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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2005 | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Title of | Name of each exchange | |
Each class | on 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. It is computed by dividing total revenues (including gross interconnection revenues) for a given period by the respective average number of subscribers for such period, except that for the mobile cellular service, revenues do not include connection fees, interconnection revenues, international roaming revenues from non-subscribers and dealer discounts. | |
“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 communication 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”. |
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“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. | |
“DCS1800” | (Digital Communication System) is a mobile cellular system using GSM technology operating in the 1800 MHz frequency band. | |
“DGPT” | is the Director General of Post and Telecommunications. | |
“Directors’ Decree on Internal Control” | is the decree of the Board of Directors, dated October 29, 2004, titled “Internal Control over Financial Reporting in Compliance with the Sections 302 and 404 of the Sarbanes Oxley Act of 2002” on certain policies and procedures for effective internal controls and good corporate governance and early detection of errors, frauds and other misuses”. | |
“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. | |
“dualband” | 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. | |
“Erlang” | refers to a unit of measurement of telephone traffic equal to one hour of conversation. | |
“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. |
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“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 line” | refers to fixed wireline and fixed wireless. | |
“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. | |
“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. | |
“ITRB” | refers to the Indonesian Telecommunications Regulatory Body. | |
“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. |
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“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. | |
“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” | (Ministry of Communication). See “MoCI”. | |
“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. |
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“PPLT” | refers to Penyediaan dan Pengembangan Layanan Telekomunikasi or Provision and Development of Telecommunications Services program established by TELKOM to provide telecommunication infrastructure to certain regions where telecommunication services are not available. | |
“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. | |
“RSA” | refers to the Revenue Sharing Agreement. | |
“RUIM” or “RUIMcard” | (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. | |
“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 “SIMcard” | (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 secur- |
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ity 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. | |
“WLL” | (Wireless Local Loop) is a means of providing local loop (the physical connection from the subscriber’s premises to the carrier’s point of presence or POP) facility without wires, which allows carriers to provide local loop with approximately 1 Gbps or more in aggregate bandwidth per coverage area. WLL is particularly effective in rocky or soggy terrain. |
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ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
A. | Selected financial data |
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Year Ended December 31, | ||||||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||
2001 | 2002 | 2003 | (As Restated)(6) | 2005 | 2005 | |||||||||||||||||||||||
(US$ | ||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, dividends and ADS) | million, | |||||||||||||||||||||||||||
except for | ||||||||||||||||||||||||||||
data relating | ||||||||||||||||||||||||||||
to shares, | ||||||||||||||||||||||||||||
dividends | ||||||||||||||||||||||||||||
and ADS)(1) | ||||||||||||||||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||||||||||||
Indonesian GAAP | ||||||||||||||||||||||||||||
OPERATING REVENUES | ||||||||||||||||||||||||||||
Telephone | ||||||||||||||||||||||||||||
Fixed lines | ||||||||||||||||||||||||||||
Local and domestic long-distance usage | 5,226 | 5,448 | 6,562 | 7,439 | 7,223 | 735 | ||||||||||||||||||||||
Monthly subscription charges | 998 | 1,475 | 1,949 | 2,935 | 3,290 | 335 | ||||||||||||||||||||||
Installation charges | 98 | 130 | 223 | 201 | 197 | 20 | ||||||||||||||||||||||
Others | 93 | 211 | 163 | 70 | 71 | 7 | ||||||||||||||||||||||
Total fixed lines revenues | 6,415 | 7,264 | 8,897 | 10,645 | 10,781 | 1,097 | ||||||||||||||||||||||
Cellular | �� | |||||||||||||||||||||||||||
Air time charges | 3,988 | 5,454 | 7,678 | 9,826 | 13,666 | 1,390 | ||||||||||||||||||||||
Monthly subscription charges | 581 | 593 | 581 | 448 | 384 | 39 | ||||||||||||||||||||||
Features | 10 | 8 | 6 | 91 | 457 | 46 | ||||||||||||||||||||||
Connection fee charges | 129 | 172 | 194 | 56 | 64 | 7 | ||||||||||||||||||||||
Total cellular revenues | 4,708 | 6,227 | 8,459 | 10,421 | 14,571 | 1,482 | ||||||||||||||||||||||
Total telephone revenues | 11,123 | 13,491 | 17,356 | 21,066 | 25,352 | 2,579 | ||||||||||||||||||||||
Joint Operation Schemes | ||||||||||||||||||||||||||||
Minimum TELKOM Revenues (MTR) | 1,474 | 1,320 | 900 | 296 | 269 | 27 | ||||||||||||||||||||||
Share in Distributable KSO Revenues (DKSOR) | 733 | 801 | 583 | 350 | 319 | 33 | ||||||||||||||||||||||
Amortization of unearned initial investor payments | 13 | 7 | 3 | 11 | 1 | 0 | ||||||||||||||||||||||
Total revenue under Joint Operation Schemes | 2,220 | 2,128 | 1,486 | 657 | 589 | 60 | ||||||||||||||||||||||
Interconnection | 1,424 | 2,831 | 4,162 | 6,188 | 7,742 | 788 | ||||||||||||||||||||||
Network | 415 | 316 | 518 | 654 | 587 | 59 | ||||||||||||||||||||||
Data and Internet | 673 | 1,552 | 3,109 | 4,809 | 6,934 | 705 | ||||||||||||||||||||||
Revenue-Sharing Arrangements | 264 | 264 | 258 | 281 | 302 | 31 | ||||||||||||||||||||||
Other telecommunications services | 165 | 221 | 227 | 293 | 301 | 31 | ||||||||||||||||||||||
Total Operating Revenues | 16,284 | 20,803 | 27,116 | 33,948 | 41,807 | 4,253 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||
2004 | |||||||||||||||||||||||||
2001 | 2002 | 2003 | (As Restated)(6) | 2005 | 2005 | ||||||||||||||||||||
(US$ | |||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, dividends and ADS) | million, | ||||||||||||||||||||||||
except for | |||||||||||||||||||||||||
data relating | |||||||||||||||||||||||||
to shares, | |||||||||||||||||||||||||
dividends | |||||||||||||||||||||||||
and ADS)(1) | |||||||||||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||||||
Personnel | 2,281 | 4,388 | 4,440 | 4,910 | 6,563 | 668 | |||||||||||||||||||
Depreciation | 2,870 | 3,474 | 4,779 | 6,438 | 7,571 | 770 | |||||||||||||||||||
Operations, maintenance and telecommunication services | 2,150 | 2,290 | 3,339 | 4,530 | 5,916 | 602 | |||||||||||||||||||
General and administrative | 1,343 | 1,146 | 2,079 | 2,600 | 2,764 | 281 | |||||||||||||||||||
Marketing | 220 | 375 | 503 | 882 | 1,126 | 114 | |||||||||||||||||||
Write-down of assets | — | — | — | — | 617 | 63 | |||||||||||||||||||
Loss on procurement commitments | — | — | — | — | 79 | 8 | |||||||||||||||||||
Total Operating Expenses | 8,864 | 11,673 | 15,140 | 19,360 | 24,636 | 2,506 | |||||||||||||||||||
Operating Income | 7,420 | 9,130 | 11,976 | 14,588 | 17,171 | 1,747 | |||||||||||||||||||
Other income (expenses) | |||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | — | 3,196 | — | — | — | — | |||||||||||||||||||
Interest expense | (1,330 | ) | (1,583 | ) | (1,383 | ) | (1,270 | ) | (1,177 | ) | (120 | ) | |||||||||||||
Interest income | 572 | 480 | 366 | 318 | 345 | 35 | |||||||||||||||||||
Gain (loss) on foreign exchange — net | (379 | ) | 557 | 126 | (1,221 | ) | (517 | ) | (53 | ) | |||||||||||||||
Equity in net income (loss) of associated companies | (86 | ) | 5 | 3 | 3 | 11 | 1 | ||||||||||||||||||
Others — net | 353 | (36 | ) | 364 | 331 | 409 | 42 | ||||||||||||||||||
Other Income (Expenses) — net | (870 | ) | 2,619 | (524 | ) | (1,839 | ) | (929 | ) | (95 | ) | ||||||||||||||
Income Before Tax | 6,550 | 11,749 | 11,452 | 12,749 | 16,242 | 1,652 | |||||||||||||||||||
Tax expense | (2,007 | ) | (2,899 | ) | (3,861 | ) | (4,178 | ) | (5,184 | ) | (527 | ) | |||||||||||||
Income before minority interest in net income of subsidiaries | 4,543 | 8,850 | 7,591 | 8,571 | 11,058 | 1,125 | |||||||||||||||||||
Minority interest in net income of subsidiaries, net | (475 | ) | (810 | ) | (1,504 | ) | (1,956 | ) | (3,064 | ) | (312 | ) | |||||||||||||
Net Income | 4,068 | 8,040 | 6,087 | 6,615 | 7,994 | 813 | |||||||||||||||||||
Weighted average shares outstanding (millions) | 20,160 | 20,160 | 20,160 | 20,160 | 20,160 | ||||||||||||||||||||
Net income per share | 201.81 | 398.80 | 301.95 | 328.10 | 396.51 | 0.04 | |||||||||||||||||||
Net income per ADS | 8,072.20 | 15,951.80 | 12,077.83 | 13,124.14 | 15,860.25 | 1.61 | |||||||||||||||||||
Dividends declared per share(2) | 44.08 | 105.41 | 165.58 | 158.09 | 144.90 | 0.01 | |||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Net income | 4,298 | 8,587 | 5,791 | 6,468 | 7,840 | 798 | |||||||||||||||||||
Net income per share | 213.20 | 425.96 | 287.23 | 320.86 | 388.89 | 0.04 | |||||||||||||||||||
Net income per ADS | 8,528.17 | 17,038.21 | 11,489.40 | 12,834.47 | 15,555.74 | 1.58 |
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As of December 31, | |||||||||||||||||||||||||
2004 | |||||||||||||||||||||||||
2001 | 2002 | 2003 | (As Restated)(6) | 2005 | 2005 | ||||||||||||||||||||
(US$ million)(1) | |||||||||||||||||||||||||
(Rp. in billion) | |||||||||||||||||||||||||
Consolidated Balance Sheet Data | |||||||||||||||||||||||||
Indonesian GAAP | |||||||||||||||||||||||||
Total assets | 33,036 | 44,307 | 50,283 | 56,179 | 62,171 | 6,325 | |||||||||||||||||||
Current liabilities(4) | 9,543 | 9,708 | 11,170 | 11,677 | 13,513 | 1,375 | |||||||||||||||||||
Other liabilities | 3,447 | 5,383 | 6,258 | 8,222 | 7,728 | 786 | |||||||||||||||||||
Long-term debts | 9,730 | 12,006 | 11,834 | 13,214 | 11,332 | 1,153 | |||||||||||||||||||
Total liabilities | 22,720 | 27,097 | 29,262 | 33,113 | 32,573 | 3,314 | |||||||||||||||||||
Minority interest | 1,235 | 2,596 | 3,708 | 4,938 | 6,305 | 641 | |||||||||||||||||||
Capital stock(5) | 5,040 | 5,040 | 5,040 | 5,040 | 5,040 | 513 | |||||||||||||||||||
Total stockholders’ equity | 9,081 | 14,614 | 17,313 | 18,128 | 23,292 | 2,370 | |||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Total assets | 32,449 | 44,623 | 51,347 | 56,702 | 63,481 | 6,440 | |||||||||||||||||||
Total stockholders’ equity | 7,766 | 13,911 | 16,285 | 19,571 | 24,568 | 2,499 |
(1) | The translations of Rupiah amounts into US Dollars are included solely for the convenience of the readers and have been made using the average of the market buy and sell rates of Rp.9,830 to US$1 published by Reuters on December 31, 2005. The convenience translations should not be construed as representations that the Rupiah amounts have been, could have been, or can in the future be, converted into US Dollars at this or any other rate of exchange. |
(2) | Dividends declared per share in 2001, 2002 and 2003 represent 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. Dividends declared per share in 2005 represent cash dividends for 2004 of Rp.152.01 per share deducted by interim cash dividends declared in 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, employee benefit plans, equity in net income or loss of associated companies, land rights, 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 54 to the consolidated financial statements. |
(4) | Includes current maturities of long-term debts. |
(5) | As of December 31, 2004 and 2005, 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. |
(6) | The 2004 consolidated financial statements have been restated to reflect the adoption of PSAK No. 24 (Revised 2004), “Employee Benefits” (“PSAK 24R”). See Note 4a to the consolidated financial statements. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Changes in Methods of Accounting under Indonesian GAAP”. |
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Year | At period end | Average(1) | High(2) | Low(2) | |||||||||||||
(Rp. Per US$1.00) | |||||||||||||||||
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 | |||||||||||||
2005 | 9,830 | 9,711 | 10,800 | 9,133 | |||||||||||||
First Quarter | 9,480 | 9,276 | 9,520 | 9,133 | |||||||||||||
Second Quarter | 9,713 | 9,548 | 9,755 | 9,435 | |||||||||||||
Third Quarter | 10,310 | 10,006 | 10,800 | 9,735 | |||||||||||||
Fourth Quarter | 9,830 | 9,992 | 10,300 | 9,735 | |||||||||||||
2006 | |||||||||||||||||
January | 9,395 | 9,493 | 9,795 | 9,355 | |||||||||||||
February | 9,230 | 9,253 | 9,335 | 9,200 | |||||||||||||
March | 9,075 | 9,172 | 9,370 | 9,030 | |||||||||||||
April | 8,775 | 8,937 | 9,045 | 8,775 | |||||||||||||
May | 9,220 | 8,985 | 9,320 | 8,720 |
(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. |
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TELKOM had a number of material weaknesses in its internal control over financial reporting as of December 31, 2003, 2004 and 2005 and TELKOM concluded that as of December 31, 2005 its disclosure controls were not effective, 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 the World Bank and the Asian Development Bank. |
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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, including its subsidiaries such as Telkomsel, 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. On February 8, 2006, the MoCI issued Regulation No. 8/2006, which mandates a new cost-based interconnection tariff scheme for all telecommunications network and services operators. Under the new scheme, the operator of the network on which calls terminate would determine the interconnection charge to |
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be received by it based on a formula to be mandated by the Government, which would be intended to have the effect of requiring that operators charge for calls based on the costs of carrying such calls. Such calculated interconnection charges must be presented in a Reference Interconnection Offer (“RIO”) and reported to the ITRB. TELKOM submitted its RIO in April 2006. ITRB is expected to complete its review of RIOs submitted by large network operators, including TELKOM, by July 2006. The new interconnection tariff scheme will become effective on January 1, 2007. For further information on the interconnection scheme, see Item 4. “Information on the Company — B. Business Overview — Regulations — Interconnection”. TELKOM can give no assurance regarding the impact, if any, of such adjustment on the interconnection revenues and costs on TELKOM and there can be no assurance that such impact would not have a material adverse effect 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. “Information on the Company — B. Business Overview — Regulations — 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 adjust their tariffs, with the resulting weighted average of tariffs increasing by 9%. There can be no assurance that the Government will implement further tariff increases or that tariffs will keep pace with costs over time. Any failure of the Government to implement regular tariff increases could have a material adverse effect on our business, financial condition and results of operations. | |
• | Migration of Frequencies for 3G Service Providers: On August 31, 2005, the MoCI issued a press release which announced that in order to conform with the international standards of the industry and as recommended by the International Telecommunications Union — Radiocommunication Sector(“ITU-R”), the 1900 MHz frequency spectrum would only be used for the International Mobile Telecommunications- 2000(“IMT-2000” or“3-G”) network. The MoCI also announced that the CDMA-based technology network which TELKOM uses for its fixed wireless services can only operate in the 800 MHz frequency spectrum. At present, TELKOM utilizes the 1900 MHz frequency spectrum for its fixed wireless network in Jakarta and West Java areas while for other areas, TELKOM utilizes the 800 MHz frequency spectrum. As a result of the Government’s decision, TELKOM’s Base Station System (“BSS”) equipment in Jakarta and West Java areas which are part of transmission installation and equipment for fixed wireless network can no longer be used commencing at the end of 2007. We expect that the BSS equipment will be |
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completely replaced with the BSS equipment operating in 800 MHz by mid-2007. On January 13, 2006, the MoCI issued MoCI Regulation No. 01/PER/M.KOMINFO/1/2006 which reaffirmed the Government’s decision that TELKOM’s fixed wireless network can only operate in the 800 MHz frequency spectrum and that the 1900 MHz is allocated for the3-G network. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Overview — Write-down of Assets, Depreciation Expense, Loss on Procurement Commitments, and Operations, Maintenance and Telecommunication Services Expenses”. There can be no assurance that TELKOM will not recognize further loss as a result of such Government decisions. | ||
• | Termination of Wireless Local Loop (“WLL”) License: In the first quarter of 2005, the Government, in its efforts to rearrange the frequency spectra utilized by the telecommunications industry, issued a series of regulations which resulted in TELKOM not being able to utilize certain frequency spectra it currently uses to support its fixed wireline cable network commencing at the end of 2006. As a result of these regulations, certain of TELKOM’s cable network facilities within the fixed wireline segment, which comprise primarily of WLL and approach link equipment (a transmission equipment to link BTSs to a local exchange) operating in the affected frequency spectra, can no longer be used commencing at the end of 2006. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Overview — Write-down of Assets, Depreciation Expense, Loss on Procurement Commitments, and Operations, Maintenance and Telecommunication Services Expenses”. There can be no assurance that TELKOM will not recognize further loss as a result of such Government decisions. | |
• | Indonesian Telecommunications Regulatory Body (“ITRB”): The Telecommunications Law allows the 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 the MoC Decree 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, financial condition, results of operations 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, 2005, Indosat offered this service in Jakarta, Bogor, Depok, Tangerang, Bekasi, Banten, Surabaya, Yogyakarta, Malang, Sidoarjo, Gresik, Batu, Madura (Bangkalan, Sampang, Sumenep), Pasuruan, and Medan. Based on the interconnection agreement between TELKOM and Indosat dated September 23, 2005, TELKOM and Indosat have agreed to open interconnection (i) of TELKOM’s local fixed line network with Indosat’s long-distance fixed line network; (ii) of Indosat’s local fixed line network with TELKOM’s long-distance fixed line network; (iii) between TELKOM’s and Indosat’s long-distance fixed line networks; (iv) of TELKOM’s domestic fixed line network with Indosat’s international fixed line network; and (v) Indosat’s local fixed line network with TELKOM’s international fixed line network, with the interconnection tariff being calculated on a call-by-call basis. On December 1, 2005, TELKOM and Indosat entered into an interconnection agreement for the interconnection of TELKOM’s fixed network with Indosat’s mobile cellular network and allowing Indosat’s mobile customers to access TELKOM’s IDD services. Therefore, Indosat is expected to expand its service coverage to other cities in Indonesia. Indosat also commenced offering limited domestic long-distance services for |
