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For the fiscal year ended December 31, 2004 | 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 250 Rupiah per share | New York Stock Exchange | |||
Series B Shares, par value 250 Rupiah per share | New York Stock Exchange** |
Series A Shares, par value 250 Rupiah per share | 1 | |
Series B Shares, par value 250 Rupiah per share | 20,159,999,279 |
* | 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. |
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“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 40 of TELKOM’s Series B shares. The ratio of shares to ADS is 40:1. | |
“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 fixed line telecommunication services including domestic long-distance and international long-distance. | |
“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. |
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“Government” | refers to the Government of the Republic of Indonesia. | |
“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. | |
“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 Communication, from which telecommunications regulatory responsibility was transferred to the MoCI in February 2005. | |
“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 “Revenue-Sharing Arrangement” | (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 User Identity Module) is a “smart” card designed to be inserted into a fixed wireless telephone that uniquely identifies a CDMA network subscription and that contains subscriber-related data such as phone numbers, service details and memory for storing messages. |
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“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. | |
“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. |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||
(US$ million) | |||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | |||||||||||||||||||||||||||||
dividends and ADS) | |||||||||||||||||||||||||||||
Consolidated Income Statement Data | |||||||||||||||||||||||||||||
Indonesian GAAP | |||||||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||||
Telephone | |||||||||||||||||||||||||||||
Fixed lines | |||||||||||||||||||||||||||||
Local and domestic long-distance usage | 4,097 | 5,226 | 5,448 | 6,562 | 7,439 | 801 | |||||||||||||||||||||||
Monthly subscription charges | 887 | 998 | 1,475 | 1,949 | 2,935 | 316 | |||||||||||||||||||||||
Installation charges | 75 | 98 | 130 | 223 | 201 | 22 | |||||||||||||||||||||||
Others | 119 | 93 | 211 | 163 | 70 | 7 | |||||||||||||||||||||||
Total fixed lines revenues | 5,178 | 6,415 | 7,264 | 8,897 | 10,645 | 1,146 | |||||||||||||||||||||||
Cellular | |||||||||||||||||||||||||||||
Air time charges | 2,484 | 3,988 | 5,454 | 7,678 | 9,826 | 1,058 | |||||||||||||||||||||||
Monthly subscription charges | 356 | 581 | 593 | 581 | 448 | 48 | |||||||||||||||||||||||
Features | 7 | 10 | 8 | 6 | 91 | 10 | |||||||||||||||||||||||
Connection fee charges | 43 | 129 | 172 | 194 | 56 | 6 | |||||||||||||||||||||||
Total cellular revenues | 2,890 | 4,708 | 6,227 | 8,459 | 10,421 | 1,122 | |||||||||||||||||||||||
Total telephone revenues | 8,068 | 11,123 | 13,491 | 17,356 | 21,066 | 2,268 | |||||||||||||||||||||||
Joint Operation Schemes | |||||||||||||||||||||||||||||
Minimum TELKOM Revenues (MTR) | 1,557 | 1,474 | 1,320 | 900 | 296 | 32 | |||||||||||||||||||||||
Share in Distributable KSO Revenues (DKSOR) | 695 | 733 | 801 | 583 | 350 | 38 | |||||||||||||||||||||||
Amortization of unearned initial investor payments | 15 | 13 | 7 | 3 | 11 | 1 | |||||||||||||||||||||||
Total revenue under Joint Operation Schemes | 2,267 | 2,220 | 2,128 | 1,486 | 657 | 71 | |||||||||||||||||||||||
Interconnection | 981 | 1,424 | 2,831 | 4,162 | 6,188 | 666 | |||||||||||||||||||||||
Network | 340 | 415 | 316 | 518 | 654 | 70 | |||||||||||||||||||||||
Data and Internet | 108 | 673 | 1,552 | 3,109 | 4,809 | 518 | |||||||||||||||||||||||
Revenue-Sharing Arrangements | 288 | 264 | 264 | 258 | 281 | 30 | |||||||||||||||||||||||
Other telecommunications services | 138 | 165 | 221 | 227 | 293 | 31 | |||||||||||||||||||||||
Total Operating Revenues | 12,190 | 16,284 | 20,803 | 27,116 | 33,948 | 3,654 | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||
Personnel | 1,770 | 2,281 | 4,388 | 4,440 | 5,571 | 600 | |||||||||||||||||||||||
Depreciation | 2,419 | 2,870 | 3,474 | 4,779 | 6,438 | 693 | |||||||||||||||||||||||
Operations, maintenance and telecommunication services | 1,386 | 2,150 | 2,290 | 3,339 | 4,530 | 487 | |||||||||||||||||||||||
General and administrative | 872 | 1,343 | 1,146 | 2,079 | 2,600 | 280 | |||||||||||||||||||||||
Marketing | 147 | 220 | 375 | 503 | 882 | 95 | |||||||||||||||||||||||
Total Operating Expenses | 6,594 | 8,864 | 11,673 | 15,140 | 20,021 | 2,155 | |||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||
(US$ million) | |||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | |||||||||||||||||||||||||
dividends and ADS) | |||||||||||||||||||||||||
Operating Income | 5,596 | 7,420 | 9,130 | 11,976 | 13,927 | 1,499 | |||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | — | — | 3,196 | — | — | — | |||||||||||||||||||
Interest expense | (817 | ) | (1,330 | ) | (1,583 | ) | (1,383 | ) | (1,270 | ) | (137 | ) | |||||||||||||
Interest income | 692 | 572 | 480 | 366 | 318 | 34 | |||||||||||||||||||
Gain (loss) on foreign exchange — net | (944 | ) | (379 | ) | 557 | 126 | (1,221 | ) | (131 | ) | |||||||||||||||
Equity in net income (loss) of associated companies | (232 | ) | (86 | ) | 5 | 3 | 3 | 0 | |||||||||||||||||
Other — net | 313 | 353 | (36 | ) | 364 | 331 | 36 | ||||||||||||||||||
Other Income (Expense) — net | (988 | ) | (870 | ) | 2,619 | (524 | ) | (1,839 | ) | (198 | ) | ||||||||||||||
Income Before Tax | 4,608 | 6,550 | 11,749 | 11,452 | 12,088 | 1,301 | |||||||||||||||||||
Tax expense | (1,520 | ) | (2,007 | ) | (2,899 | ) | (3,861 | ) | (4,003 | ) | (431 | ) | |||||||||||||
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, net | (313 | ) | (475 | ) | (810 | ) | (1,504 | ) | (1,956 | ) | (210 | ) | |||||||||||||
Net Income | 2,775 | 4,068 | 8,040 | 6,087 | 6,129 | 660 | |||||||||||||||||||
Weighted average shares outstanding (millions)(1) | 20,160 | 20,160 | 20,160 | 20,160 | 20,160 | ||||||||||||||||||||
Net income per share(1) | 137.65 | 201.81 | 398.80 | 301.95 | 304.03 | ||||||||||||||||||||
Net income per ADS(1) | 5,505.96 | 8,072.20 | 15,951.80 | 12,077.83 | 12,161.13 | ||||||||||||||||||||
Dividends declared per share(2) | 53.88 | 44.08 | 105.41 | 165.58 | 158.09 | ||||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Net income | 2,216 | 4,298 | 8,587 | 5,791 | 6,468 | ||||||||||||||||||||
Net income per share(1) | 109.94 | 213.20 | 425.96 | 287.23 | 320.86 | ||||||||||||||||||||
Net income per ADS(1) | 4,397.47 | 8,528.17 | 17,038.21 | 11,489.40 | 12,834.47 |
As of December 31, | |||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||
(US$ million) | |||||||||||||||||||||||||
(Rp. in billion) | |||||||||||||||||||||||||
Consolidated Balance Sheet Data | |||||||||||||||||||||||||
Indonesian GAAP | |||||||||||||||||||||||||
Total assets | 32,019 | 33,036 | 44,307 | 50,283 | 56,269 | 6,057 | |||||||||||||||||||
Current liabilities(4) | 4,138 | 9,543 | 9,708 | 11,170 | 11,677 | 1,257 | |||||||||||||||||||
Other liabilities | 3,048 | 3,447 | 5,383 | 6,258 | 6,178 | 665 | |||||||||||||||||||
Long-term debts | 9,546 | 9,730 | 12,006 | 11,834 | 13,214 | 1,422 | |||||||||||||||||||
Total liabilities | 16,732 | 22,720 | 27,097 | 29,262 | 31,069 | 3,344 | |||||||||||||||||||
Minority interest | 814 | 1,235 | 2,596 | 3,708 | 4,938 | 532 | |||||||||||||||||||
Capital stock(5) | 5,040 | 5,040 | 5,040 | 5,040 | 5,040 | 543 | |||||||||||||||||||
Total stockholders’ equity | 14,473 | 9,081 | 14,614 | 17,313 | 20,261 | 2,181 | |||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Total assets | 30,900 | 32,449 | 44,623 | 51,347 | 56,702 | 6,104 | |||||||||||||||||||
Total stockholders’ equity | 12,928 | 7,766 | 13,911 | 16,285 | 19,571 | 2,107 |
(1) | The prior years’ weighted average shares, net income per share and net income per ADS have been restated to reflect a two-for-one stock split as resolved in the Annual General Meeting of Shareholders (“AGMS”) on July 30, 2004. |
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(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 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 56(1) to the Company’s consolidated financial statements. |
(4) | 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 Rp.250 and 20,159,999,279 Series B shares having a par value of Rp.250 from an authorized capital stock comprising one Series A Dwiwarna share and 79,999,999,999 Series B shares, after the stock split. |
At period | |||||||||||||||||
Year | end | Average(1) | High(2) | Low(2) | |||||||||||||
(Rp. per US$1.00) | |||||||||||||||||
2000 | 9,595 | 8,534 | 9,595 | 7,425 | |||||||||||||
First Quarter | 7,590 | 7,507 | 7,590 | 7,425 | |||||||||||||
Second Quarter | 8,735 | 8,433 | 8,620 | 7,945 | |||||||||||||
Third quarter | 8,780 | 8,691 | 9,003 | 8,290 | |||||||||||||
Fourth quarter | 9,595 | 9,507 | 9,595 | 9,395 | |||||||||||||
2001 | 10,400 | 10,266 | 11,675 | 8,865 | |||||||||||||
First Quarter | 10,400 | 9,895 | 10,400 | 9,450 | |||||||||||||
Second Quarter | 11,440 | 11,391 | 11,440 | 11,058 | |||||||||||||
Third quarter | 9,675 | 9,355 | 9,675 | 10,350 | |||||||||||||
Fourth quarter | 10,400 | 10,422 | 10,435 | 10,400 | |||||||||||||
2002 | 8,940 | 9,316 | 10,473 | 8,460 | |||||||||||||
First Quarter | 9,655 | 10,192 | 10,473 | 9,542 | |||||||||||||
Second Quarter | 8,730 | 9,109 | 9,775 | 8,460 | |||||||||||||
Third quarter | 9,015 | 8,949 | 9,218 | 8,695 | |||||||||||||
Fourth quarter | 8,940 | 9,058 | 9,326 | 8,815 | |||||||||||||
2003 | 8,465 | 8,573 | 9,120 | 8,165 | |||||||||||||
First Quarter | 8,919 | 8,907 | 9,120 | 8,836 | |||||||||||||
Second Quarter | 8,285 | 8,488 | 8,906 | 8,165 | |||||||||||||
Third Quarter | 8,389 | 8,427 | 8,665 | 8,166 | |||||||||||||
Fourth Quarter | 8,465 | 8,471 | 8,583 | 8,365 | |||||||||||||
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 |
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At period | |||||||||||||||||
Year | end | Average(1) | High(2) | Low(2) | |||||||||||||
(Rp. per US$1.00) | |||||||||||||||||
2005 | |||||||||||||||||
January | 9,165 | 9,204 | 9,305 | 9,133 | |||||||||||||
February | 9,260 | 9,245 | 9,300 | 9,166 | |||||||||||||
March | 9,480 | 9,371 | 9,520 | 9,250 | |||||||||||||
April | 9,570 | 9,539 | 9,755 | 9,475 | |||||||||||||
May | 9,495 | 9,480 | 9,545 | 9,435 | |||||||||||||
June | 9,713 | 9,616 | 9,713 | 9,528 | |||||||||||||
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 |
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; |
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• | 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 and of TELKOM’s public statements regarding its annual report, and the referral of those matters to the SEC’s Division of Enforcement; | |
• | 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. |
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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. |
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Current political and social events in Indonesia may adversely impact business activity in Indonesia. |
Terrorist activities in Indonesia could destabilize Indonesia, which could adversely affect TELKOM’s business. |
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Declines or volatility in Indonesia’s currency exchange rates can have a material adverse impact on business activity in Indonesia. |
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. |
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Indonesia’s high level of sovereign debts may result in it being unable to service its debt obligations when they become due. |
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. |
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TELKOM’s expansion plans may strain key resources and thereby adversely affect its business, financial condition and prospects. |
TELKOM’s controlling stockholder’s interests may differ from those of TELKOM’s other stockholders. |
Certain systems failures could, if they occur, adversely affect TELKOM’s results of operations. |
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Regulators and other telecommunications operators may challenge TELKOM’s ability to apply PSTN tariffs to its new CDMA-based fixed wireless phone service, which is marketed under the brand name TELKOMFlexi. |
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. |
TELKOM’s ability to develop adequate financing arrangements is critical to support its capital expenditures. |
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Employee unions may negatively affect TELKOM’s business. |
New technologies may adversely affect TELKOM’s ability to remain competitive. |
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. As of the date of this Annual Report, TELKOM’s ability to negotiate such interconnection agreements is limited by the provisions set forth in various Ministerial Decrees governing interconnection rates. Following the enactment of the Telecommunications Law, a restructuring of the interconnection policy was proposed based upon a cost-based tariff approach as mutually agreed by the operators rather than the revenue sharing scheme as currently implemented. On March 11, 2004, the Ministry of Communication (“MoC”), the former telecommunications regulator, issued a decree stating that cost-based interconnection will commence beginning January 1, 2005. In connection with the implementation of cost-based interconnection, the MoC appointed an independent consultant to assist in determining the basis for the new cost-based tariffs. As of the date of this Annual Report, the MoCI has not issued implementing regulations. TELKOM expects that the current interconnection fees may be adjusted as a result of the new cost-based interconnection scheme but TELKOM can give no assurance regarding the impact, if |
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any, of such adjustment on TELKOM’s business, financial condition, results of operations and prospects. | ||
• | Licenses:TELKOM’s separate licenses to provide fixed line services, DLD services and IDD services were replaced and combined into a single license issued on May 13, 2004. TELKOM also has a multimedia license that includes services such as Internet service provider, data communication and VoIP. The Government, with due regard to prevailing laws and regulations, may amend the terms of TELKOM’s licenses and business authority at its discretion. It may also impose certain mandatory obligations on the license holders. See Item 4.B. “Business Overview — Regulation — Modern License”. Any breach of the terms and conditions of its licenses or business authority or failure to comply with applicable regulations may result in such licenses or business authority being revoked. Any revocation or unfavorable amendment of the licenses or business authority, or any failure to renew them on comparable terms, could have a materially adverse effect on TELKOM’s business, financial condition, results of operations and prospects. | |
• | 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 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, as recommended by the ITRB, announced that it would allow operators to rebalance their tariffs, with the resulting weighted average of tariffs increasing by 9%. The Government did not effect the remaining tariff increases by January 2005, and there is no assurance as to when or whether the remaining tariff increases will be implemented by the Government. | |
• | Indonesian Telecommunications Regulatory Body (“ITRB”):The Telecommunications Law allows Government to delegate its authority to regulate, supervise and control the telecommunications sector in Indonesia to an independent regulatory body, while maintaining the authority to formulate policies over the industry. Such delegation of authority to the ITRB was implemented under Decree of the Minister of Communications No. 31/2003, dated July 11, 2003. The ITRB comprises officials from the Directorate General of Post and Telecommunication and the Committee of Telecommunications Regulations. There can be no assurance that the ITRB will not take actions that may be detrimental to TELKOM’s business or prospects. | |
• | Competition in the Fixed Line Domestic Telecommunications Market:Historically, TELKOM had the exclusive right to provide fixed line domestic telecommunications services in Indonesia. Pursuant to regulations introduced to implement the Telecommunications Law, the Government terminated TELKOM’s monopoly in providing fixed line domestic telecommunications services. The MoC issued Indosat a license to provide local telephone services from August 2002. On May 13, 2004, Indosat received its commercial license to provide domestic long-distance telephone services. Indosat launched its CDMA fixed wireless access service under the brand name “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 December 31, 2004, Indosat only offered this service in Jakarta, Surabaya, Malang 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 cities in Indonesia. Indosat also commenced offering limited domestic long-distance services for calls within its network in late |
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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 that further implement the Government’s policy of encouraging competition in the markets for DLD and IDD services. Among other matters, the Decrees state that consumers will be able to choose their DLD and IDD providers among various competitors, including TELKOM and Indosat, and require operators to utilize separate three digit access codes for DLD and IDD services. Based on Decree No. 28/2004, TELKOM, which currently uses “0” as the access code for its DLD service, was required by March 1, 2005 to cease using the “0” access code and to implement a three digit access code in the form of “01X” for access to its DLD service. However, TELKOM has not within the given deadline implemented, and does not expect to in the near future to implement, a three digit access code, as extensive installation or upgrade of equipment will be required. TELKOM expects to incur significant costs in connection with the new requirement to establish three digit DLD access codes, including expenditures required to install or upgrade new switching facilities, create a new routing database, costs relating to customer education and other marketing costs. In response to the MoC Decree No. 28/2004, in June 2004, TELKOM submitted a letter to the ITRB highlighting the technical difficulties in implementing the three digit DLD access codes within the given deadline and the substantial costs involved, and requesting that TELKOM be allowed to continue using the “0” prefix for its DLD access prefix and that it be given an additional five year period to implement the three digit DLD access codes. On April 1, 2005, the MoCI, to which telecommunications regulatory responsibility was transferred, announced that it would make available to Indosat the “011” DLD access in five major cities that were technically ready for interconnection, including Jakarta, and progressively extend it to all other area codes within five years. TELKOM has also been assigned “017” as its DLD access code. However, interconnection between Indosat and TELKOM in these five cities would still be subject to the parties reaching agreement on technical and business arrangements and entering into an interconnection agreement. In the five-year interim period and thereafter, the “0” prefix may continue to be used by all operators, including TELKOM, as default codes for each operator’s customers to access the DLD service selected by the respective operator. |
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. |
