exchange capitalized | (14,859 | ) | 137,292 | |||||
(12,809 | ) | 139,342 |
Other adjustments represented individually insignificant adjustments consisting of land rights amortization and certain capitalized foreign exchange gains and losses. |
186
Basedforegoing; in particular, accounting and financial reporting personnel did not have objective written policies and procedures to follow when addressing significant accounting and financial reporting issues and so such issues were not always dealt with in a consistent manner, and the internal audit function did not focus on identifying or identify this issue as well as the evaluation described above and PwC’s and KPMG’s communications to our Audit Committee, our principal executive officer and principal financial officer concluded that these material weaknesses, if not addressed, could result in accounting errors and inadequate disclosures such as those underlying the restatements of TELKOM’s consolidated financial statements for the three years ended December 31, 2002, which related to: (1) our accounting for liabilities for post-employment medical benefits; (2) our accounting for liabilities for long service awards; (3) our calculation of deferred income taxes; (4) our accounting for business acquisitions; (5) our accounting for installation revenues; (6) our accounting for revenue sharing arrangements; and (7) a substantial number of other individually less significant items.
reportable conditions identified herein.
(1) | an assessment of the organizational structure of the finance department, including to determine additional resources which need to be dedicated to it; | |
(2) | the enhancement of all finance-related policies and procedures covering accounting and financial reporting; | |
(3) | the improvement of standard documentation requirements for the assessment of critical, significant and judgmental accounting areas; | |
(4) | the improvement of understanding of relevant Indonesian GAAP and U.S. GAAP accounting principles and financial reporting responsibilities across all business units through intensive |
187
and continuing training and proactive consultations with advisors on technical matters as they relate to TELKOM’s business; and | ||
(5) | modification of the mandate of TELKOM’s internal audit function to place greater emphasis on the adequacy of, and compliance with, procedures relating to internal control over financial reporting. |
• | On December 31, 2003, TELKOM, under the supervision of the Human Resources Department, retained a human resources consulting firm, which assisted TELKOM in assessing job competency requirements and the adequacy of the organizational structure throughout TELKOM, including its finance department. The assessment, among other things, assisted TELKOM in preparing a job catalogue and job profile manual that sets out ideal staffing and job descriptions in the various departments in TELKOM. | |
• | TELKOM, initially with the assistance of E&Y, assessed thoroughly the organizational structure of its finance department in 2004. In particular, TELKOM focused on determining the separation of each function and identifying the personnel in charge of such function, such personnel’s effectiveness in performing such function and the need for additional personnel and expertise in performing such function. Since the assessment, TELKOM has been and is still in the process of establishing job descriptions for newly identified functions, searching for additional accounting and financial reporting personnel and identifying the appropriate personnel to fill certain of the positions. | |
• | In 2004, TELKOM carried out a recruitment exercise for fresh accountancy graduates from a prominent university in Indonesia and recruited eight persons. In 2005, TELKOM recruited 15 new employees with either graduate or masters degrees in accounting to support its financial, accounting, and internal audit departments. | |
• | In connection with this step (1) and steps (2) and (3) which TELKOM’s senior management directed TELKOM to implement, on February 27, 2004, TELKOM added a new oversight function to its accounting department organization structure to improve the assessment of critical, significant and judgmental accounting areas. The new oversight function required the hiring of consultants for the accounting department (1) to monitor changes in Indonesian GAAP and U.S. GAAP, and differences between Indonesian GAAP and US GAAP and (2) to train TELKOM’s staff accountants, and on May 1, 2004, TELKOM hired two experienced personnel for such roles. |
188
• | On January 7, 2004, TELKOM established a team comprised of 75 personnel from various departments of TELKOM and chaired by the vice president of TELKOM’s budget department for the purpose of preparing TELKOM for the compliance with Section 404 of the Sarbanes-Oxley Act of 2002. | |
• | In connection with steps (2) and (3) as well as step 1 which TELKOM’s senior management directed TELKOM to implement, on June 7, 2004, TELKOM retained E&Y, under the supervision of the Audit Committee, to assist TELKOM in improving its internal control over financial reporting in two phases. The first phase included the (i) development of an internal control framework, including documentation and evaluation methodology; (ii) establishment of a project team to conduct the evaluation and implementation; (iii) evaluation of internal controls; (iv) identification of internal controls at the various levels; and (v) preparation of a Director’s Decree on internal controls. The first phase of this project was completed at the end of August 2004, and a decree of the Board of Directors was issued on October 29, 2004 to formally implement certain internal control policies and procedures. The second phase, which began on November 9, 2004, included the (i) dissemination of the Directors’ Decree on internal controls, through sessions to discuss the new internal controls; (ii) evaluation of information technology-related general controls; (iii) evaluation and monitoring of the implementation of the Directors’ Decree on internal controls, including design of an internal control testing program; (iv) selection of a software monitoring tool for the monitoring process. As of the date of this Annual Report, TELKOM is evaluating the choice of software and has not made a selection; and (v) a planned benchmarking visit to a telecommunications company in the United States which has implemented internal controls in accordance with the requirements of the Sarbanes-Oxley Act of 2002. Since December 2004, to evaluate and monitor the implementation of the Directors’ Decree on internal controls, TELKOM has conducted walkthroughs and tests with respect to the implementation of the new internal controls, and taken remedial steps where appropriate. The Board of Directors also set up an internal control integration project on December 14, 2004 to follow up on the integration process of TELKOM’s new internal controls. Since April 12, 2005, as part of an extension of the second phase of E&Y’s program to assist TELKOM in improving its internal control over financial reporting, TELKOM, with the assistance of E&Y, has also been reviewing and designing its internal controls and procedures to ensure compliance with Section 302 of the Sarbanes-Oxley Act of 2002, and strengthening its information technology-related general controls. |
189
requirements, US GAAP, and IAS; (iii) analyzing the differences between accounting policies being applied and “the best practice”; (iv) preparing a draft of accounting policies and the standard operating procedures, and disseminating it to relevant departments for feedback and comment; and (v) discussing the draft of accounting policies and the standard operating procedures with a GAAP expert; and (vi) preparing a final draft of accounting policies and the standard operating procedures for approval by the Board of Directors. The team prepared a draft for comment in January 2005, and TELKOM expects that the final draft will be completed around or after the end of 2005. |
• | Since 2004, TELKOM has implemented a new policy to organize regular training programs relating to accounting and auditing matters for all employees in finance-related positions. | |
• | TELKOM held seminars in November and December 2003 and November 2004 involving outside consultants and members of the accounting department at a major Indonesian university, covering relevant accounting and internal control issues and attended by senior management and certain accounting and finance-related personnel. | |
• | TELKOM subscribed to a U.S. GAAP information web-site through E&Y beginning May 2004. | |
• | 25 senior employees from TELKOM’s accounting and internal audit department will participate in ongoing US GAAP workshops that will run from June to August 2005 covering topics relating to the reconciliation of Indonesian GAAP and US GAAP. These workshops are being held in cooperation with outside consultants and members of the accounting department at a major Indonesian university. |
TELKOM, under the supervisionreporting
• | On December 7, 2004, TELKOM modified the mandate of | |
• | In April 2004, TELKOM hired two consultants for a two year period for its internal audit department with responsibility for (1) improving the role of internal audit for TELKOM, (2) improving the internal control system of TELKOM and (3) reviewing the financial reporting of TELKOM. | |
• | On December 14-16, 2004, all of TELKOM’s employees in its Internal Audit Unit participated in the 8th Communication Forum of Internal Audit Group, an internal audit forum which focused on the application of Sarbanes-Oxley Act Section 404-based internal controls. | |
• | Since April 12, 2005, as part of an extension of the second phase of E&Y’s program to assist TELKOM in improving its internal control over financial reporting, TELKOM, with the |
190
assistance of E&Y, has also been assessing the roles and functions of TELKOM’s Internal Audit Unit to ensure compliance with the Sarbanes-Oxley Act of 2002. |
168
necessary disclosures.
Other than as described above, there have been no significant changes in TELKOM’s internal control over financial reporting that occurred during the last fiscal quarter period covered by this report, that have materially affected, or are reasonably likely to materially affect, TELKOM’s internal control over financial reporting.
take.
191
169
Year Ended | ||||||||||||||||
December 31, | Year Ended | |||||||||||||||
December 31, | ||||||||||||||||
2002 | 2003 | |||||||||||||||
2003 | 2004 | |||||||||||||||
(in Rp. billion) | (in Rp. million) | |||||||||||||||
Audit Fees | 33,578.0 | 10,715.0 | 10,715.0 | 19,274.6 | ||||||||||||
Audit-Related Fees | — | — | — | — | ||||||||||||
Tax Fees | — | — | — | — | ||||||||||||
Other Fees | — | — | — | — |
None of KAP Eddy Pianto, PwC and
2004.
None of KAP Eddy Pianto, PwC and
2004.
192
170
S-KS-X issued thereunder, the charter of TELKOM’s audit committee waives the pre-approval requirement for permissible non-audit services (x) where the aggregate amount of the fees for such non-audit services constitutes no more than five percent of the total amount of fees paid by TELKOM to its independent registered public accounting firm during the fiscal year in which the services are provided or (y) the proposed services are not regarded as non-audit services at the time the contract to perform the same is signed. In either case, the performance of such non-audit services must subsequently be approved either by a member of the Audit Committee who has been delegated pre-approvalpre- approval authority by the full Audit Committee or by the full Audit Committee itself. Notwithstanding the foregoing, none of TELKOM’s independent public accounting firms performed non-audit services for TELKOM during the fiscal years ended December 31, 2002 and 2003.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
171193
thereof.
4.1* | ||||
Settlement Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | ||||
Credit Agreement between TELKOM and the AriaWest lenders, dated July 31, 2003. | ||||
First Amendment to the Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | ||||
Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated May 8, 2002. | ||||
Conditional Sale and Purchase Agreement between TELKOM and the shareholders of Pramindo, dated April 19, 2002. | ||||
Cooperation Agreement on the Interconnection between TELKOM’s Fixed Network and Indosat’s Local Fixed Network and the Settlement of the Interconnection Financial Rights and Obligations between TELKOM and Indosat, dated September 3, 2002, including an English translation thereof. | ||||
Kontrak Pengadaan Satelit TELKOM-2 (Contract on Procurement of TELKOM-2 Satellite) between TELKOM and Orbital Sciences Corporation, dated October 24, 2002. | ||||
First Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated December 15, 2003. | ||||
Kontrak Jasa Peluncur Satelit TELKOM-2 (Agreement on Launch Services of TELKOM-2 Satellite) between TELKOM and Arianespace S.A., dated November 8, 2002. | ||||
Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2003. | ||||
Amendment No. 1 to the Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 31, 2003. | ||||
Service Level Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2002. | ||||
Loan Agreement between TELKOM and The Export-Import Bank of Korea, dated August 27, 2003. |
172
Master Procurement Partnership Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. | ||||
Service Level Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. |
194
4.16* | Master Procurement Partnership Agreement between TELKOM and PT Industri Telekomunikasi Indonesia (Persero), dated August 26, 2003, including an English translation thereof. | |||
Service Level Agreement between TELKOM and PT Industri Telekomunikasi Indonesia Tbk., dated August 26, 2003. | ||||
Partnership Agreement for the Procurement and Construction of Backbone Transmission Network between TELKOM and a consortium led by Siemens AG, dated September 24, 2003. | ||||
Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated February 8, 2002. | ||||
Co-Operation Agreement on Fixed Wireless CDMA Facilities Construction in KSO Divre VII Area between TELKOM and PT Bukaka SingTel International, dated January 14, 2003. | ||||
Amendment No. 1 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated August 22, 2002. | ||||
Amendment No. 2 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated October 25, 2002. | ||||
Amendment No. 3 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated December 20, 2002. | ||||
Amendment No. 4 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated March 20, 2003. | ||||
Amendment No. 5 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated June 26, 2003. | ||||
Amendment No. 6 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated October 9, 2003. | ||||
Amendment No. 7 to the Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated December 4, 2003. | ||||
Master Procurement Partnership Agreement between TELKOM and Motorola, Inc., dated March 24, 2003. | ||||
Partnership Agreement for Procurement and Construction of Regional Metro Junction and Optic Access Network for Regional Division III between TELKOM and PT Industri Telekomunikasi Indonesia (Persero), dated November 12, 2003, including an English translation thereof. | ||||
Contract Agreement in connection with the Softswitch System Class-4 Procurement Program Through Buy or Return Scheme between TELKOM and the Santera-Olex consortium, dated December 18, 2003. | ||||
Side Letter to the Partnership Agreement for the Construction and Provision of the High Performance Backbone in Sumatera, dated June 12, 2003. | ||||
Amendment No. 1 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated September 27, 2002. |
173
Amendment No. 2 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated December 30, 2002. | ||||
Amendment No. 3 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated December 11, 2003. |
195
4.35* | Supply Contract among TELKOM, NEC Corporation, the Communication Authority of Thailand and Singapore Telecommunications Limited, dated November 27, 2002. | |||
Amended and Restated KSO Agreement between TELKOM and PT Mitra Global Telekomunikasi Indonesia, dated January 20, 2004. | ||||
Service Level Agreement between TELKOM and Motorola, Inc., dated March 24, 2003. | ||||
Indemnity Agreement between TELKOM and KAP Hans Tuanakotta Mustofa & Halim (formerly KAP Hans Tuanakotta & Mustofa), dated February 9, 2004. | ||||
Supply Contract for the Procurement and Installation of Dumai-Melaka Cable System among TELKOM, Telekom Malaysia Berhad and NEC Corporation, dated May 14, 2004. | ||||
Loan Agreement and Acknowledgement of Indebtedness between TELKOM and ABN AMRO Bank N.V. Jakarta Branch, dated January 28, 2004. | ||||
Letter Agreement between Indosat and TELKOM, dated December 11, 2003 (with regard to the merger of PT Indonesian Satellite Corporation Tbk with PT Indosat Multi Media Mobile, PT Satelit Palapa Indonesia and PT Bimagraha Telekomindo), including an English translation thereof. | ||||
Indemnity Agreement between TELKOM and KAP Hans Tuanakotta Mustofa & Halim (formerly KAP Hans Tuanakotta & Mustofa), dated June 29, 2004. | ||||
4.43 | Medium Term Notes Issuance Agreement dated December 13, 2004 (English summary). | |||
4.44 | Indemnity Agreement between TELKOM and KAP Hans Tuanakotta Mustofa & Halim (formerly KAP Hans Tuanakotta & Mustofa), dated April 25, 2005. |
* | Filed with Amendment No. 2 to the Annual Report of Form 20-F/A for the year ended December 31, 2002 filed February 9, 2004 and incorporated herein by reference. |
** | Filed with original Annual Report on Form 20-F for the year ended December 31, 2002 filed April 17, 2003 and incorporated herein by reference. |
+ | Filed with original Annual Report on Form 20-F for the year ended December 31, 2003 filed June 30, 2004 and incorporated herein by reference. |
196
Name Under Which | |||||||||
Jurisdiction of | Subsidiary Conducts | ||||||||
Name of Subsidiary | Incorporation | its Business | |||||||
PT AriaWest International | Indonesia | AriaWest | |||||||
PT Multimedia Nusantara | Indonesia | Metra | |||||||
PT Graha Sarana Duta | Indonesia | GSD | |||||||
PT Indonusa Telemedia | Indonesia | Indonusa | |||||||
PT Dayamitra Telekomunikasi | Indonesia | Mitratel | |||||||
PT Telekomunikasi Selular | Indonesia | Telkomsel | |||||||
PT Napsindo Primatel Internasional | Indonesia | Napsindo | |||||||
PT Infomedia Nusantara | Indonesia | Infomedia | |||||||
PT Pro Infokom Indonesia | Indonesia | PII | |||||||
PT Pramindo Ikat Nusantara | Indonesia | Pramindo |
174
175197
July, 2005.
By: | /s/ |
Page | |||||
F-2 | |||||
Consolidated Financial Statements | |||||
F-12 | |||||
F-14 | |||||
F-1
F-2
F-2
INDEPENDENT AUDITOR’S REPORT
TO THE STOCKHOLDERS, BOARD OF COMMISSIONERS AND DIRECTORS OF
We have audited the accompanying consolidated balance sheet of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. and its subsidiaries (the “Company”) as of December 31, 2002, and the related consolidated statements of income, changes in stockholders’ equity and cash flows2005, except for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company as of December 31, 2001 were audited by other independent auditors whose report that was dated February 28, 2002 except with respect to certain items that were subsequently restated,Note 56, as to which the date is January 29, 2004, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards established by the Indonesian Institute of Accountants and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2002, and the consolidated results of its operations and its consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the Indonesia.
Accounting principles generally accepted in Indonesia vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 58 to the consolidated financial statements.
Jakarta, January 29, 2004
DRS. IRHOAN TANUDIREDJA BAP
F-3
F-4
No. 280202 TI LSW SAR4 — 20F
The Stockholders, Boards of Commissioners and Directors
those statements.
F-5
Generally
HANS TUANAKOTTA MUSTOFA & HALIM
February 28, 2002, except with respect to certain items that were subsequently restated, as to which the date is January 29, 2004.
F-6F-5
Notes | 2002 | 2003 | Notes | 2003 | 2004 | |||||||||||||||||||||||||||||||||
Rp | Rp | US$ (Note 3) | Rp | Rp | US$ (Note 3) | |||||||||||||||||||||||||||||||||
CURRENT ASSETS | CURRENT ASSETS | CURRENT ASSETS | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 2c,2f,6,49 | 5,699,070 | 5,094,472 | 603,610 | Cash and cash equivalents | 2c,2f,5,47 | 5,094,472 | 4,856,123 | 522,726 | |||||||||||||||||||||||||||||
Temporary investments | 2c,2g,7,49 | 573,000 | 4,006 | 475 | Temporary investments | 2c,2g,47 | 4,006 | 19,949 | 2,147 | |||||||||||||||||||||||||||||
Trade accounts receivable | 2c,2h,8,49 | Trade accounts receivable | 2c,2h,6,47 | |||||||||||||||||||||||||||||||||||
Related parties — net of allowance for doubtful accounts of Rp95,676 million in 2002, and Rp110,932 million in 2003 | 886,763 | 410,923 | 48,687 | Related parties — net of allowance for doubtful accounts of Rp110,932 million in 2003, and Rp64,928 million in 2004 | 410,923 | 419,104 | 45,113 | |||||||||||||||||||||||||||||||
Third parties — net of allowance for doubtful accounts of Rp407,313 million in 2002, and Rp332,960 million in 2003 | 1,919,904 | 2,422,005 | 286,967 | Third parties — net of allowance for doubtful accounts of Rp332,960 million in 2003, and Rp457,138 million in 2004 | 2,422,005 | 2,899,999 | 312,164 | |||||||||||||||||||||||||||||||
Other accounts receivable — net of allowance for doubtful accounts of Rp24,253 million in 2002, and Rp45,544 million in 2003 | 2c,2h,49 | 198,493 | 170,121 | 20,157 | Other accounts receivable — net of allowance for doubtful accounts of Rp45,544 million in 2003, and Rp9,236 million in 2004 | 2c,2h,47 | 170,121 | 55,769 | 6,003 | |||||||||||||||||||||||||||||
Inventories — net of allowance for obsolescence of Rp53,795 million in 2002, and Rp40,489 million in 2003 | 2i,9 | 139,682 | 154,003 | 18,247 | Inventories — net of allowance for obsolescence of Rp40,489 million in 2003, and Rp54,733 million in 2004 | 2i,7 | 154,003 | 203,085 | 21,861 | |||||||||||||||||||||||||||||
Prepaid expenses | 2c,2j,10,49 | 353,656 | 717,917 | 85,061 | Prepaid expenses | 2c,2j,8,47 | 429,695 | 628,069 | 67,607 | |||||||||||||||||||||||||||||
Prepaid taxes | 43a | 84,674 | 212,282 | 25,152 | Prepaid taxes | 41a | 212,282 | 77,228 | 8,313 | |||||||||||||||||||||||||||||
Other current assets | 2c,11,49 | 691,788 | 45,083 | 5,342 | Other current assets | 2c,9,47 | 45,083 | 44,608 | 4,802 | |||||||||||||||||||||||||||||
Total Current Assets | 10,547,030 | 9,230,812 | 1,093,698 | Total Current Assets | 8,942,590 | 9,203,934 | 990,736 | |||||||||||||||||||||||||||||||
NON-CURRENT ASSETS | NON-CURRENT ASSETS | NON-CURRENT ASSETS | ||||||||||||||||||||||||||||||||||||
Long-term investments | 2g,12 | 183,147 | 64,648 | 7,660 | Long-term investments — net | 2g,10 | 64,648 | 82,613 | 8,893 | |||||||||||||||||||||||||||||
Property, plant and equipment — net of accumulated depreciation of Rp18,886,345 million in 2002, and Rp23,581,560 million in 2003 | 2k,2l,13 | 28,448,606 | 34,775,140 | 4,120,277 | Property, plant and equipment — net of accumulated depreciation of Rp23,581,559 million in 2003, and Rp29,297,163 million in 2004 | 2k,2l,11 | 34,775,140 | 39,572,099 | 4,259,645 | |||||||||||||||||||||||||||||
Property, plant and equipment under revenue- sharing arrangements — net of accumulated depreciation of Rp842,964 million in 2002, and Rp791,645 million in 2003 | 2m,15,52 | 377,622 | 305,041 | 36,142 | Property, plant and equipment under revenue- sharing arrangements — net of accumulated depreciation of Rp791,645 million in 2003, and Rp694,570 million in 2004 | 2m,12,50 | 305,041 | 499,127 | 53,727 | |||||||||||||||||||||||||||||
Advances and other non-current assets | 2c,49 | 306,363 | 175,954 | 20,847 | Prepaid pension benefit costs | 2q,44 | 288,222 | 91,262 | 9,824 | |||||||||||||||||||||||||||||
Intangible assets — net of accumulated amortization of Rp187,990 million in 2002, and Rp730,659 million in 2003 | 1c,2d,16 | 3,898,817 | 5,144,050 | 609,485 | Advances and other non-current assets | 2c,13,47 | 175,954 | 1,372,351 | 147,723 | |||||||||||||||||||||||||||||
Advance payments for investments in shares of stock | 5e | 247,583 | 65,458 | 7,756 | Goodwill and other intangible assets — net of accumulated amortization of Rp973,704 million in 2003, and Rp1,846,034 million in 2004 | 1c,2d,14 | 5,144,050 | 5,411,425 | 582,500 | |||||||||||||||||||||||||||||
Escrow accounts | 17 | 297,928 | 522,146 | 61,866 | Advance payments for investments in shares of stock | 4f | 65,458 | — | — | |||||||||||||||||||||||||||||
Escrow accounts | 15 | 522,146 | 36,281 | 3,905 | ||||||||||||||||||||||||||||||||||
Total Non-current Assets | 33,760,066 | 41,052,437 | 4,864,033 | |||||||||||||||||||||||||||||||||||
Total Non-current Assets | 41,340,659 | 47,065,158 | 5,066,217 | |||||||||||||||||||||||||||||||||||
TOTAL ASSETS | TOTAL ASSETS | 44,307,096 | 50,283,249 | 5,957,731 | TOTAL ASSETS | 50,283,249 | 56,269,092 | 6,056,953 | ||||||||||||||||||||||||||||||
F-7F-6
Notes | 2002 | 2003 | Notes | 2003 | 2004 | |||||||||||||||||||||||||||||||||
Rp | Rp | US$ (Note 3) | Rp | Rp | US$ (Note 3) | |||||||||||||||||||||||||||||||||
CURRENT LIABILITIES | CURRENT LIABILITIES | CURRENT LIABILITIES | ||||||||||||||||||||||||||||||||||||
Trade accounts payable | 2c,18,49 | Trade accounts payable | 2c,16,47 | |||||||||||||||||||||||||||||||||||
Related parties | 790,227 | 657,478 | 77,900 | Related parties | 657,478 | 643,094 | 69,224 | |||||||||||||||||||||||||||||||
Third parties | 2,272,624 | 3,109,854 | 368,466 | Third parties | 3,109,854 | 3,611,456 | 388,747 | |||||||||||||||||||||||||||||||
Other accounts payable | 215,775 | 188,112 | 22,288 | Other accounts payable | 187,938 | 5,073 | 546 | |||||||||||||||||||||||||||||||
Taxes payable | 2s,43b | 1,109,632 | 1,513,038 | 179,269 | Taxes payable | 2s,41b | 1,513,038 | 1,592,479 | 171,419 | |||||||||||||||||||||||||||||
Dividends payable | 1,494 | 3,779 | 448 | Dividends payable | 3,779 | 62,689 | 6,748 | |||||||||||||||||||||||||||||||
Accrued expenses | 2c,19,49 | 1,949,914 | 1,215,872 | 144,061 | Accrued expenses | 2c,17,47 | 1,185,210 | 1,051,366 | 113,172 | |||||||||||||||||||||||||||||
Unearned income | 20 | 445,561 | 763,211 | 90,428 | Unearned income | 18 | 763,211 | 1,030,000 | 110,872 | |||||||||||||||||||||||||||||
Advances from customers and suppliers | 21 | 293,522 | 268,148 | 31,771 | Advances from customers and suppliers | 19 | 268,148 | 278,430 | 29,971 | |||||||||||||||||||||||||||||
Short-term bank loans | 2c,22,49 | 39,205 | 37,642 | 4,460 | Short-term bank loans | 2c,20,47 | 37,642 | 1,101,633 | 118,583 | |||||||||||||||||||||||||||||
Current maturities of long-term liabilities | 2c,23,49 | 2,590,227 | 3,443,516 | 407,999 | Current maturities of long-term liabilities | 2c,21,47 | 3,443,516 | 2,300,822 | 247,667 | |||||||||||||||||||||||||||||
Total Current Liabilities | 9,708,181 | 11,200,650 | 1,327,090 | Total Current Liabilities | 11,169,814 | 11,677,042 | 1,256,949 | |||||||||||||||||||||||||||||||
NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | ||||||||||||||||||||||||||||||||||||
Deferred tax liabilities — net | 2s,43e | 3,083,166 | 3,546,770 | 420,234 | Deferred tax liabilities — net | 2s,41e | 3,546,770 | 3,352,171 | 360,836 | |||||||||||||||||||||||||||||
Unearned income on revenue-sharing arrangements | 2m,15,52 | 142,797 | 111,732 | 13,238 | Unearned income on revenue-sharing arrangements | 2m,12,50 | 111,732 | 360,332 | 38,787 | |||||||||||||||||||||||||||||
Unearned initial investor payments under joint operation schemes | 2n,36,51 | 66,117 | 31,584 | 3,742 | Unearned initial investor payments under joint operation schemes | 2n,49 | 31,584 | 20,453 | 2,202 | |||||||||||||||||||||||||||||
Provision for long service awards | 2r,47 | 489,231 | 473,614 | 56,115 | Provision for long service awards | 2c,2r,45,47 | 491,037 | 572,303 | 61,604 | |||||||||||||||||||||||||||||
Provision for post-retirement health care benefits | 2r,48 | 1,602,494 | 2,063,350 | 244,474 | Provision for post-retirement benefits | 2c,2r,46,47 | 2,063,524 | 1,841,146 | 198,186 | |||||||||||||||||||||||||||||
Long-term liabilities — net of current maturities | Accrued pension and other post-retirement benefits costs | 2q,44b,44d | 13,239 | 32,007 | 3,445 | |||||||||||||||||||||||||||||||||
Two-step loans — related party | 2c,24,49 | 7,734,033 | 6,858,910 | 812,667 | Long-term liabilities — net of current maturities | |||||||||||||||||||||||||||||||||
Guaranteed notes and bonds | 25 | 2,313,510 | 2,102,502 | 249,112 | Two-step loans — related party | 2c,22,47 | 6,858,910 | 5,363,283 | 577,318 | |||||||||||||||||||||||||||||
Bank loans | 2c,26,49 | 85,355 | 2,115,797 | 250,687 | Notes and bonds | 23 | 2,102,502 | 2,331,465 | 250,965 | |||||||||||||||||||||||||||||
Liabilities for acquisitions of subsidiaries | 27 | 1,618,979 | 746,974 | 88,504 | Bank loans | 2c,24,47 | 2,115,797 | 1,775,799 | 191,152 | |||||||||||||||||||||||||||||
Suppliers’ credit loans | 28 | 175,625 | 671 | 80 | Liabilities of business acquisitions | 25 | 746,974 | 3,743,317 | 402,940 | |||||||||||||||||||||||||||||
Bridging loan | 29 | 53,405 | 510 | 60 | Suppliers’ credit loans | 26 | 671 | — | — | |||||||||||||||||||||||||||||
Other long-term debt | 9,275 | 9,153 | 1,084 | Bridging loan | 27 | 510 | — | — | ||||||||||||||||||||||||||||||
Project cost payables | 15,512 | — | — | Other long-term debt | 9,153 | — | — | |||||||||||||||||||||||||||||||
Total Non-current Liabilities | 17,389,499 | 18,061,567 | 2,139,997 | Total Non-current Liabilities | 18,092,403 | 19,392,276 | 2,087,435 | |||||||||||||||||||||||||||||||
MINORITY INTEREST | MINORITY INTEREST | 30 | 2,595,799 | 3,708,155 | 439,355 | MINORITY INTEREST | 28 | 3,708,155 | 4,938,432 | 531,586 | ||||||||||||||||||||||||||||
STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||||
Capital stock1) — Rp250 par value per Series A Dwiwarna share and Series B share | ||||||||||||||||||||||||||||||||||||||
Authorized — one Series A Dwiwarna share and 79,999,999,999 Series B shares | ||||||||||||||||||||||||||||||||||||||
Issued and fully paid — one Series A Dwiwarna share and 20,159,999,279 Series B shares | 1b,29 | 5,040,000 | 5,040,000 | 542,519 | ||||||||||||||||||||||||||||||||||
Additional paid-in capital | 30 | 1,073,333 | 1,073,333 | 115,536 | ||||||||||||||||||||||||||||||||||
Difference in value of restructuring transactions between entities under common control | 31 | (7,288,271 | ) | (7,288,271 | ) | (784,529 | ) | |||||||||||||||||||||||||||||||
Difference due to change of equity in associated companies | 2g | 385,595 | 385,595 | 41,506 | ||||||||||||||||||||||||||||||||||
Unrealized holding gain on available-for-sale securities | 2g | — | 884 | 95 | ||||||||||||||||||||||||||||||||||
Translation adjustment | 2g | 224,232 | 229,595 | 24,714 | ||||||||||||||||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||||||||||||||||
Appropriated | 1,559,068 | 1,680,813 | 180,927 | |||||||||||||||||||||||||||||||||||
Unappropriated | 16,318,920 | 19,139,393 | 2,060,215 | |||||||||||||||||||||||||||||||||||
Total Stockholders’ Equity | 17,312,877 | 20,261,342 | 2,180,983 | |||||||||||||||||||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 50,283,249 | 56,269,092 | 6,056,953 | ||||||||||||||||||||||||||||||||||
1) | The prior year’s authorized, issued and fully paid capital stock and par value amounts have been restated to reflect a two-for-one stock split as resolved in the Annual General Meeting of Stockholders on July 30, 2004. |
F-7
Notes | 2002 | 2003 | 2004 | |||||||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | |||||||||||||||||||
OPERATING REVENUES | ||||||||||||||||||||||
Telephone | 2p,32 | |||||||||||||||||||||
Fixed lines | 7,264,099 | 8,896,865 | 10,645,021 | 1,145,858 | ||||||||||||||||||
Cellular | 6,226,801 | 8,458,830 | 10,421,298 | 1,121,776 | ||||||||||||||||||
Interconnection | 2p,33,47 | 2,831,334 | 4,162,148 | 6,187,981 | 666,091 | |||||||||||||||||
Joint operation schemes | 2n,34,49 | 2,128,145 | 1,486,307 | 656,614 | 70,680 | |||||||||||||||||
Data and Internet | 35 | 1,551,626 | 3,108,562 | 4,808,742 | 517,626 | |||||||||||||||||
Network | 36 | 316,098 | 517,865 | 654,309 | 70,432 | |||||||||||||||||
Revenue-sharing arrangements | 2m,37,50 | 263,754 | 258,464 | 280,576 | 30,202 | |||||||||||||||||
Other telecommunications services | 220,961 | 226,882 | 293,225 | 31,564 | ||||||||||||||||||
Total Operating Revenues | 20,802,818 | 27,115,923 | 33,947,766 | 3,654,229 | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||
Personnel | 38 | 4,387,568 | 4,440,096 | 5,570,778 | 599,653 | |||||||||||||||||
Depreciation | 2k,2l,2m,11,12 | 3,473,370 | 4,779,520 | 6,438,557 | 693,063 | |||||||||||||||||
Operations, maintenance and telecommunication services | 39 | 2,290,219 | 3,338,693 | 4,529,587 | 487,577 | |||||||||||||||||
General and administrative | 40 | 1,146,294 | 2,078,777 | 2,599,847 | 279,854 | |||||||||||||||||
Marketing | 375,152 | 502,898 | 881,930 | 94,933 | ||||||||||||||||||
Total Operating Expenses | 11,672,603 | 15,139,984 | 20,020,699 | 2,155,080 | ||||||||||||||||||
OPERATING INCOME | 9,130,215 | 11,975,939 | 13,927,067 | 1,499,149 | ||||||||||||||||||
OTHER INCOME (CHARGES) | ||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | 3,196,380 | — | — | — | ||||||||||||||||||
Interest income | 47 | 479,802 | 366,024 | 317,941 | 34,224 | |||||||||||||||||
Interest expense | 47 | (1,582,750 | ) | (1,383,446 | ) | (1,270,136 | ) | (136,721 | ) | |||||||||||||
Gain (loss) on foreign exchange — net | 2e | 556,613 | 126,121 | (1,220,760 | ) | (131,406 | ) | |||||||||||||||
Equity in net income of associated companies | 2g,10 | 4,598 | 2,819 | 3,420 | 368 | |||||||||||||||||
Others — net | (35,956 | ) | 364,338 | 331,050 | 35,635 | |||||||||||||||||
Other income (charges) — net | 2,618,687 | (524,144 | ) | (1,838,485 | ) | (197,900 | ) | |||||||||||||||
INCOME BEFORE TAX | 11,748,902 | 11,451,795 | 12,088,582 | 1,301,249 | ||||||||||||||||||
TAX EXPENSE | 2s,41c | |||||||||||||||||||||
Current tax | (2,747,762 | ) | (3,791,280 | ) | (4,267,111 | ) | (459,323 | ) | ||||||||||||||
Deferred tax | (151,209 | ) | (69,810 | ) | 264,039 | 28,422 | ||||||||||||||||
(2,898,971 | ) | (3,861,090 | ) | (4,003,072 | ) | (430,901 | ) | |||||||||||||||
INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES | 8,849,931 | 7,590,705 | 8,085,510 | 870,348 | ||||||||||||||||||
MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES, net | 28 | (810,222 | ) | (1,503,478 | ) | (1,956,301 | ) | (210,581 | ) | |||||||||||||
NET INCOME | 8,039,709 | 6,087,227 | 6,129,209 | 659,767 | ||||||||||||||||||
BASIC EARNINGS PER SHARE1) | 2t,42 | |||||||||||||||||||||
Net income per share | 398.80 | 301.95 | 304.03 | 0.03 | ||||||||||||||||||
Net income per ADS (40 Series B shares per ADS) | 15,951.80 | 12,077.83 | 12,161.13 | 1.20 | ||||||||||||||||||
1) | The prior years’ basic earnings per share have been restated to reflect a two-for-one stock split as resolved in the Annual General Meeting of Stockholders on July 30, 2004. |
F-8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes | 2002 | 2003 | |||||||||||||||||
Rp | Rp | US$ (Note 3) | |||||||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Capital stock — Rp 500 par value per Series A | |||||||||||||||||||
Dwiwarna share and Series B share | |||||||||||||||||||
Authorized — one Series A Dwiwarna share and 39,999,999,999 Series B shares | |||||||||||||||||||
Issued and fully paid — one Series A Dwiwarna share and 10,079,999,639 Series B shares | 31 | 5,040,000 | 5,040,000 | 597,156 | |||||||||||||||
Additional paid-in capital | 32 | 1,073,333 | 1,073,333 | 127,172 | |||||||||||||||
Difference in value of restructuring transactions between entities under common control | 33 | (7,288,271 | ) | (7,288,271 | ) | (863,539 | ) | ||||||||||||
Difference due to change of equity in associated companies | 2g | 424,020 | 385,595 | 45,687 | |||||||||||||||
Translation adjustment | 2e | 235,665 | 224,232 | 26,568 | |||||||||||||||
Retained earnings | |||||||||||||||||||
Appropriated | 745,404 | 1,559,068 | 184,724 | ||||||||||||||||
Unappropriated | 14,383,466 | 16,318,920 | 1,933,521 | ||||||||||||||||
Total Stockholders’ Equity | 14,613,617 | 17,312,877 | 2,051,289 | ||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 44,307,096 | 50,283,249 | 5,957,731 | ||||||||||||||||
Difference in | |||||||||||||||||||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||||||||||||||||||
Restructuring | Difference Due | Unrealized | |||||||||||||||||||||||||||||||||||||||
Transactions | to Change | Holding | |||||||||||||||||||||||||||||||||||||||
Additional | Between | of Equity | Loss on | Retained Earnings | Total | ||||||||||||||||||||||||||||||||||||
Capital | Paid-In | Entities Under | in Associated | Translation | Available-for- | Stockholders’ | |||||||||||||||||||||||||||||||||||
Description | Notes | Stock | Capital | Common Control | Companies | Adjustment | Sale Securities | Appropriated | Unappropriated | Equity | |||||||||||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | |||||||||||||||||||||||||||||||||
Balance as of January 1, 2002 | 5,040,000 | 1,073,333 | (6,992,233 | ) | 489,178 | 256,674 | (207 | ) | 320,392 | 8,893,824 | 9,080,961 | ||||||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g | — | — | — | — | (21,009 | ) | — | — | — | (21,009 | ) | |||||||||||||||||||||||||||||
Sale of investment in mutual fund Reksa Dana Seruni | — | — | — | — | — | 207 | — | — | 207 | ||||||||||||||||||||||||||||||||
Acquisition of Pramindo | 4b | — | — | (296,038 | ) | — | — | — | — | — | (296,038 | ) | |||||||||||||||||||||||||||||
Realized difference due to change of equity in associated companies as the result of sale of 12.72% of Telkomsel | 1c | — | — | — | (65,158 | ) | — | — | — | — | (65,158 | ) | |||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: | |||||||||||||||||||||||||||||||||||||||||
Declaration of cash dividends | 43 | — | — | — | — | — | — | — | (2,125,055 | ) | (2,125,055 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 43 | — | — | — | — | — | — | 425,012 | (425,012 | ) | — | ||||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | 8,039,709 | 8,039,709 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2002 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 424,020 | 235,665 | — | 745,404 | 14,383,466 | 14,613,617 | |||||||||||||||||||||||||||||||
F-9
Notes | 2001 | 2002 | 2003 | |||||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | |||||||||||||||||
OPERATING REVENUES | ||||||||||||||||||||
Telephone | 2p,34 | |||||||||||||||||||
Fixed lines | 6,415,156 | 7,264,099 | 8,896,865 | 1,054,131 | ||||||||||||||||
Cellular | 4,707,998 | 6,226,801 | 8,458,830 | 1,002,231 | ||||||||||||||||
Interconnection | 2p,35,49 | 1,423,686 | 2,831,334 | 4,162,148 | 493,145 | |||||||||||||||
Joint operation schemes | 2n,36,49,51 | 2,219,586 | 2,128,145 | 1,486,307 | 176,103 | |||||||||||||||
Data and Internet | 37 | 673,184 | 1,551,626 | 3,108,562 | 368,313 | |||||||||||||||
Network | 38 | 414,929 | 316,098 | 517,865 | 61,358 | |||||||||||||||
Revenue-sharing arrangements | 2m,39,52 | 264,253 | 263,754 | 258,464 | 30,624 | |||||||||||||||
Other telecommunications services | 165,015 | 220,961 | 226,882 | 26,882 | ||||||||||||||||
Total Operating Revenues | 16,283,807 | 20,802,818 | 27,115,923 | 3,212,787 | ||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Personnel | 40 | 2,281,245 | 4,387,568 | 4,440,096 | 526,078 | |||||||||||||||
Depreciation | 2k,2l,2m,13,15 | 2,869,772 | 3,473,370 | 4,779,520 | 566,294 | |||||||||||||||
Operations, maintenance and telecommunication services | 41 | 2,149,921 | 2,290,219 | 3,338,693 | 395,580 | |||||||||||||||
General and administrative | 42 | 1,343,456 | 1,146,294 | 2,078,777 | 246,300 | |||||||||||||||
Marketing | 220,006 | 375,152 | 502,898 | 59,585 | ||||||||||||||||
Total Operating Expenses | 8,864,400 | 11,672,603 | 15,139,984 | 1,793,837 | ||||||||||||||||
OPERATING INCOME | 7,419,407 | 9,130,215 | 11,975,939 | 1,418,950 | ||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | 1c | — | 3,196,380 | — | — | |||||||||||||||
Interest income | 49 | 571,586 | 479,802 | 366,024 | 43,367 | |||||||||||||||
Interest expense | 49 | (1,329,642 | ) | (1,582,750 | ) | (1,383,446 | ) | (163,915 | ) | |||||||||||
Gain (loss) on foreign exchange — net | 2e | (378,720 | ) | 556,613 | 126,121 | 14,943 | ||||||||||||||
Equity in net income (loss) of associated companies | 2g,12 | (85,686 | ) | 4,598 | 2,819 | 334 | ||||||||||||||
Others — net | 352,946 | (35,956 | ) | 364,338 | 43,169 | |||||||||||||||
Other income (expense) — net | (869,516 | ) | 2,618,687 | (524,144 | ) | (62,102 | ) | |||||||||||||
INCOME BEFORE TAX | 6,549,891 | 11,748,902 | 11,451,795 | 1,356,848 | ||||||||||||||||
TAX EXPENSE | 2s,43c | |||||||||||||||||||
Current tax | (2,177,366 | ) | (2,747,762 | ) | (3,791,280 | ) | (449,203 | ) | ||||||||||||
Deferred tax | 170,471 | (151,209 | ) | (69,810 | ) | (8,271 | ) | |||||||||||||
(2,006,895 | ) | (2,898,971 | ) | (3,861,090 | ) | (457,474 | ) | |||||||||||||
INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES | 4,542,996 | 8,849,931 | 7,590,705 | 899,374 | ||||||||||||||||
MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES, net | 30 | (474,605 | ) | (810,222 | ) | (1,503,478 | ) | (178,137 | ) | |||||||||||
NET INCOME | 4,068,391 | 8,039,709 | 6,087,227 | 721,237 | ||||||||||||||||
BASIC EARNINGS PER SHARE | 2t,44 | |||||||||||||||||||
Net income per share | 403.61 | 797.59 | 603.89 | 0.07 | ||||||||||||||||
Net income per ADS | ||||||||||||||||||||
(20 Series B shares per ADS) | 8,072.20 | 15,951.80 | 12,077.83 | 1.43 | ||||||||||||||||
Difference in | |||||||||||||||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||||||||||||||
Restructuring | Difference | ||||||||||||||||||||||||||||||||||||
Transactions | Due to Change | ||||||||||||||||||||||||||||||||||||
Additional | Between Entities | of Equity in | Retained Earnings | Total | |||||||||||||||||||||||||||||||||
Capital | Paid-In | Under Common | Associated | Translation | Stockholders’ | ||||||||||||||||||||||||||||||||
Description | Notes | Stock | Capital | Control | Companies | Adjustment | Appropriated | Unappropriated | Equity | ||||||||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | ||||||||||||||||||||||||||||||
Balance as of January 1, 2003 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 424,020 | 235,665 | 745,404 | 14,383,466 | 14,613,617 | ||||||||||||||||||||||||||||
Realized difference due to change of equity in associated companies as the result of disposal of investment in Metrosel | 10 | — | — | — | (38,425 | ) | — | — | — | (38,425 | ) | ||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g,10 | — | — | — | — | (11,433 | ) | — | — | (11,433 | ) | ||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on May 9, 2003 | |||||||||||||||||||||||||||||||||||||
Declaration of cash dividends | 43 | — | — | — | — | — | — | (3,338,109 | ) | (3,338,109 | ) | ||||||||||||||||||||||||||
Appropriation for general reserve | 43 | — | — | — | — | — | 813,664 | (813,664 | ) | — | |||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | 6,087,227 | 6,087,227 | |||||||||||||||||||||||||||||
Balance as of December 31, 2003 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 224,232 | 1,559,068 | 16,318,920 | 17,312,877 | ||||||||||||||||||||||||||||
F-10
Difference in | |||||||||||||||||||||||||||||||||
Value of | Equity in | ||||||||||||||||||||||||||||||||
Restructuring | Difference Due | Unrealized | Subsidiary | ||||||||||||||||||||||||||||||
Transactions | to Change | Loss on | Resulting from | ||||||||||||||||||||||||||||||
Additional | Between | of Equity | Decline in | the Recast of | |||||||||||||||||||||||||||||
Capital | Paid-In | Entities Under | in Associated | Translation | Value of | Financial | |||||||||||||||||||||||||||
Description | Notes | Stock | Capital | Common Control | Companies | Adjustment | Securities | Statements | |||||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | Rp | |||||||||||||||||||||||||||
Balance as of January 1, 2001 | 5,040,000 | 1,073,333 | — | 609,139 | 253,020 | (165 | ) | 1,221,533 | |||||||||||||||||||||||||
Restructuring transactions between entities under common control | 4 | — | — | (6,992,233 | ) | — | — | — | (1,221,533 | ) | |||||||||||||||||||||||
Reversal of difference due to change of equity in Satelindo | — | — | — | (290,442 | ) | — | — | — | |||||||||||||||||||||||||
Difference due to change of equity in Telkomsel | — | — | — | 170,481 | — | — | — | ||||||||||||||||||||||||||
Unrealized loss on decline in value of securities | — | — | — | — | — | (42 | ) | — | |||||||||||||||||||||||||
Foreign currency translation of CSM | 2g,12 | — | — | — | — | 3,654 | — | — | |||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on May 10, 2001: | |||||||||||||||||||||||||||||||||
Declaration of cash dividend | 45 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Appropriation for general reserve | 45 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Balance as of December 31, 2001 | 5,040,000 | 1,073,333 | (6,992,233 | ) | 489,178 | 256,674 | (207 | ) | — | ||||||||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated] Retained earnings Total Stockholders’ Description Appropriated Unappropriated Equity Rp Rp Rp Balance as of January 1, 2001 193,442 6,082,762 14,473,064 Restructuring transactions between entities under common control — (241,725 ) (8,455,491 ) Reversal of difference due to change of equity in Satelindo — — (290,442 ) Difference due to change of equity in Telkomsel — — 170,481 Unrealized loss on decline in value of securities — — (42 ) Foreign currency translation of CSM — — 3,654 Resolved during the Annual General Meeting of the Stockholders on May 10, 2001: Declaration of cash dividend — (888,654 ) (888,654 ) Appropriation for general reserve 126,950 (126,950 ) — Net income for the year — 4,068,391 4,068,391 Balance as of December 31, 2001 320,392 8,893,824 9,080,961
Difference in | |||||||||||||||||||||||||||||||||||||||||
Value of | Difference | Unrealized | |||||||||||||||||||||||||||||||||||||||
Restructuring | Due to | Holding | |||||||||||||||||||||||||||||||||||||||
Transactions | Change of | Gain on | |||||||||||||||||||||||||||||||||||||||
Additional | Between | Equity in | Available-for- | Retained Earnings | Total | ||||||||||||||||||||||||||||||||||||
Capital | Paid-In | Entities Under | Associated | Sale | Translation | Stockholders’ | |||||||||||||||||||||||||||||||||||
Description | Notes | Stock | Capital | Common Control | Companies | Securities | Adjustment | Appropriated | Unappropriated | Equity | |||||||||||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | |||||||||||||||||||||||||||||||||
Balance as of January 1, 2004 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | — | 224,232 | 1,559,068 | 16,318,920 | 17,312,877 | |||||||||||||||||||||||||||||||
Unrealized holding gain on available- for-sale securities | 2g | — | — | — | — | 884 | — | — | — | 884 | |||||||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g,10 | — | — | — | — | — | 5,363 | — | — | 5,363 | |||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on July 30, 2004 | |||||||||||||||||||||||||||||||||||||||||
Declaration of cash dividends | 43 | — | — | — | — | — | — | — | (3,043,614 | ) | (3,043,614 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 43 | — | — | — | — | — | — | 121,745 | (121,745 | ) | — | ||||||||||||||||||||||||||||||
Declaration of interim cash dividends | 43 | — | — | — | — | — | — | — | (143,377 | ) | (143,377 | ) | |||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | 6,129,209 | 6,129,209 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2004 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 884 | 229,595 | 1,680,813 | 19,139,393 | 20,261,342 | |||||||||||||||||||||||||||||||
F-11
Difference in | |||||||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||||||
Restructuring | Difference Due | Unrealized | |||||||||||||||||||||||||||
Transactions | to Change | Loss on | |||||||||||||||||||||||||||
Additional | Between Entities | of Equity | Decline in | ||||||||||||||||||||||||||
Capital | Paid-In | Under Common | in Associated | Translation | Value of | ||||||||||||||||||||||||
Description | Notes | Stock | Capital | Control | Companies | Adjustment | Securities | ||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | ||||||||||||||||||||||||
Balance as of January 1, 2002 | 5,040,000 | 1,073,333 | (6,992,233 | ) | 489,178 | 256,674 | (207 | ) | |||||||||||||||||||||
Foreign currency translation of CSM | 2g,12 | — | — | — | — | (21,009 | ) | — | |||||||||||||||||||||
Sale of investment in mutual fund Reksa Dana Seruni | — | — | — | — | — | 207 | |||||||||||||||||||||||
Acquisition of Pramindo | 5b | — | — | (296,038 | ) | — | — | — | |||||||||||||||||||||
Realized difference due to change of equity in associated companies as the result of sale of 12.72% of Telkomsel | 1c | — | — | — | (65,158 | ) | — | — | |||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: | |||||||||||||||||||||||||||||
Declaration of cash dividend | 45 | — | — | — | — | — | — | ||||||||||||||||||||||
Appropriation for general reserve | 45 | — | — | — | — | — | — | ||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | |||||||||||||||||||||||
Balance as of December 31, 2002 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 424,020 | 235,665 | — | ||||||||||||||||||||||
2002 | 2003 | 2004 | ||||||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||||||
Cash receipts from operating revenues | ||||||||||||||||||||
Telephone | ||||||||||||||||||||
Fixed lines | 7,230,394 | 8,201,928 | 10,084,558 | 1,085,528 | ||||||||||||||||
Cellular | 7,098,585 | 8,925,503 | 10,497,763 | 1,130,007 | ||||||||||||||||
Joint operation schemes | 1,577,976 | 1,195,563 | 547,487 | 58,933 | ||||||||||||||||
Interconnection — net | 1,697,073 | 4,203,802 | 5,766,444 | 620,715 | ||||||||||||||||
Other services | 1,132,077 | 3,932,084 | 6,663,500 | 717,277 | ||||||||||||||||
Total cash receipts from operating revenues | 18,736,105 | 26,458,880 | 33,559,752 | 3,612,460 | ||||||||||||||||
Cash payments for operating expenses | (5,800,470 | ) | (8,861,797 | ) | (12,270,643 | ) | (1,320,844 | ) | ||||||||||||
Cash generated from operations | 12,935,635 | 17,597,083 | 21,289,109 | 2,291,616 | ||||||||||||||||
Interest received | 480,288 | 369,982 | 321,677 | 34,626 | ||||||||||||||||
Income tax paid | (1,914,895 | ) | (3,905,317 | ) | (4,132,359 | ) | (444,818 | ) | ||||||||||||
Interest paid | (900,660 | ) | (1,178,332 | ) | (1,348,919 | ) | (145,201 | ) | ||||||||||||
Cash receipt (refund) from/to customers and advances | 264,105 | (30,884 | ) | (78,028 | ) | (8,399 | ) | |||||||||||||
Net Cash Provided by Operating Activities | 10,864,473 | 12,852,532 | 16,051,480 | 1,727,824 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||||||
Proceeds from investments and maturity of time deposits | 1,497,883 | 1,895,199 | 285,264 | 30,707 | ||||||||||||||||
Proceeds from sale of property, plant and equipment | 204,008 | 255,750 | 67,196 | 7,233 | ||||||||||||||||
Purchase of marketable securities and placements in time deposits | (2,222,175 | ) | (679,500 | ) | (404,268 | ) | (43,516 | ) | ||||||||||||
Sale of 12.72% of Telkomsel | 3,948,945 | — | — | — | ||||||||||||||||
Payment for cross-ownership transactions | (2,406,309 | ) | — | — | — | |||||||||||||||
Acquisition of businesses, net of cash acquired | (243,561 | ) | 141,985 | (27,797 | ) | (2,992 | ) | |||||||||||||
Acquisition of property, plant and equipment | (6,625,292 | ) | (9,007,186 | ) | (8,568,862 | ) | (922,375 | ) | ||||||||||||
Payment of advances for the purchase of property, plant and equipment | — | — | (1,063,382 | ) | (114,465 | ) | ||||||||||||||
Decrease in advances and others | 71,569 | 96,830 | 123,026 | 13,243 | ||||||||||||||||
Payments of advances for investments in shares of stock | (230,223 | ) | (14,338 | ) | — | — | ||||||||||||||
Acquisition of long-term investments | (37,607 | ) | — | (9,290 | ) | (1,000 | ) | |||||||||||||
Sale of long-term investments | — | 5,398 | — | — | ||||||||||||||||
Acquisition of intangible assets | (7,213 | ) | — | — | — | |||||||||||||||
Net Cash Used in Investing Activities | (6,049,975 | ) | (7,305,862 | ) | (9,598,113 | ) | (1,033,165 | ) | ||||||||||||
[Additional columns below]F-12
[Continued from above table, first column(s) repeated] Retained earnings Total Stockholders’ Description Appropriated Unappropriated Equity Rp Rp Rp Balance as of January 1, 2002 320,392 8,893,824 9,080,961 Foreign currency translation of CSM — — (21,009 ) Sale of investment in mutual fund Reksa Dana Seruni — — 207 Acquisition of Pramindo — — (296,038 ) Realized difference due to change of equity in associated companies as the result of sale of 12.72% of Telkomsel — — (65,158 ) Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: Declaration of cash dividend — (2,125,055 ) (2,125,055 ) Appropriation for general reserve 425,012 (425,012 ) — Net income for the year — 8,039,709 8,039,709 Balance as of December 31, 2002 745,404 14,383,466 14,613,617
2002 | 2003 | 2004 | |||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Payments for debt issuance cost | (53,915 | ) | — | (2,394 | ) | (258 | ) | ||||||||||
Proceeds from bonds | 2,365,314 | — | — | — | |||||||||||||
Proceeds from Medium-term Notes | — | — | 1,080,000 | 116,254 | |||||||||||||
Repayments of long-term liabilities | (2,493,738 | ) | (1,536,941 | ) | (5,963,659 | ) | (641,944 | ) | |||||||||
Repayments of promissory notes | (771,066 | ) | (1,513,064 | ) | (1,637,917 | ) | (176,310 | ) | |||||||||
Cash dividends paid | (2,327,458 | ) | (3,738,586 | ) | (3,811,591 | ) | (410,290 | ) | |||||||||
(Increase) decrease in escrow accounts | (126,848 | ) | (224,219 | ) | 485,866 | 52,300 | |||||||||||
Redemption of Telkomsel’s notes | — | (160,509 | ) | (504,101 | ) | (54,263 | ) | ||||||||||
Proceeds from borrowings | 737,495 | 995,903 | 3,448,931 | 371,252 | |||||||||||||
Net Cash Used in Financing Activities | (2,670,216 | ) | (6,177,416 | ) | (6,904,865 | ) | (743,259 | ) | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,144,282 | (630,746 | ) | (451,498 | ) | (48,600 | ) | ||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (89,425 | ) | 26,148 | 213,149 | 22,944 | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 3,644,213 | 5,699,070 | 5,094,472 | 548,382 | |||||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 5,699,070 | 5,094,472 | 4,856,123 | 522,726 | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||||||||
Noncash investing and financing activities: | |||||||||||||||||
Increase in property under construction through the incurrence of long-term debt | 480,756 | 536,248 | — | — | |||||||||||||
Payment of insurance premium through the incurrence of long-term debt | — | 81,186 | 11,658 | 1,255 | |||||||||||||
Conversion of receivables to long-term investments | — | 13,500 | — | — | |||||||||||||
Acquisition of subsidiary through the issuance of Promissory Notes | 3,329,004 | 927,273 | — | — | |||||||||||||
Acquisition of minority interest through the issuance of Promissory Notes | — | — | 126,692 | 13,637 | |||||||||||||
Acquisition of business through the incurrence of long-term liability | — | — | 3,257,566 | 350,653 |
F-12F-13
Difference in | |||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||
Restructuring | Difference Due | ||||||||||||||||||||||||
Transactions | to Change | ||||||||||||||||||||||||
Additional | Between | of Equity | |||||||||||||||||||||||
Capital | Paid-In | Entities Under | in Associated | Translation | |||||||||||||||||||||
Description | Notes | Stock | Capital | Common Control | Companies | Adjustments | |||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | |||||||||||||||||||||
Balance as of January 1, 2003 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 424,020 | 235,665 | |||||||||||||||||||
Realized difference due to change of equity in associated companies as the result of disposal of investment in Metrosel | 12 | — | — | — | (38,425 | ) | — | ||||||||||||||||||
Foreign currency translation of CSM | 2g,12 | — | — | — | — | (11,433 | ) | ||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on May 9, 2003: | |||||||||||||||||||||||||
Declaration of cash dividend | 45 | — | — | — | — | — | |||||||||||||||||||
Appropriation for general reserve | 45 | — | — | — | — | — | |||||||||||||||||||
Net income for the year | — | — | — | — | — | ||||||||||||||||||||
Balance as of December 31, 2003 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 224,232 | |||||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated] Retained earnings Total Stockholders’ Description Appropriated Unappropriated Equity Rp Rp Rp Balance as of January 1, 2003 745,404 14,383,466 14,613,617 Realized difference due to change of equity in associated companies as the result of disposal of investment in Metrosel — — (38,425 ) Foreign currency translation of CSM — — (11,433 ) Resolved during the Annual General Meeting of the Stockholders on May 9, 2003: Declaration of cash dividend — (3,338,109 ) (3,338,109 ) Appropriation for general reserve 813,664 (813,664 ) — Net income for the year — 6,087,227 6,087,227 Balance as of December 31, 2003 1,559,068 16,318,920 17,312,877
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements
F-13
PERUSAHAAN PERSEROAN (PERSERO)
CONSOLIDATED STATEMENTS OF CASH FLOWS
2001 | 2002 | 2003 | ||||||||||||||||||
Rp | Rp | Rp | US$ (Notes 3) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||||||
Cash receipts from operating revenues | ||||||||||||||||||||
Telephone and interconnection — net | ||||||||||||||||||||
Fixed lines | 6,310,052 | 7,230,394 | 8,201,928 | 971,792 | ||||||||||||||||
Cellular | 5,237,087 | 7,098,585 | 8,925,503 | 1,057,524 | ||||||||||||||||
Joint operation scheme | 1,717,154 | 1,577,976 | 1,195,563 | 141,654 | ||||||||||||||||
Interconnection — net | 1,127,545 | 1,697,073 | 4,203,802 | 498,081 | ||||||||||||||||
Other services | 697,348 | 1,132,077 | 3,932,084 | 465,887 | ||||||||||||||||
Total cash receipts from operating revenues | 15,089,186 | 18,736,105 | 26,458,880 | 3,134,938 | ||||||||||||||||
Cash payments for operating expenses | (5,321,836 | ) | (5,800,470 | ) | (8,861,797 | ) | (1,049,976 | ) | ||||||||||||
Cash generated from operations | 9,767,350 | 12,935,635 | 17,597,083 | 2,084,962 | ||||||||||||||||
Interest received | 590,966 | 480,288 | 369,982 | 43,836 | ||||||||||||||||
Income tax payments | (2,098,272 | ) | (1,914,895 | ) | (3,905,317 | ) | (462,715 | ) | ||||||||||||
Interest paid | (1,256,404 | ) | (900,660 | ) | (1,178,332 | ) | (139,613 | ) | ||||||||||||
Cash receipt (refund) from/to customers and advances | 8,949 | 264,105 | (30,884 | ) | (3,659 | ) | ||||||||||||||
Net Cash Provided by Operating Activities | 7,012,589 | 10,864,473 | 12,852,532 | 1,522,811 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||||||
Proceeds from investments and maturity of time deposits | 7,892,554 | 1,497,883 | 1,895,199 | 224,550 | ||||||||||||||||
Proceeds from sale of property, plant and equipment | 10,944 | 204,008 | 255,750 | 30,302 | ||||||||||||||||
Purchase of marketable securities and placements in time deposits | (4,370,479 | ) | (2,222,175 | ) | (679,500 | ) | (80,509 | ) | ||||||||||||
Sale of 12.72% of Telkomsel | — | 3,948,945 | — | — | ||||||||||||||||
Payment for cross ownership transactions | (5,967,430 | ) | (2,406,309 | ) | — | — | ||||||||||||||
Acquisition of businesses, net of cash acquired | (275,849 | ) | (243,561 | ) | 141,985 | 16,823 | ||||||||||||||
Acquisition of property, plant and equipment | (3,591,449 | ) | (6,625,292 | ) | (9,007,186 | ) | (1,067,202 | ) | ||||||||||||
Decrease in advances and others | 187,313 | 71,569 | 96,830 | 11,473 | ||||||||||||||||
Payments of advances for investments in shares of stock | — | (230,223 | ) | (14,338 | ) | (1,699 | ) | |||||||||||||
Acquisition of long-term investments | (1,400 | ) | (37,607 | ) | — | — | ||||||||||||||
Sale of long-term investments | — | — | 5,398 | 640 | ||||||||||||||||
Acquisition of intangible assets | — | (7,213 | ) | — | — | |||||||||||||||
Net Cash Used in Investing Activities | (6,115,796 | ) | (6,049,975 | ) | (7,305,862 | ) | (865,622 | ) | ||||||||||||
F-14
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
2001 | 2002 | 2003 | ||||||||||||||||
Rp | Rp | Rp | US$ (Notes 3) | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||||
Payment for debt issuance cost | — | (53,915 | ) | — | — | |||||||||||||
Proceeds from bonds | — | 2,365,314 | — | — | ||||||||||||||
Repayments of long-term liabilities | (985,403 | ) | (2,493,738 | ) | (1,536,941 | ) | (182,102 | ) | ||||||||||
Repayments of promissory notes | (247,640 | ) | (771,066 | ) | (1,513,064 | ) | (179,273 | ) | ||||||||||
Cash dividends paid | (1,023,355 | ) | (2,327,458 | ) | (3,738,586 | ) | (442,960 | ) | ||||||||||
Increase in escrow accounts | (171,077 | ) | (126,848 | ) | (224,219 | ) | (26,566 | ) | ||||||||||
Redemption of Telkomsel’s bonds | — | — | (160,509 | ) | (19,019 | ) | ||||||||||||
Decrease in other non-current assets | 264,664 | — | — | — | ||||||||||||||
Receipts from loan | 500,000 | 737,495 | 995,903 | 117,998 | ||||||||||||||
Net Cash Used in Financing Activities | (1,662,811 | ) | (2,670,216 | ) | (6,177,416 | ) | (731,922 | ) | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (766,018 | ) | 2,144,282 | (630,746 | ) | (74,733 | ) | |||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 76,568 | (89,425 | ) | 26,148 | 3,098 | |||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 4,333,663 | 3,644,213 | 5,699,070 | 675,245 | ||||||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 3,644,213 | 5,699,070 | 5,094,472 | 603,610 | ||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||||||||||||
Noncash investing and financing activities: | ||||||||||||||||||
Increase in property under construction through the incurrence of long-term debts | 60,341 | 480,756 | 536,248 | 63,536 | ||||||||||||||
Payment of insurance premium through incurrence of long-term debts | — | — | 81,186 | 9,619 | ||||||||||||||
Increase in property and equipment through lease liabilities | 2,483 | — | — | — | ||||||||||||||
Capitalization of borrowing costs during construction: | ||||||||||||||||||
Losses (gains) on foreign exchange, net | 1,746 | (27,568 | ) | — | — | |||||||||||||
Interest | 8,089 | 20,108 | 22,925 | 2,716 | ||||||||||||||
Conversion of receivables to long-term investments | 92,750 | — | 13,500 | 1,600 | ||||||||||||||
Acquisition of subsidiary through the issuance of Promissory Notes | 1,171,157 | 3,329,004 | 927,273 | 109,866 |
See accompanying notes to consolidated financial statements which form an integral part of the
F-15
PERUSAHAAN PERSEROAN (PERSERO)
1. | GENERAL |
18, 2005.