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calls within its network in late 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. TELKOM’s interconnection arrangements will be affected by the new cost-based interconnection scheme which was publicly announced in February 2006. An amendment to the interconnection agreement with Indosat reflecting the new cost-based interconnection scheme is expected to be effective by the end of 2006. | ||
• | 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. 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 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 additionalfive-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, the interconnection agreement between Indosat and TELKOM in these five cities does not contain any provisions on technical and business arrangements regarding the use of “011” and “017” DLD access codes. In the five-year interim period and thereafter, the “0” prefix may continue to be used by all operators, including TELKOM, as default code 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. 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 accommodate customers who prefer to choose their long-distance carrier. For further information, see Item 4. “Information on the Company — B. Business Overview — Indonesian Telecommunications Industry — Regulations — DLD and 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. 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 |
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(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 of Rp.478 billion (after taxes). While the amount of the compensation payable to TELKOM has been determined, payment was contingent on appropriations to the State Budget for the MoCI, which requires approval by Parliament. On December 15, 2005, TELKOM signed an agreement on Implementation of Compensation for Termination of Exclusive Rights with the Directorate General of Post and Telecommunications of MoCI. Pursuant to this agreement, the Government agreed to pay Rp.478.0 billion to TELKOM over a five-year period. Under the plan, the Government paid Rp.90.0 billion in 2005 and shall pay Rp.90.0 billion in 2006 and then the remaining Rp.298.0 billion thereafter in installments or in lump-sum, which payment schedule will depend upon the Government’s budgetary considerations. In addition, TELKOM is required by the Government to use funds received thereunder for development of Indonesian telecommunications infrastructure. TELKOM can provide no assurance that the Government will honor its promise to pay the balance within the next five years. | ||
• | Identity Registration: For prepaid subscribers, there is a new obligation regulated under the MoCI Decree No. 23/2005, issued on October 28, 2005. Pursuant to this Decree, TELKOM is required to obtain identity information for all of its prepaid customers on or prior to April 28, 2006. Such an obligation may slow down revenue growth in 2006 compared to 2005 and have an adverse impact on TELKOM’s profit as TELKOM will have to incur additional expenditures on support systems and dealers’ compensation. It may also present difficulties for TELKOM in retaining existing customers and expose TELKOM customers’ identities to illegal use or government investigations. This identity registration requirement, however, will affect other competitors as well. |
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 forTELKOM-1 andTELKOM-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. |
Certain TELKOM employees, including present and former TELKOM directors, are subject to on-going police investigations. |
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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. |
Forward-looking statements reflect current expectations and may not be correct. |
ITEM 4. | INFORMATION ON THE COMPANY |
A. | History and Development of the Company |
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B. | Business Overview |
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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 Services (including revenues from telephone directory services and building management services). |
Fixed Line Services |
Fixed Wireline Services |
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Fixed Wireless Services |
Cellular Services |
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As of or for the Year Ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Cellular subscribers(1) | ||||||||||||
KartuHALO (Postpaid) | 1,007,034 | 1,327,549 | 1,470,755 | |||||||||
SimPATI (Prepaid) | 8,581,773 | 11,557,758 | 16,004,631 | |||||||||
Kartu As (Prepaid) | — | 3,405,201 | 6,793,967 | |||||||||
Deactivations(2) | ||||||||||||
KartuHALO (Postpaid) | 265,355 | 317,020 | 372,921 | |||||||||
SimPATI (Prepaid) | 2,823,025 | 8,470,819 | 15,836,633 | |||||||||
Kartu As (Prepaid) | — | 824,489 | 12,105,848 | |||||||||
Average monthly churn rate(3) | ||||||||||||
KartuHALO (Postpaid) | 2.3 | % | 2.3 | % | 2.1 | % | ||||||
SimPATI (Prepaid) | 4.0 | % | 6.8 | % | 8.2 | % | ||||||
Kartu As (Prepaid) | — | 5.0 | % | 14.9 | % | |||||||
ARPU(4) | ||||||||||||
KartuHALO (Postpaid) (Rp.’000) | 314 | 304 | 291 | |||||||||
SimPATI (Prepaid) (Rp.’000) | 95 | 84 | 84 | |||||||||
Kartu As (Prepaid) (Rp.’000) | — | 48 | 45 |
(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 range from Rp.5,000 to Rp.100,000. The following table shows the respective active periods for Telkomsel’s SimPATI and Kartu As prepaid packages, respectively: |
Period during which subscribers | ||||
SimPATI Value of Voucher | will have 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 |
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Period during which subscribers | ||||
Kartu As Value of Voucher | will have access to services | |||
Rp.5,000 | 30 days | |||
Rp.10,000 | 30 days | |||
Rp.25,000 | 30 days | |||
Rp.50,000 | 30 days | |||
Rp.100,000 | 30 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 connection fees, interconnection revenues, international roaming revenues from non-subscribers 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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2003 | 2004 | 2005 | |||||||||||||||||||||||
KSO Division | MTR | DTR | MTR | DTR | MTR | DTR | |||||||||||||||||||
(Rp. in billion) | (Rp. in billion) | (Rp. in billion) | |||||||||||||||||||||||
Division III (West Java and Banten)(1) | 242.4 | 90.0 | — | — | — | — | |||||||||||||||||||
Division IV (Central Java)(2) | 404.3 | 184.6 | 35.2 | 15.7 | — | — | |||||||||||||||||||
Division VII (Eastern Indonesia) | 253.2 | 308.4 | 260.8 | 333.8 | 268.6 | 318.6 | |||||||||||||||||||
Total | 899.9 | 583.0 | 296.0 | 349.5 | 268.6 | 318.6 | |||||||||||||||||||
(1) | 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, Rp.1,016.8 billion and Rp.1,498.9 billion in 2004 and 2005, respectively. |
(2) | 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 and Rp.1,653.2 billion of operating revenues from Regional Division IV (Central Java) from February 1, 2004 through December 31, 2004 and in 2005, respectively. For 2004, MTR and DTR for Regional Division IV represent MTR and DTR generated by Regional Division IV in January 2004. |
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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, | |||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||
(millions of minutes) | |||||||||||||||||||||
Mobile Cellular Interconnection(1) | |||||||||||||||||||||
Incoming paid minutes | 2,355.4 | 2,830.9 | 3,463.7 | 4,235.1 | 4,863.6 | ||||||||||||||||
Outgoing paid minutes | 2,689.3 | 3,854.5 | 4,872.1 | 6,448.0 | 7,514.9 | ||||||||||||||||
Fixed Line Interconnection(2) | |||||||||||||||||||||
Incoming paid minutes | 115.6 | 128.4 | 130.1 | 136.7 | 612.3 | ||||||||||||||||
Outgoing paid minutes | 34.7 | 39.6 | 30.9 | 51.1 | 493.5 | ||||||||||||||||
Satellite Phone Interconnection | |||||||||||||||||||||
Incoming paid minutes | 2.4 | 12.6 | 16.1 | 14.7 | 10.7 | ||||||||||||||||
Outgoing paid minutes | 0.5 | 5.6 | 7.5 | 8.2 | 6.5 | ||||||||||||||||
International Interconnection(3) | |||||||||||||||||||||
Incoming paid minutes | 286.8 | 303.3 | 444.1 | 427.6 | 596.4 | ||||||||||||||||
Outgoing paid minutes | 241.9 | 200.3 | 149.7 | 158.1 | 185.5 | ||||||||||||||||
Total | |||||||||||||||||||||
Total Incoming paid minutes | 2,760.2 | 3,275.2 | 4,054.0 | 4,814.1 | 6,083.0 | ||||||||||||||||
Outgoing paid minutes | 2,966.4 | 4,100.0 | 5,060.2 | 6,665.4 | 8,200.4 |
(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), PT Batam Bintan Telekomunikasi, and for 2004 and 2005, Indosat. |
(3) | International interconnection minutes are derived from interconnection with Indosat’s international network and, starting 2004, incoming and outgoing calls using TIC 007 as well. |
Year Ended December 31, | ||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(millions of minutes) | ||||||||||||||||||||
Incoming paid minutes | 1,289.9 | 1,672.6 | 2,011.8 | 2,354.1 | 2,709.1 | |||||||||||||||
Outgoing paid minutes | 1,266.0 | 2,001.6 | 2,610.3 | 3,422.1 | 4,251.5 |
Network Services |
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Data and Internet Services |
Item | TELKOMGlobal 017 | TELKOMSave | ||
Tariff | Discount up to 40% of normal IDD rate | Discount up to 60% of normal IDD rate | ||
Dial | One stage | Two stage | ||
Quality/Technology | Premium VoIP | Standard VoIP |
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• | telephone directory, which TELKOM provides through its majority-owned subsidiary, Infomedia; | |
• | cable and pay television and related services, which it provides through its majority-owned subsidiary, Indonusa; and | |
• | telex and telegram services. |
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As of or for the Year Ended December 31, | |||||||||||||||||||||
Operating Statistics | 2001(1) | 2002(2) | 2003(3) | 2004(4) | 2005(4) | ||||||||||||||||
Exchange capacity | |||||||||||||||||||||
Non-KSO Divisions | 5,135,108 | 6,643,688 | 7,810,766 | 8,786,887 | 9,138,167 | ||||||||||||||||
KSO Divisions(9) | 3,669,336 | 2,459,950 | 1,608,455 | 954,465 | 1,045,366 | ||||||||||||||||
Total | 8,804,444 | 9,103,638 | 9,419,221 | 9,741,352 | 10,183,533 | ||||||||||||||||
Installed lines | |||||||||||||||||||||
Non-KSO Divisions | 4,725,268 | 6,157,149 | 7,235,035 | 8,264,999 | 8,497,255 | ||||||||||||||||
KSO Divisions(9) | 3,316,406 | 2,234,892 | 1,548,070 | 931,999 | 998,901 | ||||||||||||||||
Total | 8,041,674 | 8,392,041 | 8,783,105 | 9,196,998 | 9,496,156 | ||||||||||||||||
Lines in service(5) | |||||||||||||||||||||
Non-KSO Divisions | 4,270,243 | 5,701,900 | 6,792,300 | 7,714,977 | 7,787,693 | ||||||||||||||||
KSO Divisions(9) | 2,948,695 | 2,039,608 | 1,422,028 | 844,373 | 898,438 | ||||||||||||||||
Total | 7,218,938 | 7,741,508 | 8,214,328 | 8,559,350 | 8,686,131 | ||||||||||||||||
Subscriber lines | |||||||||||||||||||||
Non-KSO Divisions | 4,005,106 | 5,386,430 | 6,441,973 | 7,323,304 | 7,413,769 | ||||||||||||||||
KSO Divisions(9) | 2,831,168 | 1,952,226 | 1,365,114 | 816,208 | 869,631 | ||||||||||||||||
Total | 6,836,274 | 7,338,656 | 7,807,087 | 8,139,512 | 8,283,400 | ||||||||||||||||
Public telephones | |||||||||||||||||||||
Non-KSO Divisions | 265,137 | 315,470 | 350,327 | 391,673 | 373,924 | ||||||||||||||||
KSO Divisions(9) | 117,527 | 87,382 | 56,914 | 28,165 | 28,807 | ||||||||||||||||
Total | 382,664 | 402,852 | 407,241 | 419,838 | 402,731 | ||||||||||||||||
Leased lines in service | |||||||||||||||||||||
Non-KSO Divisions(6) | 4,973 | 8,193 | 8,213 | 8,887 | 11,333 | ||||||||||||||||
KSO Divisions(9) | 2,631 | 1,879 | 1,162 | 382 | 575 | ||||||||||||||||
Total | 7,604 | 10,072 | 9,375 | 9,269 | 11,908 | ||||||||||||||||
Fixed wireline subscriber pulse production(7)(millions) | |||||||||||||||||||||
Non-KSO Divisions | 34,342 | 44,326 | 50,848 | 58,314 | 57,926 | ||||||||||||||||
KSO Divisions(9) | 24,047 | 16,788 | 11,413 | 6,838 | 9,743 | ||||||||||||||||
Total | 58,389 | 61,114 | 62,261 | 65,152 | 67,669 | ||||||||||||||||
Call completion rate (%) | |||||||||||||||||||||
Local | |||||||||||||||||||||
Non-KSO Divisions | 75.8 | 75.8 | 76.8 | 78.6 | 80.4 | ||||||||||||||||
KSO Divisions(9) | 72.5 | 75.5 | 78.4 | 77.9 | 80.8 | ||||||||||||||||
Combined | 73.9 | 75.6 | 77.3 | 78.5 | 80.4 | ||||||||||||||||
Domestic long-distance | |||||||||||||||||||||
Non-KSO Divisions | 65.4 | 65.5 | 67.5 | 70.9 | 74.0 | ||||||||||||||||
KSO Divisions(9) | 85.6 | 68.1 | 74.7 | 74.9 | 75.8 | ||||||||||||||||
Combined | 65.7 | 66.6 | 69.5 | 71.5 | 74.3 |
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As of or for the Year Ended December 31, | |||||||||||||||||||||
Operating Statistics | 2001(1) | 2002(2) | 2003(3) | 2004(4) | 2005(4) | ||||||||||||||||
Fault rate(8) | |||||||||||||||||||||
Non-KSO Divisions | 0.8 | 4.6 | 4.4 | 3.4 | 3.8 | ||||||||||||||||
KSO Divisions(9) | 3.1 | 8.9 | 3.5 | 1.9 | 2.0 | ||||||||||||||||
Combined | 3.9 | 5.2 | 4.1 | 3.2 | 3.6 |
(1) | For 2001, Non-KSO Divisions refer to Divisions II, V and VI, while KSO Divisions refer to Divisions I, III, IV and VII. |
(2) | For 2002, Non-KSO Divisions refer to Divisions I, II, V and VI, while KSO Divisions refer to Divisions III, IV and VII. |
(3) | For 2003, Non-KSO Divisions refer to Divisions I, II, III, V and VI, while KSO Divisions refer to Divisions IV and VII. |
(4) | For 2004 and 2005, Non-KSO Divisions refer to Divisions I, II, III, IV, V and VI, while KSO Divisions refer to Division VII. |
(5) | Lines in service are comprised of subscriber lines and public telephone lines and include the following number of lines in service operated by TELKOM pursuant to revenue-sharing arrangements. Such lines in service under revenue-sharing arrangements amounted to 430,477, 443,316, 511,108, 396,926 and 201,485 as of December 31, 2001, 2002, 2003, 2004 and 2005, respectively. |
(6) | Excludes leased lines for TELKOM’s network and multimedia businesses. |
(7) | Consists of pulses generated from local and domestic long-distance calls, excluding calls made from pay phones and mobile cellular phones. |
(8) | 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. |
(9) | Divisions classified as KSO Divisions differ year by year due to acquisitions in certain years. See footnotes (1) to (4) above. |
Division III | ||||||||||||||||||||||||||||||||
(West Java | Division IV | Division VII | ||||||||||||||||||||||||||||||
Division I | Division II | and | (Central | Division V | Division VI | (East | ||||||||||||||||||||||||||
(Sumatra) | (Jakarta) | Banten) | Java) | (East Java) | (Kalimantan) | Indonesia) | Total | |||||||||||||||||||||||||
Local exchange capacity | 1,718,298 | 4,143,568 | 1,361,042 | 1,336,697 | 2,528,891 | 737,019 | 1,375,074 | 13,200,589 | ||||||||||||||||||||||||
Total lines in service | 1,921,532 | 3,856,340 | 1,095,093 | 1,182,022 | 2,806,761 | 676,766 | 1,209,484 | 12,747,998 | ||||||||||||||||||||||||
Capacity utilization (%)(1) | 111.83 | 93.07 | 80.46 | 88.43 | 110.99 | 91.82 | 87.96 | 96.57 | ||||||||||||||||||||||||
Installed lines(2) | 1,910,363 | 4,081,046 | 1,345,872 | 1,273,593 | 2,458,347 | 760,927 | 1,339,469 | 13,169,617 | ||||||||||||||||||||||||
Utilization rate (%)(1) | 100.58 | 94.49 | 81.37 | 92.81 | 114.17 | 88.94 | 90.30 | 96.80 | ||||||||||||||||||||||||
Employees(3) | 3,740 | 6,548 | 1,967 | 2,020 | 2,757 | 956 | 3,213 | 21,201 | ||||||||||||||||||||||||
Population (millions)(4) | 55.14 | 30.72 | 26.94 | 46.90 | 38.89 | 14.54 | 33.73 | 246.86 | ||||||||||||||||||||||||
TELKOM line penetration (%)(5) | 3.48 | 12.55 | 4.07 | 2.52 | 7.22 | 4.66 | 3.59 | 5.16 |
(1) | Capacity utilization (lines in service/exchange capacity) and utilization rate (lines in service/installed lines) consist of fixed wireline and fixed wireless. The rate can exceed 100% since the exchange capacity in fixed wireless (MSC and BTS) is calculated by assuming traffic allocation per subscriber of 60 mE (mili Erlang). |
(2) | Total for 2005 includes 130,947 fixed wireless line units established under RSA scheme. |
(3) | Does not include employees for support divisions, such as TELKOM’s long distance, fixed wireless, multimedia and construction divisions. |
(4) | Source: Indonesian Central Bureau of Statistics (estimated figures). |
(5) | TELKOM’s penetration based on the estimated population figures. |
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As of or for the Year Ended December 31, | |||||||||||||||||
2002(1) | 2003(2) | 2004(3) | 2005(3) | ||||||||||||||
Exchange capacity (MSC)(7) | |||||||||||||||||
Non-KSO Divisions | — | 666,050 | 1,952,644 | 2,687,348 | |||||||||||||
KSO Divisions(6) | — | 61,550 | 179,700 | 329,708 | |||||||||||||
Total | — | 727,600 | 2,132,344 | 3,017,056 | |||||||||||||
Installed lines (BTS)(7) | |||||||||||||||||
Non-KSO Divisions | 8,621 | 659,497 | 2,291,212 | 3,332,893 | |||||||||||||
KSO Divisions(6) | — | 116,150 | 179,717 | 340,568 | |||||||||||||
Total | 8,621 | 775,647 | 2,470,929 | 3,673,461 | |||||||||||||
Lines in service(4) | |||||||||||||||||
Non-KSO Divisions | 8,527 | 237,749 | 1,317,673 | 3,750,821 | |||||||||||||
KSO Divisions(6) | — | 27,038 | 111,695 | 311,046 | |||||||||||||
Total | 8,527 | 264,787 | 1,429,368 | 4,061,867 | |||||||||||||
Subscriber lines | |||||||||||||||||
Non-KSO Divisions | 8,510 | 237,200 | 1,313,978 | 3,739,095 | |||||||||||||
KSO Divisions(6) | — | 27,038 | 111,695 | 311,046 | |||||||||||||
Total | 8,510 | 264,238 | 1,425,673 | 4,050,141 | |||||||||||||
Public telephones | |||||||||||||||||
Non-KSO Divisions | 17 | 549 | 3,695 | 11,726 | |||||||||||||
KSO Divisions(6) | — | — | — | — | |||||||||||||
Total | 17 | 549 | 3,695 | 11,726 | |||||||||||||
Fixed wireless subscriber pulse production/ minutes production(5)(8)(millions) | |||||||||||||||||
Non-KSO Divisions | 14 | 214 | 989 | 3,254 | |||||||||||||
KSO Divisions(6) | — | 4 | 125 | 299 | |||||||||||||
Total | 14 | 218 | 1,114 | 3,553 |
(1) | For 2002, Non-KSO Divisions refer to Divisions I, II, V and VI, while KSO Divisions refer to Divisions III, IV and VII. |
(2) | For 2003, Non-KSO Divisions refer to Divisions I, II, III, V and VI, while KSO Divisions refer to Divisions IV and VII. |
(3) | For 2004 and 2005, Non-KSO Divisions refer to Divisions I, II, III, IV, V and VI, while KSO Divisions refer to Division VII. |
(4) | Lines in service are comprised of subscriber lines and public telephone lines and include the lines in service operated by TELKOM pursuant to the revenue-sharing arrangements. Such lines in service under revenue-sharing arrangements amounted to 8,208, 63,005 and 130,947 as of December 31, 2003, 2004 and 2005, respectively. |
(5) | Fixed wireless usage was measured in subscriber pulse before 2004, and in minutes beginning 2004 due to the installation of new equipment. Therefore, fixed wireless usage beginning 2004 and prior to 2004 are not comparable. |