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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 (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 MoCI, which requires approval by Parliament. As of the date of this Annual Report, TELKOM can provide no assurance with regard to when Parliament will approve the necessary appropriations or as to the effects the net cash payment will have on TELKOM’s financial condition, results of operations and prospects. | ||
• | 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. The MoC Decree No. 34/2004 issued on March 11, 2004 sets out certain minimum requirements that USO facilities must meet. On March 30, 2004, the MoC issued Announcement No. PM.2/2004, which sets forth the basic policies underlying the USO program and requires telecommunications operators in Indonesia to contribute 0.75% of gross revenues (with due consideration for bad debt and interconnection charges) for USO development. As of the date of this Annual Report, there has been no implementing regulations or announcement as to when such contribution will take effect. The Government is also in the process of drafting detailed regulations that will fully implement the USO program for telecommunications operators in Indonesia. |
TELKOM’s increasingly important cellular operations face significant constraints and competitive pressures. |
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TELKOM’s satellites have a limited life and substantial risk exists for TELKOM-1, Palapa B-4 and its to be launched TELKOM-2 to be damaged or interrupted during operation and satellite loss or reduced performance may adversely affect our financial condition, results of operations and ability to provide certain services. |
TELKOM is subject to Indonesian accounting and corporate disclosure standards that differ in significant respects from those applicable in other countries. |
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. |
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Forward-looking statements reflect current expectations and may not be correct. |
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• | 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 |
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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. |
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• | Fixed lines (which consists of fixed wireline and fixed wireless); | |
• | Cellular; | |
• | Joint Operation Schemes (KSO); | |
• | Interconnection; | |
• | Network; | |
• | Data and Internet; | |
• | Revenue-Sharing Arrangements; and | |
• | Other Telecommunications Services (including revenues from telephone directory services and building management services). |
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IDD Services |
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Cellular Services |
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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 voucher values are Rp.20,000 and Rp.50,000. The following table shows the respective active periods for Telkomsel’s SimPATI prepaid packages: |
Period during which | ||
subscribers will have | ||
SimPATI Value of Voucher | access to services | |
Rp.20,000 | 45 days | |
Rp.50,000 | 60 days | |
Rp.100,000 | 90 days | |
Rp.150,000 | 150 days | |
Rp.200,000 | 180 days | |
Rp.300,000 | 210 days | |
Rp.500,000 | 240 days | |
Rp.1,000,000 | 270 days |
(2) | Includes voluntary and involuntary deactivations. |
(3) | The average monthly churn rate for a year is computed by adding the monthly churn rates during the year and dividing by 12. The monthly churn rate is computed by dividing the number of subscribers deactivated during the month by the number of subscribers at the beginning of the month. |
(4) | Refers to Average Revenue per User which is calculated by taking the sum of the ARPU for each month of the year and dividing by 12. ARPU is computed by dividing total cellular revenues for either postpaid or prepaid subscribers (excluding |
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connection fees, interconnection revenues, international roaming revenues from visitors and dealer discounts) for each month by the respective average number of postpaid or prepaid cellular subscribers for that month. |
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 to acquire 100% of the equity interest in and control of Pramindo on August 15, 2002. For 2002, the numbers included in this table for Regional Division I represent the MTR 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 operating revenues from Regional Division I in 2002, 2003 and 2004, respectively. |
(2) | For 2003, MTR and DTR are from January 1 to July 31, 2003. TELKOM consolidated Regional Division III (West Java and Banten) from July 31, 2003 following the acquisition of a 100% equity interest in AriaWest on July 31, 2003. TELKOM consolidated Rp.377.9 billion of operating revenues from Regional Division III (West Java and Banten) from July 31, 2003 through December 31, 2003 and Rp.1,016.8 billion in 2004. |
(3) | On January 20, 2004, TELKOM and MGTI entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV (Central Java). See Item 10. “Additional Information — C. Material Contracts — PT Mitra Global Telekomunikasi Indonesia.” As a result of the amended and 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. |
(4) | TELKOM consolidated Regional Division VI (Kalimantan) following the acquisition of a 90.32% equity interest in Dayamitra on May 17, 2001. TELKOM consolidated Rp. 323.4 billion, Rp.763.8 billion and Rp.802.4 billion of operating revenues from Regional Division VI (Kalimantan) in 2002, 2003 and 2004, respectively. |
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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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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 | |||||||||||||||||
(1) | Includes interconnection with Telkomsel. |
(2) | Fixed line interconnection minutes reflect interconnection with the networks of PT Bakrie Telecom (formerly PT Radio Telepon Indonesia or Ratelindo), BBT, and for 2004, Indosat. |
(3) | International interconnection minutes are derived from interconnection with Indosat’s international network, which does not include minutes from mobile cellular and fixed wireless operators that interconnect directly with international gateways. |
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 40% of normal IDD rate | Up to 60% of normal IDD rate | ||
Dial | One stage | Two stage | ||
Quality/ Technology | Premium VoIP | Standard VoIP |
Revenue-Sharing Arrangements (PBHs) |
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Other Telecommunications Services |
• | 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. |
Fixed line Network and Backbone |
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As of or for the Year Ended December 31, | ||||||||||||||||||||||
2000(1) | 2001(2) | 2002(3) | 2003(4) | 2004(5) | ||||||||||||||||||
Operating Statistics | ||||||||||||||||||||||
Exchange capacity | ||||||||||||||||||||||
Non-KSO Divisions | 4,515,615 | 5,135,108 | 6,643,688 | 8,476,816 | 10,739,531 | |||||||||||||||||
KSO Divisions(10) | 3,946,407 | 3,669,336 | 2,459,950 | 1,670,005 | 1,134,165 | |||||||||||||||||
Total | 8,462,022 | 8,804,444 | 9,103,638 | 10,146,821 | 11,873,696 | |||||||||||||||||
Installed lines | ||||||||||||||||||||||
Non-KSO Divisions | 4,086,298 | 4,725,268 | 6,165,770 | 7,894,532 | 10,556,211 | |||||||||||||||||
KSO Divisions(10) | 3,581,779 | 3,316,406 | 2,234,892 | 1,664,220 | 1,111,716 | |||||||||||||||||
Total | 7,668,077 | 8,041,674 | 8,400,662 | 9,558,752 | 11,667,927 | |||||||||||||||||
Lines in service(6) | ||||||||||||||||||||||
Non-KSO Divisions | 3,610,363 | 4,270,243 | 5,710,427 | 7,030,049 | 9,032,650 | |||||||||||||||||
KSO Divisions(10) | 3,052,242 | 2,948,695 | 2,039,608 | 1,449,066 | 956,068 | |||||||||||||||||
Total | 6,662,605 | 7,218,938 | 7,750,035 | 8,479,115 | 9,988,718 | |||||||||||||||||
Lines in service per 100 inhabitants | ||||||||||||||||||||||
Non-KSO Divisions | 5.7 | 5.6 | 4.6 | 4.4 | 4.3 | |||||||||||||||||
KSO Divisions(10) | 2.0 | 2.0 | 2.0 | 1.9 | 2.9 | |||||||||||||||||
Combined | 3.1 | 3.3 | 3.5 | 3.5 | 4.1 | |||||||||||||||||
Subscriber lines | ||||||||||||||||||||||
Non-KSO Divisions | 3,394,075 | 4,005,106 | 5,394,940 | 6,679,173 | 8,636,544 | |||||||||||||||||
KSO Divisions(10) | 2,923,223 | 2,831,168 | 1,952,226 | 1,392,152 | 928,641 | |||||||||||||||||
Total | 6,317,298 | 6,836,274 | 7,347,166 | 8,071,325 | 9,565,185 | |||||||||||||||||
Public telephones | ||||||||||||||||||||||
Non-KSO Divisions | 216,288 | 265,137 | 315,487 | 350,876 | 395,368 | |||||||||||||||||
KSO Divisions(10) | 129,019 | 117,527 | 87,382 | 56,914 | 28,165 | |||||||||||||||||
Total | 345,307 | 382,664 | 402,869 | 407,790 | 423,533 | |||||||||||||||||
Leased lines in service | ||||||||||||||||||||||
Non-KSO Divisions(7) | 3,300 | 4,973 | 8,193 | 8,213 | 8,887 | |||||||||||||||||
KSO Divisions(10) | 2,702 | 2,631 | 1,879 | 1,162 | 382 | |||||||||||||||||
Total | 6,002 | 7,604 | 10,072 | 9,375 | 9,269 | |||||||||||||||||
Fixed wireline subscriber pulse production(8)(millions) | ||||||||||||||||||||||
Non-KSO Divisions | 28,231 | 34,342 | 44,340 | 50,848 | 58,314 | |||||||||||||||||
KSO Divisions(10) | 24,628 | 24,047 | 16,788 | 11,413 | 6,838 | |||||||||||||||||
Total | 52,859 | 58,389 | 61,128 | 62,261 | 65,152 | |||||||||||||||||
Fixed wireless subscriber pulse production/ minutes(8)(11)(millions) | ||||||||||||||||||||||
Non-KSO Divisions | — | — | 14 | 214 | 1,020 | |||||||||||||||||
KSO Divisions(10) | — | — | — | 4 | 128 | |||||||||||||||||
Total | — | — | 14 | 218 | 1,148 |
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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 2000, Non-KSO Divisions refer to Divisions II and V, while KSO Divisions refer to Divisions I, III, IV, VI and VII. | |
(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 revenue-sharing arrangements as of December 31, 2000: 409,818, 2001: 430,477, 2002: 443,316, 2003: 519,316 and 2004: 459,931. | |
(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 differ by year due to acquisitions in certain years. See footnotes (1) to (5) above. |
(11) | Fixed wireless use was measured in subscriber pulse before 2004, and in minutes beginning 2004 due to the installation of new equipment, and are therefore not comparable between 2004 and previous years. |
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 2004 includes 257,350 CDMA fixed wireless line units established under RSA scheme. |
(2) | Includes employees seconded to KSO in Division VII. Does not include employees for support divisions, such as TELKOM’s long distance, fixed wireless, multimedia and construction divisions. |
(3) | Source: Indonesian Central Bureau of Statistics (estimated figures). |
(4) | TELKOM’s penetration based on the estimated population figures. Does not include Indosat’s fixed lines. |
Capacity | Percentage | ||||||||
(number of | of total | ||||||||
Transmission medium | circuits) | capacity | |||||||
Optical fiber cable | 369,270 | 66.5 | |||||||
Microwave | 109,980 | 19.8 | |||||||
Submarine cable | 46,860 | 8.4 | |||||||
Satellite | 29,590 | 5.3 | |||||||
Total | 555,700 | 100.0 | |||||||
Mobile Cellular Network |
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Data Networks |
International Network |
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Other Network Infrastructure |
• | Network backbone transmission; | |
• | Rural telecommunications services; | |
• | Back-up transmission capacity for the national telecommunications network; | |
• | Satellite broadcasting, VSAT and multimedia services; | |
• | 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 |
• | 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 Singapore. This was completed in January 2005; | |
• | fiber optic backbone infrastructure in Kalimantan (Borneo) from Banjarmasin to Samarinda; | |
• | fiber optic backbone infrastructure in Sulawesi from Makasar to Palu; |
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• | fiber optic regional junction in greater Jakarta, Surabaya (East Java) and Bandung — Cirebon (West Java); |
• | continue to implement soft switch technologies to move towards a next generation network; | |
• | continue to enhance its network through the progressive replacement of its old copper access network with optical access network; and | |
• | continue network integration and quality improvement. |
Mobile Cellular Network Development |
Data Network Development |
TELKOM-2 Satellite |
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Capital Expenditures |
Strengthening the Fixed line Business |
• | increasing its fixed 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 bundled services, broadband access, a customer care service center for business customers 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 line business, which TELKOM began offering to customers on June 7, 2004. |
Strengthening its Backbone Network |
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Maintaining Telkomsel’s Leading Position in the Industry |
• | taking advantage of commercial, operational and network synergies with TELKOM and sharing best-practices and know-how with SingTel Mobile; | |
• | continuous capacity and coverage expansion at predefined quality levels to handle subscriber growth; | |
• | maintaining or improving market share by continuously aligning the characteristics and features of Telkomsel’s service offerings to the evolving needs of its customer, enhancing its products and services portfolio (including its EDGE and GPRS services), expanding network capacity and improving service quality; | |
• | 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 |
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Developing its Data and Internet Business |
• | increased investment in TELKOM’s broadband infrastructure (such as ADSL, Hybrid Fiber/ Coaxial and satellite); | |
• | 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; | |
• | 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 wholesalers; 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. |
Increasing TELKOM and Telkomsel Synergy |
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• | 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 |
• | 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 had more than 795 customer service points in total, including 51 large centers in Jakarta and 49 in Surabaya, and including customer service points operated by its KSO Units. | |
• | Call centers and Internet.TELKOM operates call centers in many cities in Indonesia, including in the KSO regions. Customers are provided a number 08001 TELKOM (toll free for corporate customers) to 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, promotions and service features. Billing information may also be obtained through the Internet for customers in Divisions I to VI. Since December 2004, TELKOM has also introduced on a trial basis SMS as a service point for customers in Jakarta and Jawa Timur in East Java and charges such customers at the regular SMS rates. Customers are also provided access to directory services for which a charge is levied. TELKOM intends to promote the use of call centers, SMS and the Internet over walk-in customer service points for its retail customers. | |
• | Enterprise service and account management teams.To focus on the top 20% of its corporate customers, particularly corporations with national operations, TELKOM has set up an enterprise service division in Jakarta, which seeks to develop its business in this segment of the market. TELKOM provides these customers with account management teams, each comprising an account manager supported by personnel from the relevant operational departments, to provide a single point of contact for all of the customer’s communications needs, including integrated communications solutions. TELKOM has also divided its enterprise service and account management teams into six segments, namely, (i) Financial and Banking, (ii) Government, Army & Police, (iii) Manufacturing, (iv) Mining & Construction, (v) Trade & Industrial Park, and (vi) Trading & Service. To cater to such customers, the enterprise service division works on integrating various product and service offerings to provide total telecommunications solutions, including voice telecommunications services, multimedia services and certain office automation |
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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 had 137 national-level account managers and over 497 regional-level account managers that cover Divisions I to VI and KSO VII. It plans to further increase the number of such teams. | ||
• | TELKOM has had a service level guarantee program for its fixed line customers in Divisions II and V since May 2001 and has been implementing a service level guarantee program on a national basis since June 2002. The service level guarantee program provides guarantees of certain minimum levels of service relating to, among others, new line installations, restoration of disconnected lines and billing complaints, and provides for non-cash compensation, such as free subscription for a certain period, to be awarded to customers where such minimum service levels are not met. |
Telkomsel |
• | GraPARI Customer Services Centers:As of December 31, 2004, Telkomsel had 62 GraPARI customer services centers (“GraPARI centers”). Telkomsel’s GraPARI centers provide convenient and comprehensive access to Telkomsel’s customer services. GraPARI centers handle product and service information requests and complaints and typically focus on activation of services, customer billing, payments, account suspensions, service features, network coverage, IDD, roaming information and marketing promotions. See “— Sales, Marketing and Distribution”. | |
• | 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 phone-cards and TELKOMFlexi starter packs and vouchers. TELKOM generally provides discounts to such kiosks of 30% compared with subscriber telephone rates. Kiosks operate on a non-exclusive basis and may provide products and services of other operators. |
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• | Authorized dealers and retail outlets.These are located throughout Indonesia and primarily sell phone-cards and TELKOMFLexi subscriptions, starter packs and vouchers. Independent dealers and retail outlets pay a discount to face value for all products they receive, operate on a non-exclusive basis and may also sell products and services of other operators. | |
• | 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. |
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. |
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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 | Total isolation (i.e., no outgoing or incoming calls) | |||
IV | More than 70 days | Customer must fulfill overdue payment, 100% of installation fee | Terminated |
Management of Customer Receivables |
Telkomsel |
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Telkomsel |
Overview |
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• | 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 |
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• | Deregulation; | |
• | Promoting competition; | |
• | Liberalization; | |
• | Restructuring; | |
• | Improving market access; and | |
• | Introducing market-oriented regulations. |
• | 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 |
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New Service Categories |
Modern License |
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Exclusivity |
Competition |
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 services. |
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Indonesian Telecommunications Regulatory Body |
Consumer Protection |
Universal Service Obligations |
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Implementing Regulations |
Satellite regulation |
Fixed Wireless Access regulation |