1. | The Company’s objective is to provide telecommunications and information facilities and services, in accordance with prevailing regulations. | |
2. | To achieve the above objective, the Company is involved in the following activities: |
i. Planning, building, providing, developing, operating, marketing or selling, leasing and maintaining telecommunications and information networks in accordance with prevailing regulations. | |
ii. Planning, developing, providing, marketing or selling and improving telecommunications and information services in accordance with prevailing regulations. | |
iii. Performing activities and other undertakings in connection with the utilization and development of the Company’s resources and optimizing the utilization of the Company’s property, plant and equipment, information systems, education and training, and repairs and maintenance facilities. |
F-16F-14
Under
On September 8, 1999, the Government issued Under Law No. 36/1999 on Telecommunications, to replace Law No. 3/1989. Under the new Law, which took effect from September 2000, telecommunications activities cover:
i. Telecommunications networks | |
ii. Telecommunications services | |
iii. Special telecommunications |
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
distancelong-distance fixed-line telecommunications services, which initially would expire in December 2010 and December 2005, respectively, was shortened to expire in August 2002 and August 2003, respectively. In return, the Government is required to pay compensation to the Company, the amount of which is to be estimated by an independent appraiser appointed by the Government.
F-15
following matters:
a. | Compensation for early termination of exclusive rights |
The Government shall pay to the Company an amount of Rp478,000 million net of tax and Indosat shall pay to the Government an amount of Rp178,000 million net of tax. As of the date of issuance of these consolidated financial statements, the Company has not received any payments. |
b. | License synchronization for the Company and Indosat |
The Company was given the right to use access code of 007 for operating international telephone network and Indosat was given the right to use access code of 011 for operating DLD fixed telephone network. |
President Commissioner | : | Bacelius Ruru | ||
Commissioner | : | Agus Haryanto | ||
Commissioner | : | Djamhari Sirat | ||
Independent Commissioner | : | Arif Arryman | ||
Independent Commissioner | : | Petrus Sartono | ||
President Director | : | Kristiono | ||
Director of Finance | : | Guntur Siregar | ||
Director of Telecommunications Service Business | : | Garuda Sugardo | ||
Director of Human Resources and Support Business | : | Agus Utoyo | ||
Director of Telecommunications Network Business | : | Suryatin Setiawan |
Subsequently,compositionresolution of the Company’s Board of Commissioners and Board of Directors was changed based on the Extraordinary General Meeting of Stockholders, the minutes of which have been notarized by deed No. 4 dated March 10, 2004 of A. Partomuan Pohan, S.H., LLM.,
F-16
President Commissioner | : | Tanri Abeng | ||
Commissioner | : | Anggito Abimanyu | ||
Commissioner | : | Gatot Trihargo | ||
Independent Commissioner | : | Arif Arryman | ||
Independent Commissioner | : | Petrus Sartono | ||
President Director | : | Kristiono | ||
Director of Finance | : | Rinaldi Firmansyah | ||
Director of Telecommunications Service Business | : | Suryatin Setiawan | ||
Director of Human Resources and Support Business | : | Woeryanto Soeradji | ||
Director of Telecommunications Network Business | : | Abdul Haris |
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 20022003 and 2003,2004, the Company had 34,67830,820 employees and 30,82029,375 employees, respectively, including those in the KSO Units, while the subsidiaries had 3,7224,384 employees and 4,3845,282 employees, respectively.
b. Public Offering of Shares of the Company
b. Public offering of shares of the Company |
shares at that time.
F-17
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
c. Subsidiaries
Percentage of | Total Assets Before | Percentage of | Total Assets before | |||||||||||||||||||||||||||||||||
Ownership | Start of | Eliminations | Ownership | Start of | Eliminations | |||||||||||||||||||||||||||||||
Commercial | Commercial | |||||||||||||||||||||||||||||||||||
Subsidiaries | Domicile | Nature of Business | 2002 | 2003 | Operations | 2002 | 2003 | Domicile | Nature of Business | 2003 | 2004 | Operations | 2003 | 2004 | ||||||||||||||||||||||
% | % | % | % | |||||||||||||||||||||||||||||||||
PT Pramindo Ikat Nusantara | Medan | Telecommunications construction & services | 100.00 | 100.00 | 1995 | 1,911,183 | 1,954,907 | Medan | Telecommunications construction & services | 100 | 100 | 1995 | 1,954,907 | 1,604,405 | ||||||||||||||||||||||
PT AriaWest International | Bandung | Telecommunications | — | 100.00 | 1995 | — | 1,628,605 | Bandung | Telecommunications | 100 | 100 | 1995 | 1,628,605 | 1,416,225 | ||||||||||||||||||||||
PT Multimedia Nusantara | Jakarta | Pay TV | 31.00 | 100.00 | 1998 | 9,290 | 7,908 | Jakarta | Pay TV | 100 | 100 | 1998 | 7,908 | 22,116 | ||||||||||||||||||||||
PT Graha Sarana Duta | Jakarta | Real estate, construction and services | 99.99 | 99.99 | 1982 | 44,998 | 69,752 | Jakarta | Real estate, construction and services | 100 | 100 | 1982 | 69,752 | 69,227 | ||||||||||||||||||||||
PT Dayamitra Telekomunikasi | Balikpapan | Telecommunications | 90 | 100 | 1995 | 797,810 | 641,249 | |||||||||||||||||||||||||||||
PT Indonusa Telemedia | Jakarta | Multimedia | 57.50 | 90.39 | 1997 | 49,787 | 54,319 | Jakarta | Multimedia | 90 | 90 | 1997 | 54,319 | 72,080 | ||||||||||||||||||||||
PT Dayamitra Telekomunikasi | Balikpapan | Telecommunications | 90.32 | 90.32 | 1995 | 854,007 | 797,810 | |||||||||||||||||||||||||||||
PT Telekomunikasi Selular | Jakarta | Telecommunications | 65.00 | 65.00 | 1995 | 11,255,500 | 15,386,289 | Jakarta | Telecommunications | 65 | 65 | 1995 | 15,386,289 | 19,557,557 | ||||||||||||||||||||||
PT Napsindo Primatel International | Jakarta | Telecommunications | 32.00 | 60.00 | 1999 | 45,668 | 47,389 | Jakarta | Telecommunications | 60 | 60 | 1999 | 47,389 | 28,974 | ||||||||||||||||||||||
PT Infomedia Nusantara | Jakarta | Data and information service | 51.00 | 51.00 | 1984 | 265,830 | 247,646 | Jakarta | Data and information service | 51 | 51 | 1984 | 247,646 | 333,738 | ||||||||||||||||||||||
PT Pro Infokom Indonesia | Jakarta | System information network | — | 51.00 | 2003 | — | 5,032 | Jakarta | System information network | 51 | 51 | 2003 | 5,032 | 1,261 |
F-18
Effective | ||||||||||||||||||||||||||||||||||||||||||||
Ownership | Ownership | |||||||||||||||||||||||||||||||||||||||||||
Percentage | Start of | Percentage | Start of | |||||||||||||||||||||||||||||||||||||||||
Nature of | Commercial | Nature of | Commercial | |||||||||||||||||||||||||||||||||||||||||
Indirect Subsidiaries | Stockholders | Domicile | Business | 2002 | 2003 | Operations | Stockholders | Domicile | Business | 2003 | 2004 | Operations | ||||||||||||||||||||||||||||||||
% | % | % | % | |||||||||||||||||||||||||||||||||||||||||
Telekomunikasi Selular Finance Limited | PT Telekomunikasi Selular | Mauritius | Fund raising | 65.00 | 65.00 | 2002 | PT Telekomunikasi Selular | Mauritius | Fund raising | 100 | 100 | 2002 | ||||||||||||||||||||||||||||||||
Aria West International Finance B.V. | PT AriaWest International | Netherlands | Finance | — | 100.00 | 1996 | ||||||||||||||||||||||||||||||||||||||
Aria West International Finance B.V | PT AriaWest International | Netherlands | Finance | 100 | 100 | 1996 | ||||||||||||||||||||||||||||||||||||||
PT Balebat Dedikasi Prima | PT Infomedia Nusantara | Bogor | Printing | — | 26.18 | 2000 | PT Infomedia Nusantara | Bogor | Printing | 51 | 51 | 2000 |
PT Pramindo Ikat Nusantara (“Pramindo”) |
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Purchase Agreement (“CSPA”) (as amended on August 1, 2002) to acquire 100% of the issued and paid-up share capital of Pramindo (Note 5b)4b).
PT AriaWest International (“AWI”) |
PT Multimedia Nusantara (“Metra”) |
PT Graha Sarana Duta (“GSD”) |
F-19
On November 28, 2001, the Company sold one share of GSD to a related party for Rp9.5 million thereby reducing the Company’s ownership interest to 99.99%.
Indonusa is engaged in providing multimedia telecommunications services.
The Company increased its investment in Indonusa from 35% in 2000 to 57.5% in 2001, by acquiring 2,800,000 shares for Rp28,000 million. This acquisition resulted in goodwill of Rp654 million which was fully amortized in 2001.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On August 8, 2003, the Company increased its investment in Indonusa to 88.08% through a share-swap agreement with PT Centralindo Pancasakti Cellular (“CPSC”) (Note 12).
Pursuant to the extraordinary meeting of stockholders of Indonusa on October 29, 2003, Indonusa agreed to convert its payable to the Company amounting to Rp13,500 million to 1,350,000 shares of Indonusa. Following such conversion, the Company’s ownership in Indonusa increased from 88.08% to 90.39%.
PT Dayamitra Telekomunikasi (“Dayamitra”) |
51)49), the joint operating scheme that provides telecommunications services in Kalimantan. The Company’s acquisition of a 90.32% ownership interest in Dayamitra was effective on May 17, 2001, the date when the Deed of Share Transfer was signed. The Company also entered into an Option Agreement to acquire the remaining 9.68% interest from the selling stockholdersstockholders. On December 14, 2004, the Company exercised the option to acquire the remaining 9.68% outstanding shares of Dayamitra by entering into a Sale and Purchase Agreement with TM Communications (HK) Ltd. (Note 5a)4a).PT Indonusa Telemedia (“Indonusa”) PT Telekomunikasi Selular (“Telkomsel”)
F-20
PT Napsindo Primatel Internasional (“Napsindo”) |
In connection with an increase in Napsindo’s paid-in capital, the Company increased its investment in Napsindo by Rp13,840 million on October 31, 2000. The increase in investment was made to maintain the Company’s ownership interest at 32% and was effective on March 29, 2001.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
US$4,900,0004.9 million (equivalent to Rp43,620 million), thereby increasing the Company’s ownership interest from 32% to 60% after the settlement of payment on January 28, 2003.
PT Infomedia Nusantara (“Infomedia”) |
PT Pro Infokom Indonesia (“PII”)
PT Pro Infokom Indonesia (“PII”) |
Telekomunikasi Selular Finance Limited (“TSFL”) |
Aria West International Finance B.V. (“AWI BV”)
PT Balebat Dedikasi Prima (“Balebat”)
F-21
d. Authorization of the |
JuneApril 29, 2004.2005.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
sianIndonesian GAAP varies in certain significant respects to accounting principles generally accepted in the United States of America (U.S. GAAP). Information relating to the nature and effect of such differences is presented in Note 58.
a. Basis for Preparation of Financial Statements
56.
a. Basis for preparation of financial statements |
b. Principles of Consolidation
b. Principles of consolidation |
c. Transactions with Related PartiesF-22
c. Transactions with related parties |
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
d. Acquisitions of subsidiaries |
d. Acquisitions of Subsidiaries
The acquisition of a subsidiary from a third party is accounted for using the purchase method of accounting. The excess of the acquisition cost over the Company’s interest in the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill and amortized using the straight-line method over a period of not more than five years.
e. Foreign Currency Translation
e. Foreign currency translation |
2003, and Rp9,280 and Rp9,300 to US$1 as of December 31, 2004.
f. Cash and Cash Equivalents
f. Cash and cash equivalents |
F-25F-23
g. Investments |
i. Time Depositsdeposits
F-26F-24
h. Trade and Other Accounts Receivable
h. Trade and other accounts receivable |
i. Inventories
i. Inventories |
j. Prepaid Expenses
j. Prepaid expenses |
k. Property, Plant and Equipment — Direct Acquisitions
k. Property, plant and equipment — direct acquisitions |
F-27F-25
Years | ||||
Buildings | 20 | |||
Switching equipment | 5–15 | |||
Telegraph, telex and data communication equipment | 5–15 | |||
Transmission installation and equipment | 5–20 | |||
Satellite, earth station and equipment | 3–15 | |||
Cable network | 5–15 | |||
Power supply | 3–10 | |||
Data processing equipment | 3–10 | |||
Other telecommunications peripherals | 5 | |||
Office equipment | 3–5 | |||
Vehicles | 5–8 | |||
Other equipment | 5 |
l. Property, Plant and Equipment under Capital Leases
l. Property, plant and equipment under capital leases |
F-26
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Leased assets are capitalized only if all of the following criteria are met: (a) the lessee has an option to purchase the leased asset at the end of the lease period at a price agreed upon at the inception of the lease agreement, and (b) the sum of periodic lease payments, plus the residual value, will cover the acquisition price of the leased asset and related interest, and (c) there is a minimum lease period of 2 years.
m. Revenue-Sharing Arrangements
m. Revenue-sharing arrangements |
n. Joint Operation Schemes
n. Joint operation schemes |
F-27
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
o. Deferred charges for landrights |
o. Deferred Charges for Landrights
Costs incurred to process and extend the landrights are deferred and amortized using the straight-line method over the term of the landrights.
p. Revenue and expense recognition |
i. Fixed Line Telephone Revenuesline telephone revenues
1. | Sale of starter packs is recognized as revenue upon delivery of the starter packs to distributors, dealers or directly to customers. | |
2. | Sale of pulse reload vouchers is recognized initially as unearned income and recognized proportionately as revenue based on successful calls made by the subscribers or whenever the unused stored value of the voucher has expired. |
q. Pension Benefits
i. Defined Benefit Pension Plans
The Company and certain subsidiaries established defined benefit pension plans covering substantially all of their permanent employees.
q. Pension benefits |
i. Defined benefit pension plans |
F-30F-28
ii. Early Retirement Benefits
ii. Early retirement benefits |
r. Employee Benefits Other Than Pension
i. Long Service Awards (“LSA”)
r. Employee benefits other than pension |
i. Long service awards (“LSA”) |
ii. Post-Retirement Health Care Plan
ii. Post-retirement health care plan |
dependents.
s. Income Tax
s. Income tax |
t. Earnings per Share and Earnings per American Depositary Share (“ADS”)
t. Earnings per share and earnings per American Depositary Share (“ADS”) |
u. Segment InformationF-29
u. Segment information |
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
services and is managed separately. Business segment information is consistent with operating information routinely reported to the Company’s chief operating decision maker.
v. Derivative Instruments
v. Derivative instruments |
w. Use of Estimates
w. Use of estimates |
x. Reclassification of accounts |
F-30
a. Dayamitra |
Rp | |||||
Purchase consideration — net of discount on promissory notes | 1,351,299 | ||||
Fair value of net assets acquired: | |||||
— Cash and cash equivalents | 93,652 | ||||
— Distributable KSO revenue receivable | 62,398 | ||||
— Other current assets | 9,450 | ||||
— Property, plant and equipment | 1,401,479 | ||||
— Intangible assets | 1,276,575 | ||||
— Other non-current assets | 19,510 | ||||
— Current liabilities | (236,265 | ) | |||
— Deferred tax liabilities | (581,816 | ) | |||
— Non-current liabilities | (693,684 | ) | |||
1,351,299 | |||||
F-31
F-32
b. Pramindo |
F-33
Rp | ||||
Purchase consideration — net of discount on promissory notes | 3,338,653 | |||
Historical amount of net assets | 1,061,437 | |||
Difference in value for 100% ownership | 2,277,216 | |||
Difference adjusted to stockholders’ equity for Indosat’s 13% ownership in Pramindo | 296,038 | |||
Rp | |||||
Purchase consideration — net of discount on promissory notes | 3,338,653 | ||||
Fair value of net assets acquired: | |||||
— Cash and cash equivalents | 141,475 | ||||
— Distributable KSO revenue receivable | 187,468 | ||||
— Other current assets | 13,839 | ||||
— Property, plant and equipment | 1,807,338 | ||||
— Intangible assets | 2,752,267 | ||||
— Other non-current assets | 160,139 | ||||
— Current liabilities | (284,120 | ) | |||
— Deferred tax liabilities | (1,115,645 | ) | |||
— Non-current liabilities | (620,146 | ) | |||
Fair value of net assets | 3,042,615 | ||||
Difference adjusted to equity for 13% Indosat’s ownership in Pramindo | 296,038 | ||||
Total purchase consideration | 3,338,653 | ||||
F-34
c. AWI |
Rp | ||||
Distributable KSO revenue receivable | 540,267 | |||
Property, plant and equipment | 1,556,269 | |||
Intangible assets | 1,982,564 | |||
Other assets | 34,372 | |||
Deferred tax liabilities | (393,794 | ) | ||
Fair value of net assets acquired | 3,719,678 | |||
Borrowings assumed | (2,577,926 | ) | ||
Amount of cash and promissory notes given up | 1,141,752 | |||
F-35
• | The rights to operate fixed-line telecommunications services are transferred to the Company, where KSO IV is operated under the management, supervision, control and responsibility of the Company. | |
• | Responsibilities for funding construction of new telecommunication facilities and payments of operating expenses incurred in KSO IV are assigned to the Company. | |
• | Risk of loss from damages or destruction of assets operated by KSO IV is transferred to the Company. | |
• | At the end of the KSO period (December 31, 2010), all rights, title and interest of MGTI in existing property, plant and equipment (including new additional installations) and inventories shall be transferred to the Company at no cost. | |
• | The Company’s rights to receive Minimum Telkom Revenues (“MTR”) and share in Distributable KSO Revenues (“DKSOR”) under the original KSO agreement were amended so that MGTI receives fixed monthly payments (“Fixed Investor Revenues”) beginning in February 2004 through December 2010 totaling US$517.1 million and the Company is entitled to the balance of KSO revenues net of operating expenses and payments to MGTI for Fixed Investor Revenues. In addition, payments for Fixed Investor Revenues must be made to MGTI before any payments can be made to the Company. | |
• | In the event funds in KSO IV are insufficient to pay Fixed Investor Revenues to MGTI, the Company is required to pay the shortfall to MGTI. |
Rp | ||||
Property, plant and equipment | 2,377,134 | |||
Intangible assets | 908,228 | |||
Total purchase consideration | 3,285,362 | |||
F-36
2002 | 2003 | 2004 | ||||||||||
Operating revenues | 22,297,575 | 28,343,447 | 34,020,663 | |||||||||
Operating income | 8,778,831 | 11,687,955 | 13,916,465 | |||||||||
Income before tax | 11,726,254 | 11,399,321 | 12,071,780 | |||||||||
Net income | 8,127,080 | 6,509,255 | 6,117,619 | |||||||||
Net income per share — in full Rupiah amount | 403.13 | 322.88 | 303.45 | |||||||||
Net income per ADS — in full Rupiah amount | 16,125.16 | 12,915.19 | 12,138.13 |
2003 | 2004 | |||||||
Dayamitra (Note 4a) | 65,458 | — | ||||||
2003 | 2004 | ||||||||||
Cash on hand | 6,790 | 8,631 | |||||||||
Cash in banks | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Negara Indonesia | 217,276 | 158,519 | |||||||||
Bank Mandiri | 109,887 | 192,056 | |||||||||
Bank Rakyat Indonesia | 9,988 | 10,712 | |||||||||
Bank Pos Nusantara | 1,135 | 1,278 | |||||||||
Total | 338,286 | 362,565 | |||||||||
F-37
2003 | 2004 | ||||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 32,016 | 98,951 | |||||||||
Bank Negara Indonesia | 1,576 | 1,765 | |||||||||
Bank Rakyat Indonesia | 453 | 612 | |||||||||
Total | 34,045 | 101,328 | |||||||||
Total — related parties | 372,331 | 463,893 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Citibank NA | 302 | 362 | |||||||||
Bank Bukopin | 9,463 | 10,190 | |||||||||
Bank Central Asia | 7,889 | 5,906 | |||||||||
Bank Niaga | 2,102 | 1,884 | |||||||||
ABN AMRO Bank | 251 | 81,184 | |||||||||
Bank Danamon | 172 | 114 | |||||||||
Lippo Bank | 274 | 2,265 | |||||||||
Bank Internasional Indonesia | 3 | 26 | |||||||||
Bank Buana Indonesia | 218 | 45 | |||||||||
Bank Muamalat Indonesia | 76 | 75 | |||||||||
Bank Mega | 4,239 | 689 | |||||||||
Deutsche Bank | 6,097 | 9,173 | |||||||||
Total | 31,086 | 111,913 | |||||||||
Foreign currencies | |||||||||||
Citibank NA | 3,231 | 4,416 | |||||||||
Deutsche Bank | 2,412 | 541 | |||||||||
Standard Chartered Bank | 1,808 | 322 | |||||||||
ABN AMRO Bank | 73 | 95 | |||||||||
Bank Internasional Indonesia | 22 | 31 | |||||||||
Bank Central Asia | 31 | 39 | |||||||||
The Bank of Tokyo Mitsubishi | 26 | 22 | |||||||||
Total | 7,603 | 5,466 | |||||||||
Total — third parties | 38,689 | 117,379 | |||||||||
Total cash in banks | 411,020 | 581,272 | |||||||||
F-38
2003 | 2004 | ||||||||||
Time deposits | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Mandiri | 968,829 | 794,371 | |||||||||
Bank Rakyat Indonesia | 529,350 | 231,805 | |||||||||
Bank Negara Indonesia | 485,115 | 206,195 | |||||||||
Bank Tabungan Negara | 169,590 | 75,960 | |||||||||
Total | 2,152,884 | 1,308,331 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 526,384 | — | |||||||||
Bank Rakyat Indonesia | — | 32,480 | |||||||||
Bank Negara Indonesia | 5,789 | 139,450 | |||||||||
Total | 532,173 | 171,930 | |||||||||
Total — related parties | 2,685,057 | 1,480,261 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Standard Chartered Bank | 287,122 | 698,750 | |||||||||
Bank Mega | 91,342 | 98,906 | |||||||||
Bank Bukopin | 96,099 | 98,710 | |||||||||
Bank Yudha Bhakti | 1,000 | — | |||||||||
Bank Niaga | 4,500 | 102,787 | |||||||||
Deutsche Bank | 359,342 | — | |||||||||
Bank Danamon | 145,725 | 61,115 | |||||||||
ABN AMRO Bank | 1,000 | 11,000 | |||||||||
Bank NISP | 47,369 | 53,650 | |||||||||
Bank Bumiputra | — | 18,303 | |||||||||
Bank Syariah Mega Indonesia | — | 16,000 | |||||||||
Bank Muamalat Indonesia | — | 7,000 | |||||||||
Bank Jabar | 67,204 | 89,648 | |||||||||
Total | 1,100,703 | 1,255,869 | |||||||||
F-39
2003 | 2004 | |||||||||
Foreign currencies | ||||||||||
Standard Chartered Bank | 5,697 | 225,208 | ||||||||
The Hongkong Shanghai Bank Corporation | — | 253,043 | ||||||||
Deutsche Bank | 885,205 | 1,051,839 | ||||||||
Total | 890,902 | 1,530,090 | ||||||||
Total — third parties | 1,991,605 | 2,785,959 | ||||||||
Total time deposits | 4,676,662 | 4,266,220 | ||||||||
Total cash and cash equivalents | 5,094,472 | 4,856,123 | ||||||||
2003 | 2004 | |||||||
Rupiah | 5.5% – 14.25% | 3.00% – 9.50% | ||||||
Foreign currencies | 0.92% – 2.25% | 0.55% – 1.95% |
2003 | 2004 | |||||||
KSO Units | 265,517 | 145,810 | ||||||
Government agencies | 181,551 | 289,644 | ||||||
PT Mandara Selular Indonesia | 37,326 | — | ||||||
PT Citra Sari Makmur | 20,450 | 20,127 | ||||||
PT Patra Telekomunikasi Indonesia | 8,513 | 8,824 | ||||||
PT Aplikanusa Lintasarta | 5,819 | 8,780 | ||||||
Others | 2,679 | 10,847 | ||||||
Total | 521,855 | 484,032 | ||||||
Allowance for doubtful accounts | (110,932 | ) | (64,928 | ) | ||||
Net | 410,923 | 419,104 | ||||||
F-40
2003 | 2004 | |||||||
Residential and business subscribers | 2,682,288 | 3,213,598 | ||||||
Overseas international carriers | 42,836 | 143,539 | ||||||
Others | 29,841 | — | ||||||
Total | 2,754,965 | 3,357,137 | ||||||
Allowance for doubtful accounts | (332,960 | ) | (457,138 | ) | ||||
Net | 2,422,005 | 2,899,999 | ||||||
Related parties: |
2003 | 2004 | |||||||
Up to 6 months | 350,348 | 396,425 | ||||||
7 to 12 months | 42,250 | 14,947 | ||||||
13 to 24 months | 42,920 | 19,659 | ||||||
More than 24 months | 86,337 | 53,001 | ||||||
Total | 521,855 | 484,032 | ||||||
Allowance for doubtful accounts | (110,932 | ) | (64,928 | ) | ||||
Net | 410,923 | 419,104 | ||||||
2003 | 2004 | |||||||
Up to 3 months | 2,358,570 | 2,773,992 | ||||||
More than 3 months | 396,395 | 583,145 | ||||||
Total | 2,754,965 | 3,357,137 | ||||||
Allowance for doubtful accounts | (332,960 | ) | (457,138 | ) | ||||
Net | 2,422,005 | 2,899,999 | ||||||
F-41
2003 | 2004 | |||||||
Rupiah | 443,930 | 447,657 | ||||||
United States Dollar | 77,925 | 36,375 | ||||||
Total | 521,855 | 484,032 | ||||||
Allowance for doubtful accounts | (110,932 | ) | (64,928 | ) | ||||
Net | 410,923 | 419,104 | ||||||
2003 | 2004 | |||||||
Rupiah | 2,720,331 | 3,198,875 | ||||||
United States Dollar | 34,634 | 158,262 | ||||||
Total | 2,754,965 | 3,357,137 | ||||||
Allowance for doubtful accounts | (332,960 | ) | (457,138 | ) | ||||
Net | 2,422,005 | 2,899,999 | ||||||
2002 | 2003 | 2004 | ||||||||||
Beginning balance | 578,785 | 502,989 | 443,892 | |||||||||
Additions | 523,024 | 296,099 | 342,895 | |||||||||
Reversal of allowance for trade accounts receivable from AWI (Note 4c) | (511,933 | ) | — | — | ||||||||
Bad debts write-off | (86,887 | ) | (355,196 | ) | (264,721 | ) | ||||||
Ending balance | 502,989 | 443,892 | 522,066 | |||||||||
F-42
2003 | 2004 | ||||||||
Components: | |||||||||
Telephone terminals and spare parts | 27,407 | 29,910 | |||||||
Cable and transmission installation spare parts | 1,540 | 3,155 | |||||||
Other spare parts | 13,521 | 20,546 | |||||||
Total | 42,468 | 53,611 | |||||||
Allowance for obsolescence | (14,757 | ) | (20,188 | ) | |||||
Net | 27,711 | 33,423 | |||||||
Modules: | |||||||||
Cable and transmission installation spare parts | 55,997 | 53,683 | |||||||
Telephone terminals and spare parts | 37,917 | 34,434 | |||||||
Other spare parts | 272 | 142 | |||||||
Total | 94,186 | 88,259 | |||||||
Allowance for obsolescence | (25,584 | ) | (34,063 | ) | |||||
Net | 68,602 | 54,196 | |||||||
Cards: | |||||||||
SIM cards, RUIM cards and prepaid voucher blanks | 57,838 | 115,948 | |||||||
Allowance for obsolescence | (148 | ) | (482 | ) | |||||
Net | 57,690 | 115,466 | |||||||
Total | 154,003 | 203,085 | |||||||
2003 | 2004 | |||||||
Beginning balance | 53,795 | 40,489 | ||||||
Additions | 4,523 | 14,800 | ||||||
Inventory write-off | (17,829 | ) | (556 | ) | ||||
Ending balance | 40,489 | 54,733 | ||||||
F-43
2003 | 2004 | |||||||
Rental | 173,242 | 268,287 | ||||||
Salary | 124,061 | 218,329 | ||||||
Insurance | 98,167 | 98,485 | ||||||
Telephone directory issuance cost | 11,091 | 27,246 | ||||||
Other | 23,134 | 15,722 | ||||||
Total | 429,695 | 628,069 | ||||||
2003 | 2004 | |||||||
Bank Mandiri | 45,083 | 44,608 | ||||||
F-44
2003 | ||||||||||||||||||||||||
Percentage | ||||||||||||||||||||||||
of | Opening | Equity in | Translation | Ending | ||||||||||||||||||||
Ownership | Balance | Deduction | Net Income | Adjustment | Balance | |||||||||||||||||||
Equity method: | ||||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 62,270 | — | 1,585 | (11,433 | ) | 52,422 | |||||||||||||||||
PT Patra Telekomunikasi Indonesia** | 30.00 | 12,843 | (2,745 | ) | 1,234 | — | 11,332 | |||||||||||||||||
PT Napsindo Primatel International* | 60.00 | 4,693 | (4,693 | ) | — | — | — | |||||||||||||||||
PT Multimedia Nusantara* | 100.00 | 1,928 | (1,928 | ) | — | — | — | |||||||||||||||||
PT Telekomindo Selular Raya | — | 26,642 | (26,642 | ) | — | — | — | |||||||||||||||||
PT Metro Selular Nusantara | — | 16,307 | (16,307 | ) | — | — | — | |||||||||||||||||
PT Pasifik Satelit Nusantara | 43.69 | — | — | — | — | — | ||||||||||||||||||
124,683 | (52,315 | ) | 2,819 | (11,433 | ) | 63,754 | ||||||||||||||||||
Cost method: | ||||||||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | ||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | ||||||||||||||||||
Medianusa Pte. Ltd. | 9.44 | 108 | — | — | — | 108 | ||||||||||||||||||
PT Komunikasi Selular Indonesia | — | 57,570 | (57,570 | ) | — | — | — | |||||||||||||||||
PT Mandara Selular Indonesia | 7.44 | — | — | — | — | — | ||||||||||||||||||
58,464 | (57,570 | ) | — | — | 894 | |||||||||||||||||||
183,147 | (109,885 | ) | 2,819 | (11,433 | ) | 64,648 | ||||||||||||||||||
F-45
2004 | ||||||||||||||||||||||||
Percentage | ||||||||||||||||||||||||
of | Opening | Addition/ | Equity in | Translation | Ending | |||||||||||||||||||
Ownership | Balance | (Deduction) | Net Income | Adjustment | Balance | |||||||||||||||||||
Equity method: | ||||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 52,422 | — | 2,331 | 5,363 | 60,116 | ||||||||||||||||||
PT Patra Telekomunikasi Indonesia | 30.00 | 11,332 | — | 1,089 | — | 12,421 | ||||||||||||||||||
PT Pasifik Satelit Nusantara | 43.69 | — | — | — | — | — | ||||||||||||||||||
63,754 | — | 3,420 | 5,363 | 72,537 | ||||||||||||||||||||
Cost method: | ||||||||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | ||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | ||||||||||||||||||
Bridge Mobile Pte. Ltd. | 14.29 | — | 9,290 | — | — | 9,290 | ||||||||||||||||||
Medianusa Pte. Ltd. | — | 108 | (108 | ) | — | — | — | |||||||||||||||||
PT Mandara Selular Indonesia | 3.63 | — | — | — | — | — | ||||||||||||||||||
894 | 9,182 | — | — | 10,076 | ||||||||||||||||||||
64,648 | 9,182 | 3,420 | 5,363 | 82,613 | ||||||||||||||||||||
F-46
f. Bridge Mobile Pte. Ltd |
g. Medianusa Pte. Ltd. |
F-47
h. PT Mandara Selular Indonesia (“Mobisel”) |
i. PT Telekomindo Seluler Raya (“Telesera”) |
• | The Company sold its investments in Telekomindo, TMI and GIP to RC for Rp101,838 million. | |
• | TMI sold its investments in PT Telekomindo Selular Raya (“Telesera”) and the fixed assets of PT Multisaka Mitra (“MSM”) to the Company for Rp87,907 million and Rp17,442 million, respectively. |
F-48
j. PT Metro Selular Nusantara (“Metrosel”) |
k. PT Menara Jakarta (“MJ”) |
l. PT Komunikasi Selular Indonesia (“Komselindo”) |
January 1, | AWI | December 31, | |||||||||||||||||||||||
2003 | Acquisitions | Additions | Deductions | Reclassifications | 2003 | ||||||||||||||||||||
At cost or revalued amounts: | |||||||||||||||||||||||||
Direct acquisitions | |||||||||||||||||||||||||
Land | 267,933 | — | 52,738 | (20,762 | ) | (945 | ) | 298,964 | |||||||||||||||||
Buildings | 1,658,390 | 2,436 | 43,301 | (43,293 | ) | 158,261 | 1,819,095 | ||||||||||||||||||
Switching equipment | 9,629,203 | 402,598 | 144,658 | (10 | ) | 296,943 | 10,473,392 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 206,667 | — | 3,833 | (86 | ) | (11,100 | ) | 199,314 | |||||||||||||||||
Transmission installation and equipment | 10,340,314 | 7,565 | 278,020 | (11,903 | ) | 6,204,183 | 16,818,179 | ||||||||||||||||||
Satellite, earth station and equipment | 5,798,011 | — | 21,512 | — | 390,304 | 6,209,827 |
F-49
January 1, | AWI | December 31, | ||||||||||||||||||||||||
2003 | Acquisitions | Additions | Deductions | Reclassifications | 2003 | |||||||||||||||||||||
Cable network | 13,122,336 | 1,075,987 | 637,068 | (59,275 | ) | 712,681 | 15,488,797 | |||||||||||||||||||
Power supply | 1,032,534 | 9,549 | 18,473 | (3,996 | ) | 92,898 | 1,149,458 | |||||||||||||||||||
Data processing equipment | 2,739,837 | 2,269 | 131,942 | (1,810 | ) | 380,429 | 3,252,667 | |||||||||||||||||||
Other telecommunications peripherals | 681,363 | — | 33,769 | (369 | ) | 20,425 | 735,188 | |||||||||||||||||||
Office equipment | 639,682 | — | 25,585 | �� | (1,802 | ) | (2,974 | ) | 660,491 | |||||||||||||||||
Vehicles | 187,353 | — | 1,298 | (1,760 | ) | 962 | 187,853 | |||||||||||||||||||
Other equipment | 87,370 | — | 1,890 | (6 | ) | 18,319 | 107,573 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 42,913 | — | 36,173 | — | (24,198 | ) | 54,888 | |||||||||||||||||||
Switching equipment | 348,286 | — | 222,275 | — | (412,505 | ) | 158,056 | |||||||||||||||||||
Transmission installation and equipment | 139,499 | — | 5,843,119 | — | (5,888,711 | ) | 93,907 | |||||||||||||||||||
Satellite, earth station and equipment | 264,029 | — | 390,994 | — | (47,851 | ) | 607,172 | |||||||||||||||||||
Cable network | 115,420 | 55,865 | 1,567,652 | — | (1,724,413 | ) | 14,524 | |||||||||||||||||||
Power supply | 5,715 | — | 18,416 | — | (24,025 | ) | 106 | |||||||||||||||||||
Data processing equipment | 10,807 | — | 63,945 | (634 | ) | (63,592 | ) | 10,526 | ||||||||||||||||||
Other telecommunications peripherals | 13,649 | — | 15,853 | (1,392 | ) | (11,627 | ) | 16,483 | ||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 3,640 | — | 73 | (1,689 | ) | (1,785 | ) | 239 | ||||||||||||||||||
Total | 47,334,951 | 1,556,269 | 9,552,587 | (148,787 | ) | 61,679 | 58,356,699 | |||||||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||||||||
Direct acquisitions | ||||||||||||||||||||||||||
Buildings | 736,997 | — | 115,602 | (41,293 | ) | 1,013 | 812,319 | |||||||||||||||||||
Switching equipment | 4,569,287 | — | 668,136 | (4 | ) | 29,069 | 5,266,488 | |||||||||||||||||||
Telegraph, telex and data communication equipment | 202,043 | — | 3,365 | (59 | ) | (11,100 | ) | 194,249 | ||||||||||||||||||
Transmission installation and equipment | 3,183,736 | — | 1,784,031 | (4,534 | ) | (6,338 | ) | 4,956,895 | ||||||||||||||||||
Satellite, earth station and equipment | 2,001,671 | — | 153,506 | — | 3,202 | 2,158,379 | ||||||||||||||||||||
Cable network | 5,286,209 | — | 1,300,460 | (20,312 | ) | 46,924 | 6,613,281 | |||||||||||||||||||
Power supply | 724,985 | — | 77,765 | (3,437 | ) | (1,388 | ) | 797,925 | ||||||||||||||||||
Data processing equipment | 990,054 | — | 492,799 | (2,394 | ) | (10,643 | ) | 1,469,816 | ||||||||||||||||||
Other telecommunications peripherals | 499,093 | — | 71,217 | (240 | ) | 2,120 | 572,190 | |||||||||||||||||||
Office equipment | 460,518 | — | 37,251 | (1,088 | ) | 786 | 497,467 | |||||||||||||||||||
Vehicles | 167,226 | — | 7,986 | (1,705 | ) | (373 | ) | 173,134 | ||||||||||||||||||
Other equipment | 63,020 | — | 2,028 | (6 | ) | 4,260 | 69,302 | |||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 1,506 | — | 307 | (848 | ) | (851 | ) | 114 | ||||||||||||||||||
Total | 18,886,345 | — | 4,714,453 | (75,920 | ) | 56,681 | 23,581,559 | |||||||||||||||||||
Net Book Value | 28,448,606 | 34,775,140 | ||||||||||||||||||||||||
F-50
January 1, | KSO IV | December 31, | ||||||||||||||||||||||||
2004 | Acquisitions | Additions | Deductions | Reclassifications | 2004 | |||||||||||||||||||||
At cost or revalued amounts: | ||||||||||||||||||||||||||
Direct acquisitions | ||||||||||||||||||||||||||
Land | 298,964 | — | 34,212 | (156 | ) | (5,681 | ) | 327,339 | ||||||||||||||||||
Buildings | 1,819,095 | 7,021 | 29,722 | (14,448 | ) | 328,665 | 2,170,055 | |||||||||||||||||||
Switching equipment | 10,473,392 | 616,769 | 209,463 | (52,829 | ) | (886,695 | ) | 10,360,100 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 199,314 | — | 4,071 | (14 | ) | 10,484 | 213,855 | |||||||||||||||||||
Transmission installation and equipment | 16,818,179 | 271,678 | 245,170 | (573,950 | ) | 10,161,066 | 26,922,143 | |||||||||||||||||||
Satellite, earth station and equipment | 6,209,827 | — | 30,998 | (165,130 | ) | (2,720,892 | ) | 3,354,803 | ||||||||||||||||||
Cable network | 15,488,797 | 1,427,049 | 195,947 | (44,651 | ) | 633,932 | 17,701,074 | |||||||||||||||||||
Power supply | 1,149,458 | 18,644 | 22,784 | (6,116 | ) | 9,940 | 1,194,710 | |||||||||||||||||||
Data processing equipment | 3,252,667 | 32,012 | 469,470 | (11,671 | ) | 44,263 | 3,786,741 | |||||||||||||||||||
Other telecommunications peripherals | 735,188 | — | 62,550 | (3,872 | ) | 30,768 | 824,634 | |||||||||||||||||||
Office equipment | 660,491 | 102 | 32,513 | (8,470 | ) | (22,970 | ) | 661,666 | ||||||||||||||||||
Vehicles | 187,853 | 3,859 | 4,972 | (9,285 | ) | 4,004 | 191,403 | |||||||||||||||||||
Other equipment | 107,573 | — | 1,855 | (71 | ) | 3,269 | 112,626 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 54,888 | — | 46,137 | — | (47,613 | ) | 53,412 | |||||||||||||||||||
Switching equipment | 158,056 | — | 57,033 | — | (215,089 | ) | — | |||||||||||||||||||
Transmission installation and equipment | 93,907 | — | 5,067,293 | — | (4,986,069 | ) | 175,131 | |||||||||||||||||||
Satellite, earth station and equipment | 607,172 | — | 234,354 | — | (64,627 | ) | 776,899 | |||||||||||||||||||
Cable network | 14,524 | — | 2,006,243 | — | (1,995,259 | ) | 25,508 | |||||||||||||||||||
Power supply | 106 | — | 24,953 | — | (24,990 | ) | 69 | |||||||||||||||||||
Data processing equipment | 10,526 | — | 30,065 | — | (23,910 | ) | 16,681 | |||||||||||||||||||
Other telecommunications peripherals | 16,483 | — | 10,594 | — | (27,077 | ) | — | |||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 239 | — | 11 | — | 163 | 413 | ||||||||||||||||||||
Total | 58,356,699 | 2,377,134 | 8,820,410 | (890,663 | ) | 205,682 | 68,869,262 | |||||||||||||||||||
F-51
January 1, | KSO IV | December 31, | |||||||||||||||||||||||
2004 | Acquisitions | Additions | Deductions | Reclassifications | 2004 | ||||||||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||||||
Direct acquisitions | |||||||||||||||||||||||||
Buildings | 812,319 | — | 136,083 | (11,209 | ) | 15,445 | 952,638 | ||||||||||||||||||
Switching equipment | 5,266,488 | — | 748,667 | (36,795 | ) | (377,087 | ) | 5,601,273 | |||||||||||||||||
Telegraph, telex and data communication equipment | 194,249 | — | 853 | (791 | ) | 4,342 | 198,653 | ||||||||||||||||||
Transmission installation and equipment | 4,956,895 | — | 2,747,743 | (513,618 | ) | 1,017,239 | 8,208,259 | ||||||||||||||||||
Satellite, earth station and equipment | 2,158,379 | — | 199,729 | (165,075 | ) | (660,751 | ) | 1,532,282 | |||||||||||||||||
Cable network | 6,613,281 | — | 1,560,387 | (33,777 | ) | 95,770 | 8,235,661 | ||||||||||||||||||
Power supply | 797,925 | — | 108,436 | (5,642 | ) | 4,061 | 904,780 | ||||||||||||||||||
Data processing equipment | 1,469,816 | — | 680,399 | (11,221 | ) | (26,173 | ) | 2,112,821 | |||||||||||||||||
Other telecommunications peripherals | 572,190 | — | 75,248 | (3,664 | ) | 68,804 | 712,578 | ||||||||||||||||||
Office equipment | 497,467 | — | 68,822 | (7,291 | ) | 3,759 | 562,757 | ||||||||||||||||||
Vehicles | 173,134 | — | 11,730 | (8,224 | ) | 4,224 | 180,864 | ||||||||||||||||||
Other equipment | 69,302 | — | 17,469 | (71 | ) | 7,827 | 94,527 | ||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 114 | — | 33 | — | (77 | ) | 70 | ||||||||||||||||||
Total | 23,581,559 | — | 6,355,599 | (797,378 | ) | 157,383 | 29,297,163 | ||||||||||||||||||
Net Book Value | 34,775,140 | 39,572,099 | |||||||||||||||||||||||
2003 | 2004 | |||||||
Proceeds from sale of property, plant and equipment | 255,750 | 67,196 | ||||||
Net book value | 72,867 | 93,285 | ||||||
Gain/(loss) on disposal | 182,883 | (26,089 | ) | |||||
F-52
F-53
12. | PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS |
January 1, | December 31, | ||||||||||||||||||||
2003 | Additions | Deductions | Reclassifications | 2003 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,160 | — | — | — | 3,160 | ||||||||||||||||
Buildings | 23,727 | — | — | (3,472 | ) | 20,255 | |||||||||||||||
Switching equipment | 623,757 | — | (9,154 | ) | (76,713 | ) | 537,890 | ||||||||||||||
Transmission installation and equipment | 107,558 | — | (14,530 | ) | — | 93,028 | |||||||||||||||
Cable network | 333,188 | 27,314 | — | (42,121 | ) | 318,381 | |||||||||||||||
Other telecommunications peripherals | 129,196 | — | (2,711 | ) | (2,513 | ) | 123,972 | ||||||||||||||
Total | 1,220,586 | 27,314 | (26,395 | ) | (124,819 | ) | 1,096,686 | ||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,278 | 171 | — | — | 1,449 | ||||||||||||||||
Buildings | 10,411 | 1,155 | — | (1,762 | ) | 9,804 | |||||||||||||||
Switching equipment | 360,637 | 37,458 | (9,154 | ) | (47,416 | ) | 341,525 | ||||||||||||||
Transmission installation and equipment | 95,198 | 9,052 | (14,530 | ) | — | 89,720 | |||||||||||||||