(6) | The number of divisions classified as KSO Divisions varies year to year due to KSO acquisitions in certain years. See footnotes (1) to (3) above. |
(7) | The capacity of BTS and MSC are calculated by assuming traffic allocation per subscriber to be 60 mE (mili Erlang). However, the average traffic used per subscriber in 2005 was only 18 to 30 mE. Therefore, the capacity of BTS and MSC can accommodate more than 6 million subscribers, respectively. |
(8) | Consists of minutes usage generated from local and domestic long-distance calls, excluding calls made from pay phones and mobile cellular phones. |
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Capacity | Percentage | |||||||
(number of Transmission | of total | |||||||
medium circuits) | capacity | |||||||
Optical fiber cable | 13,827 | 71.17 | ||||||
Microwave | 3,682 | 18.95 | ||||||
Submarine cable | 1,562 | 8.04 | ||||||
Satellite | 357 | 1.84 | ||||||
Total | 19,428 | 100.00 | ||||||
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• | 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). |
• | fiber optic backbone infrastructure in Kalimantan (Borneo) from Banjarmasin to Samarinda; | |
• | fiber optic backbone infrastructure in Sulawesi from Makasar to Palu; | |
• | fiber optic regional junction in greater Jakarta, Surabaya (East Java) and Bandung — Cirebon (West Java); | |
• | IP DSLAM project offering broadband access to all users in Indonesia; | |
• | submarine cable system between Jakarta and Batam which facilitates the connection between domestic link and international link; | |
• | transmission backbone infrastructure for Java island; | |
• | IP-based network; and | |
• | installation of Softswitch Class 4 in Jakarta, Bandung, Semarang and Surabaya to replace the outmoded TDM switch. |
• | 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. |
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• | 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 the use of TELKOMFlexi and value added services; | |
• | 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; |
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• | 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. |
• | 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 pre-defined 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. |
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• | 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. |
• | share investment risks with its suppliers; | |
• | reduce its asset base and outsource non-core businesses; and | |
• | mitigate financing, commercial, operational, technical and capacity risks. |
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Increasing TELKOM and Telkomsel Synergy |
• | 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 a joint promotion campaign); | |
• | joint promotion and marketing activities on a case-by-case basis whenever this generates additional benefits to the group; | |
• | consolidated procurement programs and processes to obtain competitive prices for common purchases and implement an e-auction process as a standard bid price 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. |
Pay TV Services |
TELKOM |
• | Walk-in customer service points. TELKOM’s walk-in customer service points (“Plasa Telkom”) provide convenient and comprehensive access to TELKOM’s customer services including product and service information requests and complaints, activation of services, customer billing, payments, account suspensions, service features and marketing promotions. As of December 31, 2005, TELKOM had more than 800 customer service points in total, including 53 customer service points in Jakarta and 48 in Surabaya, and including 163 customer service points operated by its KSO Unit. In 2006, TELKOM plans to expand its services at customer service points to include electronic payment services via Electronic Data Capture (“EDC”) using on-site terminals. | |
• | 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 |
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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 at a service point for customers in Jakarta and 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 promotes 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 its corporate customers that contribute between Rp.50 million to Rp.500 million to TELKOM’s monthly revenues, 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 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, 2005, TELKOM had 689 national and regional-level account managers that cover Divisions I to VI and KSO VII, a 9% increase from 634 account managers as of December 31, 2004. It plans to further increase the number of such teams. | |
• | Service level guarantee program.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, 2005, Telkomsel had 64 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. |
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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, telexes 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 also provide products and services of other operators. | |
• | 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 for all products they receive at a discount, 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 64 GraPARI centers (as of December 31, 2005), | |
(ii) | a network of authorized dealers (operating over 12,000 retail outlets throughout Indonesia as of December 31, 2005) selling primarily prepaid SIM cards and vouchers, and | |
(iii) | other outlets such as banks and photo shops. |
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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 | Out-going isolation (i.e., restricted to receiving incoming calls only) | |||
II | 11-40 days | 10% of overdue bill subject to minimum charge of Rp.10,000 | Total isolation (i.e., no outgoing or incoming calls) | |||
III | 41-60 days | 15% of overdue bill subject to minimum charge of Rp.15,000 | Service disconnected | |||
IV | More than 60 days | 15% of overdue bill subject to minimum charge of Rp.15,000 | Service disconnected and associated number subject to termination |
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Stage | Overdue Payment | Charge | Penalty | |||
I | 1-10 days | 5% of the total outstanding receivables | Total isolation | |||
II | 11-40 days | 10% of overdue bill | Total isolation | |||
III | 41-60 days | 15% of overdue bill | Service disconnected | |||
IV | More than 60 days | 15% of overdue bill | Service disconnected and associated number subject to termination |
Stage | Overdue Payment | Charge | Penalty | |||
I | 1-20 days | 5% of the total outstanding receivables | Total isolation | |||
II | 21-50 days | 10% of overdue bill | Service disconnected | |||
III | More than 50 days | 15% of overdue bill | Service disconnected and associated number subject to termination |
Management of Customer Receivables |
Telkomsel |
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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 |
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Interconnection |
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; |
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• | 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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Implementing Regulations |
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Satellite regulation |
Fixed Wireless Access regulation |
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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, 2005)(1) | 52% | 31% | 13% | |||
Subscribers (as of December 31, 2005)(1) | 24.3 million | 14.5 million | 7.0 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. |
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• | Tariffs for the provision of telecommunications services; and | |
• | Tariffs for provision of telecommunications networks. |
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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 |
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 |
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 |
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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(1) | Rp.1,000/call plus incoming charge per minute | ||
Local Cellular Conversation | PSTN local tariff | ||
DLD Cellular Conversation | PSTN DLD tariff |
(1) | Beginning in mid-2005, Telkomsel provides free roaming services to its subscribers. |
Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Mobile cellular to mobile cellular: | ||||||||
Local | 650 – 938 | 20 sec | ||||||
Domestic Long-distance | ||||||||
30-200 km | 1,110 – 2,628 | 15 sec | ||||||
Over 200 km | 1,220 – 3,083 | 15 sec | ||||||
Mobile cellular to fixed line: | ||||||||
Local | 450 – 531 | 20 sec | ||||||
Domestic Long-distance | ||||||||
30-200 km | 650 – 1,696 | 15 sec | ||||||
200-500 km | 785 – 2,221 | 15 sec | ||||||
Over 500 km | 895 – 2,676 | 15 sec | ||||||
International Long-distance: | ||||||||
Group I | 3,675 – 5,880 | 15 sec | ||||||
Group II | 4,237 – 6,780 | 15 sec | ||||||
Group III | 4,687 – 7,500 | 15 sec | ||||||
Group IV | 5,362 – 8,580 | 15 sec | ||||||
Group V | 6,225 – 9,960 | 15 sec |
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Rounding Time | ||||||||
Price Per Minute | Block Duration | |||||||
(Rp.) | ||||||||
Group VI | 7,050 – 11,280 | 15 sec | ||||||
Group VII | 8,025 – 12,840 | 15 sec |
Rounding Time | |||||||||||||||||
Price Per Minute | Block Duration | ||||||||||||||||
(Rp.) | |||||||||||||||||
SimPATI | KARTU As | SimPATI | KARTU As | ||||||||||||||
Calls within Telkomsel: | |||||||||||||||||
Local | 300 – 1,500 | 1,000 | 30 sec | 30 sec | |||||||||||||
Domestic Long-distance | |||||||||||||||||
Zone 1 | 300 – 4,000 | 1,000 | 30 sec | 30 sec | |||||||||||||
Zone 2 | 300 – 4,500 | 1,000 | 30 sec | 30 sec | |||||||||||||
Calls to other cellular: | |||||||||||||||||
Local | 1,300 – 1,600 | 1,500 | 30 sec | 30 sec | |||||||||||||
Domestic Long-distance | |||||||||||||||||
Zone 1 | 3,500 – 4,000 | 3,850 | 30 sec | 30 sec | |||||||||||||
Zone 2 | 4,000 – 4,500 | 3,850 | 30 sec | 30 sec | |||||||||||||
Calls to fixed line/fixed wireless: | |||||||||||||||||
Local | 750 – 950 | 700 | 30 sec | 30 sec | |||||||||||||
Domestic Long-distance | |||||||||||||||||
30-200 km | 2,000 – 2,300 | 2,000 | 30 sec | 30 sec | |||||||||||||
200-500 km | 3,200 – 3,720 | 3,200 | 30 sec | 30 sec | |||||||||||||
Over 500 km | 3,600 – 4,150 | 3,200 | 30 sec | 30 sec | |||||||||||||
International Long-distance: | |||||||||||||||||
Group I-III | 7,500 – 8,000 | 8,000 | 15 sec | 15 sec | |||||||||||||
Group IV-VII | 11,000 – 12,000 | 12,000 | 15 sec | 15 sec |
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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) | 190,000 – 172,268,000(4) | ||
Inter-local (over 25 km) | 478,800 – 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. |
(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. |
Fees for Usage | ||||||||||||||
in Excess of | ||||||||||||||
Fees for Usage in | Monthly | Monthly | ||||||||||||
SpeedyLink ADSL(1) | Activation Fee | Monthly Fee | Usage Allowance(1) | 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 | — |
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Fees for Usage | ||||||||||||||||
in Excess of | ||||||||||||||||
Fees for Usage in Speedy | Monthly | Monthly | ||||||||||||||
High Speed ADSL Internet Access | Activation Fee | Monthly Fee | Usage Allowance | 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. |
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Description | Tariff | |||
Access Charge | Rp.850/successful call | |||
Usage Charge | Rp.550/paid minute |
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Legal | ||||||||||
Ownership (%) | ||||||||||
As of | ||||||||||
December 31, | ||||||||||
Company | 2005 | Notes | Business Operations | |||||||
Consolidated subsidiaries | ||||||||||
Fixed Phone: | ||||||||||
PT AriaWest International (“AriaWest”) | 100 | (1) | Fixed-phone (KSO-III West Java & Banten) | |||||||
PT Dayamitra Telekomunikasi (“Dayamitra”) | 100 | (2) | Fixed-phone (KSO-VI Kalimantan) | |||||||
PT Pramindo Ikat Nusantara (“Pramindo”) | 100 | (3) | Fixed-phone (KSO-I Sumatera) | |||||||
Cellular: | ||||||||||
PT Telekomunikasi Selular (“Telkomsel”) | 65 | (4) | GSM cellular phone services | |||||||
Application, Content, Datacom: | ||||||||||
PT Multimedia Nusantara (“Metra”) | 100 | (5) | Multimedia, Pay TV | |||||||
PT Infomedia Nusantara (“Infomedia”) | 51 | (6) | Telephone directory and other information services (electronic based business, call center and data segment) | |||||||
PT Indonusa Telemedia (“Indonusa”) | 96 | (7) | Interactive multimedia, Pay TV | |||||||
PT Napsindo Primatel Internasional (“Napsindo”) | 60 | (8) | Network Access Point | |||||||
Property & Construction: | ||||||||||
PT Graha Sarana Duta (“GSD”) | 100 | (9) | Real estate, construction and services | |||||||
Where TELKOM owns between 20% to 50%: | ||||||||||
PT Patra Telekomunikasi Indonesia (“Patrakom”) | 40.00 | (10) | VSAT services | |||||||
PT Citra Sari Makmur (“CSM”) | 25.00 | (11) | VSAT and other telecommunications services | |||||||
PT Pasifik Satelit Nusantara (“PSN”) | 35.50 | (12) | Satellite transponder & communications | |||||||
Where TELKOM owns less than 20%: | ||||||||||
PT Mandara Selular Indonesia (“MSI”) | 1.33 | (13) | NMT-450 cellular and CDMA services | |||||||
PT Batam Bintan Telekomunikasi (“BBT”) | 5.00 | (14) | Fixed-phone (in Batam & Bintan islands) | |||||||
PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) | 3.18 | (15) | Telco network & equipment maintenance | |||||||
Bridge Mobile Pte. Ltd. | 12.50 | (16) | Mobile services (in the Asia Pacific) |
(1) | TELKOM fully controlled AriaWest from July 31, 2003, after acquiring 100% of AriaWest from PT.Aria Infotek (52.50%), MediaOne International I B.V. (35%) and The Asian Infrastructure Fund (12.50%). Pursuant to the Sale and Purchase Agreement dated September 12, 2005, one share in AriaWest was transferred to Mr. John Welly in order to comply with the legal requirement that Indonesian limited liability companies should have more than one shareholder. | |
(2) | TELKOM controlled 100% of the shares of Dayamitra from December 14, 2004, following the acquisition of 9.68% shares of Dayamitra from TM Communications (HK) Ltd., which increased TELKOM’s ownership in Dayamitra from 90.32% to 100%. One TELKOM’s share in Dayamitra was transferred to Mr. Robby Rubama Sadeli in order to comply with the legal requirement that Indonesian limited liability companies be owned by more than one shareholder. | |
(3) | TELKOM and the shareholders of Pramindo signed a Conditional Sale and Purchase Agreement for the sale of the Pramindo shares on April 19, 2002, pursuant to which TELKOM received 30% of the shares of Pramindo in August 2002 and additional 15% in September 2003 while the remaining 55% was to be transferred to TELKOM on December 15, 2004. Although TELKOM only had 30% of the shares of Pramindo, TELKOM acquired control of Pramindo on August 15, 2002 and accordingly, TELKOM consolidated 100% of Pramindo from August 15, 2002. TELKOM signed a short-term loan agreement with ABN AMRO Bank N.V. Jakarta in the amount of approximately US$130 million on January 29, 2004 to finance the accelerated purchase of the remaining 55%. 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. Following this transaction, TELKOM owned 100% of Pramindo. One of TELKOM’s shares in Pramindo was transferred to Mr. Adek Julianwar in order to comply with the legal requirement that Indonesian limited liability companies be owned by more than one shareholder. |
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(4) | Telkomsel was established in 1995 by TELKOM (51%) and PT Indosat Tbk (49%). Following various transactions and changes in ownership, Telkomsel is currently owned by TELKOM (65%) and Singapore Telecom Mobile Pte. Ltd. (35%). | |
(5) | TELKOM increased its ownership in Metra on April 8, 2003 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. Pursuant to a sale and purchase agreement dated September 12, 2005, one share in Metra was transferred by TELKOM to Mr. John Welly in order to comply with the legal requirement that Indonesian limited liability companies be owned by more than one shareholder. | |
(6) | Infomedia was established in 1984 by TELKOM (51%) and PT Elnusa (49%), a subsidiary of PERTAMINA — an Indonesian state-owned oil company. | |
(7) | On August 8, 2003, TELKOM and PT Centralindo Pancasakti Cellular (“CPSC”) signed a share-swap agreement pursuant to which TELKOM received an additional 31% of the shares of Indonusa from CPSC. Following this transaction, TELKOM’s ownership in Indonusa increased from 57% to 88%. 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% to 90%. As of December 31, 2005, CPSC did not hold any shares in Indonusa. CPSC is not a major customer of TELKOM. In November 2005, TELKOM increased its ownership in Indonusa from 90% to 96% by acquiring 5.29% of the shares in Indonusa, owned by PT Megacell Media. | |
(8) | TELKOM increased its ownership in Napsindo from 32% to 60% by acquiring 28% of the shares of Napsindo from PT Info Asia Sukses Mandiri (“InfoAsia”) on January 28, 2003. | |
(9) | TELKOM acquired 100% of GSD in April 2001 from Koperasi Mitra Duta and Dana Pensiun Bank Duta. TELKOM transferred one of such shares to Mr. Martono in order to comply with the legal requirement that Indonesian limited liability companies should be owned by more than one shareholder. |
(10) | On August 26, 2005 TELKOM purchased a 10% stake in PT Patra Telekomunikasi Indonesia (“Patrakom”) from Indosat. As a result, TELKOM’s ownership in Patrakom increased from 30% to 40%. |
(11) | CSM was established in 1986 by Mr. Subagio Wirjoatmodjo and Bell Atlantic Indonesia Inc. Currently, CSM is owned by PT Tigatra Media (38.29%), Media Trio (L) Inc. Malaysia (36.71%), and TELKOM (25%). |
(12) | 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 respect of 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 consummated a debt-to-equity conversion, pursuant to which PSN issued 18,180,660 new shares to the creditors. The conversion has the effect of diluting the shareholding percentage of the existing shareholders of PSN, including TELKOM. In 2005, TELKOM’s ownership interest in PSN was diluted to 35.5% as a result of the debt-to-equity conversion. |
(13) | In July 2003 and January 2004, MSI carried out a series of debt to equity conversions, resulting in a dilution of TELKOM’s ownership interest from 25% to 6.4%. In December 2004 and May 2005, MSI issued new shares to MSI’s other shareholders, resulting in a further dilution of TELKOM’s ownership interest to 1.33%. On January 13, 2006, TELKOM sold its entire ownership interest in MSI to a third party, namely, Twinwood Venture Limited. |
(14) | BBT was established in 1996 by PT Batamindo Investment Co (95%) and TELKOM (5%). BBT provides fixed line services at Batamindo Industrial Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island. There are special economic and tourist development zones on those islands. |
(15) | Bangtelindo was established in 1993 by TELKOM (15%), PT Indosat (15%), PT Inti (15%) and other shareholders (55%). Bangtelindo is currently owned by Dana Pensiun TELKOM (82%), TELKOM (3.18%) and other shareholders (14.82%). |
(16) | Bridge Mobile Pte. Ltd. (Singapore) was established in 2004 by Telkomsel (14.286%) and six other international mobile operators in the Asia-Pacific region. On April 14, 2005, Telkomsel’s ownership interest was diluted to 12.5% following the issuance of new shares by Bridge Mobile Pte. Ltd. to a new shareholder, namely, Hong Kong CSL Limited. |