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Fixed line |
Cellular |
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Operator | ||||||||
Telkomsel | Indosat | Excelcomindo | ||||||
Launch date | May 1995 | November 1994(2) | October 1996 | |||||
Licensed frequency bandwidth (GSM 900 & 1800) | 30 MHz | 30 MHz | 25 MHz | |||||
Licensed coverage | Nationwide | Nationwide | Nationwide | |||||
Network coverage | Nationwide | Information not available | Information not available | |||||
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) | Estimated, based on statistics compiled by TELKOM. |
(2) | In November 2003, Indosat and Satelindo merged, and Indosat has taken over Satelindo’s cellular operations. |
IDD |
VoIP |
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Satellite |
Other |
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• | Tariffs for the provision of telecommunications services; and | |
• | Tariffs for provision of telecommunications networks. |
Tariffs for the Provision of Telecommunications Services |
Fixed line Tariffs |
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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 |
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 |
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 | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Domestic Long-distance | ||||||||
0-200 km | 325 – 1,290 | 6 sec | ||||||
200-500 km | 460 – 1,815 | 6 sec | ||||||
Over 500 km | 570 – 2,270 | 6 sec |
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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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 |
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Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Calls to mobile cellular: | ||||||||
Local | 300 – 1,600 | 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 | 1,200 – 2,300 | 1 min | ||||||
200-500 km | 1,200 – 3,720 | 1 min | ||||||
Over 500 km | 1,200 – 4,150 | 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. |
VoIP Tariffs |
Kiosk phone Tariffs |
Satellite Tariffs |
Broadband Access |
Fees for Usage in | ||||||||||||||||
Monthly | Excess of | |||||||||||||||
SpeedyLink ADSL(1) | Activation Fee | Monthly Fee | Usage Allowance(1) | Monthly Allowance | ||||||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||||||
Limited 384 kbps | 200,000 | 200,000 | 500 MB – 1.0 GB | (2) | 500/MB | |||||||||||
Limited 512 kbps | 200,000 | 350,000 | 2.0 GB | 500/MB | ||||||||||||
Unlimited 384 kbps | 2,500,000 | 1,520,000 | 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) | Provides access only to the Internet service provider’s node and does not include Internet access. The subscriber is responsible for obtaining Internet access with an Internet service provider. |
(2) | Depending on the Internet service provider plan. |
Tariffs for Other Services |
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Tariffs for Interconnection and Access |
Interconnection with Fixed line Network |
• | 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. |
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• | DLD calls that terminate on TELKOM’s network. TELKOM receives a certain percentage of the prevailing DLD tariff. |
Cellular Interconnection |
International Interconnection |
Description | Tariff | |||
Access Charge | Rp.850/successful call | |||
Usage Charge | Rp.550/paid minute | |||
USO | Rp.750/call |
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Satellite Phone Interconnection |
VoIP Interconnection |
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Legal | ||||||||||
Ownership (%) | ||||||||||
As of | ||||||||||
December 31, | ||||||||||
Company | 2004 | Notes | Business Operations | |||||||
Consolidated subsidiaries: | ||||||||||
PT AriaWest International (“AriaWest”) | 100 | (1) | Fixed-phone (KSO-III West Java & Banten) | |||||||
PT Multimedia Nusantara (“Metra”) | 100 | (2) | Multimedia, pay TV | |||||||
PT Graha Sarana Duta (“GSD”) | 100 | Real estate, construction and services | ||||||||
PT Indonusa Telemedia (“Indonusa”) | 90 | (3) | Interactive multimedia, special pay TV | |||||||
PT Dayamitra Telekomunikasi (“Dayamitra”) | 100 | (4) | Fixed-phone (KSO-VI Kalimantan) | |||||||
PT Telekomunikasi Selular (“Telkomsel”) | 65 | GSM cellular phone services | ||||||||
PT Napsindo Primatel Internasional (“Napsindo”) | 60 | (5) | Network Access Point, Voice Over Data | |||||||
PT Infomedia Nusantara (“Infomedia”) | 51 | Telephone directory and other information services (electronic based business, call center and data segment) | ||||||||
PT Pro Infokom Indonesia (“PII”) | 51 | (6) | Telecommunication & information services, especially e-Government, e-Indonesia programs and B2B | |||||||
PT Pramindo Ikat Nusantara (“Pramindo”) | 100 | (7) | Fixed-phone (KSO-I Sumatera) | |||||||
Where TELKOM owns between 20% to 50%: | ||||||||||
PT Patra Telekomunikasi Indonesia (“Patrakom”) | 30.00 | VSAT services | ||||||||
PT Citra Sari Makmur (“CSM”) | 25.00 | VSAT and other telecommunications services | ||||||||
PT Pasifik Satelit Nusantara (“PSN”) | 43.69 | (8) | Satellite transponder & communications | |||||||
Where TELKOM owns less than 20%: | ||||||||||
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 | ||||||||||
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 AriaWest consummated the sale and purchase of AriaWest, pursuant to which TELKOM acquired 100% of AriaWest from PT Aria Infotek (52.50%), MediaOne International I B.V. (35%) and The Asian Infrastructure Fund (12.50%). One share in AriaWest was transferred to Mr. Woeryanto Soeradji in order to comply with the legal requirement that Indonesian limited liability companies should have more than one shareholder. |
(2) | On April 8, 2003, TELKOM increased its ownership in Metra to 100% by acquiring 69% of the shares of Metra from PT Indocitra Grahabawana under a share-swap transaction. TELKOM intends to use Metra to operate multimedia services in line with TELKOM’s strategy to focus on phone, mobile and multimedia services. One share in Metra was transferred to Mr. Woeryanto Soeradji in order to comply with the legal requirement that Indonesian limited liability companies be owned by more than one shareholder. |
(3) | On August 8, 2003, TELKOM and PT Centralindo Pancasakti Cellular (“CPSC”) signed a share-swap agreement pursuant to which TELKOM received an additional 30.58% of the shares of Indonusa from CPSC. Following this transaction, TELKOM’s ownership in Indonusa increased from 57.50% to 88.08%. Pursuant to an extraordinary general meeting of the shareholders of Indonusa on October 29, 2003, all of the stockholders agreed to convert an additional Rp.13,500 million of debt owed by Indonusa to TELKOM into newly issued shares of Indonusa. Following such conversion, TELKOM’s ownership in Indonusa increased from 88.08% to 90.39%. As of December 31, 2004, CPSC did not hold any shares in Indonusa. CPSC is not a major customer of TELKOM. |
(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 Napsindo from 32% to 60% by acquiring 28% of the shares of Napsindo from PT Info Asia Sukses Makmur Mandiri (“InfoAsia”). The agreement between TELKOM and InfoAsia was signed on December 30, 2002. The purchase price was paid on 28 January 2003, on which date TELKOM acquired control of Napsindo. |
(6) | In January 2003, TELKOM, PT Indonesia Comnets Plus, a subsidiary of Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara and PT Prima Infokom Indonesia established PII to provide B2B, e-Government and e-Indonesia services. On January 20, 2005, TELKOM sold all of its shares in PII to PT Prima Infokom Indonesia. |
(7) | On April 19, 2002, TELKOM and the shareholders of Pramindo signed a Conditional Sale and Purchase Agreement for the sale of the Pramindo shares. TELKOM received 30% of the shares of Pramindo in August 2002 and in September 2003 received an additional 15%, while the remaining 55% was to be transferred to TELKOM on December 15, 2004, 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 protective rights granted to the selling shareholders. TELKOM obtained control of Pramindo at the closing on August 15, 2002 and consequently has consolidated 100% of Pramindo from that date even though its ownership in Pramindo was only 30% as of December 31, 2002. On January 29, 2004, TELKOM signed a short-term loan agreement with ABN AMRO Bank N.V. Jakarta in the amount of approximately US$130 million and on March 15, 2004, TELKOM used the loan proceeds to repurchase the promissory notes that were due on June 15, 2004, September 15, 2004 and December 15, 2004, and so accelerated the purchase of the remaining 55%. Following this transaction, TELKOM owned 100% of Pramindo. One share in Pramindo has been transferred to Mr. Adek Julianwar in order to comply with the legal requirement that Indonesian limited liability companies should be owned by more than one shareholder. |
(8) | As part of the agreement signed on August 8, 2003 between TELKOM and CPSC, TELKOM was entitled to receive CPSC’s 21.12% interest in PSN within a period of one year from the date the agreement was signed. During this period, all of CPSC’s rights in relation to the shares were granted to TELKOM. TELKOM received the shares of CPSC in PSN on August 9, 2004, increasing its legal ownership interest in PSN to 43.69%. PSN and its creditors have agreed to a debt-to-equity conversion, pursuant to which PSN is required to issue approximately 20 million new shares to the creditors. The conversion will in effect dilute the shareholding percentage of the existing shareholders of PSN, including TELKOM. As of the date of this Annual Report, the debt-to-equity conversion has not been effected. Once the conversion is effected, TELKOM’s ownership interest in PSN will be diluted to approximately 35%. |
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(9) | 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 was diluted to 6.40%. On December 20, 2004, pursuant to shareholders’ resolutions, Mobisel issued 306 million new Series B shares, resulting in TELKOM’s interest being diluted from 6.40% to 3.63%. |
Unconsolidated Associated Companies |
PT Patra Telekomunikasi Indonesia |
PT Citra Sari Makmur |
PT Pasifik Satelit Nusantara |
PT Mandara Selular Indonesia (previously PT Mobile Selular Indonesia) |
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PT Batam Bintan Telekomunikasi |
PT Pembangunan Telekomunikasi Indonesia |
D. | Property, Plant and Equipment |
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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. | Operating Results |
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 |
• | 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 |
• | 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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Growth of Indonesian Cellular Market and Increase in Telkomsel’s revenues |
Increase in TELKOM’s interconnection revenues |
Increase in TELKOM’s data and Internet revenues |
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Sale of 12.72% equity interest in Telkomsel to SingTel |
Acquisition and Consolidation of KSO IV, III and I |
Early Retirement Program |
Depreciation Expense and Operations and Maintenance Expense |
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Consolidation of TELKOM’s Financial Statements |
Foreign Exchange Translations |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||||
Telephone | |||||||||||||||||||||||||||||
Fixed lines | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 1,145.9 | ||||||||||||||||||||||
Cellular | 6,226.8 | 29.9 | 8,458.8 | 31.2 | 10,421.3 | 30.7 | 1,121.8 | ||||||||||||||||||||||
Joint Operation Schemes | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 656.6 | 1.9 | 70.7 | ||||||||||||||||||||||
Interconnection | 2,831.3 | 13.6 | 4,162.1 | 15.3 | 6,188.0 | 18.2 | 666.1 | ||||||||||||||||||||||
Data and Internet | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 517.6 | ||||||||||||||||||||||
Network | 316.1 | 1.5 | 517.9 | 1.9 | 654.3 | 1.9 | 70.4 | ||||||||||||||||||||||
Revenue-sharing arrangements | 263.8 | 1.3 | 258.5 | 1.0 | 280.6 | 0.8 | 30.2 | ||||||||||||||||||||||
Other telecommunications services | 221.0 | 1.1 | 226.9 | 0.8 | 293.2 | 0.9 | 31.5 | ||||||||||||||||||||||
Total Operating Revenues | 20,802.8 | 100.0 | 27,116.0 | 100.0 | 33,947.8 | 100.0 | 3,654.2 | ||||||||||||||||||||||
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Fixed Line Telephone Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Fixed Line Telephone Revenues | |||||||||||||||||||||||||||||
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 | 1,474.8 | 7.1 | 1,948.8 | 7.2 | 2,934.9 | 8.6 | 315.9 | ||||||||||||||||||||||
Installation charges | 130.2 | 0.6 | 223.1 | 0.8 | 201.3 | 0.6 | 21.7 | ||||||||||||||||||||||
Phone cards | 29.3 | 0.1 | 34.4 | 0.1 | 15.6 | 0.1 | 1.7 | ||||||||||||||||||||||
Others | 181.9 | 0.9 | 128.8 | 0.5 | 53.9 | 0.2 | 5.8 | ||||||||||||||||||||||
Total | 7,264.1 | 34.9 | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 1,145.9 | ||||||||||||||||||||||
Cellular Telephone Revenues |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Cellular Telephone Revenues | |||||||||||||||||||||||||||||
Air time charges | 5,453.6 | 26.2 | 7,677.9 | 28.3 | 9,825.7 | 28.9 | 1,057.7 | ||||||||||||||||||||||
Monthly subscription charges | 593.3 | 2.9 | 580.5 | 2.2 | 448.5 | 1.3 | 48.3 | ||||||||||||||||||||||
Connection fee charges | 172.3 | 0.8 | 194.1 | 0.7 | 55.8 | 0.2 | 6.0 | ||||||||||||||||||||||
Features | 7.6 | 0.0 | 6.3 | 0.0 | 91.3 | 0.3 | 9.8 | ||||||||||||||||||||||
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. |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
KSO Revenues | |||||||||||||||||||||||||||||
Minimum TELKOM Revenues | 1,319.7 | 6.3 | 899.9 | 3.3 | 296.0 | 0.9 | 31.9 | ||||||||||||||||||||||
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 | 7.4 | 0.0 | 3.4 | 0.0 | 11.1 | 0.0 | 1.2 | ||||||||||||||||||||||
Total | 2,128.1 | 10.2 | 1,486.3 | 5.5 | 656.6 | 1.9 | 70.7 | ||||||||||||||||||||||
Interconnection Revenues |
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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 |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Data and Internet Revenue | |||||||||||||||||||||||||||||
SMS | 997.2 | 4.9 | 2,205.1 | 8.2 | 3,562.7 | 10.5 | 383.5 | ||||||||||||||||||||||
Multimedia | 337.8 | 1.6 | 494.7 | 1.8 | 813.3 | 2.4 | 87.5 | ||||||||||||||||||||||
VoIP | 152.2 | 0.7 | 328.3 | 1.2 | 318.9 | 0.9 | 34.3 | ||||||||||||||||||||||
ISDN | 64.4 | 0.3 | 80.5 | 0.3 | 113.9 | 0.4 | 12.3 | ||||||||||||||||||||||
Total | 1,551.6 | 7.5 | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 517.6 | ||||||||||||||||||||||
Network Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Network Revenue | |||||||||||||||||||||||||||||
Satellite transponder lease | 190.2 | 0.9 | 270.9 | 1.0 | 210.9 | 0.6 | 22.7 | ||||||||||||||||||||||
Leased lines | 125.9 | 0.6 | 247.0 | 0.9 | 443.4 | 1.3 | 47.7 | ||||||||||||||||||||||
Total | 316.1 | 1.5 | 517.9 | 1.9 | 654.3 | 1.9 | 70.4 | ||||||||||||||||||||||
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Revenues under Revenue-Sharing Arrangements |
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 Telecommunications Services Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||||
Depreciation | 3,473.4 | 16.7 | 4,779.5 | 17.6 | 6,438.5 | 19.0 | 693.1 | ||||||||||||||||||||||
Operations, maintenance and telecommunications services | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 487.6 | ||||||||||||||||||||||
Personnel | 4,387.6 | 21.1 | 4,440.1 | 16.4 | 5,570.8 | 16.4 | 599.7 | ||||||||||||||||||||||
General and administrative | 1,146.3 | 5.5 | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 279.8 | ||||||||||||||||||||||
Marketing | 375.1 | 1.8 | 502.9 | 1.8 | 881.9 | 2.6 | 94.9 | ||||||||||||||||||||||
Total Operating Expenses | 11,672.6 | 56.1 | 15,140.0 | 55.8 | 20,020.6 | 59.0 | 2,155.1 | ||||||||||||||||||||||
Depreciation Expense |
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Operations, Maintenance and Telecommunications Services Expenses |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operations, Maintenance and Telecommunications Services Expenses | |||||||||||||||||||||||||||||
Operations and maintenance | 1,042.6 | 5.0 | 1,744.8 | 6.4 | 2,398.2 | 7.1 | 258.1 | ||||||||||||||||||||||
Radio frequency usage charges | 292.7 | 1.4 | 371.7 | 1.4 | 492.6 | 1.5 | 53.0 | ||||||||||||||||||||||
Electricity, gas and water | 219.9 | 1.1 | 300.4 | 1.1 | 385.7 | 1.1 | 41.5 | ||||||||||||||||||||||
Cost of phone cards | 197.7 | 1.0 | 181.3 | 0.7 | 366.7 | 1.1 | 39.5 | ||||||||||||||||||||||
Concession fees | 163.9 | 0.8 | 239.0 | 0.9 | 314.7 | 0.9 | 33.9 | ||||||||||||||||||||||
Insurance | 142.9 | 0.7 | 157.1 | 0.6 | 151.3 | 0.4 | 16.3 | ||||||||||||||||||||||
Leased lines | 103.6 | 0.5 | 127.0 | 0.5 | 132.8 | 0.4 | 14.3 | ||||||||||||||||||||||
Vehicles and supporting facilities | 80.0 | 0.3 | 115.7 | 0.4 | 181.7 | 0.5 | 19.6 | ||||||||||||||||||||||
Traveling | 16.5 | 0.1 | 29.8 | 0.1 | 42.2 | 0.1 | 4.5 | ||||||||||||||||||||||
Others | 30.4 | 0.1 | 71.9 | 0.2 | 63.7 | 0.2 | 6.9 | ||||||||||||||||||||||
Total | 2,290.2 | 11.0 | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 487.6 | ||||||||||||||||||||||
Personnel Expenses |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Personnel Expenses | |||||||||||||||||||||||||||||
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 | 655.5 | 3.2 | 816.1 | 3.0 | 1,156.1 | 3.4 | 124.4 | ||||||||||||||||||||||
Early retirements | 717.3 | 3.4 | 355.7 | 1.3 | 243.5 | 0.7 | 26.2 | ||||||||||||||||||||||
Long service awards | 289.9 | 1.4 | 219.2 | 0.8 | 159.3 | 0.5 | 17.2 | ||||||||||||||||||||||
Net periodic pension cost | 362.3 | 1.7 | 191.0 | 0.7 | 1,034.8 | 3.1 | 111.4 | ||||||||||||||||||||||
Employee income tax | 201.5 | 1.0 | 468.8 | 1.7 | 523.8 | 1.5 | 56.4 | ||||||||||||||||||||||
Net periodic post-retirement benefit cost | 616.5 | 3.0 | 641.4 | 2.4 | 492.2 | 1.5 | 53.0 | ||||||||||||||||||||||
Housing | 89.5 | 0.4 | 116.9 | 0.4 | 103.5 | 0.3 | 11.2 | ||||||||||||||||||||||
Medical | 28.2 | 0.1 | 9.7 | 0.1 | 12.2 | 0.0 | 1.3 | ||||||||||||||||||||||
Other employee benefits | — | — | 4.4 | 0.0 | 11.5 | 0.0 | 1.2 | ||||||||||||||||||||||
Others | 16.2 | 0.1 | 42.7 | 0.2 | 37.0 | 0.1 | 4.0 | ||||||||||||||||||||||
Total | 4,387.6 | 21.1 | 4,440.1 | 16.4 | 5,570.8 | 16.4 | 599.7 | ||||||||||||||||||||||
General and Administrative Expenses |
Year Ended December 31, | |||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
General and Administrative Expenses | |||||||||||||||||||||||||||||
Provision for doubtful accounts and inventory obsolescence | 31.1 | 0.1 | 326.4 | 1.2 | 357.7 | 1.1 | 38.5 | ||||||||||||||||||||||
Professional fees | 219.0 | 1.0 | 115.6 | 0.4 | 137.3 | 0.4 | 14.8 | ||||||||||||||||||||||
Collection expenses | 224.8 | 1.1 | 273.8 | 1.0 | 359.0 | 1.1 | 38.6 | ||||||||||||||||||||||
Training, education and recruitment | 122.1 | 0.6 | 126.9 | 0.5 | 228.5 | 0.7 | 24.6 | ||||||||||||||||||||||
Travel | 111.4 | 0.5 | 144.7 | 0.6 | 192.6 | 0.6 | 20.7 | ||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 188.0 | 0.9 | 730.7 | 2.7 | 872.3 | 2.6 | 93.9 | ||||||||||||||||||||||
Security and screening | 77.1 | 0.4 | 110.3 | 0.4 | 143.9 | 0.4 | 15.5 | ||||||||||||||||||||||
Printing and stationery | 43.5 | 0.2 | 50.5 | 0.2 | 81.0 | 0.2 | 8.7 | ||||||||||||||||||||||
Meetings | 31.7 | 0.2 | 42.8 | 0.2 | 58.3 | 0.2 | 6.3 | ||||||||||||||||||||||
Research and development | 10.5 | 0.1 | 9.1 | 0.0 | 13.2 | 0.0 | 1.4 | ||||||||||||||||||||||
General and social contribution | 69.4 | 0.3 | 113.8 | 0.4 | 111.8 | 0.3 | 12.0 | ||||||||||||||||||||||
Others | 17.7 | 0.1 | 34.2 | 0.1 | 44.2 | 0.1 | 4.8 | ||||||||||||||||||||||
Total | 1,146.3 | 5.5 | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 279.8 | ||||||||||||||||||||||
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Marketing Expenses |
Year Ended December 31, | ||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||
Marketing Expenses | ||||||||||||||||||||||||||||