Cable network | 246,244 | 17,231 | — | (38,300 | ) | 225,175 | |||||||||||||||
Other telecommunications peripherals | 129,196 | — | (2,711 | ) | (2,513 | ) | 123,972 | ||||||||||||||
Total | 842,964 | 65,067 | (26,395 | ) | (89,991 | ) | 791,645 | ||||||||||||||
Net Book Value | 377,622 | 305,041 | |||||||||||||||||||
January 1, | December 31, | ||||||||||||||||||||
2004 | Additions | Deductions | Reclassifications | 2004 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,160 | 222 | — | — | 3,382 | ||||||||||||||||
Buildings | 20,255 | 225 | — | (7,058 | ) | 13,422 | |||||||||||||||
Switching equipment | 537,890 | 12,473 | — | (132,226 | ) | 418,137 | |||||||||||||||
Transmission installation and equipment | 93,028 | 200,251 | — | (34,160 | ) | 259,119 | |||||||||||||||
Cable network | 318,381 | 117,228 | — | (39,469 | ) | 396,140 | |||||||||||||||
Other telecommunications peripherals | 123,972 | 234 | — | (20,709 | ) | 103,497 | |||||||||||||||
Total | 1,096,686 | 330,633 | — | (233,622 | ) | 1,193,697 | |||||||||||||||
F-54
January 1, | December 31, | ||||||||||||||||||||
2004 | Additions | Deductions | Reclassifications | 2004 | |||||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,449 | 152 | — | — | 1,601 | ||||||||||||||||
Buildings | 9,804 | 802 | — | (3,529 | ) | 7,077 | |||||||||||||||
Switching equipment | 341,525 | 34,757 | — | (90,160 | ) | 286,122 | |||||||||||||||
Transmission installation and equipment | 89,720 | 13,406 | — | (34,160 | ) | 68,966 | |||||||||||||||
Cable network | 225,175 | 33,817 | — | (31,475 | ) | 227,517 | |||||||||||||||
Other telecommunications peripherals | 123,972 | 24 | — | (20,709 | ) | 103,287 | |||||||||||||||
Total | 791,645 | 82,958 | — | (180,033 | ) | 694,570 | |||||||||||||||
Net Book Value | 305,041 | 499,127 | |||||||||||||||||||
2003 | 2004 | |||||||
Gross amount | 1,096,686 | 1,193,697 | ||||||
Accumulated amortization: | ||||||||
Beginning balance | (1,077,789 | ) | (984,954 | ) | ||||
Addition (Note 37) | (58,379 | ) | (82,033 | ) | ||||
Deduction | 151,214 | 233,622 | ||||||
Ending balance | (984,954 | ) | (833,365 | ) | ||||
Net | 111,732 | 360,332 | ||||||
2003 | 2004 | |||||||
Advances for purchase of property, plant and equipment | 28,698 | 1,070,065 | ||||||
Security deposits | 22,851 | 28,345 | ||||||
Restricted cash | 5,053 | 114,202 | ||||||
Deferred landrights charges | 74,299 | 93,843 | ||||||
Others | 45,053 | 65,896 | ||||||
Total | 175,954 | 1,372,351 | ||||||
F-55
Other | |||||||||||||
Intangible | |||||||||||||
Goodwill | Assets | Total | |||||||||||
Gross carrying amount: | |||||||||||||
Balance as of December 31, 2002 | 106,348 | 4,028,842 | 4,135,190 | ||||||||||
Addition — acquisition of AWI (Note 4c) | — | 1,982,564 | 1,982,564 | ||||||||||
Balance as of December 31, 2003 | 106,348 | 6,011,406 | 6,117,754 | ||||||||||
Accumulated amortization: | |||||||||||||
Balance as of December 31, 2002 | (33,681 | ) | (209,364 | ) | (243,045 | ) | |||||||
Amortization expense for 2003 | (21,270 | ) | (709,389 | ) | (730,659 | ) | |||||||
Balance as of December 31, 2003 | (54,951 | ) | (918,753 | ) | (973,704 | ) | |||||||
Net book value | 51,397 | 5,092,653 | 5,144,050 | ||||||||||
Weighted-average amortization period | 5 years | 8.26 years |
Other | |||||||||||||
Intangible | |||||||||||||
Goodwill | Assets | Total | |||||||||||
Gross carrying amount: | |||||||||||||
Balance as of December 31, 2003 | 106,348 | 6,011,406 | 6,117,754 | ||||||||||
Addition — acquisition of Dayamitra (Note 4a) | — | 231,477 | 231,477 | ||||||||||
Addition — acquisition of KSO IV (Note 4d) | — | 908,228 | 908,228 | ||||||||||
Balance as of December 31, 2004 | 106,348 | 7,151,111 | 7,257,459 | ||||||||||
Accumulated amortization: | |||||||||||||
Balance as of December 31, 2003 | (54,951 | ) | (918,753 | ) | (973,704 | ) | |||||||
Amortization expense for 2004 | (21,270 | ) | (851,060 | ) | (872,330 | ) | |||||||
Balance as of December 31, 2004 | (76,221 | ) | (1,769,813 | ) | (1,846,034 | ) | |||||||
Net book value | 30,127 | 5,381,298 | 5,411,425 | ||||||||||
Weighted-average amortization period | 5 years | 7.97 years |
F-56
2003 | 2004 | |||||||
Citibank N.A., Singapore | 239,689 | 30,059 | ||||||
JP Morgan Chase Bank | 276,439 | — | ||||||
Bank Mandiri | 6,018 | 6,222 | ||||||
522,146 | 36,281 | |||||||
b. JP Morgan Chase Bank |
F-57
c. Bank Mandiri |
16. | TRADE ACCOUNTS PAYABLE |
2003 | 2004 | ||||||||
Related parties | |||||||||
Payables to other telecommunications carriers | 322,842 | 196,127 | |||||||
Concession fees | 224,370 | 254,665 | |||||||
Purchases of equipment, materials and services | 110,266 | 192,302 | |||||||
Total | 657,478 | 643,094 | |||||||
Third parties | |||||||||
Purchases of equipment, materials and services | 2,892,803 | 3,366,320 | |||||||
Payables related to revenue-sharing arrangements | 94,508 | 220,158 | |||||||
Payables to other telecommunication providers | 122,543 | 24,978 | |||||||
Total | 3,109,854 | 3,611,456 | |||||||
Total | 3,767,332 | 4,254,550 | |||||||
2003 | 2004 | |||||||
Rupiah | 2,825,795 | 3,613,715 | ||||||
U.S. Dollar | 900,408 | 638,861 | ||||||
Euro | 29,463 | — | ||||||
Japanese Yen | 10,033 | 715 | ||||||
Great Britain Pound Sterling | 916 | 1,092 | ||||||
Singapore Dollar | 717 | 147 | ||||||
Myanmar KYAT | — | 20 | ||||||
Total | 3,767,332 | 4,254,550 | ||||||
F-58
17. | ACCRUED EXPENSES |
2003 | 2004 | |||||||
Early retirement benefits | 132,810 | — | ||||||
Salaries and employee bonuses | 442,785 | 321,237 | ||||||
Interest and bank charges | 261,050 | 163,203 | ||||||
General, administrative and marketing | 259,462 | 242,597 | ||||||
Operations, maintenance and telecommunications services | 89,103 | 324,329 | ||||||
Total | 1,185,210 | 1,051,366 | ||||||
18. | UNEARNED INCOME |
2003 | 2004 | |||||||
Prepaid pulse reload vouchers | 740,077 | 1,017,530 | ||||||
Other telecommunication services | 16,361 | 7,669 | ||||||
Other | 6,773 | 4,801 | ||||||
Total | 763,211 | 1,030,000 | ||||||
19. | ADVANCES FROM CUSTOMERS AND SUPPLIERS |
20. | SHORT-TERM BANK LOANS |
2003 | 2004 | |||||||
Bank Mandiri | 37,642 | 41,433 | ||||||
ABN AMRO Bank | — | 604,500 | ||||||
Bank Central Asia | — | 455,700 | ||||||
Total | 37,642 | 1,101,633 | ||||||
F-59
a. Bank Mandiri |
b. ABN AMRO Bank |
c. Bank Central Asia |
F-60
a. Current maturities |
Notes | 2003 | 2004 | ||||||||||
Two-step loans | 22 | 832,135 | 655,422 | |||||||||
Medium-term Notes | 23 | — | 468,976 | |||||||||
Bank loans | 24 | 808,793 | 602,516 | |||||||||
Liabilities of business acquisitions | 25 | 1,587,775 | 573,908 | |||||||||
Suppliers’ credit loans | 26 | 164,958 | — | |||||||||
Bridging loan | 27 | 49,855 | — | |||||||||
Total | 3,443,516 | 2,300,822 | ||||||||||
b. Long-term portion |
Notes | Total | 2006 | 2007 | 2008 | 2009 | Later | ||||||||||||||||||||||
(In billions of Rupiah) | ||||||||||||||||||||||||||||
Two-step loans | 22 | 5,363.3 | 570.7 | 501.6 | 460.4 | 444.9 | 3,385.7 | |||||||||||||||||||||
Guaranteed Notes | 23 | 736.2 | — | 736.2 | — | — | — | |||||||||||||||||||||
Bonds | 23 | 986.6 | — | 986.6 | — | — | — | |||||||||||||||||||||
Medium-term Notes | 23 | 608.7 | 144.7 | 464.0 | — | — | — | |||||||||||||||||||||
Bank loans | 24 | 1,775.8 | 750.9 | 623.6 | 400.8 | 0.4 | 0.1 | |||||||||||||||||||||
Liabilities of business acquisitions | 25 | 3,743.3 | 746.7 | 690.4 | 767.8 | 748.0 | 790.4 | |||||||||||||||||||||
Total | 13,213.9 | 2,213.0 | 4,002.4 | 1,629.0 | 1,193.3 | 4,176.2 | ||||||||||||||||||||||
F-61
Interest Rate | Outstanding | |||||||||||||||
Creditors | 2003 | 2004 | 2003 | 2004 | ||||||||||||
Overseas banks | 3.10% – 14.90% | 3.10% – 13.25% | 7,441,076 | 5,889,703 | ||||||||||||
Consortium of contractors | 3.20% – 14.90% | 3.20% – 13.25% | 249,969 | 129,002 | ||||||||||||
Total | 7,691,045 | 6,018,705 | ||||||||||||||
Current maturities | (832,135 | ) | (655,422 | ) | ||||||||||||
Long-term portion | 6,858,910 | 5,363,283 | ||||||||||||||
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2003 | 2004 | 2003 | 2004 | ||||||||||||
U.S. Dollar | 4.00% – 7.98% | 4.00% – 7.98% | 2,946,687 | 2,397,437 | ||||||||||||
Rupiah | 9.69% – 14.90% | 8.30% – 13.25% | 3,050,043 | 2,098,948 | ||||||||||||
Japanese Yen | 3.10% | 3.10% | 1,244,331 | 1,393,318 | ||||||||||||
Euro | 7.33% – 8.45% | 7.33% – 8.45% | 200,015 | — | ||||||||||||
Total | 7,441,076 | 5,889,703 | ||||||||||||||
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2003 | 2004 | 2003 | 2004 | ||||||||||||
Rupiah | 12.66% – 14.90% | 8.30% – 13.25% | 116,574 | 9,924 | ||||||||||||
Japanese Yen | 3.20% | 3.20% | 133,395 | 119,078 | ||||||||||||
Total | 249,969 | 129,002 | ||||||||||||||
F-62
a. Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1 for two-step loans originating from World Bank and Asian Development Bank (“ADB”), respectively. | |
b. Internal financing (earnings before depreciation and interest expenses) should exceed 50% and 20% compared to capital expenditures for loans originating from World Bank and ADB, respectively. |
2003 | 2004 | |||||||
Guaranteed Notes | 1,121,224 | 736,174 | ||||||
Bonds | 981,278 | 986,564 | ||||||
Medium-term Notes | — | 1,077,703 | ||||||
Total | 2,102,502 | 2,800,441 | ||||||
Current maturities | — | (468,976 | ) | |||||
Long-term portion | 2,102,502 | 2,331,465 | ||||||
a. Guaranteed Notes |
F-63
b. | Bonds |
2003 | 2004 | |||||||
Principal | 1,000,000 | 1,000,000 | ||||||
Bond issuance costs | (18,722 | ) | (13,436 | ) | ||||
Net | 981,278 | 986,564 | ||||||
1. | Debt service coverage ratio should exceed 1.5:1 | |
2. | Debt to equity ratio should not exceed: |
a. | 3:1 for the period of January 1, 2002 to December 31, 2002 | |
b. | 2.5:1 for the period of January 1, 2003 to December 31, 2003 |
c. | 2:1 for the period of January 1, 2004 to the redemption date of the bonds |
3. | Debt to EBITDA ratio should not exceed 3:1 |
F-64
c. | Medium-term Notes |
Series | Principal | Maturity | Interest rate | ||||||||||
A | 290,000 | June 15, 2005 | 7.70 | % | |||||||||
B | 225,000 | December 15, 2005 | 7.95 | % | |||||||||
C | 145,000 | June 15, 2006 | 8.20 | % | |||||||||
D | 465,000 | June 15, 2007 | 9.40 | % | |||||||||
Total | 1,125,000 | ||||||||||||
Rp | ||||
Principal | 1,080,000 | |||
Debt issuance costs | (2,297 | ) | ||
1,077,703 | ||||
Current maturities | (468,976 | ) | ||
Long-term portion | 608,727 | |||
1. | Debt service coverage ratio should exceed 1.5:1 | |
2. | Debt to equity ratio should not exceed 2:1 | |
3. | Debt to EBITDA ratio should not exceed 3:1 |
F-65
24. | BANK LOANS |
2003 | 2004 | |||||||||||||||||||||||
Outstanding | Outstanding | |||||||||||||||||||||||
Original | Original | |||||||||||||||||||||||
Total Facility | Currency | Rupiah | Currency | Rupiah | ||||||||||||||||||||
Lenders | Currency | (in millions) | (in millions) | Equivalent | (in millions) | Equivalent | ||||||||||||||||||
Group of lenders | US$ | — | 172.3 | 1,456,063 | — | — | ||||||||||||||||||
Citibank N.A. | EUR | 73.4 | 64.9 | 690,646 | 51.4 | 649,758 | ||||||||||||||||||
US$ | 113.3 | 51.3 | 434,059 | 85.9 | 798,197 | |||||||||||||||||||
Bank Central Asia | Rp | 173,000.0 | — | 139,826 | — | 143,489 | ||||||||||||||||||
Deutsche Bank | Rp | 108,817.7 | — | 95,418 | — | 41,009 | ||||||||||||||||||
Bank Finconesia | Rp | — | — | 15,884 | — | — | ||||||||||||||||||
Bank Mandiri | Rp | 82,425.3 | — | 42,115 | — | 59,729 | ||||||||||||||||||
Syndicated banks | Rp | 90,000.0 | — | 34,263 | — | 8,088 | ||||||||||||||||||
US$ | 4.0 | 1.9 | 15,751 | 0.4 | 4,092 | |||||||||||||||||||
Bank Niaga | Rp | 7,765.0 | — | 565 | — | 7,330 | ||||||||||||||||||
The Export-Import Bank of Korea | US$ | 124.0 | — | — | 59.1 | 549,449 | ||||||||||||||||||
Consortium of banks | Rp | 150,000.0 | — | — | — | 117,174 | ||||||||||||||||||
Total | 2,924,590 | 2,378,315 | ||||||||||||||||||||||
Current maturities of bank loans | (808,793 | ) | (602,516 | ) | ||||||||||||||||||||
Long-term portion | 2,115,797 | 1,775,799 | ||||||||||||||||||||||
a. | Group of lenders |
b. | Citibank N.A. |
F-66
Amount | ||||||||
EUR | Rupiah | |||||||
Year | (in millions) | Equivalent | ||||||
2005 | 14.7 | 185,645 | ||||||
2006 | 14.7 | 185,645 | ||||||
2007 | 11.0 | 139,234 | ||||||
2008 | 11.0 | 139,234 |
2. | High Performance Backbone (“HP Backbone”) Loans |
F-67
a. 3:1 for the period of April 10, 2002 to January 1, 2003 | |
b. 2.75:1 for the period of January 2, 2003 to January 1, 2004 | |
c. 2.5:1 for the period of January 2, 2004 to January 1, 2005 | |
d. 2:1 for the period of January 2, 2005 to the fully repayment date of the loans |
a. 3.5:1 for the period of April 10, 2002 to January 1, 2004 | |
b. 3:1 for the period of January 2, 2004 to the fully repayment date of the loans |
F-68
Amount | ||||||||
US$ | Rupiah | |||||||
Year | (in millions) | Equivalent | ||||||
2005 | 15.5 | 143,841 | ||||||
2006 | 15.5 | 143,841 | ||||||
2007 | 12.6 | 116,894 | ||||||
2008 | 12.5 | 116,894 |
2003 | 2004 | |||||||||||||||
Foreign | Foreign | |||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||
Hermes Export Facility | EUR64.9 | 690,646 | EUR51.4 | 649,758 | ||||||||||||
HP Backbone loans | US$ | 31.8 | 268,737 | US$ | 29.8 | 276,727 | ||||||||||
EKN-Backed Facility | US$ | 19.5 | 165,322 | US$ | 56.1 | 521,470 | ||||||||||
Total | 1,124,705 | 1,447,955 | ||||||||||||||
Current maturities | (242,116 | ) | (402,983 | ) | ||||||||||||
Long-term portion | 882,589 | 1,044,972 | ||||||||||||||
c. Bank Central Asia |
F-69
d. Deutsche Bank AG |
e. Bank Finconesia |
f. Bank Mandiri |
F-70
g. Syndicated banks (Internet Protocol Backbone (“IP Backbone”) Loan) |
2003 | 2004 | |||||||
Rupiah | 11.63% – 19.00% | 10.83% – 11.63% | ||||||
U.S. Dollar | 3.31% – 3.69% | 3.31% – 4.88% |
F-71
h. Bank Niaga |
i. The Export-Import Bank of Korea |
j. Consortium of banks |
F-72
2003 | 2004 | ||||||||
Pramindo transaction(Note 4b) | |||||||||
France Cables et Radio S.A. | 646,100 | — | |||||||
PT Astratel Nusantara | 565,497 | — | |||||||
Indosat | 210,042 | — | |||||||
Marubeni Corporation | 129,220 | — | |||||||
International Finance Corporation, USA | 48,457 | — | |||||||
NMP Singapore Pte. Ltd. | 16,157 | — | |||||||
Less discount on promissory notes | (80,184 | ) | — | ||||||
1,535,289 | — | ||||||||
AWI transaction(Note 4c) | |||||||||
PT Aria Infotek | 483,955 | 479,373 | |||||||
The Asian Infrastructure Fund | 115,227 | 114,136 | |||||||
MediaOne International I B.V. | 322,636 | 319,582 | |||||||
Less discount on promissory notes | (122,358 | ) | (90,173 | ) | |||||
799,460 | 822,918 | ||||||||
Dayamitra transaction(Note 4a) | |||||||||
TM Communication (HK) Ltd. | — | 139,752 | |||||||
Less discount on promissory notes | — | (11,883 | ) | ||||||
— | 127,869 | ||||||||
F-73
2003 | 2004 | ||||||||
KSO IV transaction(Note 4d) | |||||||||
MGTI | — | 4,305,125 | |||||||
Less discount | — | (938,687 | ) | ||||||
— | 3,366,438 | ||||||||
Total | 2,334,749 | 4,317,225 | |||||||
Current maturity — net of discount (Note 21a) | (1,587,775 | ) | (573,908 | ) | |||||
Long-term portion — net of discount | 746,974 | 3,743,317 | |||||||
2003 | 2004 | |||||||
Tomen Corporation | 139,608 | — | ||||||
Cable & Wireless plc | 26,021 | — | ||||||
Total | 165,629 | — | ||||||
Current maturities | (164,958 | ) | — | |||||
Long-term portion | 671 | — | ||||||
a. Tomen Corporation (“Tomen”) |
F-74
b. Cable and Wireless plc (“C&W plc”) |
2003 | 2004 | |||||||
Total outstanding amount | 50,365 | — | ||||||
Current maturities | (49,855 | ) | — | |||||
Long-term portion | 510 | — | ||||||
F-75
2003 | 2004 | ||||||||
Minority interest in net assets of subsidiaries: | |||||||||
Telkomsel | 3,608,874 | 4,857,089 | |||||||
Infomedia | 60,353 | 80,883 | |||||||
Dayamitra | 32,999 | — | |||||||
Indonusa | 1,959 | — | |||||||
Napsindo | 2,068 | — | |||||||
PII | 1,899 | 456 | |||||||
GSD | 3 | 4 | |||||||
Total | 3,708,155 | 4,938,432 | |||||||
2002 | 2003 | 2004 | |||||||||||
Minority interest in net income (loss) of subsidiaries: | |||||||||||||
Telkomsel | 782,870 | 1,482,897 | 1,915,543 | ||||||||||
Infomedia | 19,031 | 22,399 | 37,088 | ||||||||||
Dayamitra | 15,151 | 11,584 | 9,139 | ||||||||||
Indonusa | (6,831 | ) | (2,351 | ) | (1,959 | ) | |||||||
Napsindo | — | (8,541 | ) | (2,068 | ) | ||||||||
PII | — | (2,511 | ) | (1,443 | ) | ||||||||
GSD | 1 | 1 | 1 | ||||||||||
Total | 810,222 | 1,503,478 | 1,956,301 | ||||||||||
F-76
2003 | ||||||||||||||
Percentage | Total | |||||||||||||
Number of | of | Paid-up | ||||||||||||
Description | Shares* | Ownership | Capital | |||||||||||
% | Rp | |||||||||||||
Series A Dwiwarna share | ||||||||||||||
Government of the Republic of Indonesia | 1 | — | — | |||||||||||
Series B shares | ||||||||||||||
Government of the Republic of Indonesia | 10,320,470,711 | 51.19 | 2,580,118 | |||||||||||
JPMCB US Resident (Norbax Inc.) | 1,792,091,302 | 8.89 | 448,023 | |||||||||||
The Bank of New York | 1,314,526,816 | 6.52 | 328,632 | |||||||||||
Board of Commissioners: | ||||||||||||||
Petrus Sartono | 19,116 | — | 5 | |||||||||||
Board of Directors: | ||||||||||||||
Kristiono | 25,380 | — | 6 | |||||||||||
Garuda Sugardo | 16,524 | — | 4 | |||||||||||
Guntur Siregar | 19,980 | — | 5 | |||||||||||
Agus Utoyo | 23,652 | — | 6 | |||||||||||
Suryatin Setiawan | 21,708 | — | 5 | |||||||||||
Public (below 5% each) | 6,732,784,090 | 33.40 | 1,683,196 | |||||||||||
Total | 20,159,999,280 | 100.00 | 5,040,000 | |||||||||||
* | Number of shares has been restated to reflect a two-for-one stock split as resolved in the Annual General Meeting of Stockholders on July 30, 2004 (Note 1b). |
F-77
2004 | ||||||||||||||
Percentage | Total | |||||||||||||
Number of | of | Paid-up | ||||||||||||
Description | Shares | Ownership | Capital | |||||||||||
% | Rp | |||||||||||||
Series A Dwiwarna share | ||||||||||||||
Government of the Republic of Indonesia | 1 | — | — | |||||||||||
Series B shares | ||||||||||||||
Government of the Republic of Indonesia | 10,320,470,711 | 51.19 | 2,580,118 | |||||||||||
JPMCB US Resident (Norbax Inc.) | 1,378,468,925 | 6.84 | 344,617 | |||||||||||
The Bank of New York | 1,568,517,736 | 7.78 | 392,129 | |||||||||||
Board of Commissioners | ||||||||||||||
Petrus Sartono | 19,116 | — | 5 | |||||||||||
Board of Directors | ||||||||||||||
Kristiono | 25,380 | — | 6 | |||||||||||
Suryatin Setiawan | 21,708 | — | 5 | |||||||||||
Woeryanto Soeradji | 16,524 | — | 4 | |||||||||||
Public (below 5% each) | 6,892,459,179 | 34.19 | 1,723,116 | |||||||||||
Total | 20,159,999,280 | 100.00 | 5,040,000 | |||||||||||
2003 | 2004 | |||||||
Proceeds from sale of 933,333,000 shares in excess of par value through initial public offering in 1995 | 1,446,666 | 1,446,666 | ||||||
Capitalization into 746,666,640 series B shares in 1999 | (373,333 | ) | (373,333 | ) | ||||
Total | 1,073,333 | 1,073,333 | ||||||
31. | DIFFERENCE IN VALUE OF RESTRUCTURING TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL |
i. | Acquisition by the Company of Indosat’s 35% equity interest in Telkomsel for US$ | |
ii. | Acquisition by Indosat of the Company’s 22.5% equity interest in PT Satelit Palapa Indonesia (“Satelindo”) for US$ |
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
iii. | Acquisition by Indosat of the Company’s 37.66% equity interest in PT Aplikanusa Lintasarta (“Lintasarta”) for US$ |
F-78
iv. | The acquisition by Indosat of all of the Company’s rights and novation of all of the Company’s obligations, under the KSO IV Agreement dated October 20, 1995, between the Company and PT Mitra Global Telekomunikasi Indonesia (“MGTI”), together with all of the Company’s assets being used as KSO IV assets, for US$ |
F-79
Historical | ||||||||||||||||||||||||||||
Consideration | Amount of | Deferred | Change | |||||||||||||||||||||||||
Paid/ | Net Assets/ | Income | in | |||||||||||||||||||||||||
(Received) | Investment | Tax | Equity | Total | Tax | Net | ||||||||||||||||||||||
Telkomsel | 10,782,450 | 1,466,658 | 337,324 | — | 8,978,468 | — | 8,978,468 | |||||||||||||||||||||
Satelindo | (2,122,260 | ) | — | — | (290,442 | ) | (2,412,702 | ) | (627,678 | ) | (1,785,024 | ) | ||||||||||||||||
Lintasarta | (437,631 | ) | 116,834 | — | — | (320,797 | ) | (119,586 | ) | (201,211 | ) | |||||||||||||||||
Total | 8,222,559 | 1,583,492 | 337,324 | (290,442 | ) | 6,244,969 | (747,264 | ) | 6,992,233 | |||||||||||||||||||
Historical | |||||||||||||||||||||||||||||
Consideration | Amount of | Deferred | |||||||||||||||||||||||||||
Paid/ | Net Assets/ | Income | Change | ||||||||||||||||||||||||||
(Received) | Investment | Tax | in Equity | Total | Tax | Net | |||||||||||||||||||||||
Cross-ownership transactions with Indosat in 2001: | |||||||||||||||||||||||||||||
Acquisition of 35% equity interest in Telkomsel | 10,782,450 | 1,466,658 | 337,324 | — | 8,978,468 | — | 8,978,468 | ||||||||||||||||||||||
Sale of 22.5% equity interest in Satelindo | (2,122,260 | ) | — | — | (290,442 | ) | (2,412,702 | ) | (627,678 | ) | (1,785,024 | ) | |||||||||||||||||
Sale of 37.66% equity interest in Lintasarta | (437,631 | ) | 116,834 | — | — | (320,797 | ) | (119,586 | ) | (201,211 | ) | ||||||||||||||||||
Total | 8,222,559 | 1,583,492 | 337,324 | (290,442 | ) | 6,244,969 | (747,264 | ) | 6,992,233 | ||||||||||||||||||||
Acquisition of 13% equity interest in Pramindo in 2002 from Indosat (Note 4b): | 434,025 | 137,987 | — | — | 296,038 | — | 296,038 | ||||||||||||||||||||||
Total | 8,656,584 | 1,721,479 | 337,324 | (290,442 | ) | 6,541,007 | (747,264 | ) | 7,288,271 | ||||||||||||||||||||
2002 | 2003 | 2004 | |||||||||||
Fixed lines | |||||||||||||
Local and domestic long-distance usage | 5,447,925 | 6,561,800 | 7,439,310 | ||||||||||
Monthly subscription charges | 1,474,823 | 1,948,830 | 2,934,899 | ||||||||||
Installation charges | 130,234 | 223,130 | 201,313 | ||||||||||
Phone cards | 29,265 | 34,371 | 15,561 | ||||||||||
Others | 181,852 | 128,734 | 53,938 | ||||||||||
Total | 7,264,099 | 8,896,865 | 10,645,021 | ||||||||||
Cellular | |||||||||||||
Air time charges | 5,453,597 | 7,677,884 | 9,825,738 | ||||||||||
Monthly subscription charges | 593,347 | 580,550 | 448,472 | ||||||||||
Connection fee charges | 172,302 | 194,053 | 55,797 | ||||||||||
Features | 7,555 | 6,343 | 91,291 | ||||||||||
Total | 6,226,801 | 8,458,830 | 10,421,298 | ||||||||||
Total Telephone Revenues | 13,490,900 | 17,355,695 | 21,066,319 | ||||||||||
F-33F-80
5. ACQUISITION OF KSO INVESTORS
a. Dayamitra
On May 17, 2001, the Company acquired 90.32% of the shares of Dayamitra for an aggregate purchase price of US$134,172,232 (including consultants’ fees of approximately US$3,303,191 or Rp37,325 million). Pursuant to the terms of the agreement, the Company paid the initial payment amount of US$18,289,800 (Rp206,675 million) on May 17, 2001, the closing date of the transaction, and US$8,937,041 (Rp100,989 million) on August 10, 2001 as a post-closing working capital adjustment to the purchase price. The remaining amount of US$103,642,200 (Rp1,171,157 million) was paid through an escrow arrangement discussed below, in eight quarterly installments of US$12,955,275, from August 17, 2001 to May 17, 2003. The estimated present value of US$103,642,200 at the discount rate of 14% was estimated to be US$89,053,984 (Rp1,006,310 million).
This acquisition resulted in the identification of an intangible asset amounting to Rp1,276,575 million representing the right to operate the business in the KSO Area. The amount is being amortized over the remaining term of the KSO agreement (Note 16).
The Company acquired control of Dayamitra on May 17, 2001 and has consequently consolidated Dayamitra from that date.
The allocation of the acquisition cost for the 90.32% ownership in Dayamitra was as follows:
Net cash outflow on the acquisition of Dayamitra amounted to Rp241,300 million.
In connection with the Dayamitra transaction, the Company also entered into the following agreements:
1. Option Agreement
The Company entered into an Option Agreement with TM Communications (HK) Ltd (“TMC”), providing the Company with an option to acquire the remaining 9.68% equity interest in Dayamitra, referred to as the Option Share. Under the agreement, TMC, the selling stockholder, granted the
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company an exclusive option to purchase full and legal title to the Option Share (the “Call Option”), and the Company granted the selling stockholder an exclusive option to sell to the Company full legal title to those shares (the “Put Option”).
In consideration for the grant of the options, the Company will pay to the selling stockholder the option purchase price of US$6,300,000, plus US$957,823 as payment for Dayamitra’s adjusted working capital, or a total of US$7,257,823. The amount is payable in eight quarterly installments of US$907,228, beginning on August 17, 2001 and ending on May 17, 2003. Payments will be made through an escrow account established under the Escrow Agreement discussed below.
The Company may exercise the option any time after Dayamitra has satisfied all of its obligations under the JBIC (formerly J-Exim) loan (Note 26i) beginning on May 17, 2003 and until five business days prior to March 26, 2006. The strike price payable by the Company to the selling stockholder for the Option Shares upon exercise of the option is US$16,200,000, less certain amounts that are stipulated in the Option Agreement. As of December 31, 2003 the Company has not exercised the option.
As of December 31, 2003, the option purchase price that has been paid by the Company amounted to US$7,257,823 or equivalent to Rp65,458 million (2002: US$5,443,367 or equivalent to Rp51,120 million), and is presented as part of “Advance payments for investments in shares of stock” (Note 5e).
2. Escrow Agreement
An Escrow Agreement dated May 17, 2001, was entered into by and among the Company, Dayamitra, PT Intidaya Sistelindomitra (“Intidaya”), Cable and Wireless plc (“C&W plc”), PT Mitracipta Sarananusa (“Mitracipta”), TMC, Tomen Corporation (“Tomen”), Citibank N.A. Singapore (the Singapore Escrow Agent) and Citibank N.A. Jakarta (the Jakarta Escrow Agent), to establish an Escrow Account and facilitate the payment (Note 17).
b. Pramindo
On April 19, 2002, the Company and the stockholders of Pramindo, namely France Cables et Radio SA, PT Astratel Nusantara, Indosat, Marubeni Corporation, International Finance Corporation (“IFC”) and NMP Singapore Pte. Ltd. (“NMP Singapore”) (collectively the “Selling Stockholders”) entered into a Conditional Sale and Purchase Agreement (“CSPA”) pursuant to which the Company acquired all of Pramindo’s shares. The Selling Stockholders shares were transferred to an escrow account (hereafter referred as “escrow shares”).
Legal title to the escrow shares will be transferred to Telkom in 3 (three) specific tranches on 15 September 2002 — 30%, 30 September 2003 — 15% and on 31 December 2004 — 55% upon payment of the promissory notes issued to the selling stockholders as payment for the acquisition of the shares. The escrow shares can be accessed by the selling stockholders only upon default on payment of the promissory notes by the Company and no dividends can be paid out until the arrangements between the parties are completed or terminated in accordance with the terms of the relevant agreements.
The Company and the Selling Stockholders also entered into a Stockholders Voting Agreement (“SVA”) on August 15, 2002, pursuant to which each stockholder of Pramindo delivered to the Company a Power of Attorney (“PoA”) whereby the Company obtained the right to vote the escrow shares. The Company, thereby acquired the right to nominate all of the members of the Board of
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Directors and Board of Commissioners of Pramindo. The SVA is subject to certain reserve matters which serve as protective rights to the Selling Stockholders.
The aggregate purchase price amounted to US$390,308,972 (Rp3,464,040 million) plus Rp250,000 million, represented by an initial payment of approximately US$9,263,953 (Rp82,218 million), consultants’ fees of US$5,945,946 (Rp52,818 million), working capital reimbursement of Rp250,000 million, and the issue by Telkom of Promissory Notes (series I and series II) with an aggregate face value of US$375,099,073, of which the present value at the discount rate of 8.15% at the effective date of the acquisition was estimated to be US$332,802,122 (Rp2,953,617 million). The series I promissory notes are non-interest bearing and the series II promissory notes carry a market interest rate. The Promissory Notes are to be paid in 10 unequal quarterly installments beginning September 15, 2002 and are irrevocable, unconditional and transferable.
The total purchase consideration was allocated first to the net monetary assets and then the fixed assets acquired. An intangible asset of Rp2,752,267 million was identified representing right to operate the business in the KSO Area. The amount is being amortized over the remaining term of the KSO agreement (Note 16). There was no goodwill arising from this acquisition.
In addition, the portion that relates to Indosat’s 13% equity interest in Pramindo has been accounted for as a restructuring of entities under common control. The difference between the purchase consideration and the historical amount of the net assets acquired amounting to Rp296,038 million, included as “Difference in value of restructuring transactions between entities under common control” in the stockholders’ equity section is calculated as follows:
The Company acquired control of Pramindo on August 15, 2002 and has consequently consolidated Pramindo from August 1, 2002 being the nearest convenient balance date.
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The allocation of the acquisition cost was as follows:
Net cash outflow on the acquisition of Pramindo amounted to Rp243,561 million.
The outstanding promissory notes issued for the acquisition of Pramindo are presented as “Liabilities for acquisitions of subsidiaries” in the consolidated balance sheets as of December 31, 2002 and 2003 (Note 27). As of December 31, 2002 and 2003, the outstanding promissory notes, before unamortized discount, amounted to US$342 million (Rp3,060,884 million) and US$191 million (Rp1,615,473 million).
Subsequent to December 31, 2003, the Company obtained a loan to finance the payment of these promissory notes and legal title to all of Pramindo’s shares has been completely transferred to the Company (Note 57c).
c. PT AriaWest International (“AWI”)
Effective on July 31, 2003 (the “closing date”), the Company acquired 100% of the outstanding common stock of AWI, the investor in KSO III, for approximately Rp1,141,752 million plus the assumption of AWI’s debts of Rp2,577,926 million. The purchase consideration included non-interest bearing promissory notes with a face value of US$109,090,909 (Rp927,272 million), of which the present value at the discount rate of 5.16% at the closing date was estimated to be US$92,743,741 (Rp788,322 million). The promissory notes are to be paid in 10 equal semi-annual installments beginning July 31, 2004.
The acquisition of AWI has been accounted for using the purchase method of accounting. There was no goodwill arising from this acquisition. The following table summarizes the final purchase price
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
allocation of the acquired assets and assumed liabilities based on estimates of their respective fair values at the closing date:
The Company’s consolidated results of operations includes the operating results of AWI since July 31, 2003, the date of acquisition.
The outstanding promissory notes issued for the acquisition of AWI are presented as “Liabilities for acquisitions of subsidiaries” in the consolidated balance sheet as of December 31, 2003 (Note 27). As of December 31, 2003 the outstanding promissory notes, before unamortized discount, amounted to US$109,090,909 (Rp921,818 million).
The purchase price described above was based on third party appraisal. In addition, the Company also entered into a settlement agreement with AWI pursuant to which the Company and AWI irrevocably settled, discharged, and released claims and counterclaims in their ICC arbitration proceeding, and the Company agreed to pay a settlement amount of US$20,000,000. Based on this settlement and subsequent receipt of trade receivables from KSO III, the Company decided to reverse the provision for bad debts that had previously been recognized and has accrued the costs related to the settlement at December 31, 2002 (Notes 8d and 19).
d. Pro Forma Operating Results Related to Acquisition of KSO Investors
The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the acquisition of Dayamitra and Pramindo had taken place on January 1, 2001 and AWI on January 1, 2002. The pro forma information includes adjustments for amortization of intangible assets, depreciation expense on property, plant and equipment based on the allocated purchase price, interest expense on incremental borrowings and income taxes. The pro forma
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
financial information is not necessarily indicative of the results of operations as it would have been had the transactions been effected on the assumed dates or indicative of future operations.
2001 | 2002 | 2003 | ||||||||||
Operating revenues | 17,622,331 | 22,297,575 | 27,513,766 | |||||||||
Operating income | 7,215,988 | 8,778,831 | 11,819,863 | |||||||||
Income before tax | 5,797,788 | 11,726,254 | 11,531,510 | |||||||||
Net income | 3,409,285 | 8,127,080 | 6,571,287 | |||||||||
Net income per share (full amount) | 338.22 | 806.26 | 651.91 | |||||||||
Net income per ADS (full amount) | 6,764.45 | 16,125.16 | 13,038.27 |
e. Advance Payments for Investments in Shares of Stock
2002 | 2003 | |||||||
Dayamitra (Note 5a) | 51,120 | 65,458 | ||||||
AWI | �� | 196,463 | — | |||||
247,583 | 65,458 | |||||||
Advance payment for investment in shares of AWI represented advance amounting to US$20,000,000 (Rp196,463 million) paid to the former stockholders of AWI upon the signing of the Conditional Sale and Purchase Agreement on May 8, 2002.
6. CASH AND CASH EQUIVALENTS
2002 | 2003 | ||||||||||
Cash on hand | 12,696 | 6,790 | |||||||||
Cash in banks | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Negara Indonesia | 152,774 | 217,276 | |||||||||
Bank Mandiri | 64,603 | 109,887 | |||||||||
Bank Rakyat Indonesia | 8,059 | 9,988 | |||||||||
Bank Pos Nusantara | 2,582 | 1,135 | |||||||||
Total | 228,018 | 338,286 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 29,019 | 32,016 | |||||||||
Bank Negara Indonesia | 4,560 | 1,576 | |||||||||
Bank Rakyat Indonesia | 479 | 453 | |||||||||
Total | 34,058 | 34,045 | |||||||||
Total — related parties | 262,076 | 372,331 | |||||||||
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | ||||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Citibank | 10,426 | 302 | |||||||||
Bank Bukopin | 6,428 | 9,463 | |||||||||
Bank Central Asia | 5,630 | 7,889 | |||||||||
Bank Niaga | 540 | 2,102 | |||||||||
Bank Mizuho Indonesia | 142 | — | |||||||||
ABN Amro Bank | 140 | 251 | |||||||||
Bank Danamon | 103 | 172 | |||||||||
Lippo Bank | 97 | 274 | |||||||||
Chase Manhattan | 39 | — | |||||||||
Bank International Indonesia | 136 | 3 | |||||||||
Bank Buana Indonesia | 2 | 218 | |||||||||
Bank Muamalat Indonesia | — | 76 | |||||||||
Bank Mega | — | 4,239 | |||||||||
Deutsche Bank | — | 6,097 | |||||||||
Total | 23,683 | 31,086 | |||||||||
Foreign currencies | |||||||||||
Citibank | 940 | 3,231 | |||||||||
Deutsche Bank | 456 | 2,412 | |||||||||
Standard Chartered Bank | 194 | 1,808 | |||||||||
ABN Amro Bank | 33 | 73 | |||||||||
Bank Internasional Indonesia | — | 22 | |||||||||
Bank Central Asia | — | 31 | |||||||||
Bank of Tokyo Mitsubishi | — | 26 | |||||||||
Total | 1,623 | 7,603 | |||||||||
Total — third parties | 25,306 | 38,689 | |||||||||
Total cash in banks | 287,382 | 411,020 | |||||||||
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | ||||||||||
Time deposits | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Mandiri | 779,983 | 968,829 | |||||||||
Bank Rakyat Indonesia | 607,420 | 529,350 | |||||||||
Bank Negara Indonesia | 298,565 | 485,115 | |||||||||
Bank Tabungan Negara | 108,480 | 169,590 | |||||||||
Total | 1,794,448 | 2,152,884 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 3,022,661 | 526,384 | |||||||||
Bank Negara Indonesia | 2,447 | 5,789 | |||||||||
Total | 3,025,108 | 532,173 | |||||||||
Total — related parties | 4,819,556 | 2,685,057 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Standard Chartered Bank | 142,000 | 287,122 | |||||||||
Bank Mega | 129,757 | 91,342 | |||||||||
Bank Bukopin | 58,214 | 96,099 | |||||||||
Bank Yudha Bhakti | 6,000 | 1,000 | |||||||||
Bank Niaga | 5,000 | 4,500 | |||||||||
Bank Internasional Indonesia | 2,000 | — | |||||||||
Deutsche Bank | — | 359,342 | |||||||||
Bank Danamon | — | 145,725 | |||||||||
ABN Amro Bank | — | 1,000 | |||||||||
Bank NISP | — | 47,369 | |||||||||
Bank Jabar | — | 67,204 | |||||||||
Total | 342,971 | 1,100,703 | |||||||||
Foreign currencies | |||||||||||
Standard Chartered Bank | — | 5,697 | |||||||||
Deutsche Bank | 236,465 | 885,205 | |||||||||
Total | 236,465 | 890,902 | |||||||||
Total — third parties | 579,436 | 1,991,605 | |||||||||
Total time deposits | 5,398,992 | 4,676,662 | |||||||||
Total cash and cash equivalents | 5,699,070 | 5,094,472 | |||||||||
Range of interest rates per annum for time deposits is as follows:
2002 | 2003 | |||||||
Rupiah | 11.59% – 18.45% | 5.5% – 14.25% | ||||||
Foreign currencies | 1.15% – 5.03% | 0.92% – 2.25% |
Refer to Note 49 for details of related party transactions.
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7. TEMPORARY INVESTMENTS
2002 | 2003 | ||||||||||
Time deposits | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Mandiri | 100,000 | — | |||||||||
Bank Rakyat Indonesia | 423,000 | — | |||||||||
523,000 | — | ||||||||||
Third parties | |||||||||||
Bank Muamalat Indonesia | — | 4,006 | |||||||||
Total time deposits | 523,000 | 4,006 | |||||||||
Available-for-sale securities | |||||||||||
Medium Term Notes — PSSI | 50,000 | — | |||||||||
Total available-for-sale securities | 50,000 | — | |||||||||
Total temporary investments | 573,000 | 4,006 | |||||||||
Range of interest rates per annum for time deposits is as follows:
2002 | 2003 | |||||||
Rupiah | 11.14% – 14.33% | 6.00% – 6.76% |
The terms of time deposits range from 3 months to 1 year.
Medium Term Notes — PSSI represent medium term notes issued by Persatuan Sepakbola Seluruh Indonesia (PSSI) amounting to Rp50,000 million maturing on February 22, 2003. On the maturity date, the medium term notes were settled in cash.
Investments placed with related parties have similar interest rates, terms and conditions as those placed with third parties. Refer to Note 49 for details of related party transactions.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. TRADE ACCOUNTS RECEIVABLE
a. By Debtor
Related parties:
2002 | 2003 | |||||||
KSO Units | 633,327 | 265,517 | ||||||
Government agencies | 253,845 | 181,551 | ||||||
PT Mandara Selular Indonesia (formerly PT Mobile Selular Indonesia) | 33,560 | 37,326 | ||||||
PT Citra Sari Makmur | 16,262 | 20,450 | ||||||
PT Bakrie Telecom (formerly PT Radio Telepon Indonesia) | 18,233 | — | ||||||
PT Komunikasi Selular Indonesia* | 7,500 | — | ||||||
PT Metro Selular Nusantara* | 5,607 | — | ||||||
PT Patra Telekomunikasi Indonesia | — | 8,513 | ||||||
PT Aplikanusa Lintasarta | 3,578 | 5,819 | ||||||
Other | 10,527 | 2,679 | ||||||
Total | 982,439 | 521,855 | ||||||
Allowance for doubtful accounts | (95,676 | ) | (110,932 | ) | ||||
Net | 886,763 | 410,923 | ||||||
Trade accounts receivable from certain related parties are presented net of the Company’s liabilities to such parties due to legal right of offset in accordance with agreements with those parties.