Unconsolidated Associated Companies |
PT Patra Telekomunikasi Indonesia (“Patrakom”) |
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PT Mandara Selular Indonesia (“MSI”), (previously referred to as PT Mobile Selular Indonesia (“Mobisel”) |
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• | 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 | |
• | increased depreciation expense and operations and maintenance expenses associated with Telkomsel’s expansion of its network capacity. |
• | the general economic situation in Indonesia, particularly the depreciation 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; 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. |
• | the increase in fixed lines, particularly in fixed wireless lines; | |
• | 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; | |
• | increased demand for data and Internet services, particularly in SMS, broadband Internet, and data communication network services using frame relay, SMS and IP VPN; | |
• | increased 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; | |
• | increased depreciation expense, primarily due to Telkomsel’s expansion of its network capacity, increase in TELKOM’s fixed wireless assets and change in TELKOM’s estimate of remaining useful lives for certain cable network facilities (WLL and Approach Link equipment) and certain Jakarta and West Java transmission and installation equipment (BSS equipment); and | |
• | write-down of assets and loss on procurement commitments due to the Government’s decision to allocate the 1900 MHz frequency spectrum for exclusive use in 3G services commencing at the end of 2007 which resulted in TELKOM no longer being able to use its BSS equipment operating in the 1900 MHz in Jakarta and West Java areas commencing at the end of 2007. |
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• | 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; | |
• | in 2005, a depreciation from Rp.9,290 per US Dollar at December 31, 2004 to Rp.9,830 per US Dollar at December 31, 2005; |
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Write-down of Assets, Depreciation Expense, Loss on Procurement Commitments, and Operations Maintenance and Telecommunication Services Expenses |
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Consolidation of TELKOM’s Financial Statements |
Foreign Exchange Translations |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||||
Telephone | |||||||||||||||||||||||||||||
Fixed lines | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 10,781.3 | 25.8 | 1,096.8 | ||||||||||||||||||||||
Cellular | 8,458.8 | 31.2 | 10,421.3 | 30.7 | 14,570.9 | 34.9 | 1,482.3 | ||||||||||||||||||||||
Revenue under Joint Operation Schemes (JOS) | 1,486.3 | 5.5 | 656.6 | 1.9 | 588.7 | 1.4 | 59.9 | ||||||||||||||||||||||
Interconnection | 4,162.1 | 15.3 | 6,188.0 | 18.2 | 7,742.1 | 18.5 | 787.6 | ||||||||||||||||||||||
Data and Internet | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 6,934.3 | 16.6 | 705.4 | ||||||||||||||||||||||
Network | 517.9 | 1.9 | 654.3 | 1.9 | 586.6 | 1.4 | 59.7 | ||||||||||||||||||||||
Revenue-sharing arrangements | 258.5 | 1.0 | 280.6 | 0.8 | 302.3 | 0.7 | 30.8 | ||||||||||||||||||||||
Other telecommunications services | 226.9 | 0.8 | 293.2 | 0.9 | 301.0 | 0.7 | 30.5 | ||||||||||||||||||||||
Total Operating Revenues | 27,116.0 | 100.0 | 33,947.8 | 100.0 | 41,807.2 | 100.0 | 4,253.0 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Fixed Line Telephone Revenues | |||||||||||||||||||||||||||||
Local and domestic long-distance usage | 6,561.8 | 24.2 | 7,439.3 | 21.9 | 7,223.1 | 17.3 | 734.8 | ||||||||||||||||||||||
Monthly subscription charges | 1,948.8 | 7.2 | 2,934.9 | 8.6 | 3,289.8 | 7.9 | 334.7 | ||||||||||||||||||||||
Installation charges | 223.1 | 0.8 | 201.3 | 0.6 | 197.3 | 0.5 | 20.1 | ||||||||||||||||||||||
Phone cards | 34.4 | 0.1 | 15.6 | 0.1 | 10.9 | 0.0 | 1.1 | ||||||||||||||||||||||
Others | 128.8 | 0.5 | 53.9 | 0.2 | 60.2 | 0.1 | 6.1 | ||||||||||||||||||||||
Total | 8,896.9 | 32.8 | 10,645.0 | 31.4 | 10,781.3 | 25.8 | 1,096.8 | ||||||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | |||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||
Cellular Telephone Revenues | ||||||||||||||||||||||||||||
Air time charges | 7,677.9 | 28.3 | 9,825.7 | 28.9 | 13,666.3 | 32.7 | 1,390.3 | |||||||||||||||||||||
Monthly subscription charges | 580.5 | 2.2 | 448.5 | 1.3 | 383.5 | 0.9 | 39.0 | |||||||||||||||||||||
Connection fee charges | 194.1 | 0.7 | 55.8 | 0.2 | 64.1 | 0.2 | 6.5 | |||||||||||||||||||||
Features | 6.3 | 0.0 | 91.3 | 0.3 | 457.0 | 1.1 | 46.5 | |||||||||||||||||||||
Total | 8,458.8 | 31.2 | 10,421.3 | 30.7 | 14,570.9 | 34.9 | 1,482.3 | |||||||||||||||||||||
• | 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, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
KSO Revenues | |||||||||||||||||||||||||||||
Minimum TELKOM Revenues | 899.9 | 3.3 | 296.0 | 0.9 | 268.6 | 0.6 | 27.3 | ||||||||||||||||||||||
Share in Distributable KSO Revenues | 583.0 | 2.2 | 349.5 | 1.0 | 318.6 | 0.8 | 32.4 | ||||||||||||||||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 3.4 | 0.0 | 11.1 | 0.0 | 1.5 | 0.0 | 0.2 | ||||||||||||||||||||||
Total | 1,486.3 | 5.5 | 656.6 | 1.9 | 588.7 | 1.4 | 59.9 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Interconnection Revenues | |||||||||||||||||||||||||||||
Cellular | 3,908.3 | 14.4 | 5,351.6 | 15.7 | 6,685.1 | 16.0 | 680.1 | ||||||||||||||||||||||
International | 184.1 | 0.7 | 641.2 | 1.9 | 854.8 | 2.0 | 87.0 | ||||||||||||||||||||||
Other | 69.7 | 0.2 | 195.2 | 0.6 | 202.2 | 0.5 | 20.5 | ||||||||||||||||||||||
Total | 4,162.1 | 15.3 | 6,188.0 | 18.2 | 7,742.1 | 18.5 | 787.6 | ||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Data and Internet Revenue | |||||||||||||||||||||||||||||
SMS | 2,205.1 | 8.2 | 3,562.7 | 10.5 | 5,309.2 | 12.7 | 540.1 | ||||||||||||||||||||||
Internet | 325.9 | 1.2 | 554.9 | 1.6 | 711.4 | 1.7 | 72.4 | ||||||||||||||||||||||
Data communication | 245.6 | 0.9 | 360.7 | 1.1 | 610.4 | 1.5 | 62.1 | ||||||||||||||||||||||
VoIP | 328.3 | 1.2 | 318.9 | 1.0 | 292.7 | 0.7 | 29.8 | ||||||||||||||||||||||
E-business | 3.7 | 0.0 | 11.6 | 0.0 | 10.6 | 0.0 | 1.0 | ||||||||||||||||||||||
Total | 3,108.6 | 11.5 | 4,808.8 | 14.2 | 6,934.3 | 16.6 | 705.4 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Network Revenue | |||||||||||||||||||||||||||||
Satellite transponder lease | 270.9 | 1.0 | 210.9 | 0.6 | 239.5 | 0.6 | 24.4 | ||||||||||||||||||||||
Leased lines | 247.0 | 0.9 | 443.4 | 1.3 | 347.1 | 0.8 | 35.3 | ||||||||||||||||||||||
Total | 517.9 | 1.9 | 654.3 | 1.9 | 586.6 | 1.4 | 59.7 | ||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Revenues Under Revenue-Sharing Arrangements | |||||||||||||||||||||||||||||
Net share in revenue earned under Revenue-Sharing Arrangements | 200.1 | 0.8 | 198.6 | 0.6 | 165.6 | 0.4 | 16.9 | ||||||||||||||||||||||
Amortization of unearned income under Revenue-Sharing Arrangements | 58.4 | 0.2 | 82.0 | 0.2 | 136.7 | 0.3 | 13.9 | ||||||||||||||||||||||
Total | 258.5 | 1.0 | 280.6 | 0.8 | 302.3 | 0.7 | 30.8 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | |||||||||||||||||||||||||||||
2003 | (As restated*) | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||||
Depreciation | 4,779.5 | 17.6 | 6,438.6 | 19.0 | 7,570.7 | 18.1 | 770.2 | ||||||||||||||||||||||
Operations, maintenance and telecommunications services | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 5,916.3 | 14.1 | 601.9 | ||||||||||||||||||||||
Personnel | 4,440.1 | 16.4 | 4,910.0 | 14.5 | 6,563.0 | 15.7 | 667.6 | ||||||||||||||||||||||
General and administrative | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 2,764.0 | 6.6 | 281.2 | ||||||||||||||||||||||
Marketing | 502.9 | 1.8 | 881.9 | 2.6 | 1,126.2 | 2.7 | 114.6 | ||||||||||||||||||||||
Write-down of assets | — | — | — | — | 616.8 | 1.5 | 62.7 | ||||||||||||||||||||||
Loss on procurement commitments | — | — | — | — | 79.4 | 0.2 | 8.1 | ||||||||||||||||||||||
Total Operating Expenses | 15,140.0 | 55.8 | 19,359.9 | 57.1 | 24,636.4 | 58.9 | 2,506.3 | ||||||||||||||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R. See “— Changes in Methods of Accounting under Indonesian GAAP” and Note 4a to TELKOM’s consolidated financial statements. |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operations, Maintenance and Telecommunications Services Expenses | |||||||||||||||||||||||||||||
Operations and maintenance | 1,744.8 | 6.4 | 2,398.2 | 7.1 | 3,075.1 | 7.3 | 312.8 | ||||||||||||||||||||||
Concession fees | 610.7 | 2.3 | 807.3 | 2.4 | 1,257.4 | 3.0 | 128.0 | ||||||||||||||||||||||
Cost of phone, SIM and RUIM cards | 181.3 | 0.7 | 366.7 | 1.1 | 582.3 | 1.4 | 59.2 | ||||||||||||||||||||||
Electricity, gas and water | 300.4 | 1.1 | 385.7 | 1.1 | 372.5 | 0.9 | 37.9 | ||||||||||||||||||||||
Vehicles and supporting facilities | 115.7 | 0.4 | 181.7 | 0.5 | 217.2 | 0.5 | 22.1 | ||||||||||||||||||||||
Insurance | 157.1 | 0.6 | 151.3 | 0.4 | 136.4 | 0.3 | 13.9 | ||||||||||||||||||||||
Leased lines | 127.0 | 0.5 | 132.8 | 0.4 | 124.2 | 0.3 | 12.6 | ||||||||||||||||||||||
Traveling | 29.8 | 0.1 | 42.2 | 0.1 | 33.5 | 0.1 | 3.4 | ||||||||||||||||||||||
Others | 71.9 | 0.2 | 63.7 | 0.2 | 117.7 | 0.3 | 12.0 | ||||||||||||||||||||||
Total | 3,338.7 | 12.3 | 4,529.6 | 13.3 | 5,916.3 | 14.1 | 601.9 | ||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | |||||||||||||||||||||||||||||
2003 | (As restated*) | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Personnel Expenses | |||||||||||||||||||||||||||||
Salaries and related benefits | 1,574.2 | 5.8 | 1,796.9 | 5.3 | 2,165.9 | 5.2 | 220.3 | ||||||||||||||||||||||
Vacation pay, incentives and other benefits | 816.1 | 3.0 | 1,156.1 | 3.4 | 1,615.6 | 3.8 | 164.4 | ||||||||||||||||||||||
Early retirements | 355.7 | 1.3 | 243.5 | 0.7 | 486.4 | 1.2 | 49.5 | ||||||||||||||||||||||
Net periodic post-retirement health care benefit cost | 641.4 | 2.4 | 416.3 | 1.2 | 488.6 | 1.2 | 49.7 | ||||||||||||||||||||||
Net periodic pension cost | 191.0 | 0.7 | 572.4 | 1.7 | 532.3 | 1.3 | 54.1 | ||||||||||||||||||||||
Employee income tax | 468.8 | 1.7 | 523.8 | 1.5 | 856.4 | 2.0 | 87.1 | ||||||||||||||||||||||
Long service awards | 219.2 | 0.8 | 36.9 | 0.1 | 201.9 | 0.5 | 20.5 | ||||||||||||||||||||||
Housing | 116.9 | 0.4 | 103.4 | 0.3 | 113.7 | 0.3 | 11.6 | ||||||||||||||||||||||
Medical | 9.7 | 0.1 | 12.2 | 0.1 | 18.0 | 0.0 | 1.8 | ||||||||||||||||||||||
Other employee benefits | 4.4 | 0.0 | 11.5 | 0.1 | 6.0 | 0.0 | 0.6 | ||||||||||||||||||||||
Others | 42.7 | 0.2 | 37.0 | 0.1 | 78.2 | 0.2 | 8.0 | ||||||||||||||||||||||
Total | 4,440.1 | 16.4 | 4,910.0 | 14.5 | 6,563.0 | 15.7 | 667.6 | ||||||||||||||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R. See “— Change in Method of Accounting under Indonesian GAAP” and Note 4a to TELKOM’s consolidated financial statements. |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
General and Administrative Expenses | |||||||||||||||||||||||||||||
Professional fees | 115.6 | 0.4 | 137.3 | 0.4 | 131.0 | 0.3 | 13.3 | ||||||||||||||||||||||
Collection expenses | 273.8 | 1.0 | 359.0 | 1.1 | 379.1 | 0.9 | 38.6 | ||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 730.7 | 2.7 | 872.3 | 2.6 | 918.2 | 2.2 | 93.4 | ||||||||||||||||||||||
Training, education and recruitment | 126.9 | 0.5 | 228.5 | 0.7 | 177.9 | 0.4 | 18.1 | ||||||||||||||||||||||
Travel | 144.7 | 0.6 | 192.6 | 0.6 | 171.7 | 0.4 | 17.5 | ||||||||||||||||||||||
Security and screening | 110.3 | 0.4 | 143.9 | 0.4 | 164.4 | 0.4 | 16.7 | ||||||||||||||||||||||
General and social contribution | 113.8 | 0.4 | 111.8 | 0.3 | 204.3 | 0.5 | 20.8 | ||||||||||||||||||||||
Printing and stationery | 50.5 | 0.2 | 81.0 | 0.2 | 50.2 | 0.1 | 5.1 | ||||||||||||||||||||||
Meetings | 42.8 | 0.2 | 58.3 | 0.2 | 40.3 | 0.1 | 4.1 | ||||||||||||||||||||||
Provision for doubtful accounts and inventory obsolescence | 326.4 | 1.2 | 357.7 | 1.1 | 489.0 | 1.2 | 49.7 | ||||||||||||||||||||||
Research and development | 9.1 | 0.0 | 13.2 | 0.0 | 8.4 | 0.0 | 0.9 | ||||||||||||||||||||||
Others | 34.2 | 0.1 | 44.2 | 0.1 | 29.5 | 0.1 | 3.0 | ||||||||||||||||||||||
Total | 2,078.8 | 7.7 | 2,599.8 | 7.7 | 2,764.0 | 6.6 | 281.2 | ||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | |||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||
Marketing Expenses | ||||||||||||||||||||||||||||
Advertising | 381.7 | 1.4 | 699.6 | 2.1 | 795.6 | 1.9 | 80.9 | |||||||||||||||||||||
Customer education | 102.2 | 0.3 | 152.4 | 0.4 | 305.3 | 0.7 | 31.1 | |||||||||||||||||||||
Others | 19.0 | 0.1 | 29.9 | 0.1 | 25.3 | 0.1 | 2.6 | |||||||||||||||||||||
Total | 502.9 | 1.8 | 881.9 | 2.6 | 1,126.2 | 2.7 | 114.6 | |||||||||||||||||||||
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• | salaries and related benefits increased by Rp.369.0 billion, or 20.5%, from Rp.1,796.9 billion in 2004 to Rp.2,165.9 billion in 2005; | |
• | vacation pay, incentives and other benefits increased by Rp.459.5 billion, or 39.7%, from Rp.1,156.1 billion in 2004 to Rp.1,615.6 billion in 2005; and | |
• | employee income tax increased by Rp.332.6 billion, or 63.5%, from Rp.523.8 billion in 2004 to Rp.856.4 billion in 2005 which is in line with the increase in salaries and related benefits and vacation pay, incentives and other benefits. |
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• | an increase in operations and maintenance expenses by Rp.676.9 billion to Rp.3,075.1 billion, an increase of 28.2%, due to an increase in Telkomsel’s operations and maintenance expenses arising from the growth in the Telkomsel’s overall capacity from 17.9 million subscribers as of December 31, 2004 to 26.2 million subscribers as of December 31, 2005. The number of Telkomsel’s BTSs grew by 59.5% from 6,205 units in 2004 to 9,895 units in 2005. Telkomsel also increased the capacity of its transmitting and receiving stations and switching and Intelligent Network equipment; | |
• | cost of phone, SIM and RUIM cards increased by Rp.215.6 billion to Rp.582.3 billion in 2005, an increase of 58.8%, due to increases in expenses for TELKOM and Telkomsel prepaid cards. TELKOM’s cost of fixed wireless cards (starterpack/ voucher/replacement) increased by Rp.72.5 billion, or 220.4%, from Rp.32.9 billion in 2004 to Rp.105.4 billion in 2005. Telkomsel’s cost of cards increased by Rp.142.2 billion, or 44.9%, from Rp.316.5 billion in 2004 to |
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Rp.458.7 billion in 2005, due to a substantial increase in subscribers, particularly prepaid subscribers; and | ||
• | total concession fees increased by Rp.450.1 billion to Rp.1,257.4 billion in 2005, an increase of 55.8%, primarily due to a 125.3% increase, or Rp.394.5 billion, in concession fees paid to the Government from Rp.314.7 billion in 2004 to Rp.709.2 billion in 2005, in line with the growth in operating revenues and incurrence of USO contribution by TELKOM and Telkomsel to the Government beginning in 2005. Total USO contribution incurred by TELKOM and Telkomsel for the fiscal year 2005 amounted to Rp.307.7 billion. |
• | amortization of goodwill and other intangible assets increased by Rp.45.9 billion to Rp.918.2 billion, or 5.3%, mainly due to an increase in amortization of intangible assets resulting from acquisitions of KSO IV on January 20, 2004 and the remaining 9.68% interest in Dayamitra on December 14, 2004. The intangible assets resulting from such acquisitions were amortized for the full year in 2005, compared to 2004 when it was only amortized from the date of acquisition; | |
• | collection expenses increased by Rp.20.1 billion to Rp.379.1 billion, an increase of 5.6%, generally in line with the growth in TELKOM’s fixed line subscriber base and Telkomsel’s mobile cellular subscriber base, which resulted in higher collection charges paid to third party collection agents; | |
• | security and screening expenses increased by Rp.20.5 billion, or 14.3%, to Rp.164.4 billion in 2005, primarily due to an increase in the salary of security guards by Rp.21.5 billion; | |
• | provision for doubtful accounts and inventory obsolescence increased by Rp.131.3 billion, or 36.7%, to Rp.489.0 billion in 2005, primarily due to an increase in TELKOM and Telkomsel customer defaults as subscriber numbers increased; and | |
• | general and social contributions expenses increased by Rp.92.5 billion, or 82.7%, to Rp.204.3 billion, which increase was primarily due to an increase in social contribution fund and community development expenses by Rp.60.6 billion to Rp.91.9 billion in 2005, pursuant to TELKOM’s AGMS resolution on June 24, 2005. |
• | training, education and recruitment expenses, which decreased by Rp.50.6 billion to Rp.177.9 billion, or 22.2%, following a decrease in TELKOM’s employee training programs primarily due to a more rigorous selection process for its overseas training; | |
• | travel expenses, which decreased by Rp.20.9 billion, or 10.9%, to Rp.171.7 billion in 2005, primarily due to a decrease in local travel cost by Rp.12.7 billion; and | |
• | printing and stationery expenses, which decreased by Rp.30.8 billion, or 38.0%, to Rp.50.2 billion in 2005, primarily due to a decrease in printing and photocopy expenses by Rp.14.8 billion, as well as a decrease in stationery expenses by Rp.15.6 billion, resulting from the implementation of cost-saving plans. |
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• | Loss on foreign exchange-net decreased by Rp.704.0 billion from a net loss of Rp.1,220.8 billion in 2004 to a net loss of Rp.516.8 billion in 2005, primarily due to lower foreign exchange losses on US dollar borrowings in 2005 compared to 2004, resulting from a decrease in TELKOM’s US dollar borrowings and the relatively modest depreciation of the Rupiah; | |
• | Interest expense decreased by Rp.92.8 billion, or 7.3%, from Rp.1,270.1 billion in 2004 to Rp.1,177.3 billion in 2005, reflecting primarily decreases in short-term bank loans and long-term debts of TELKOM; | |
• | Interest income increased by Rp.26.8 billion, or 8.4%, from Rp.317.9 billion in 2004 to Rp.344.7 billion in 2005, primarily due to a slight increase in the average balance of time deposits. See Note 6 to the consolidated financial statements; and | |
• | Others (net) increased by Rp.78.1 billion, from Rp.331.1 billion in 2004 to Rp.409.2 billion in 2005, primarily resulting from an increase in income from penalty on overdue payments. |
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• | 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; | |
• | 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%; and |
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• | the 439.8% growth in the number of subscribers and lines in service for fixed wireless, from 264,787 lines in service as of December 31, 2003 to 1,429,368 lines in service 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. |
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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, SIM and RUIM 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 (starterpack/ voucher/replacement) of Rp.32.9 billion that contributed Rp.26.5 billion to the increase in cost of phone, SIM and RUIM cards after TELKOM began its TELKOMFlexi prepaid program in September 2003. Telkomsel’s cost of phone and SIM cards of Rp.316.5 billion contributed Rp.143.3 billion to the increase in cost of phone, SIM and RUIM cards due to a substantial increase in subscribers, particularly prepaid subscribers; | |