Advertising | 310.3 | 1.5 | 381.7 | 1.4 | 699.6 | 2.1 | 75.3 | |||||||||||||||||||||
Customer education | 52.3 | 0.2 | 102.2 | 0.3 | 152.4 | 0.4 | 16.4 | |||||||||||||||||||||
Others | 12.5 | 0.1 | 19.0 | 0.1 | 29.9 | 0.1 | 3.2 | |||||||||||||||||||||
Total | 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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• | 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 |
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Year ended December 31, 2003 compared to year ended December 31, 2002 |
Operating Revenues. |
• | 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 to the increase in operating revenues. |
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• | salaries and related benefits increased by Rp.163.5 billion to Rp.1,574.2 billion, an increase of 11.6%; | |
• | vacation pay, incentives and other benefits increased by Rp.160.6 billion to Rp.816.1 billion, an increase of 24.5%; and | |
• | employee income tax increased by Rp.267.3 billion to Rp.468.8 billion, an increase of 132.7%, primarily due to the payment of significant withholding tax on payments under TELKOM’s early retirement program. |
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• | an increase in operations and maintenance expenses by Rp.702.2 billion to Rp.1,744.8, an increase of 67.4%, due to an increase in Telkomsel’s operations and maintenance expenses arising from the growth in the number of Telkomsel’s BTSs, which grew by 38.4% to 4,820 in 2003, and the increase in the number of Telkomsel’s transmitting and receiving exchanges; | |
• | total radio frequency usage charges increased by Rp.79.0 billion to Rp.371.7 billion in 2003, an increase of 27.0%, primarily due to a 26.1% increase in usage charges by Telkomsel of Rp.73.2 billion from Rp.280.4 billion in 2002 to Rp.353.6 billion in 2003, in line with the 38.4% increase in the number of BTSs from 3,483 in 2002 to 4,820 in 2003; | |
• | total concession fees increased by Rp.75.1 billion to Rp.239.0 billion in 2003, an increase of 45.8% due to an increase in the revenues of TELKOM and Telkomsel; and | |
• | electricity, gas and water charges increased by 36.6%, from Rp.219.9 billion in 2002 to Rp.300.4 billion in 2003, reflecting primarily the consolidation of the gas electricity and water charges of AriaWest and other subsidiaries, as well as an increase in electricity and gas rates in 2003 compared to 2002. |
• | amortization of goodwill and other intangible assets increased by Rp.542.7 billion to Rp.730.7 billion, or 288.7%, mainly due to amortization of additional intangible assets arising from the acquisition of AriaWest in July 2003 and Pramindo in August 2002; | |
• | provision for doubtful accounts and inventory obsolescence increased by Rp.295.3 billion to Rp.326.4 billion in 2003, primarily due to an increase in TELKOM and Telkomsel customer defaults and, in addition, the amount for 2003 represented TELKOM’s provisions for doubtful accounts following the reversal in 2002 of certain provisions for doubtful accounts as a result of the settlement of TELKOM’s dispute with AriaWest. | |
• | collection expenses increased by Rp.49.0 billion to Rp.273.8 billion, an increase of 21.8%, 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; | |
• | general and social contribution increased by Rp.44.4 billion to Rp.113.8 billion, an increase of 63.9%, reflecting TELKOM’s various charitable donations and community services; | |
• | security and screening increased by Rp.33.2 billion to Rp.110.3 billion, an increase of 43.1%, primarily due to the consolidation of the KSO III Unit; and | |
• | professional fees decreased by Rp.103.4 billion, or 47.2%, to Rp.115.6 billion in 2003, principally due to a decline in financial advisory and legal fees in 2003. |
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Operating Income and Operating Margin |
Other Income (Charges) |
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• | Rp.248.6 billion in income from fines from late-paying subscribers; | |
• | gain on sale of fixed assets (net), primarily property, plant and equipment, amounting to Rp.182.9 billion. |
Income Before Tax and Pre-Tax Margin |
Income Tax Expense |
Minority Interest in Net Income of Subsidiaries |
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Year Ended December 31, | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Net income in accordance with | ||||||||||||||||
Indonesian GAAP | 8,039.7 | 6,087.2 | 6,129.2 | 659.8 | ||||||||||||
U.S. GAAP | 8,587.3 | 5,790.6 | 6,468.6 | 696.3 |
Year Ended December 31, | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Equity in accordance with | ||||||||||||||||
Indonesian GAAP | 14,613.6 | 17,312.9 | 20,261.3 | 2,181.0 | ||||||||||||
U.S. GAAP | 13,910.9 | 16,284.7 | 19,570.9 | 2,106.7 |
Termination Benefits |
Foreign Exchange Differences Capitalized to Property under Construction |
Interest Capitalized on Property under Construction |
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Revenue-Sharing Arrangements |
Revaluation of Property, Plant and Equipment |
Pension |
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Equity in Net Income or Loss of Associated Companies |
Land rights |
Equipment to be Installed |
Revenue Recognition |
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Goodwill |
Capital Leases |
Acquisition of Dayamitra |
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Reversal of Difference Due to Change of Equity in Associated Companies |
Asset Retirement Obligations |
Deferred Income Taxes |
Impairment of Assets |
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Gain (loss) on Sale of Property, Plant and Equipment |
2002 | 2003 | 2004 | ||||||||||
Rp. million | Rp. million | Rp. million | ||||||||||
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: | ||||||||||||
Termination benefits | 530,981 | (670,981 | ) | — | ||||||||
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 | ) |
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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. |
2003 | 2004 | ||||||||
Rp. million | Rp. million | ||||||||
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 | (550,473 | ) | (548,886 | ) | |||||
Interest capitalized on property under construction — net of related depreciation | 101,812 | 128,614 | |||||||
Revenue-sharing arrangements | (447,696 | ) | (292,327 | ) | |||||
Revaluation of property, plant and equipment: | |||||||||
Increment | (664,974 | ) | (664,974 | ) | |||||
Accumulated depreciation | 664,974 | 664,974 | |||||||
Pension | 122,156 | 436,026 | |||||||
Equity in net income (loss) of associated companies | (18,252 | ) | (18,429 | ) | |||||
Amortization of land rights | (65,211 | ) | (79,118 | ) | |||||
Revenue recognition | (768,548 | ) | (714,389 | ) | |||||
Goodwill | 42,539 | 63,809 | |||||||
Capital leases | 21,123 | 17,688 | |||||||
Adjustment for consolidation of Dayamitra | (38,718 | ) | (61,728 | ) | |||||
Asset retirement obligations | (848 | ) | (1,696 | ) |
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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 |
• | 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 wireless access networks, fiber optic transmission network from Kalimantan and Sulawesi, an additional ground satellite segment in east Indonesia, fiber optic transmission network Medan-Pekanbaru, installation and upgrading of fixed lines and increased capacity in its mobile cellular service conducted through Telkomsel (see “— Capital Expenditures”); | |
• | debt service requirements relating to existing indebtedness, including two-step loans, indebtedness of subsidiaries, its short-term loan with ABN AMRO Bank N.V. Jakarta and Bank Central Asia, and its Rp.1.1 trillion medium-term notes due between June 2005 and June 2007; | |
• | installment payments of the purchase price for shares of AriaWest; | |
• | payments of contribution to TELKOM’s defined benefit pension plan, post-retirement health care plan and long-service awards in 2005; | |
• | fixed monthly payments to MGTI pursuant to the amended and restated agreement for KSO IV, commencing February 2004 and terminating in 2010; and | |
• | 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. |
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Defaults and Waivers of Defaults under our Debt Facilities |
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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 |
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. |
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• | 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 subscribers. |
• | 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. |
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. |
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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. |
Net Cash Flows from Financing Activities |
Repayments of Current Indebtedness. |
• | 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. |
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Payment of Cash Dividends and General Reserve. |
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 |
(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 Accounts. |
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; |
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• | a decrease in cash and cash equivalents of Rp.238.4 billion, or 4.7%, from Rp.5,094.5 billion at December 31, 2003 to Rp.4,856.1 billion (US$522.7 million) at December 31, 2004; | |
• | a decrease in prepaid taxes of Rp.135.1 billion, or 63.6%, from Rp.212.3 billion at December 31, 2003 to Rp.77.2 billion (US$8.3 million) at December 31, 2004; and | |
• | a decrease in other accounts receivable of Rp.114.3 billion, or 67.2%, from Rp.170.1 billion at December 31, 2003 to Rp.55.8 billion (US$6.0 million) at December 31, 2004; |
Trade Accounts Receivable. |
Other Current Assets. |
Current Liabilities |
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Current Maturities of Long-term Liabilities. |
Accrued Expenses. |
At December 31, | |||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(US$ 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) | Amounts at December 31, 2004 include debt issuance costs for medium term notes of Rp.2.3 billion. In addition for 2002, 2003 and 2004, amounts also include bond issuance costs for TELKOM bonds of Rp.24.0 billion, Rp.18.7 billion and Rp.13.4 billion. |
(2) | Amounts at December 31, 2002, 2003 and 2004 translated into Rupiah at Rp.8,960, Rp.8,450 and Rp.9,300 = US$1, respectively, being the Reuters sell rates for U.S. Dollars at each of those dates. |
(3) | Amounts at December 31, 2002 includes imputed interest on liabilities of business acquisitions (which relates to Dayamitra and Pramindo) of US$1.1 million (Rp.10.0 billion) and US$31.1 million (Rp.278.1 billion), respectively, being imputed interest for installment payments of the liability. Amounts at December 31, 2003 includes imputed interest on liabilities of business acquisitions (which relates to Pramindo and AriaWest) of US$9.5 million (Rp.80.2 billion) and US$14.5 million (Rp.122.4 billion), respectively, being imputed interest for installment payments of the liability. Amounts at December 31, 2004 includes imputed interest on liabilities of business acquisitions (which relates to AriaWest, the remaining 9.68% interest in Dayamitra and KSO IV) of US$9.7 million (Rp.90.2 billion), US$1.3 million (Rp.11.9 billion) and US$101.0 million (Rp.938.7 billion), respectively, being imputed interest for installment payments of the liability. |
(4) | Amounts at December 31, 2002, 2003 and 2004 translated into Rupiah at Rp.75.5, Rp.79.05 and Rp.90.6 = Yen 1, respectively, being the prevailing exchange rates for buying Yen at each of those dates. |
(5) | Amounts at December 31, 2002, 2003 and 2004 translated into Rupiah at Rp.9,377.5, Rp.10,663.9 and Rp.12,666.9 = EURO 1, respectively, being the prevailing exchange rate for buying Euros at each of those dates. |
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• | Rp.6,018.7 billion (US$647.9 million) (including current maturities) in two-step loans through the Government; | |
• | Rp.736.2 billion (US$79.2 million) (after discount) in guaranteed notes which is owed by Telkomsel; | |
• | Rp.986.6 billion (US$106.2 million) (after bond issuance costs) IDR bonds issued by TELKOM; | |
• | Rp.822.9 billion (US$88.6 million) (including current maturities) in acquisition indebtedness relating to TELKOM’s acquisition of 100% equity interest in AriaWest (after discount); | |
• | Rp.127.9 billion (US$13.8 million) from exercising the call option agreement with TM Communication (HK) Ltd. to purchase 9.68% of Dayamitra shares (after discount); | |
• | 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.1,171.2 billion (US$126.1 million) (including current maturities) of Telkomsel’s loan from Citibank N.A. through its Hermes Export facility (Rp.649.8 billion) and EKN-Backed facility (Rp.521.4 billion); | |
• | Rp.590.6 billion (US$63.6 million) (including current maturities) from loan facilities relating to TELKOM’s Sumatera backbone network and Regional Division V junction project; | |
• | Rp.108.5 billion (US$11.7 million) (including current maturities and short-term loans) from other loan facilities for other subsidiaries, namely Infomedia, Napsindo and Dayamitra; | |
• | 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 |
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• | 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. |
Guaranteed Notes |
IDR Bond Issuance |
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• | 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. |
Medium-Term Notes |
Acquisition Indebtedness and Option Purchase Price |
Dayamitra |
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Pramindo |
AriaWest |
KSO IV |
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Sumatera backbone network |
Regional Division V Junction Project |
Telkomsel’s Indebtedness (including facilities) |
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Hermes Export Facility |
EKN-Backed Facility |
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Dayamitra’s Indebtedness |
• | Rp.58.3 billion (US$6.3 million), representing loan facilities from Bank Mandiri pursuant to the terms of loan agreements entered into on November 20, 2003 and December 20, 2003. The loans are payable on a quarterly basis until the fourth quarter of 2006 and bear interest at 11.25% per annum. |
• | 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 through Telkomsel; | |
• | Multimedia, which consists of Internet access, VoIP services and data services; and | |
• | 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, | ||||||||||||||||||||||
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 | |||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005(2) | 2006(3) | ||||||||||||||||
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 | 3.7 | 21.3 | 28.7 | |||||||||||||||
PT Pro Infokom Indonesia | — | 0.6 | 0.6 | — | 10.8 | |||||||||||||||
PT Metra (Holding) | — | 6.1 | 0.9 | 12.6 | — | |||||||||||||||
AriaWest | — | 0.2 | 0.1 | 0.1 | — | |||||||||||||||
Napsindo | — | 53.8 | 0.3 | 1.3 | — | |||||||||||||||
Subtotal for subsidiaries | 4,710.3 | 5,618.8 | 5,104.8 | 7,399.2 | 5,498.0 | |||||||||||||||
Total for TELKOM (consolidated) | 6,788.6 | 9,552.6 | 8,820.4 | 12,971.6 | 13,064.0 | |||||||||||||||
(1) | Amounts for 2002, 2003 and 2004 are actual capital expenditures. |
(2) | Amounts for 2005 are planned capital expenditures included in TELKOM’s budget and are subject to upward or downward adjustment. |
(3) | Amounts for 2006 are projected capital expenditures for such year, and actual capital expenditures may be significantly different from projected amounts. |
Planned Investments in 2005 |
Planned Investments in Infrastructure |
• | Rp.752.1 billion for capital investments in transmission infrastructure, which are expected to include investments in a fiber optic transmission network, a backbone transmission network on the island of Kalimantan and Sulawesi and an additional ground satellite segment in Jakarta and a submarine cable system between Batam-Jakarta; and | |
• | Rp.2,247.7 billion for capital investments in access infrastructure, which are expected to include investments in fiber optic cable fixed line, copper wire fixed line and CDMA wireless access networks. |
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Planned Investments in Commercial Services |
• | Rp.683.7 billion for capital investments in fixed line commercial services (including fixed wireless services), which include additional capacity, service enhancements and upgrades, including to its value added services and software and mechanical and electrical systems; | |
• | Rp.802.4 billion for capital investments in multimedia (including core network of IP transport, HFC and CATV services), which include increases in the number of VoIP access points, Internet multiplexing (IMUX) systems for Internet and data access, Internet value added services such as B2B e-commerce, broadband access (xDsl), and improving TELKOM’s HFC and CATV systems; | |
• | Rp.164.5 billion for capital investments in service-net, including the establishment of fixed wireless services, e-commerce, internet connectivity and value added services. |
Planned Investments in Supporting Services |
• | 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 |
Two-Step Loans |
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Revenue Sharing |
Direct Borrowings |
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Pay as You Grow |
IDR Bond Issuance |
Medium-Term Notes |
Consolidation/ Equity method |
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Revenue Recognition |
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• | 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. |
Allowances for Doubtful Accounts |
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Carrying Amount of Property, Plant and Equipment and Goodwill and Other Intangible Assets |
Acquisitions and Business Divestitures |
Pension and Post-retirement Benefits |
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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 |
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Legal Contingencies |
C. | Research and Development and Intellectual Property |
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 Pramindo; |
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• | acquisition of AriaWest; | |
• | acquisition of KSO IV; | |
• | competition in the market for DLD services; | |
• | commencement of TELKOM’s IDD services; | |
• | 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 |
F. | Tabular Disclosure of Contractual Obligations |
Payments Due by Period | |||||||||||||||||||||
Less than | |||||||||||||||||||||
Contractual Obligations | Total | 1 year | 1-3 years | 4-5 years | After 5 years | ||||||||||||||||
(Rp. billion) | |||||||||||||||||||||
Short Term Loans(1)(5) | 1,101.6 | 1,101.6 | — | — | — | ||||||||||||||||
Long Term Debts(2)(5) | 15,514.7 | 2,300.8 | 6,215.4 | 2,822.3 | 4,176.2 | ||||||||||||||||
Capital Lease Obligations(3) | — | — | — | — | — | ||||||||||||||||
Operating Leases(3) | 247.5 | — | 247.5 | — | — | ||||||||||||||||
Unconditional Purchase Obligations(4) | 4,373.2 | 3,500.3 | 872.9 | — | — | ||||||||||||||||
Total | 21,237.0 | 6,902.7 | 7,335.8 | 2,822.3 | 4,176.2 | ||||||||||||||||
(1) | Relates to liabilities under a short term loans obtained from Bank Mandiri, ABN AMRO Bank and Bank Central Asia. See Note 20 to the Company’s consolidated financial statements included elsewhere in this Annual Report. |
(2) | See “— Liquidity and Capital Resources — Indebtedness” and Notes 22, 23, 24, 25, 26 and 27 to the Company’s consolidated financial statements included elsewhere in this Annual Report. |
(3) | Relates primarily to leases of motor vehicles and computers. |
(4) | Relates to commitments of TELKOM to suppliers and vendors for the purchase of telecommunications-related equipment and infrastructure. |