Third parties:
2002 | 2003 | |||||||
Residential and business subscribers | 2,140,894 | 2,682,288 | ||||||
Overseas international carriers | 167,853 | 42,836 | ||||||
Others | 18,470 | 29,841 | ||||||
Total | 2,327,217 | 2,754,965 | ||||||
Allowance for doubtful accounts | (407,313 | ) | (332,960 | ) | ||||
Net | 1,919,904 | 2,422,005 | ||||||
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
b. By Age
Related parties:
2002 | 2003 | |||||||
Up to 6 months | 763,820 | 350,348 | ||||||
7 to 12 months | 143,773 | 42,250 | ||||||
13 to 24 months | 30,227 | 42,920 | ||||||
More than 24 months | 44,619 | 86,337 | ||||||
Total | 982,439 | 521,855 | ||||||
Allowance for doubtful accounts | (95,676 | ) | (110,932 | ) | ||||
Net | 886,763 | 410,923 | ||||||
Third parties:
2002 | 2003 | |||||||
Up to 3 months | 1,919,904 | 2,358,570 | ||||||
More than 3 months | 407,313 | 396,395 | ||||||
Total | 2,327,217 | 2,754,965 | ||||||
Allowance for doubtful accounts | (407,313 | ) | (332,960 | ) | ||||
Net | 1,919,904 | 2,422,005 | ||||||
c. By Currency
Related parties
2002 | 2003 | |||||||
Rupiah | 911,065 | 443,930 | ||||||
United States Dollar | 71,374 | 77,925 | ||||||
Total | 982,439 | 521,855 | ||||||
Allowance for doubtful accounts | (95,676 | ) | (110,932 | ) | ||||
Net | 886,763 | 410,923 | ||||||
Third parties
2002 | 2003 | |||||||
Rupiah | 2,251,199 | 2,720,331 | ||||||
United States Dollar | 76,018 | 34,634 | ||||||
Total | 2,327,217 | 2,754,965 | ||||||
Allowance for doubtful accounts | (407,313 | ) | (332,960 | ) | ||||
Net | 1,919,904 | 2,422,005 | ||||||
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
d. Movements in the Allowance for Doubtful Accounts
2001 | 2002 | 2003 | ||||||||||
Beginning balance | 429,579 | 578,785 | 502,989 | |||||||||
Additions | 266,433 | 523,024 | 296,099 | |||||||||
Reversal of allowance for trade accounts receivable from AWI (Note 5c) | — | (511,933 | ) | — | ||||||||
Bad debts write-off | (117,227 | ) | (86,887 | ) | (355,196 | ) | ||||||
Ending balance | 578,785 | 502,989 | 443,892 | |||||||||
Management believes that the allowance for doubtful receivables is adequate to cover probable losses on uncollectible accounts.
Except for the amounts receivable from Government Agencies, management believes that there are no significant concentrations of credit risk on these receivables.
Refer to Note 49 for details of related party transactions.
9. INVENTORIES
2002 | 2003 | ||||||||
Components: | |||||||||
Telephone terminals and spare parts | 29,311 | 27,407 | |||||||
Cable and transmission installation spare parts | 15,226 | 1,540 | |||||||
Other spare parts | 11,020 | 13,521 | |||||||
Total | 55,557 | 42,468 | |||||||
Allowance for obsolescence | (30,160 | ) | (14,757 | ) | |||||
Net | 25,397 | 27,711 | |||||||
Modules: | |||||||||
Cable and transmission installation spare parts | 54,912 | 55,997 | |||||||
Telephone terminals and spare parts | 42,563 | 37,917 | |||||||
Other spare parts | 434 | 272 | |||||||
Total | 97,909 | 94,186 | |||||||
Allowance for obsolescence | (23,464 | ) | (25,584 | ) | |||||
Net | 74,445 | 68,602 | |||||||
SIM cards and prepaid voucher blanks | 40,011 | 57,838 | |||||||
Allowance for obsolescence | (171 | ) | (148 | ) | |||||
Net | 39,840 | 57,690 | |||||||
Total | 139,682 | 154,003 | |||||||
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Movements in the allowance for obsolescence are as follows:
2002 | 2003 | |||||||
Beginning balance | 48,997 | 53,795 | ||||||
Additions | 20,012 | 4,523 | ||||||
Inventory write-off | (15,214 | ) | (17,829 | ) | ||||
Ending balance | 53,795 | 40,489 | ||||||
Management believes that the allowance is adequate to cover probable losses from decline in inventory value due to obsolescence.
At December 31, 2003, inventory held by a certain subsidiary was insured against fire, theft and other specified risks for US$750,000. Management believes that the insurance amount is adequate to cover such risks.
2002 | 2003 | |||||||
Pension cost (Note 46) | 28,181 | 286,652 | ||||||
Rental | 131,906 | 173,242 | ||||||
Salary | 105,090 | 124,061 | ||||||
Insurance | 9,144 | 98,167 | ||||||
Telephone directory issuance cost | 68,382 | 11,091 | ||||||
Other | 10,953 | 24,704 | ||||||
Total | 353,656 | 717,917 | ||||||
This account consists of time deposits and restricted funds at the following banks:
2002 | 2003 | |||||||
Bank Mandiri | 540,520 | 45,083 | ||||||
Deutsche Bank and Citibank | 151,268 | — | ||||||
Total | 691,788 | 45,083 | ||||||
a. Bank Mandiri
As of December 31, 2002, the balance consists of the Company’s time deposits of Rp500,000 million pledged as collateral for a credit facility from Bank Mandiri and Telkomsel’s Rupiah time deposits of Rp40,520 million representing security deposits for payments of customs duties. The Company’s credit facility from Bank Mandiri was obtained on February 11, 2002 with a maximum facility of Rp500,000 million which bears interest at 2% above the interest rate on the pledged time deposits. The credit facility was never used and was terminated on February 18, 2003. The time deposits have been released from the pledge.
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2003, the balance consists of the Company’s time deposits of US$4,600,000 (Rp38,778 million) pledged as collateral for credit facility obtained by Napsindo (Note 22a) and Rp2,412 million (included US$58,251) pledged as collateral for bank guarantees, and Telkomsel’s Rupiah time deposits of Rp3,893 million pledged as collateral for bank guarantees covering payments of customs duties.
b. Deutsche Bank and Citibank
As of December 31, 2002, the balance consists of Telkomsel’s time deposits in Deutsche Bank and Citibank totaling US$9,971,936 (Rp89,149 million) for letter of credit facilities (Note 22b), and the Company’s time deposits in Citibank of US$6,950,000 (Rp62,119 million) that was pledged as collateral for a loan facility for the High Performance Backbone Project from Citibank for the two-year period ending April 10, 2004 (Note 26b).
12. LONG-TERM INVESTMENTS
2002 | ||||||||||||||||||||||||
Percentage | Equity in | |||||||||||||||||||||||
of | Opening | Addition/ | Net Income | Translation | Ending | |||||||||||||||||||
Ownership | Balance | (Deduction) | (Loss) | Adjustment | Balance | |||||||||||||||||||
Equity method: | ||||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 74,833 | — | 8,446 | (21,009 | ) | 62,270 | |||||||||||||||||
PT Telekomindo Selular Raya | 100.00 | 87,907 | (62,907 | ) | 1,642 | — | 26,642 | |||||||||||||||||
PT Metro Selular Nusantara | 20.17 | 1,657 | 13,513 | 1,137 | — | 16,307 | ||||||||||||||||||
PT Patra Telekomunikasi Indonesia | 30.00 | 12,133 | — | 710 | — | 12,843 | ||||||||||||||||||
PT Napsindo Primatel International | 32.00 | 12,030 | — | (7,337 | ) | — | 4,693 | |||||||||||||||||
PT Multimedia Nusantara | 31.00 | 1,928 | — | — | — | 1,928 | ||||||||||||||||||
PT Mandara Selular Indonesia | 25.00 | — | — | — | — | — | ||||||||||||||||||
PT Pasifik Satelit Nusantara | 22.57 | — | — | — | — | — | ||||||||||||||||||
PT Menara Jakarta | 20.00 | — | — | — | — | — | ||||||||||||||||||
190,488 | (49,394 | ) | 4,598 | (21,009 | ) | 124,683 | ||||||||||||||||||
Cost method: | ||||||||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | ||||||||||||||||||
PT Komunikasi Selular Indonesia | 14.20 | — | 57,570 | — | — | 57,570 | ||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | ||||||||||||||||||
Medianusa Pte. Ltd. | 9.44 | 108 | — | — | — | 108 | ||||||||||||||||||
894 | 57,570 | — | — | 58,464 | ||||||||||||||||||||
191,382 | 8,176 | 4,598 | (21,009 | ) | 183,147 | |||||||||||||||||||
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2003 | |||||||||||||||||||||||||
Equity in | |||||||||||||||||||||||||
Percentage | Net | ||||||||||||||||||||||||
of | Opening | Addition/ | Income | Translation | Ending | ||||||||||||||||||||
Ownership | Balance | (Deduction) | (Loss) | Adjustment | Balance | ||||||||||||||||||||
Equity method: | |||||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 62,270 | — | 1,585 | (11,433 | ) | 52,422 | ||||||||||||||||||
PT Patra Telekomunikasi Indonesia** | 30.00 | 12,843 | (2,745 | ) | 1,234 | — | 11,332 | ||||||||||||||||||
PT Napsindo Primatel International* | 60.00 | 4,693 | (4,693 | ) | — | — | — | ||||||||||||||||||
PT Multimedia Nusantara* | 100.00 | 1,928 | (1,928 | ) | — | — | — | ||||||||||||||||||
PT Telekomindo Selular Raya | — | 26,642 | (26,642 | ) | — | — | — | ||||||||||||||||||
PT Metro Selular Nusantara | — | 16,307 | (16,307 | ) | — | — | — | ||||||||||||||||||
PT Pasifik Satelit Nusantara | 43.69 | — | — | — | — | — | |||||||||||||||||||
PT Menara Jakarta | — | — | — | — | — | — | |||||||||||||||||||
124,683 | (52,315 | ) | 2,819 | (11,433 | ) | 63,754 | |||||||||||||||||||
Cost method: | |||||||||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | |||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | |||||||||||||||||||
Medianusa Pte. Ltd. | 9.44 | 108 | — | — | — | 108 | |||||||||||||||||||
PT Komunikasi Selular Indonesia | — | 57,570 | (57,570 | ) | — | — | — | ||||||||||||||||||
PT Mandara Selular Indonesia | 7.44 | — | — | — | — | — | |||||||||||||||||||
58,464 | (57,570 | ) | — | — | 894 | ||||||||||||||||||||
183,147 | (109,885 | ) | 2,819 | (11,433 | ) | 64,648 | |||||||||||||||||||
On August 8, 2003, the Company and PT Centralindo Pancasakti Cellular (“CPSC”) signed a share-swap agreement (“KMT-IP share-swap transaction”) in which the Company delivered its 14.20% outstanding shares in PT Komunikasi Selular Indonesia (“Komselindo”), its 20.17% outstanding shares in PT Metro Selular Nusantara (“Metrosel”), and its 100% outstanding shares in PT Telekomindo Selular Raya (“Telesera”) to CPSC. In return, CPSC delivered its 30.58% outstanding shares in PT Indonusa Telemedia (“Indonusa”), 21.12% outstanding shares in PT Pasifik Satelit Nusantara (“PSN”) under certain terms and paid cash of Rp5,398 million to the Company.
From the KMT-IP share-swap transaction, the Company recognized a loss of Rp47.3 billion being the difference between the fair value of assets received and the carrying amount of the Company’s investments given to CPSC, and reversal of difference due to change of equity in Metrosel previously recognized directly in equity.
a. PT Citra Sari Makmur (“CSM”)
CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
b. PT Patra Telekomunikasi Indonesia (“Patrakom”)
Patrakom is engaged in providing satellite communication system services and related services and facilities to companies in the petroleum industry.
c. PT Telekomindo Seluler Raya (“Telesera”)
In 2001, the Minister of Justice and Human Rights approved the corporate restructuring of PT Telekomindo Primabhakti (“Telekomindo”), an associated company engaged in the construction and development of telecommunications facilities. Pursuant to the restructuring, Telekomindo’s authorized and paid-up capital was reduced and the capital reduction became the paid-up capital of two new companies: PT Telekomindo Media Informatika (“TMI”) and PT Griya Insani Primabhakti (“GIP”).
Based on a share-swap agreement dated December 5, 2001 among the Company, PT Rajawali Corporation (“RC”), Telekomindo and TMI, the parties agreed on the following:
This transaction resulted in the Company owning 69.77% shares of Telesera as of December 31, 2001. In 2002, the Company acquired the remaining 30.23% interest in Telesera from Dana Pensiun Telkom for Rp38,093 million. In 2002, the Company also recognized a loss of Rp101,000 million to write down the carrying amount of this investment to net asset value. As of December 31, 2002, the carrying amount of this investment was Rp26,642 million.
On August 8, 2003, the Company exchanged its investment in Telesera to CPSC.
d. PT Metro Selular Nusantara (“Metrosel”)
Metrosel is engaged in providing national mobile cellular services and related facilities in Central Java, Yogyakarta, East Java, Maluku and Irian Jaya.
On May 30, 2002, Metrosel made an equity call. The Company made additional capital contributions amounting to Rp13,513 million to maintain its ownership in Metrosel at 20.17%.
On August 8, 2003, the Company exchanged its investment in Metrosel to CPSC.
e. PT Pasifik Satelit Nusantara (“PSN”)
PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia Pacific Region.
In 2001, Management decided to recognize the decline in value of this investment due to the financial condition of PSN.
On August 8, 2003, as a result of share-swap transaction with CPSC, the Company interest in PSN effectively increased to 43.69%.
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In 2003, PSN entered into a negotiation with its current creditors to restructure its debts. Up to the date of this report, the debt restructuring has not yet been effective.
f. PT Menara Jakarta (“MJ”)
MJ was engaged in the construction and the operation of towers and related facilities. The economic difficulties faced by Indonesia have resulted in the termination of MJ’s construction projects at the end of 1997. The value of this investment has been reduced to nil.
On April 8, 2003, the Company exchanged all its shares in MJ to PT Indocitra Grahabawana (“Indocitra”) for Indocitra’s 69% ownership interest in Metra (Note 1c).
g. PT Batam Bintan Telekomunikasi (“BBT”)
BBT is engaged in providing fixed line telecommunication services at Batamindo Industrial Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island.
h. PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”)
Bangtelindo is primarily engaged in providing consultancy services on the installation and maintenance of telecommunications facilities.
i. Medianusa Pte. Ltd.
Medianusa Pte. Ltd. is an associated company of Infomedia, which is engaged as a sales agent, in search of advertisers for telephone directories.
j. PT Komunikasi Selular Indonesia (“Komselindo”)
Komselindo is a joint venture between the Company and PT Elektrindo Nusantara (“Elektrindo”), and is engaged in providing analog mobile cellular services. These services were previously provided by the Company under a revenue-sharing arrangement with Elektrindo.
Based on the Deed of Komselindo’s Stockholders Extraordinary General Meeting No. 110 dated October 10, 2000, which was notarized by Ny. R. Arie Soetardjo, S.H., the Company agreed to the conversion of Rp92,750 million of receivables from Komselindo into equity in order to maintain a 35% ownership interest.
In 2001, the Company recorded the conversion of the receivables into equity and recognized a loss upon the write-down of the new carrying amount of the investment amounting to Rp92,750 million.
On August 30, 2002, Komselindo’s stockholders through an Extraordinary Stockholders Meeting approved the equity call for debt restructuring which was included in the Settlement Agreement and the Settlement, Termination and Release Agreement dated August 30, 2002. The Company released and waived its pre-emptive right to subscribe newly issued shares resulting in the dilution of the Company’s ownership in Komselindo to 14.20%.
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
This debt restructuring transaction resulted in a net equity of Komselindo amounting to Rp405,421 million. As of December 31, 2002, the Company recorded its 14.20% interest in Komselindo at its net equity value of Rp57,570 million.
On August 8, 2003, the Company sold its investment in Komselindo to CPSC.
k. PT Mandara Selular Indonesia (formerly PT Mobile Selular Indonesia, “Mobisel”)
Mobisel is engaged in providing mobile cellular services and related facilities. These services were previously provided by the Company under a revenue-sharing arrangement with PT Rajasa Hazanah Perkasa (“RHP”). The capital contribution made by the Company of Rp10,398 million represented a 25% equity ownership in Mobisel.
On July 28, 2003, Mobisel’s stockholders agreed to a restructuring program which included a debt to equity conversion of Mobisel’s interconnection payables to the Company, and an equity investment by a new stockholder. The debt conversion was completed in August 2003 which resulted in dilution of the Company’s interest to 7.44%.
As of December 31, 2003, the value of investment has been reduced to nil.
Subsequently, in January 2004, the Company’s ownership interest was further diluted to 6.4% following the debt to equity conversion of Mobisel’s debt to PT Property Java, Boston Investment Limited and Inquam (Indonesia) Limited Company.
l. PT Radio Telepon Indonesia (“Ratelindo”)
Ratelindo is engaged in providing facilities and telecommunication services using a domestic fixed wireless network.
As of December 31, 2001, the Company had recognized a loss due to an other-than-temporary decline in value of this investment because of Ratelindo’s continuing operating losses and capital deficiency.
The Company sold its equity interest in Ratelindo on March 28, 2002 for Rp14,000 million and recognized a gain for this amount because the carrying amount of the investment in Ratelindo was nil.
13. PROPERTY, PLANT AND EQUIPMENT
January 1, | Pramindo | December 31, | |||||||||||||||||||||||
2002 | Acquisition | Additions | Deductions | Reclassifications | 2002 | ||||||||||||||||||||
At cost or revalued amounts: | |||||||||||||||||||||||||
Direct ownership | |||||||||||||||||||||||||
Land | 195,153 | 8,881 | 60,553 | (54 | ) | 3,400 | 267,933 | ||||||||||||||||||
Buildings | 1,596,806 | — | 42,130 | (18,888 | ) | 38,342 | 1,658,390 | ||||||||||||||||||
Switching equipment | 8,842,943 | 456,062 | 53,341 | (15,606 | ) | 292,463 | 9,629,203 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 206,592 | — | 4,141 | (3,001 | ) | (1,065 | ) | 206,667 | |||||||||||||||||
Transmission installation and equipment | 4,899,964 | 776,597 | 2,349,624 | (8,942 | ) | 2,323,071 | 10,340,314 | ||||||||||||||||||
Satellite, earth station and equipment | 5,772,334 | — | 5,892 | — | 19,785 | 5,798,011 |
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
January 1, | Pramindo | December 31, | ||||||||||||||||||||||||
2002 | Acquisition | Additions | Deductions | Reclassifications | 2002 | |||||||||||||||||||||
Cable network | 11,689,767 | 333,111 | 267,993 | (7,602 | ) | 839,067 | 13,122,336 | |||||||||||||||||||
Power supply | 998,461 | — | 30,037 | (538 | ) | 4,574 | 1,032,534 | |||||||||||||||||||
Data processing equipment | 1,863,387 | 104,895 | 442,409 | (79,550 | ) | 408,696 | 2,739,837 | |||||||||||||||||||
Other telecommunications peripherals | 507,652 | 97,316 | 55,511 | (6,704 | ) | 27,588 | 681,363 | |||||||||||||||||||
Office equipment | 615,046 | 9,492 | 40,429 | (26,589 | ) | 1,304 | 639,682 | |||||||||||||||||||
Vehicles | 187,874 | — | 3,968 | (1,717 | ) | (2,772 | ) | 187,353 | ||||||||||||||||||
Other equipment | 68,048 | 4,736 | 14,951 | (365 | ) | — | 87,370 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 17,556 | — | 67,666 | — | (42,309 | ) | 42,913 | |||||||||||||||||||
Switching equipment | 187,125 | — | 519,066 | — | (357,905 | ) | 348,286 | |||||||||||||||||||
Transmission installation and equipment | 291,861 | 16,248 | 2,157,089 | — | (2,325,699 | ) | 139,499 | |||||||||||||||||||
Satellite, earth station and equipment | 306,365 | — | — | — | (42,336 | ) | 264,029 | |||||||||||||||||||
Cable network | 189,883 | — | 806,897 | — | (881,360 | ) | 115,420 | |||||||||||||||||||
Power supply | 6,258 | — | 5,095 | — | (5,638 | ) | 5,715 | |||||||||||||||||||
Data processing equipment | 133,543 | — | 287,916 | — | (410,652 | ) | 10,807 | |||||||||||||||||||
Other telecommunications peripherals | 3,492 | — | 10,157 | — | — | 13,649 | ||||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 3,804 | — | 215 | — | (379 | ) | 3,640 | |||||||||||||||||||
Total | 38,583,914 | 1,807,338 | 7,225,080 | (169,556 | ) | (111,825 | ) | 47,334,951 | ||||||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||||||||
Direct ownership | ||||||||||||||||||||||||||
Buildings | 654,142 | — | 93,210 | (10,471 | ) | 116 | 736,997 | |||||||||||||||||||
Switching equipment | 3,985,490 | — | 650,215 | (568 | ) | (65,850 | ) | 4,569,287 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 201,748 | — | 4,186 | (2,703 | ) | (1,188 | ) | 202,043 | ||||||||||||||||||
Transmission installation and equipment | 2,075,653 | — | 1,120,179 | (1,653 | ) | (10,443 | ) | 3,183,736 | ||||||||||||||||||
Satellite, earth station and equipment | 1,875,016 | — | 126,658 | — | (3 | ) | 2,001,671 | |||||||||||||||||||
Cable network | 4,482,733 | — | 829,627 | (1,102 | ) | (25,049 | ) | 5,286,209 | ||||||||||||||||||
Power supply | 667,615 | — | 42,673 | (654 | ) | 15,351 | 724,985 | |||||||||||||||||||
Data processing equipment | 679,382 | — | 388,453 | (58,618 | ) | (19,163 | ) | 990,054 | ||||||||||||||||||
Other telecommunications peripherals | 437,610 | — | 65,036 | (326 | ) | (3,227 | ) | 499,093 | ||||||||||||||||||
Office equipment | 425,057 | — | 49,706 | (16,244 | ) | 1,999 | 460,518 | |||||||||||||||||||
Vehicles | 158,945 | — | 14,385 | (3,361 | ) | (2,743 | ) | 167,226 | ||||||||||||||||||
Other equipment | 48,815 | — | 13,820 | (298 | ) | 683 | 63,020 | |||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 669 | — | 837 | — | — | 1,506 | ||||||||||||||||||||
Total | 15,692,875 | — | 3,398,985 | (95,998 | ) | (109,517 | ) | 18,886,345 | ||||||||||||||||||
Net Book Value | 22,891,039 | 28,448,606 | ||||||||||||||||||||||||
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
January 1, | AWI | December 31, | ||||||||||||||||||||||||
2003 | Acquisitions | Additions | Deductions | Reclassifications | 2003 | |||||||||||||||||||||
At cost or revalued amounts: | ||||||||||||||||||||||||||
Direct ownership | ||||||||||||||||||||||||||
Land | 267,933 | — | 52,738 | (20,762 | ) | (945 | ) | 298,964 | ||||||||||||||||||
Buildings | 1,658,390 | 2,436 | 43,301 | (43,293 | ) | 158,261 | 1,819,095 | |||||||||||||||||||
Switching equipment | 9,629,203 | 402,598 | 144,658 | (10 | ) | 296,943 | 10,473,392 | |||||||||||||||||||
Telegraph, telex and data communication equipment | 206,667 | — | 3,833 | (86 | ) | (11,100 | ) | 199,314 | ||||||||||||||||||
Transmission installation and equipment | 10,340,314 | 7,565 | 278,020 | (11,903 | ) | 6,204,183 | 16,818,179 | |||||||||||||||||||
Satellite, earth station and equipment | 5,798,011 | — | 21,512 | — | 390,304 | 6,209,827 | ||||||||||||||||||||
Cable network | 13,122,336 | 1,075,987 | 637,068 | (59,275 | ) | 712,681 | 15,488,797 | |||||||||||||||||||
Power supply | 1,032,534 | 9,549 | 18,473 | (3,996 | ) | 92,898 | 1,149,458 | |||||||||||||||||||
Data processing equipment | 2,739,837 | 2,269 | 131,942 | (1,810 | ) | 380,429 | 3,252,667 | |||||||||||||||||||
Other telecommunications peripherals | 681,363 | — | 33,769 | (369 | ) | 20,425 | 735,188 | |||||||||||||||||||
Office equipment | 639,682 | — | 25,585 | (1,802 | ) | (2,974 | ) | 660,491 | ||||||||||||||||||
Vehicles | 187,353 | — | 1,298 | (1,760 | ) | 962 | 187,853 | |||||||||||||||||||
Other equipment | 87,370 | — | 1,890 | (6 | ) | 18,319 | 107,573 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 42,913 | — | 36,173 | — | (24,198 | ) | 54,888 | |||||||||||||||||||
Switching equipment | 348,286 | — | 222,275 | — | (412,505 | ) | 158,056 | |||||||||||||||||||
Transmission installation and equipment | 139,499 | — | 5,843,119 | — | (5,888,711 | ) | 93,907 | |||||||||||||||||||
Satellite, earth station and equipment | 264,029 | — | 390,994 | — | (47,851 | ) | 607,172 | |||||||||||||||||||
Cable network | 115,420 | 55,865 | 1,567,652 | — | (1,724,413 | ) | 14,524 | |||||||||||||||||||
Power supply | 5,715 | — | 18,416 | — | (24,025 | ) | 106 | |||||||||||||||||||
Data processing equipment | 10,807 | — | 63,945 | (634 | ) | (63,592 | ) | 10,526 | ||||||||||||||||||
Other telecommunications peripherals | 13,649 | — | 15,853 | (1,392 | ) | (11,627 | ) | 16,483 | ||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 3,640 | — | 73 | (1,689 | ) | (1,785 | ) | 239 | ||||||||||||||||||
Total | 47,334,951 | 1,556,269 | 9,522,587 | (148,787 | ) | 61,679 | 58,356,699 | |||||||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||||||||
Direct ownership | ||||||||||||||||||||||||||
Buildings | 736,997 | — | 115,602 | (41,293 | ) | 1,013 | 812,319 | |||||||||||||||||||
Switching equipment | 4,569,287 | — | 668,136 | (4 | ) | 29,069 | 5,266,488 | |||||||||||||||||||
Telegraph, telex and data communication equipment | 202,043 | — | 3,365 | (59 | ) | (11,100 | ) | 194,249 | ||||||||||||||||||
Transmission installation and equipment | 3,183,736 | — | 1,784,031 | (4,534 | ) | (6,338 | ) | 4,956,895 | ||||||||||||||||||
Satellite, earth station and equipment | 2,001,671 | — | 153,506 | — | 3,202 | 2,158,379 | ||||||||||||||||||||
Cable network | 5,286,209 | — | 1,300,460 | (20,312 | ) | 46,924 | 6,613,281 | |||||||||||||||||||
Power supply | 724,985 | — | 77,765 | (3,437 | ) | (1,388 | ) | 797,925 | ||||||||||||||||||
Data processing equipment | 990,054 | — | 492,799 | (2,394 | ) | (10,643 | ) | 1,469,816 | ||||||||||||||||||
Other telecommunications peripherals | 499,093 | — | 71,217 | (240 | ) | 2,120 | 572,190 | |||||||||||||||||||
Office equipment | 460,518 | �� | — | 37,251 | (1,088 | ) | 786 | 497,467 |
F-53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
January 1, | AWI | December 31, | |||||||||||||||||||||||
2003 | Acquisitions | Additions | Deductions | Reclassifications | 2003 | ||||||||||||||||||||
Vehicles | 167,226 | — | 7,986 | (1,705 | ) | (373 | ) | 173,134 | |||||||||||||||||
Other equipment | 63,020 | — | 2,028 | (6 | ) | 4,260 | 69,302 | ||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 1,506 | — | 307 | (848 | ) | (851 | ) | 114 | |||||||||||||||||
Total | 18,886,345 | — | 4,714,453 | (75,920 | ) | 56,681 | 23,581,559 | ||||||||||||||||||
Net Book Value | 28,448,606 | 34,775,140 | |||||||||||||||||||||||
2002 | 2003 | |||||||
Proceeds from sale of property, plant and equipment | 204,008 | 255,750 | ||||||
Net book value | 73,558 | 72,867 | ||||||
Gain on sale | 130,450 | 182,883 | ||||||
Interest capitalized to property under construction amounted to Rp8,089 million, Rp20,108 million and Rp22,925 million in 2001, 2002 and 2003, respectively.
Foreign exchange losses (gains) capitalized as part of property under construction amounted to Rp1,746 million, (Rp27,568) million and nil in 2001, 2002 and 2003, respectively.
The Company and its subsidiaries own several pieces of land located throughout Indonesia with Building Use Rights (Hak Guna Bangunan or HGB) for a period of 20-30 years, which will expire between 2004-2032. Management believes that there will be no difficulty in obtaining the extension of the landrights when they expire.
Some of the Company’s land of 330,690 sqm is still under the name of other parties including, among others, the Ministry of Tourism, Post and Telecommunications and the Ministry of Communications of the Republic of Indonesia. The transfer to the Company of the legal title of ownership on those parcels of land is still in progress.
The estimated date of completion of assets under construction is between January 2004 up to January 2005. Management believes that there is no impediment to the completion of the construction in progress.
As of December 31, 2003, property, plant and equipment of the Company and subsidiaries, except for land, were insured with various insurance companies against fire, theft and other specified risks for a coverage of Rp22,518,012 million and US$1,982,291,950. In addition, the Palapa B4 and Telkom-1 satellites are insured for US$59,456,265. Management believes that the insurance coverage is adequate.
Certain property, plant and equipment of the Company and subsidiaries have been pledged as collateral for lending agreements (Notes 26, 28 and 29).
F-54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Set forth below are the Company’s property, plant and equipment (included in Note 13 above) that are being managed, operated and maintained by the KSOs:
2002 | 2003 | |||||||
Land | 3,783 | 200 | ||||||
Buildings | 203,660 | 237,045 | ||||||
Switching equipment | 1,346,764 | 871,799 | ||||||
Telegraph, telex and data communication equipment | 62,501 | 34,014 | ||||||
Transmission installation and equipment | 513,601 | 351,172 | ||||||
Satellite, earth station and equipment | 51,878 | 51,455 | ||||||
Cable network | 1,638,469 | 1,164,364 | ||||||
Power supply | 146,045 | 145,993 | ||||||
Data processing equipment | 87,745 | 67,213 | ||||||
Other telecommunications peripherals | 93,045 | 58,103 | ||||||
Office equipment | 42,133 | 48,765 | ||||||
Vehicles | 22,391 | 16,901 | ||||||
Other equipment | 463 | 463 | ||||||
Property under construction | 60,106 | 3,322 | ||||||
Total cost | 4,272,584 | 3,050,809 | ||||||
Accumulated depreciation | (3,073,555 | ) | (2,254,971 | ) | ||||
Net book value | 1,199,029 | 795,838 | ||||||
The fixed assets under joint operation scheme decreased in 2003 due to the acquisition and consolidation of AWI, the investor in KSO III (Note 5c).
January 1, | December 31, | ||||||||||||||||||||
2002 | Additions | Deductions | Reclassifications | 2002 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,160 | — | — | — | 3,160 | ||||||||||||||||
Buildings | 23,952 | — | — | (225 | ) | 23,727 | |||||||||||||||
Switching equipment | 624,794 | — | — | (1,037 | ) | 623,757 | |||||||||||||||
Transmission installation and equipment | 107,558 | — | — | — | 107,558 | ||||||||||||||||
Cable network | 334,345 | — | — | (1,157 | ) | 333,188 | |||||||||||||||
Other telecommunications peripherals | 199,842 | — | (69,267 | ) | (1,379 | ) | 129,196 | ||||||||||||||
Total | 1,293,651 | — | (69,267 | ) | (3,798 | ) | 1,220,586 | ||||||||||||||
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
January 1, | December 31, | ||||||||||||||||||||
2002 | Additions | Deductions | Reclassifications | 2002 | |||||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,146 | 132 | — | — | 1,278 | ||||||||||||||||
Buildings | 9,334 | 1,183 | — | (106 | ) | 10,411 | |||||||||||||||
Switching equipment | 322,455 | 38,776 | — | (594 | ) | 360,637 | |||||||||||||||
Transmission installation and equipment | 87,143 | 8,055 | — | — | 95,198 | ||||||||||||||||
Cable network | 221,034 | 26,203 | — | (993 | ) | 246,244 | |||||||||||||||
Other telecommunications peripherals | 199,806 | 36 | (69,267 | ) | (1,379 | ) | 129,196 | ||||||||||||||
Total | 840,918 | 74,385 | (69,267 | ) | (3,072 | ) | 842,964 | ||||||||||||||
Net Book Value | 452,733 | 377,622 | |||||||||||||||||||
January 1, | December 31, | ||||||||||||||||||||
2003 | Additions | Deductions | Reclassifications | 2003 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,160 | — | — | — | 3,160 | ||||||||||||||||
Buildings | 23,727 | — | — | (3,472 | ) | 20,255 | |||||||||||||||
Switching equipment | 623,757 | — | (9,154 | ) | (76,713 | ) | 537,890 | ||||||||||||||
Transmission installation and equipment | 107,558 | — | (14,530 | ) | — | 93,028 | |||||||||||||||
Cable network | 333,188 | 27,314 | — | (42,121 | ) | 318,381 | |||||||||||||||
Other telecommunications peripherals | 129,196 | — | (2,711 | ) | (2,513 | ) | 123,972 | ||||||||||||||
Total | 1,220,586 | 27,314 | (26,395 | ) | (124,819 | ) | 1,096,686 | ||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,278 | 171 | — | — | 1,449 | ||||||||||||||||
Buildings | 10,411 | 1,155 | — | (1,762 | ) | 9,804 | |||||||||||||||
Switching equipment | 360,637 | 37,458 | (9,154 | ) | (47,416 | ) | 341,525 | ||||||||||||||
Transmission installation and equipment | 95,198 | 9,052 | (14,530 | ) | — | 89,720 | |||||||||||||||
Cable network | 246,244 | 17,231 | — | (38,300 | ) | 225,175 | |||||||||||||||
Other telecommunications peripherals | 129,196 | — | (2,711 | ) | (2,513 | ) | 123,972 | ||||||||||||||
Total | 842,964 | 65,067 | (26,395 | ) | (89,991 | ) | 791,645 | ||||||||||||||
Net Book Value | 377,622 | 305,041 | |||||||||||||||||||
In accordance with revenue-sharing arrangements agreements, ownership rights to the property, plant and equipment under revenue-sharing arrangements are legally retained by the investors until the end of the revenue-sharing period.
F-56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The unearned income on revenue-sharing arrangements is as follows:
2002 | 2003 | |||||||
Gross amount | 1,220,586 | 1,096,686 | ||||||
Accumulated amortization: | ||||||||
Beginning balance | (1,098,583 | ) | (1,077,789 | ) | ||||
Addition (Note 39) | (52,271 | ) | (58,379 | ) | ||||
Deduction | 73,065 | 151,214 | ||||||
Ending balance | (1,077,789 | ) | (984,954 | ) | ||||
Net | 142,797 | 111,732 | ||||||
2002 | 2003 | |||||||
Intangible assets | 3,892,145 | 5,144,050 | ||||||
License — net | 6,672 | — | ||||||
Net | 3,898,817 | 5,144,050 | ||||||
Movement of intangible assets during 2002 and 2003 is as follows:
2002 | ||||||||||||||||||||
Intangible Assets | Goodwill | |||||||||||||||||||
Dayamitra | Pramindo | AWI | GSD | Total | ||||||||||||||||
Beginning balance | 1,233,932 | — | — | 93,936 | 1,327,868 | |||||||||||||||
Additions | — | 2,752,267 | — | — | 2,752,267 | |||||||||||||||
Amortization | (72,504 | ) | (94,217 | ) | — | (21,269 | ) | (187,990 | ) | |||||||||||
Ending balance | 1,161,428 | 2,658,050 | — | 72,667 | 3,892,145 | |||||||||||||||
2003 | ||||||||||||||||||||
Intangible Assets | Goodwill | |||||||||||||||||||
Dayamitra | Pramindo | AWI | GSD | Total | ||||||||||||||||
Beginning balance | 1,161,428 | 2,658,050 | — | 72,667 | 3,892,145 | |||||||||||||||
Additions | — | — | 1,982,564 | — | 1,982,564 | |||||||||||||||
Amortization | (228,973 | ) | (369,036 | ) | (111,380 | ) | (21,270 | ) | (730,659 | ) | ||||||||||
Ending balance | 932,455 | 2,289,014 | 1,871,184 | 51,397 | 5,144,050 | |||||||||||||||
The intangible assets resulted from the acquisitions of Dayamitra, Pramindo and AWI, and represent the right to operate the business in the KSO areas. Goodwill resulted from the acquisition of GSD (Note 1c).
The license represented the Nationwide DCS 1800 Operations and License for Nationwide DCS 1800 Radio Frequency Spectrum Utilization held by Telkomsel which was fully amortized in 2003.
F-57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Escrow accounts consist of the following:
2002 | 2003 | |||||||
Citibank N.A., Singapore | 129,188 | 239,689 | ||||||
JP Morgan Chase Bank | 168,740 | 276,439 | ||||||
Bank Mandiri | — | 6,018 | ||||||
297,928 | 522,146 | |||||||
a. Citibank N.A., Singapore
This escrow account with Citibank N.A., Singapore (“Dayamitra Escrow Agent”) was established to facilitate the payment of the Company’s obligations under the Conditional Sale and Purchase Agreement and Option Agreement entered into with the selling stockholders of Dayamitra (Note 5a).
In accordance with the Escrow Agreement, the Company made the first installment payment of US$14,343,750 on May 17, 2001. Further monthly installments of US$6,250,000 for twenty four months are required by the agreement. The Company is also obliged to make additional installment payments necessary to settle the obligation on the due dates and to maintain a minimum balance of US$14,343,750.
The escrow account earns interest at LIBOR minus 0.75% per annum, which is computed on a daily basis. The interest income earned is included as part of the escrow funds. The remaining funds available will be transferred to the Company after all of the obligations related to the Dayamitra transaction are satisfied.
b. JP Morgan Chase Bank
This escrow account with JP Morgan Chase Bank (“Pramindo Escrow Agent”) was established to facilitate the settlement of the Company’s obligations under its Conditional Sale and Purchase Agreement for the acquisition of Pramindo (Note 5b).
In accordance with the Escrow Agreement, the Company will make installment payments of US$12,800,000 for eleven months and US$15,000,000 for sixteen months. The first installment was due on October 1, 2002.
The escrow account earns interest at LIBOR minus 0.4% per annum, which is computed on a daily basis. The interest income earned will be included as part of the escrow funds. The remaining funds available will be transferred to the Company after all of the obligations related to the Pramindo transaction are satisfied.
c. Bank Mandiri
The escrow account with Bank Mandiri was established by Dayamitra in relation with the credit facilities from Bank Mandiri (Note 26f).
F-58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | ||||||||
Related parties | |||||||||
Payables to other telecommunications carriers | 365,786 | 322,842 | |||||||
Concession fees | 359,665 | 224,370 | |||||||
Purchases of equipment, materials and services | 64,776 | 110,266 | |||||||
Total | 790,227 | 657,478 | |||||||
Third parties | |||||||||
Purchases of equipment, materials and services | 2,015,145 | 2,892,803 | |||||||
Payables related to revenue-sharing arrangements | 81,710 | 94,508 | |||||||
Payables to other telecommunication providers | 175,769 | 122,543 | |||||||
Total | 2,272,624 | 3,109,854 | |||||||
Total | 3,062,851 | 3,767,332 | |||||||
Trade accounts payable by currency are as follows:
2002 | 2003 | |||||||
Rupiah | 1,961,804 | 2,825,795 | ||||||
U.S. Dollars | 831,258 | 900,408 | ||||||
Euro | 264,959 | 29,463 | ||||||
Japanese Yen | 229 | 10,033 | ||||||
Great Britain Pound Sterling | 4,598 | 916 | ||||||
Singapore Dollars | 3 | 717 | ||||||
Total | 3,062,851 | 3,767,332 | ||||||
Refer to Note 49 for details of related party transactions.
2002 | 2003 | |||||||
Early retirement benefits | 670,981 | 132,810 | ||||||
Salaries and employee bonuses | 411,739 | 473,447 | ||||||
Interest and bank charges | 298,840 | 261,050 | ||||||
General, administrative and marketing | 199,625 | 259,462 | ||||||
Operations, maintenance and telecommunications services | 180,740 | 89,103 | ||||||
AWI settlement (Note 5c) | 179,000 | — | ||||||
Other | 8,989 | — | ||||||
Total | 1,949,914 | 1,215,872 | ||||||
Based on the Board of Directors’ Resolution No. KD.20/ PS900/ SDM-10/2001 dated June 11, 2001 and Resolution of Human Resources Director No. KR.18/ PS900/ SDM-30/2003 dated October 9, 2003 concerning Early Retirement, the Company offered an Early Retirement Program for interested and eligible employees. Employees’ rights under the early retirement program, method of calculation and payments for compensation and other benefits in 2002 and 2003 are provided in the Board of Directors’
F-59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Resolution No. KD.35/ PS900/ SDM-10/01 dated November 30, 2001 regarding Employees’ Rights under Early Retirement Program Year 2002 and the Board of Directors’ Resolution No. KD 80/ PS900/ SDM-20/2002 regarding Employees’ Rights under Early Retirement Program year 2003, respectively. Accrued early retirement benefits as of December 31, 2002 were fully paid in 2003. Accrued early retirement benefits as of December 31, 2003 represents the continued early retirement program which was paid out in early 2004.
2002 | 2003 | |||||||
Prepaid pulse reload vouchers | 375,021 | 740,077 | ||||||
Telephone directory | 52,729 | — | ||||||
Other telecommunication services | 8,069 | 16,361 | ||||||
Other | 9,742 | 6,773 | ||||||
Total | 445,561 | 763,211 | ||||||
Represent security deposits received from customers related to services and performance guarantee deposits from suppliers related to procurement contracts.
Short-term bank loans consist of:
2002 | 2003 | |||||||
Bank Mandiri | — | 37,642 | ||||||
Citibank N.A. | 39,205 | — | ||||||
Total | 39,205 | 37,642 | ||||||
a. Bank Mandiri
On August 28, 2001, Napsindo entered into a loan agreement with Bank Mandiri amounting to US$1,800,000 for a one–year term. The loan is secured with the Company’s time deposits (Note 11) with interest rate at 2% above the pledged time deposits interest rate (i.e., 3% as of December 31, 2003). On November 11, 2003, the facility was extended until August 28, 2004. On April 24, 2003, Napsindo obtained a new loan from Bank Mandiri amounting to US$2,660,000 for a one–year term. The loan is secured by the Company’s time deposits and bears interest at 2% above the pledged time deposits interest rate. The facility can be extended upon approval by the Company. Subsequently, on May 4, 2004, this loan facility was extended for another one-year term and will expire on April 24, 2005. As of December 31, 2003, principal outstanding under these facilities amounted to US$4,460,000 (Rp37,642 million).
F-60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
b. Citibank N.A.
On July 12, 2002, Telkomsel entered into an Opening LC and Trust Receipt Loan Facility Agreement with Citibank, N.A. providing for a total facility of US$40,000,000.
The facility was obtained to finance Telkomsel’s capital expenditures in connection with procurement contracts with three strategic partners and a strategic supplier. Amounts drawn from the facility bear interest at the bank’s cost of funds plus 2.5%. The facility is available until July 31, 2004 and is not collateralized.
As of December 31, 2002, the outstanding balance of the loan amounted to US$4,385,295 (equivalent to Rp39,205 million). The loan drawn down from the facility in 2003 amounted to US$32,441,455 (equivalent to Rp275,312 million). As of December 31, 2003, the loan had been repaid.
23. MATURITIES OF LONG-TERM LIABILITIES
a. Current Maturities
Notes | 2002 | 2003 | ||||||||||
Two-step loans | 24 | 836,109 | 832,135 | |||||||||
Bank loans | 26 | 162,077 | 808,793 | |||||||||
Liabilities for acquisitions of subsidiaries | 27 | 1,385,956 | 1,587,775 | |||||||||
Suppliers’ credit loans | 28 | 163,072 | 164,958 | |||||||||
Bridging loan | 29 | 42,112 | 49,855 | |||||||||
Other | 901 | — | ||||||||||
Total | 2,590,227 | 3,443,516 | ||||||||||
b. Long-Term Portion
Notes | Total | 2005 | 2006 | 2007 | 2008 | Later | ||||||||||||||||||||||
(In billions of Rupiah) | ||||||||||||||||||||||||||||
Two-step loans | 24 | 6,858.9 | 843.3 | 748.8 | 660.5 | 578.3 | 4,028.0 | |||||||||||||||||||||
Guaranteed notes | 25 | 1,121.2 | — | — | 1,121.2 | — | — | |||||||||||||||||||||
Bonds | 25 | 981.3 | — | — | 981.3 | — | — | |||||||||||||||||||||
Bank loans | 26 | 2,115.8 | 817.4 | 732.2 | 454.2 | 112.0 | — | |||||||||||||||||||||
Liabilities for acquisitions of subsidiaries | 27 | 747.0 | 151.4 | 159.4 | 167.8 | 176.6 | 91.8 | |||||||||||||||||||||
Suppliers’ credit loans | 28 | 0.7 | 0.7 | — | — | — | — | |||||||||||||||||||||
Bridging loan | 29 | 0.5 | 0.5 | — | — | — | — | |||||||||||||||||||||
Other long-term debt | 9.1 | — | — | — | — | 9.1 | ||||||||||||||||||||||
Total | 11,834.5 | 1,813.3 | 1,640.4 | 3,385.0 | 866.9 | 4,128.9 | ||||||||||||||||||||||
24. TWO-STEP LOANS
Two-step loans are loans, which were obtained by the Government from overseas banks and a consortium of contractors, which are then re-loaned to the Company. The loans entered into up to July 1994 were recorded and are payable in Rupiah based on the exchange rate at the date of draw-down.
F-61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Loans entered into after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company.
The details of the two-step loans are as follows:
Interest Rate | Outstanding | |||||||||||||||
Creditors | 2002 | 2003 | 2002 | 2003 | ||||||||||||
Overseas banks | 2.95% – 18.41% | 3.10% – 14.90% | 8,271,096 | 7,441,076 | ||||||||||||
Consortium of contractors | 3.20% – 18.41% | 3.20% – 14.90% | 299,046 | 249,969 | ||||||||||||
Total | 8,570,142 | 7,691,045 | ||||||||||||||
Current maturities | (836,109 | ) | (832,135 | ) | ||||||||||||
Long-term portion | 7,734,033 | 6,858,910 | ||||||||||||||
Details of two-step loans obtained from overseas banks as of December 31, 2002 and 2003 are as follows:
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2002 | 2003 | 2002 | 2003 | ||||||||||||
U.S. Dollars | 3.85% – 8.70% | 4.00% – 7.98% | 3,500,678 | 2,946,687 | ||||||||||||
Rupiah | 12.00% – 18.41% | 9.69% – 14.90% | 3,366,297 | 3,050,043 | ||||||||||||
Japanese Yen | 2.95% | 3.10% | 1,188,369 | 1,244,331 | ||||||||||||
Euro | 7.18% – 8.30% | 7.33% – 8.45% | 215,752 | 200,015 | ||||||||||||
Total | 8,271,096 | 7,441,076 | ||||||||||||||
The loans are intended for the development of telecommunications infrastructure and supporting equipment. The loans are repayable in semi-annual installments and they are due on various dates until 2025.
Details of two-step loans obtained from a consortium of contractors as of December 31, 2002 and 2003 are as follows:
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2002 | 2003 | 2002 | 2003 | ||||||||||||
Rupiah | 13.25% – 18.41% | 12.66% – 14.90% | 143,365 | 116,574 | ||||||||||||
Japanese Yen | 3.20% | 3.20% | 155,681 | 133,395 | ||||||||||||
Long-term portion | 299,046 | 249,969 | ||||||||||||||
The consortium of contractors consists of Sumitomo Corporation, PT NEC Nusantara Communications and PT Humpuss Elektronika (SNH Consortium). The loans were obtained to finance the second digital telephone exchange project. The loans are repayable in semi-annual installments and they are due on various dates until March 15, 2015.
Two-step loans which are payable in Rupiah bear either a fixed interest rate or a floating rate based upon the average interest rate on 3-month Certificates of Bank Indonesia during the six-months preceding the installment due date, plus 1%. Two-step loans which are payable in foreign currencies bear either a fixed rate interest or the floating interest rate offered by the lenders, plus 0.5%.
F-62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2003, the Company has used all facilities under the two-step loan program and the draw-down period for the two-step loans has expired.
The Company should maintain financial ratios as follows:
As of December 31, 2003, the Company complied with the above mentioned ratios.
2002 | 2003 | |||||||
Guaranteed Notes | 1,337,518 | 1,121,224 | ||||||
Bonds | 975,992 | 981,278 | ||||||
2,313,510 | 2,102,502 | |||||||
In April 2002, TSFL, Telkomsel’s wholly-owned subsidiary, issued US$150,000,000 Guaranteed Notes (“Notes”) which are guaranteed by Telkomsel. The Notes bear interest at 9.75%, payable semi-annually on April 30 and October 30 of each year and will mature on April 30, 2007. The trustee of the Notes is Deutsche Bank Trustees (Hongkong Limited) and the custodian is Deutsche Bank AG, Hongkong Branch.
On April 23, 2002, TSFL entered into subscription agreements with UBS AG (“UBS”) whereby UBS agreed to subscribe and pay for the Notes at an issue price equal to 99.709% of the principal amount of the Notes, less any fees. TSFL has further authorized UBS to have the Notes listed on the Singapore Exchange Securities Trading Limited (the “Singapore Exchange”).
Based on the “On-Loan Agreement” dated April 30, 2002, between Telkomsel and TSFL, the proceeds from the subscription of the Notes were lent to Telkomsel at an interest rate of 9.765% per annum, payable on the same terms as above.
On September 8, 2003, the agreement was amended such that if any Notes are cancelled, the principal amount of the outstanding loan will be reduced by the principal amount of the Notes cancelled.
TSFL may, on the interest payment date falling on or about the third anniversary of the issue date redeem the Notes, in whole or in part, at 102.50% of the principal amount of such Notes, together with interest accrued up to the redemption date. If only parts of the Notes are redeemed, the principal amount of the Notes outstanding after such redemption must be at least US$100,000,000.
In 2003, Telkomsel purchased US$17,273,000 (equivalent to Rp145,447 million) of the Notes from Deutsche Bank.
F-63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The current rating for the Notes issued by Standard and Poors is B+ and by Fitch is B+.
As of December 31, 2002 and 2003, the outstanding principal amount of the Notes and the unamortized discount are as follows:
2002 | 2003 | |||||||||||||||
Foreign Currency | Rupiah Equivalent | Foreign Currency | Rupiah Equivalent | |||||||||||||
US$ | US$ | |||||||||||||||
Principal | 150,000,000 | 1,341,000 | 132,727,000 | 1,123,534 | ||||||||||||
Discount | (389,468 | ) | (3,482 | ) | (272,857 | ) | (2,310 | ) | ||||||||
Net | 149,610,532 | 1,337,518 | 132,454,143 | 1,121,224 | ||||||||||||
On July 16, 2002, the Company issued bonds amounting to Rp1,000,000 million. The bonds were issued at par value and have a term of five years. The bonds bear interest at a fixed rate of 17% per annum, payable quarterly beginning October 16, 2002. The bonds are traded on the Surabaya Stock Exchange and will mature on July 15, 2007. The trustee of the bonds is PT Bank Negara Indonesia (Persero) Tbk and the custodian is PT Danareksa Sekuritas.
The current rating for the bonds issued by Pefindo is AAA and by Standard and Poors is B+.
As of December 31, 2002 and 2003, the outstanding principal amount of the bonds and the unamortized discount are as follows:
2002 | 2003 | |||||||
Principal | 1,000,000 | 1,000,000 | ||||||
Discount | (24,008 | ) | (18,722 | ) | ||||
Net | 975,992 | 981,278 | ||||||
During the period when the bonds are outstanding, the Company should comply with all covenants or restrictions including maintaining consolidated financial ratios as follows:
As of December 31, 2003, the Company complied with the covenants.