• | concession fees increased by Rp.196.6 billion to Rp.807.3 billion in 2004, an increase of 32.2%, 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, and a 31.7% increase in concession fees paid to the Government of Rp.75.7 billion from Rp.239.0 billion in 2003 to Rp.314.7 billion in 2004, in line with the growth in operating revenues; and | |
• | 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. |
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• | 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; | |
• | 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. |
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• | Gain (loss) on foreignexchange-net decreased by Rp.1,346.9 billion from a net gain of Rp.126.1 billion in 2003 to a net loss of Rp.1,220.8 billion in 2004, primarily due to depreciation of the Rupiah from Rp.8,440 to US$1.00 in December 2003 to Rp.9,290 to US$1.00 in December 2004, where a loss of Rp.342.1 billion resulted from liabilities of business acquisition of KSO IV due to the acquisition cost being denominated in US dollars; | |
• | Interest income decreased by Rp.48.1 billion, or 13.1%, from Rp.366.0 billion in 2003 to Rp.317.9 billion in 2004, primarily due to the decrease in floating interest rates for both Rupiah and U.S. Dollar-denominated deposits and the decrease in average balance of TELKOM’s time deposits from Rp.5,037.8 billion in 2003 to Rp.4,471.4 billion in 2004. See Note 5 to the consolidated financial statements; and | |
• | Others (net) decreased by Rp.33.2 billion, from Rp.364.3 billion in 2003 to Rp.331.1 billion in 2004. In 2004, the significant other income (net) included income from fines from late-paying subscribers of Rp.280.3 billion. |
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Year Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2003 | (As restated*) | 2005 | 2005 | |||||||||||||
Rp.(billion) | Rp.(billion) | Rp.(billion) | US$(million) | |||||||||||||
Fixed Wireline | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 15,905.1 | 18,860.8 | 19,637.4 | 1,997.7 | ||||||||||||
Inter-segment operating revenues | 71.9 | 4.3 | 305.4 | 31.1 | ||||||||||||
Total revenues | 15,977.0 | 18,865.1 | 19,942.8 | 2,028.8 | ||||||||||||
Segment expense | (10,350.7 | ) | (12,207.7 | ) | (14,378.8 | ) | (1,462.7 | ) | ||||||||
Segment result | 5,626.3 | 6,657.4 | 5,564.0 | 566.1 | ||||||||||||
Depreciation and amortization | (3,090.4 | ) | (3,568.2 | ) | (4,006.2 | ) | (407.6 | ) | ||||||||
Amortization of goodwill and other intangible assets | (709.4 | ) | (851.1 | ) | (896.9 | ) | (91.2 | ) | ||||||||
Other non-cash expenses | (210.6 | ) | (244.4 | ) | (292.4 | ) | (29.7 | ) |
* | The 2004 figures have been restated due to the adoption of PSAK 24R. See — “Changes in Methods of Accounting under Indonesian GAAP” and Note 4a to TELKOM’s consolidated financial statements. |
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Year Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2003 | (As restated*) | 2005 | 2005 | |||||||||||||
Rp.(billion) | Rp.(billion) | Rp.(billion) | US$(million) | |||||||||||||
Fixed Wireless | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 163.4 | 575.4 | 1,449.7 | 147.5 | ||||||||||||
Inter-segment operating revenues | 50.7 | (51.1 | ) | (167.9 | ) | (17.1 | ) | |||||||||
Total revenues | 214.1 | 524.3 | 1,281.8 | 130.4 | ||||||||||||
Segment expense | (246.2 | ) | (789.6 | ) | (2,174.7 | ) | (221.2 | ) | ||||||||
Segment result | (32,.1 | ) | (265.3 | ) | (892.9 | ) | (90.8 | ) | ||||||||
Depreciation and amortization | (35.8 | ) | (230.0 | ) | (537.3 | ) | (54.7 | ) | ||||||||
Write-down of assets and loss on procurement commitments | — | — | (696.1 | ) | (70.8 | ) | ||||||||||
Other non-cash expenses | — | — | (21.6 | ) | (2.2 | ) | ||||||||||
Cellular | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 10,797.6 | 14,201.8 | 20,384.9 | 2,073.7 | ||||||||||||
Inter-segment operating revenues | 337.1 | 534.8 | 691.2 | 70.3 | ||||||||||||
Total revenues | 11,134.7 | 14,736.6 | 21,076.1 | 2,144.0 | ||||||||||||
Segment expense | (4,802.3 | ) | (6,757.2 | ) | (8,775.0 | ) | (892.7 | ) | ||||||||
Segment result | 6,332.4 | 7,979.4 | 12,301.1 | 1,251.3 | ||||||||||||
Depreciation and amortization | (1,680.6 | ) | (2,651.0 | ) | (3,046.6 | ) | (309.9 | ) | ||||||||
Other non-cash expenses | (113.9 | ) | (100.7 | ) | (171.2 | ) | (17.4 | ) | ||||||||
Other | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 249.9 | 309.7 | 335.2 | 34.1 | ||||||||||||
Inter-segment operating revenues | 30.8 | 51.1 | 70.5 | 7.2 | ||||||||||||
Total revenues | 280.7 | 360.8 | 405.7 | 41.3 | ||||||||||||
Segment expense | (275.5 | ) | (320.7 | ) | (328.2 | ) | (33.4 | ) | ||||||||
Segment result | 5.2 | 40.1 | 77.5 | 7.9 | ||||||||||||
Depreciation and amortization | (9.8 | ) | (18.7 | ) | (23.3 | ) | (2.4 | ) | ||||||||
Amortization of goodwill and other intangible assets | (21.3 | ) | (21.3 | ) | (21.3 | ) | (2.2 | ) | ||||||||
Other non-cash expenses | (4.3 | ) | (5.3 | ) | (4.8 | ) | (0.5 | ) |
* | The 2004 figures have been restated due to the adoption of PSAK 24R. See — “Changes in Methods of Accounting under Indonesian GAAP” and Note 4a to TELKOM’s consolidated financial statements. |
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Year Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2003 | (As restated)(1) | 2005 | 2005 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Net income in accordance with | ||||||||||||||||
Indonesian GAAP | 6,087.2 | 6,614.6 | 7,993.6 | 813.2 | ||||||||||||
U.S. GAAP | 5,790.6 | 6,468.6 | 7,840.1 | 797.6 |
Year Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2003 | (As restated)(2) | 2005 | 2005 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Stockholders’ equity in accordance with | ||||||||||||||||
Indonesian GAAP | 17,312.9 | 18,128.0 | 23,292.4 | 2,369.5 | ||||||||||||
U.S. GAAP | 16,284.7 | 19,570.9 | 24,568.5 | 2,499.3 |
(1) | Net income for the year ended December 31, 2004 under Indonesian GAAP has been restated due to the adoption of PSAK 24R (see Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Changes in Methods of Accounting under Indonesian GAAP” and Note 4a to the Company’s consolidated financial statements). |
(2) | Equity as of December 31, 2004 under Indonesian GAAP has been restated due to the adoption of PSAK 24R (see Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Changes in Methods of Accounting under Indonesian GAAP” and Note 4a to the Company’s consolidated financial statements). |
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Termination Benefits |
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i. | Under Indonesian GAAP, the prior service cost attributable to the increases in pension benefits for pensioners were directly charged to expense in those years. Under U.S. GAAP, because the majority of plan participants are still active, such prior service cost is deferred and amortized systematically over the estimated remaining service period for active employees. |
ii. | Under Indonesian GAAP, the Company amortized the cumulative unrecognized actuarial gain or loss over four years. Under U.S. GAAP, any cumulative unrecognized actuarial gain or loss exceeding 10 percent of the greater of projected benefit obligation or fair value of plan assets is recognized in the statement of income on a straight-line basis over the expected average remaining service period. |
iii. | Under Indonesian GAAP, recognition of a minimum liability is not required. Under U.S. GAAP, the Company would be required to recognize an additional minimum liability when the accumulated benefit obligation exceeds the fair value of the plan assets, and an equal amount would be recognized as an intangible asset, provided that the asset recognized does not exceed the amount of unrecognized prior service cost. |
i. | Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized over the vesting period. Under U.S. GAAP, prior service cost (vested andnon-vested benefits) is generally deferred and amortized systematically over the estimated remaining service period for active employees. |
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ii. | Different dates of implementation caused significant differences in cumulative unrecognized actuarial gains and losses. However, the cumulative unrecognized actuarial gains and losses under Indonesian GAAP is now recognized in a manner similar to U.S. GAAP. |
iii. | Under Indonesian GAAP, the transition obligation was recognized on January 1, 2004, the date PSAK 24R was adopted. Under U.S. GAAP, the transition obligation is deferred and amortized systematically over the estimated remaining service period for active employees. |
iv. | The difference between Indonesian GAAP and U.S. GAAP in connection with the recognition of minimum liability remains unchanged. |
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Gain (loss) on Disposal of Property, Plant and Equipment |
Reversal of Difference in Value of Restructuring Transactions Between Entities Under Common Control |
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2004 | ||||||||||||||
2003 | (As restated) | 2005 | ||||||||||||
Rp. million | Rp. million | Rp. million | ||||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP(1) | 6,087,227 | 6,614,568 | 7,993,566 | |||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||
Termination benefits | (670,981 | ) | — | — | ||||||||||
Capitalization of foreign exchange gains and losses, net of related depreciation of (Rp.76,756) million, (Rp.75,870) million and (Rp.77,010) million, respectively | 76,756 | 1,587 | 77,010 | |||||||||||
Interest capitalized on property under construction, net of related depreciation of (Rp.8,787) million, (Rp.13,392) million and (Rp.17,275) million, respectively | 39,077 | 26,802 | 23,825 | |||||||||||
Revenue-sharing arrangements | 23,159 | 155,369 | 69,173 | |||||||||||
Pension | (109,334 | ) | (148,517 | ) | (104,877 | ) | ||||||||
Post-retirement health care | — | (75,964 | ) | (104,466 | ) | |||||||||
Long service awards | — | (122,462 | ) | (90,933 | ) | |||||||||
Equity in net income (loss) of associated companies | (170 | ) | (177 | ) | (192 | ) | ||||||||
Amortization of land rights | (10,212 | ) | (13,907 | ) | (4,881 | ) | ||||||||
Revenue recognition | (53,226 | ) | 54,159 | 5,046 | ||||||||||
Goodwill | 21,270 | 21,270 | 21,270 | |||||||||||
Capital leases | 6,882 | (3,435 | ) | (47,524 | ) | |||||||||
Adjustment for consolidation of Dayamitra | (24,476 | ) | (72,361 | ) | 5,084 | |||||||||
Reversal of difference due to change of equity in associated companies | (38,425 | ) | — | — | ||||||||||
Asset retirement obligations | (848 | ) | (848 | ) | (848 | ) | ||||||||
Deferred income tax: | ||||||||||||||
Deferred income tax on equity method investments | 119,456 | (11,234 | ) | (3,206 | ) | |||||||||
Deferred income tax effect on U.S. GAAP adjustments | 323,089 | 61,742 | 18,288 | |||||||||||
(297,983 | ) | (127,976 | ) | (137,231 | ) | |||||||||
Minority interest | 1,396 | (18,019 | ) | (16,244 | ) | |||||||||
Net adjustments | (296,587 | ) | (145,995 | ) | (153,475 | ) | ||||||||
Net income in accordance with U.S. GAAP | 5,790,640 | 6,468,573 | 7,840,091 | |||||||||||
Net income per share — in full Rupiah amount | 287.23 | 320.86 | 388.89 | |||||||||||
Net income per ADS — in full Rupiah amount (40 Series B shares per ADS) | 11,489.40 | 12,834.47 | 15,555.74 | |||||||||||
(1) | Net income for the year ended December 31, 2004 under Indonesian GAAP has been restated due to the adoption of PSAK 24R (see Note 4a to the consolidated financial statements). |
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2004 | ||||||||||
(As restated) | 2005 | |||||||||
Rp. million | Rp. million | |||||||||
Stockholders’ equity according to the consolidated balance sheets prepared under Indonesian GAAP(2) | 18,128,036 | 23,292,401 | ||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||
Capitalization of foreign exchange differences — net of related depreciation | (548,886 | ) | (471,876 | ) | ||||||
Interest capitalized on property under construction — net of related depreciation | 128,614 | 152,439 | ||||||||
Revenue-sharing arrangements | (292,327 | ) | (223,154 | ) | ||||||
Pension | 1,973,837 | 1,851,509 | ||||||||
Post-retirement health care | 1,142,561 | 1,038,095 | ||||||||
Long service awards | (122,462 | ) | (213,395 | ) | ||||||
Equity in net income (loss) of associated companies | (18,429 | ) | (18,621 | ) | ||||||
Amortization of land rights | (79,118 | ) | (83,999 | ) | ||||||
Revenue recognition | (714,389 | ) | (709,343 | ) | ||||||
Goodwill | 63,809 | 85,079 | ||||||||
Capital leases | 17,688 | (29,836 | ) | |||||||
Adjustment for consolidation of Dayamitra | (61,728 | ) | (56,644 | ) | ||||||
Asset retirement obligations | (1,696 | ) | (2,544 | ) | ||||||
Deferred income tax: | ||||||||||
Deferred income tax on equity method investments | 39,343 | 35,040 | ||||||||
Deferred income tax effect on U.S. GAAP adjustments | (89,704 | ) | (66,182 | ) | ||||||
1,437,113 | 1,286,568 | |||||||||
Minority interest | 5,763 | (10,481 | ) | |||||||
Net adjustments | 1,442,876 | 1,276,087 | ||||||||
Stockholders’ equity in accordance with U.S. GAAP | 19,570,912 | 24,568,488 | ||||||||
(2) | Stockholders’ equity as of December 31, 2004 under Indonesian GAAP has been restated due to the adoption of PSAK 24R (see Note 4a to the consolidated financial statements). |
• | capital expenditures for existing and new network and backbone infrastructure, including a backbone transmission network on Ring JASUKA (Jawa, Sumatra and Kalimantan), Submarine Cable JDM(Jember-Denpasar-Mataram), the expansion of TELKOM’s CDMA wireless access networks, the expansion of Submarine Cable SUB(Surabaya-UjungPandang-Banjarmasin), an additional ground satellite segment in Jakarta, fiber optic transmission networkMedan-Padang, |
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softswitch development, the 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, includingtwo-step loans, itsshort-term loan with Bank Central Asia and Bank Niaga, and itsmedium-term notes of Rp.610 billion, IDR bonds of Rp.1 trillion, loan facility from Bank Central Asia in relation to the construction of Sumatera backbone network, loan from a consortium of banks for the Regional Division V junction project, loans from Citibank N.A. through its Hermes Export facility, High Performance Backbone facility and EKN-Backed facility and a loan from the Export and Import Bank of Korea in connection with the CDMA project and loan facilities of Rp.40,000 million and Rp.2,500 million from Bank Mandiri; | |
• | installment payments of the purchase price for shares of AriaWest which are expected to be fully paid by January 31, 2009; | |
• | payments of contribution to TELKOM’s defined benefit pension plan and post-retirement health care plan; | |
• | 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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Year Ended December 31, | ||||||||||||||||
2003 | 2004 | 2005 | 2005 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Net cash flows: | ||||||||||||||||
from operating activities | 12,852.5 | 16,051.5 | 21,102.7 | 2,146.8 | ||||||||||||
from investing activities | (7,305.9 | ) | (9,598.1 | ) | (12,212.7 | ) | (1,242.4 | ) | ||||||||
from financing activities | (6,177.4 | ) | (6,904.9 | ) | (8,339.4 | ) | (848.4 | ) | ||||||||
Change in cash and cash equivalents | (630.8 | ) | (451.5 | ) | 550.6 | 56.0 | ||||||||||
Effect of foreign exchange changes on cash and cash equivalents | 26.2 | 213.1 | (32.0 | ) | (3.3 | ) | ||||||||||
Cash and cash equivalents, beginning of year | 5,699.1 | 5,094.5 | 4,856.1 | 494.0 | ||||||||||||
Cash and cash equivalents, end of year | 5,094.5 | 4,856.1 | 5,374.7 | 546.7 |
• | an increase of Rp.4,327.7 billion, or 41.2%, in cash receipts from cellular business, primarily due to a growth in the mobile cellular business of Telkomsel; | |
• | an increase of Rp.1,636.9 billion, or 28.4%, in cash receipts from interconnection services, primarily due to an increase in cellular interconnection fees, resulting from an increased mobile cellular subscriber base in Indonesia; and |
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• | an increase of Rp.1,978.8 billion, or 39.8%, in cash receipts from data and Internet primarily due to increases in SMS usage by Telkomsel subscribers and the number of Speedy subscribers. |
• | an increase of Rp.2,684.1 billion, or 21.9%, in cash payments for operating expenses, which is in line with the increase in operating expenses (excluding depreciation and amortization, write-down of assets and loss on procurement commitments). |
• | an increase of Rp.2,760.2 billion, or 124.7%, in cash receipts from data and Internet services, particularly from greater SMS usage by Telkomsel subscribers; | |
• | an increase of Rp.1,882.6 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. |
• | 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 amortization); 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. |
• | an increase of Rp.3,538.1 billion, or 41.3%, in the acquisition of property, plant and equipment, primarily due to an additional installation of transmission stations, earth stations and equipment, cable network and an investment in data processing equipment. |
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• | a decrease of Rp.1,609.9 billion, or 84.9%, in the cash proceeds from sale of temporary investments and the maturity of time deposits; and | |
• | an increase of Rp.1,063.4 billion for payments of advances for the purchase of property, plant and equipment. |
• | two-step loans of Rp.716.3 billion; | |
• | liabilities from business acquisitions of AriaWest and KSO IV of Rp.568.8 billion; | |
• | Rp.2,336.1 billion for payment of bank loans; and | |
• | Rp.475.6 billion for payment of medium-term notes and obligations under capital leases. |
Dividend | Total Cash | Dividend | ||||||||||
Date of AGMS | Year | Dividends | per Share(1) | |||||||||
(Rp. billion) | (Rp.) | |||||||||||
May 9, 2003 | 2002 | 3,338.1 | 331.16 | |||||||||
July 30, 2004 | 2003 | 3,043.6 | 301.95 | |||||||||
June 24, 2005 | 2004 | 3,064.6 | (2) | 152.01 |
(1) | Dividend per share for 2002 and 2003 were prior to the two-for-one stock split as resolved in the AGMS on July 30, 2004. |
(2) | Including interim cash dividends distributed in December 2004 amounting to Rp.143.4 billion. |
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• | an increase of Rp.518.6 billion, or 10.7%, in cash and cash equivalents from Rp.4,856.1 billion in 2004 to Rp.5,374.7 billion in 2005; | |
• | an increase of Rp.149.8 billion, or 23.8%, in prepaid expenses from Rp.628.1 billion in 2004 to Rp.777.9 billion in 2005; | |
• | an increase of Rp.258.8 billion, or 7.8%, in trade accounts receivable from Rp.3,319.1 billion in 2004 to Rp.3,577.9 billion in 2005; | |
• | an increase of Rp.97.4 billion, or 174.6%, in other accounts receivable from Rp.55.8 billion in 2004 to Rp.153.2 billion in 2005; and | |
• | an increase of Rp.114.9 billion, or 257.6%, in other current assets from Rp.44.6 billion in 2004 to Rp.159.5 billion in 2005. |
• | a decrease of Rp.58.3 billion, or 75.5%, in prepaid taxes from Rp.77.2 billion in 2004 to Rp.18.9 billion in 2005. |
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At December 31, | ||||||||||||||||
2003 | 2004 | 2005 | 2005 | |||||||||||||
(Rp. in billion) | (US$ in million) | |||||||||||||||
Indonesian Rupiah(1) | 4,485.1 | 4,550.0 | 4,009.0 | 407.8 | ||||||||||||