(5) | Excludes contractually committed rate of interest. |
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ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. | Directors and Senior Management |
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Age as of | ||||||||
Name | January 1, 2005 | Title | Since | |||||
Tanri Abeng | 63 | President Commissioner | March 10, 2004 | |||||
P. Sartono | 60 | Independent Commissioner | June 21, 2002 | |||||
Arif Arryman | 49 | Independent Commissioner | June 21, 2002 | |||||
Anggito Abimanyu | 42 | Commissioner | March 10, 2004 | |||||
Gatot Trihargo | 44 | Commissioner | March 10, 2004 |
Tanri Abeng |
P. Sartono |
Arif Arryman |
Anggito Abimanyu |
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Gatot Trihargo |
• | 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. |
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Age as of | ||||||||||
Name | January 1, 2005 | Title | Since | |||||||
Arwin Rasyid | 47 | President Director | June 24, 2005 | |||||||
Garuda Sugardo | 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 Network & Solution | March 10, 2004 | |||||||
John Welly | 50 | Director of Human Resource Development | June 24, 2005 | |||||||
Guntur Siregar | 53 | Director of Consumer | June 24, 2005 |
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TELKOM regions | KSO region VII | ||||||||
as at | as at | ||||||||
December 31, | December 31, | ||||||||
2004 | 2004 | ||||||||
Senior management | 154 | — | |||||||
Middle management | 2,136 | 87 | |||||||
Supervisors | 7,982 | 796 | |||||||
Others | 15,551 | 2,669 | |||||||
Total | 25,823 | 3,552 | |||||||
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Title of Class | Identity of Person or Group | Amount Owned | Percent of Class | |||||||
Series A | Government | 1 | 100.00% | |||||||
Series B | Government | 10,320,470,711 | 51.19% | |||||||
Series B | JPMCB US Resident (Norbax Inc.) | 1,378,468,925 | 6.84% | |||||||
Series B | The Bank of New York (BoNY) | 1,568,517,736 | 7.78% | |||||||
Series B | Board of Directors and Commissioners | 82,728 | <0.01% |
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Government as Shareholder |
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Government as Regulator |
Government as Lender |
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Government as Customer |
Proportion of securities of TELKOM held in Indonesia and outside Indonesia |
Change in Control |
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 Communications of the Republic of Indonesia; | |
• | The Company has also entered into an interconnection agreement between the Company’s PSTN 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’s compensation relating to leased lines/ channel services, such as International Broadcasting System, AVD and bill printing is calculated at 15% of Indosat’s revenues from such services. Indosat also leased circuits from the Company to link Jakarta, Medan and Surabaya in 2003, but did not use this service in 2004; and | |
• | 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 regardless whether billings to customers have been collected; and | |
• | 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”) |
Indefeasible Right of Use Agreement |
Interconnection Revenues |
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Leased Lines |
Satellite Transponder Lease |
Data communication network |
Agreement with Government agencies and associated companies |
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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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B. | Significant changes |
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ITEM 9. | THE OFFER AND LISTING |
A. | Offer and listing details |
Price per | ||||||||
Share* | ||||||||
Calendar Year | High | Low | ||||||
(in Rupiah) | ||||||||
2000 | 4,350 | 2,025 | ||||||
First Quarter | 4,350 | 3,325 | ||||||
Second Quarter | 3,775 | 2,675 | ||||||
Third Quarter | 3,325 | 2,600 | ||||||
Fourth Quarter | 2,890 | 2,025 | ||||||
2001 | 3,400 | 1,825 | ||||||
First Quarter | 3,150 | 1,775 | ||||||
Second Quarter | 3,200 | 2,175 | ||||||
Third Quarter | 3,525 | 2,650 | ||||||
Fourth Quarter | 3,250 | 2,425 | ||||||
2002 | ||||||||
First Quarter | 4,300 | 2,825 | ||||||
Second Quarter | 4,725 | 3,700 | ||||||
Third Quarter | 3,900 | 3,125 | ||||||
Fourth Quarter | 4,000 | 2,350 | ||||||
2003 | ||||||||
First Quarter | 3,725 | 3,225 | ||||||
Second Quarter | 4,950 | 3,650 | ||||||
Third Quarter | 6,000 | 4,125 | ||||||
Fourth Quarter | 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 | 5,200 | 4,600 | ||||||
2005 | ||||||||
January | 5,125 | 4,800 | ||||||
February | 4,825 | 4,425 | ||||||
March | 4,625 | 4,300 | ||||||
April | 4,725 | 4,275 | ||||||
May | 4,600 | 4,175 | ||||||
June | 5,350 | 4,700 | ||||||
July (through July 13, 2005) | 5,250 | 4,950 |
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Price per ADS | Price per ADS | |||||||||||||||
(NYSE) | (LSE) | |||||||||||||||
Calendar Year | High | Low | High | Low | ||||||||||||
(in US Dollars) | (in US Dollars) | |||||||||||||||
2000 | 12.00 | 4.13 | 12.15 | 4.27 | ||||||||||||
First Quarter | 12.00 | 9.1 | 12.1 | 9.2 | ||||||||||||
Second Quarter | 9.7 | 6.4 | 9.6 | 6.4 | ||||||||||||
Third Quarter | 8.0 | 5.9 | 7.9 | 6.1 | ||||||||||||
Fourth Quarter | 6.3 | 4.1 | 6.4 | 4.3 | ||||||||||||
2001 | 7.06 | 3.65 | 7.05 | 3.80 | ||||||||||||
First Quarter | 6.7 | 4.0 | 6.5 | 3.9 | ||||||||||||
Second Quarter | 5.6 | 3.7 | 5.6 | 3.8 | ||||||||||||
Third Quarter | 7.1 | 5.5 | 7.1 | 5.5 | ||||||||||||
Fourth Quarter | 5.8 | 4.7 | 6.1 | 4.8 | ||||||||||||
2002 | 9.77 | 5.56 | 9.82 | 5.27 | ||||||||||||
First Quarter | 8.6 | 5.5 | 8.6 | 5.5 | ||||||||||||
Second Quarter | 9.8 | 8.4 | 9.8 | 8.4 | ||||||||||||
Third Quarter | 8.7 | 7.0 | 8.7 | 7.1 | ||||||||||||
Fourth Quarter | 8.9 | 5.6 | 8.9 | 5.3 | ||||||||||||
2003 | 8.44 | 7.30 | 8.53 | 7.27 | ||||||||||||
First Quarter | 8.44 | 7.30 | 8.53 | 7.27 | ||||||||||||
Second Quarter | 12.09 | 8.19 | 11.78 | 8.33 | ||||||||||||
Third Quarter | 13.73 | 9.85 | 13.90 | 9.60 | ||||||||||||
Fourth Quarter | 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 | 23.33 | 19.35 | 22.96 | 19.64 | ||||||||||||
2005 | ||||||||||||||||
January | 21.96 | 20.60 | 21.95 | 20.47 | ||||||||||||
February | 20.95 | 19.21 | 20.88 | 19.05 | ||||||||||||
March | 19.40 | 18.11 | 20.05 | 18.66 | ||||||||||||
April | 19.82 | 17.75 | 20.24 | 18.02 | ||||||||||||
May | 19.75 | 16.85 | 20.18 | 18.01 | ||||||||||||
June 30, 2005 | 21.96 | 19.46 | 22.36 | 19.86 | ||||||||||||
July (through July 13, 2005) | 21.30 | 20.29 | 21.42 | 20.55 |
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B. | Plan of distribution |
C. | Markets |
Overview of the JSX |
• | 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. |
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Trading on the NYSE and LSE |
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ITEM 10. | ADDITIONAL INFORMATION |
• | 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; |
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• | 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. |
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Overview of Indonesia law |
Composition of Board of Directors; Independence |
160
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Committees |
Disclosure regarding corporate governance |
161
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Code of Business Conduct and Ethics |
162
Table of Contents
163
Table of Contents
164
Table of Contents
165
Table of Contents
166
Table of Contents
167
Table of Contents
168
Table of Contents
Dividends |
Capital Gains |
169
Table of Contents
Stamp Duty |
170
Table of Contents
Taxation of Distributions |
Taxation of Capital Gains |
171
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Passive Foreign Investment Company Status |
172
Table of Contents
Interest Rate Risk |
173
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Outstanding Balance as at | ||||||||||||||||||||||||||||||||||||||||||
December 31, 2004 | ||||||||||||||||||||||||||||||||||||||||||
Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | |||||||||||||||||||||||||||||||||||||||||
Currency | Equivalent | Rate | 2005 | 2006 | 2007 | 2008 | 2009 | 2010-2024 | Fair Value | |||||||||||||||||||||||||||||||||
(Rp. in | ||||||||||||||||||||||||||||||||||||||||||
(Rp. in | million) | |||||||||||||||||||||||||||||||||||||||||
(in millions) | million) | (%) | (Rp. in million) | |||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||
Fixed Rate | ||||||||||||||||||||||||||||||||||||||||||
Cash and Cash equivalents | ||||||||||||||||||||||||||||||||||||||||||
Time deposit | ||||||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||||||
Principal | — | 2,564,200 | 2,564,200 | — | — | — | — | — | 2,564,200 | |||||||||||||||||||||||||||||||||
Interest | 6.5 | |||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||||||
Principal | 66.79 | 620,452 | 620,452 | — | — | — | — | — | 620,452 | |||||||||||||||||||||||||||||||||
Interest | 1.9 | |||||||||||||||||||||||||||||||||||||||||
Euro | ||||||||||||||||||||||||||||||||||||||||||
Principal | 85.49 | 1,081,568 | 1,081,568 | — | — | — | — | — | 1,081,568 | |||||||||||||||||||||||||||||||||
Interest | 1.9 | |||||||||||||||||||||||||||||||||||||||||
Temporary Investments | ||||||||||||||||||||||||||||||||||||||||||
Time deposits | ||||||||||||||||||||||||||||||||||||||||||
Rupiah | ||||||||||||||||||||||||||||||||||||||||||
Principal | — | 5,065 | 5,065 | — | — | — | — | — | 5,065 | |||||||||||||||||||||||||||||||||
Interest | 6.4 | |||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Securities Rupiah | — | 14,884 | 14,884 | — | — | — | — | — | 14,884 | |||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||
Short Term Bank Loan | ||||||||||||||||||||||||||||||||||||||||||
Variable Rate | ||||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | ||||||||||||||||||||||||||||||||||||||||||
Principal | 118.46 | 1,101,633 | 1,101,633 | — | — | — | — | — | 1,101,633 | |||||||||||||||||||||||||||||||||
Interest | 5.0 | 24,161 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Long-term debt(1) | ||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||
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 |
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(1) | Long-term debt consists of loans which are subject to interest; namely two-step loans, notes and bonds, liabilities of business acquisitions and long-term bank loans, in each case including their current maturities. Long-term debt, for the purpose of this table, includes liabilities of business acquisitions. |
Exchange Rate Risk |
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, 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, liabilities of business acquisitions, long-term bank loans, notes and bonds, in each case including their current maturities. |
Equity Price Risk |
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ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
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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. |
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(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 |
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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 |
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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 |
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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. |
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(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 |
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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. |
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• | 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. |
• | From April 2004 to June 2004, TELKOM held internal meetings to establish a task force to enhance its finance-related policies and procedures covering accounting and financial reporting. On July 12, 2004, TELKOM formally established such task force with responsibility for enhancing all finance-related policies and procedures covering accounting and financial reporting. The task force collected and reviewed the previously dispersed accounting policies and updated and created new accounting policies. The responsibilities of the team include (i) identifying the accounting policies and the standard operating procedures being applied; (ii) identifying “the best practices” of accounting policies based on Indonesian standards and |
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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. |
• | On December 7, 2004, TELKOM modified the mandate of its internal audit function to place greater emphasis on the adequacy of and compliance with, procedures relating to internal control over financial reporting. Under the previous Internal Audit Charter, each TELKOM division had an internal auditor which reported to the head of the division. Under the revised Internal Audit Charter, TELKOM centralized the reporting function and the division-based internal auditors report to the Head of the Internal Audit Unit. The Internal Audit Unit reports directly to the President Director but also works with the Audit Committee and the external auditor, and, under the revised charter, is responsible for the assessment of the effectiveness of internal controls. The charter also provides for the internal auditor to have free and broad access to TELKOM’s activities. | |
• | 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 |
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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. |
• | On December 28, 2004, TELKOM informally established a new disclosure committee and held a meeting among the members of the disclosure committee. The disclosure committee is comprised of 14 senior members from various departments and chaired by the CFO, for purposes of supporting TELKOM’s management in designing and evaluating TELKOM’s disclosure controls and procedures and participating in the disclosure process. TELKOM formally established its disclosure committee on February 18, 2005. Since its formal establishment, the disclosure committee has established internal work procedures relating to the preparation of TELKOM’s annual report on Form 20-F, and participated in the review and preparation of TELKOM’s annual report on Form 20-F. The establishment of the disclosure committee formalized the previous disclosure process where designated senior employees from various departments were responsible for assisting with the necessary disclosures. |
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Year Ended | ||||||||
December 31, | ||||||||
2003 | 2004 | |||||||
(in Rp. million) | ||||||||
Audit Fees | 10,715.0 | 19,274.6 | ||||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
Other Fees | — | — |
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ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
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4.1* | Settlement Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | |||
4.2* | Credit Agreement between TELKOM and the AriaWest lenders, dated July 31, 2003. | |||
4.3* | First Amendment to the Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | |||
4.4* | Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated May 8, 2002. | |||
4.5* | Conditional Sale and Purchase Agreement between TELKOM and the shareholders of Pramindo, dated April 19, 2002. | |||
4.6* | 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. | |||
4.7** | Kontrak Pengadaan Satelit TELKOM-2 (Contract on Procurement of TELKOM-2 Satellite) between TELKOM and Orbital Sciences Corporation, dated October 24, 2002. | |||
4.8+ | First Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated December 15, 2003. | |||
4.9** | Kontrak Jasa Peluncur Satelit TELKOM-2 (Agreement on Launch Services of TELKOM-2 Satellite) between TELKOM and Arianespace S.A., dated November 8, 2002. | |||
4.10* | Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2003. | |||
4.11* | Amendment No. 1 to the Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 31, 2003. | |||
4.12* | Service Level Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2002. | |||
4.13* | Loan Agreement between TELKOM and The Export-Import Bank of Korea, dated August 27, 2003. | |||
4.14* | Master Procurement Partnership Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. | |||
4.15* | Service Level Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. |
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4.16* | Master Procurement Partnership Agreement between TELKOM and PT Industri Telekomunikasi Indonesia (Persero), dated August 26, 2003, including an English translation thereof. | |||
4.17* | Service Level Agreement between TELKOM and PT Industri Telekomunikasi Indonesia Tbk., dated August 26, 2003. | |||
4.18* | Partnership Agreement for the Procurement and Construction of Backbone Transmission Network between TELKOM and a consortium led by Siemens AG, dated September 24, 2003. | |||
4.19** | Development Contract PSTN Excellence Regional Junction Divre-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated February 8, 2002. | |||
4.20+ | 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. | |||
4.21* | 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. | |||
4.22* | 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. | |||
4.23* | 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. | |||
4.24* | 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. | |||
4.25* | 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. | |||
4.26+ | 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. | |||
4.27+ | 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. | |||
4.28* | Master Procurement Partnership Agreement between TELKOM and Motorola, Inc., dated March 24, 2003. | |||
4.29* | 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. | |||
4.30* | 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. | |||
4.31* | Side Letter to the Partnership Agreement for the Construction and Provision of the High Performance Backbone in Sumatera, dated June 12, 2003. | |||
4.32* | 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. | |||
4.33* | 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. | |||
4.34+ | 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. |
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4.35* | Supply Contract among TELKOM, NEC Corporation, the Communication Authority of Thailand and Singapore Telecommunications Limited, dated November 27, 2002. | |||
4.36* | Amended and Restated KSO Agreement between TELKOM and PT Mitra Global Telekomunikasi Indonesia, dated January 20, 2004. | |||
4.37* | Service Level Agreement between TELKOM and Motorola, Inc., dated March 24, 2003. | |||
4.38* | Indemnity Agreement between TELKOM and KAP Hans Tuanakotta Mustofa & Halim (formerly KAP Hans Tuanakotta & Mustofa), dated February 9, 2004. | |||
4.39+ | Supply Contract for the Procurement and Installation of Dumai-Melaka Cable System among TELKOM, Telekom Malaysia Berhad and NEC Corporation, dated May 14, 2004. | |||
4.40+ | Loan Agreement and Acknowledgement of Indebtedness between TELKOM and ABN AMRO Bank N.V. Jakarta Branch, dated January 28, 2004. | |||
4.41+ | 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. | |||
4.42+ | 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. |
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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 |
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By: | /s/ Arwin Rasyid |
Page | |||||
F-2 | |||||
Consolidated Financial Statements | |||||
F-6 | |||||
F-8 | |||||
F-9 | |||||
F-12 | |||||
F-14 |
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Notes | 2003 | 2004 | |||||||||||||||||
Rp | Rp | US$ (Note 3) | |||||||||||||||||
CURRENT ASSETS | |||||||||||||||||||