F-64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The details of long-term bank loans as of December 31, 2002 and 2003 are as follows:
2002 | 2003 | |||||||||||||||||||||||
Outstanding | Outstanding | |||||||||||||||||||||||
Original | Original | |||||||||||||||||||||||
Total Facility | Currency | Rupiah | Currency | Rupiah | ||||||||||||||||||||
Lenders | Currency | (in million) | (in million) | Equivalent | (in million) | Equivalent | ||||||||||||||||||
Group of lenders | US$ | 196.970 | — | — | 172.315 | 1,456,063 | ||||||||||||||||||
Citibank N.A. | EUR | 73.365 | — | — | 64.890 | 690,646 | ||||||||||||||||||
US$ | 114.883 | 7.690 | 68,911 | 51.340 | 434,059 | |||||||||||||||||||
Bank Central Asia | Rp | 173,000.000 | — | 25,903 | — | 139,826 | ||||||||||||||||||
Deutsche Bank | Rp | 108,817.710 | — | — | — | 95,418 | ||||||||||||||||||
Bank Finconesia | Rp | 31,767.818 | — | — | — | 15,884 | ||||||||||||||||||
Bank Mandiri | Rp | 82,425.262 | — | — | — | 42,115 | ||||||||||||||||||
Syndicated banks | Rp | 90,000.000 | — | 60,438 | — | 34,263 | ||||||||||||||||||
US$ | 4.000 | 3.288 | 29,460 | 1.864 | 15,751 | |||||||||||||||||||
Bank Niaga | Rp | 565.000 | — | — | — | 565 | ||||||||||||||||||
Japan Bank for International Cooperation | US$ | — | 7.000 | 62,720 | — | — | ||||||||||||||||||
Total | 247,432 | 2,924,590 | ||||||||||||||||||||||
Current maturities of bank loans | (162,077 | ) | (808,793 | ) | ||||||||||||||||||||
Long-term portion | 85,355 | 2,115,797 | ||||||||||||||||||||||
AWI had a loan of US$270,935,729 from a group of lenders (the “lenders”) before it was 100% acquired by the Company on July 31, 2003. Based on the Conditional Sale and Purchase Agreement related to the acquisition, the Company assumed the loan by repaying US$73,965,454 and entering into a credit agreement with the lenders to finance the remaining outstanding balance of the loan amounting to US$196,970,275, with JP Morgan Chase Bank, Hong Kong office, as the facility agent. This loan bears an interest at LIBOR plus 3.5% per annum (i.e., 4.65% as of December 31, 2003), net of 10% withholding tax. The Company must pay an annual facility agent fee of US$75,000. The loan is repayable in 8 semi-annual installments beginning on December 31, 2003 with the first through the seventh installment of US$24,655,151 and final installment of US$24,384,218.
1. Hermes Export Facility
On December 2, 2002, pursuant to the partnership agreement with Siemens Aktiengesellschaft (AG), Telkomsel entered into the Hermes Export Facility Agreement (“Facility”) with Citibank International plc (as “Arranger” and “Agent”) covering a total facility of EUR 76,195,313 which is divided into several tranches.
F-65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The agreement was subsequently amended on October 15, 2003, amending the Facility amount to EUR73,365,093, availability period and the repayment dates.
The interest rate per annum on the Facility is determined based on the aggregate of the applicable margin, EURIBOR and mandatory cost, if any (i.e., 2.98% as of December 31, 2003). Interest is payable semi-annually, starting on the utilization date of the Facility.
In addition to the interest, in 2003, Telkomsel was also charged an insurance premium for the insurance guarantee given by Hermes in favor of Telkomsel for each loan utilization amounting to EUR 6,089,149, 15% of which was paid in cash. The remaining balance was settled through utilization of the Facility.
The total amount drawn down from the Facility in 2003 amounted to EUR72,227,349 (equivalent to Rp712,389 million). As of December 31, 2003, the outstanding balance was EUR64,890,840.
The schedule of the principal payments on this long-term loan as of December 31, 2003 is as follows:
Amount | ||||||||
EUR | Rupiah | |||||||
Year | Full Amount | Equivalent | ||||||
2004 | 14,420,187 | 153,477 | ||||||
2005 | 14,420,187 | 153,477 | ||||||
2006 – 2008 | 36,050,466 | 383,692 |
a. On April 10, 2002, the Company entered into a “Term Loan Agreement HP Backbone Sumatra Project and Pledge of Right to Deposit” with Citibank, N.A. providing a total facility of US$6,950,000.
The facility was obtained to finance the construction of the Sumatra High Performance Backbone, in connection with the “Partnership Agreement” dated November 30, 2001, with PT Pirelli Cables Indonesia and PT Siemens Indonesia for the construction and provision of a high performance backbone in Sumatra.
Amounts drawn from the facility bear interest at 1% above the interest rate provided by the Bank on the relevant deposits being pledged to the bank (Note 11). The loans are payable in eight monthly installments beginning in April 2003. The Company has drawn down the entire facility of US$6,950,000.
As of December 31, 2002, the outstanding balance of the loan amounted to US$6,950,000. The loans were repaid in full by the Company and the loan agreement was terminated in May 2003.
b. On April 10, 2002, the Company entered into a “Loan Agreement” with Citibank N.A. (“arranger”) and Citibank International plc (“agent”), which was supported by an export credit guarantee of Hermes Kreditversicherungs AG (“lender” and “guarantor”), providing a total facility of US$23,400,000.
The facility was obtained to finance up to 85% of the cost of supplies and services sourced in Germany relating to the design, manufacture, construction, installation and testing of high performance backbone networks in Sumatra pursuant to the “Partnership Agreement” referred to above.
F-66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The lender required a fee of 8.4% of the total facility. This fee is paid twice during the agreement period, 15% of the fee is required to be paid in cash and 85% is included in the loan balance.
As of December 31, 2002 and 2003, the outstanding loan was US$740,914 (representing the first installment of the fee) and US$15,108,176, respectively. The loan is payable in ten semi-annual installments beginning in July 2004.
Amounts drawn from the facility bear interest at LIBOR plus 0.75% (i.e., 1.98% as of December 31, 2003).
c. On April 10, 2002, the Company entered into a loan agreement with Citibank N.A. (as an arranger) and Citibank International Plc (as an agent), which was supported by an export credit guarantee obtained from Istituto per I Servizi Assicurativi del Commercio Estero(“SACE Italy”)providing a total maximum facility to US$21,000,000. The facility was used to finance up to 85% of material and services procured in Italy in connection with the design, manufacture, development, installation and testing ofSub System VI,as part ofHP Backbonenetwork.
This facility was secured by the Company’s property under construction pursuant to the Partnership Agreement.
Amounts drawn from the facility bear fixed interest rate of 4.14%. The loans are payable in ten semi-annual installments beginning December 2003. Total principal outstanding as of December 31, 2003 was US$16,701,777.
The Company has breached a covenant in the loan agreement which stipulates that the Company will not make any loans or grant any credit to or for the benefit of any person. As of June 9, 2004, the Company has obtained a written waiver from Citibank International Plc with regard to entering into the AWI loan (Notes 5c and 26a).
3. EKN-Backed Facility
On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia (Note 54b), Telkomsel entered into the EKN-Backed Facility agreement (“Facility”) with Citibank International plc (as “Arranger” and “Agent”) covering a total facility amount of US$70,483,426 which is divided into several tranches.
The agreement was subsequently amended on October 15, 2003, amending availability period and the first repayment date.
The interest rate per annum on the Facility is determined based on the aggregate of the applicable margin, CIRR (Commercial Interest Reference Rate) and mandatory cost, if any (i.e., 4.27% as of December 31, 2003). The interest charge will be paid semi annually, starting on the utilization date of the Facility.
In addition to the interest, in 2003, Telkomsel was also charged an insurance premium for the insurance guarantee given by EKN in favor of Telkomsel for each loan utilization amounting to US$4,244,793, 15% of which was paid in cash. The remaining balance was settled through utilization of the Facility.
The total amount drawn down from the Facility in 2003 amounted to US$21,700,126 (Rp184,834 million). As of December 31, 2003, the outstanding balance was US$19,530,113.
F-67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The schedule of the principal payments of this long-term loan as of December 31, 2003 is as follows:
Amount | ||||||||
US$ | Rupiah | |||||||
Year | (in Full Amount) | Equivalent | ||||||
2004 | 4,340,025 | 36,738 | ||||||
2005 | 4,340,025 | 36,738 | ||||||
2006 – 2008 | 10,850,063 | 91,846 |
c. Bank Central Asia
On April 10, 2002, the Company entered into a “Term Loan Agreement HP Backbone Sumatra Project” with Bank Central Asia, providing a total facility of Rp173,000 million. The facility was obtained to finance the Rupiah portion of the high performance backbone network in Sumatra pursuant to the “Partnership Agreement”.
Amounts drawn from the facility bear interest at 4.35% plus the 3-month time deposit rate (i.e., 11.6% as of December 31, 2003). The loans are payable in twelve quarterly installments beginning January 2004. The loan will mature in October 2006.
Total principal outstanding as of December 31, 2002 and 2003 were Rp25,903 million and Rp139,826 million, respectively.
The loan facility from Bank Central Asia is not collateralized.
The Company has breached a covenant in the loan agreement which stipulates that the Company will not make any guarantee or collateralize its assets for an amount exceeding US$2 million or its equivalent. As of June 23, 2004, the Company has obtained a written waiver from Bank Central Asia with regard to the Company’s time deposits collateralized for Napsindo’s loan (Notes 11b and 22a).
d. Deutsche Bank AG
On June 28, 2002, the Company entered into a contract agreement with PT Siemens Indonesia and PT NEC Nusantara Communications for addition of Central Electronic Wahler Switching Digital (“EWSD”) and Nippon Electric Automatic Exchange (“NEAC”), respectively, in Division Regional V. Subsequently, 80% of the contract amounts were factored by the vendors to Deutsche Bank AG (“Facility Agent”). The loans bear fixed interest rate at 19% per annum and are repayable in two annual installments of Rp13,400 million beginning in December 2003 for loan ex-PT NEC Nusantara Communications and Rp41,800 million beginning in January 2004 for loan ex-PT Siemens Indonesia.
e. Bank Finconesia
On June 28, 2002, the Company entered into a contract agreement with PT Olex Cables Indonesia for addition of installation of Central Lucent in Division Regional V. Subsequently, 80% of the contract amounts were factored by the vendor to Bank Finconesia. The loan bears fixed interest rate at 19% per annum and is repayable in two annual installments of Rp15,884 million beginning in December 2003.
F-68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
f. Bank Mandiri
On November 20, 2003, Dayamitra entered into a loan agreement with Bank Mandiri for a maximum facility of Rp39,925 million. As of December 31, 2003, the facility has been fully drawn down. This facility is repayable on a quarterly basis until the fourth quarter of 2005 and bears interest at 14.5% per annum, payable on a monthly basis and subject to change. On December 30, 2003, Bank Mandiri agreed to decrease the interest rate to 14% per annum commencing in January 2004.
On December 20, 2003, Dayamitra also obtained a credit facility from Bank Mandiri for a maximum facility of Rp40,000 million. The facility is repayable on a quarterly basis beginning end of the third quarter of 2004 until end of the fourth quarter of 2006 and bears interest at 14% per annum. The loan is obtained to finance the construction of Fixed Wireless CDMA project pursuant to the procurement agreement entered between Dayamitra and Samsung Electronic Co. Ltd.
The above loans are collateralized by Dayamitra’s telecommunications equipment/network with CDMA technology financed by these facilities, and Dayamitra’s share in the DKSOR of KSO Unit VI. As of December 31, 2003, total principal outstanding under these facilities amounted to Rp39,925 million.
On March 13, 2003, Balebat entered into a loan agreement with Bank Mandiri for a facility of Rp2,500 million. This facility bears interest at 15% per annum payable on a monthly basis, is secured by Balebat’s operating equipment and will mature in July 2006. The principal is repayable on a monthly basis. As of December 31, 2003, principal outstanding under this facility amounted to Rp2,190 million.
g. Syndicated Banks (Internet Protocol Backbone (“IP Backbone”) Loan)
On February 25, 2002, the Company entered into a “Facility Funding Agreement” with Bank DBS Indonesia (syndicated agent and lender), Bank Bukopin (lender) and Bank Central Asia (lender), providing a total facility of US$4,000,000 and Rp90,000 million to fund the IP Backbone project in 7 (seven) Regional Divisions or KSO regions divided into 6 (six) batches.
Amounts drawn in U.S. Dollars bear interest at 2% plus the highest of 1, 2 or 3 month SIBOR divided by 0.87% for the first year and 2% plus the 3 month SIBOR divided by 0.87% thereafter (i.e., 3.38% as of December 31, 2003). Amounts drawn in Rupiah bear interest at 19% fixed for the first year and 5% plus the average of BCA’s and Bukopin’s interest rates (the highest of 1, 3, 6 or 12 month time deposit rate) thereafter (i.e., 12.75% as of December 31, 2003).
The loans are payable in eleven quarterly installments beginning in September 2002. The loans will mature on March 15, 2005.
Total outstanding IP Backbone loans for Rupiah and U.S. Dollars as of December 31, 2002 and 2003 are Rp60,438 million and US$3,288,000 (equivalent Rp29,460 million) and Rp34,263 million and US$1,864,000 (Rp15,751 million), respectively.
The Company pledged the property under construction as collateral for the IP Backbone loan pursuant to Notarial Deed No. 17 dated February 25, 2002 of Notary Titi Sri Amiretno Diah Wasisti Bagiono, S.H. on “Fiduciary Collateral”. The pledge has a maximum amount of US$14,587,525 and Rp401 million.
F-69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Average interest rates for the loans during 2002 and 2003 were as follows:
2002 | 2003 | |||||||
Rupiah | 17.14% – 19% | 14.87% – 19% | ||||||
U.S. Dollar | 3.5% – 4.38% | 3.31% – 3.68% |
Under the Loan Agreements for HP Backbone and IP Backbone, the Company should maintain quarterly financial ratios as follows:
1. Debt to equity ratio should not exceed 3:1
2. EBITDA to interest expense should exceed 5:1
As of December 31, 2003, the Company complied with the above mentioned ratios.
h. Bank Niaga
On July 18 and December 3, 2003, Balebat entered into loan agreements with Bank Niaga for facilities totalling Rp565 million. The facilities bear interest at 15% per annum and are secured by Balebat’s time deposit and vehicles. The principal and interest are payable on a monthly basis which will end in October 2005 and December 2005, respectively. As of December 31, 2003, principal outstanding amounted to Rp565 million.
i. Japan Bank for International Cooperation (“JBIC”, Formerly Export-Import Bank of Japan)
2002 | 2003 | |||||||
Total outstanding amount | 62,720 | — | ||||||
Current maturities | (62,720 | ) | — | |||||
Long-term portion | — | — | ||||||
This loan represented Dayamitra’s obligation under a loan facility agreement it entered into with Tomen on April 27, 1998. The facility had been fully drawn down for US$35 million, which was repayable in five semi-annual installments of US$7 million commencing on March 25, 2001. The Company unconditionally guaranteed this loan.
Interest accrues on the outstanding principal at the rate of LIBOR plus 1% and was repayable semi-annually, commencing on September 25, 1998. Annual interest rates in 2002 and 2003 ranged from 2.75% to 3.58% and from 2.75% to 2.77%.
On June 21, 1999, an agreement was entered into between Tomen and JBIC under which the loan and related security rights were assigned from Tomen to JBIC.
Principal outstanding as of December 31, 2002 of US$7,000,000 was fully paid and the loan agreement was terminated on March 25, 2003.
F-70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
27. LIABILITIES FOR ACQUISITIONS OF SUBSIDIARIES
This amount represents the Company’s obligation under the Promissory Notes issued to the Selling Stockholders of Dayamitra in respect of the Company’s acquisition of 90.32% of Dayamitra, to the Selling Stockholders of Pramindo in respect of the Company’s acquisition of 100% of Pramindo, and to the Selling Stockholders of AWI in respect of the Company’s acquisition of 100% of AWI.
2002 | 2003 | ||||||||
Dayamitra transaction(Note 5a) | |||||||||
PT Intidaya Sistelindomitra | 99,500 | — | |||||||
PT Mitracipta Sarananusa | 68,398 | — | |||||||
Cable and Wireless plc | 64,260 | — | |||||||
Less discount on promissory notes | (10,033 | ) | — | ||||||
222,125 | — | ||||||||
Pramindo transaction(Note 5b) | |||||||||
France Cables et Radio S.A. | 1,224,296 | 646,100 | |||||||
PT Astratel Nusantara | 1,071,343 | 565,497 | |||||||
Indosat | 397,928 | 210,042 | |||||||
Marubeni Corporation | 244,878 | 129,220 | |||||||
International Finance Corporation, USA | 91,829 | 48,457 | |||||||
NMP Singapore Pte. Ltd. | 30,610 | 16,157 | |||||||
Less discount on promissory notes | (278,074 | ) | (80,184 | ) | |||||
2,782,810 | 1,535,289 | ||||||||
AriaWest transaction(Note 5c) | |||||||||
PT Aria Infotek | — | 483,955 | |||||||
The Asian Infrastructure Fund | — | 115,227 | |||||||
MediaOne International I B.V. | — | 322,636 | |||||||
Less discount on promissory notes | — | (122,358 | ) | ||||||
— | 799,460 | ||||||||
Total | 3,004,935 | 2,334,749 | |||||||
Current maturity — net of discount | (1,385,956 | ) | (1,587,775 | ) | |||||
Long-term portion — net of discount | 1,618,979 | 746,974 | |||||||
F-71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | |||||||
Tomen Corporation | 290,498 | 139,608 | ||||||
Cable & Wireless plc | 48,199 | 26,021 | ||||||
Total | 338,697 | 165,629 | ||||||
Current maturities | (163,072 | ) | (164,958 | ) | ||||
Long-term portion | 175,625 | 671 | ||||||
Dayamitra entered into a Design, Supply, Construction and Installation Contract dated November 18, 1998 with Tomen, the ultimate holding company of TMC, one of the former stockholders of Dayamitra. Under the terms of the contract, Tomen is responsible for the construction of the minimum new installations required under the KSO VI Agreement in which Dayamitra is the investor.
In connection with the above agreement, Dayamitra entered into a Supplier’s Credit Agreement (“SCA”) with Tomen on November 18, 1998. The total commitment under the SCA was US$54,000,000 of which US$50,444,701 had been drawn down before the expiration date of the available credit on September 30, 1999.
Interest accrues on the amounts drawn down at LIBOR plus 4.5% per annum, and is payable semiannually in arrears. Annual interest rates in 2002 and 2003 ranged from 5.92% to 6.48% and from 5.53% to 5.92%, respectively.
The SCA loan is repayable in ten semi-annual installments commencing on December 15, 2000. The SCA contains a minimum fixed repayment schedule, however, additional principal repayments are required on repayment dates in the event that Dayamitra has excess cash, as defined in the SCA. To date, Dayamitra has not been required to make additional principal repayments from excess cash. The SCA loan is secured on a pro rata basis by the security rights provided under the C&W plc bridging facility loan (Note 29).
Dayamitra entered into a Supplier’s Credit Agreement (“SCA”) with C&W plc on May 19, 1999.
The SCA loan is repayable in ten semi-annual installments commencing on December 15, 2000. The loan contains a minimum fixed repayment schedule, however, additional principal repayments are required on repayment dates in the event that Dayamitra has excess cash, as defined in the SCA. To date, Dayamitra has not been required to make additional principal repayments from excess cash. Interest on this loan is at the rate of LIBOR plus 4.5%. Annual interest rates in 2002 and 2003 ranged from 5.92% to 6.48% and from 5.53% to 5.92%, respectively.
The SCA loan is secured on a pro rata basis by the security rights provided under the C&W plc bridging facility loan. In addition, any distributions to stockholders in the form of dividends or repayments of share capital require the written consent of Tomen and C&W plc.
F-72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | |||||||
Total outstanding amount | 95,517 | 50,365 | ||||||
Current maturities | (42,112 | ) | (49,855 | ) | ||||
Long-term portion | 53,405 | 510 | ||||||
This loan is owed by Dayamitra to C&W plc under a bridging loan facility which was assigned from three local Indonesian banks. The loan is repayable in ten semi-annual installments commencing on December 15, 2000. Interest is payable on a monthly or a quarterly basis, at the option of Dayamitra, at the rate of LIBOR plus 4% per annum. Annual interest rates in 2002 and 2003 ranged from 5.42% to 5.98% and from 5.06% to 5.42%, respectively.
C&W plc has agreed to the repayment of the bridging loan facility in proportion to the amounts made available to Dayamitra under this bridging loan facility and the C&W plc and Tomen Supplier’s Credit Loan. The security provided against the bridging loan facility consists of an assignment of KSO revenues, an assignment of bank accounts, a security interest in Dayamitra’s movable assets, an assignment of the Tomen construction contract, an assignment of proceeds from early termination of the KSO license by the Company, and an assignment of insurance proceeds.
Distributions to stockholders in the form of dividends or repayment of share capital require the written consent of C&W plc.
2002 | 2003 | ||||||||
Minority interest in net assets of subsidiaries: | |||||||||
Telkomsel | 2,516,180 | 3,608,874 | |||||||
Infomedia | 43,744 | 60,353 | |||||||
Dayamitra | 22,173 | 32,999 | |||||||
Indonusa | 13,700 | 1,959 | |||||||
Napsindo | — | 2,068 | |||||||
PII | — | 1,899 | |||||||
GSD | 2 | 3 | |||||||
Total | 2,595,799 | 3,708,155 | |||||||
F-73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2001 | 2002 | 2003 | |||||||||||
Minority interest in net income (loss) of subsidiaries: | |||||||||||||
Telkomsel | 455,331 | 782,870 | 1,482,897 | ||||||||||
Infomedia | 15,067 | 19,031 | 22,399 | ||||||||||
Dayamitra | 6,241 | 15,151 | 11,584 | ||||||||||
Indonusa | (2,034 | ) | (6,831 | ) | (2,351 | ) | |||||||
Napsindo | — | — | (8,541 | ) | |||||||||
PII | — | — | (2,511 | ) | |||||||||
GSD | — | 1 | 1 | ||||||||||
Total | 474,605 | 810,222 | 1,503,478 | ||||||||||
31. CAPITAL STOCK
2002 | ||||||||||||||
Percentage | Total | |||||||||||||
Number of | of | Paid-up | ||||||||||||
Description | Shares | Ownership | Capital | |||||||||||
% | ||||||||||||||
Series A Dwiwarna share | ||||||||||||||
Government of the Republic of Indonesia | 1 | — | — | |||||||||||
Series B shares | ||||||||||||||
Government of the Republic of Indonesia | 5,160,235,355 | 51.19 | 2,580,118 | |||||||||||
JPMCB US Resident (Norbax Inc.) | 879,723,798 | 8.73 | 439,862 | |||||||||||
The Bank of New York | 610,489,548 | 6.06 | 305,245 | |||||||||||
Board of Commissioners: | ||||||||||||||
Petrus Sartono | 8,262 | — | 4 | |||||||||||
Board of Directors: | ||||||||||||||
Kristiono | 12,690 | — | 6 | |||||||||||
Garuda Sugardo | 8,262 | — | 4 | |||||||||||
Guntur Siregar | 9,990 | — | 5 | |||||||||||
Agus Utoyo | 11,826 | — | 6 | |||||||||||
Suryatin Setiawan | 10,854 | — | 5 | |||||||||||
Public (below 5% each) | 3,429,489,054 | 34.02 | 1,714,745 | |||||||||||
Total | 10,079,999,640 | 100.00 | 5,040,000 | |||||||||||
F-74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2003 | ||||||||||||||
Percentage | Total | |||||||||||||
Number of | of | Paid-up | ||||||||||||
Description | Shares | Ownership | Capital | |||||||||||
% | ||||||||||||||
Series A Dwiwarna share | ||||||||||||||
Government of the Republic of Indonesia | 1 | — | — | |||||||||||
Series B shares | ||||||||||||||
Government of the Republic of Indonesia | 5,160,235,355 | 51.19 | 2,580,118 | |||||||||||
JPMCB US Resident (Norbax Inc.) | 896,045,651 | 8.89 | 448,023 | |||||||||||
The Bank of New York | 657,263,408 | 6.52 | 328,632 | |||||||||||
Board of Commissioners: | ||||||||||||||
Petrus Sartono | 9,558 | — | 5 | |||||||||||
Board of Directors: | ||||||||||||||
Kristiono | 12,690 | — | 6 | |||||||||||
Garuda Sugardo | 8,262 | — | 4 | |||||||||||
Guntur Siregar | 9,990 | — | 5 | |||||||||||
Agus Utoyo | 11,826 | — | 6 | |||||||||||
Suryatin Setiawan | 10,854 | — | 5 | |||||||||||
Public (below 5% each) | 3,366,392,045 | 33.40 | 1,683,196 | |||||||||||
Total | 10,079,999,640 | 100.00 | 5,040,000 | |||||||||||
32. ADDITIONAL PAID-IN CAPITAL
2002 | 2003 | |||||||
Proceeds from sale of 933,333,000 shares in excess of par value through initial public offering in 1995 | 1,446,666 | 1,446,666 | ||||||
Capitalization into 746,666,640 series B shares in 1999 | (373,333 | ) | (373,333 | ) | ||||
Total | 1,073,333 | 1,073,333 | ||||||
33. |
F-75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
34. TELEPHONE REVENUES
2001 | 2002 | 2003 | |||||||||||
Fixed lines | |||||||||||||
Local and domestic long-distance usage | 5,225,705 | 5,447,925 | 6,561,800 | ||||||||||
Monthly subscription charges | 997,651 | 1,474,823 | 1,948,830 | ||||||||||
Installation charges | 98,017 | 130,234 | 223,130 | ||||||||||
Phone cards | 25,455 | 29,265 | 34,371 | ||||||||||
Others | 68,328 | 181,852 | 128,734 | ||||||||||
Total | 6,415,156 | 7,264,099 | 8,896,865 | ||||||||||
Cellular | |||||||||||||
Air time charges | 3,987,738 | 5,453,597 | 7,677,884 | ||||||||||
Monthly subscription charges | 581,566 | 593,347 | 580,550 | ||||||||||
Connection fee charges | 128,543 | 172,302 | 194,053 | ||||||||||
Features | 10,151 | 7,555 | 6,343 | ||||||||||
Total | 4,707,998 | 6,226,801 | 8,458,830 | ||||||||||
Total Telephone Revenues | 11,123,154 | 13,490,900 | 17,355,695 | ||||||||||
35. INTERCONNECTION REVENUES — NET
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Cellular | 1,241,603 | 2,383,667 | 3,908,292 | 2,241,533 | 3,908,292 | 5,351,613 | ||||||||||||||||||
International | 116,770 | 344,500 | 184,097 | 389,255 | 184,097 | 641,210 | ||||||||||||||||||
Other | 65,313 | 103,167 | 69,759 | 200,546 | 69,759 | 195,158 | ||||||||||||||||||
Total | 1,423,686 | 2,831,334 | 4,162,148 | 2,831,334 | 4,162,148 | 6,187,981 | ||||||||||||||||||
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Minimum Telkom Revenues | 1,474,200 | 1,319,715 | 899,862 | 1,319,715 | 899,862 | 295,955 | ||||||||||||||||||
Share in Distributable KSO Revenues | 732,960 | 801,010 | 583,012 | 801,010 | 583,012 | 349,528 | ||||||||||||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 12,426 | 7,420 | 3,433 | 7,420 | 3,433 | 11,131 | ||||||||||||||||||
Total | 2,219,586 | 2,128,145 | 1,486,307 | 2,128,145 | 1,486,307 | 656,614 | ||||||||||||||||||
2002 | 2003 | 2004 | ||||||||||
SMS | 997,249 | 2,205,058 | 3,562,726 | |||||||||
Multimedia | 337,796 | 494,747 | 813,330 | |||||||||
VoIP | 152,195 | 328,284 | 318,854 | |||||||||
ISDN | 64,386 | 80,473 | 113,832 | |||||||||
Total | 1,551,626 | 3,108,562 | 4,808,742 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Satellite transponder lease | 190,220 | 270,860 | 210,901 | |||||||||
Leased lines | 125,878 | 247,005 | 443,408 | |||||||||
Total | 316,098 | 517,865 | 654,309 | |||||||||
F-76F-81
2001 | 2002 | 2003 | ||||||||||
SMS | 344,600 | 997,249 | 2,205,058 | |||||||||
Multimedia | 218,300 | 337,796 | 494,747 | |||||||||
VoIP | 25,589 | 152,195 | 328,284 | |||||||||
ISDN | 84,695 | 64,386 | 80,473 | |||||||||
Total | 673,184 | 1,551,626 | 3,108,562 | |||||||||
38. NETWORK REVENUES
2001 | 2002 | 2003 | ||||||||||
Satellite transponder lease | 203,558 | 190,220 | 270,860 | |||||||||
Leased lines | 211,371 | 125,878 | 247,005 | |||||||||
Total | 414,929 | 316,098 | 517,865 | |||||||||
39. REVENUE-SHARING ARRANGEMENT REVENUES
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Revenue-Sharing Arrangement revenues | 191,478 | 211,483 | 200,085 | 211,483 | 200,085 | 198,543 | ||||||||||||||||||
Amortization of unearned income (Note 15) | 72,775 | 52,271 | 58,379 | |||||||||||||||||||||
Amortization of unearned income (Note 12) | 52,271 | 58,379 | 82,033 | |||||||||||||||||||||
Total | 264,253 | 263,754 | 258,464 | 263,754 | 258,464 | 280,576 | ||||||||||||||||||
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Salaries and related benefits | 883,409 | 1,410,670 | 1,574,181 | 1,410,670 | 1,574,181 | 1,796,914 | ||||||||||||||||||
Vacation pay, incentives and other benefits | 364,707 | 655,518 | 816,055 | 655,518 | 816,055 | 1,156,069 | ||||||||||||||||||
Early retirements | 140,000 | 717,289 | 355,735 | 717,289 | 355,735 | 243,466 | ||||||||||||||||||
Net periodic post-retirement benefit cost (Note 48) | 374,510 | 616,512 | 641,435 | |||||||||||||||||||||
Net periodic pension cost (Note 46) | 86,233 | 362,298 | 190,914 | |||||||||||||||||||||
Net periodic post-retirement benefit cost (Note 46) | 616,512 | 641,435 | 492,240 | |||||||||||||||||||||
Net periodic pension cost (Note 44) | 362,298 | 190,974 | 1,034,806 | |||||||||||||||||||||
Employee income tax | 132,855 | 201,468 | 468,805 | 201,468 | 468,805 | 523,787 | ||||||||||||||||||
Long service awards (Note 47) | 94,540 | 289,922 | 207,126 | |||||||||||||||||||||
Long service awards (Note 45) | 289,922 | 219,239 | 159,323 | |||||||||||||||||||||
Housing | 93,315 | 89,495 | 116,858 | 89,495 | 116,858 | 103,459 | ||||||||||||||||||
Medical | 81,698 | 28,209 | 9,682 | 28,209 | 9,682 | 12,190 | ||||||||||||||||||
Other employee benefits (Note 44) | — | 4,439 | 11,510 | |||||||||||||||||||||
Others | 29,978 | 16,187 | 59,305 | 16,187 | 42,693 | 37,014 | ||||||||||||||||||
Total | 2,281,245 | 4,387,568 | 4,440,096 | 4,387,568 | 4,440,096 | 5,570,778 | ||||||||||||||||||
39. | OPERATING EXPENSES — OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES |
2002 | 2003 | 2004 | ||||||||||
Operations and maintenance | 1,042,588 | 1,744,806 | 2,398,159 | |||||||||
Radio frequency usage charges | 292,703 | 371,740 | 492,568 | |||||||||
Electricity, gas and water | 219,913 | 300,432 | 385,662 | |||||||||
Cost of phone cards | 197,683 | 181,272 | 366,661 | |||||||||
Concession fees | 163,891 | 238,979 | 314,741 | |||||||||
Insurance | 142,932 | 157,075 | 151,297 | |||||||||
Leased lines | 103,643 | 127,021 | 132,829 | |||||||||
Vehicles and supporting facilities | 79,961 | 115,697 | 181,737 | |||||||||
Travelling | 16,523 | 29,815 | 42,213 | |||||||||
Others | 30,382 | 71,856 | 63,720 | |||||||||
Total | 2,290,219 | 3,338,693 | 4,529,587 | |||||||||
F-77F-82
2001 | 2002 | 2003 | ||||||||||
Operations and maintenance | 891,435 | 1,042,588 | 1,744,806 | |||||||||
Radio frequency usage charges | 101,305 | 292,703 | 371,740 | |||||||||
Electricity, gas and water | 157,068 | 219,913 | 300,432 | |||||||||
Cost of phone cards | 173,412 | 197,683 | 181,272 | |||||||||
Concession fees | 63,561 | 163,891 | 238,979 | |||||||||
Insurance | 67,783 | 142,932 | 157,075 | |||||||||
Leased lines | 82,880 | 103,643 | 127,021 | |||||||||
Vehicles and supporting facilities | 38,235 | 79,961 | 115,697 | |||||||||
Travelling | 15,700 | 16,523 | 29,815 | |||||||||
Telephone kiosks’ commissions | 520,947 | — | — | |||||||||
Others | 37,595 | 30,382 | 71,856 | |||||||||
Total | 2,149,921 | 2,290,219 | 3,338,693 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Professional fees | 218,949 | 115,598 | 137,355 | |||||||||
Collection expenses | 224,782 | 273,767 | 358,957 | |||||||||
Amortization of goodwill and other intangible assets (Note 14) | 187,990 | 730,659 | 872,330 | |||||||||
Training, education and recruitment | 122,045 | 126,927 | 228,524 | |||||||||
Travel | 111,427 | 144,677 | 192,567 | |||||||||
Security and screening | 77,103 | 110,278 | 143,892 | |||||||||
General and social contribution | 69,419 | 113,785 | 111,838 | |||||||||
Printing and stationery | 43,513 | 50,535 | 80,972 | |||||||||
Meetings | 31,719 | 42,813 | 58,333 | |||||||||
Provision for doubtful accounts and inventory obsolescence | 31,103 | 326,419 | 357,695 | |||||||||
Research and development | 10,483 | 9,111 | 13,225 | |||||||||
Others | 17,761 | 34,208 | 44,159 | |||||||||
Total | 1,146,294 | 2,078,777 | 2,599,847 | |||||||||
2003 | 2004 | |||||||||
a. Prepaid taxes | ||||||||||
The Company | ||||||||||
Refundable corporate income tax — overpayment | 38,370 | 38,370 | ||||||||
38,370 | 38,370 | |||||||||
Subsidiaries | ||||||||||
Corporate income tax | 2,443 | 34,515 | ||||||||
Value added tax | 171,469 | 4,343 | ||||||||
173,912 | 38,858 | |||||||||
212,282 | 77,228 | |||||||||
Effective January 1, 2002, telephone kiosks are charged 70% of basic tariff charged by operators to its customers on calls placed from kiosk phones. Consequently, the Company is no longer required to pay commissions.
2001 | 2002 | 2003 | ||||||||||
Professional fees | 325,268 | 218,949 | 115,598 | |||||||||
Collection expenses | 181,925 | 224,782 | 273,767 | |||||||||
Amortization of intangible assets (Note 16) | 55,709 | 187,990 | 730,659 | |||||||||
Training, education and recruitment | 147,312 | 122,045 | 126,927 | |||||||||
Travel | 92,828 | 111,427 | 144,677 | |||||||||
Security and screening | 48,792 | 77,103 | 110,278 | |||||||||
General and social contribution | 36,762 | 69,419 | 113,785 | |||||||||
Printing and stationery | 37,589 | 43,513 | 50,535 | |||||||||
Meetings | 26,498 | 31,719 | 42,813 | |||||||||
Provision for doubtful accounts and inventory obsolescence | 342,900 | 31,103 | 326,419 | |||||||||
Research and development | 39,523 | 10,483 | 9,111 | |||||||||
Others | 8,350 | 17,761 | 34,208 | |||||||||
Total | 1,343,456 | 1,146,294 | 2,078,777 | |||||||||
The allowance for doubtful accounts in 2001 includes an allowance for the MTR and share in distributable KSO revenues receivable from KSO III amounting to Rp155,756 million. This provision was reversed in 2002 following the settlement of the AriaWest dispute (Note 8d).
F-78F-83
43. INCOME TAX
2002 | 2003 | ||||||||||
a. Prepaid taxes | |||||||||||
The Company | |||||||||||
Refundable corporate income tax overpayment | — | 38,370 | |||||||||
— | 38,370 | ||||||||||
Subsidiaries | |||||||||||
Corporate income tax | 265 | 2,443 | |||||||||
Value added tax | 84,409 | 171,469 | |||||||||
84,674 | 173,912 | ||||||||||
84,674 | 212,282 | ||||||||||
b. Taxes payable | |||||||||||
The Company | |||||||||||
Income tax | |||||||||||
Article 21 | 10,959 | 91,229 | |||||||||
Article 22 | 2,189 | 2,577 | |||||||||
Article 23 | 25,325 | 19,131 | |||||||||
Article 25 | 3,450 | 87,219 | |||||||||
Article 26 | 1,892 | 7,045 | |||||||||
Article 29 | 631,124 | 363,566 | |||||||||
Value added tax | 34,487 | 120,206 | |||||||||
709,426 | 690,973 | ||||||||||
Subsidiaries | |||||||||||
Income tax | |||||||||||
Article 4 | — | 4,012 | |||||||||
Article 21 | 16,613 | 47,265 | |||||||||
Article 22 | 187 | 765 | |||||||||
Article 23 | 26,408 | 66,793 | |||||||||
Article 25 | 77,881 | 66,289 | |||||||||
Article 26 | 4,931 | 39,488 | |||||||||
Article 29 | 220,377 | 498,826 | |||||||||
Value added tax | 53,809 | 98,627 | |||||||||
400,206 | 822,065 | ||||||||||
1,109,632 | 1,513,038 | ||||||||||
2003 | 2004 | ||||||||||
b. Taxes payable | |||||||||||
The Company | |||||||||||
Income tax | |||||||||||
Article 21 | 91,229 | 35,970 | |||||||||
Article 22 | 2,577 | 3,057 | |||||||||
Article 23 | 19,131 | 25,223 | |||||||||
Article 25 | 87,219 | 94,857 | |||||||||
Article 26 | 7,045 | 31,165 | |||||||||
Article 29 | 363,566 | 508,909 | |||||||||
Value added tax | 120,206 | 101,683 | |||||||||
690,973 | 800,864 | ||||||||||
Subsidiaries | |||||||||||
Income tax | |||||||||||
Article 4 | 4,012 | 4,437 | |||||||||
Article 21 | 47,265 | 38,853 | |||||||||
Article 22 | 765 | 930 | |||||||||
Article 23 | 66,793 | 46,636 | |||||||||
Article 25 | 66,289 | 151,318 | |||||||||
Article 26 | 39,488 | 9,515 | |||||||||
Article 29 | 498,826 | 427,641 | |||||||||
Value added tax | 98,627 | 112,285 | |||||||||
822,065 | 791,615 | ||||||||||
1,513,038 | 1,592,479 | ||||||||||
2002 | 2003 | 2004 | |||||||||||
Current | |||||||||||||
The Company | 1,671,104 | 1,886,283 | 1,922,238 | ||||||||||
Subsidiaries | 1,076,658 | 1,904,997 | 2,344,873 | ||||||||||
2,747,762 | 3,791,280 | 4,267,111 | |||||||||||
Deferred | |||||||||||||
The Company | (44,054 | ) | (198,719 | ) | (506,084 | ) | |||||||
Subsidiaries | 195,263 | 268,529 | 242,045 | ||||||||||
151,209 | 69,810 | (264,039 | ) | ||||||||||
2,898,971 | 3,861,090 | 4,003,072 | |||||||||||
F-79F-84
c. The components of income tax expense (benefit) are as follows:
2001 | 2002 | 2003 | |||||||||||
Current | |||||||||||||
The Company | 1,291,206 | 1,671,104 | 1,886,283 | ||||||||||
Subsidiaries | 886,160 | 1,076,658 | 1,904,997 | ||||||||||
2,177,366 | 2,747,762 | 3,791,280 | |||||||||||
Deferred | |||||||||||||
The Company | (168,815 | ) | (153,019 | ) | 142,089 | ||||||||
Subsidiaries | (1,656 | ) | 304,228 | (72,279 | ) | ||||||||
(170,471 | ) | 151,209 | 69,810 | ||||||||||
2,006,895 | 2,898,971 | 3,861,090 | |||||||||||
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Consolidated income before tax | 6,549,891 | 11,748,902 | 11,451,795 | 11,748,902 | 11,451,795 | 12,088,582 | ||||||||||||||||||
Add back consolidation eliminations | 1,926,439 | 2,554,407 | 3,332,176 | 2,554,407 | 3,332,176 | 3,936,524 | ||||||||||||||||||
Consolidated income before tax and eliminations | 8,476,330 | 14,303,309 | 14,783,971 | 14,303,309 | 14,783,971 | 16,025,106 | ||||||||||||||||||
Deduct income before tax of the subsidiaries | (3,285,548 | ) | (4,745,515 | ) | (7,009,179 | ) | (4,745,515 | ) | (7,009,179 | ) | (8,485,296 | ) | ||||||||||||
Income before tax attributable to the Company | 5,190,782 | 9,557,794 | 7,774,792 | 9,557,794 | 7,774,792 | 7,539,810 | ||||||||||||||||||
Less: Income subject to final tax | — | (279,142 | ) | (206,601 | ) | |||||||||||||||||||
9,557,794 | 7,495,650 | 7,333,209 | ||||||||||||||||||||||
Tax calculated at progressive rates | 1,557,218 | 2,867,321 | 2,332,420 | 2,867,321 | 2,248,678 | 2,199,945 | ||||||||||||||||||
Income not subject to tax | (665,007 | ) | (1,785,208 | ) | (1,044,835 | ) | ||||||||||||||||||
Non-taxable income | (1,785,208 | ) | (1,017,791 | ) | (1,181,983 | ) | ||||||||||||||||||
Non-deductible expenses | 230,180 | 469,464 | 669,643 | 578,429 | 328,835 | 345,674 | ||||||||||||||||||
Deferred tax (assets) liabilities originating from previously unrecognized temporary difference, net | — | (40,252 | ) | 71,144 | ||||||||||||||||||||
Deferred tax assets that cannot be utilized | — | 6,760 | — | |||||||||||||||||||||
Deferred tax (assets) liabilities originating from previously unrecognized temporary differences, net | (40,252 | ) | 71,144 | (14,940 | ) | |||||||||||||||||||
Deferred tax assets that cannot be utilized, net | 6,760 | — | 24,045 | |||||||||||||||||||||
Income tax expense of the Company | 1,122,391 | 1,518,085 | 2,028,372 | |||||||||||||||||||||
Corporate income tax expense | 1,627,050 | 1,630,866 | 1,372,741 | |||||||||||||||||||||
Final income tax expense | — | 56,698 | 43,413 | |||||||||||||||||||||
Total income tax expense of the Company | 1,627,050 | 1,687,564 | 1,416,154 | |||||||||||||||||||||
Income tax expense of the subsidiaries | 884,504 | 1,380,886 | 1,832,718 | 1,271,921 | 2,173,526 | 2,586,918 | ||||||||||||||||||
Total consolidated income tax expense | 2,006,895 | 2,898,971 | 3,861,090 | 2,898,971 | 3,861,090 | 4,003,072 | ||||||||||||||||||
F-80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The reconciliation between income before tax and the estimated taxable income for the years ended December 31, 2001, 2002, 2003 and 20032004 is as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||||
Income before tax attributable to the Company | Income before tax attributable to the Company | 5,190,782 | 9,557,794 | 7,774,792 | Income before tax attributable to the Company | 9,557,794 | 7,774,792 | 7,539,810 | ||||||||||||||||||
Less: Income subject to final tax | Less: Income subject to final tax | — | (279,142 | ) | (206,601 | ) | ||||||||||||||||||||
9,557,794 | 7,495,650 | 7,333,209 | ||||||||||||||||||||||||
Temporary differences: | Temporary differences: | Temporary differences: | ||||||||||||||||||||||||
Depreciation of property, plant and equipment | 165,239 | (170,134 | ) | 442,029 | Depreciation of property, plant and equipment | (170,134 | ) | 442,029 | 415,805 | |||||||||||||||||
Gain on sale of property, plant and equipment | (21,759 | ) | 14,774 | (25,495 | ) | Gain on sale of property, plant and equipment | 14,774 | (25,495 | ) | (12,874 | ) | |||||||||||||||
Allowance/(write back) for doubtful accounts | 226,514 | (156,223 | ) | 166,341 | Allowance/(write back) for doubtful accounts | (156,223 | ) | 166,341 | 491,577 | |||||||||||||||||
Accounts receivable written-off | (44,423 | ) | (82,474 | ) | (79,728 | ) | Accounts receivable written-off | (82,474 | ) | (79,728 | ) | (91,865 | ) | |||||||||||||
Allowance for inventory obsolescence | 74,059 | 10,099 | 5,543 | Allowance for inventory obsolescence | 10,099 | 5,543 | 11,385 | |||||||||||||||||||
Inventory written-off | (3,013 | ) | (15,223 | ) | (693 | ) | ||||||||||||||||||||
Provision for early retirement benefits | 140,000 | 670,981 | 293,626 | |||||||||||||||||||||||
Payment of early retirement benefits | — | (140,000 | ) | (831,796 | ) | |||||||||||||||||||||
Provision for bonus | — | — | 262,082 | |||||||||||||||||||||||
Net periodic pension cost | (46,852 | ) | 58,226 | (271,503 | ) | |||||||||||||||||||||
Long service awards | 65,675 | 213,397 | (15,617 | ) | ||||||||||||||||||||||
Amortization of deferred stock issuance costs | (5,981 | ) | (17,942 | ) | — | |||||||||||||||||||||
Amortization of landrights | 5,839 | (1,524 | ) | (2,356 | ) | |||||||||||||||||||||
Provision for impairment of property, plant and equipment | — | 6,401 | (6,401 | ) | ||||||||||||||||||||||
Decline in value of investments | (90,000 | ) | — | — | ||||||||||||||||||||||
Gain on sale of long-term investments | — | — | (171,334 | ) | ||||||||||||||||||||||
Temporary differences of KSO units | 10,694 | 6,317 | 4,782 | |||||||||||||||||||||||
Depreciation of property, plant and equipment under revenue sharing arrangements | 53,884 | 11,576 | 63,424 | |||||||||||||||||||||||
Amortization of unearned income under revenue-sharing arrangements | (15,380 | ) | (7,998 | ) | (58,379 | ) | ||||||||||||||||||||
Revenue from transfer of property, plant and equipment under revenue-sharing arrangements | — | 765 | 34,828 | |||||||||||||||||||||||
Interest income/receivable | — | — | (45,835 | ) | ||||||||||||||||||||||
Equity in net loss of associated companies | — | 41,178 | — | |||||||||||||||||||||||
514,496 | 442,196 | (236,482 | ) | |||||||||||||||||||||||
Permanent differences: | ||||||||||||||||||||||||||
Net periodic post-retirement benefit cost | 373,074 | 611,992 | 634,385 | |||||||||||||||||||||||
Amortization of goodwill and intangible assets | 55,709 | 187,990 | 773,197 | |||||||||||||||||||||||
Amortization of discount on promissory notes and interest expense | 79,899 | 173,794 | 224,931 | |||||||||||||||||||||||
Tax penalties | — | 216,198 | — | |||||||||||||||||||||||
Equity in net income of associates and subsidiaries | (1,307,404 | ) | (2,238,300 | ) | (3,313,831 | ) | ||||||||||||||||||||
Gain on sale of long-term investments | — | (3,166,086 | ) | (38,425 | ) | |||||||||||||||||||||
Interest income | (494,332 | ) | (359,049 | ) | (279,142 | ) |
F-81F-85
2001 | 2002 | 2003 | |||||||||||
Amortization of unearned income under revenue-sharing arrangements | (57,395 | ) | (44,273 | ) | — | ||||||||
Adjustment of equity in net income of Telkomsel as a result of the recast of financial statements | (241,725 | ) | — | — | |||||||||
Income from land/building rental | (116,831 | ) | (65,175 | ) | (40,380 | ) | |||||||
Others | 307,813 | 253,322 | 599,631 | ||||||||||
Total | (1,401,192 | ) | (4,429,587 | ) | (1,439,634 | ) | |||||||
Total taxable income of the Company | 4,304,086 | 5,570,403 | 6,098,676 | ||||||||||
Current income tax expense of the Company | 1,291,206 | 1,671,104 | 1,886,283 | ||||||||||
Current income tax expense of the subsidiaries | 886,160 | 1,076,658 | 1,904,997 | ||||||||||
Total | 2,177,366 | 2,747,762 | 3,791,280 | ||||||||||
2002 | 2003 | 2004 | |||||||||||
Inventory written-off | (15,223 | ) | (693 | ) | — | ||||||||
Provision for early retirement benefits | 530,981 | (538,170 | ) | (132,810 | ) | ||||||||
Provision for bonus | — | 262,082 | (139,064 | ) | |||||||||
Net periodic pension cost | 58,226 | (271,503 | ) | 197,591 | |||||||||
Long service awards | 213,397 | (15,617 | ) | 75,554 | |||||||||
Amortization of intangible assets | 166,721 | 751,927 | 851,060 | ||||||||||
Amortization of deferred stock issuance costs | (17,942 | ) | — | — | |||||||||
Amortization of landrights | (1,524 | ) | (2,356 | ) | (3,419 | ) | |||||||
Provision for impairment of property, plant and equipment | 6,401 | (6,401 | ) | — | |||||||||
Gain on sale of long-term investments | — | (171,334 | ) | — | |||||||||
Temporary differences of KSO units | 6,317 | 4,782 | — | ||||||||||
Depreciation of property, plant and equipment under revenue-sharing arrangements | 11,576 | 63,424 | 82,415 | ||||||||||
Amortization of unearned income on revenue-sharing arrangements | (7,998 | ) | (58,379 | ) | (82,033 | ) | |||||||
Revenue from transfer of property, plant and equipment under revenue-sharing arrangements | 765 | 34,828 | — | ||||||||||
Interest income/receivable | — | (45,835 | ) | 45,835 | |||||||||
Equity in net loss of associated companies | 41,178 | — | — | ||||||||||
Payments of liability of business acquisition and the related interest | — | — | (233,337 | ) | |||||||||
Consultant fees for acquisition of business | — | — | (27,797 | ) | |||||||||
Unrealized foreign exchange loss on liability of business acquisitions | — | — | 342,073 | ||||||||||
Foreign exchange losses capitalized to property under construction | — | — | (74,283 | ) | |||||||||
Total temporary differences | 608,917 | 515,445 | 1,715,813 | ||||||||||
Permanent differences: | |||||||||||||
Net periodic post-retirement benefit cost | 611,992 | 634,385 | 484,462 | ||||||||||
Amortization of goodwill | 21,269 | 21,270 | 21,270 | ||||||||||
Amortization of discount on promissory notes | 173,794 | 224,931 | 109,786 | ||||||||||
Tax penalties | 216,198 | — | 14,645 | ||||||||||
Equity in net income of associates and subsidiaries | (2,238,300 | ) | (3,313,831 | ) | (3,939,944 | ) | |||||||
Gain on sale of long-term investments | (3,166,086 | ) | (38,425 | ) | — | ||||||||
Interest income | (359,049 | ) | — | — | |||||||||
Amortization of unearned income on revenue-sharing arrangements | (44,273 | ) | — | — |
F-86
2002 | 2003 | 2004 | ||||||||||
Income from land/building rental | (65,175 | ) | (40,380 | ) | — | |||||||
Others | 253,322 | 599,631 | 523,568 | |||||||||
Total permanent differences | (4,596,308 | ) | (1,912,419 | ) | (2,786,213 | ) | ||||||
Taxable income subject to corporate income tax | 5,570,403 | 6,098,676 | 6,262,809 | |||||||||
Corporate income tax expense | 1,671,104 | 1,829,585 | 1,878,825 | |||||||||
Final income tax expense | — | 56,698 | 43,413 | |||||||||
Total current income tax expense of the Company | 1,671,104 | 1,886,283 | 1,922,238 | |||||||||
Current income tax expense of the subsidiaries | 1,076,658 | 1,904,997 | 2,344,873 | |||||||||
Total current income tax expense | 2,747,762 | 3,791,280 | 4,267,111 | |||||||||
F-87
liabilities
(Charged)/ | (Charged)/ | |||||||||||||||||||||||||||||||||
Credited to | Acquisition | Credited to | ||||||||||||||||||||||||||||||||
December 31, | Statements | of | December 31, | December 31, | Acquisition | Statements | December 31, | |||||||||||||||||||||||||||
2001 | of Income | Pramindo | 2002 | 2002 | of AWI | of Income | 2003 | |||||||||||||||||||||||||||
The Company | The Company | The Company | ||||||||||||||||||||||||||||||||
Deferred tax assets: | Deferred tax assets: | Deferred tax assets: | ||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | 170,419 | (69,030 | ) | — | 101,389 | Allowance for doubtful accounts | 101,389 | — | 17,456 | 118,845 | ||||||||||||||||||||||||
Allowance for inventory obsolescence | 11,911 | (1,404 | ) | — | 10,507 | Allowance for inventory obsolescence | 10,507 | — | 1,020 | 11,527 | ||||||||||||||||||||||||
Provision for early retirement benefits | 42,000 | 159,294 | — | 201,294 | Provision for impairment of property, plant and equipment | 1,920 | — | (1,920 | ) | — | ||||||||||||||||||||||||
Decline in value of investments | 5,656 | (5,656 | ) | — | — | Landrights | 161 | — | (707 | ) | (546 | ) | ||||||||||||||||||||||
Long-term investments | 52,605 | — | (52,605 | ) | — | |||||||||||||||||||||||||||||
Provision for early retirement benefits | 201,294 | — | (161,451 | ) | 39,843 | |||||||||||||||||||||||||||||
Provision for employee bonuses | — | — | 84,385 | 84,385 | ||||||||||||||||||||||||||||||
Provision for long service awards | 146,769 | — | (4,685 | ) | 142,084 | |||||||||||||||||||||||||||||
Total deferred tax assets | Total deferred tax assets | 514,645 | — | (118,507 | ) | 396,138 | ||||||||||||||||||||||||||||
Deferred tax liabilities: | Deferred tax liabilities: | |||||||||||||||||||||||||||||||||
Interest receivables | — | — | (13,750 | ) | (13,750 | ) | ||||||||||||||||||||||||||||
Long-term investments | — | — | (14,138 | ) | (14,138 | ) | ||||||||||||||||||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (1,729,436 | ) | (29,989 | ) | 190,750 | (1,568,675 | ) | |||||||||||||||||||||||||||
Revenue-sharing arrangements | (18,119 | ) | — | (40,334 | ) | (58,453 | ) | |||||||||||||||||||||||||||
Intangible assets | (1,208,652 | ) | (594,771 | ) | 275,625 | (1,527,798 | ) | |||||||||||||||||||||||||||
Net periodic pension cost | (7,988 | ) | — | (80,927 | ) | (88,915 | ) | |||||||||||||||||||||||||||
Total deferred tax liabilities | Total deferred tax liabilities | (2,964,195 | ) | (624,760 | ) | 317,226 | (3,271,729 | ) | ||||||||||||||||||||||||||
Deferred tax liabilities of the Company, net | Deferred tax liabilities of the Company, net | (2,449,550 | ) | (624,760 | ) | 198,719 | (2,875,591 | ) | ||||||||||||||||||||||||||
Deferred tax liabilities of the subsidiaries, net | Deferred tax liabilities of the subsidiaries, net | (633,616 | ) | 230,966 | (268,529 | ) | (671,179 | ) | ||||||||||||||||||||||||||
Total deferred tax liabilities, net | Total deferred tax liabilities, net | (3,083,166 | ) | (3,546,770 | ) | |||||||||||||||||||||||||||||
F-82F-88
(Charged)/ | (Charged)/ | |||||||||||||||||||||||||||||||||
Credited to | Acquisition | Credited to | ||||||||||||||||||||||||||||||||
December 31, | Statements | of | December 31, | December 31, | Business | Statements | December 31, | |||||||||||||||||||||||||||
2003 | Acquisitions | of Income | 2004 | |||||||||||||||||||||||||||||||
The Company | The Company | |||||||||||||||||||||||||||||||||
Deferred tax assets: | Deferred tax assets: | |||||||||||||||||||||||||||||||||
2001 | of Income | Pramindo | 2002 | Allowance for doubtful accounts | 118,845 | — | 88,834 | 207,679 | ||||||||||||||||||||||||||
Allowance for inventory obsolescence | 11,527 | — | 3,967 | 15,494 | ||||||||||||||||||||||||||||||
Deferred stock issuance costs | 5,382 | (5,382 | ) | — | — | Long-term investments | (14,138 | ) | — | 18,823 | 4,685 | |||||||||||||||||||||||
Landrights | 618 | (457 | ) | — | 161 | Provision for early retirement benefits | 39,843 | — | (39,843 | ) | — | |||||||||||||||||||||||
Long-term investments | — | 52,605 | — | 52,605 | Provision for employee bonuses | 84,385 | — | (41,720 | ) | 42,665 | ||||||||||||||||||||||||
Provision for long service awards | 82,751 | 64,018 | — | 146,769 | Provision for long service awards | 142,084 | — | 22,666 | 164,750 | |||||||||||||||||||||||||
Provision for impairment of property, plant and equipment | — | 1,920 | — | 1,920 | Liabilities of business acquisitions | — | 985,609 | 24,323 | 1,009,932 | |||||||||||||||||||||||||
Total deferred tax assets | Total deferred tax assets | 318,737 | 195,908 | — | 514,645 | Total deferred tax assets | 382,546 | 985,609 | 77,050 | 1,445,205 | ||||||||||||||||||||||||
Deferred tax liabilities: | Deferred tax liabilities: | Deferred tax liabilities: | ||||||||||||||||||||||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (1,451,655 | ) | (61,352 | ) | — | (1,513,007 | ) | Interest receivables | (13,750 | ) | — | 13,750 | — | |||||||||||||||||||||
Revenue-sharing arrangements | (19,417 | ) | 1,298 | — | (18,119 | ) | Difference between book and tax property, plant and equipment’s net book value | (1,568,675 | ) | (713,140 | ) | 83,161 | (2,198,654 | ) | ||||||||||||||||||||
Net periodic pension cost | (25,153 | ) | 17,165 | — | (7,988 | ) | Landrights | (546 | ) | — | (1,025 | ) | (1,571 | ) | ||||||||||||||||||||
Revenue-sharing arrangements | (58,453 | ) | — | 16,816 | (41,637 | ) | ||||||||||||||||||||||||||||
Intangible assets | (1,527,798 | ) | (341,909 | ) | 255,321 | (1,614,386 | ) | |||||||||||||||||||||||||||
Net periodic pension cost | (88,915 | ) | — | 61,011 | (27,904 | ) | ||||||||||||||||||||||||||||
Total deferred tax liabilities | Total deferred tax liabilities | (1,496,225 | ) | (42,889 | ) | — | (1,539,114 | ) | Total deferred tax liabilities | (3,258,137 | ) | (1,055,049 | ) | 429,034 | (3,884,152 | ) | ||||||||||||||||||
Deferred tax liabilities of the Company, net | Deferred tax liabilities of the Company, net | (1,177,488 | ) | 153,019 | — | (1,024,469 | ) | Deferred tax liabilities of the Company, net | (2,875,591 | ) | (69,440 | ) | 506,084 | (2,438,947 | ) | |||||||||||||||||||
Deferred tax liabilities of the subsidiaries, net | Deferred tax liabilities of the subsidiaries, net | (638,824 | )(*) | (304,228 | ) | (1,115,645 | ) | (2,058,697 | ) | Deferred tax liabilities of the subsidiaries, net | (671,179 | ) | — | (242,045 | ) | (913,224 | ) | |||||||||||||||||
Total deferred tax liabilities, net | Total deferred tax liabilities, net | (1,816,312 | ) | (3,083,166 | ) | Total deferred tax liabilities, net | (3,546,770 | ) | (3,352,171 | ) | ||||||||||||||||||||||||
(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Statements | Acquisition | December 31, | ||||||||||||||
2002 | of Income | of AWI | 2003 | ||||||||||||||
The Company | |||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Allowance for doubtful accounts | 101,389 | 17,456 | — | 118,845 | |||||||||||||
Allowance for inventory obsolescence | 10,507 | 1,020 | — | 11,527 | |||||||||||||
Provision for early retirement benefits | 201,294 | (161,451 | ) | — | 39,843 | ||||||||||||
Landrights | 161 | (707 | ) | — | (546 | ) | |||||||||||
Long-term investments | 52,605 | (52,605 | ) | — | — | ||||||||||||
Provision for employee bonuses | — | 84,385 | — | 84,385 | |||||||||||||
Provision for long service awards | 146,769 | (4,685 | ) | — | 142,084 | ||||||||||||
Provision for impairment of property, plant and equipment | 1,920 | (1,920 | ) | — | — | ||||||||||||
Total deferred tax assets | 514,645 | (118,507 | ) | — | 396,138 | ||||||||||||
F-83F-89
(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Statements | Acquisition | December 31, | ||||||||||||||
2002 | of Income | of AWI | 2003 | ||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (1,513,007 | ) | 125,567 | — | (1,387,440 | ) | |||||||||||
Interest receivables | — | (13,750 | ) | — | (13,750 | ) | |||||||||||
Long-term investments | — | (14,138 | ) | — | (14,138 | ) | |||||||||||
Revenue sharing arrangements | (18,119 | ) | (40,334 | ) | — | (58,453 | ) | ||||||||||
Net periodic pension cost | (7,988 | ) | (80,927 | ) | — | (88,915 | ) | ||||||||||
Total deferred tax liabilities | (1,539,114 | ) | (23,582 | ) | — | (1,562,696 | ) | ||||||||||
Deferred tax liabilities of the Company, net | (1,024,469 | ) | (142,089 | ) | — | (1,166,558 | ) | ||||||||||
Deferred tax liabilities of the subsidiaries, net | (2,058,697 | ) | 72,279 | (393,794 | ) | (2,380,212 | ) | ||||||||||
Total deferred tax liabilities, net | (3,083,166 | ) | (3,546,770 | ) | |||||||||||||
As of December 31, 2003, AWI had tax loss carryforwards of approximately Rp952,854 million, which will expire from 2005 through 2006.