U.S. Dollar(2),(3) | 8,562.2 | 9,904.2 | 7,993.9 | 812.8 | ||||||||||||
Japanese Yen(4) | 1,377.7 | 1,512.4 | 1,302.6 | 132.5 | ||||||||||||
EURO(5) | 890.7 | 649.7 | 427.7 | 43.5 | ||||||||||||
Total | 15,315.7 | 16,616.3 | 13,733.2 | 1,396.6 | ||||||||||||
(1) | Amounts at December 31, 2005 include debt issuance costs for medium-term notes of Rp.0.7 billion. In addition for 2003, 2004 and 2005, amounts also include bond issuance costs for TELKOM bonds of Rp.18.7 billion, Rp.13.4 billion and Rp.8.15 billion. |
(2) | Amounts at December 31, 2003, 2004 and 2005 translated into Rupiah at Rp.8,450, Rp.9,300 and Rp.9,835 = US$1, respectively, being the Reuters sell rates for U.S. Dollars at each of those dates. |
(3) | Amounts at December 31, 2003 include imputed interest on liabilities of business acquisitions relating to Pramindo and AriaWest of US$9.5 million (Rp.80.2 billion) and US$14.5 million (Rp.122.4 billion), respectively. Amounts at December 31, 2004 include imputed interest on liabilities of business acquisitions relating to AriaWest, the remaining 9.68% interest in Dayamitra and KSO IV in the amount 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. Amounts at December 31, 2005 included imputed interest on liabilities of business acquisitions relating to Aria West, the remaining 9.68% interest in Dayamitra and KSO IV of US$5.8 million (Rp.57.3 billion), US$0.3 million (Rp.2.5 billion) and US$72.9 million (Rp.717.1 billion), respectively, being imputed interest on installment payments of the foregoing liabilities. |
(4) | Amounts at December 31, 2003, 2004 and 2005 translated into Rupiah at Rp.79.05, Rp.90.6 and Rp.83.89 = Yen 1, respectively, being the prevailing exchange rates for buying Yen at each of those dates. |
(5) | Amounts at December 31, 2003, 2004 and 2005 translated into Rupiah at Rp.10,663.9, Rp.12,666.9 and Rp.11,651.5 = EURO 1, respectively, being the prevailing exchange rate for buying Euros at each of those dates. |
• | Rp.5,329.5 billion (US$542.2 million) (including current maturities) in two-step loans through the Government; |
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• | Rp.991.9 billion (US$100.9 million) (after bond issuance costs) IDR bonds issued by TELKOM; | |
• | Rp.693.7 billion (US$70.6 million) (including current maturities) in acquisition indebtedness relating to TELKOM’s acquisition of 100% equity interest in AriaWest (after discount); | |
• | Rp.3,151.3 billion (US$320.6 million) representing the present value of fixed monthly payments to be paid to MGTI in respect of the acquisition of KSO IV; | |
• | Rp.609.3 billion (US$62.0 million) medium-term notes (net of debt issuance costs) issued by TELKOM; | |
• | Rp.1,156.3 billion (US$117.6 million) in project financing from the Export and Import Bank of Korea in connection with the CDMA Project; | |
• | Rp.301.0 billion (US$30.6 million) loan for the Sumatera backbone network; and | |
• | Rp.827.3 billion (US$84.2 million) (including current maturities) of Telkomsel’s loan from Citibank International plc through its Hermes Export facility (Rp.427.7 billion) andEKN-Backed facility (Rp.399.6 billion). |
Two-Step Loans |
• | 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. |
Direct Borrowings |
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IDR Bond Issuance |
• | 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. |
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Medium-Term Notes |
Acquisition Indebtedness and Option Purchase Price |
Dayamitra |
AriaWest |
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KSO IV |
Sumatera High Performance Backbone Network |
(i) debt service coverage ratio of not less than 1.5 to 1; (ii) debt to equity ratio of not more than: (a) 3 to 1 for the period of April 10, 2002 to January 1, 2003, (b) 2.75 to 1 for the period of January 2, 2003 to January 1, 2004, (c) 2.5 to 1 for the period of January 2, 2004 to January 1, 2005 and (d) 2 to 1 for the period of January 2, 2005 to the full repayment date of the loans (iii) debt to EBITDA ratio of not more than: (a) 3.5 to 1 for the period from April 10, 2002 to January 1, 2004 (b) 3 to 1 for the period from January 2, 2004 to the full repayment date of the loans. TELKOM also covenanted in these facilities that TELKOM would not make any loans or grant any credit to or for the benefit of any person in an amount which in the aggregate exceeds 3% of TELKOM’s stockholders’ equity. In 2005, TELKOM breached this covenant. As of May 12, 2006, TELKOM had obtained a written waiver from Citibank International plc with regard to providing loans to certain subsidiaries, which in the aggregate exceed 3% of TELKOM’s stockholders’ equity. See “— B. Liquidity and Capital Resources — Defaults and Waivers of Defaults under our Debt Facilities. |
Regional Division V Junction Project |
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Telkomsel’s Indebtedness (including facilities) |
Hermes Export Facility |
EKN-Backed Facility |
• | Infrastructure, which consists of the transmission network and backbone (including data backbone and fixed line network backbone infrastructure) and access network (including fixed wireless networks); | |
• | Phone, which is essentially fixed wireline and fixed wireless; | |
• | Mobile Cellular, 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 other content development; and |
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• | 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, | ||||||||||||||||||||
2003(1) | 2004(1) | 2005(1) | 2006(2) | 2007(3) | ||||||||||||||||
Rp. (billion) | ||||||||||||||||||||
TELKOM: | ||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||
Transmission Network and Backbone | 1,595.1 | 560.4 | 277.7 | 1,205.3 | 1,015.0 | |||||||||||||||
Access Network | 1,849.6 | 1,831.2 | 1,577.0 | 2,937.1 | 1,724.5 | |||||||||||||||
Subtotal Infrastructure | 3,444.7 | 2,391.6 | 1,854.7 | 4,142.4 | 2,739.5 | |||||||||||||||
Commercial Services: | ||||||||||||||||||||
Phone | 161.9 | 901.5 | 524.5 | 1,077.7 | 360.0 | |||||||||||||||
Mobile Cellular | — | — | — | — | — | |||||||||||||||
Multimedia | 76.2 | 92.7 | 334.2 | 729.9 | 169.5 | |||||||||||||||
Services-Net | 99.9 | 34.2 | 94.9 | 108.8 | 222.2 | |||||||||||||||
Subtotal Commercial Services | 338.0 | 1,028.4 | 953.6 | 1,916.4 | 751.7 | |||||||||||||||
Supporting Services | 151.1 | 295.6 | 559.5 | 754.6 | 758.5 | |||||||||||||||
Subtotal for TELKOM (unconsolidated) | 3,933.8 | 3,715.6 | 3,367.8 | 6,813.4 | 4,249.7 | |||||||||||||||
TELKOM’s Subsidiaries: | ||||||||||||||||||||
Telkomsel | 5,348.8 | 4,982.7 | 10,085.7 | 11,937.0 | 14,000 | |||||||||||||||
Dayamitra | 109.5 | 50.4 | — | 41.3 | 21.1 | |||||||||||||||
Infomedia Nusantara | 44.6 | 63.0 | 37.9 | 114.5 | 82.7 | |||||||||||||||
Pramindo Ikat Nusantara | 37.4 | 1.7 | 29.4 | 44.5 | 35.2 | |||||||||||||||
Indonusa Telemedia | 0.8 | 1.4 | 8.9 | — | 28.5 | |||||||||||||||
Graha Sarana Duta | 17.0 | 3.7 | 2.4 | 18.0 | 13.0 | |||||||||||||||
PT Pro Infokom Indonesia | 0.6 | 0.6 | — | — | — | |||||||||||||||
PT Metra (Holding) | 6.1 | 0.9 | 19.3 | 42.0 | 32.5 | |||||||||||||||
AriaWest | 0.2 | 0.1 | 1.1 | 87.3 | 175.2 | |||||||||||||||
Napsindo | 53.8 | 0.3 | 0.5 | — | — | |||||||||||||||
Subtotal for subsidiaries | 5,618.8 | 5,104.8 | 10,185.2 | 12,284.6 | 14,388.2 | |||||||||||||||
Total for TELKOM (consolidated) | 9,552.6 | 8,820.4 | 13,553.0 | 19,098.0 | 18,637.9 | |||||||||||||||
(1) | Amounts for 2003, 2004 and 2005 are actual capital expenditures. |
(2) | Amounts for 2006 are planned capital expenditures included in TELKOM’s budget and are subject to upward or downward adjustment. |
(3) | Amounts for 2007 are projected capital expenditures for such year, and actual capital expenditures may be significantly different from projected amounts. |
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• | capital investments in fixed line commercial services (including fixed wireless services), which include additional capacity, service enhancements and upgrades, including its value added services and software and mechanical and electrical systems; | |
• | enhancing TELKOM’s multimedia network (including core network of IP transport, HFC and CATV services), which includes increases in the number of VoIP access points, Internet multiplexing (IMUX) systems for Internet and data access, Internet value added services such as B2Be-commerce, broadband access (xDsl), and improving TELKOM’s HFC and CATV systems; and | |
• | investing in service-net, including the establishment of fixed wireless services,e-commerce, internet connectivity and value added services. |
• | investments in BTS stations to expand network coverage, transmission receiver (TRX) and microcells to improve its quality; | |
• | switching equipment; | |
• | equipment used for prepaid products | |
• | fiber optic transmission for the large cities in Java |
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• | additional radio network capacity | |
• | 3G roll out plan, and | |
• | supporting facilities consisting of buildings, R&D and office facilities. |
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1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | 159,073 | (126,008 | ) | |||||
Effect on post-retirement benefit obligation | 1,143,943 | (908,400 | ) |
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Income Taxes |
Legal Contingencies |
C. | Research and Development and Intellectual Property |
D. | Trend Information |
• | upgrading of the network with soft switching technology; | |
• | increasing relative contribution of Telkomsel to our consolidated revenues; |
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• | 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; | |
• | implementation of cost-based interconnection tariff; | |
• | changes in foreign exchange rates and interest rates; | |
• | increase in the usage of high speed broadband Internet in Indonesia; | |
• | acquisition of Pramindo; | |
• | acquisition of AriaWest; | |
• | acquisition of Dayamitra | |
• | acquisition of KSO IV; | |
• | competition in the market for DLD services; | |
• | expansion of TELKOM’s IDD services; | |
• | fixed wireless development and deployment; and | |
• | implementation of competence-based human resource management. |
E. | Off-Balance Sheet Arrangements |
F. | Tabular Disclosure of Contractual Obligations |
Payments Due by Period | |||||||||||||||||||||
Less than | More than | ||||||||||||||||||||
Contractual Obligations | Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
�� | |||||||||||||||||||||
(Rp. billion) | |||||||||||||||||||||
Short-Term Loans(1)(6) | 173.8 | 173.8 | — | — | — | ||||||||||||||||
Long-Term Debts(2)(6) | 13,307.7 | 2,210.7 | 5,134.2 | 2,899.0 | 3,063.8 | ||||||||||||||||
Capital Lease Obligations(3) | 251.8 | 16.2 | 46.6 | 74.9 | 114.1 | ||||||||||||||||
Interest on Short-term Loans, Long-term Debts and Capital Lease Obligations | 3,437.8 | 924.4 | 1,152.9 | 593.8 | 766.7 | ||||||||||||||||
Operating Leases(4) | 2,815.9 | 474.8 | 946.4 | 543.3 | 851.4 | ||||||||||||||||
Unconditional Purchase Obligations(5) | 6,594.5 | 6,594.5 | — | — | — | ||||||||||||||||
Total | 26,581.5 | 10,394.4 | 7,280.1 | 4,111.0 | 4,796.0 | ||||||||||||||||
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(1) | Relates to liabilities under short term loans obtained from Bank Central Asia and Bank Niaga. See Note 20 to the consolidated financial statements. |
(2) | See “— Liquidity and Capital Resources — Indebtedness” and Notes 22, 23, 24 and 25 to the consolidated financial statements. |
(3) | Relates to the leases of the repeaters used for TELKOM’s telecommunication networks for TELKOMFlexi. |
(4) | Relates primarily to leases of towers, computers, vehicles, land, buildings, office equipment and circuits. |
(5) | Relates to commitments of TELKOM to suppliers and vendors for the purchase of telecommunications-related equipment and infrastructure. |
(6) | Excludes contractually committed rate of interest. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. | Directors and Senior Management |
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Age as of | ||||||||
Name | January 1, 2006 | Title | Since | |||||
Tanri Abeng | 64 | President Commissioner | March 10, 2004 | |||||
P. Sartono | 61 | Independent Commissioner | June 21, 2002 | |||||
Arif Arryman | 50 | Independent Commissioner | June 21, 2002 | |||||
Anggito Abimanyu | 43 | Commissioner | March 10, 2004 | |||||
Gatot Trihargo | 45 | Commissioner | March 10, 2004 |
Tanri Abeng |
P. Sartono |
Arif Arryman |
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• | 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, 2006 | Title | Since | |||
Arwin Rasyid | 48 | President Director | June 24, 2005 | |||
Garuda Sugardo | 56 | Vice President Director and Chief Operating Officer | June 24, 2005 | |||
Rinaldi Firmansyah | 45 | Director of Finance | March 10, 2004 | |||
Arief Yahya | 44 | Director of Enterprise & Wholesale | June 24, 2005 | |||
Abdul Haris | 50 | Director of Network & Solution | March 10, 2004 | |||
John Welly | 51 | Director of Human Resources | June 24, 2005 | |||
Guntur Siregar | 54 | Director of Consumer | June 24, 2005 |
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TELKOM regions as at | KSO regions VII as at | TELKOM’s subsidiaries as at | ||||||||||
December 31, 2005 | December 31, 2005 | December 31, 2005 | ||||||||||
Senior management | 148 | 0 | 38 | |||||||||
Middle management | 2,095 | 82 | 316 | |||||||||
Supervisors | 8,605 | 839 | 1,011 | |||||||||
Others | 14,118 | 2,292 | 4,460 | |||||||||
Total | 24,966 | 3,213 | 5,825 | |||||||||
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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.) | 1,992,333,765 | 9.88% | |||||||
Series B | The Bank of New York (BoNY) | 1,291,002,696 | 6.41% | |||||||
Series B | Board of Directors and Commissioners | 78,332 | <0.01% |
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• | 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 |
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Multimedia Mobile services and the settlement of the related interconnection rights and obligations; and | ||
• | 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 throughyear-end 2003. |
• | 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 as agreed by both parties. The latest amended agreement is valid until March 2008, but extendable as agreed by both parties. 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 became effective on March 1, 2004 and continues 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”) |
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Price per Share* | |||||||||
Calendar Year | High | Low | |||||||
(in Rupiah) | |||||||||
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 | |||||||
2005 | |||||||||
First Quarter | 5,125 | 4,300 | |||||||
Second Quarter | 5,350 | 4,175 | |||||||
Third Quarter | 5,800 | 4,775 | |||||||
Fourth Quarter | 6,150 | 4,925 | |||||||
October | 5,400 | 5,000 | |||||||
November | 5,500 | 4,925 | |||||||
December | 6,150 | 5,450 | |||||||
2006 | |||||||||
January | 6,550 | 6,050 | |||||||
February | 6,400 | 5,950 | |||||||
March | 7,000 | 6,200 | |||||||
April | 7,750 | 6,900 | |||||||
May | 8,400 | 7,050 |
* | On October 1, 2004, TELKOM effected a two-for-one split of its Common Stock from Rp.500 par value per share to Rp.250 par value per share as resolved in the AGMS on July 30, 2004. The price per share reflects this split for all periods shown. |
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Price per ADS | Price per ADS | ||||||||||||||||
(NYSE) | (LSE) | ||||||||||||||||
Calendar Year | High | Low | High | Low | |||||||||||||
(in US Dollars) | (in US Dollars) | ||||||||||||||||
2001 | |||||||||||||||||
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 | |||||||||||||||||
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 | |||||||||||||||||
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 | |||||||||||||
2005 | |||||||||||||||||
First Quarter | 21.96 | 18.11 | 21.86 | 18.17 | |||||||||||||
Second Quarter | 21.96 | 16.85 | 21.99 | 16.88 | |||||||||||||
Third Quarter | 23.66 | 18.10 | 29.76 | 17.97 | |||||||||||||
Fourth Quarter | 25.50 | 19.81 | 25.47 | 19.71 | |||||||||||||
October | 21.35 | 19.81 | 20.76 | 19.78 | |||||||||||||
November | 22.08 | 19.82 | 20.45 | 19.71 | |||||||||||||
December | 25.50 | 22.21 | 25.47 | 22.05 | |||||||||||||
2006 | |||||||||||||||||
January | 27.75 | 24.65 | 27.29 | 23.78 | |||||||||||||
February | 28.00 | 26.05 | 27.86 | 26.73 | |||||||||||||
March | 31.51 | 26.38 | 31.38 | 26.62 | |||||||||||||
April | 35.19 | 30.46 | 35.11 | 30.76 | |||||||||||||
May | 38.28 | 28.86 | 38.35 | 30.60 |
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• | 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.2,000, in multiples of Rp.10 and each price movement should be no more than Rp.100; | |
• | for shares with previous price between the range of Rp.2,000 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 between the range 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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• | 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; |
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• | 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; | |
• | 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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PSTN Regional Junction in Jakarta Area |
Master of Procurement Partnership Agreement (MPPA) with Motorola |
Metro Junction and Optical Network Access Agreement for Regional Division III with PT INTI |
Agreement for the Procurement of Softswitch System Class 4 with a consortium led bySantera-Olex |
Co-Operation Agreement on Fixed Wireless CDMA Facilities Construction in KSO Divre VII Area |
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Partnership Agreement for the Construction and Provision of High Performance Backbone in Sumatera |
Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java) |
Agreement forDumai-Melaka Cable System |
Acquisition of Dayamitra |
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PT Mitra Global Telekomunikasi Indonesia |
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Taxation of Distributions |
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ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
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Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||||||
December 31, 2005 | Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | 2011- | Fair | ||||||||||||||||||||||||||||||||||||||
Currency | Equivalent | Rate | 2006 | 2007 | 2008 | 2009 | 2010 | 2025 | Value | ||||||||||||||||||||||||||||||||
(in | (Rp. in | (Rp. in | |||||||||||||||||||||||||||||||||||||||
million) | million) | (%) | million) | ||||||||||||||||||||||||||||||||||||||
(Rp. in million) | |||||||||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||||||||||||||
Time deposit | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 3,642,172 | 3,642,172 | 3,642,172 | ||||||||||||||||||||||||||||||||||||||
Interest | 9.95 | ||||||||||||||||||||||||||||||||||||||||
U.S. Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 72.32 | 710,497 | 710,497 | 710,497 | |||||||||||||||||||||||||||||||||||||
Interest | 3.46 | ||||||||||||||||||||||||||||||||||||||||
Euro | |||||||||||||||||||||||||||||||||||||||||
Principal | 56.55 | 659,372 | 659,372 | 659,372 | |||||||||||||||||||||||||||||||||||||
Interest | 1.65 | ||||||||||||||||||||||||||||||||||||||||