Cash and cash equivalents | 2c,2f,5,47 | 5,094,472 | 4,856,123 | 522,726 | |||||||||||||||
Temporary investments | 2c,2g,47 | 4,006 | 19,949 | 2,147 | |||||||||||||||
Trade accounts receivable | 2c,2h,6,47 | ||||||||||||||||||
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 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 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 Rp40,489 million in 2003, and Rp54,733 million in 2004 | 2i,7 | 154,003 | 203,085 | 21,861 | |||||||||||||||
Prepaid expenses | 2c,2j,8,47 | 429,695 | 628,069 | 67,607 | |||||||||||||||
Prepaid taxes | 41a | 212,282 | 77,228 | 8,313 | |||||||||||||||
Other current assets | 2c,9,47 | 45,083 | 44,608 | 4,802 | |||||||||||||||
Total Current Assets | 8,942,590 | 9,203,934 | 990,736 | ||||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||||
Long-term investments — net | 2g,10 | 64,648 | 82,613 | 8,893 | |||||||||||||||
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 Rp791,645 million in 2003, and Rp694,570 million in 2004 | 2m,12,50 | 305,041 | 499,127 | 53,727 | |||||||||||||||
Prepaid pension benefit costs | 2q,44 | 288,222 | 91,262 | 9,824 | |||||||||||||||
Advances and other non-current assets | 2c,13,47 | 175,954 | 1,372,351 | 147,723 | |||||||||||||||
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 | |||||||||||||||
Advance payments for investments in shares of stock | 4f | 65,458 | — | — | |||||||||||||||
Escrow accounts | 15 | 522,146 | 36,281 | 3,905 | |||||||||||||||
Total Non-current Assets | 41,340,659 | 47,065,158 | 5,066,217 | ||||||||||||||||
TOTAL ASSETS | 50,283,249 | 56,269,092 | 6,056,953 | ||||||||||||||||
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Notes | 2003 | 2004 | |||||||||||||||||
Rp | Rp | US$ (Note 3) | |||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||||
Trade accounts payable | 2c,16,47 | ||||||||||||||||||
Related parties | 657,478 | 643,094 | 69,224 | ||||||||||||||||
Third parties | 3,109,854 | 3,611,456 | 388,747 | ||||||||||||||||
Other accounts payable | 187,938 | 5,073 | 546 | ||||||||||||||||
Taxes payable | 2s,41b | 1,513,038 | 1,592,479 | 171,419 | |||||||||||||||
Dividends payable | 3,779 | 62,689 | 6,748 | ||||||||||||||||
Accrued expenses | 2c,17,47 | 1,185,210 | 1,051,366 | 113,172 | |||||||||||||||
Unearned income | 18 | 763,211 | 1,030,000 | 110,872 | |||||||||||||||
Advances from customers and suppliers | 19 | 268,148 | 278,430 | 29,971 | |||||||||||||||
Short-term bank loans | 2c,20,47 | 37,642 | 1,101,633 | 118,583 | |||||||||||||||
Current maturities of long-term liabilities | 2c,21,47 | 3,443,516 | 2,300,822 | 247,667 | |||||||||||||||
Total Current Liabilities | 11,169,814 | 11,677,042 | 1,256,949 | ||||||||||||||||
NON-CURRENT LIABILITIES | |||||||||||||||||||
Deferred tax liabilities — net | 2s,41e | 3,546,770 | 3,352,171 | 360,836 | |||||||||||||||
Unearned income on revenue-sharing arrangements | 2m,12,50 | 111,732 | 360,332 | 38,787 | |||||||||||||||
Unearned initial investor payments under joint operation schemes | 2n,49 | 31,584 | 20,453 | 2,202 | |||||||||||||||
Provision for long service awards | 2c,2r,45,47 | 491,037 | 572,303 | 61,604 | |||||||||||||||
Provision for post-retirement benefits | 2c,2r,46,47 | 2,063,524 | 1,841,146 | 198,186 | |||||||||||||||
Accrued pension and other post-retirement benefits costs | 2q,44b,44d | 13,239 | 32,007 | 3,445 | |||||||||||||||
Long-term liabilities — net of current maturities | |||||||||||||||||||
Two-step loans — related party | 2c,22,47 | 6,858,910 | 5,363,283 | 577,318 | |||||||||||||||
Notes and bonds | 23 | 2,102,502 | 2,331,465 | 250,965 | |||||||||||||||
Bank loans | 2c,24,47 | 2,115,797 | 1,775,799 | 191,152 | |||||||||||||||
Liabilities of business acquisitions | 25 | 746,974 | 3,743,317 | 402,940 | |||||||||||||||
Suppliers’ credit loans | 26 | 671 | — | — | |||||||||||||||
Bridging loan | 27 | 510 | — | — | |||||||||||||||
Other long-term debt | 9,153 | — | — | ||||||||||||||||
Total Non-current Liabilities | 18,092,403 | 19,392,276 | 2,087,435 | ||||||||||||||||
MINORITY INTEREST | 28 | 3,708,155 | 4,938,432 | 531,586 | |||||||||||||||
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 | 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. |
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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. |
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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
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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
Table of Contents
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
Table of Contents
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 | ) | ||||||||||||
F-12
Table of Contents
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-13
Table of Contents
1. | GENERAL |
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-14
Table of Contents
i. Telecommunications networks | |
ii. Telecommunications services | |
iii. Special telecommunications |
F-15
Table of Contents
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 |
F-16
Table of Contents
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 |
b. Public offering of shares of the Company |
F-17
Table of Contents
Percentage of | Total Assets before | |||||||||||||||||||
Ownership | Start of | Eliminations | ||||||||||||||||||
Commercial | ||||||||||||||||||||
Subsidiaries | Domicile | Nature of Business | 2003 | 2004 | Operations | 2003 | 2004 | |||||||||||||
% | % | |||||||||||||||||||
PT Pramindo Ikat Nusantara | Medan | Telecommunications construction & services | 100 | 100 | 1995 | 1,954,907 | 1,604,405 | |||||||||||||
PT AriaWest International | Bandung | Telecommunications | 100 | 100 | 1995 | 1,628,605 | 1,416,225 | |||||||||||||
PT Multimedia Nusantara | Jakarta | Pay TV | 100 | 100 | 1998 | 7,908 | 22,116 | |||||||||||||
PT Graha Sarana Duta | 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 | 90 | 90 | 1997 | 54,319 | 72,080 | |||||||||||||
PT Telekomunikasi Selular | Jakarta | Telecommunications | 65 | 65 | 1995 | 15,386,289 | 19,557,557 | |||||||||||||
PT Napsindo Primatel International | Jakarta | Telecommunications | 60 | 60 | 1999 | 47,389 | 28,974 | |||||||||||||
PT Infomedia Nusantara | Jakarta | Data and information service | 51 | 51 | 1984 | 247,646 | 333,738 | |||||||||||||
PT Pro Infokom Indonesia | Jakarta | System information network | 51 | 51 | 2003 | 5,032 | 1,261 |
F-18
Table of Contents
Ownership | ||||||||||||||||||||||
Percentage | Start of | |||||||||||||||||||||
Nature of | Commercial | |||||||||||||||||||||
Indirect Subsidiaries | Stockholders | Domicile | Business | 2003 | 2004 | Operations | ||||||||||||||||
% | % | |||||||||||||||||||||
Telekomunikasi Selular Finance Limited | PT Telekomunikasi Selular | Mauritius | Fund raising | 100 | 100 | 2002 | ||||||||||||||||
Aria West International Finance B.V | PT AriaWest International | Netherlands | Finance | 100 | 100 | 1996 | ||||||||||||||||
PT Balebat Dedikasi Prima | PT Infomedia Nusantara | Bogor | Printing | 51 | 51 | 2000 |
PT Pramindo Ikat Nusantara (“Pramindo”) |
PT AriaWest International (“AWI”) |
PT Multimedia Nusantara (“Metra”) |
PT Graha Sarana Duta (“GSD”) |
F-19
Table of Contents
PT Dayamitra Telekomunikasi (“Dayamitra”) |
PT Indonusa Telemedia (“Indonusa”) |
PT Telekomunikasi Selular (“Telkomsel”) |
F-20
Table of Contents
PT Napsindo Primatel Internasional (“Napsindo”) |
PT Infomedia Nusantara (“Infomedia”) |
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
Table of Contents
d. Authorization of the financial statements |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a. Basis for preparation of financial statements |
b. Principles of consolidation |
F-22
Table of Contents
c. Transactions with related parties |
d. Acquisitions of subsidiaries |
e. Foreign currency translation |
f. Cash and cash equivalents |
F-23
Table of Contents
g. Investments |
F-24
Table of Contents
h. Trade and other accounts receivable |
i. Inventories |
j. Prepaid expenses |
k. Property, plant and equipment — direct acquisitions |
F-25
Table of Contents
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 |
F-26
Table of Contents
m. Revenue-sharing arrangements |
n. Joint operation schemes |
F-27
Table of Contents
o. Deferred charges for landrights |
p. Revenue and expense recognition |
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 |
F-28
Table of Contents
ii. Early retirement benefits |
r. Employee benefits other than pension |
i. Long service awards (“LSA”) |
ii. Post-retirement health care plan |
s. Income tax |
t. Earnings per share and earnings per American Depositary Share (“ADS”) |
F-29
Table of Contents
u. Segment information |
v. Derivative instruments |
w. Use of estimates |
x. Reclassification of accounts |
F-30
Table of Contents
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
Table of Contents
F-32
Table of Contents
b. Pramindo |
F-33
Table of Contents
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
Table of Contents
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
Table of Contents
• | 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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
f. Bridge Mobile Pte. Ltd |
g. Medianusa Pte. Ltd. |
F-47
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
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
Table of Contents
F-53
Table of Contents
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 | |||||||||||||||
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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 | ||||||
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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 |
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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 |
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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 | ||||||
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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 | ||||||
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a. Bank Mandiri |
b. ABN AMRO Bank |
c. Bank Central Asia |
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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 | ||||||||||||||||||||||
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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 | ||||||||||||||
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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 |
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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 |
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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 |
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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. |
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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 |
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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 |
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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 |
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d. Deutsche Bank AG |
e. Bank Finconesia |
f. Bank Mandiri |
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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% |
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h. Bank Niaga |
i. The Export-Import Bank of Korea |
j. Consortium of banks |
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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 | ||||||||
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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”) |
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b. Cable and Wireless plc (“C&W plc”) |
2003 | 2004 | |||||||
Total outstanding amount | 50,365 | — | ||||||
Current maturities | (49,855 | ) | — | |||||
Long-term portion | 510 | — | ||||||
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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 | ||||||||||
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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). |
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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$945.0 million (“Telkomsel Transaction”); | |
ii. | Acquisition by Indosat of the Company’s 22.5% equity interest in PT Satelit Palapa Indonesia (“Satelindo”) for US$186.0 million (“Satelindo Transaction”); | |
iii. | Acquisition by Indosat of the Company’s 37.66% equity interest in PT Aplikanusa Lintasarta (“Lintasarta”) for US$38.0 million plus convertible bonds of Rp4,051 million issued by Lintasarta (“Lintasarta Transaction”); and |
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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$375.0 million (“KSO IV Transaction”). |
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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 | ||||||||||
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2002 | 2003 | 2004 | ||||||||||
Cellular | 2,241,533 | 3,908,292 | 5,351,613 | |||||||||
International | 389,255 | 184,097 | 641,210 | |||||||||
Other | 200,546 | 69,759 | 195,158 | |||||||||
Total | 2,831,334 | 4,162,148 | 6,187,981 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Minimum Telkom Revenues | 1,319,715 | 899,862 | 295,955 | |||||||||
Share in Distributable KSO Revenues | 801,010 | 583,012 | 349,528 | |||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 7,420 | 3,433 | 11,131 | |||||||||
Total | 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 | |||||||||
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2002 | 2003 | 2004 | ||||||||||
Revenue-Sharing Arrangement revenues | 211,483 | 200,085 | 198,543 | |||||||||
Amortization of unearned income (Note 12) | 52,271 | 58,379 | 82,033 | |||||||||
Total | 263,754 | 258,464 | 280,576 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Salaries and related benefits | 1,410,670 | 1,574,181 | 1,796,914 | |||||||||
Vacation pay, incentives and other benefits | 655,518 | 816,055 | 1,156,069 | |||||||||
Early retirements | 717,289 | 355,735 | 243,466 | |||||||||
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 | 201,468 | 468,805 | 523,787 | |||||||||
Long service awards (Note 45) | 289,922 | 219,239 | 159,323 | |||||||||
Housing | 89,495 | 116,858 | 103,459 | |||||||||
Medical | 28,209 | 9,682 | 12,190 | |||||||||
Other employee benefits (Note 44) | — | 4,439 | 11,510 | |||||||||
Others | 16,187 | 42,693 | 37,014 | |||||||||
Total | 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 | |||||||||
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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 | |||||||||
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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 | |||||||||||
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2002 | 2003 | 2004 | ||||||||||
Consolidated income before tax | 11,748,902 | 11,451,795 | 12,088,582 | |||||||||
Add back consolidation eliminations | 2,554,407 | 3,332,176 | 3,936,524 | |||||||||
Consolidated income before tax and eliminations | 14,303,309 | 14,783,971 | 16,025,106 | |||||||||
Deduct income before tax of the subsidiaries | (4,745,515 | ) | (7,009,179 | ) | (8,485,296 | ) | ||||||
Income before tax attributable to the Company | 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 | 2,867,321 | 2,248,678 | 2,199,945 | |||||||||
Non-taxable income | (1,785,208 | ) | (1,017,791 | ) | (1,181,983 | ) | ||||||
Non-deductible expenses | 578,429 | 328,835 | 345,674 | |||||||||
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 | |||||||||
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 | 1,271,921 | 2,173,526 | 2,586,918 | |||||||||
Total consolidated income tax expense | 2,898,971 | 3,861,090 | 4,003,072 | |||||||||
2002 | 2003 | 2004 | |||||||||||
Income before tax attributable to the Company | 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 | |||||||||||
Temporary differences: | |||||||||||||
Depreciation of property, plant and equipment | (170,134 | ) | 442,029 | 415,805 | |||||||||
Gain on sale of property, plant and equipment | 14,774 | (25,495 | ) | (12,874 | ) | ||||||||
Allowance/(write back) for doubtful accounts | (156,223 | ) | 166,341 | 491,577 | |||||||||
Accounts receivable written-off | (82,474 | ) | (79,728 | ) | (91,865 | ) | |||||||
Allowance for inventory obsolescence | 10,099 | 5,543 | 11,385 |
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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 | ) | — | — |
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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 | |||||||||
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(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Acquisition | Statements | December 31, | ||||||||||||||
2002 | of AWI | of Income | 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 impairment of property, plant and equipment | 1,920 | — | (1,920 | ) | — | ||||||||||||
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 | 514,645 | — | (118,507 | ) | 396,138 | ||||||||||||
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 | (2,964,195 | ) | (624,760 | ) | 317,226 | (3,271,729 | ) | ||||||||||
Deferred tax liabilities of the Company, net | (2,449,550 | ) | (624,760 | ) | 198,719 | (2,875,591 | ) | ||||||||||
Deferred tax liabilities of the subsidiaries, net | (633,616 | ) | 230,966 | (268,529 | ) | (671,179 | ) | ||||||||||
Total deferred tax liabilities, net | (3,083,166 | ) | (3,546,770 | ) | |||||||||||||
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(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Business | Statements | December 31, | ||||||||||||||
2003 | Acquisitions | of Income | 2004 | ||||||||||||||
The Company | |||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Allowance for doubtful accounts | 118,845 | — | 88,834 | 207,679 | |||||||||||||
Allowance for inventory obsolescence | 11,527 | — | 3,967 | 15,494 | |||||||||||||
Long-term investments | (14,138 | ) | — | 18,823 | 4,685 | ||||||||||||
Provision for early retirement benefits | 39,843 | — | (39,843 | ) | — | ||||||||||||
Provision for employee bonuses | 84,385 | — | (41,720 | ) | 42,665 | ||||||||||||
Provision for long service awards | 142,084 | — | 22,666 | 164,750 | |||||||||||||
Liabilities of business acquisitions | — | 985,609 | 24,323 | 1,009,932 | |||||||||||||
Total deferred tax assets | 382,546 | 985,609 | 77,050 | 1,445,205 | |||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Interest receivables | (13,750 | ) | — | 13,750 | — | ||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (1,568,675 | ) | (713,140 | ) | 83,161 | (2,198,654 | ) | ||||||||||
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 | (3,258,137 | ) | (1,055,049 | ) | 429,034 | (3,884,152 | ) | ||||||||||
Deferred tax liabilities of the Company, net | (2,875,591 | ) | (69,440 | ) | 506,084 | (2,438,947 | ) | ||||||||||
Deferred tax liabilities of the subsidiaries, net | (671,179 | ) | — | (242,045 | ) | (913,224 | ) | ||||||||||
Total deferred tax liabilities, net | (3,546,770 | ) | (3,352,171 | ) | |||||||||||||
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f. Administration |
• | 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. |
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a. The Company |
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 | ||||||
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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 | (372,114 | ) | (304,277 | ) | ||||
Fair value of plan assets at end of year | 3,671,309 | 4,884,523 | ||||||
Funded status | (3,181,614 | ) | (2,430,659 | ) | ||||
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 | 148,891 | 120,257 | ||||||
Prepaid pension benefit costs | 286,652 | 89,900 | ||||||
2002 | 2003 | 2004 | ||||||||||
Discount rate | 13 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 13 | % | 11 | % | 10.5 | % | ||||||
Rate of compensation increase | 6 | % | 8 | % | 8 | % |