f. Administration
f. Administration |
2004. See also Notes 1b and 2t.
Pursuant to the Annual General Meeting of Shareholders as stated in notarial deed No. 17 dated May 10, 2001 of A. Partomuan Pohan, S.H., LL.M., the stockholders approved the distribution of cash dividends for 2000 amounting to Rp888,654 million or Rp88.16 per share, and appropriation of Rp126,950 million for general reserve.
F-84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pursuant to the Annual General Meeting of Shareholders as stated in notarial deed No. 17/V/2003 dated May 9, 2003 of A. Partomuan Pohan, S.H., LL.M., the stockholders approved the distribution of cash dividends for 2002 amounting to Rp3,338,109 million or Rp331.16 per share (pre-split), and appropriation of Rp813,664 million for general reserve.
• | Dividends for 2002 amounting to Rp3,338,109 million or Rp331.16 per share (pre-split), social contribution fund (“Dana Bina Lingkungan”) of Rp20,863 million and appropriated Rp813,664 million for general reserves. | |
• | Dividends for 2001 amounting to Rp2,125,055 million or Rp210.82 per share (pre-split), and appropriated Rp425,012 million for general reserves. | |
• | Dividends for 2000 amounting to Rp888,654 million or Rp88.16 per share (pre-split), and appropriated Rp126,950 million for general reserves. |
F-90
a. The Company
a. The Company |
2002 | 2003 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 2,289,134 | 4,248,110 | ||||||
Service cost | 90,869 | 119,089 | ||||||
Interest cost | 418,044 | 537,797 | ||||||
Employee contributions | 31,939 | 40,530 | ||||||
Benefits paid | (186,805 | ) | (222,421 | ) | ||||
Plan amendment | 1,676,601 | — | ||||||
Actuarial (gain) loss | (71,672 | ) | 2,129,818 | |||||
Benefit obligation at end of year | 4,248,110 | 6,852,923 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 2,571,714 | 3,099,648 | ||||||
Employer contributions | 359,725 | 521,816 | ||||||
Actual return on plan assets | 343,121 | 421,706 |
2003 | 2004 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 4,248,110 | 6,852,923 | ||||||
Service cost | 119,089 | 137,264 | ||||||
Interest cost | 537,797 | 740,494 | ||||||
Plan participants’ contributions | 35,173 | 43,906 | ||||||
Actuarial loss (gain) | 2,284,868 | (155,128 | ) | |||||
Benefits paid | (372,114 | ) | (304,277 | ) | ||||
Benefit obligation at end of year | 6,852,923 | 7,315,182 | ||||||
F-85F-91
2002 | 2003 | 2003 | 2004 | |||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 3,099,648 | 3,671,309 | ||||||||||||||
Actual return on plan assets | 422,278 | 633,605 | ||||||||||||||
Employer contribution | 486,324 | 839,980 | ||||||||||||||
Plan participants’ contributions | 35,173 | 43,906 | ||||||||||||||
Benefits paid | (186,805 | ) | (222,421 | ) | (372,114 | ) | (304,277 | ) | ||||||||
Actuarial gain (loss) | 11,893 | (149,440 | ) | |||||||||||||
Fair value of plan assets at end of year | 3,099,648 | 3,671,309 | 3,671,309 | 4,884,523 | ||||||||||||
Funded status | (1,148,462 | ) | (3,181,614 | ) | (3,181,614 | ) | (2,430,659 | ) | ||||||||
Unamortized net amount resulting from changes in plan experience and actuarial assumptions | (820,394 | ) | 1,663,963 | |||||||||||||
Unamortized prior service cost | 1,812,198 | 1,655,412 | ||||||||||||||
Unrecognized prior service cost | 1,655,412 | 1,498,628 | ||||||||||||||
Unrecognized net actuarial loss | 1,663,963 | 901,674 | ||||||||||||||
Unrecognized net obligation at the date of initial application of PSAK No. 24 | 177,525 | 148,891 | 148,891 | 120,257 | ||||||||||||
Prepaid pension cost | 20,867 | 286,652 | ||||||||||||||
Prepaid pension benefit costs | 286,652 | 89,900 | ||||||||||||||
deposits at December 31, 2003 and Indonesian Government Bonds at December 31, 2004.
2001 | 2002 | 2003 | ||||||||||||||||||||||
2002 | 2003 | 2004 | ||||||||||||||||||||||
% | % | % | ||||||||||||||||||||||
Discount rate | 13 | 13 | 11 | 13 | % | 11 | % | 11 | % | |||||||||||||||
Expected long-term return on plan assets | 13 | 13 | 11 | 13 | % | 11 | % | 10.5 | % | |||||||||||||||
Salary growth rate | 6 | 6 | 8 | |||||||||||||||||||||
Rate of compensation increase | 6 | % | 8 | % | 8 | % |
The components of net periodic pension cost recognized are as follows:
2001 | 2002 | 2003 | ||||||||||
Service cost | 32,441 | 65,661 | 89,193 | |||||||||
Interest cost | 277,077 | 418,044 | 537,797 | |||||||||
Expected return on plan assets | (266,324 | ) | (343,121 | ) | (421,706 | ) | ||||||
Net amortization and deferral | 17,624 | 132,928 | (176,465 | ) | ||||||||
Increase in amortization of prior service cost | 23,806 | 88,786 | 156,784 | |||||||||
Net periodic pension cost (Note 40) | 84,624 | 362,298 | 185,603 | |||||||||
In addition, the pension cost charged to the KSO Units amounted to Rp27,188 million, Rp25,207 million and Rp29,896 million in 2001, 2002 and 2003, respectively.
F-86F-92
2002 | 2003 | 2004 | ||||||||||
Service cost | 90,869 | 119,089 | 137,264 | |||||||||
Interest cost | 418,044 | 537,797 | 740,494 | |||||||||
Expected return on plan assets | (343,121 | ) | (421,706 | ) | (436,672 | ) | ||||||
Amortization of prior service cost | 88,786 | 156,784 | 156,784 | |||||||||
Recognized actuarial loss (gain) | 104,293 | (205,099 | ) | 415,991 | ||||||||
Amortization of net obligation at the date of initial application of PSAK No. 24 | 28,634 | 28,634 | 28,634 | |||||||||
Net periodic pension cost | 387,505 | 215,499 | 1,042,495 | |||||||||
Amounts charged to KSO Units under contractual agreement | (25,207 | ) | (29,896 | ) | (16,369 | ) | ||||||
Total net periodic pension cost less amounts charged to KSO Units (Note 38) | 362,298 | 185,603 | 1,026,126 | |||||||||
2001 | 2002 | 2003 | ||||||||||
Service cost | 2,247 | 2,651 | 3,068 | |||||||||
Net amortization and deferral | (943 | ) | (533 | ) | 2,243 | |||||||
Net periodic pension cost | 1,304 | 2,118 | 5,311 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Service cost | 2,651 | 3,068 | 4,155 | |||||||||
Interest cost | — | 2,499 | 3,889 | |||||||||
Expected return on plan assets | (512 | ) | (1,013 | ) | (824 | ) | ||||||
Amortization of prior service cost (gain) | 431 | — | (63 | ) | ||||||||
Recognized actuarial loss (gain) | (452 | ) | 579 | 1,158 | ||||||||
Amortization of net obligation at the date of initial application of PSAK No. 24 | — | 178 | 178 | |||||||||
Net periodic pension cost (Note 38) | 2,118 | 5,311 | 8,493 | |||||||||
F-93
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Discount rate | 12% | 12% | 11% | 12 | % | 11 | % | 11 | % | |||||||||||||||
Expected long-term return on plan assets | 12% | 12% | 7.5% | 12 | % | 7.5 | % | 7.5 | % | |||||||||||||||
Salary growth rate | 10% | 10% | 9% | |||||||||||||||||||||
Rate of compensation increase | 10 | % | 9 | % | 9 | % |
20022003 and 20032004 is as follows:
2002 | 2003 | |||||||
Projected benefit obligation | 20,927 | 35,502 | ||||||
Plan assets at fair value | 27,919 | 8,504 | ||||||
Excess (shortages) of plan assets over projected benefit obligation | 6,992 | (26,998 | ) | |||||
Unrecognized past service cost | 3,135 | 1,443 | ||||||
Unrecognized experience adjustment | (2,813 | ) | 23,718 | |||||
Prepaid (unfunded) pension cost | 7,314 | (1,837 | ) | |||||
2003 | 2004 | |||||||
Projected benefit obligation | (35,502 | ) | (43,547 | ) | ||||
Fair value of plan assets | 8,504 | 11,182 | ||||||
Funded status | (26,998 | ) | (32,365 | ) | ||||
Unrecognized prior service gain | (1,097 | ) | (1,034 | ) | ||||
Unrecognized net actuarial loss | 23,718 | 20,707 | ||||||
Unrecognized net obligation at the date of initial application of PSAK No. 24 | 2,540 | 2,362 | ||||||
Accrued pension benefit costs | (1,837 | ) | (10,330 | ) | ||||
2003 | 2004 | |||||||
Projected benefit obligation | (3,774 | ) | (4,051 | ) | ||||
Fair value of plan assets | 4,432 | 5,413 | ||||||
Funded status | 658 | 1,362 | ||||||
Unrecognized prior service cost | 1,259 | — | ||||||
Unrecognized net actuarial gain | (347 | ) | — | |||||
Prepaid pension benefit cost | 1,570 | 1,362 | ||||||
F-87F-94
c. Other Subsidiaries
Infomedia provides a defined benefit pension plans to their employees. The funding status of the plan as of December 31, 2003 is as follows:
In other subsidiaries that no pension plans are provided,and 2004 amounted to Rp11,402 million and Rp21,677 million, respectively. The total related employee benefit cost charged to expense amounted to Rp4,439 million and Rp11,510 million for the obligation for pension benefits is calculated based on Law No. 13 of 2003 concerning labor regulation. Total obligation recognized as ofyears ended December 31, 2003 was Rp576 million.
and 2004, respectively.
Awards paid during active employment:
Awards payable upon resignation, retirement or termination:
termination.
F-88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Method. The principal actuarial assumptions used by the independent actuary as of December 31, 2001, 2002, 2003 and 20032004 are as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Discount rate | 13 | % | 13 | % | 11 | % | 13 | % | 11 | % | 11 | % | ||||||||||||
Salary growth rate | 8 | % | 8 | % | 8 | % | ||||||||||||||||||
Rate of compensation increase | 8 | % | 8 | % | 8 | % |
2001, 2002, 2003 and 20032004 is as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Liability at beginning of year | 210,159 | 275,834 | 489,231 | 275,834 | 489,231 | 473,614 | ||||||||||||||||||
Net periodic benefit cost (Note 40) | 94,540 | 289,922 | 207,126 | |||||||||||||||||||||
Net periodic benefit cost (Note 38) | 289,922 | 207,126 | 153,610 | |||||||||||||||||||||
Benefits paid | (28,865 | ) | (76,525 | ) | (222,743 | ) | (76,525 | ) | (222,743 | ) | (78,057 | ) | ||||||||||||
Liability at end of year | 275,834 | 489,231 | 473,614 | 489,231 | 473,614 | 549,167 | ||||||||||||||||||
F-95
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Service cost | 46,689 | 69,345 | 80,599 | 83,956 | 88,394 | 76,163 | ||||||||||||||||||
Interest cost | 298,541 | 424,834 | 493,596 | 424,834 | 493,596 | 411,110 | ||||||||||||||||||
Expected return on plan assets | (49,011 | ) | (33,744 | ) | (56,004 | ) | (33,744 | ) | (56,004 | ) | (61,084 | ) | ||||||||||||
Amortization of prior service gain | (395 | ) | (368 | ) | (368 | ) | ||||||||||||||||||
Recognized actuarial loss | 80,683 | 99,287 | 52,007 | |||||||||||||||||||||
Amortization of unrecognized transition obligation | 26,213 | 26,213 | 24,325 | 26,213 | 24,325 | 24,325 | ||||||||||||||||||
Amortization of prior service cost | (395 | ) | (395 | ) | (368 | ) | ||||||||||||||||||
Amortization of gain/losses | 52,473 | 80,683 | 99,287 | |||||||||||||||||||||
Net curtailment gain/loss | — | 49,576 | — | |||||||||||||||||||||
Net curtailment loss | 49,576 | — | — | |||||||||||||||||||||
Net periodic post-retirement benefit cost (Note 40) | 374,510 | 616,512 | 641,435 | |||||||||||||||||||||
Net periodic post-retirement benefit cost | 631,123 | 649,230 | 502,153 | |||||||||||||||||||||
Amounts charged to KSO Units under contractual agreement | (14,611 | ) | (7,795 | ) | (9,913 | ) | ||||||||||||||||||
Total net periodic post-retirement benefit cost less amounts charged to KSO Units (Note 38) | 616,512 | 641,435 | 492,240 | |||||||||||||||||||||
In addition, the cost of post-retirement benefits charged to the KSO Units amounted to Rp16,212 million, Rp14,611 million and Rp7,795 million in 2001, 2002 and 2003, respectively.
F-89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The principal actuarial assumptions used by the independent actuary as of December 31, 2001, 2002, 2003 and 20032004 are as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Discount rate | 13% | 13% | 11% | 13% | 11% | 11% | ||||||||||||||||||
Expected return on plan assets | 13% | 13% | 11% | |||||||||||||||||||||
Expected long-term return on plan assets | 13% | 11% | 8% | |||||||||||||||||||||
Health care cost trend rate assumed for next year | 16% | 14% | 12% | 14% | 12% | 12% | ||||||||||||||||||
The ultimate trend rate | 10% | 10% | 8% | 10% | 8% | 8% | ||||||||||||||||||
Year that the rate reaches the ultimate trend rate | 2005 | 2005 | 2006 | 2005 | 2006 | 2007 |
20022003 and 2003:2004:
2002 | 2003 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 3,286,991 | 3,812,781 | ||||||
Service cost | 69,345 | 80,599 | ||||||
Interest cost | 424,834 | 493,596 | ||||||
Benefits paid | (70,491 | ) | (93,420 | ) | ||||
Actuarial (gain) loss | 102,102 | (544,785 | ) | |||||
Benefit obligation at end of year | 3,812,781 | 3,748,771 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 330,461 | 343,896 | ||||||
Employer contributions | 59,543 | 180,580 | ||||||
Actual return on plan assets | 53,287 | 56,004 | ||||||
Benefits paid | (79,851 | ) | (98,612 | ) | ||||
Actuarial gain (loss) | (19,544 | ) | (14,972 | ) | ||||
Fair value of plan assets at end of year | 343,896 | 466,896 | ||||||
Funded status | (3,468,885 | ) | (3,281,875 | ) | ||||
Unrecognized net transition obligation | 291,899 | 267,574 | ||||||
Unrecognized prior service gain | (2,301 | ) | (1,934 | ) | ||||
Unrecognized net losses | 1,576,793 | 952,885 | ||||||
Accrued post-retirement benefit cost | (1,602,494 | ) | (2,063,350 | ) | ||||
2003 | 2004 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 3,843,604 | 3,787,389 | ||||||
Service cost | 88,394 | 76,163 | ||||||
Interest cost | 493,596 | 411,110 | ||||||
Actuarial (gain) loss | (539,593 | ) | 529,618 | |||||
Benefits paid | (98,612 | ) | (123,275 | ) | ||||
Benefit obligation at end of year | 3,787,389 | 4,681,005 | ||||||
F-96
2003 | 2004 | |||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 374,446 | 505,340 | ||||||
Actual return on plan assets | 41,033 | 32,173 | ||||||
Employer contributions | 188,473 | 724,530 | ||||||
Benefits paid | (98,612 | ) | (123,275 | ) | ||||
Fair value of plan assets at end of year | 505,340 | 1,138,768 | ||||||
Funded status | (3,282,049 | ) | (3,542,237 | ) | ||||
Unrecognized prior service gain | (1,934 | ) | (1,566 | ) | ||||
Unrecognized net actuarial loss | 952,885 | 1,459,408 | ||||||
Unrecognized net transition obligation | 267,574 | 243,249 | ||||||
Accrued post-retirement benefit costs | (2,063,524 | ) | (1,841,146 | ) | ||||
2001 | 2002* | 2003 | 2002* | 2003 | 2004 | |||||||||||||||||||
Service cost and interest cost | 623,715 | 664,741 | 594,958 | 664,741 | 594,958 | 723,941 | ||||||||||||||||||
Accumulated post-retirement benefit obligation | 3,981,842 | 4,473,675 | 4,545,961 | 4,473,675 | 4,545,961 | 5,597,965 |
* | before curtailment |
F-90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
49.47. RELATED PARTY INFORMATION
i. The Company obtained “two-step loans” from the Government of the Republic of Indonesia, the Company’s majority stockholder. | |
Interest expense for two-step loans amounted to | |
ii. The Company and its | |
Concession fees amounted to |
F-97
Rp371,740 million and |
i. The Company and its subsidiaries provide honorarium and facilities to support the operational duties of the Board of Commissioners. The total of such benefits amounted to | |
ii. The Company and its subsidiaries provide salaries and facilities to support the operational duties of the Board of Directors. The total of such benefits amounted to |
The Company has an agreement with Indosat for the provision of international telecommunications services to the public.
Following the merger of Indosat, PT Indosat Multimedia Mobile (“IM3”), Satelindo and PT Bimagraha Telekomindo on November 20, 2003, all rights and obligations arising from the agreements entered by the Company with IM3 and Satelindo were transferred to Indosat. The Company has an agreement with Indosat for the provision of international telecommunications services to the public. |
i. The Company provides a local network for customers to make or receive international calls. Indosat provides the international network for the customers, except for certain border towns, as determined by the Director General of Post and Telecommunications of the Republic of Indonesia. The international telecommunications services include telephone, telex, telegram, package |
F-91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
switched data network, television, teleprinter, Alternate Voice/ Data Telecommunications (“AVD”), hotline and teleconferencing. | |
ii. The Company and Indosat are responsible for their respective telecommunications facilities. | |
iii. Customer billing and collection, except for leased lines and public phones located at the international gateways, are handled by the Company. | |
iv. The Company receives compensation for the services provided in the first item above, based on the interconnection tariff determined by the Minister of Communications of the Republic of Indonesia. | |
The Company has also entered into an interconnection agreement between the Company’s fixed-line network and Indosat’s cellular network in connection with the implementation of Indosat Multimedia Mobile services and the settlement of the related interconnection rights and obligations. | |
The Company also has an agreement with Indosat for the interconnection of Indosat’s GSM mobile cellular telecommunications network with the Company’s PSTN, enabling the |
The Company has also entered into an interconnection agreement between the Company’s fixed-line network and Indosat’s cellular networkF-98
Pursuant to the Ministry of Communications Decree regarding the transfer of the license for Indosat’s mobile cellular network operation from Indosat to PT Indosat Multimedia Mobile (“IM3”), the Company agreed to transfer all interconnection rights and obligations to IM3 based on Interconnection Cooperation Agreement, as regulated in the Amendment of Agreement in the side letter No. 656 dated March 18, 2002.
The Company’s compensation relating to leased lines/channel services, such as International Broadcasting System (“IBS”), AVD and bill printing is calculated at 15% of Indosat’s revenues from such services.
Indosat also leases circuits from the Company to link Jakarta, Medan and Surabaya.
The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record.
Telkomsel also entered into an agreement with Indosat for the provision of international telecommunications services to GSM mobile cellular customers. The principal matters covered by the agreement are as follows:
Rupiah, unless otherwise stated)
Company’s customers to make outgoing calls to or receive incoming calls from Indosat’s customers. | |
The Company’s compensation relating to leased lines/channel services, such as International Broadcasting System (“IBS”), AVD and bill printing is calculated at 15% of Indosat’s revenues from such services. Through year-end 2003, Indosat leased circuits from the Company to link Jakarta, Medan and Surabaya. In 2004, Indosat did not use this service. | |
The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record. | |
Telkomsel also entered into an agreement with Indosat for the provision of international telecommunications services to GSM mobile cellular customers. The principal matters covered by the agreement are as follows: | |
i. Telkomsel’s GSM mobile cellular telecommunications network is connected to Indosat’s international gateway exchanges to make outgoing or receive incoming international calls through Indosat’s international gateway exchanges. | |
ii. Telkomsel’s GSM mobile cellular telecommunications network is connected to Indosat’s mobile cellular telecommunications network, enabling Telkomsel’s cellular subscribers to make outgoing calls to or receive incoming calls from Indosat’s cellular subscribers. | |
iii. Telkomsel receives as compensation for the interconnection, a specific percentage of Indosat’s revenues from the related services which are made through Indosat’s international gateway exchanges and mobile cellular telecommunications network. |
F-92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
iv. Billings for calls made by Telkomsel’s customers are handled by Telkomsel. Telkomsel is obliged to pay Indosat’s share of revenue regardless whether billings to customers have been collected. | |
v. The provision and installation of the necessary interconnection equipment is Telkomsel’s responsibility. Interconnection equipment installed by one of the parties in another party’s locations shall remain the property of the party installing such equipment. Expenses incurred in connection with the provision of equipment, installation and maintenance are borne by Telkomsel. |
Telkomsel also has an agreement with Indosat on the usage of Indosat’s telecommunications facilities. The agreement, which was made in 1997 and is valid for eleven years, is subject to change based on an annual review and mutual agreement by both parties. The charges for the usage of the facilities amounted to Rp13,372 million, Rp12,703 million and Rp17,933 million in 2001, 2002 and 2003, respectively, reflecting 0.2%, 0.1% and 0.1% of total operating expenses in 2001, 2002 and 2003, respectively. Other agreements between Telkomsel and Indosat are as follows:
Telkomsel also has an agreement with Indosat on the usage of Indosat’s telecommunications facilities. The agreement, which was made in 1997 and is valid for eleven years, is subject to change based on an annual review and mutual agreement by both parties. The charges for the usage of the facilities amounted to Rp12,703 million, Rp17,933 million and Rp19,101 million in 2002, 2003 and 2004, respectively, reflecting 0.1%, 0.1% and 0.1% of total operating expenses in 2002, 2003 and 2004, respectively. Other agreements between Telkomsel and Indosat are as follows: | |
i. Agreement on Construction and Maintenance for Jakarta-Surabaya Cable System (“ |
F-99
On October 10, 1996, Telkomsel, Lintasarta, Satelindo and Indosat (the “Parties”) entered into an agreement on the construction and maintenance of the J-S Cable System. The | |
| |
ii. Indefeasible Right of Use Agreement | |
On September 21, 2000, Telkomsel entered into agreement with Indosat on the use of SEA — ME — WE 3 and tail link in Jakarta and Medan. In accordance with the agreement, Telkomsel was granted an indefeasible right to use certain capacity of the Link starting from September 21, 2000 until September 20, 2015 in return for an upfront payment of US$ | |
Pursuant to the expiration of the agreement between Telkomsel and Indosat with regard to the provision of international telecommunication services to GSM mobile cellular customers, in April 2004 Telkomsel and Indosat entered into an interim agreement. Under the terms of the interim agreement, Telkomsel receives 27% of the applicable tariff for outgoing international calls from Telkomsel subscribers and Rp800 per minute for incoming international calls to Telkomsel subscribers. The interim agreement is effective from March 1, 2004 until such date that Telkomsel and Indosat enter into a new agreement. | |
The Company and its subsidiaries earned net interconnection revenues from Indosat (including IM3 and Satelindo) of Rp950,687 million and Rp235,655 million in 2002 and 2003, respectively, reflecting 4.6% and 0.9% of total operating revenues in 2002 and 2003, respectively. The Company and its subsidiaries were charged net interconnection charges from Indosat of Rp158,285 million in 2004, reflecting 0.5% of total operating revenues in 2004. | |
The Company leased international circuits from Indosat. Payments made in relation to the lease expense amounted to Rp32,885 million and Rp30,239 million in 2002 and 2003, respectively, which reflected 0.3% and 0.2% of total operating expenses for 2002 and 2003, respectively. | |
In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo. Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp43,023 million to the Company for the thirty-year right. Satelindo paid Rp17,210 million in 1994 and the remaining Rp25,813 million was not paid because the Utilization Right (“Hak Pengelolaan Lahan”) on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution resulting in which the payment is treated as a lease expense up to 2006. In 2001, Satelindo paid an additional amount of Rp59,860 million as lease expense up to 2024. As of |
The Company and its subsidiary earned net interconnection revenues from Indosat (including IM3 and Satelindo in 2003) of Rp54,024 million, Rp274,706 million and Rp235,655 million in 2001, 2002 and 2003, respectively, reflecting 0.3%, 1.3% and 0.9% of total operating revenues in 2001, 2002 and 2003, respectively.
The Company and its subsidiary earned net interconnection revenue from IM3 in 2001 and 2002 amounted to Rp157 million and Rp50,880 million, respectively.
F-93F-100
The Company leases international circuits from Indosat, subsequent to the merger of Satelindo to Indosat in 2003. Payments made in relation to the lease expense amounted to Rp30,239 million in 2003, which reflected 0.2% of total operating expenses for 2003.
The Company has an agreement with Satelindo, an Indosat subsidiary, whereby both parties agreed, among other matters, on the following:
| |
| |
Telkomsel has an agreement with Lintasarta and PT Artajasa Pembayaran Elektronis (“Artajasa”) for the |
The Company also has an agreement with Satelindo for the interconnection of Satelindo’s GSM mobile cellular telecommunications network with the Company’s PSTN, enabling the Company’s customers to make outgoing calls to or receive incoming calls from Satelindo’s customers.
Interconnection revenues earned from Satelindo were Rp293,726 million and Rp625,101 million in 2001 and 2002, respectively, which reflected 1.8% and 3.0% of total operating revenues for 2001 and 2002, respectively.
The Company leases international circuits from Satelindo. Payments made in relation to the lease expense amounted to Rp28,111 million and Rp32,885 million in 2001 and 2002, respectively, which reflected 0.3% and 0.3% of total operating expenses for 2001 and 2002, respectively.
In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo, an associated company. Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp43,023 million to the Company for the thirty-year right. Satelindo paid Rp17,210 million in 1994 and the remaining Rp25,813 million was not paid because the Utilization Right (“Hak Pengelolaan Lahan”) on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution resulting in which the payment is treated as a lease expense up to 2006. In 2001, Satelindo paid the remaining amount of Rp59,860 million as lease expense up to 2024. As of December 31, 2003, the prepaid portion is shown in the consolidated balance sheets as “Advances from customers and suppliers.”
The Company provides leased lines to Satelindo. The leased lines can be used by Satelindo for telephone, telegraph, data, telex, facsimile or other telecommunication services. Revenue earned from these transactions amounted to Rp21,475 million in 2003 which reflected 0.1% of total operating revenue in 2003.
Following the merger of Indosat, IM3, Satelindo and PT Bimagraha Telekomindo on November 20, 2003, all right and obligations arising from the agreements entered by the Company with IM3 and Satelindo were transferred to Indosat.
d. Others |
(i) The Company provides telecommunication services to Government agencies. |
(ii) The Company has entered into agreements with Government agencies and associated companies, |
F-94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
satellite transponders or frequency channels. |
(iii) The Company provides leased lines to associated companies, namely CSM and |
(iv) The Company purchases property and equipment including construction and installation services from a number of related parties. These related parties include PT Industri Telekomunikasi Indonesia (“PT INTI”), Lembaga Elektronika Nasional, PT Adhi Karya, PT Pembangunan Perumahan, PT Nindya Karya, PT Boma Bisma Indra, PT Wijaya Karya, PT Waskita Karya, PT Gratika |
(v) PT INTI is also a major contractor and supplier for providing equipment, including construction and installation services for Telkomsel. Total purchases from PT INTI in | ||
F-101
operation of the transmission link and is extendable subject to agreement by both parties. The lease charges amounted to Rp40,519 million and Rp49,710 million in 2003 and 2004, respectively, reflecting 0.3% and 0.2% of total operating expenses in 2003 and 2004, respectively. | |
(vii) The Company and its subsidiaries carry insurance (on their property, plant and equipment against property losses, inventory and on employees’ social security) obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga Kerja and PT Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance premiums charged amounted to |
(viii) The Company and its subsidiaries maintain current accounts and time deposits in several state-owned banks. In addition, some of those banks are appointed as collecting agents for the Company. Total placements in form of current accounts and time deposits, and mutual funds in state-owned banks |
F-95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(x) The Company leases buildings, purchases materials and construction services, and utilizes maintenance and cleaning services from Dana Pensiun Telkom and PT Sandhy Putra Makmur, a subsidiary of Yayasan Sandikara Putra Telkom — a foundation managed by Dharma Wanita Telkom. Total charges from these transactions amounted to |
(xi) The Company purchased encoded phone cards from Perusahaan Umum Percetakan Uang Republik Indonesia (“Peruri”), a state-owned company. The cost of the phone cards amounted to |
(xii) The Company and its |
(xiii) In addition to revenues earned under the KSO Agreement (Note |
F-102
(xv) Infomedia provides electronic media and call center services to KSO Unit VII based on an agreement dated March 4, 2003. Revenue earned from these transactions in 2004 amounted to Rp5,541 million, reflecting 0.01% of total operating revenues. | ||
(xvi) The Company has also seconded a number of its employees to related parties to assist them in operating their business. In addition, the Company provided certain of its related parties with the right to use its buildings free of charge. |
2003 | 2004 | |||||||||||||||||
% of | % of | |||||||||||||||||
Amount | Total Assets | Amount | Total Assets | |||||||||||||||
a. | Cash and cash equivalents (Note 5) | 3,057,388 | 6.08 | 1,944,154 | 3.46 | |||||||||||||
b. | Temporary investments | — | — | 7,290 | 0.01 | |||||||||||||
c. | Trade accounts receivable, net (Note 6) | 410,923 | 0.82 | 419,104 | 0.74 | |||||||||||||
d. | Other accounts receivable | |||||||||||||||||
KSO Units | 26,969 | 0.05 | 1,300 | 0.00 | ||||||||||||||
State-owned banks (interest) | 9,453 | 0.02 | 5,717 | 0.01 | ||||||||||||||
Government agencies | 2,683 | 0.01 | 5,433 | 0.01 | ||||||||||||||
Other | 81,603 | 0.16 | 16,765 | 0.03 | ||||||||||||||
Total | 120,708 | 0.24 | 29,215 | 0.05 | ||||||||||||||
e. | Prepaid expenses (Note 8) | 17,074 | 0.03 | 22,440 | 0.04 | |||||||||||||
f. | Other current assets (Note 9) | 45,083 | 0.09 | 44,608 | 0.08 | |||||||||||||
g. | Advances and other non-current assets (Note 13) | |||||||||||||||||
Bank Mandiri | 642 | 0.00 | 113,762 | 0.20 | ||||||||||||||
PT Asuransi Jasa Indonesia | — | — | 23,104 | 0.04 | ||||||||||||||
Peruri | 813 | 0.00 | 813 | 0.00 | ||||||||||||||
Total | 1,455 | 0.00 | 137,679 | 0.24 | ||||||||||||||
F-96F-103
Presented below are balances of accounts with related parties:
2002 | 2003 | |||||||||||||||||
% of | % of | |||||||||||||||||
Rp | Total Assets | Rp | Total Assets | |||||||||||||||
a. | Cash and cash equivalents (Note 6) | 5,081,632 | 11.47 | 3,057,388 | 6.08 | |||||||||||||
b. | Temporary investments (Note 7) | 523,000 | 1.18 | — | — | |||||||||||||
c. | Trade accounts receivable, net (Note 8) | 886,763 | 2.00 | 410,923 | 0.82 | |||||||||||||
d. | Other accounts receivable | |||||||||||||||||
KSO Units | 48,221 | 0.11 | 26,969 | 0.05 | ||||||||||||||
State-owned banks (interest) | 12,523 | 0.03 | 9,453 | 0.02 | ||||||||||||||
Government agencies | 4,122 | 0.01 | 2,683 | 0.01 | ||||||||||||||
Other | 58,411 | 0.13 | 81,603 | 0.16 | ||||||||||||||
Total | 123,277 | 0.28 | 120,708 | 0.24 | ||||||||||||||
e. | Prepaid expenses (Note 10) | 20,867 | 0.05 | 17,074 | 0.03 | |||||||||||||
f. | Other current assets (Note 11) | 540,520 | 1.22 | 45,083 | 0.09 | |||||||||||||
g. | Advances and other non-current assets | |||||||||||||||||
Bank Mandiri | 16,128 | 0.04 | 27,904 | 0.06 | ||||||||||||||
Peruri | — | — | 813 | 0.00 | ||||||||||||||
16,128 | 0.04 | 28,717 | 0.06 | |||||||||||||||
2003 | 2004 | |||||||||||||||||
% of | % of | |||||||||||||||||
Total | Total | |||||||||||||||||
Amount | Liabilities | Amount | Liabilities | |||||||||||||||
h. | Trade accounts payable (Note 16) | |||||||||||||||||
Government agencies | 224,370 | 0.77 | 259,678 | 0.84 | ||||||||||||||
KSO Units | 78,664 | 0.27 | 24,312 | 0.08 | ||||||||||||||
Indosat | 224,611 | 0.77 | 150,631 | 0.49 | ||||||||||||||
Koperasi Pegawai Telkom | 11,512 | 0.04 | 78,717 | 0.25 | ||||||||||||||
PSN | 1,035 | 0.00 | 39 | 0.00 | ||||||||||||||
PT INTI | 94,190 | 0.32 | 77,591 | 0.25 | ||||||||||||||
Others | 23,096 | 0.08 | 52,126 | 0.17 | ||||||||||||||
Total | 657,478 | 2.25 | 643,094 | 2.08 | ||||||||||||||
i. | Accrued expenses (Note 17) | |||||||||||||||||
Government agencies and state-owned banks | 176,272 | 0.60 | 204,504 | 0.66 | ||||||||||||||
Employees | 606,257 | 2.07 | 321,237 | 1.03 | ||||||||||||||
PT Asuransi Jasa Indonesia | 13,713 | 0.05 | 2,040 | 0.01 | ||||||||||||||
Others | — | — | 9,729 | 0.03 | ||||||||||||||
Total | 796,242 | 2.72 | 537,510 | 1.73 | ||||||||||||||
j. | Short-term bank loans (Note 20) | |||||||||||||||||
Bank Mandiri | 37,642 | 0.13 | 41,433 | 0.13 | ||||||||||||||
k. | Two-step loans (Note 22) | 7,691,045 | 26.28 | 6,018,705 | 19.37 | |||||||||||||
l. | Provision for long service awards (Note 45) | 491,037 | 1.68 | 572,303 | 1.84 | |||||||||||||
m. | Provision for post-retirement benefits (Note 46) | 2,063,524 | 7.05 | 1,841,146 | 5.93 | |||||||||||||
n. | Long-term bank loans (Note 24) | |||||||||||||||||
Bank Mandiri | 42,115 | 0.14 | 59,729 | 0.19 | ||||||||||||||
2002 | 2003 | |||||||||||||||||
% of | % of | |||||||||||||||||
Rp | Total Liabilities | Rp | Total Liabilities | |||||||||||||||
h. | Trade accounts payable (Note 18) | |||||||||||||||||
Government agencies | 359,211 | 1.33 | 224,370 | 0.77 | ||||||||||||||
KSO Units | 114,717 | 0.42 | 78,664 | 0.27 | ||||||||||||||
Indosat (Including Satelindo) | 220,637 | 0.81 | 224,611 | 0.77 | ||||||||||||||
Koperasi Pegawai Telkom | 14,279 | 0.05 | 11,512 | 0.04 | ||||||||||||||
PSN | 5,183 | 0.02 | 1,035 | 0.00 | ||||||||||||||
PT INTI | 1,420 | 0.01 | 94,190 | 0.32 | ||||||||||||||
Others | 74,780 | 0.28 | 23,096 | 0.08 | ||||||||||||||
Total | 790,227 | 2.92 | 657,478 | 2.25 | ||||||||||||||
F-97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2002 | 2003 | |||||||||||||||||
% of | % of | |||||||||||||||||
Total | Total | |||||||||||||||||
Rp | Liabilities | Rp | Liabilities | |||||||||||||||
i. | Accrued expenses (Note 19) | |||||||||||||||||
Government Agencies and State-owned banks | 298,840 | 1.10 | 176,272 | 0.60 | ||||||||||||||
Employees | 1,082,720 | 4.00 | 606,257 | 2.07 | ||||||||||||||
PT Asuransi Jasa Indonesia | 7,665 | 0.03 | 13,713 | 0.05 | ||||||||||||||
Total | 1,389,225 | 5.13 | 796,242 | 2.72 | ||||||||||||||
j. | Short-term bank loans (Note 22) | |||||||||||||||||
Bank Mandiri | — | — | 37,642 | 0.13 | ||||||||||||||
k. | Two-step loans (Note 23 and 24) | 8,570,142 | 31.63 | 7,691,045 | 26.28 | |||||||||||||
l. | Provision for long service awards (Note 47) | 489,231 | 1.81 | 473,614 | 1.62 | |||||||||||||
m. | Provision for post-retirement benefits (Note 48) | 1,602,494 | 5.91 | 2,063,350 | 7.05 | |||||||||||||
n. | Long-term bank loans (Note 26) | |||||||||||||||||
Bank Mandiri | — | — | 42,115 | 0.14 | ||||||||||||||
50. SEGMENT INFORMATION
The Company and its subsidiaries have two main business segments: fixed line and cellular. The fixed line segment provides local, domestic long-distance and domestic long distanceinternational (starting 2004) telephone services, and other telecommunications services (including among others, leased lines, telex, transponder, satellite and Very Small Aperture Terminal-VSAT) as well as ancillary services. The cellular segment provides basic telecommunication services, particularly mobile cellular telecommunication services. Operating segments that do not individually represent more than 10% of the Company’s revenues are presented as “Other” comprising the telephone directories and building management businesses.