Temporary Investments-Available-for- Sale Securities | |||||||||||||||||||||||||||||||||||||||||
Rupiah | 22,064 | 22,064 | 22,064 | ||||||||||||||||||||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||||||||||||||||||
Short-term bank loans | |||||||||||||||||||||||||||||||||||||||||
Variable Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 170,000.00 | 170,000 | 170,000 | 170,000 | |||||||||||||||||||||||||||||||||||||
Interest | 13.1 | 1,951 | |||||||||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 3,800.00 | 3,800 | 3,800 | 3,800 | |||||||||||||||||||||||||||||||||||||
Interest | 14.1 | 225 |
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Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||||||
December 31, 2005 | Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | 2011- | Fair | ||||||||||||||||||||||||||||||||||||||
Currency | Equivalent | Rate | 2006 | 2007 | 2008 | 2009 | 2010 | 2025 | Value | ||||||||||||||||||||||||||||||||
(in | (Rp. in | (Rp. in | |||||||||||||||||||||||||||||||||||||||
million) | million) | (%) | million) | ||||||||||||||||||||||||||||||||||||||
(Rp. in million) | |||||||||||||||||||||||||||||||||||||||||
Long-term debts(1) | |||||||||||||||||||||||||||||||||||||||||
Variable Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 1,955,132.87 | 1,955,133 | 301,631 | 249,265 | 189,326 | 190,831 | 167,431 | 856,649 | 1,619,930 | ||||||||||||||||||||||||||||||||
Interest | 8.8 | 158,346 | 128,874 | 111,129 | 94,978 | 79,037 | 343,408 | ||||||||||||||||||||||||||||||||||
U.S. Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 198.21 | 1,949,211 | 336,020 | 336,020 | 278,994 | 142,597 | 142,597 | 712,983 | 1,894,189 | ||||||||||||||||||||||||||||||||
Interest | 5.0 | 90,611 | 74,967 | 59,356 | 48,591 | 41,020 | 91,603 | ||||||||||||||||||||||||||||||||||
Euro | |||||||||||||||||||||||||||||||||||||||||
Principal | 36.68 | 427,718 | 171,087 | 171,087 | 85,544 | — | — | — | 422,954 | ||||||||||||||||||||||||||||||||
Interest | 3.3 | 12,226 | 6,640 | 1,184 | — | — | — | ||||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 1,880,065.08 | 1,880,065 | 178,921 | 1,480,643 | 28,301 | 35,090 | 43,060 | 114,083 | 1,948,814 | ||||||||||||||||||||||||||||||||
Interest | 15.3 | 282,853 | 174,127 | 48,090 | 40,766 | 31,615 | 28,724 | ||||||||||||||||||||||||||||||||||
U.S. Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 614.61 | 6,044,691 | 1,143,380 | 1,074,262 | 1,111,291 | 1,072,564 | 1,050,847 | 592,347 | 6,034,323 | ||||||||||||||||||||||||||||||||
Interest | 5.7 | 339,866 | 273,480 | 205,022 | 133,489 | 63,707 | 102,450 | ||||||||||||||||||||||||||||||||||
Japanese Yen | |||||||||||||||||||||||||||||||||||||||||
Principal | 15,527.59 | 1,302,575 | 95,876 | 95,876 | 80,147 | 64,417 | 64,417 | 901,841 | 1,432,071 | ||||||||||||||||||||||||||||||||
Interest | 3.1 | 38,364 | 36,508 | 33,588 | 31,282 | 29,285 | 200,474 |
(1) | Long-term debts consist 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. |
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Outstanding Balance | ||||||||||||||||||||||||||||||||||||
as at | ||||||||||||||||||||||||||||||||||||
December 31, 2005 | Expected Maturity Date | |||||||||||||||||||||||||||||||||||
Foreign | Rp. | 2011- | Fair | |||||||||||||||||||||||||||||||||
Currency | Equivalent | 2006 | 2007 | 2008 | 2009 | 2010 | 2024 | Value | ||||||||||||||||||||||||||||
(in | (Rp. in | |||||||||||||||||||||||||||||||||||
millions) | million) | (Rp. in million) | ||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 81.96 | 805,489 | 805,489 | 805,489 | ||||||||||||||||||||||||||||||||
Japanese Yen | ||||||||||||||||||||||||||||||||||||
Euro | 59.14 | 689,472 | 689,472 | 689,472 | ||||||||||||||||||||||||||||||||
Trade accounts receivable | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 21.10 | 207,311 | 207,311 | 207,311 | ||||||||||||||||||||||||||||||||
Other accounts receivable | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 0.30 | 2,910 | 2,910 | 2,910 | ||||||||||||||||||||||||||||||||
Euro | 0.01 | 88 | 88 | 88 | ||||||||||||||||||||||||||||||||
Other current assets | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 13.63 | 133,926 | 133,926 | 133,926 | ||||||||||||||||||||||||||||||||
Advances and other non- current assets | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 2.25 | 22,162 | 22,162 | 22,162 | ||||||||||||||||||||||||||||||||
Escrow accounts | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 12.89 | 126,128 | 126,128 | 126,128 | ||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||
Trade accounts payable | ||||||||||||||||||||||||||||||||||||
Related parties | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 15.09 | 148,423 | 148,423 | 148,423 | ||||||||||||||||||||||||||||||||
Third parties | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 125.40 | 1,223,050 | 1,223,050 | 1,233,050 | ||||||||||||||||||||||||||||||||
Euro | 68.30 | 796,343 | 796,343 | 796,343 | ||||||||||||||||||||||||||||||||
Great Britain Pound Sterling | 0.00 | 14 | 14 | 14 | ||||||||||||||||||||||||||||||||
Japanese Yen | 66.03 | 5,508 | 5,508 | 5,508 | ||||||||||||||||||||||||||||||||
Singapore Dollar | 0.01 | 33 | 33 | 33 | ||||||||||||||||||||||||||||||||
Accrued expenses | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 21.01 | 206,639 | 206,639 | 206,639 | ||||||||||||||||||||||||||||||||
Japanese Yen | 52.85 | 4,433 | 4,433 | 4,433 | ||||||||||||||||||||||||||||||||
Singapore Dollar | 0.42 | 2,497 | 2,497 | 2,497 | ||||||||||||||||||||||||||||||||
Euro | 8.79 | 102,509 | 102,509 | 102,509 | ||||||||||||||||||||||||||||||||
Advances from customers and suppliers | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 0.15 | 1,474 | 1,474 | 1,474 | ||||||||||||||||||||||||||||||||
Long-term debts(1) | ||||||||||||||||||||||||||||||||||||
U.S. Dollar | 812.82 | 7,993,902 | 1,479,401 | 1,410,282 | 1,390,285 | 1,215,160 | 1,193,444 | 1,305,330 | 7,928,512 | |||||||||||||||||||||||||||
Japanese Yen | 15,527.59 | 1,302,575 | 95,876 | 95,876 | 80,147 | 64,417 | 64,417 | 901,841 | 1,432,071 | |||||||||||||||||||||||||||
Euro | 36.68 | 427,718 | 171,087 | 171,087 | 85,544 | — | — | — | 422,954 |
(1) | Long-term debts for the purpose of this table consist 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. |
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ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. | CONTROL AND PROCEDURES |
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(1) TELKOM carried out a recruitment exercise for accountancy graduates and provided regular training programs on accounting and financial reporting issues with emphasis on Indonesian and U.S. GAAP. Since May 2004, TELKOM has provided additional information, resources |
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and databases to its accounting staff by subscribing to various printed oron-line accounting publications. | |
(2) TELKOM over hauled its organization structure in respect of internal control over financial reporting to achieve the separation of each financial reporting function and also to bring qualified, knowledgeable employees to implement TELKOM’s improved financial reporting policies and procedures. In connection with the improvement of the oversight function, TELKOM’s senior management directed the addition of a new oversight function to its accounting organization structure to improve the assessment of critical, significant and judgmental accounting issues by establishing a new unit dedicated to the on-going review and monitoring of TELKOM’s internal control over financial reporting. As part of such efforts, TELKOM established its “Finance Center” on January 6, 2006. The Finance Center is a unit which directly reports to Finance Director and acts as a centralized decision making and execution body in relation to TELKOM’s financial reporting for all the business units. The unit is also responsible for supporting all the business units of TELKOM in all relevant financial areas, including its accounting function. Since the establishment of the Finance Center, the Accounting Department, which also directly reports to Finance Director and is a unit independent from Finance Center, focuses on reviewing financial statements produced by all the business units of TELKOM to ensure that the financial statements are prepared in accordance with generally accepted accounting principles. | |
(3) On April 13, 2006, TELKOM formally approved and issued revised accounting and financial reporting policies and related supplements, which take effect retroactively from January 1, 2006. Following the issuance of the revised accounting and financial reporting policies and the supplements, TELKOM is updating its accounting manuals and work procedures as operating guidelines for implementation of the new policies. Such revised accounting manuals and work procedures are expected to be finalized in the third quarter of 2006. | |
(4) To improve its internal control over financial reporting at the entity level and to incorporate the best corporate governance practices, TELKOM restructured its corporate organization and separated the Risk Management unit and Legal Compliance unit, each reporting directly to the CEO. Each of these units is responsible for ensuring TELKOM’s compliance with various internal and external rules and regulations in respect of financial reporting and minimizing TELKOM’s regulatory and business risks which may arise in conducting its accounting and financial reporting functions. | |
(5) Since 2004, in preparation for the compliance with Section 404 of Sarbanes-Oxley Act of 2002, TELKOM, in conjunction with Ernst & Young, has designed an internal control framework and protocol for all of its business processes. Since then, TELKOM has gradually adopted and implemented such new internal control system in its daily operations. Since December 2004, TELKOM has conducted walkthroughs and test-runs with respect to the implementation of the new internal controls, has made adjustments and also taken remedial steps where appropriate to evaluate and monitor the implementation of the Directors’ Decree on Internal Control. TELKOM plans to implement these regular tests and remedy problems identified through such tests on a regular basis. In addition, TELKOM, also in conjunction with Ernst & Young, reviewed the implementation of its information technology-related general controls. Such review was completed on July 15, 2005. | |
(6) Since December 2004, TELKOM has 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. Since April 2005, with the assistance of Ernst & Young, TELKOM has also been assessing the roles and functions of its Internal Audit Unit to ensure compliance with the Sarbanes-Oxley Act of 2002. |
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Year Ended | ||||||||
December 31, | ||||||||
2004 | 2005 | |||||||
(in Rp. million) | ||||||||
Audit Fees | 19,274.6 | 42,390.3 | ||||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — |
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ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
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. |
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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. | |
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. |
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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. | |
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. | |
4.45 | Supply Contract For The Procurement and Installation of Ring JASUKA Backbone between TELKOM and NEC-SIEMENS CONSORTIUM, dated June 10, 2005. | |
4.46 | Supply Contract For Capacity Expansion of Submarine Cable System Tanjung Pandan-Pontianak between TELKOM and NEC Corporation, dated July 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. | |
++ | Filed with original Annual Report on Form 20-F for the year ended December 31, 2004 filed July 15, 2005 and incorporated herein by reference. |
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Name Under Which | ||||||
Subsidiary Conducts | ||||||
Name of Subsidiary | Jurisdiction of 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 Pramindo Ikat Nusantara | Indonesia | Pramindo |
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PERUSAHAAN PERSEROAN (PERSERO) | |
P.T. TELEKOMUNIKASI INDONESIA Tbk. |
By: | /s/ Arwin Rasyid |
ARWIN RASYID | |
President Director | |
Date: June 23, 2006 |
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Page | |||||
Report of Independent Registered Public Accounting Firm | F-2 | ||||
Consolidated Financial Statements | |||||
1. Consolidated Balance Sheets | F-5 | ||||
2. Consolidated Statements of Income | F-7 | ||||
3. Consolidated Statements of Changes in Stockholders’ Equity | F-8 | ||||
4. Consolidated Statements of Cash Flows | F-11 | ||||
5. Notes to Consolidated Financial Statements | F-13 |
F-1
Table of Contents
F-2
Table of Contents
Member Firm of KPMG International
License No.: KEP-232/KM.6/2002
Lucas Kurniawan, BAP
Public Accountant License No. 04.1.0934
Jakarta-Indonesia, June 8, 2006, except for Note 54, as to which the date is June 16, 2006.
F-3
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F-4
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Notes | 2004 | 2005 | |||||||||||||||||
Rp | Rp | US$ (Note 3) | |||||||||||||||||
(As restated) | |||||||||||||||||||
CURRENT ASSETS | |||||||||||||||||||
Cash and cash equivalents | 2c,2f,6,45 | 4,856,123 | 5,374,684 | 546,763 | |||||||||||||||
Temporary investments | 2c,2g,45 | 19,949 | 22,064 | 2,245 | |||||||||||||||
Trade accounts receivable | 2c,2h,7,45 | ||||||||||||||||||
Related parties — net of allowance for doubtful accounts of Rp64,928 million in 2004 and Rp84,275 million in 2005 | 419,104 | 530,370 | 53,954 | ||||||||||||||||
Third parties — net of allowance for doubtful accounts of Rp457,138 million in 2004 and Rp601,393 million in 2005 | 2,899,999 | 3,047,539 | 310,024 | ||||||||||||||||
Other accounts receivable — net of allowance for doubtful accounts of Rp9,236 million in 2004 and Rp4,402 million in 2005 | 2c,2h,45 | 55,769 | 153,247 | 15,589 | |||||||||||||||
Inventories — net of allowance for obsolescence of Rp54,733 million in 2004 and Rp48,347 million in 2005 | 2i,8 | 203,085 | 220,327 | 22,413 | |||||||||||||||
Prepaid expenses | 2c,2j,9,45 | 628,069 | 777,869 | 79,132 | |||||||||||||||
Prepaid taxes | 39a | 77,228 | 18,913 | 1,924 | |||||||||||||||
Other current assets | 2c,10,45 | 44,608 | 159,537 | 16,230 | |||||||||||||||
Total Current Assets | 9,203,934 | 10,304,550 | 1,048,274 | ||||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||||
Long-term investments — net | 2g,11 | 82,613 | 101,400 | 10,315 | |||||||||||||||
Property, plant and equipment — net of accumulated depreciation of Rp29,297,163 million in 2004 and Rp37,092,663 million in 2005 | 2k,2l,12 | 39,572,099 | 45,643,243 | 4,643,260 | |||||||||||||||
Property, plant and equipment under revenue-sharing arrangements — net of accumulated depreciation of Rp694,570 million in 2004 and Rp458,234 million in 2005 | 2m,13,48 | 499,127 | 549,405 | 55,891 | |||||||||||||||
Prepaid pension benefit costs | 2q,42 | 1,362 | 640 | 65 | |||||||||||||||
Advances and other non-current assets | 2c,14,45 | 1,372,351 | 946,037 | 96,240 | |||||||||||||||
Goodwill and other intangible assets — net of accumulated amortization of Rp1,846,034 million in 2004 and Rp2,764,187 million in 2005 | 1c,2d,15 | 5,411,425 | 4,493,272 | 457,098 | |||||||||||||||
Escrow accounts | 16,45 | 36,281 | 132,497 | 13,479 | |||||||||||||||
Total Non-current Assets | 46,975,258 | 51,866,494 | 5,276,348 | ||||||||||||||||
TOTAL ASSETS | 56,179,192 | 62,171,044 | 6,324,622 | ||||||||||||||||
F-5
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Notes | 2004 | 2005 | |||||||||||||||||
Rp | Rp | US$ (Note 3) | |||||||||||||||||
(As restated) | |||||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||||
Trade accounts payable | 2c,17,45 | ||||||||||||||||||
Related parties | 643,094 | 1,014,389 | 103,193 | ||||||||||||||||
Third parties | 3,611,456 | 4,281,285 | 435,533 | ||||||||||||||||
Other accounts payable | 5,073 | 6,677 | 679 | ||||||||||||||||
Taxes payable | 2r,39b | 1,592,479 | 2,469,765 | 251,248 | |||||||||||||||
Dividends payable | 62,689 | 3,276 | 333 | ||||||||||||||||
Accrued expenses | 2c,18,45 | 1,051,366 | 1,521,247 | 154,756 | |||||||||||||||
Unearned income | 19 | 1,030,000 | 1,592,718 | 162,026 | |||||||||||||||
Advances from customers and suppliers | 278,430 | 223,086 | 22,694 | ||||||||||||||||
Short-term bank loans | 2c,20,45 | 1,101,633 | 173,800 | 17,681 | |||||||||||||||
Current maturities of long-term liabilities | 2c,21,45 | 2,300,822 | 2,226,925 | 226,544 | |||||||||||||||
Total Current Liabilities | 11,677,042 | 13,513,168 | 1,374,687 | ||||||||||||||||
NON-CURRENT LIABILITIES | |||||||||||||||||||
Deferred tax liabilities — net | 2r,39e | 2,927,567 | 2,391,810 | 243,317 | |||||||||||||||
Unearned income on revenue-sharing arrangements | 2m,13,48 | 360,332 | 425,484 | 43,284 | |||||||||||||||
Unearned initial investor payments under joint operation scheme | 2n,47 | 20,453 | 7,311 | 744 | |||||||||||||||
Accrued long service awards | 2c,2q,43,45 | 449,841 | 524,524 | 53,360 | |||||||||||||||
Accrued post-retirement health care benefits | 2c,2q,44,45 | 2,983,707 | 3,048,021 | 310,073 | |||||||||||||||
Accrued pension and other post-retirement benefit costs | 42 | 1,479,918 | 1,330,664 | 135,368 | |||||||||||||||
Long-term liabilities — net of current maturities | |||||||||||||||||||
Two-step loans — related party | 2c,22,45 | 5,363,283 | 4,760,199 | 484,252 | |||||||||||||||
Notes and bonds | 23 | 2,331,465 | 1,456,669 | 148,186 | |||||||||||||||
Bank loans | 2c,24,45 | 1,775,799 | 1,752,104 | 178,240 | |||||||||||||||
Liabilities of business acquisitions | 25 | 3,743,317 | 3,127,959 | 318,205 | |||||||||||||||
Obligations under capital leases | 2l,12 | — | 235,537 | 23,961 | |||||||||||||||
Total Non-current Liabilities | 21,435,682 | 19,060,282 | 1,938,990 | ||||||||||||||||
MINORITY INTEREST | 26 | 4,938,432 | 6,305,193 | 641,423 | |||||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Capital stock — 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,27 | 5,040,000 | 5,040,000 | 512,716 | |||||||||||||||
Additional paid-in capital | 28 | 1,073,333 | 1,073,333 | 109,190 | |||||||||||||||
Difference in value of restructuring transactions between entities under common control | 29 | (7,288,271 | ) | 90,000 | 9,156 | ||||||||||||||
Difference due to change of equity in associated companies | 2g | 385,595 | 385,595 | 39,226 | |||||||||||||||
Unrealized holding gain (loss) on available-for-sale securities | 2g | 884 | (748 | ) | (76 | ) | |||||||||||||
Translation adjustment | 2g | 229,595 | 233,253 | 23,729 | |||||||||||||||
Retained earnings | |||||||||||||||||||
Appropriated | 1,680,813 | 1,803,397 | 183,458 | ||||||||||||||||
Unappropriated | 17,006,087 | 14,667,571 | 1,492,123 | ||||||||||||||||
Total Stockholders’ Equity | 18,128,036 | 23,292,401 | 2,369,522 | ||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 56,179,192 | 62,171,044 | 6,324,622 | ||||||||||||||||
F-6
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Notes | 2003 | 2004 | 2005 | ||||||||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | ||||||||||||||||||||
(As restated) | |||||||||||||||||||||||
OPERATING REVENUES | |||||||||||||||||||||||
Telephone | 2p,30 | ||||||||||||||||||||||
Fixed lines | 8,896,865 | 10,645,021 | 10,781,252 | 1,096,770 | |||||||||||||||||||
Cellular | 8,458,830 | 10,421,298 | 14,570,958 | 1,482,295 | |||||||||||||||||||