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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 | |||||||||
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 | |||||||||
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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 | % |
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 | ||||||
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2002 | 2003 | 2004 | ||||||||||
Discount rate | 13 | % | 11 | % | 11 | % | ||||||
Rate of compensation increase | 8 | % | 8 | % | 8 | % |
2002 | 2003 | 2004 | ||||||||||
Liability at beginning of year | 275,834 | 489,231 | 473,614 | |||||||||
Net periodic benefit cost (Note 38) | 289,922 | 207,126 | 153,610 | |||||||||
Benefits paid | (76,525 | ) | (222,743 | ) | (78,057 | ) | ||||||
Liability at end of year | 489,231 | 473,614 | 549,167 | |||||||||
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2002 | 2003 | 2004 | ||||||||||
Service cost | 83,956 | 88,394 | 76,163 | |||||||||
Interest cost | 424,834 | 493,596 | 411,110 | |||||||||
Expected return on plan assets | (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 | 24,325 | 24,325 | |||||||||
Net curtailment loss | 49,576 | — | — | |||||||||
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 | |||||||||
2002 | 2003 | 2004 | ||||||||||
Discount rate | 13% | 11% | 11% | |||||||||
Expected long-term return on plan assets | 13% | 11% | 8% | |||||||||
Health care cost trend rate assumed for next year | 14% | 12% | 12% | |||||||||
The ultimate trend rate | 10% | 8% | 8% | |||||||||
Year that the rate reaches the ultimate trend rate | 2005 | 2006 | 2007 |
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 | ||||||
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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 | ) | ||||
2002* | 2003 | 2004 | ||||||||||
Service cost and interest cost | 664,741 | 594,958 | 723,941 | |||||||||
Accumulated post-retirement benefit obligation | 4,473,675 | 4,545,961 | 5,597,965 |
* | before curtailment |
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 Rp968,973 million, Rp755,517 million and Rp489,220 million in 2002, 2003 and 2004, respectively. Interest expense for two-step loan reflected 61.2%, 54.6% and 38.5% of total interest expense in 2002, 2003 and 2004, respectively. | |
ii. The Company and its subsidiaries pay concession fees for telecommunications services provided and radio frequency usage charges to the Ministry of Communications (formerly, Ministry of Tourism, Post and Telecommunications) of the Republic of Indonesia. Concession fees amounted to Rp163,891 million, Rp238,979 million and Rp314,741 million in 2002, 2003 and 2004, respectively. Concession fees reflected 1.4%, 1.6% and 1.6% of total operating expenses in 2002, 2003 and 2004, respectively. Radio frequency usage charges amounted to Rp292,703 million, |
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Rp371,740 million and Rp492,568 million in 2002, 2003 and 2004, respectively. Radio frequency usage charges reflected 2.5%, 2.5% and 2.5% of total operating expenses in 2002, 2003 and 2004, respectively. |
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 Rp8,706 million, Rp14,047 million and Rp22,700 million in 2002, 2003 and 2004, respectively, which reflected 0.1%, 0.1% and 0.1% of total operating expenses in 2002, 2003 and 2004, respectively. | |
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 Rp35,106 million, Rp45,586 million, and Rp50,327 million in 2002, 2003 and 2004, respectively, which reflected 0.3%, 0.3% and 0.3% of total operating expenses in 2002, 2003 and 2004, respectively. |
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 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 |
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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. | |
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 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 (“J-S Cable System”). |
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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 Parties have formed a management committee which consists of a chairman and one representative from each of the Parties to direct the construction and operation of the cable system. The construction of the cable system was completed in 1998. In accordance with the agreement, Telkomsel shared 19.325% of the total construction cost. Operating and maintenance costs are shared based on an agreed formula. | |
Telkomsel’s share in operating and maintenance costs amounted to Rp956 million, Rp1,393 million and Rp2,098 million for the years 2002, 2003 and 2004, respectively. | |
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$2.7 million. In addition to the upfront payment, Telkomsel is also charged annual operating and maintenance costs amounting to US$0.1 million. | |
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 December 31, 2003 and 2004, the prepaid portion is shown in the consolidated balance sheets as “Advances from customers and suppliers.” |
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The Company provides leased lines to Indosat and its subsidiaries, namely Indosat Mega Media and Lintasarta. The leased lines can be used by those companies for telephone, telegraph, data, telex, facsimile or other telecommunication services. Revenue earned from these transactions amounted to Rp43,595 million and Rp109,814 million in 2003 and 2004, respectively, which reflected 0.2% and 0.3% of total operating revenues in 2003 and 2004, respectively. | |
Lintasarta utilizes the Company’s Palapa B4 and Telkom-1 satellite transponders or frequency channels. Revenue earned from these transactions amounted to Rp15,778 million, Rp23,672 million and Rp14,486 million in 2002, 2003 and 2004, respectively, which reflected 0.1%, 0.1% and less than 0.1% of total operating revenues in 2002, 2003 and 2004, respectively. | |
Telkomsel has an agreement with Lintasarta and PT Artajasa Pembayaran Elektronis (“Artajasa”) for the usage of data communication network system. The charges from Lintasarta and Artajasa for the services amounted to Rp10,975 million and Rp21,407 million, in 2003 and 2004, respectively, reflecting 0.1% and 0.1% of total operating expenses in 2003 and 2004, respectively. |
d. Others |
(i) The Company provides telecommunication services to Government agencies. | |
(ii) The Company has entered into agreements with Government agencies and associated companies, namely CSM and Patrakom, for utilization of the Company’s Palapa B4 and Telkom-1 satellite transponders or frequency channels. Revenue earned from these transactions amounted to Rp28,331 million, Rp73,205 million and Rp51,046 million in 2002, 2003 and 2004, respectively, which reflected 0.1%, 0.3% and 0.2% of total operating revenues in 2002, 2003 and 2004, respectively. | |
(iii) The Company provides leased lines to associated companies, namely CSM and PSN (2002: including Komselindo, Mobisel and Metrosel). The leased lines can be used by the associated companies for telephone, telegraph, data, telex, facsimile or other telecommunications services. Revenue earned from these transactions amounted to Rp75,704 million, Rp44,738 million and Rp25,714 million in 2002, 2003 and 2004, respectively, reflecting 0.4%, 0.2%, and 0.1% of total operating revenues in 2002, 2003 and 2004, respectively. | |
(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 and Koperasi Pegawai Telkom. Total purchases made from these related parties amounted to Rp154,808 million, Rp126,965 million and Rp268,901 million in 2002, 2003 and 2004, respectively, reflecting 2.1%, 1.1%, and 2.4% of total fixed asset purchases in 2002, 2003 and 2004, respectively. | |
(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 2002, 2003 and 2004 amounted to Rp34,717 million, Rp52,346 million and Rp217,668 million, respectively, reflecting 0.5%, 0.5% and 1.9% of total fixed asset purchases in 2002, 2003 and 2004, respectively. | |
(vi) Telkomsel has an agreement with PSN for lease of PSN’s transmission link. Based on the agreement, which was made in March 14, 2001, the minimum lease period is 2 years since the |
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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 Rp131,445 million, Rp159,517 million and Rp148,279 million in 2002, 2003 and 2004, respectively, reflecting 1.1%, 1.1% and 0.7% of total operating expenses in 2002, 2003 and 2004, respectively. | |
(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 amounted to Rp3,130,375 million and Rp2,116,038 million as of December 31, 2003 and 2004, respectively, reflecting 6.2% and 3.8% of total assets as of December 31, 2003 and 2004, respectively. Interest income recognized during 2003 and 2004 was Rp273,986 million and Rp150,367 million reflecting 74.9% and 47.3% of total interest income in 2003 and 2004, respectively. | |
(ix) The Company’s subsidiaries have loans from a state-owned bank. Interest expense on the loans for 2004 amounted to Rp9,115 million representing 0.7% of total interest expense in 2004. | |
(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 Rp14,570 million, Rp32,785 million and Rp24,921 million in 2002, 2003 and 2004, respectively, reflecting 0.1%, 0.2% and 0.1% of total operating expenses in 2002, 2003 and 2004, respectively. | |
(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 Rp1,377 million, Rp7,730 million and nil in 2002, 2003 and 2004, respectively, which reflect 0.01%, 0.05% and 0% of total operating expenses for 2002, 2003 and 2004, respectively. | |
(xii) The Company and its subsidiaries earned (were charged for) interconnection revenues (charges) from PSN (2002: including Komselindo, Metrosel, Mobisel and BBT), with a total of Rp77,984 million, Rp19,035 million and (Rp5,495 million) in 2002, 2003 and 2004, respectively, which reflect 0.4%, 0.1% and (0.02%) of total operating revenues in 2002, 2003 and 2004, respectively. | |
(xiii) In addition to revenues earned under the KSO Agreement (Note 49), the Company also earned income from building rental, repairs and maintenance services and training services provided to the KSO Units, amounting to Rp73,679 million, Rp23,147 million and Rp18,449 million in 2002, 2003 and 2004, respectively, which reflect 0.4%, 0.1% and 0.1% of total operating revenues in 2002, 2003 and 2004, respectively. |
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(xiv) The Company has a revenue-sharing arrangement with Koperasi Pegawai Telkom (“Kopegtel”). Share of Kopegtel in revenues from this arrangement amounted to Rp20,560 million in 2004, representing 0.1% of total operating revenues. | |
(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 | ||||||||||||||
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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 | ||||||||||||||
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2002 | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||
Fixed | Before | Total | ||||||||||||||||||||||
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 | ||||||||||||||||||
Intersegment operating revenues | 155,105 | 245,970 | 8,624 | 409,699 | (409,699 | ) | — | |||||||||||||||||
Total operating revenues | 13,400,408 | 7,560,998 | 251,111 | 21,212,517 | (409,699 | ) | 20,802,818 | |||||||||||||||||
Operating expenses | (8,525,232 | ) | (3,446,755 | ) | (205,835 | ) | (12,177,822 | ) | 505,219 | (11,672,603 | ) | |||||||||||||
Operating income | 4,875,176 | 4,114,243 | 45,276 | 9,034,695 | 95,520 | 9,130,215 | ||||||||||||||||||
Interest expense | (1,405,409 | ) | (177,341 | ) | — | (1,582,750 | ) | — | (1,582,750 | ) | ||||||||||||||
Interest income | 367,725 | 102,176 | 9,901 | 479,802 | — | 479,802 | ||||||||||||||||||
Gain (loss) on foreign exchange-net | 554,741 | 2,311 | (439 | ) | 556,613 | — | 556,613 | |||||||||||||||||
Other income (charges) — net | 82,327 | (27,257 | ) | 4,494 | 59,564 | (95,520 | ) | (35,956 | ) | |||||||||||||||
Tax expense | (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 | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,849,931 | |||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (810,222 | ) | |||||||||||||||||
Net income | 8,077,854 | 2,787,174 | 46,582 | 10,911,610 | (2,061,679 | ) | 8,039,709 | |||||||||||||||||
Other information | ||||||||||||||||||||||||
Segment assets | 34,177,425 | 11,255,500 | 310,828 | 45,743,753 | (1,561,340 | ) | 44,182,413 | |||||||||||||||||
Investments in associates | 124,683 | — | — | 124,683 | — | 124,683 | ||||||||||||||||||
Total consolidated assets | 34,302,108 | 11,255,500 | 310,828 | 45,868,436 | (1,561,340 | ) | 44,307,096 | |||||||||||||||||
Total consolidated liabilities | (24,348,322 | ) | (4,066,412 | ) | (198,756 | ) | (28,613,490 | ) | 1,515,810 | (27,097,680 | ) | |||||||||||||
Minority interest | — | — | — | — | — | (2,595,799 | ) | |||||||||||||||||
Capital expenditures | (6,266,859 | ) | (2,730,028 | ) | (35,531 | ) | (9,032,418 | ) | — | (9,032,418 | ) | |||||||||||||
Depreciation and amortization | (2,576,073 | ) | (984,039 | ) | (7,256 | ) | (3,567,368 | ) | 4,675 | (3,562,693 | ) | |||||||||||||
Amortization of goodwill and other intangible assets | (187,990 | ) | — | — | (187,990 | ) | — | (187,990 | ) | |||||||||||||||
Other non-cash expenses | 106,329 | (139,214 | ) | (3,047 | ) | (35,932 | ) | — | (35,932 | ) | ||||||||||||||
Net cash provided by operating activities | 6,237,405 | 4,557,442 | 69,626 | 10,864,473 | — | 10,864,473 | ||||||||||||||||||
Net cash used in investing activities | (1,492,286 | ) | (4,531,036 | ) | (26,653 | ) | (6,049,975 | ) | — | (6,049,975 | ) | |||||||||||||
Net cash used in financing activities | (2,482,408 | ) | (146,819 | ) | (40,989 | ) | (2,670,216 | ) | — | (2,670,216 | ) | |||||||||||||
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2003 | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||
Fixed | Before | Total | ||||||||||||||||||||||
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 | ||||||||||||||||||
Intersegment operating revenues | 122,653 | 337,100 | 30,824 | 490,577 | (490,577 | ) | — | |||||||||||||||||
Total operating revenues | 16,191,149 | 11,134,655 | 280,696 | 27,606,500 | (490,577 | ) | 27,115,923 | |||||||||||||||||
Operating expenses | (10,596,851 | ) | (4,802,283 | ) | (275,499 | ) | (15,674,633 | ) | 534,649 | (15,139,984 | ) | |||||||||||||
Operating income | 5,594,298 | 6,332,372 | 5,197 | 11,931,867 | 44,072 | 11,975,939 | ||||||||||||||||||
Interest expense | (1,249,795 | ) | (179,486 | ) | — | (1,429,281 | ) | 45,835 | (1,383,446 | ) | ||||||||||||||
Interest income | 342,980 | 60,407 | 8,472 | 411,859 | (45,835 | ) | 366,024 | |||||||||||||||||
Gain (loss) on foreign exchange — net | 198,803 | (73,017 | ) | 335 | 126,121 | — | 126,121 | |||||||||||||||||
Other income (charges) — net | 358,191 | (10,605 | ) | 81,988 | 429,574 | (65,236 | ) | 364,338 | ||||||||||||||||
Tax expense | (1,942,070 | ) | (1,892,821 | ) | (26,199 | ) | (3,861,090 | ) | — | (3,861,090 | ) | |||||||||||||
Equity in net income of associated companies | 3,313,831 | — | — | 3,313,831 | (3,311,012 | ) | 2,819 | |||||||||||||||||
Income before minority interest | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 7,590,705 | |||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (1,503,478 | ) | |||||||||||||||||
Net income | 6,616,238 | 4,236,850 | 69,793 | 10,922,881 | (3,332,176 | ) | 6,087,227 | |||||||||||||||||
Other information | ||||||||||||||||||||||||
Segment assets | 46,884,985 | 15,386,289 | 317,398 | 62,588,672 | (12,370,071 | ) | 50,218,601 | |||||||||||||||||
Investments in associates | 64,648 | — | — | 64,648 | — | 64,648 | ||||||||||||||||||
Total consolidated assets | 46,949,633 | 15,386,289 | 317,398 | 62,653,320 | (12,370,071 | ) | 50,283,249 | |||||||||||||||||
Total consolidated liabilities | (28,020,867 | ) | (5,075,222 | ) | (166,119 | ) | (33,262,208 | ) | 3,999,991 | (29,262,217 | ) | |||||||||||||
Minority interest | — | — | — | — | — | (3,708,155 | ) | |||||||||||||||||
Capital expenditures | (5,698,401 | ) | (5,348,783 | ) | (61,672 | ) | (11,108,856 | ) | — | (11,108,856 | ) | |||||||||||||
Depreciation and amortization | (3,126,223 | ) | (1,680,554 | ) | (9,824 | ) | (4,816,601 | ) | 11,916 | (4,804,685 | ) | |||||||||||||
Amortization of goodwill and other intangible assets | (730,659 | ) | — | — | (730,659 | ) | — | (730,659 | ) | |||||||||||||||
Other non-cash expenses | (210,646 | ) | (113,904 | ) | (4,308 | ) | (328,858 | ) | — | (328,858 | ) | |||||||||||||
Net cash provided by operating activities | 6,028,485 | 6,753,253 | 70,794 | 12,852,532 | — | 12,852,532 | ||||||||||||||||||
Net cash used in investing activities | (1,955,079 | ) | (5,310,509 | ) | (40,274 | ) | (7,305,862 | ) | — | (7,305,862 | ) | |||||||||||||
Net cash used in financing activities | (5,425,189 | ) | (727,880 | ) | (24,347 | ) | (6,177,416 | ) | — | (6,177,416 | ) | |||||||||||||
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2004 | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||
Fixed | Before | Total | ||||||||||||||||||||||
Line | Cellular | Other | Elimination | Elimination | Consolidated | |||||||||||||||||||
Segment results | ||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||
External operating revenues | 19,436,271 | 14,201,786 | 309,709 | 33,947,766 | — | 33,947,766 | ||||||||||||||||||
Intersegment operating revenues | (46,781 | ) | 534,790 | 51,063 | 539,072 | (539,072 | ) | — | ||||||||||||||||
Total operating revenues | 19,389,490 | 14,736,576 | 360,772 | 34,486,838 | (539,072 | ) | 33,947,766 | |||||||||||||||||
Operating expenses | (13,658,138 | ) | (6,757,243 | ) | (320,698 | ) | (20,736,079 | ) | 715,380 | (20,020,699 | ) | |||||||||||||
Operating income | 5,731,352 | 7,979,333 | 40,074 | 13,750,759 | 176,308 | 13,927,067 | ||||||||||||||||||
Interest expense | (1,224,079 | ) | (142,632 | ) | (38 | ) | (1,366,749 | ) | 96,613 | (1,270,136 | ) | |||||||||||||
Interest income | 289,322 | 121,744 | 3,488 | 414,554 | (96,613 | ) | 317,941 | |||||||||||||||||
Gain (loss) on foreign exchange — net | (1,158,577 | ) | (62,029 | ) | (154 | ) | (1,220,760 | ) | — | (1,220,760 | ) | |||||||||||||
Other income (charges) — net | 449,556 | (39,122 | ) | 96,924 | 507,358 | (176,308 | ) | 331,050 | ||||||||||||||||
Tax expense | (1,583,477 | ) | (2,384,314 | ) | (35,281 | ) | (4,003,072 | ) | — | (4,003,072 | ) | |||||||||||||
Equity in net income of associated companies | 3,939,944 | — | — | 3,939,944 | (3,936,524 | ) | 3,420 | |||||||||||||||||
Income before minority interest | 6,444,041 | 5,472,980 | 105,013 | 12,022,034 | (3,936,524 | ) | 8,085,510 | |||||||||||||||||
Unallocated minority interest | — | — | — | — | — | (1,956,301 | ) | |||||||||||||||||
Net income | 6,444,041 | 5,472,980 | 105,013 | 12,022,034 | (3,936,524 | ) | 6,129,209 | |||||||||||||||||
Other information | ||||||||||||||||||||||||
Segment assets | 38,902,911 | 19,548,267 | 402,965 | 58,854,143 | (2,667,664 | ) | 56,186,479 | |||||||||||||||||
Investments in associates | 10,705,711 | 9,290 | — | 10,715,001 | (10,632,388 | ) | 82,613 | |||||||||||||||||
Total consolidated assets | 49,608,622 | 19,557,557 | 402,965 | 69,569,144 | (13,300,052 | ) | 56,269,092 | |||||||||||||||||
Total consolidated liabilities | (27,853,851 | ) | (5,680,160 | ) | (202,971 | ) | (33,736,982 | ) | 2,667,664 | (31,069,318 | ) | |||||||||||||
Minority interest | — | — | — | — | — | (4,938,432 | ) | |||||||||||||||||
Capital expenditures | (6,148,109 | ) | (4,982,744 | ) | (66,691 | ) | (11,197,544 | ) | — | (11,197,544 | ) | |||||||||||||
Depreciation and amortization | (3,798,179 | ) | (2,651,028 | ) | (18,740 | ) | (6,467,947 | ) | 14,590 | (6,453,357 | ) | |||||||||||||
Amortization of goodwill and other intangible assets | (872,330 | ) | — | — | (872,330 | ) | — | (872,330 | ) | |||||||||||||||
Other non-cash expenses | (244,356 | ) | (100,737 | ) | (5,338 | ) | (350,431 | ) | — | (350,431 | ) | |||||||||||||
Net cash provided by operating activities | 7,184,330 | 8,786,290 | 80,860 | 16,051,480 | — | 16,051,480 | ||||||||||||||||||