F-98F-104
2001 | 2002 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Fixed | Before | Total | Fixed | Before | Total | |||||||||||||||||||||||||||||||||||||||||||
Line | Cellular | Other | Elimination | Elimination | Consolidated | Line | Cellular | Other | Elimination | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||||||||||||||||
External operating revenues | 10,549,644 | 5,590,108 | 144,055 | 16,283,807 | — | 16,283,807 | 13,245,303 | 7,315,028 | 242,487 | 20,802,818 | — | 20,802,818 | ||||||||||||||||||||||||||||||||||||
Intersegment operating revenues | 1,174,993 | (671,884 | ) | — | 503,109 | (503,109 | ) | — | 155,105 | 245,970 | 8,624 | 409,699 | (409,699 | ) | — | |||||||||||||||||||||||||||||||||
Total operating revenues | 11,724,637 | 4,918,224 | 144,055 | 16,786,916 | (503,109 | ) | 16,283,807 | 13,400,408 | 7,560,998 | 251,111 | 21,212,517 | (409,699 | ) | 20,802,818 | ||||||||||||||||||||||||||||||||||
Operating expenses | (6,966,606 | ) | (1,932,919 | ) | (121,780 | ) | (9,021,305 | ) | 156,905 | (8,864,400 | ) | (8,525,232 | ) | (3,446,755 | ) | (205,835 | ) | (12,177,822 | ) | 505,219 | (11,672,603 | ) | ||||||||||||||||||||||||||
Operating income | 4,758,031 | 2,985,305 | 22,275 | 7,765,611 | (346,204 | ) | 7,419,407 | 4,875,176 | 4,114,243 | 45,276 | 9,034,695 | 95,520 | 9,130,215 | |||||||||||||||||||||||||||||||||||
Interest expense | (1,302,452 | ) | (27,190 | ) | — | (1,329,642 | ) | — | (1,329,642 | ) | (1,405,409 | ) | (177,341 | ) | — | (1,582,750 | ) | — | (1,582,750 | ) | ||||||||||||||||||||||||||||
Interest income | 506,464 | 57,220 | 7,902 | 571,586 | — | 571,586 | 367,725 | 102,176 | 9,901 | 479,802 | — | 479,802 | ||||||||||||||||||||||||||||||||||||
Loss on foreign exchange — net | (322,511 | ) | (53,946 | ) | (2,263 | ) | (378,720 | ) | — | (378,720 | ) | |||||||||||||||||||||||||||||||||||||
Gain (loss) on foreign exchange-net | 554,741 | 2,311 | (439 | ) | 556,613 | — | 556,613 | |||||||||||||||||||||||||||||||||||||||||
Other income (charges) — net | 644,492 | (35,513 | ) | 12,514 | 621,493 | (268,547 | ) | 352,946 | 82,327 | (27,257 | ) | 4,494 | 59,564 | (95,520 | ) | (35,956 | ) | |||||||||||||||||||||||||||||||
Equity in net income (loss) of associated companies | 1,334,083 | — | — | 1,334,083 | (1,419,769 | ) | (85,686 | ) | ||||||||||||||||||||||||||||||||||||||||
Tax expense | (1,114,574 | ) | (881,867 | ) | (10,454 | ) | (2,006,895 | ) | — | (2,006,895 | ) | (1,659,363 | ) | (1,226,958 | ) | (12,650 | ) | (2,898,971 | ) | — | (2,898,971 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 2,066,277 | — | — | 2,066,277 | (2,061,679 | ) | 4,598 | |||||||||||||||||||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | 3,196,380 | — | — | 3,196,380 | — | 3,196,380 | ||||||||||||||||||||||||||||||||||||||||||
Income before minority interest | 4,503,533 | 2,044,009 | 29,974 | 6,577,516 | (2,034,520 | ) | 4,542,996 | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,849,931 | ||||||||||||||||||||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (474,605 | ) | — | — | — | — | — | (810,222 | ) | ||||||||||||||||||||||||||||||||||
Net income | 4,503,533 | 2,044,009 | 29,974 | 6,577,516 | (2,034,520 | ) | 4,068,391 | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,039,709 | ||||||||||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||||||||||||||||||||||
Segment assets | 29,678,357 | 7,363,322 | 253,153 | 37,294,832 | (4,449,250 | ) | 32,845,582 | 34,177,425 | 11,255,500 | 310,828 | 45,743,753 | (1,561,340 | ) | 44,182,413 | ||||||||||||||||||||||||||||||||||
Investments in associates | 190,488 | — | — | 190,488 | — | 190,488 | 124,683 | — | — | 124,683 | — | 124,683 | ||||||||||||||||||||||||||||||||||||
Total consolidated assets | 29,868,845 | 7,363,322 | 253,153 | 37,485,320 | (4,449,250 | ) | 33,036,070 | 34,302,108 | 11,255,500 | 310,828 | 45,868,436 | (1,561,340 | ) | 44,307,096 | ||||||||||||||||||||||||||||||||||
Total consolidated liabilities | (20,583,335 | ) | (2,143,805 | ) | (146,137 | ) | (22,873,277 | ) | 153,502 | (22,719,775 | ) | (24,348,322 | ) | (4,066,412 | ) | (198,756 | ) | (28,613,490 | ) | 1,515,810 | (27,097,680 | ) | ||||||||||||||||||||||||||
Minority interest | — | — | — | — | — | 1,235,334 | — | — | — | — | — | (2,595,799 | ) | |||||||||||||||||||||||||||||||||||
Capital expenditures | (2,903,486 | ) | (2,780,366 | ) | (14,416 | ) | (5,698,268 | ) | — | (5,698,268 | ) | (6,266,859 | ) | (2,730,028 | ) | (35,531 | ) | (9,032,418 | ) | — | (9,032,418 | ) | ||||||||||||||||||||||||||
Depreciation | (2,346,535 | ) | (513,065 | ) | (10,172 | ) | (2,869,772 | ) | — | (2,869,772 | ) | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | (2,576,073 | ) | (984,039 | ) | (7,256 | ) | (3,567,368 | ) | 4,675 | (3,562,693 | ) | |||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | (55,709 | ) | — | — | (55,709 | ) | — | (55,709 | ) | |||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | (187,990 | ) | — | — | (187,990 | ) | — | (187,990 | ) | |||||||||||||||||||||||||||||||||||||||
Other non-cash expenses | (305,698 | ) | (35,307 | ) | (1,895 | ) | (342,900 | ) | — | (342,900 | ) | 106,329 | (139,214 | ) | (3,047 | ) | (35,932 | ) | — | (35,932 | ) | |||||||||||||||||||||||||||
Net cash provided by operating activities | 4,215,969 | 2,759,528 | 37,092 | 7,012,589 | — | 7,012,589 | 6,237,405 | 4,557,442 | 69,626 | 10,864,473 | — | 10,864,473 | ||||||||||||||||||||||||||||||||||||
Net cash used in investing activities | (3,064,442 | ) | (2,629,620 | ) | (18,539 | ) | (5,712,601 | ) | (403,195 | ) | (6,115,796 | ) | (1,492,286 | ) | (4,531,036 | ) | (26,653 | ) | (6,049,975 | ) | — | (6,049,975 | ) | |||||||||||||||||||||||||
Net cash (used in) provided by financing activities | (2,291,844 | ) | 218,808 | 7,030 | (2,066,006 | ) | 403,195 | (1,662,811 | ) | |||||||||||||||||||||||||||||||||||||||
Net cash used in financing activities | (2,482,408 | ) | (146,819 | ) | (40,989 | ) | (2,670,216 | ) | — | (2,670,216 | ) | |||||||||||||||||||||||||||||||||||||
F-99F-105
2002 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Fixed | Before | Total | Fixed | Before | Total | |||||||||||||||||||||||||||||||||||||||||||
Line | Cellular | Other | Elimination | Elimination | Consolidated | Line | Cellular | Other | Elimination | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||||||||||||||||
External operating revenues | 13,245,303 | 7,315,028 | 242,487 | 20,802,818 | — | 20,802,818 | 16,068,496 | 10,797,555 | 249,872 | 27,115,923 | — | 27,115,923 | ||||||||||||||||||||||||||||||||||||
Intersegment operating revenues | 155,105 | 245,970 | 8,624 | 409,699 | (409,699 | ) | — | 122,653 | 337,100 | 30,824 | 490,577 | (490,577 | ) | — | ||||||||||||||||||||||||||||||||||
Total operating revenues | 13,400,408 | 7,560,998 | 251,111 | 21,212,517 | (409,699 | ) | 20,802,818 | 16,191,149 | 11,134,655 | 280,696 | 27,606,500 | (490,577 | ) | 27,115,923 | ||||||||||||||||||||||||||||||||||
Operating expenses | (8,525,232 | ) | (3,446,755 | ) | (205,835 | ) | (12,177,822 | ) | 505,219 | (11,672,603 | ) | (10,596,851 | ) | (4,802,283 | ) | (275,499 | ) | (15,674,633 | ) | 534,649 | (15,139,984 | ) | ||||||||||||||||||||||||||
Operating income | 4,875,176 | 4,114,243 | 45,276 | 9,034,695 | 95,520 | 9,130,215 | 5,594,298 | 6,332,372 | 5,197 | 11,931,867 | 44,072 | 11,975,939 | ||||||||||||||||||||||||||||||||||||
Interest expense | (1,405,409 | ) | (177,341 | ) | — | (1,582,750 | ) | — | (1,582,750 | ) | (1,249,795 | ) | (179,486 | ) | — | (1,429,281 | ) | 45,835 | (1,383,446 | ) | ||||||||||||||||||||||||||||
Interest income | 367,725 | 102,176 | 9,901 | 479,802 | — | 479,802 | 342,980 | 60,407 | 8,472 | 411,859 | (45,835 | ) | 366,024 | |||||||||||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | 554,741 | 2,311 | (439 | ) | 556,613 | — | 556,613 | 198,803 | (73,017 | ) | 335 | 126,121 | — | 126,121 | ||||||||||||||||||||||||||||||||||
Other income (charges) — net | 82,327 | (27,257 | ) | 4,494 | 59,564 | (95,520 | ) | (35,956 | ) | 358,191 | (10,605 | ) | 81,988 | 429,574 | (65,236 | ) | 364,338 | |||||||||||||||||||||||||||||||
Tax expense | (1,659,363 | ) | (1,226,958 | ) | (12,650 | ) | (2,898,971 | ) | — | (2,898,971 | ) | (1,942,070 | ) | (1,892,821 | ) | (26,199 | ) | (3,861,090 | ) | — | (3,861,090 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 2,066,277 | — | — | 2,066,277 | (2,061,679 | ) | 4,598 | 3,313,831 | — | — | 3,313,831 | (3,311,012 | ) | 2,819 | ||||||||||||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | 3,196,380 | — | — | 3,196,380 | — | 3,196,380 | ||||||||||||||||||||||||||||||||||||||||||
Income before minority interest | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,849,931 | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 7,590,705 | ||||||||||||||||||||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (810,222 | ) | — | — | — | — | — | (1,503,478 | ) | ||||||||||||||||||||||||||||||||||
Net income | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,039,709 | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 6,087,227 | ||||||||||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||||||||||||||||||||||
Segment assets | 34,177,425 | 11,255,500 | 310,828 | 45,743,753 | (1,561,340 | ) | 44,182,413 | 46,884,985 | 15,386,289 | 317,398 | 62,588,672 | (12,370,071 | ) | 50,218,601 | ||||||||||||||||||||||||||||||||||
Investments in associates | 124,683 | — | — | 124,683 | — | 124,683 | 64,648 | — | — | 64,648 | — | 64,648 | ||||||||||||||||||||||||||||||||||||
Total consolidated assets | 34,302,108 | 11,255,500 | 310,828 | 45,868,436 | (1,561,340 | ) | 44,307,096 | 46,949,633 | 15,386,289 | 317,398 | 62,653,320 | (12,370,071 | ) | 50,283,249 | ||||||||||||||||||||||||||||||||||
Total consolidated liabilities | (24,348,322 | ) | (4,066,412 | ) | (198,756 | ) | (28,613,490 | ) | 1,515,810 | (27,097,680 | ) | (28,020,867 | ) | (5,075,222 | ) | (166,119 | ) | (33,262,208 | ) | 3,999,991 | (29,262,217 | ) | ||||||||||||||||||||||||||
Minority interest | — | — | — | — | — | (2,595,799 | ) | — | — | — | — | — | (3,708,155 | ) | ||||||||||||||||||||||||||||||||||
Capital expenditures | (6,266,859 | ) | (2,730,028 | ) | (35,531 | ) | (9,032,418 | ) | — | (9,032,418 | ) | (5,698,401 | ) | (5,348,783 | ) | (61,672 | ) | (11,108,856 | ) | — | (11,108,856 | ) | ||||||||||||||||||||||||||
Depreciation and amortization | (2,576,073 | ) | (984,039 | ) | (7,256 | ) | (3,567,368 | ) | 4,675 | (3,562,693 | ) | (3,126,223 | ) | (1,680,554 | ) | (9,824 | ) | (4,816,601 | ) | 11,916 | (4,804,685 | ) | ||||||||||||||||||||||||||
Amortization of intangible assets | (187,990 | ) | — | — | (187,990 | ) | — | (187,990 | ) | |||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | (730,659 | ) | — | — | (730,659 | ) | — | (730,659 | ) | |||||||||||||||||||||||||||||||||||||||
Other non-cash expenses | 106,329 | (139,214 | ) | (3,047 | ) | (35,932 | ) | — | (35,932 | ) | (210,646 | ) | (113,904 | ) | (4,308 | ) | (328,858 | ) | — | (328,858 | ) | |||||||||||||||||||||||||||
Net cash provided by operating activities | 6,237,405 | 4,557,442 | 69,626 | 10,864,473 | — | 10,864,473 | 6,028,485 | 6,753,253 | 70,794 | 12,852,532 | — | 12,852,532 | ||||||||||||||||||||||||||||||||||||
Net cash used in investing activities | (1,492,286 | ) | (4,531,036 | ) | (26,653 | ) | (6,049,975 | ) | — | (6,049,975 | ) | (1,955,079 | ) | (5,310,509 | ) | (40,274 | ) | (7,305,862 | ) | — | (7,305,862 | ) | ||||||||||||||||||||||||||
Net cash used in financing activities | (2,482,408 | ) | (146,819 | ) | (40,989 | ) | (2,670,216 | ) | — | (2,670,216 | ) | (5,425,189 | ) | (727,880 | ) | (24,347 | ) | (6,177,416 | ) | — | (6,177,416 | ) | ||||||||||||||||||||||||||
F-100F-106
2003 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Fixed | Before | Total | Fixed | Before | Total | |||||||||||||||||||||||||||||||||||||||||||
Line | Cellular | Other | Elimination | Elimination | Consolidated | Line | Cellular | Other | Elimination | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||||||||||||||||
External operating revenues | 16,068,496 | 10,797,555 | 249,872 | 27,115,923 | — | 27,115,923 | 19,436,271 | 14,201,786 | 309,709 | 33,947,766 | — | 33,947,766 | ||||||||||||||||||||||||||||||||||||
Intersegment operating revenues | 122,653 | 337,100 | 30,824 | 490,577 | (490,577 | ) | — | (46,781 | ) | 534,790 | 51,063 | 539,072 | (539,072 | ) | — | |||||||||||||||||||||||||||||||||
Total operating revenues | 16,191,149 | 11,134,655 | 280,696 | 27,606,500 | (490,577 | ) | 27,115,923 | 19,389,490 | 14,736,576 | 360,772 | 34,486,838 | (539,072 | ) | 33,947,766 | ||||||||||||||||||||||||||||||||||
Operating expenses | (10,596,851 | ) | (4,802,283 | ) | (275,499 | ) | (15,674,633 | ) | 534,649 | (15,139,984 | ) | (13,658,138 | ) | (6,757,243 | ) | (320,698 | ) | (20,736,079 | ) | 715,380 | (20,020,699 | ) | ||||||||||||||||||||||||||
Operating income | 5,594,298 | 6,332,372 | 5,197 | 11,931,867 | 44,072 | 11,975,939 | 5,731,352 | 7,979,333 | 40,074 | 13,750,759 | 176,308 | 13,927,067 | ||||||||||||||||||||||||||||||||||||
Interest expense | (1,249,795 | ) | (179,486 | ) | — | (1,429,281 | ) | 45,835 | (1,383,446 | ) | (1,224,079 | ) | (142,632 | ) | (38 | ) | (1,366,749 | ) | 96,613 | (1,270,136 | ) | |||||||||||||||||||||||||||
Interest income | 342,980 | 60,407 | 8,472 | 411,859 | (45,835 | ) | 366,024 | 289,322 | 121,744 | 3,488 | 414,554 | (96,613 | ) | 317,941 | ||||||||||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | 198,803 | (73,017 | ) | 335 | 126,121 | — | 126,121 | (1,158,577 | ) | (62,029 | ) | (154 | ) | (1,220,760 | ) | — | (1,220,760 | ) | ||||||||||||||||||||||||||||||
Other income (charges) — net | 358,191 | (10,605 | ) | 81,988 | 429,574 | (65,236 | ) | 364,338 | 449,556 | (39,122 | ) | 96,924 | 507,358 | (176,308 | ) | 331,050 | ||||||||||||||||||||||||||||||||
Tax expense | (1,942,070 | ) | (1,892,821 | ) | (26,199 | ) | (3,861,090 | ) | — | (3,861,090 | ) | (1,583,477 | ) | (2,384,314 | ) | (35,281 | ) | (4,003,072 | ) | — | (4,003,072 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 3,313,831 | — | — | 3,313,831 | (3,311,012 | ) | 2,819 | 3,939,944 | — | — | 3,939,944 | (3,936,524 | ) | 3,420 | ||||||||||||||||||||||||||||||||||
Income before minority interest | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 7,590,705 | 6,444,041 | 5,472,980 | 105,013 | 12,022,034 | (3,936,524 | ) | 8,085,510 | ||||||||||||||||||||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (1,503,478 | ) | — | — | — | — | — | (1,956,301 | ) | ||||||||||||||||||||||||||||||||||
Net income | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 6,087,227 | 6,444,041 | 5,472,980 | 105,013 | 12,022,034 | (3,936,524 | ) | 6,129,209 | ||||||||||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||||||||||||||||||||||
Segment assets | 46,884,985 | 15,386,289 | 317,398 | 62,588,672 | (12,370,071 | ) | 50,218,601 | 38,902,911 | 19,548,267 | 402,965 | 58,854,143 | (2,667,664 | ) | 56,186,479 | ||||||||||||||||||||||||||||||||||
Investments in associates | 64,648 | — | — | 64,648 | — | 64,648 | 10,705,711 | 9,290 | — | 10,715,001 | (10,632,388 | ) | 82,613 | |||||||||||||||||||||||||||||||||||
Total consolidated assets | 46,949,633 | 15,386,289 | 317,398 | 62,653,320 | (12,370,071 | ) | 50,283,249 | 49,608,622 | 19,557,557 | 402,965 | 69,569,144 | (13,300,052 | ) | 56,269,092 | ||||||||||||||||||||||||||||||||||
Total consolidated liabilities | (28,020,867 | ) | (5,075,222 | ) | (166,119 | ) | (33,262,208 | ) | 3,999,991 | (29,262,217 | ) | (27,853,851 | ) | (5,680,160 | ) | (202,971 | ) | (33,736,982 | ) | 2,667,664 | (31,069,318 | ) | ||||||||||||||||||||||||||
Minority interest | — | — | — | — | — | (3,708,155 | ) | — | — | — | — | — | (4,938,432 | ) | ||||||||||||||||||||||||||||||||||
Capital expenditures | (5,698,401 | ) | (5,348,783 | ) | (61,672 | ) | (11,108,856 | ) | — | (11,108,856 | ) | (6,148,109 | ) | (4,982,744 | ) | (66,691 | ) | (11,197,544 | ) | — | (11,197,544 | ) | ||||||||||||||||||||||||||
Depreciation and amortization | (3,126,223 | ) | (1,680,554 | ) | (9,824 | ) | (4,816,601 | ) | 11,916 | (4,804,685 | ) | (3,798,179 | ) | (2,651,028 | ) | (18,740 | ) | (6,467,947 | ) | 14,590 | (6,453,357 | ) | ||||||||||||||||||||||||||
Amortization of intangible assets | (730,659 | ) | — | — | (730,659 | ) | — | (730,659 | ) | |||||||||||||||||||||||||||||||||||||||
Amortization of goodwill and other intangible assets | (872,330 | ) | — | — | (872,330 | ) | — | (872,330 | ) | |||||||||||||||||||||||||||||||||||||||
Other non-cash expenses | (210,646 | ) | (113,904 | ) | (4,308 | ) | (328,858 | ) | — | (328,858 | ) | (244,356 | ) | (100,737 | ) | (5,338 | ) | (350,431 | ) | — | (350,431 | ) | ||||||||||||||||||||||||||
Net cash provided by operating activities | 6,028,485 | 6,753,253 | 70,794 | 12,852,532 | — | 12,852,532 | 7,184,330 | 8,786,290 | 80,860 | 16,051,480 | — | 16,051,480 | ||||||||||||||||||||||||||||||||||||
Net cash used in investing activities | (1,955,079 | ) | (5,310,509 | ) | (40,274 | ) | (7,305,862 | ) | — | (7,305,862 | ) | (4,065,668 | ) | (5,469,715 | ) | (62,730 | ) | (9,598,113 | ) | — | (9,598,113 | ) | ||||||||||||||||||||||||||
Net cash used in financing activities | (5,425,189 | ) | (727,880 | ) | (24,347 | ) | (6,177,416 | ) | — | (6,177,416 | ) | (4,693,034 | ) | (2,181,181 | ) | (30,650 | ) | (6,904,865 | ) | — | (6,904,865 | ) | ||||||||||||||||||||||||||
F-101F-107
• | Minimum Telkom Revenue (“MTR”) Represents the amount guaranteed by the KSO investor to be paid to the Company in accordance with the KSO agreement. | |
• | Distributable KSO Revenues (“DKSOR”) DKSOR are the entire KSO revenues, less the MTR and the operational expenses of the KSO Units, as provided in the KSO agreements. These revenues are shared between the Company and the KSO Investors based on agreed upon percentages. |
The DKSOR from fixed wireless revenues (“Telkom Flexi Revenues”) are shared between the Company and KSO Investor based on a ratio of 95% and 5%, respectively. | |
The DKSOR from non-Telkom Flexi Revenues are shared between the Company and KSO Investor based on a ratio of 30% and 70%, respectively, except for KSO VII. For KSO VII, the DKSOR from non-Telkom Flexi Revenues are shared between the Company and KSO Investor at a ratio of 35% and 65%, respectively. |
of:
i. the net present value, if any, of the KSO Investor’s projected share in DKSOR from the additional new installations forming part of the KSO system on the termination date over the balance of the applicable payback periods, and | |
ii. an amount to be agreed upon between the Company and the KSO Investor as a fair compensation in respect of any uncompleted or untested additional new installations transferred. |
F-102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
June 5, 1998, all KSO Investors and the Company signed a Memorandum of Understanding (“MoU”) to amend certain provisions of the KSO agreements. Among the amendments are as follows:
i. The percentage of sharing of the distributable KSO revenues for 1998 and 1999 was 10% and 90% for the Company and the KSO Investors, respectively. |
F-108
ii. The minimum number of access line units to be installed by the KSO Investors up to March 31, 1999 was 1,268,000 lines. | |
iii. The incremental rate of the MTR would not exceed 1% in 1998 and 1.5% in 1999 for the KSO agreements with the Investors that have MTR incremental factors. | |
iv. “Operating Capital Expenditures” in each of the KSO Units will be shared between the Company and the respective KSO Investors in proportion to the previous year’s share in the annual net income of the KSO Units, starting from 1999. | |
v. The cancellation of the requirement to maintain a bank guarantee in respect of MTR. |
The sale of
F-103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
KSO VII
F-109
The
F-104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and classified as either local or domestic long-distance. The tariffs depend on call distance, call duration, the time of day, the day of the week and holidays.
To follow up the previous Letter, the MinistryF-110
• | Local charges increased by an average of 28% | |
• | DLD charges decreased by an average of 10% | |
• | Monthly subscription charges increased by an average of 12% to 25%, depending on customer segment. |
Tariff
1. Cellular to | 2 times airtime rate | |
2. Cellular to | 1 times airtime rate | |
3. PSTN to | 1 times airtime rate | |
4. Card phone to | 1 times airtime rate plus 41% surcharges |
1. Usage tariffs charged to a cellular subscriber who makes a call to a fixed line (“PSTN”) subscriber are the same as the usage tariffs applied to PSTN subscribers. For the use of local PSTN network, the tariffs are computed at 50% of the prevailing local PSTN tariffs. | |
2. The long-distance usage tariffs between two different service areas charged to a cellular subscriber are the same as the prevailing tariffs for domestic long-distance call (“SLJJ”) applied to PSTN subscribers. |
F-105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interconnection Tariffs
F-111
i. | International interconnection with PSTN and cellular telecommunications network |
Based on KM. 37 year 1999, effective December 1, 1998, the international interconnection tariffs are calculated by applying the following charges to successful incoming and outgoing calls to the Company’s network: |
(in full Rupiah) | ||||
Access charge | Rp850 per call | |||
Usage charge | Rp550 per paid minute | |||
Universal Service Obligation (USO) | Rp750 per call |
ii. | Mobile and fixed cellular interconnection with the PSTN |
Based on KM. 46 year 1998, cellular interconnection tariffs with PSTN are as follows: |
For local calls from a mobile cellular network to PSTN, the cellular operator pays the Company 50% of the prevailing tariffs for local calls. For local calls from PSTN to a cellular network, the Company charges its subscribers the applicable local call tariff plus an airtime charge, and pays the cellular operator the airtime charge. |
KM. 46 year 1998 provides tariffs which vary among long-distance carriers depending upon the routes and the long-distance network used. Pursuant to this decree, for long-distance calls which originate from the PSTN, the Company is entitled to retain a portion of the prevailing long-distance tariffs, which portion ranges from 40% of the tariffs, in cases where the entire long-distance traffic is carried by cellular operator’s network, and |
Interconnection tariffs with mobile satellite networks (“STBSAT”) are established based on Joint Operation Agreements between the Company and STBSAT providers pursuant to Minister of Communications Decree No. KM. 30 year 2000 concerning Global Mobile Personal Telecommunication Service
F-106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Tariffs by Garuda Satellite dated March 29, 2000. Flat interconnection tariffs per minute apply for those companies.
Interconnection tariffs with mobile cellular networks, including USO, are determined based on the duration of the call. Access and usage charges for international telecommunications traffic interconnection with telecommunications networks of more than one domestic carrier are to be shared proportionately with each carrier involved, which proportion is determined by the MTPT.
Interconnection tariffs between a fixed wireless network and PSTN, and amongst PSTN, are regulated under MTPT letter No. KU.506/1/1/ MPPT-97 dated January 2, 1997 and letter No. KU.506/4/6/ MPPT-97 dated July 21, 1997. Currently, Ratelindo is the only operator of a fixed wireless network and apart from the Company, PT Batam Bintan Telekomunikasi (“BBT”) is the only operator of PSTN. For fixed wireless interconnection with the PSTN and BBT with the PSTN, the “sender-keeps-all” basis for local calls is applied and for domestic long-distance calls that originate from Ratelindo’s network and transit to the PSTN, the Company receives 35% of Ratelindo’s revenue for such calls. For domestic long-distance calls that originate from the PSTN, the Company retains 65% as its revenue for such calls. For long distance calls from and to BBT, the Company retains 75% of the revenue while BBT receives the remaining 25%.
1. Local Calls
2. Domestic Long-distance Calls
Interconnection tariffs with mobile satellite networks (“STBSAT”) are established based on Joint Operation Agreements between the Company and STBSAT providers pursuant to |
In connection with the issuance of Law No. 36 year 1999 and Government Regulation No. 52 year 2000, the Minister of Communications, on May 31, 2001, issued Decree No. KM. 20 year 2001, concerning Operations of Telecommunications Network and KM. 21 year 2001, concerning Operations of Telecommunications Services, which became effective from the date of the decree. Subsequently, the Minister of Communications issued Decree No. KM. 84 year 2002 concerning Telecommunication Traffic Clearing Process.
F-107F-112
iii. Fixed-line and fixed-wireless network interconnection |
Currently the operators of fixed wireline and fixed wireless network are PT Batam Bintan Telekomunikasi (“BBT”), Indosat and Bakrie Telecom (“Bakrie”). |
Local interconnection calls with the network of Bakrie and BBT are operated on a “sender-keeps-all” basis. | |
For local calls originating from the network of Bakrie and BBT and terminating at a cellular network and vice versa which transit through the Company’s network, the Company receives 50% of the local interconnection call tariff for local interconnection with Bakrie and a fixed amount for each minute for local interconnection call with BBT. | |
For local interconnection calls with Indosat’s network, the operator of the network on which the calls terminate receives Rp57/minute. |
For interconnection with the network of Bakrie and BBT, the Company is entitled to retain 35% of the prevailing DLD tariff, in cases where DLD calls originate on Bakrie’s network and terminate at the Company’s network, 65% of the prevailing DLD tariff, in cases where DLD calls originate on the Company’s network and terminate at Bakrie’s network, and 75% of the prevailing DLD tariff, in cases where DLD calls originate from or terminate at BBT’s network. | |
For DLD calls originating from the network of Bakrie and BBT and terminating at a cellular network and vice versa which transit through the Company’s network, the Company receives 60% to 63.75% of the prevailing DLD tariff. |
In addition, BBT is to receive or retain certain fixed amount for each minute of incoming and outgoing international calls which transit through the Company’s network and international gateway, and certain fixed amount for each successful call and each minute of incoming and outgoing international calls that transit through the Company’s network and use Indosat’s international gateway. | |
With respect to the interconnection long-distance calls from or to Indosat, pending the implementation of the duopoly system for long-distance calls, Indosat receives Rp240/minute for local originating calls from or local terminating calls at Indosat’s network. |
Public Phone Kiosk (“Wartel”) TariffF-113
Public Phone Kiosk (“Wartel”) Tariff |
a. Capital Expenditures
a. Capital Expenditures |
Amounts in | Amounts in | |||||||||||||||
Foreign Currencies | Equivalent | Foreign Currencies | Equivalent | |||||||||||||
Currencies | (in thousands) | in Rupiah | (in millions) | in Rupiah | ||||||||||||
Rupiah | — | 9,370,973 | 2,293,478 | |||||||||||||
U.S. Dollars | 310,056 | 2,622,237 | ||||||||||||||
U.S. Dollar | 155 | 1,443,474 | ||||||||||||||
Euro | 72,913 | 776,024 | 86 | 1,085,577 | ||||||||||||
Japanese Yen | 116,276 | 9,206 | 202 | 18,307 | ||||||||||||
Singapore Dollar | 3,881 | 19,316 | ||||||||||||||
Total | 12,797,756 | 4,840,836 | ||||||||||||||
(i) Procurement Agreements
(i) Procurement Agreements |
F-108F-114
Telkomsel’s procurement (import) under
Telkomsel has not collateralized anymaintenance and procurement of its borrowings, loans Guaranteed Notes or other credit facilities.
The termsequipment and related services which consist of the variousfollowing:
• | Joint Planning and Process Agreement | |
• | Equipment Supply Agreement (“ESA”) | |
• | Technical Service Agreement (“TSA”) | |
• | Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”) |
discount are subject to a quarterly review.
(ii) Procurement of TELKOM-2 Satellite |
In accordance procurement agreement with Agreement No.K.TEL.191/ HK.810/ UTA-00/2002 dated October 24, 2002, which is amended on December 15, 2003, the Company and Orbital Sciences Corporation (“Contractor”(the “Contractor”) agreed on the procurement of the TELKOM-2 satellite. Thewith a total price of US$73,140,32273.1 million. As of December 31, 2004, the Company has paid US$70.5 million and the remaining balance is expected to be fullypaid when the satellite has been launched and passed acceptance test.
(iii) Launching of TELKOM-2 Satellite |
(iii) Launchinglaunch of TELKOM-2 Satellite,
On November 8, 2002, the Company and ARIANESPACE S.A. agreed on the launching of TELKOM-2 Satellite which was previously scheduled between November 1, 2004 and January 31, 2005. Payments totaling US$62,880,000 will2005, is currently expected to be made between January 2004 and September 2004.
(iv) PSTN Excellence Regional Junction DIVRE II Project
On February 8, 2002, the Company entered into an agreement with Consortium Olex-Lucent-Brimbun (“Consortium”) for the procurement of in SDH Transmission System, Optical Fiber, Network Management System (“NMS”) and other services with a value of approximately US$28,807,460 and Rp102,829 million. The agreement was amended several times with the latest amendment on December 4, 2003 whereby the total cost of services and equipment became approximately US$28,880,957 and Rp123,240 million (inclusive of value-added tax), respectively. The amount was settled in February 2004.
(v) CDMA Procurement Agreement with Samsung Consortium
June 2005.
(iv) CDMA Procurement Agreement with Samsung Consortium |
F-115
F-109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
802,000 lines of BSS for Regional DivisionDivisions III, IV, V, VI, and VII for US$116 per line for BSS and US$34 per line for NSS. This project will be partly financed by The Export-Import Bank of Korea as contemplated in the Loan Agreement dated August 27, 2003. The2003 (Note 24i). As of December 31, 2004, the Company has paid and/or accrued a total facility amounts toof US$123,965,000 and will be available from the execution of the agreement until April 2006 (Note 54i).
136.3 million plus Rp162,238 million.
On November 30, 2001, As of December 31, 2004, the Company signedhas paid and/or accrued a partnership agreement with a consortium consistingtotal of PT Pirelli Cables Indonesia and PT Siemens Indonesia for the construction and provision of a high performance backbone network in Sumatera. The agreement became effective as of June 10, 2002. The scope of work includes the provision of an optical fiber cable, together with transmission equipment and network management systems. The Company is obliged to pay approximately US$46,322,629 and Rp172,69070.7 million as consideration. On June 12, 2003, the parties agreed to amend this agreement to reflect additional work being carried out by the consortium in consideration for a lump-sum additional US$2,830,086 and Rp1,699plus Rp140,952 million. The amount was fully settled in April 2004.
On December 5, 2001, the Company entered into a partnership agreement with a consortium consisting of Sumitomo Corporation, NEC Corporation and PT Nasio Karya Pratama for the development of a high quality PSTN Regional Junction for Regional Division V (East Java). The scope of work includes the development of a SDH transmission system, as well as the provision of ancillary fiber optic and other related equipment. The Company is obliged to pay approximately JP¥3,670,938,358 and Rp125,464 million which is inclusive of value-added tax. The parties agreed to add another partner to the consortium, PT Communication Cable Systems Indonesia, on September 27, 2002. In accordance with the amendment of the partnership agreement on December 11, 2003, the parties agreed to amend the contract value to JP¥1,258,833,916 and Rp188,788 million (exclusive of value-added tax). The amounts will be paid in the third quarter of 2004.
(ix) (vi) Supply Contract for Thailand-Indonesia-Singapore (TIS) Cable Network
F-110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CAT will contribute equally to a payment of US$32,680,00032.7 million (inclusive of value-added tax). The amount will be fully settled in the last quarter of 2004.
b. Agreements on Derivative Transactions
Telkomsel is exposed to market risks, primarily changes in foreign exchange, and uses derivative instruments in connection with its risk management activities. Telkomsel entered into derivative transactions for the purpose of hedging and not for trading purposes. However, the existing documentation does not fulfill the criteria contained in PSAK 55 to qualify as hedges. Therefore, changes in the fair values of the derivative financial instruments are recognized in the consolidated statements of income.
Telkomsel purchases equipment from several countries and, as a result, is exposed to movements in foreign currency exchange rates. In 2003, Telkomsel entered into forward foreign exchange contracts with Deutsche Bank (DB) and Standard Chartered Bank (SCB) to protect against foreign exchange risks relating to its foreign currency denominated purchases. The primary purpose of Telkomsel’s foreign currency hedging activities is to protect against the volatility associated with foreign currency purchases of equipment and other assets in the normal course of business.
The following table presents the aggregate notional amounts of Telkomsel’s foreign exchange forward contracts entered into in 2003:
US$ | EUR | |||||||
(full amount) | (full amount) | |||||||
DB | 80,000,000 | 6,000,000 | ||||||
SCB | 12,000,000 | 18,000,000 | ||||||
Total | 92,000,000 | 24,000,000 | ||||||
As of December 31, 2003, all2004 the Company has paid approximately 90% of the forward contracts with SCB had been settled. The outstanding contract with DB amounted to EUR 1 million. A receivable to reflectprice and the gain on the difference between the contract rate and month-end rate amounting to Rp941,000,000 is reportedremaining 10% was paid in the balance sheet, as part of “accrued income”.
In 2002, the Company entered into two derivative facility agreements with Bank Mandiri and HSBC with the intention of hedging the Company’s liabilities in foreign currency and for the Company’s liability under the cross-ownership transaction amounting to US$120,000,000 and US$1,000,000, respectively. The facility agreement with Bank Mandiri was extended until April 4, 2004, whilst the facility agreement with HSBC was extended until August 31, 2004. The Company has not used these derivative facilities.
January 2005.
F-111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
addedvalue-added tax).PT INTI will service and maintain the CDMA 2000 IX system pursuant to a Service Level Agreement dated the same date in return for an annual consideration of US$2,305,000.2.3 million. As of December 31, 2004, the Company has paid and/or accrued a total of US$30.6 million plus Rp103,461 million.
F-116
The Company entered into a Partnership Agreement with a consortium led by Siemens AG on September 24, 2003 for the development, procurement and construction of a fiber optic backbone transmission network in Kalimantan and Sulawesi, a related work management system and the provision of maintenance services in connection with this network. Other members of the consortium include PT Siemens Indonesia, PT Lembaga Elektronik Indonesia and Corning Cable System GmbH & Co.KG. The consideration payable by the Company for the fiber optic networks is approximately US$3,776,2694.2 million plus Rp74,021Rp79,144 million for the network located within Kalimantan and approximately US$3,815,2953.4 million plus Rp70,733Rp78,566 million for the network located within Sulawesi. As of December 31, 2004, approximately 95% of the project has been completed and the Company has paid approximately 40% of the total contract. The project is expected to complete in 2005.
On November 12, 2003, the Company entered into an agreement with PT INTI for the construction and procurement of an optical network, as well as a network management system and other related services and equipment, with respect to Regional Division III (West Java). Under this agreement and its amendment, the Company is obliged to pay PT INTI a total consideration of approximately US$6,479,9926.6 million and Rp112,427Rp111,655 million.
On December 18, 2003,31, 2004, the Company has paid and/or accrued a total of US$2.9 million plus Rp59,018 million.
h. Loan Agreement with Bukopin for Regional Division V Junction Project
On June 21, 2002, the CompanyTelkomsel entered into a loan agreementforward foreign exchange contracts with a consortiumDeutsche Bank, Standard Chartered Bank and Citibank Jakarta to protect against foreign exchange risk relating to its foreign currency denominated purchases. The primary purpose of banks amountingTelkomsel’s foreign currency hedging activities is to Rp400,000 million for financingprotect against the Regional Division V Junction Project. Bukopin actingvolatility associated with foreign currency purchases of equipment and other assets in the normal course of business.
F-112F-117
as facility agent, charged
Subsequently, based on an Addendum to the loan agreement dated April 4,Company’s foreign exchange forwards entered into in 2003 the loan facility was reduced to Rp150,000 million. The disbursement period changed to 18 months from the signing of the Addendum. The repayment schedule in 14 quarterly installments starting from May 21, 2004 and ending on June 21, 2007.
2004:
2003 | 2004 | ||||||||
(in millions) | (in millions) | ||||||||
Deutsche Bank | |||||||||
U.S. Dollar | 80 | 15 | |||||||
Euro | 6 | — | |||||||
Standard Chartered Bank | |||||||||
U.S. Dollar | 12 | — | |||||||
Euro | 18 | 15 | |||||||
Citibank — U.S. Dollar | — | 25 |
i. Loan Agreementforward contracts with The Export-ImportStandard Chartered Bank, which were made in 2003, had been closed and the outstanding contract with Deutsche Bank amounted to EUR1 million.
(i) | Loan Agreement with The Hongkong Shanghai Bank Corporation (“HSBC”) |
The loanJanuary 20, 2005 and interestany amount drawn down under this facility is payable in 10 semi-annual installments on June 30within 6 months from the withdrawal date. The facility bears interest at one-month Certificate of Bank Indonesia (“SBI”) plus 1% of the amount drawn down which is payable at the maturity date of the loan. On January 20, 2005, the Company drew down Rp100,000 million from the facility.
j. In December 2003, Napsindo entered into an agreement with Indosat with regards to an installation of fiber optic international link cable from Jakarta to Hongkong. Napsindo shall pay fixed revenue of US$100,000 and 30% of income to Indosat. Napsindo also3, 2004, Telkomsel entered into a sales VSAT contractLoan Agreement with PT Pundi Karya Abadi amountingDeutsche Bank AG, Jakarta (as “Arranger” and “Agent”) and Bank Central Asia (“BCA”, as “Lender”) covering a total facility of Rp170,000 million (“Facility”). The Facility bears interest at three-month SBI plus 1%, to US$120,000 (inclusivebe paid quarterly in arrears. The facility is available during the period commencing on the date of value-added tax).the agreement and ending on the earlier of sixty (60) days after the date of agreement and the date of which the Facility is fully drawn, cancelled or terminated. The repayment of amount drawn is on the first anniversary of the utilization date of the Facility. The lender (transferor), may at any time, subject to giving five business days prior notice to the Agent, transfer its rights, benefits, and obligations under this agreement to any bank or financial institution. Such transfer is conducted by way of delivery of
55. CONTINGENCIESF-118
F-113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company cannot at this time predict the likelihood or severity of an SEC enforcement action or any other legal liability or adverse consequences.
2004.
F-119
d. The Company is being inquired by Commissions for Business Competition Watch (Komisi Pengawas Persaingan Usaha) related to alleged unfair business practiceUsaha, “KPPU”) issued its verdict in providing international telecommunications services,Commission Court, which if proven, breachesdetermined that the Company had breached several articles 15, 19 and 25 of Law of the Republic of Indonesia No. 5/1999 on Anti Monopolistic Practices and Unfair Business Competition (“Competition Law”). A breach of this regulation may result in a penalty at a minimum of Rp5,000 million and at a maximum of Rp100,000 million. The Company has not accrued any amount as of December 31, 2003 because the Company is unable to estimate the likelihood of the outcome.
e. The Company has breached a covenant in the loan agreement with Citibank N.A. and Citibank International Plc which stipulatesIn addition, KPPU also indicated that the Company will not make any loans or grant any creditshould allow Warung Telkom (“kiosks”) to or forchannel international calls to other international call operators, and abolish the benefit of any person. As of June 9, 2004,clause in agreements between the Company has obtained a written waiver from Citibank International Plc with regardand Warung Telkom providers which limit Warung Telkom to entering into the AWI loan (Notes 5c, 26a and 26c).sell telecommunication services of other operators. The Company has also breached a covenant in the loan agreement with Bank Central Asia which stipulates that the Company will not make any guarantee or collateralize its assets forfiled an amount exceeding US$2 million or its equivalent. As of June 23, 2004, the Company has obtained a written waiver from Bank Central Asia with regardappeal to the Company’s time deposits collateralized for Napsindo loan (Notes 11b, 22a and 26c).Bandung District Court which on December 7, 2004, issued its verdicts in favor of the Company. Subsequently, KPPU has filed an appeal to the Indonesian Supreme Court.
F-114F-120
2002 | 2003 | 2003 | 2004 | ||||||||||||||||||||||||||||||||
Foreign | Foreign | Foreign | Foreign | ||||||||||||||||||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | Currencies | Rupiah | Currencies | Rupiah | ||||||||||||||||||||||||||||
(in thousands) | Equivalent | (in thousands) | Equivalent | (in millions) | Equivalent | (in millions) | Equivalent | ||||||||||||||||||||||||||||
Assets | Assets | Assets | |||||||||||||||||||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents | Cash and cash equivalents | |||||||||||||||||||||||||||||||||
U.S. Dollars | 349,800 | 3,127,211 | 123,536 | 1,043,400 | U.S. Dollar | 123.54 | 1,043,400 | 74.80 | 694,116 | ||||||||||||||||||||||||||
Euro | 18,148 | 170,040 | 39,583 | 421,288 | Euro | 39.58 | 421,288 | 88.10 | 1,114,704 | ||||||||||||||||||||||||||
Japanese Yen | 36 | 3 | 454 | 35 | Japanese Yen | 0.45 | 35 | 0.98 | 89 | ||||||||||||||||||||||||||
Trade accounts receivable | Trade accounts receivable | Trade accounts receivable | |||||||||||||||||||||||||||||||||
Related parties | Related parties U.S. Dollar | 9.22 | 77,925 | 3.92 | 36,375 | ||||||||||||||||||||||||||||||
U.S. Dollars | 7,984 | 71,374 | 9,224 | 77,925 | Third parties U.S. Dollar | 4.11 | 34,634 | 16.19 | 150,223 | ||||||||||||||||||||||||||
Third parties | |||||||||||||||||||||||||||||||||||
U.S. Dollars | 8,503 | 76,018 | 4,108 | 34,634 | |||||||||||||||||||||||||||||||
Other accounts receivable | Other accounts receivable | Other accounts receivable | |||||||||||||||||||||||||||||||||
U.S. Dollars | 202 | 1,808 | 12,605 | 106,258 | U.S. Dollar | 12.61 | 106,258 | 1.12 | 10,355 | ||||||||||||||||||||||||||
Japanese Yen | — | — | 5,441 | 429 | Japanese Yen | 5.44 | 429 | — | — | ||||||||||||||||||||||||||
French Franc | — | — | 4,805 | 5,447 | French Franc | 4.81 | 5,447 | — | — | ||||||||||||||||||||||||||
Netherland Guilder | — | — | 814 | 2,745 | Netherland Guilder | 0.81 | 2,745 | — | — | ||||||||||||||||||||||||||
Euro | — | — | 21 | 224 | Euro | 0.02 | 224 | — | — | ||||||||||||||||||||||||||
Other current assets | Other current assets | Other current assets | |||||||||||||||||||||||||||||||||
U.S. Dollars | 16,922 | 151,282 | 4,658 | 39,269 | U.S. Dollar | 4.66 | 39,269 | 4.61 | 42,792 | ||||||||||||||||||||||||||
Euro | — | — | 0.01 | 157 | |||||||||||||||||||||||||||||||
Advances and other non-current assets | Advances and other non-current assets | Advances and other non-current assets | |||||||||||||||||||||||||||||||||
U.S. Dollars | 2,429 | 21,711 | 12,290 | 103,651 | U.S. Dollar | 1.91 | 16,283 | 6.90 | 64,056 | ||||||||||||||||||||||||||
Escrow accounts | Escrow accounts | Escrow accounts | |||||||||||||||||||||||||||||||||
U.S. Dollars | 33,325 | 297,928 | 61,302 | 516,128 | U.S. Dollar | 61.30 | 516,128 | 3.24 | 30,059 | ||||||||||||||||||||||||||
Total Assets | Total Assets | 3,917,375 | 2,351,433 | Total Assets | 2,264,065 | 2,142,926 | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Trade accounts payable | |||||||||||||||||||||||||||||||||||
Related parties | |||||||||||||||||||||||||||||||||||
U.S. Dollars | 54,433 | 487,715 | 13,867 | 117,281 | |||||||||||||||||||||||||||||||
Euro | 2,027 | 19,007 | 2,720 | 28,947 | |||||||||||||||||||||||||||||||
Third parties | |||||||||||||||||||||||||||||||||||
U.S. Dollars | 38,342 | 343,543 | 92,677 | 783,127 | |||||||||||||||||||||||||||||||
Euro | 26,228 | 245,952 | 48 | 516 | |||||||||||||||||||||||||||||||
Great Britain Pound Sterling | 319 | 4,598 | 61 | 916 | |||||||||||||||||||||||||||||||
Japanese Yen | 3,039 | 229 | 126,925 | 10,033 | |||||||||||||||||||||||||||||||
Singapore Dollars | 1 | 3 | 144 | 717 |
F-115F-121
2003 | 2004 | |||||||||||||||||||||||||||||||||||
Foreign | Foreign | |||||||||||||||||||||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||||||||||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||||||||||||||||||||||
Liabilities | Liabilities | |||||||||||||||||||||||||||||||||||
Trade accounts payable | Trade accounts payable | |||||||||||||||||||||||||||||||||||
Related parties | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 13.87 | 117,281 | 19.13 | 177,892 | ||||||||||||||||||||||||||||||||
2002 | 2003 | Euro | 2.72 | 28,947 | — | — | ||||||||||||||||||||||||||||||
Myanmar | — | — | 0.01 | 20 | ||||||||||||||||||||||||||||||||
Foreign | Foreign | Singapore Dollar | — | — | — | 1 | ||||||||||||||||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | Third parties | ||||||||||||||||||||||||||||||||
(in thousands) | Equivalent | (in thousands) | Equivalent | U.S. Dollar | 92.68 | 783,127 | 49.57 | 460,969 | ||||||||||||||||||||||||||||
Euro | 0.05 | 516 | — | — | ||||||||||||||||||||||||||||||||
Other accounts payable | ||||||||||||||||||||||||||||||||||||
Great Britain Pound Sterling | 0.06 | 916 | 0.06 | 1,092 | ||||||||||||||||||||||||||||||||
Japanese Yen | 126.93 | 10,033 | 7.88 | 715 | ||||||||||||||||||||||||||||||||
U.S. Dollars | 9 | 77 | — | — | Singapore Dollar | 0.14 | 717 | 0.03 | 146 | |||||||||||||||||||||||||||
Accrued expenses | Accrued expenses | Accrued expenses | ||||||||||||||||||||||||||||||||||
U.S. Dollars | 17,981 | 161,116 | 28,946 | 244,925 | U.S. Dollar | 28.95 | 244,925 | 24.08 | 223,931 | |||||||||||||||||||||||||||
Japanese Yen | 252,604 | 19,069 | 14,135 | 1,117 | Japanese Yen | 14.14 | 1,117 | 20.41 | 1,852 | |||||||||||||||||||||||||||
Singapore Dollars | — | — | 189 | 940 | Singapore Dollar | 0.19 | 940 | 0.37 | 2,135 | |||||||||||||||||||||||||||
Great Britain Pound Sterling | — | — | 46 | 689 | Australian Dollar | — | — | 0.07 | 507 | |||||||||||||||||||||||||||
French Franc | — | — | 710 | 808 | Great Britain Pound Sterling | 0.05 | 689 | — | — | |||||||||||||||||||||||||||
Netherland Guilder | — | — | 482 | 1,631 | Netherland Guilder | 0.48 | 1,631 | 0.48 | 1,795 | |||||||||||||||||||||||||||
Euro | 9,633 | 90,336 | 40,698 | 433,155 | Euro | 40.77 | 433,963 | 26.54 | 336,572 | |||||||||||||||||||||||||||
Short-term bank loans | Short-term bank loans | Short-term bank loans | ||||||||||||||||||||||||||||||||||
Third parties | Third parties | |||||||||||||||||||||||||||||||||||
U.S. Dollars | 4,385 | 39,205 | 4,460 | 37,642 | U.S. Dollar | 4.46 | 37,642 | 118.46 | 1,101,633 | |||||||||||||||||||||||||||
Advances from customers and suppliers | Advances from customers and suppliers | Advances from customers and suppliers | ||||||||||||||||||||||||||||||||||
U.S. Dollars | 1,555 | 13,935 | 3,041 | 25,701 | U.S. Dollar | 3.04 | 25,701 | 0.42 | 3,947 | |||||||||||||||||||||||||||
Great Britain Pound Sterling | — | — | 1 | 7 | Great Britain Pound Sterling | — | 7 | — | — | |||||||||||||||||||||||||||
Japanese Yen | — | — | 23,940 | 1,892 | Japanese Yen | 23.94 | 1,892 | — | — | |||||||||||||||||||||||||||
Current maturities of long-term liabilities | Current maturities of long-term liabilities | Current maturities of long-term liabilities | ||||||||||||||||||||||||||||||||||
U.S. Dollars | 249,823 | 2,238,421 | 332,921 | 2,813,246 | U.S. Dollar | 332.92 | 2,813,246 | 116.29 | 1,081,478 | |||||||||||||||||||||||||||
Euro | 3,781 | 35,455 | 18,671 | 198,810 | Euro | 18.67 | 198,810 | 14.64 | 185,643 | |||||||||||||||||||||||||||
Japanese Yen | 374,909 | 28,306 | 699,163 | 55,266 | Japanese Yen | 699.16 | 55,266 | 1,142.91 | 103,688 | |||||||||||||||||||||||||||
Long-term liabilities | Long-term liabilities | Long-term liabilities | ||||||||||||||||||||||||||||||||||
U.S. Dollars | 724,193 | 6,488,764 | 699,605 | 5,913,824 | U.S. Dollar | 699.61 | 5,913,824 | 830.22 | 7,721,068 | |||||||||||||||||||||||||||
Euro | 19,226 | 180,297 | 64,976 | 691,850 | Euro | 64.98 | 691,850 | 36.60 | 464,108 | |||||||||||||||||||||||||||
Japanese Yen | 17,626,220 | 1,330,614 | 16,730,301 | 1,322,460 | Japanese Yen | 16,730.30 | 1,322,460 | 15,527.59 | 1,408,708 | |||||||||||||||||||||||||||
Total liabilities | Total liabilities | 11,726,642 | 12,685,500 | Total liabilities | 12,685,500 | 13,277,900 | ||||||||||||||||||||||||||||||
Net liabilities | Net liabilities | (7,809,267 | ) | (10,334,067 | ) | Net liabilities | (10,421,435 | ) | (11,134,974 | ) | ||||||||||||||||||||||||||
a. Extraordinary General Meeting of Shareholders
In connection with the restatement of the consolidated financial statements for the three years ended December 31, 2002, the stockholders ratified the previous declaration of dividends in the Extraordinary General Meeting of Stockholders as stated in notarial deed No. 4 dated March 10, 2004 of Notary A. Partomuan Pohan, S.H., LLM., as follows:
F-116F-122
early retirement program. The b. Amendment KSO IV Agreement with PT Mitra Global Telekomunikasi Indonesia (“MGTI”) On January 20, 2004, the Company and MGTI entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV. Under the amended KSO Agreement, for the remaining KSO period, the Company will be entitled at its sole discretion and expense to construct new telecommunication facilities in Divre IV. The Company also obtains the right to manage KSO Unit IV and assume the risk and rewards of the KSO Unit IV operation. MGTI will receive a fixed monthly payment regardless of the performance of KSO Unit IV. c. Loan Agreement with ABN-AMRO and Settlement of Payment for Pramindo Transaction On January 28, 2004, the Company signed a short-term loan agreement with ABN-AMRO Bank NV Jakarta Branch (“ABN-AMRO”) in the amount of approximately US$130,000,000. The loan will be used to re-purchase the outstanding promissory notes on March 15, 2004 which were issued for the acquisition of the Pramindo (Note 5b). The loan and interest is payable to ABN-AMRO in 10 monthly installments from March 2004 to December 2004. The loan bears floating interest rate of LIBOR + 2.75%. On March 15, 2004, the Company and Selling shareholders of Pramindo entered into the termination agreement related to acquisition of Pramindo and settled the payment of the remaining liabilities. d. Implementation of the Restructuring in Telecommunication Sector On March 30, 2004 the Minister of Communication issued Announcement No. PM.2 of 2004 regarding the Implementation of Restructuring in the Telecommunication Sector which, among others, conveys the following matters: 1. Compensation for early termination of exclusive rights The Government shall pay to TELKOM (including its KSO Partners) an amount of Rp478 billion after tax and Indosat shall pay to the Government an amount of Rp178 billion after tax. The payment of compensation shall be made gradually from the “on top” (above allocated ceiling) fund of the State Budget for the Ministry of Communications after approval by Parliament. 2. Supporting RegulationsAmendments to regulations restricting competition 1. Domestic Long Distance (DLD) and International Direct Dialing (IDD) access codes are distinctive features of the network as well as distinctive features of basic telephone services. All DLD and IDD operators use a 3 (three)-digits access code (prefix) for all parts of Indonesian territory; 2. Every customer can freely select (have free selection of) DLD and IDD operators as he/she desires in an automatic manner (normally opened) for each call he/she wishes to make.F-117PERUSAHAAN PERSEROAN (PERSERO)P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)DECEMBER 31, 2002 AND 2003, AND FOR YEARS ENDEDDECEMBER 31, 2001, 2002 AND 2003(Figures in tables are presented in millions of Rupiah, unless otherwise stated) 3. DLD and IDD fixed telecommunication network operators may provide DLD and IDD basic telephony services; 4. Furthermore, DLD and IDD operators shall be entitled to determine retail rates for customers and provide services for their customers.Regulations on Interconnection Cost-based interconnection fees shall be applicable as from January 1, 2005. Preparation shall be made within the period commencing on January 1, 2004 and ending on December 31, 2004 for the adjustment of interconnection arrangements with the assistance of consultants, which shall include: the amount of interconnection fees, cost accounting standards, reference interconnection offer (RIO) and interconnection dispute resolutions.Supervision on competition Prohibition of the abuse of position as dominant operator (dumping, cross subsidy, blocking, hampering interconnection, tied sales), as well as prohibition for dominant operator from conducting anti-competition transfer pricing. 3. Establishment of Indonesian Telecommunication Regulatory Body (BRTI) and Telecommunication Traffic Clearing System (SKTT). 4. Rebalancing Tariff a. With the elimination of cross subsidy of Long-distance Tariff by Local Tariff through the implementation of tariff rebalancing, operators are given freedom to set the local tariff and monthly subscription in accordance to market mechanism, with a minimum decrease of Domestic Long Distance Tariff of 10%. b. Accordingly,2005, the Company has adjusted the amount of tariff with the following rebalancing structure: 1. Local charges increased by an average of 28% 2. Domestic Long Distance charges decreased by an average of 20% for the 07.00 – 20.00 time band, while other time band are not increased, therefore the decrease of all DLD charges is 10% 3. Monthly subscription charges increased by an average of 12% – 25%, depending upon its customer segment. c. In addition, the Government requires operator to build a minimum of 1.4 million installed lines in 2004 up to 10.7 million installed lines in 2008. 5. Universal Service Obligation Funds for USO development are taken from contributions given by telecommunication operators in the amount of 0.75% of their gross revenue with due observance of bad debtsaccepted and interconnection charges; 6. Fixed Wireless a. FWA is included in the provision for local fixed network services;F-118PERUSAHAAN PERSEROAN (PERSERO)P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)DECEMBER 31, 2002 AND 2003, AND FOR YEARS ENDEDDECEMBER 31, 2001, 2002 AND 2003(Figures in tables are presented in millions of Rupiah, unless otherwise stated) b. FWA technology has limited mobility and is operated based on local fixed network operation permit without any automated facilities. 7. License synchronizationapproved 1,016 employees eligible for the Company and IndosatCompanyentire early retirement benefits cost of Rp734,981 million was given the right to use access code of 007 for operating international telephone network and Indosat was given the right to access code of 011 for operating long-distance fixed telephone network. e. Guaranteed Notes As part of Telkomsel’s plan to minimize foreign exchange exposures and to reduce interest charge, subsequent to December 31, 2003, Telkomsel bought back TSFL’s Guaranteed Notes from Deutsche Bank with a total face value of US$51,960,000. f. Telkomsel’s interim agreement with IndosatPursuant to the expiration of the agreement between Telkomsel and Indosat with regards of the provision of international telecommunication services to GSM mobile cellular customers,paid in April 2004 Telkomsel and Indosat have entered into an interim agreement. Under the terms of the interim agreement, Telkomsel will receive 27% of the applicable tariff for outgoing international calls from Telkomsel subscribers and Rp800 per minute for incoming international calls to Telkomsel subscribers. The interim agreement will be effective from March 1, 2004 until such date that Telkomsel and Indosat enter into a new agreement.2005.58. 56. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
(1) Description of Differences Between Indonesian GAAP and U.S. GAAP
a. Termination Benefits
(1) | Description of differences between Indonesian GAAP and U.S. GAAP |
a. Termination Benefits |
b. Foreign Exchange Differences Capitalized to Property under Construction
b. Foreign Exchange Differences Capitalized to Property Under Construction |
F-119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the construction of the qualifying asset is substantially completed and the constructed property is ready for its intended use.
c. Interest Capitalized on Property under Construction
c. Interest Capitalized on Property under Construction |
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obligation under revenue-sharing arrangements.