Net cash used in investing activities | (4,065,668 | ) | (5,469,715 | ) | (62,730 | ) | (9,598,113 | ) | — | (9,598,113 | ) | |||||||||||||
Net cash used in financing activities | (4,693,034 | ) | (2,181,181 | ) | (30,650 | ) | (6,904,865 | ) | — | (6,904,865 | ) | |||||||||||||
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• | 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. |
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. |
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. |
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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. |
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• | 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. |
1. Cellular to cellular | 2 times airtime rate | |
2. Cellular to PSTN | 1 times airtime rate | |
3. PSTN to cellular | 1 times airtime rate | |
4. Card phone to cellular | 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. |
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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: |
Tariff | ||||
(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 up to 85% of the tariffs, in cases where the entire long-distance traffic is carried by the PSTN. | |
For long-distance calls which originate from a cellular operator, the Company is entitled to retain a portion of the prevailing long-distance tariffs, which portion ranges from 25% of the tariff, in cases where the entire long-distance traffic is carried by cellular operator’s network and the call is delivered to a cellular subscriber, and up to 85% of the tariff, in cases where the entire long-distance traffic is carried by the PSTN and the call is delivered to a PSTN subscriber. |
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 Tariffs by Garuda Satellite dated March 29, 2000. Flat interconnection tariffs per minute apply for those companies. |
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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. |
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Public Phone Kiosk (“Wartel”) Tariff |
a. Capital Expenditures |
Amounts in | ||||||||
Foreign Currencies | Equivalent | |||||||
Currencies | (in millions) | in Rupiah | ||||||
Rupiah | 2,293,478 | |||||||
U.S. Dollar | 155 | 1,443,474 | ||||||
Euro | 86 | 1,085,577 | ||||||
Japanese Yen | 202 | 18,307 | ||||||
Total | 4,840,836 | |||||||
(i) Procurement Agreements |
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• | Joint Planning and Process Agreement | |
• | Equipment Supply Agreement (“ESA”) | |
• | Technical Service Agreement (“TSA”) | |
• | Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”) |
(ii) Procurement of TELKOM-2 Satellite |
(iii) Launching of TELKOM-2 Satellite |
(iv) CDMA Procurement Agreement with Samsung Consortium |
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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 Agreement with The Hongkong Shanghai Bank Corporation (“HSBC”) |
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2003 | 2004 | ||||||||||||||||
Foreign | Foreign | ||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | ||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | ||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | |||||||||||||||||
U.S. Dollar | 123.54 | 1,043,400 | 74.80 | 694,116 | |||||||||||||
Euro | 39.58 | 421,288 | 88.10 | 1,114,704 | |||||||||||||
Japanese Yen | 0.45 | 35 | 0.98 | 89 | |||||||||||||
Trade accounts receivable | |||||||||||||||||
Related parties U.S. Dollar | 9.22 | 77,925 | 3.92 | 36,375 | |||||||||||||
Third parties U.S. Dollar | 4.11 | 34,634 | 16.19 | 150,223 | |||||||||||||
Other accounts receivable | |||||||||||||||||
U.S. Dollar | 12.61 | 106,258 | 1.12 | 10,355 | |||||||||||||
Japanese Yen | 5.44 | 429 | — | — | |||||||||||||
French Franc | 4.81 | 5,447 | — | — | |||||||||||||
Netherland Guilder | 0.81 | 2,745 | — | — | |||||||||||||
Euro | 0.02 | 224 | — | — | |||||||||||||
Other current assets | |||||||||||||||||
U.S. Dollar | 4.66 | 39,269 | 4.61 | 42,792 | |||||||||||||
Euro | — | — | 0.01 | 157 | |||||||||||||
Advances and other non-current assets | |||||||||||||||||
U.S. Dollar | 1.91 | 16,283 | 6.90 | 64,056 | |||||||||||||
Escrow accounts | |||||||||||||||||
U.S. Dollar | 61.30 | 516,128 | 3.24 | 30,059 | |||||||||||||
Total Assets | 2,264,065 | 2,142,926 | |||||||||||||||
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2003 | 2004 | |||||||||||||||||
Foreign | Foreign | |||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||||
Liabilities | ||||||||||||||||||
Trade accounts payable | ||||||||||||||||||
Related parties | ||||||||||||||||||
U.S. Dollar | 13.87 | 117,281 | 19.13 | 177,892 | ||||||||||||||
Euro | 2.72 | 28,947 | — | — | ||||||||||||||
Myanmar | — | — | 0.01 | 20 | ||||||||||||||
Singapore Dollar | — | — | — | 1 | ||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 92.68 | 783,127 | 49.57 | 460,969 | ||||||||||||||
Euro | 0.05 | 516 | — | — | ||||||||||||||
Great Britain Pound Sterling | 0.06 | 916 | 0.06 | 1,092 | ||||||||||||||
Japanese Yen | 126.93 | 10,033 | 7.88 | 715 | ||||||||||||||
Singapore Dollar | 0.14 | 717 | 0.03 | 146 | ||||||||||||||
Accrued expenses | ||||||||||||||||||
U.S. Dollar | 28.95 | 244,925 | 24.08 | 223,931 | ||||||||||||||
Japanese Yen | 14.14 | 1,117 | 20.41 | 1,852 | ||||||||||||||
Singapore Dollar | 0.19 | 940 | 0.37 | 2,135 | ||||||||||||||
Australian Dollar | — | — | 0.07 | 507 | ||||||||||||||
Great Britain Pound Sterling | 0.05 | 689 | — | — | ||||||||||||||
Netherland Guilder | 0.48 | 1,631 | 0.48 | 1,795 | ||||||||||||||
Euro | 40.77 | 433,963 | 26.54 | 336,572 | ||||||||||||||
Short-term bank loans | ||||||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 4.46 | 37,642 | 118.46 | 1,101,633 | ||||||||||||||
Advances from customers and suppliers | ||||||||||||||||||
U.S. Dollar | 3.04 | 25,701 | 0.42 | 3,947 | ||||||||||||||
Great Britain Pound Sterling | — | 7 | — | — | ||||||||||||||
Japanese Yen | 23.94 | 1,892 | — | — | ||||||||||||||
Current maturities of long-term liabilities | ||||||||||||||||||
U.S. Dollar | 332.92 | 2,813,246 | 116.29 | 1,081,478 | ||||||||||||||
Euro | 18.67 | 198,810 | 14.64 | 185,643 | ||||||||||||||
Japanese Yen | 699.16 | 55,266 | 1,142.91 | 103,688 | ||||||||||||||
Long-term liabilities | ||||||||||||||||||
U.S. Dollar | 699.61 | 5,913,824 | 830.22 | 7,721,068 | ||||||||||||||
Euro | 64.98 | 691,850 | 36.60 | 464,108 | ||||||||||||||
Japanese Yen | 16,730.30 | 1,322,460 | 15,527.59 | 1,408,708 | ||||||||||||||
Total liabilities | 12,685,500 | 13,277,900 | ||||||||||||||||
Net liabilities | (10,421,435 | ) | (11,134,974 | ) | ||||||||||||||
Early retirement program |
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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 |
b. Foreign Exchange Differences Capitalized to Property Under Construction |
c. Interest Capitalized on Property under Construction |
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Note | 2002 | 2003 | 2004 | ||||||||||||||
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: | |||||||||||||||||
Termination benefits | (a | ) | 530,981 | (670,981 | ) | — | |||||||||||
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 (3,061), (8,787) and (13,392), respectively | (c | ) | 43,045 | 39,077 | 26,802 | ||||||||||||
Revenue-sharing arrangements | (d | ) | 67,959 | 23,159 | 155,369 | ||||||||||||
Revaluation of property, plant and equipment | (e | ) | 3,929 | — | — | ||||||||||||
Pension | (f | ) | 111,415 | (109,334 | ) | 313,870 | |||||||||||
Equity in net income/ (loss) of associated companies | (g | ) | (182 | ) | (170 | ) | (177 | ) | |||||||||
Amortization of land rights | (h | ) | (11,781 | ) | (10,212 | ) | (13,907 | ) | |||||||||
Depreciation of equipment to be installed | (i | ) | 9,706 | — | — | ||||||||||||
Revenue recognition | (j | ) | (89,274 | ) | (53,226 | ) | 54,159 | ||||||||||
Goodwill | (k | ) | 21,269 | 21,270 | 21,270 | ||||||||||||
Capital leases | (l | ) | 14,241 | 6,882 | (3,435 | ) | |||||||||||
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 | ) | — | ||||||||||
Asset retirement obligations | (o | ) | — | (848 | ) | (848 | ) |
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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 | ) |
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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 | |||||||||||
2002 | 2003 | 2004 | |||||||||||
Equity at beginning of year | 7,765,500 | 13,910,864 | 16,284,692 | ||||||||||
Changes during the year: | |||||||||||||
Net income under U.S. GAAP | 8,587,259 | 5,790,640 | 6,468,573 | ||||||||||
Dividends | (2,125,055 | ) | (3,338,109 | ) | (3,186,991 | ) | |||||||
Other comprehensive income, net of tax | (20,802 | ) | (78,703 | ) | 4,638 | ||||||||
Common control transaction | (296,038 | ) | — | — | |||||||||
Equity at end of year | 13,910,864 | 16,284,692 | 19,570,912 | ||||||||||
2003 | 2004 | |||||||
Consolidated balance sheets | ||||||||
Current assets | 9,411,469 | 9,610,433 | ||||||
Non-current assets | 41,935,581 | 47,091,387 | ||||||
Total assets | 51,347,050 | 56,701,820 | ||||||
Current liabilities | 11,207,431 | 11,650,470 | ||||||
Non-current liabilities | 20,212,692 | 20,547,769 | ||||||
Total liabilities | 31,420,123 | 32,198,239 | ||||||
Minority interest in net assets of subsidiaries | 3,642,235 | 4,932,669 | ||||||
Equity | 16,284,692 | 19,570,912 | ||||||
Total liabilities and equity | 51,347,050 | 56,701,820 | ||||||
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(3) | Additional financial statement disclosures required by U.S. GAAP and U.S. SEC |
2002 | 2003 | 2004 | |||||||||||
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 | 3,744,927 | 3,213,380 | 3,771,273 | ||||||||||
Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | |||||||||||||
Net periodic post-retirement benefit cost | 183,597 | 188,375 | 139,834 | ||||||||||
Amortization of discount on promissory notes and other borrowing costs | 58,298 | 132,876 | 136,994 | ||||||||||
Amortization of intangible assets | 55,616 | — | — | ||||||||||
Tax penalty | 72,471 | 16,521 | 1,941 | ||||||||||
Employee benefits | 24,714 | 6,342 | 24,719 | ||||||||||
Permanent differences of the KSO Units | (8,767 | ) | 16,739 | 17,213 | |||||||||
Income which was already subject to final tax | (140,982 | ) | (61,876 | ) | (30,743 | ) | |||||||
Gain on sale of Telkomsel’s shares | (949,826 | ) | — | — | |||||||||
Equity in net (income) loss of associated companies | 22,465 | (990 | ) | 3,273 | |||||||||
Others | 57,182 | (92,822 | ) | 63,514 | |||||||||
Total | (625,232 | ) | 205,165 | 356,745 | |||||||||
Provision for income tax in accordance with U.S. GAAP | 3,119,695 | 3,418,545 | 4,128,018 | ||||||||||
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2003 | 2004 | |||||||
Deferred tax assets | ||||||||
Trade accounts receivable | 145,918 | 228,889 | ||||||
Inventories | 11,528 | 15,494 | ||||||
Tax loss carryforwards | 285,856 | 239,501 | ||||||
Provision for long service awards | 142,084 | 164,750 | ||||||
Deferral of revenue | 230,564 | 220,538 | ||||||
Long-term investments | 38,048 | 44,029 | ||||||
Liabilities of business acquisitions | — | 1,009,932 | ||||||
Provision for employee benefits | 131,757 | 53,692 | ||||||
Others | 72,730 | 40,532 | ||||||
Total | 1,058,485 | 2,017,357 | ||||||
Deferred tax liabilities | ||||||||
Property, plant and equipment | (2,471,577 | ) | (3,215,173 | ) | ||||
Intangible assets | (1,527,796 | ) | (1,592,645 | ) | ||||
Pension benefit costs | (125,010 | ) | (153,177 | ) | ||||
Prepaid expenses and other receivables | (49,519 | ) | (34,290 | ) | ||||
Total | (4,173,902 | ) | (4,995,285 | ) | ||||
Total deferred tax liabilities — net | (3,115,417 | ) | (2,977,928 | ) | ||||
b. Fair Value of Financial Instruments |
Cash and cash equivalents and temporary investments |
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Carrying Amount | Fair Value | ||||||||
2003 | |||||||||
Cash and cash equivalents | 5,094,472 | 5,094,472 | |||||||
Temporary investments | 4,006 | 4,006 | |||||||
Short-term bank loans | 37,642 | 37,642 | |||||||
Long-term liabilities: | |||||||||
Two-step loans | 7,691,045 | 9,230,697 | |||||||
Guaranteed notes | 1,121,224 | 1,452,826 | |||||||
Bonds | 981,278 | 1,265,606 | |||||||
Bank loans | 2,924,590 | 3,140,373 | |||||||
Liabilities of business acquisitions | 2,334,749 | 2,498,138 | |||||||
Suppliers’ credit loans | 165,629 | 194,006 | |||||||
Bridging loan | 50,365 | 52,393 | |||||||
Other | 9,153 | 9,153 | |||||||
2004 | |||||||||
Cash and cash equivalents | 4,856,123 | 4,856,123 | |||||||
Temporary investments | 19,949 | 19,949 | |||||||
Short-term bank loans | 1,101,633 | 1,101,633 | |||||||
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 |
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i. Fair values presented do not take into consideration the effect of future currency fluctuations. | |
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. |
2002 | 2003 | 2004 | ||||||||||
Net income under U.S. GAAP | 8,587,259 | 5,790,640 | 6,468,573 | |||||||||
Unrealized holding gain on available-for-sale securities | 207 | — | 884 | |||||||||
Foreign exchange translation of associates | (21,009 | ) | (78,703 | ) | 3,754 | |||||||
8,566,457 | 5,711,937 | 6,473,211 | ||||||||||
2002 | 2003 | 2004 | ||||||||||
Unrealized holding gain on available-for-sale securities | — | — | 884 | |||||||||
Foreign exchange translation of associates | 235,665 | 156,962 | 160,716 | |||||||||
235,665 | 156,962 | 161,600 | ||||||||||
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The Company |
Pension | Health Care | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||
Components of Net Periodic Benefit Cost | ||||||||||||||||||||||||
Service cost | 90,869 | 119,089 | 137,264 | 83,956 | 88,394 | 76,163 | ||||||||||||||||||
Interest cost | 418,044 | 537,797 | 740,494 | 424,834 | 493,596 | 411,110 | ||||||||||||||||||
Expected return on plan assets | (343,121 | ) | (421,706 | ) | (436,672 | ) | (33,744 | ) | (56,004 | ) | (61,084 | ) | ||||||||||||
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 | — | — | ||||||||||||||||||
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 | ||||||||||||||||||
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Pension | Health Care | |||||||||||||||
2003 | 2004 | 2003 | 2004 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | 4,248,110 | 6,852,923 | 3,843,604 | 3,787,389 | ||||||||||||
Service cost | 119,089 | 137,264 | 88,394 | 76,163 | ||||||||||||
Interest cost | 537,797 | 740,494 | 493,596 | 411,110 | ||||||||||||
Plan participants’ contributions | 35,173 | 43,906 | — | — | ||||||||||||
Actuarial loss (gain) | 2,284,868 | (155,128 | ) | (539,593 | ) | 529,618 | ||||||||||
Benefits paid | (372,114 | ) | (304,277 | ) | (98,612 | ) | (123,275 | ) | ||||||||
Benefit obligation at end of year | 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 | 3,099,648 | 3,671,309 | 374,446 | 505,340 | ||||||||||||
Actual return on plan assets | 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 | (372,114 | ) | (304,277 | ) | (98,612 | ) | (123,275 | ) | ||||||||
Fair value of plan assets at end of year | 3,671,309 | 4,884,523 | 505,340 | 1,138,768 | ||||||||||||
Funded status | (3,181,614 | ) | (2,430,659 | ) | (3,282,049 | ) | (3,542,237 | ) | ||||||||
Unrecognized prior service cost (gain) | 2,062,830 | 1,861,565 | (1,934 | ) | (1,566 | ) | ||||||||||
Unrecognized net actuarial loss | 1,378,701 | 974,763 | 952,885 | 1,459,408 | ||||||||||||
Unrecognized net transition obligation | 148,891 | 120,257 | 267,574 | 243,249 | ||||||||||||
Net amount recognized | 408,808 | 525,926 | (2,063,524 | ) | (1,841,146 | ) | ||||||||||
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 | — | ||||||
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Pension | Health Care | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||
Discount rate | 13 | % | 11 | % | 11 | % | 13 | % | 11 | % | 11 | % | ||||||||||||
Expected long-term return on plan assets | 13 | % | 11 | % | 10.5 | % | 13 | % | 11 | % | 8 | % | ||||||||||||
Rate of compensation increase | 6 | % | 8 | % | 8 | % | — | — | — |
2002 | 2003 | 2004 | ||||||||||
Health care cost trend assumed for next year | 14% | 12% | 12% | |||||||||
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 10% | 8% | 8% | |||||||||
Year that the rate reaches the ultimate trend rate | 2005 | 2006 | 2007 |
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 | ) |
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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 | ||||||||
as of | ||||||||
December 31 | ||||||||
2003 | 2004 | |||||||
Asset Category | ||||||||
Debt securities | — | 15 | % | |||||
Deposit securities | 98 | % | 84 | % | ||||
Other | 2 | % | 1 | % | ||||
Total | 100 | % | 100 | % | ||||
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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 | |||||||||
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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 | — | ||||||
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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 |
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57. | RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES |
2002 | 2003 | 2004 | |||||||||||
Net income | 8,039,709 | 6,087,227 | 6,129,209 | ||||||||||
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 | ||||||||||
Interest income | (479,802 | ) | (366,024 | ) | (317,941 | ) | |||||||
Interest expense | 1,582,750 | 1,383,446 | 1,270,136 | ||||||||||
Foreign exchange (gain) loss | (723,831 | ) | (363,505 | ) | 1,192,842 | ||||||||
Equity in net income of associated companies | (4,598 | ) | (2,819 | ) | (3,420 | ) | |||||||
(Gain) loss on sale of property, plant and equipment | (130,450 | ) | (182,883 | ) | 26,089 | ||||||||
Loss on redemption of Telkomsel’s bonds | — | — | 44,628 | ||||||||||
(Gain) loss on sale of trading and investment securities | (3,196,380 | ) | 46,595 | — | |||||||||
Amortization of goodwill and other intangible assets | 187,990 | 730,659 | 872,330 | ||||||||||
Amortization of unearned income | (59,691 | ) | (61,812 | ) | (93,164 | ) | |||||||
Amortization of deferred charges | 11,903 | 26,555 | 25,751 | ||||||||||
Net periodic post-retirement benefit cost | 616,512 | 641,435 | 492,240 | ||||||||||
Net periodic long service award benefit cost | 289,922 | 219,239 | 159,323 | ||||||||||
Provision for doubtful accounts and inventory obsolescence | 31,103 | 326,419 | 357,096 | ||||||||||
Income tax expense | 2,898,971 | 3,861,090 | 4,003,072 | ||||||||||
Minority interest in net income of subsidiaries | 810,222 | 1,503,478 | 1,956,301 | ||||||||||
Changes in assets and liabilities: | |||||||||||||
Trade accounts receivable | (373,125 | ) | (827,772 | ) | (670,103 | ) | |||||||
Other accounts receivable | 882 | 14,579 | 105,670 | ||||||||||
Inventories | 31,398 | 76,486 | (58,329 | ) | |||||||||
Prepaid expenses | (17,936 | ) | (84,690 | ) | (179,573 | ) | |||||||
Prepaid taxes | (84,409 | ) | (127,607 | ) | 173,189 | ||||||||
Prepaid pension benefit costs | — | (260,041 | ) | 196,960 | |||||||||
Trade accounts payable | 1,303,288 | 593,826 | (47,618 | ) | |||||||||
Other accounts payable | 166,383 | (27,837 | ) | (96,022 | ) | ||||||||
Taxes payable | (1,601,223 | ) | 477,961 | (105,991 | ) | ||||||||
Accrued expenses | 347,910 | (779,917 | ) | (65,078 | ) | ||||||||
Unearned income | 134,850 | 317,650 | 266,774 | ||||||||||
Advances from customers and suppliers | 80,090 | (30,884 | ) | (78,028 | ) | ||||||||
Accrued pension and other post-retirement benefit costs | — | 7,041 | 18,768 | ||||||||||
Contributions to Yayasan Kesehatan Pegawai Telkom | (59,543 | ) | (188,473 | ) | (724,530 | ) | |||||||
Payments of long service award benefit | (76,525 | ) | (222,743 | ) | (78,057 | ) | |||||||
Interest paid | (900,660 | ) | (1,178,332 | ) | (1,348,919 | ) | |||||||
Interest received | 480,288 | 369,982 | 321,677 | ||||||||||
Income tax paid | (1,914,895 | ) | (3,905,317 | ) | (4,132,359 | ) | |||||||
Net cash provided by operating activities | 10,864,473 | 12,852,532 | 16,051,480 | ||||||||||
F-142