F-120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
participants are still active, such prior service costs are deferred and amortized systematically over the estimated remaining service period for active employees.
F-124
F-121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under U.S. GAAP, revenue from front-end fees and incremental costs up to, but not exceeding such fees, are deferred and recognized over the expected term of the customer relationship. Direct incremental costs were not significant. Revenues from calling cards are recognized upon usage or expiration.
F-125
The
expense since May 17, 2001.
stock.” The Company started consolidating the remaining 9.68% of Dayamitra on December 14, 2004 following the exercise of the option.
F-122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under U.S. GAAP, it is the Company’s policy to include differences resulting from equity transactions in associated companies in equity. Such amounts can not be released to the statement of income and consequently remain in equity indefinitely.
F-126
The Company and its subsidiaries identified their Asset Retirement Obligations by reviewing contractual agreements to identify whether the Company and its subsidiaries are required to settle any obligations as a result of the prevailing laws, statute, ordinance, written or by legal construction of a contract under the doctrine of promissory estoppel.
F-123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under U.S. GAAP, gain (loss) on saledisposal of property, plant and equipment is classified as a component of operating expenses and hence included in the determination of operating income. For
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Note | 2001 | 2002 | 2003 | Note | 2002 | 2003 | 2004 | |||||||||||||||||||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP | Net income according to the consolidated statements of income prepared under Indonesian GAAP | 4,068,391 | 8,039,709 | 6,087,227 | Net income according to the consolidated statements of income prepared under Indonesian GAAP | 8,039,709 | 6,087,227 | 6,129,209 | ||||||||||||||||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | U.S. GAAP adjustments — increase (decrease) due to: | U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||||||||||||||||||||
Termination benefits | (a | ) | 140,000 | 530,981 | (670,981 | ) | Termination benefits | (a | ) | 530,981 | (670,981 | ) | — | |||||||||||||||||||||
Capitalization of foreign exchange differences, net of related depreciation of (76,732), (79,797) and (76,756), respectively | (b | ) | 74,987 | 107,365 | 76,756 | Capitalization of foreign exchange differences, net of related depreciation of (79,797), (76,756) and (75,870), respectively | (b | ) | 107,365 | 76,756 | 1,587 | |||||||||||||||||||||||
Interest capitalized on property under construction net of related depreciation of (nil), (3,061) and (8,787), respectively | (c | ) | 19,690 | 43,045 | 39,077 | Interest capitalized on property under construction, net of related depreciation of (3,061), (8,787) and (13,392), respectively | (c | ) | 43,045 | 39,077 | 26,802 | |||||||||||||||||||||||
Revenue-sharing arrangements | (d | ) | 43,999 | 67,959 | 23,159 | Revenue-sharing arrangements | (d | ) | 67,959 | 23,159 | 155,369 | |||||||||||||||||||||||
Revaluation of property, plant and equipment | (e | ) | 4,095 | 3,929 | — | Revaluation of property, plant and equipment | (e | ) | 3,929 | — | — | |||||||||||||||||||||||
Pension | (f | ) | (19,640 | ) | 111,415 | (109,334 | ) | Pension | (f | ) | 111,415 | (109,334 | ) | 313,870 | ||||||||||||||||||||
Equity in net income/ (loss) of associated companies | (g | ) | (3,786 | ) | (182 | ) | (170 | ) | Equity in net income/ (loss) of associated companies | (g | ) | (182 | ) | (170 | ) | (177 | ) | |||||||||||||||||
Amortization of landrights | (h | ) | (6,409 | ) | (11,781 | ) | (10,212 | ) | Amortization of land rights | (h | ) | (11,781 | ) | (10,212 | ) | (13,907 | ) | |||||||||||||||||
Depreciation of equipment to be installed | (i | ) | — | 9,706 | — | Depreciation of equipment to be installed | (i | ) | 9,706 | — | — | |||||||||||||||||||||||
Revenue recognition | (j | ) | 81,429 | (89,274 | ) | (53,226 | ) | Revenue recognition | (j | ) | (89,274 | ) | (53,226 | ) | 54,159 | |||||||||||||||||||
Goodwill | (k | ) | — | 21,269 | 21,270 | Goodwill | (k | ) | 21,269 | 21,270 | 21,270 | |||||||||||||||||||||||
Capital leases | (l | ) | — | 14,241 | 6,882 | Capital leases | (l | ) | 14,241 | 6,882 | (3,435 | ) | ||||||||||||||||||||||
Adjustment for Dayamitra accounted at 100% | (m | ) | (4,191 | ) | (9,270 | ) | (24,476 | ) | Adjustment for consolidation of Dayamitra | (m | ) | (9,270 | ) | (24,476 | ) | (72,361 | ) | |||||||||||||||||
Reversal of difference due to change of equity in associated companies | (n | ) | — | (65,158 | ) | (38,425 | ) | Reversal of difference due to change of equity in associated companies | (n | ) | (65,158 | ) | (38,425 | ) | — | |||||||||||||||||||
Asset retirement obligations | (o | ) | — | — | (848 | ) | Asset retirement obligations | (o | ) | — | (848 | ) | (848 | ) |
F-124F-128
Note | 2001 | 2002 | 2003 | |||||||||||||||
Deferred income tax: | ||||||||||||||||||
Deferred income tax on equity method investments | (p | ) | — | — | 119,456 | |||||||||||||
Deferred income tax effect on U.S. GAAP adjustments | (100,942 | ) | (220,724 | ) | 323,089 | |||||||||||||
229,232 | 513,521 | (297,983 | ) | |||||||||||||||
Minority interest | 577 | 34,029 | 1,396 | |||||||||||||||
Net adjustments | 229,809 | 547,550 | (296,587 | ) | ||||||||||||||
Net income in accordance with U.S. GAAP | 4,298,200 | 8,587,259 | 5,790,640 | |||||||||||||||
Net income per share — in full Rupiah amount | 426.41 | 851.91 | 574.47 | |||||||||||||||
Net income per ADS (20 Series B shares per ADS) — in full Rupiah amount | 8,528.17 | 17,038.21 | 11,489.40 | |||||||||||||||
Note | 2002 | 2003 | 2004 | |||||||||||||||
Deferred income tax: | ||||||||||||||||||
Deferred income tax on equity method investments | (p | ) | — | 119,456 | (11,234 | ) | ||||||||||||
Deferred income tax effect on U.S. GAAP adjustments | (220,724 | ) | 323,089 | (113,712 | ) | |||||||||||||
513,521 | (297,983 | ) | 357,383 | |||||||||||||||
Minority interest | 34,029 | 1,396 | (18,019 | ) | ||||||||||||||
Net adjustments | 547,550 | (296,587 | ) | 339,364 | ||||||||||||||
Net income in accordance with U.S. GAAP | 8,587,259 | 5,790,640 | 6,468,573 | |||||||||||||||
Net income per share — in full Rupiah amount* | 425.96 | 287.23 | 320.86 | |||||||||||||||
Net income per ADS — in full Rupiah amount (40 Series B shares per ADS) | 17,038.21 | 11,489.40 | 12,834.47 | |||||||||||||||
* | The prior years’ net income per share has been restated to reflect a two-for-one stock split as resolved in the Annual General Meeting of Stockholders on July 30, 2004 (Note 1b). |
Note | 2003 | 2004 | ||||||||||||
Equity according to the consolidated balance sheets prepared under Indonesian GAAP | 17,312,877 | 20,261,342 | ||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||
Capitalization of foreign exchange differences — net of related depreciation | (b) | (550,473 | ) | (548,886 | ) | |||||||||
Interest capitalized on property under construction — net of related depreciation | (c) | 101,812 | 128,614 | |||||||||||
Revenue-sharing arrangements | (d) | (447,696 | ) | (292,327 | ) | |||||||||
Revaluation of property, plant and equipment: | (e) | |||||||||||||
Increment | (664,974 | ) | (664,974 | ) | ||||||||||
Accumulated depreciation | 664,974 | 664,974 | ||||||||||||
Pension | (f) | 122,156 | 436,026 | |||||||||||
Equity in net income/(loss) of associated companies | (g) | (18,252 | ) | (18,429 | ) | |||||||||
Amortization of landrights | (h) | (65,211 | ) | (79,118 | ) | |||||||||
Revenue recognition | (j) | (768,548 | ) | (714,389 | ) | |||||||||
Goodwill | (k) | 42,539 | 63,809 | |||||||||||
Capital leases | (l) | 21,123 | 17,688 | |||||||||||
Adjustment for consolidation of Dayamitra | (m) | (38,718 | ) | (61,728 | ) | |||||||||
Asset retirement obligations | (o) | (848 | ) | (1,696 | ) |
F-125F-129
Note | 2002 | 2003 | ||||||||||||
Equity according to the consolidated balance sheets prepared under Indonesian GAAP | 14,613,617 | 17,312,877 | ||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||
Early retirement benefits | (a) | 670,981 | — | |||||||||||
Capitalization of foreign exchange differences — net of related depreciation | (b) | (627,229 | ) | (550,473 | ) | |||||||||
Interest capitalized on property under construction — net of related depreciation | (c) | 62,735 | 101,812 | |||||||||||
Revenue-sharing arrangements | (d) | (470,855 | ) | (447,696 | ) | |||||||||
Revaluation of property, plant and equipment: | (e) | |||||||||||||
Increment | (664,974 | ) | (664,974 | ) | ||||||||||
Accumulated depreciation | 664,974 | 664,974 | ||||||||||||
Pension | (f) | 231,490 | 122,156 | |||||||||||
Equity in net loss of associated companies | (g) | (18,082 | ) | (18,252 | ) | |||||||||
Amortization of landrights | (h) | (54,999 | ) | (65,211 | ) | |||||||||
Revenue recognition | (j) | (715,322 | ) | (768,548 | ) | |||||||||
Goodwill | (k) | 21,269 | 42,539 | |||||||||||
Capital leases | (l) | 14,241 | 21,123 | |||||||||||
Adjustment for Dayamitra accounted at 100% | (m) | (14,242 | ) | (38,718 | ) | |||||||||
Asset retirement obligations | (o) | — | (848 | ) | ||||||||||
Deferred income tax: | ||||||||||||||
Deferred income tax on equity method investments | (p) | — | 52,186 | |||||||||||
Deferred income tax effect on U.S. GAAP adjustments | 132,736 | 455,825 | ||||||||||||
(767,277 | ) | (1,094,105 | ) | |||||||||||
Minority interest | 64,524 | 65,920 | ||||||||||||
Net adjustments | (702,753 | ) | (1,028,185 | ) | ||||||||||
Equity in accordance with U.S. GAAP | 13,910,864 | 16,284,692 | ||||||||||||
Note | 2003 | 2004 | |||||||||||
Deferred income tax: | |||||||||||||
Deferred income tax on equity method investments | (p) | 52,186 | 39,343 | ||||||||||
Deferred income tax effect on U.S. GAAP adjustments | 455,825 | 334,900 | |||||||||||
(1,094,105 | ) | (696,193 | ) | ||||||||||
Minority interest | 65,920 | 5,763 | |||||||||||
Net adjustments | (1,028,185 | ) | (690,430 | ) | |||||||||
Equity in accordance with U.S. GAAP | 16,284,692 | 19,570,912 | |||||||||||
F-126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The changes in stockholders’ equity in accordance with U.S. GAAP for the years ended December 31, 2001, 2002, 2003 and 20032004 are as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||||
Equity at beginning of year | Equity at beginning of year | 12,927,793 | 7,765,500 | 13,910,864 | Equity at beginning of year | 7,765,500 | 13,910,864 | 16,284,692 | ||||||||||||||||||
Changes during the year: | Changes during the year: | Changes during the year: | ||||||||||||||||||||||||
Net income under U.S. GAAP | 4,298,200 | 8,587,259 | 5,790,640 | Net income under U.S. GAAP | 8,587,259 | 5,790,640 | 6,468,573 | |||||||||||||||||||
Dividends | (888,654 | ) | (2,125,055 | ) | (3,338,109 | ) | Dividends | (2,125,055 | ) | (3,338,109 | ) | (3,186,991 | ) | |||||||||||||
Difference due to change in equity of investees | (119,961 | ) | — | — | Other comprehensive income, net of tax | (20,802 | ) | (78,703 | ) | 4,638 | ||||||||||||||||
Other comprehensive income, net of nil tax | 3,612 | (20,802 | ) | (78,703 | ) | Common control transaction | (296,038 | ) | — | — | ||||||||||||||||
Common control transaction | (8,455,490 | ) | (296,038 | ) | — | |||||||||||||||||||||
Equity at end of year | Equity at end of year | 7,765,500 | 13,910,864 | 16,284,692 | Equity at end of year | 13,910,864 | 16,284,692 | 19,570,912 | ||||||||||||||||||
2002 | 2003 | 2003 | 2004 | |||||||||||||
Consolidated balance sheets | ||||||||||||||||
Current assets | 10,628,933 | 9,411,469 | 9,411,469 | 9,610,433 | ||||||||||||
Non-current assets | 33,994,014 | 41,935,581 | 41,935,581 | 47,091,387 | ||||||||||||
Total assets | 44,622,947 | 51,347,050 | 51,347,050 | 56,701,820 | ||||||||||||
Current liabilities | 9,037,200 | 11,207,431 | 11,207,431 | 11,650,470 | ||||||||||||
Non-current liabilities | 19,143,607 | 20,212,692 | 20,212,692 | 20,547,769 | ||||||||||||
Total liabilities | 28,180,807 | 31,420,123 | 31,420,123 | 32,198,239 | ||||||||||||
Minority interest in net assets of subsidiaries | 2,531,276 | 3,642,235 | 3,642,235 | 4,932,669 | ||||||||||||
Equity | 13,910,864 | 16,284,692 | 16,284,692 | 19,570,912 | ||||||||||||
Total liabilities and equity | 44,622,947 | 51,347,050 | 51,347,050 | 56,701,820 | ||||||||||||
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(3) | Additional |
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||||
Consolidated income before tax in accordance with U.S. GAAP | Consolidated income before tax in accordance with U.S. GAAP | 6,880,064 | 12,483,147 | 10,711,267 | Consolidated income before tax in accordance with U.S. GAAP | 12,483,147 | 10,711,267 | 12,570,911 | ||||||||||||||||||
Income tax in accordance with U.S. GAAP at 30% statutory tax rate | Income tax in accordance with U.S. GAAP at 30% statutory tax rate | 2,064,002 | 3,744,927 | 3,213,380 | Income tax in accordance with U.S. GAAP at 30% statutory tax rate | 3,744,927 | 3,213,380 | 3,771,273 | ||||||||||||||||||
Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | ||||||||||||||||||||||||
Net periodic post-retirement benefits cost | 111,922 | 183,597 | 188,375 | Net periodic post-retirement benefit cost | 183,597 | 188,375 | 139,834 | |||||||||||||||||||
Amortization of discount on promissory notes and interest expense | 28,515 | 58,298 | 132,876 | Amortization of discount on promissory notes and other borrowing costs | 58,298 | 132,876 | 136,994 | |||||||||||||||||||
Amortization of intangible assets | 16,713 | 55,616 | — | Amortization of intangible assets | 55,616 | — | — | |||||||||||||||||||
Tax penalty | — | 72,471 | 16,521 | Tax penalty | 72,471 | 16,521 | 1,941 | |||||||||||||||||||
Employee benefits | 18,707 | 24,714 | 6,342 | Employee benefits | 24,714 | 6,342 | 24,719 | |||||||||||||||||||
Permanent differences of the KSO Units | 12,209 | (8,767 | ) | 16,739 | Permanent differences of the KSO Units | (8,767 | ) | 16,739 | 17,213 | |||||||||||||||||
Amortization of landrights | 1,922 | 3,534 | 3,064 | Income which was already subject to final tax | (140,982 | ) | (61,876 | ) | (30,743 | ) | ||||||||||||||||
Income which was already subject to final tax | (169,447 | ) | (140,982 | ) | (61,876 | ) | Gain on sale of Telkomsel’s shares | (949,826 | ) | — | — | |||||||||||||||
Decline in value of investments | 23,288 | — | — | Equity in net (income) loss of associated companies | 22,465 | (990 | ) | 3,273 | ||||||||||||||||||
Gain on sale of Telkomsel’s shares | — | (949,826 | ) | — | Others | 57,182 | (92,822 | ) | 63,514 | |||||||||||||||||
Equity in net (income) loss of associated companies | 26,842 | 22,465 | (990 | ) | ||||||||||||||||||||||
Others | (26,837 | ) | 53,648 | (95,886 | ) | Total | (625,232 | ) | 205,165 | 356,745 | ||||||||||||||||
Total | 43,834 | (625,232 | ) | 205,165 | ||||||||||||||||||||||
Provision for income tax in accordance with U.S. GAAP | Provision for income tax in accordance with U.S. GAAP | 2,107,836 | 3,119,695 | 3,418,545 | Provision for income tax in accordance with U.S. GAAP | 3,119,695 | 3,418,545 | 4,128,018 | ||||||||||||||||||
F-128F-131
2002 | 2003 | 2003 | 2004 | |||||||||||||
Deferred tax assets | ||||||||||||||||
Accounts receivable | 151,955 | 145,918 | ||||||||||||||
Trade accounts receivable | 145,918 | 228,889 | ||||||||||||||
Inventories | 14,614 | 11,528 | 11,528 | 15,494 | ||||||||||||
Tax loss carryforwards | 16,254 | 285,856 | 285,856 | 239,501 | ||||||||||||
Provision for long service awards | 146,769 | 142,084 | 142,084 | 164,750 | ||||||||||||
Deferral of revenue | 214,597 | 230,564 | 230,564 | 220,538 | ||||||||||||
Long-term investments | 52,605 | 38,048 | 38,048 | 44,029 | ||||||||||||
Liabilities of business acquisitions | — | 1,009,932 | ||||||||||||||
Provision for employee benefits | 131,757 | 53,692 | ||||||||||||||
Others | — | 72,730 | 72,730 | 40,532 | ||||||||||||
Provision for employee benefits | — | 131,757 | ||||||||||||||
Total | 596,794 | 1,058,485 | 1,058,485 | 2,017,357 | ||||||||||||
Deferred tax liabilities | ||||||||||||||||
Property, plant and equipment | (2,406,220 | ) | (2,471,577 | ) | (2,471,577 | ) | (3,215,173 | ) | ||||||||
Intangible assets | (1,115,897 | ) | (1,527,796 | ) | (1,527,796 | ) | (1,592,645 | ) | ||||||||
Pension costs | (79,303 | ) | (125,010 | ) | ||||||||||||
Pension benefit costs | (125,010 | ) | (153,177 | ) | ||||||||||||
Prepaid expenses and other receivables | (21,618 | ) | (49,519 | ) | (49,519 | ) | (34,290 | ) | ||||||||
Others | (842 | ) | — | |||||||||||||
Total | (3,623,880 | ) | (4,173,902 | ) | (4,173,902 | ) | (4,995,285 | ) | ||||||||
Total deferred tax liabilities — net | (3,027,086 | ) | (3,115,417 | ) | (3,115,417 | ) | (2,977,928 | ) | ||||||||
Benefits enjoyed by pensioners fall under the category of benefits in kind which are non-deductible expenses under Indonesian tax laws.
b. Fair Value of Financial Instruments
b. Fair Value of Financial Instruments Cash and Cash Equivalentscash equivalents and Temporary Investmentstemporary investments
F-129F-132
Carrying Amount | Fair Value | |||||||||||||||||
2002 | ||||||||||||||||||
Cash and cash equivalents | 5,699,070 | 5,699,070 | ||||||||||||||||
Temporary investments | 573,000 | 573,000 | ||||||||||||||||
Short-term bank loans | 39,205 | 39,205 | ||||||||||||||||
Long-term liabilities: | ||||||||||||||||||
Two-step loans | 8,570,142 | 9,866,256 | ||||||||||||||||
Suppliers’ credit loans | 338,697 | 361,388 | ||||||||||||||||
Bridging loan | 95,517 | 101,213 | ||||||||||||||||
Bonds | 975,992 | 1,050,000 | ||||||||||||||||
Guaranteed notes | 1,337,518 | 1,441,575 | ||||||||||||||||
Liabilities for acquisitions of subsidiaries | 3,004,935 | 3,235,312 | Carrying Amount | Fair Value | ||||||||||||||
Bank loans | 247,432 | 268,309 | ||||||||||||||||
2003 | 2003 | 2003 | ||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents | 5,094,472 | 5,094,472 | Cash and cash equivalents | 5,094,472 | 5,094,472 | ||||||||||||
Temporary investments | Temporary investments | 4,006 | 4,006 | Temporary investments | 4,006 | 4,006 | ||||||||||||
Short-term bank loans | Short-term bank loans | 37,642 | 37,642 | Short-term bank loans | 37,642 | 37,642 | ||||||||||||
Long-term liabilities: | Long-term liabilities: | Long-term liabilities: | ||||||||||||||||
Two-step loans | 7,691,045 | 9,230,697 | Two-step loans | 7,691,045 | 9,230,697 | |||||||||||||
Guaranteed notes | 1,121,224 | 1,452,826 | Guaranteed notes | 1,121,224 | 1,452,826 | |||||||||||||
Bonds | 981,278 | 1,265,606 | Bonds | 981,278 | 1,265,606 | |||||||||||||
Bank loans | 2,924,590 | 3,140,373 | Bank loans | 2,924,590 | 3,140,373 | |||||||||||||
Liabilities for acquisitions of subsidiaries | 2,334,749 | 2,498,138 | Liabilities of business acquisitions | 2,334,749 | 2,498,138 | |||||||||||||
Suppliers’ credit loans | 165,629 | 194,006 | Suppliers’ credit loans | 165,629 | 194,006 | |||||||||||||
Bridging loan | 50,365 | 52,393 | Bridging loan | 50,365 | 52,393 | |||||||||||||
Other | 9,153 | 9,153 | Other | 9,153 | 9,153 | |||||||||||||
2004 | 2004 | |||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents | 4,856,123 | 4,856,123 | |||||||||||||||
Temporary investments | Temporary investments | 19,949 | 19,949 | |||||||||||||||
Short-term bank loans | Short-term bank loans | 1,101,633 | 1,101,633 | |||||||||||||||
Long-term liabilities: | Long-term liabilities: | |||||||||||||||||
Two-step loans | 6,018,705 | 6,983,321 | ||||||||||||||||
Guaranteed notes | 736,174 | 863,184 | ||||||||||||||||
Bonds | 986,564 | 1,245,208 | ||||||||||||||||
Bank loans | 2,378,315 | 2,462,916 | ||||||||||||||||
Liabilities of business acquisitions | 4,317,225 | 5,033,748 | ||||||||||||||||
Medium-term notes | 1,077,703 | 1,100,032 |
F-133
i. Fair values presented do not take into consideration the effect of future currency fluctuations. |
F-130
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ii. Estimated fair values are not necessarily indicative of the amounts that the Company and its subsidiary would record upon disposal/termination of the financial instruments. |
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Net income under U.S. GAAP | 4,298,200 | 8,587,259 | 5,790,640 | 8,587,259 | 5,790,640 | 6,468,573 | ||||||||||||||||||
Unrealized gain (loss) in value of securities | (42 | ) | 207 | — | ||||||||||||||||||||
Unrealized holding gain on available-for-sale securities | 207 | — | 884 | |||||||||||||||||||||
Foreign exchange translation of associates | 3,654 | (21,009 | ) | (78,703 | ) | (21,009 | ) | (78,703 | ) | 3,754 | ||||||||||||||
4,301,812 | 8,566,457 | 5,711,937 | 8,566,457 | 5,711,937 | 6,473,211 | |||||||||||||||||||
inof available-for-sale securities. The foreign exchange translation of associates is reported net of income tax of nil, Rp67,270 million and Rp1,609 million for the value of securities.years ended December 31, 2002, 2003 and 2004, respectively. The components of accumulated other comprehensive income (loss) are as follows:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Unrealized losses in value of securities | (207 | ) | — | — | ||||||||||||||||||||
Unrealized holding gain on available-for-sale securities | — | — | 884 | |||||||||||||||||||||
Foreign exchange translation of associates | 256,674 | 235,665 | 156,962 | 235,665 | 156,962 | 160,716 | ||||||||||||||||||
256,467 | 235,665 | 156,962 | 235,665 | 156,962 | 161,600 | |||||||||||||||||||
F-134
The Company |
Pension | Health Care | |||||||||||||||||||||||||||||||||||||||||||||||
Pension | Health Care | |||||||||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2001 | 2002 | 2003 | |||||||||||||||||||||||||||||||||||||||||||
Components of Net Periodic Pension Cost | ||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Periodic Benefit Cost | ||||||||||||||||||||||||||||||||||||||||||||||||
Service cost | 59,629 | 90,869 | 119,089 | 46,689 | 69,345 | 80,599 | 90,869 | 119,089 | 137,264 | 83,956 | 88,394 | 76,163 | ||||||||||||||||||||||||||||||||||||
Interest cost | 277,077 | 418,044 | 537,797 | 298,541 | 424,834 | 493,596 | 418,044 | 537,797 | 740,494 | 424,834 | 493,596 | 411,110 | ||||||||||||||||||||||||||||||||||||
Expected return on plan assets | (266,325 | ) | (343,121 | ) | (421,706 | ) | (49,011 | ) | (33,744 | ) | (56,004 | ) | (343,121 | ) | (421,706 | ) | (436,672 | ) | (33,744 | ) | (56,004 | ) | (61,084 | ) | ||||||||||||||||||||||||
Net amortization and deferral | 61,354 | 110,557 | 186,879 | 78,291 | 106,501 | 123,244 | ||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service cost (gain) | 115,495 | 201,265 | 201,265 | (395 | ) | (367 | ) | (367 | ) | |||||||||||||||||||||||||||||||||||||||
Recognized actuarial loss (gain) | (33,572 | ) | (43,020 | ) | 57,641 | 80,683 | 99,286 | 52,006 | ||||||||||||||||||||||||||||||||||||||||
Amortization of transition obligation | 28,634 | 28,634 | 28,634 | 26,213 | 24,325 | 24,325 | ||||||||||||||||||||||||||||||||||||||||||
Curtailment | — | — | — | — | 49,576 | — | — | — | — | 49,576 | — | — | ||||||||||||||||||||||||||||||||||||
Net periodic pension cost | 131,735 | 276,349 | 422,059 | 374,510 | 616,512 | 641,435 | ||||||||||||||||||||||||||||||||||||||||||
Net periodic benefit cost | 276,349 | 422,059 | 728,626 | 631,123 | 649,230 | 502,153 | ||||||||||||||||||||||||||||||||||||||||||
Amounts charged to KSO Units under contractual agreement | (25,207 | ) | (29,896 | ) | (16,369 | ) | (14,611 | ) | (7,795 | ) | (9,913 | ) | ||||||||||||||||||||||||||||||||||||
Total net periodic benefit cost less amounts charged to KSO Units | 251,142 | 392,163 | 712,257 | 616,512 | 641,435 | 492,240 | ||||||||||||||||||||||||||||||||||||||||||
F-131F-135
A summary of projected benefit obligation and funded status of the plans wereplan and the net amount recognized in the Company’s balance sheets as follows:of December 31, 2003 and 2004:
Pension | Health Care | Pension | Health Care | |||||||||||||||||||||||||||||
2002 | 2003 | 2002 | 2003 | 2003 | 2004 | 2003 | 2004 | |||||||||||||||||||||||||
Change in benefit obligation | ||||||||||||||||||||||||||||||||
Beginning of year | 2,289,134 | 4,248,110 | 3,286,991 | 3,812,781 | ||||||||||||||||||||||||||||
Benefit obligation at beginning of year | 4,248,110 | 6,852,923 | 3,843,604 | 3,787,389 | ||||||||||||||||||||||||||||
Service cost | 90,869 | 119,089 | 69,345 | 80,599 | 119,089 | 137,264 | 88,394 | 76,163 | ||||||||||||||||||||||||
Interest cost | 418,044 | 537,797 | 424,834 | 493,596 | 537,797 | 740,494 | 493,596 | 411,110 | ||||||||||||||||||||||||
Employee contributions | 31,939 | 40,530 | — | — | ||||||||||||||||||||||||||||
Plan participants’ contributions | 35,173 | 43,906 | — | — | ||||||||||||||||||||||||||||
Actuarial loss (gain) | 2,284,868 | (155,128 | ) | (539,593 | ) | 529,618 | ||||||||||||||||||||||||||
Benefits paid | (186,805 | ) | (222,421 | ) | (70,491 | ) | (93,420 | ) | (372,114 | ) | (304,277 | ) | (98,612 | ) | (123,275 | ) | ||||||||||||||||
Plan amendment | 1,676,601 | — | — | — | ||||||||||||||||||||||||||||
Actuarial (gain) loss | (71,672 | ) | 2,129,818 | 102,102 | (544,785 | ) | ||||||||||||||||||||||||||
Benefit obligation at end of year | 4,248,110 | 6,852,923 | 3,812,781 | 3,748,771 | 6,852,923 | 7,315,182 | 3,787,389 | 4,681,005 | ||||||||||||||||||||||||
Change in plan assets | ||||||||||||||||||||||||||||||||
Fair value of plan assets at beginning of year | 2,571,714 | 3,099,648 | 330,461 | 343,896 | 3,099,648 | 3,671,309 | 374,446 | 505,340 | ||||||||||||||||||||||||
Employer contributions | 359,725 | 521,816 | 59,543 | 180,580 | ||||||||||||||||||||||||||||
Actual return on plan assets | 343,121 | 421,706 | 53,287 | 56,004 | 422,278 | 633,605 | 41,033 | 32,173 | ||||||||||||||||||||||||
Employer contribution | 486,324 | 839,980 | 188,473 | 724,530 | ||||||||||||||||||||||||||||
Plan participants’ contributions | 35,173 | 43,906 | — | — | ||||||||||||||||||||||||||||
Benefits paid | (186,805 | ) | (222,421 | ) | (79,852 | ) | (98,612 | ) | (372,114 | ) | (304,277 | ) | (98,612 | ) | (123,275 | ) | ||||||||||||||||
Actuarial gain (loss) | 11,893 | (149,440 | ) | (19,543 | ) | (14,972 | ) | |||||||||||||||||||||||||
Fair value of plan assets at end of year | 3,099,648 | 3,671,309 | 343,896 | 466,896 | 3,671,309 | 4,884,523 | 505,340 | 1,138,768 | ||||||||||||||||||||||||
Funded status | (1,148,462 | ) | (3,181,614 | ) | (3,468,885 | ) | (3,281,875 | ) | (3,181,614 | ) | (2,430,659 | ) | (3,282,049 | ) | (3,542,237 | ) | ||||||||||||||||
Unrecognized prior service cost (gain) | 2,264,095 | 2,062,830 | (2,301 | ) | (1,934 | ) | 2,062,830 | 1,861,565 | (1,934 | ) | (1,566 | ) | ||||||||||||||||||||
Unrecognized actuarial net (gain) loss | (943,576 | ) | 1,378,701 | 1,576,793 | 952,885 | |||||||||||||||||||||||||||
Unrecognized net actuarial loss | 1,378,701 | 974,763 | 952,885 | 1,459,408 | ||||||||||||||||||||||||||||
Unrecognized net transition obligation | 177,525 | 148,891 | 291,899 | 267,574 | 148,891 | 120,257 | 267,574 | 243,249 | ||||||||||||||||||||||||
Net amount recognized | 349,582 | 408,808 | (1,602,494 | ) | (2,063,350 | ) | 408,808 | 525,926 | (2,063,524 | ) | (1,841,146 | ) | ||||||||||||||||||||
Pension | ||||||||
2002 | 2003 | |||||||
Accumulated benefit obligation (ABO) | 3,436,184 | 4,258,022 | ||||||
Fair value of plan asset | (3,099,648 | ) | (3,671,309 | ) | ||||
336,536 | 586,713 | |||||||
Excess of ABO over fair value of plan assets | 336,536 | 586,713 | ||||||
Prepaid pension expense | 349,582 | 408,808 | ||||||
Additional minimum liability under U.S. GAAP | 686,118 | 995,521 | ||||||
Unrecognized prior service cost — intangible asset | 686,118 | 995,521 | ||||||
Pension | ||||||||
2003 | 2004 | |||||||
Accumulated benefit obligation | 4,258,022 | 4,656,605 | ||||||
Fair value of plan asset | (3,671,309 | ) | (4,884,523 | ) | ||||
Unfunded accumulated benefits (required minimum liability) | 586,713 | — | ||||||
Overfunded accumulated benefits | — | (227,918 | ) | |||||
Prepaid pension cost | 408,808 | 525,926 | ||||||
Additional liability under U.S. GAAP | 995,521 | — | ||||||
Intangible asset | 995,521 | — | ||||||
F-136
F-132
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The assumptions used by the independent actuary to determine the benefit obligation and net periodic pensionbenefit cost of the planplans as of December 31, 2001, 2002, 2003 and 20032004 were as follows:
Pension | Health Care | Pension | Health Care | |||||||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2001 | 2002 | 2003 | 2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||||||||||||||||||||
Discount rate | 13 | % | 13 | % | 11 | % | 13 | % | 13 | % | 11 | % | 13 | % | 11 | % | 11 | % | 13 | % | 11 | % | 11 | % | ||||||||||||||||||||||||
Expected long-term return on plan assets | 13 | % | 13 | % | 11 | % | 13 | % | 13 | % | 11 | % | 13 | % | 11 | % | 10.5 | % | 13 | % | 11 | % | 8 | % | ||||||||||||||||||||||||
Rate of compensation increase | 6 | % | 6 | % | 8 | % | — | — | — | 6 | % | 8 | % | 8 | % | — | — | — |
2001, 2002, 2003 and 20032004 are as follow:
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||
Health care cost trend assumed for next year | 16 | % | 14 | % | 12 | % | 14% | 12% | 12% | |||||||||||||||
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 10 | % | 10 | % | 8 | % | 10% | 8% | 8% | |||||||||||||||
Year that the rate reaches the ultimate trend rate | 2005 | 2005 | 2006 | 2005 | 2006 | 2007 |
actuary.
The expected long-term return on plan assets is based on the average rate of earnings expected on the funds invested or to be invested.
1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | 128,311 | (99,603 | ) | |||||
Effect on post-retirement benefit obligation | 916,961 | (720,657 | ) |
The Company’s pension plan weighted average asset allocation at December 31, 2002 and 2003, by asset category, is as follows:
Allocation | ||||||||||||
of Plan | ||||||||||||
Assets as of | ||||||||||||
Expected | December 31 | |||||||||||
Allocation | ||||||||||||
2004 | 2002 | 2003 | ||||||||||
Debt securities | 68 | % | 7 | % | 24 | % | ||||||
Deposit securities | 21 | % | 82 | % | 67 | % | ||||||
Equity securities | 7 | % | 7 | % | 5 | % | ||||||
Real estate | 1 | % | 2 | % | 2 | % | ||||||
Other | 3 | % | 2 | % | 2 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
F-133F-137
Plan Assets | ||||||||
as of | ||||||||
December 31 | ||||||||
2003 | 2004 | |||||||
Asset Category | ||||||||
Debt securities | 24 | % | 71 | % | ||||
Deposit securities | 67 | % | 17 | % | ||||
Equity securities | 5 | % | 7 | % | ||||
Real estate | 2 | % | 1 | % | ||||
Other | 2 | % | 4 | % | ||||
Total | 100 | % | 100 | % | ||||
Plan Assets | ||||||||||||||||
Allocation | as of | |||||||||||||||
of Plan | December 31 | |||||||||||||||
Assets as of | ||||||||||||||||
December 31 | 2003 | 2004 | ||||||||||||||
2002 | 2003 | |||||||||||||||
Asset Category | ||||||||||||||||
Debt securities | — | — | — | 15 | % | |||||||||||
Deposit securities | 98 | % | 98 | % | 98 | % | 84 | % | ||||||||
Equity securities | — | — | ||||||||||||||
Real estate | — | — | ||||||||||||||
Other | 2 | % | 2 | % | 2 | % | 1 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Expected Future Benefit Payments
The expected benefit payments are as follows:
Pension | Health Care | |||||||
2004 | 242,312 | 100,054 | ||||||
2005 | 282,056 | 114,866 | ||||||
2006 | 316,589 | 131,507 | ||||||
2007 | 367,143 | 148,374 | ||||||
2008 | 437,514 | 165,132 | ||||||
2009 – 2013 | 3,503,488 | 1,170,330 |
Pension | ||||||||||||
2001 | 2002 | 2003 | ||||||||||
Service cost | 2,247 | 4,021 | 4,679 | |||||||||
Interest cost | 1,315 | 2,395 | 3,337 | |||||||||
Expected return on assets | (2,417 | ) | (2,741 | ) | (1,013 | ) | ||||||
Net amortization and deferral | (125 | ) | 437 | 1,045 | ||||||||
Net periodic benefit cost | 1,020 | 4,112 | 8,048 | |||||||||
F-134F-138
Pension | Health Care | |||||||
2005 | 337,588 | 125,751 | ||||||
2006 | 403,314 | 143,629 | ||||||
2007 | 360,334 | 164,356 | ||||||
2008 | 423,202 | 185,685 | ||||||
2009 | 514,794 | 207,564 | ||||||
2010 – 2014 | 3,694,356 | 1,457,765 |
Telkomsel |
Pension Plan | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Service cost | 4,021 | 4,679 | 6,300 | |||||||||
Interest cost | 2,395 | 3,337 | 5,199 | |||||||||
Expected return on plan assets | (2,741 | ) | (1,013 | ) | (824 | ) | ||||||
Amortization of prior service cost | — | — | 125 | |||||||||
Recognized actuarial loss (gain) | (21 | ) | 587 | 1,157 | ||||||||
Amortization of transition obligation | 458 | 458 | 458 | |||||||||
Net periodic benefit cost | 4,112 | 8,048 | 12,415 | |||||||||
A summaryF-139
2002 | 2003 | |||||||
Vested benefits | 5,049 | 9,185 | ||||||
Accumulated benefit obligation | 11,073 | 21,921 | ||||||
Projected benefit obligation | 28,060 | 47,645 | ||||||
Plan assets at fair value | 27,918 | 8,504 | ||||||
Excess of plan assets over projected benefit obligation | (142 | ) | (39,141 | ) | ||||
Unrecognized net transition obligations | 7,564 | 7,106 | ||||||
Unrecognized prior service cost | — | 2,173 | ||||||
Unrecognized net (gain) loss | (667 | ) | 23,831 | |||||
Prepaid (unfunded) pension cost before adjustment for minimum liability | 6,755 | (6,031 | ) | |||||
Additional minimum liability | (1,359 | ) | (7,386 | ) | ||||
Prepaid (unfunded) pension cost after adjustment for minimum liability | 5,396 | (13,417 | ) | |||||
2003 | 2004 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 28,060 | 47,646 | ||||||
Service cost | 4,679 | 6,300 | ||||||
Interest cost | 3,337 | 5,199 | ||||||
Plan participants’ contributions | 2,001 | — | ||||||
Actuarial loss | 9,777 | — | ||||||
Benefits paid | (208 | ) | — | |||||
Benefit obligation at end of year | 47,646 | 59,145 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 6,063 | 8,504 | ||||||
Actual return on plan assets | (2,617 | ) | 2,678 | |||||
Employer contribution | 3,265 | — | ||||||
Plan participants’ contributions | 2,001 | — | ||||||
Benefits paid | (208 | ) | — | |||||
Fair value of plan assets at end of year | 8,504 | 11,182 | ||||||
Funded status | (39,142 | ) | (47,963 | ) | ||||
Unrecognized prior service cost | 2,173 | 2,048 | ||||||
Unrecognized net actuarial loss | 23,831 | 20,820 | ||||||
Unrecognized transition obligation | 7,106 | 6,648 | ||||||
Net amount recognized | (6,032 | ) | (18,447 | ) | ||||
2003 | 2004 | |||||||
Accumulated benefit obligation | 21,921 | 26,045 | ||||||
Fair value of plan assets | (8,504 | ) | (11,182 | ) | ||||
Unfunded accumulated benefits (required minimum liability) | 13,417 | 14,863 | ||||||
Accrued pension cost | (6,032 | ) | (18,447 | ) | ||||
Additional liability under U.S. GAAP | 7,385 | — | ||||||
Intangible asset | 7,385 | — | ||||||
F-140
2001 | 2002 | 2003 | ||||||||||
Discount rate | 12 | % | 12 | % | 11 | % | ||||||
Salary growth rate | 10 | % | 10 | % | 9 | % | ||||||
Expected long term return on assets | 12 | % | 12 | % | 7.5 | % |
2002 | 2003 | 2004 | ||||||||||
Discount rate | 12 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 12 | % | 7.5 | % | 7.5 | % | ||||||
Rate of compensation increase | 10 | % | 9 | % | 9 | % |
f. Recent Accounting Pronouncements |
F-135F-141
other than small business issuers, for all other types of variable interest entities is required in financial statements for periods ending after March 15, 2004. The adoption of this standard did not have a material impact on the Company’s financial statements.
SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. In May 2003, the FASB issued SFAS No. 150 which establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It also include required disclosures for financial instruments within its scope. For the Company, SFAS No. 150 was effective for instruments entered into or modified after May 31, 2003 and otherwise will be effective at the beginning of the first financial year beginning after June 15, 2003. FASB Staff Position No. FAS 150-3 deferred certain provisions of SFAS No. 150 for certain mandatorily redeemable non-controlling interests. The Company currently does not have any financial instruments that are within the scope of SFAS No. 150.
EITF Issue 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables”. The Issue addresses a vendor’s accounting for transactions involving the delivery of more than one product or service, and when it is necessary to separate the transaction into individual component deliverables, each with its own separate earnings process. If the conditions requiring separate revenue recognition exist, revenue is allocated among the different deliverables based on their relative fair values (the relative fair value of each of the component deliverables to the aggregated relative fair value of the bundled deliverables), with revenue for each component deliverable recognized when the revenue is realized and earned. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003 with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s financial statements.
F-136
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES |
2001 | 2002 | 2003 | 2002 | 2003 | 2004 | |||||||||||||||||||||
Net income | Net income | 4,068,391 | 8,039,709 | 6,087,227 | Net income | 8,039,709 | 6,087,227 | 6,129,209 | ||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation of property, plant and equipment | 3,473,370 | 4,779,520 | 6,438,557 | |||||||||||||||||||||||
Depreciation of property, plant and equipment | 2,869,772 | 3,473,370 | 4,779,520 | Interest income | (479,802 | ) | (366,024 | ) | (317,941 | ) | ||||||||||||||||
Interest income | (571,586 | ) | (479,802 | ) | (366,024 | ) | Interest expense | 1,582,750 | 1,383,446 | 1,270,136 | ||||||||||||||||
Interest expense | 1,329,642 | 1,582,750 | 1,383,446 | Foreign exchange (gain) loss | (723,831 | ) | (363,505 | ) | 1,192,842 | |||||||||||||||||
Foreign exchange (gain) loss | (811,933 | ) | (723,831 | ) | (363,505 | ) | Equity in net income of associated companies | (4,598 | ) | (2,819 | ) | (3,420 | ) | |||||||||||||
Equity in net (income) loss of associated companies | 85,686 | (4,598 | ) | (2,819 | ) | (Gain) loss on sale of property, plant and equipment | (130,450 | ) | (182,883 | ) | 26,089 | |||||||||||||||
Gain on sale of property, plant and equipment | (10,944 | ) | (130,450 | ) | (182,883 | ) | Loss on redemption of Telkomsel’s bonds | — | — | 44,628 | ||||||||||||||||
(Gain) loss on sale of trading and investment securities | — | (3,196,380 | ) | 46,595 | (Gain) loss on sale of trading and investment securities | (3,196,380 | ) | 46,595 | — | |||||||||||||||||
Amortization of intangible assets | 55,709 | 187,990 | 730,659 | Amortization of goodwill and other intangible assets | 187,990 | 730,659 | 872,330 | |||||||||||||||||||
Amortization of unearned income | (85,201 | ) | (59,691 | ) | (61,812 | ) | Amortization of unearned income | (59,691 | ) | (61,812 | ) | (93,164 | ) | |||||||||||||
Amortization of deferred charges | 36,014 | 11,903 | 26,555 | Amortization of deferred charges | 11,903 | 26,555 | 25,751 | |||||||||||||||||||
Net periodic postretirement benefit cost | 374,510 | 616,512 | 641,435 | Net periodic post-retirement benefit cost | 616,512 | 641,435 | 492,240 | |||||||||||||||||||
Net periodic long service award benefit cost | 94,539 | 289,922 | 207,126 | Net periodic long service award benefit cost | 289,922 | 219,239 | 159,323 | |||||||||||||||||||
Provision for doubtful accounts and inventory obsolescence | 342,900 | 31,103 | 326,419 | Provision for doubtful accounts and inventory obsolescence | 31,103 | 326,419 | 357,096 | |||||||||||||||||||
Income tax expense | 2,006,895 | 2,898,971 | 3,861,090 | Income tax expense | 2,898,971 | 3,861,090 | 4,003,072 | |||||||||||||||||||
Minority interest in net income of subsidiaries | 474,605 | 810,222 | 1,503,478 | Minority interest in net income of subsidiaries | 810,222 | 1,503,478 | 1,956,301 | |||||||||||||||||||
Changes in assets and liabilities: | Changes in assets and liabilities: | Changes in assets and liabilities: | ||||||||||||||||||||||||
Trade accounts receivable | (980,196 | ) | (373,125 | ) | (827,772 | ) | Trade accounts receivable | (373,125 | ) | (827,772 | ) | (670,103 | ) | |||||||||||||
Other accounts receivable | (78,930 | ) | 882 | 6,512 | Other accounts receivable | 882 | 14,579 | 105,670 | ||||||||||||||||||
Inventories | (51,278 | ) | 31,398 | 76,486 | Inventories | 31,398 | 76,486 | (58,329 | ) | |||||||||||||||||
Prepaid expenses | (153,415 | ) | (17,936 | ) | (344,731 | ) | Prepaid expenses | (17,936 | ) | (84,690 | ) | (179,573 | ) | |||||||||||||
Prepaid taxes | — | (84,409 | ) | (127,607 | ) | Prepaid taxes | (84,409 | ) | (127,607 | ) | 173,189 | |||||||||||||||
Trade accounts payable | 134,237 | 1,303,288 | 593,826 | Prepaid pension benefit costs | — | (260,041 | ) | 196,960 | ||||||||||||||||||
Other accounts payable | 23,035 | 166,383 | (27,663 | ) | Trade accounts payable | 1,303,288 | 593,826 | (47,618 | ) | |||||||||||||||||
Taxes payable | 319,412 | (1,601,223 | ) | 477,961 | Other accounts payable | 166,383 | (27,837 | ) | (96,022 | ) | ||||||||||||||||
Accrued expenses | 225,170 | 347,910 | (760,763 | ) | Taxes payable | (1,601,223 | ) | 477,961 | (105,991 | ) | ||||||||||||||||
Unearned income | 60,223 | 134,850 | 317,650 | Accrued expenses | 347,910 | (779,917 | ) | (65,078 | ) | |||||||||||||||||
Advance from customers and suppliers | 89,600 | 80,090 | (30,884 | ) | Unearned income | 134,850 | 317,650 | 266,774 | ||||||||||||||||||
Contribution to Yayasan Kesehatan Pegawai Telkom | (41,693 | ) | (59,543 | ) | (180,580 | ) | Advances from customers and suppliers | 80,090 | (30,884 | ) | (78,028 | ) | ||||||||||||||
Payment of long service award benefit | (28,865 | ) | (76,525 | ) | (222,743 | ) | Accrued pension and other post-retirement benefit costs | — | 7,041 | 18,768 | ||||||||||||||||
Interest paid | (1,256,404 | ) | (900,660 | ) | (1,178,332 | ) | ||||||||||||||||||||
Interest received | 590,966 | 480,288 | 369,982 | |||||||||||||||||||||||
Income tax paid | (2,098,272 | ) | (1,914,895 | ) | (3,905,317 | ) | ||||||||||||||||||||
Contributions to Yayasan Kesehatan Pegawai Telkom | Contributions to Yayasan Kesehatan Pegawai Telkom | (59,543 | ) | (188,473 | ) | (724,530 | ) | |||||||||||||||||||
Payments of long service award benefit | Payments of long service award benefit | (76,525 | ) | (222,743 | ) | (78,057 | ) | |||||||||||||||||||
Interest paid | Interest paid | (900,660 | ) | (1,178,332 | ) | (1,348,919 | ) | |||||||||||||||||||
Interest received | Interest received | 480,288 | 369,982 | 321,677 | ||||||||||||||||||||||
Income tax paid | Income tax paid | (1,914,895 | ) | (3,905,317 | ) | (4,132,359 | ) | |||||||||||||||||||
Net cash provided by operating activities | Net cash provided by operating activities | 7,012,589 | 10,864,473 | 12,852,532 | Net cash provided by operating activities | 10,864,473 | 12,852,532 | 16,051,480 | ||||||||||||||||||
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