Interconnection | 2p,31,45 | 4,162,148 | 6,187,981 | 7,742,084 | 787,598 | ||||||||||||||||||
Joint operation schemes | 2n,32,47 | 1,486,307 | 656,614 | 588,647 | 59,883 | ||||||||||||||||||
Data and Internet | 33 | 3,108,562 | 4,808,742 | 6,934,324 | 705,425 | ||||||||||||||||||
Network | 34 | 517,865 | 654,309 | 586,636 | 59,678 | ||||||||||||||||||
Revenue-sharing arrangements | 2m,35,48 | 258,464 | 280,576 | 302,282 | 30,751 | ||||||||||||||||||
Other telecommunications services | 226,882 | 293,225 | 301,001 | 30,620 | |||||||||||||||||||
Total Operating Revenues | 27,115,923 | 33,947,766 | 41,807,184 | 4,253,020 | |||||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||||
Personnel | 36 | 4,440,096 | 4,909,965 | 6,563,047 | 667,655 | ||||||||||||||||||
Depreciation | 2k,2l,2m,12,13 | 4,779,520 | 6,438,557 | 7,570,739 | 770,167 | ||||||||||||||||||
Write-down of assets | 2k,12 | — | — | 616,768 | 62,743 | ||||||||||||||||||
Loss on procurement commitments | 12 | — | — | 79,359 | 8,073 | ||||||||||||||||||
Operations, maintenance and telecommunication services | 37 | 3,338,693 | 4,529,587 | 5,916,341 | 601,866 | ||||||||||||||||||
General and administrative | 38 | 2,078,777 | 2,599,847 | 2,763,951 | 281,175 | ||||||||||||||||||
Marketing | 502,898 | 881,930 | 1,126,229 | 114,571 | |||||||||||||||||||
Total Operating Expenses | 15,139,984 | 19,359,886 | 24,636,434 | 2,506,250 | |||||||||||||||||||
OPERATING INCOME | 11,975,939 | 14,587,880 | 17,170,750 | 1,746,770 | |||||||||||||||||||
OTHER INCOME (EXPENSES) | |||||||||||||||||||||||
Interest income | 45 | 366,024 | 317,941 | 344,686 | 35,065 | ||||||||||||||||||
Interest expense | 45 | (1,383,446 | ) | (1,270,136 | ) | (1,177,268 | ) | (119,763 | ) | ||||||||||||||
Gain (loss) on foreign exchange — net | 2e | 126,121 | (1,220,760 | ) | (516,807 | ) | (52,574 | ) | |||||||||||||||
Equity in net income of associated companies | 2g,11 | 2,819 | 3,420 | 10,879 | 1,107 | ||||||||||||||||||
Others — net | 364,338 | 331,050 | 409,184 | 41,626 | |||||||||||||||||||
Other income (expenses) — net | (524,144 | ) | (1,838,485 | ) | (929,326 | ) | (94,539 | ) | |||||||||||||||
INCOME BEFORE TAX | 11,451,795 | 12,749,395 | 16,241,424 | 1,652,231 | |||||||||||||||||||
TAX EXPENSE | 2r,39c | ||||||||||||||||||||||
Current tax | (3,791,280 | ) | (4,267,111 | ) | (5,719,644 | ) | (581,856 | ) | |||||||||||||||
Deferred tax | (69,810 | ) | 88,585 | 535,757 | 54,502 | ||||||||||||||||||
(3,861,090 | ) | (4,178,526 | ) | (5,183,887 | ) | (527,354 | ) | ||||||||||||||||
INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES | 7,590,705 | 8,570,869 | 11,057,537 | 1,124,877 | |||||||||||||||||||
MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES, net | 26 | (1,503,478 | ) | (1,956,301 | ) | (3,063,971 | ) | (311,696 | ) | ||||||||||||||
NET INCOME | 6,087,227 | 6,614,568 | 7,993,566 | 813,181 | |||||||||||||||||||
BASIC EARNINGS PER SHARE | 2s,40 | ||||||||||||||||||||||
Net income per share | 301.95 | 328.10 | 396.51 | 0.04 | |||||||||||||||||||
Net income per ADS (40 Series B shares per ADS) | 12,077.83 | 13,124.14 | 15,860.25 | 1.61 | |||||||||||||||||||
F-7
Table of Contents
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 | ||||||||||||||||||||||||||||
Reclassification to the statement of income as a result of disposal of investment in Metrosel | 11 | — | — | — | (38,425 | ) | — | — | — | (38,425 | ) | ||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g | — | — | — | — | (11,433 | ) | — | — | (11,433 | ) | ||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on May 9, 2003 Declaration of cash dividends | 41 | — | — | — | — | — | — | (3,338,109 | ) | (3,338,109 | ) | ||||||||||||||||||||||||||
Appropriation for general reserve | 41 | — | — | — | — | — | 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-8
Table of Contents
Difference in | |||||||||||||||||||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||||||||||||||||||
Restructuring | Difference | ||||||||||||||||||||||||||||||||||||||||
Transactions | Due to Change | Unrealized | |||||||||||||||||||||||||||||||||||||||
Additional | Between Entities | of Equity in | Holding Gain on | Retained Earnings | Total | ||||||||||||||||||||||||||||||||||||
Capital | Paid-in | Under Common | Associated | Available-for-Sale | Translation | Stockholders’ | |||||||||||||||||||||||||||||||||||
Description | Notes | Stock | Capital | 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 | |||||||||||||||||||||||||||||||
Cumulative effect due to change in method of accounting for employee benefits, net of tax effect of Rp600,059 million | 2q,4 | — | — | — | — | — | — | — | (2,618,665 | ) | (2,618,665 | ) | |||||||||||||||||||||||||||||
Balance as of January 1, 2004, as restated | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | — | 224,232 | 1,559,068 | 13,700,255 | 14,694,212 | |||||||||||||||||||||||||||||||
Unrealized holding gain on available- for-sale securities | 2g | — | — | — | — | 884 | — | — | — | 884 | |||||||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g,11 | — | — | — | — | — | 5,363 | — | — | 5,363 | |||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on July 30, 2004 Declaration of cash dividends | 41 | — | — | — | — | — | — | — | (3,043,614 | ) | (3,043,614 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 41 | — | — | — | — | — | — | 121,745 | (121,745 | ) | — | ||||||||||||||||||||||||||||||
Declaration of interim cash dividends | — | — | — | — | — | — | — | (143,377 | ) | (143,377 | ) | ||||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | 6,614,568 | 6,614,568 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2004, as restated | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 884 | 229,595 | 1,680,813 | 17,006,087 | 18,128,036 | |||||||||||||||||||||||||||||||
F-9
Table of Contents
Difference in | |||||||||||||||||||||||||||||||||||||||||
Value of | |||||||||||||||||||||||||||||||||||||||||
Restructuring | Difference | Unrealized | |||||||||||||||||||||||||||||||||||||||
Transactions | Due to | Holding Gain | |||||||||||||||||||||||||||||||||||||||
Between Entities | Change of Equity | (Loss) on | Retained Earnings | Total | |||||||||||||||||||||||||||||||||||||
Capital | Additional | Under Common | in Associated | Available-for-Sale | Translation | Stockholders’ | |||||||||||||||||||||||||||||||||||
Description | Notes | Stock | Paid-in Capital | Control | Companies | Securities | Adjustment | Appropriated | Unappropriated | Equity | |||||||||||||||||||||||||||||||
Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | Rp | |||||||||||||||||||||||||||||||||
Balance as of January 1, 2005, as restated | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 884 | 229,595 | 1,680,813 | 17,006,087 | 18,128,036 | |||||||||||||||||||||||||||||||
Change in method of accounting for restructuring transactions between entities under common control | 4 | — | — | 7,288,271 | — | — | — | — | (7,288,271 | ) | — | ||||||||||||||||||||||||||||||
Unrealized holding loss on available- for-sale securities | 2g | — | — | — | — | (1,632 | ) | — | — | — | (1,632 | ) | |||||||||||||||||||||||||||||
Foreign currency translation of CSM | 2g,11 | — | — | — | — | — | 3,658 | — | — | 3,658 | |||||||||||||||||||||||||||||||
Compensation for early termination of exclusive rights | 29 | — | — | 90,000 | — | — | — | — | — | 90,000 | |||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on June 24, 2005 | |||||||||||||||||||||||||||||||||||||||||
Declaration of cash dividends | 41 | — | — | — | — | — | — | — | (2,921,227 | ) | (2,921,227 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 41 | — | — | — | — | — | — | 122,584 | (122,584 | ) | — | ||||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | 7,993,566 | 7,993,566 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2005 | 5,040,000 | 1,073,333 | 90,000 | 385,595 | (748 | ) | 233,253 | 1,803,397 | 14,667,571 | 23,292,401 | |||||||||||||||||||||||||||||||
F-10
Table of Contents
2003 | 2004 | 2005 | ||||||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||||||
Cash receipts from operating revenues | ||||||||||||||||||||
Telephone | ||||||||||||||||||||
Fixed lines | 8,201,928 | 10,084,558 | 10,668,915 | 1,085,342 | ||||||||||||||||
Cellular | 8,925,503 | 10,497,763 | 14,825,437 | 1,508,183 | ||||||||||||||||
Interconnection — net | 4,203,802 | 5,766,444 | 7,403,322 | 753,136 | ||||||||||||||||
Joint operation schemes | 1,195,563 | 547,487 | 614,652 | 62,528 | ||||||||||||||||
Data and Internet | 2,213,391 | 4,973,559 | 6,952,323 | 707,256 | ||||||||||||||||
Other services | 1,718,693 | 1,689,941 | 1,445,668 | 147,067 | ||||||||||||||||
Total cash receipts from operating revenues | 26,458,880 | 33,559,752 | 41,910,317 | 4,263,512 | ||||||||||||||||
Cash payments for operating expenses | (8,861,797 | ) | (12,270,643 | ) | (14,954,742 | ) | (1,521,337 | ) | ||||||||||||
Cash generated from operations | 17,597,083 | 21,289,109 | 26,955,575 | 2,742,175 | ||||||||||||||||
Interest received | 369,982 | 321,677 | 341,848 | 34,776 | ||||||||||||||||
Income tax paid | (3,905,317 | ) | (4,132,359 | ) | (4,938,916 | ) | (502,433 | ) | ||||||||||||
Interest paid | (1,178,332 | ) | (1,348,919 | ) | (1,200,484 | ) | (122,125 | ) | ||||||||||||
Cash refund to customers and advances | (30,884 | ) | (78,028 | ) | (55,343 | ) | (5,630 | ) | ||||||||||||
Net Cash Provided by Operating Activities | 12,852,532 | 16,051,480 | 21,102,680 | 2,146,763 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||||||
Proceeds from sale of temporary investments and maturity of time deposits | 1,895,199 | 285,264 | 227,633 | 23,157 | ||||||||||||||||
Purchase of temporary investments and placements in time deposits | (679,500 | ) | (404,268 | ) | (226,054 | ) | (22,996 | ) | ||||||||||||
Proceeds from sale of property, plant and equipment | 255,750 | 67,196 | 84,621 | 8,608 | ||||||||||||||||
Proceeds from insurance claim | — | — | 27,580 | 2,806 | ||||||||||||||||
Acquisition of property, plant and equipment | (9,007,186 | ) | (8,568,862 | ) | (12,106,930 | ) | (1,231,631 | ) | ||||||||||||
Payment of advances for the purchase of property,plant and equipment | — | (1,063,382 | ) | (212,187 | ) | (21,586 | ) | |||||||||||||
Decrease in advances and others | 96,830 | 123,026 | 874 | 89 | ||||||||||||||||
Acquisition of businesses, net of cash acquired | 141,985 | (27,797 | ) | (4,000 | ) | (407 | ) | |||||||||||||
Payments of advances for investments in shares of stock | (14,338 | ) | — | — | — | |||||||||||||||
Acquisition of long-term investments | — | (9,290 | ) | (4,250 | ) | (432 | ) | |||||||||||||
Sale of long-term investments | 5,398 | — | — | — | ||||||||||||||||
Net Cash Used in Investing Activities | (7,305,862 | ) | (9,598,113 | ) | (12,212,713 | ) | (1,242,392 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||||||
Cash dividends paid | (3,336,582 | ) | (3,129,225 | ) | (2,980,640 | ) | (303,219 | ) | ||||||||||||
Cash dividends paid to minority shareholders of subsidiaries | (402,004 | ) | (682,366 | ) | (1,694,261 | ) | (172,356 | ) | ||||||||||||
Increase in escrow accounts | (1,497,462 | ) | (1,341,546 | ) | (96,216 | ) | (9,788 | ) | ||||||||||||
Proceeds from (repayments of) short-term borrowings | (39,205 | ) | 1,062,183 | (994,709 | ) | (101,191 | ) | |||||||||||||
Payments for debt issuance cost | — | (2,394 | ) | — | — | |||||||||||||||
Proceeds from Medium-term Notes | — | 1,080,000 | — | — | ||||||||||||||||
Repayments of Medium-term Notes | — | — | (470,000 | ) | (47,813 | ) | ||||||||||||||
Redemption of Telkomsel’s notes | (160,509 | ) | (504,101 | ) | (780,565 | ) | (79,406 | ) | ||||||||||||
Proceeds from long-term borrowings | 720,591 | 2,386,748 | 569,995 | 57,985 | ||||||||||||||||
Repayments of long-term borrowings | (1,222,424 | ) | (5,734,156 | ) | (1,723,126 | ) | (175,293 | ) | ||||||||||||
Repayments of promissory notes | (239,821 | ) | (40,008 | ) | (164,186 | ) | (16,703 | ) | ||||||||||||
Repayments of obligations under capital leases | — | — | (5,643 | ) | (574 | ) | ||||||||||||||
Net Cash Used in Financing Activities | (6,177,416 | ) | (6,904,865 | ) | (8,339,351 | ) | (848,358 | ) | ||||||||||||
F-11
Table of Contents
2003 | 2004 | 2005 | |||||||||||||||
Rp | Rp | Rp | US$ (Note 3) | ||||||||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (630,746 | ) | (451,498 | ) | 550,616 | 56,013 | |||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 26,148 | 213,149 | (32,055 | ) | (3,261 | ) | |||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 5,699,070 | 5,094,472 | 4,856,123 | 494,011 | |||||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 5,094,472 | 4,856,123 | 5,374,684 | 546,763 | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||||||||
Noncash investing and financing activities: | |||||||||||||||||
Increase in property under construction through the incurrence of long-term debt | 536,248 | — | — | — | |||||||||||||
Payment of insurance premium through the incurrence of long-term debt | 81,186 | 11,658 | — | — | |||||||||||||
Conversion of receivables to long-term investments | 13,500 | — | — | — | |||||||||||||
Acquisition of subsidiary through the issuance of Promissory Notes | 927,273 | — | — | — | |||||||||||||
Acquisition of minority interest through the issuance of Promissory Notes | — | 126,692 | — | — | |||||||||||||
Acquisition of business through the incurrence of long-term liability | — | 3,257,566 | — | — | |||||||||||||
Acquisition of property, plant and equipment through capital leases | — | — | 257,380 | 26,183 |
F-12
Table of Contents
1. | GENERAL |
a. Establishment and General Information |
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-13
Table of Contents
i. Telecommunications networks | |
ii. Telecommunications services | |
iii. Special telecommunications |
F-14
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 |
President Commissioner | : | Tanri Abeng | ||||
Commissioner | : | Anggito Abimanyu | ||||
Commissioner | : | Gatot Trihargo | ||||
Independent Commissioner | : | Arif Arryman | ||||
Independent Commissioner | : | Petrus Sartono | ||||
President Director | : | Arwin Rasyid | ||||
Vice President Director/ Chief Operating Officer | : | Garuda Sugardo | ||||
Director of Finance | : | Rinaldi Firmansyah | ||||
Director of Network and Solution | : | Abdul Haris | ||||
Director of Enterprise and Wholesale | : | Arief Yahya | ||||
Director of Human Resources | : | John Welly | ||||
Director of Consumer | : | Guntur Siregar |
b.Public offering of shares of the Company |
F-15
Table of Contents
F-16
Table of Contents
Percentage of | Total Assets Before | |||||||||||||||||||||||||
Ownership | Start of | Eliminations | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||
Subsidiaries | Domicile | Nature of Business | 2004 | 2005 | Operations | 2004 | 2005 | |||||||||||||||||||
% | % | |||||||||||||||||||||||||
PT Pramindo Ikat Nusantara | Medan | Telecommunications | 100 | 100 | 1995 | 1,604,405 | 1,356,634 | |||||||||||||||||||
construction & services | ||||||||||||||||||||||||||
PT AriaWest International | Bandung | Telecommunications | 100 | 100 | 1995 | 1,416,225 | 1,127,772 | |||||||||||||||||||
PT Multimedia Nusantara | Jakarta | Pay TV | 100 | 100 | 1998 | 22,116 | 53,738 | |||||||||||||||||||
PT Graha Sarana Duta | Jakarta | Real estate, construction | 100 | 100 | 1982 | 69,227 | 101,910 | |||||||||||||||||||
and services | ||||||||||||||||||||||||||
PT Dayamitra Telekomunikasi | Balikpapan | Telecommunications | 100 | 100 | 1995 | 641,249 | 622,662 | |||||||||||||||||||
PT Indonusa Telemedia | Jakarta | Multimedia | 90 | 96 | 1997 | 72,080 | 66,445 | |||||||||||||||||||
PT Telekomunikasi Selular | Jakarta | Telecommunications | 65 | 65 | 1995 | 19,557,557 | 25,754,321 | |||||||||||||||||||
PT Napsindo Primatel Internasional | Jakarta | Telecommunications | 60 | 60 | 1999 | 28,974 | 7,884 | |||||||||||||||||||
PT Infomedia Nusantara | Jakarta | Data and information | 51 | 51 | 1984 | 333,738 | 376,160 | |||||||||||||||||||
service | ||||||||||||||||||||||||||
PT Pro Infokom Indonesia | Jakarta | System information | 51 | — | 2003 | 1,261 | — | |||||||||||||||||||
network |
Ownership | ||||||||||||||||||
Percentage | Start of | |||||||||||||||||
Nature of | Commercial | |||||||||||||||||
Indirect Subsidiaries | Stockholders | Domicile | Business | 2004 | 2005 | Operations | ||||||||||||
% | % | |||||||||||||||||
Telekomunikasi Selular Finance Limited | PT Telekomunikasi | Mauritius | Fund raising | 100 | 100 | 2002 | ||||||||||||
Selular | ||||||||||||||||||
Telkomsel Finance B.V | PT Telekomunikasi | Netherlands | Finance | — | 100 | 2005 | ||||||||||||
Selular | ||||||||||||||||||
Aria West International Finance B.V | PT AriaWest | Netherlands | Finance | 100 | 100 | 1996 | ||||||||||||
International | ||||||||||||||||||
PT Balebat Dedikasi Prima | PT Infomedia | Bogor | Printing | 51 | 51 | 2000 | ||||||||||||
Nusantara |
F-17
Table of Contents
PT Pramindo Ikat Nusantara (“Pramindo”) |
PT AriaWest International (“AWI”) |
PT Multimedia Nusantara (“Metra”) |
PT Graha Sarana Duta (“GSD”) |
PT Dayamitra Telekomunikasi (“Dayamitra”) |
F-18
Table of Contents
PT Indonusa Telemedia (“Indonusa”) |
PT Telekomunikasi Selular (“Telkomsel”) |
PT Napsindo Primatel Internasional (“Napsindo”) |
PT Infomedia Nusantara (“Infomedia”) |
PT Pro Infokom Indonesia (“PII”) |
F-19
Table of Contents
Telekomunikasi Selular Finance Limited (“TSFL”) |
Telkomsel Finance B.V. (“TFBV”) |
Aria West International Finance B.V. (“AWI BV”) |
PT Balebat Dedikasi Prima (“Balebat”) |
d. Authorization of the financial statements |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-20
Table of Contents
a. Basis for preparation of financial statements |
b. Principles of consolidation |
c. Transactions with related parties |
d. Acquisitions of subsidiaries |
F-21
Table of Contents
e. Foreign currency translation |
f. Cash and cash equivalents |
g. Investments |
i. Time deposits |
ii. Investments in securities |
iii. Investments in associated companies |
F-22
Table of Contents
iv. Other investments |
h. Trade and other accounts receivable |
F-23
Table of Contents
i. Inventories |
j. Prepaid expenses |
k. Property, plant and equipment — direct acquisitions |
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 |
F-24
Table of Contents
l. Property, plant and equipment under capital leases |
m. Revenue-sharing arrangements |
F-25
Table of Contents
n. Joint operation schemes |
o. Deferred charges for landrights |
p. Revenue and expense recognition |
i. Fixed line telephone revenues |
ii. Cellular and fixed wireless telephone revenues |
1. Sale of starter packs is recognized as revenue upon delivery of the starter packs to distributors, dealers or directly to customers. | |
2. Sale of pulse reload vouchers is recognized initially as unearned income and recognized proportionately as revenue based on successful calls made by the subscribers or whenever the unused stored value of the voucher has expired. |
F-26
Table of Contents
iii. Interconnection revenues |
q. Employee benefits |
i. Pension and post-retirement health care benefit plans |
ii. Long service awards (“LSA”) |
iii. Early retirement benefits |
r. Income tax |
F-27
Table of Contents
s. Earnings per share and earnings per American Depositary Share (“ADS”) |
t. Segment information |
u. Derivative instruments |
v. Use of estimates |
3. | TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS |
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4. | CHANGES IN METHODS OF ACCOUNTING |
a. Employee Benefits |
As | |||||||||
Previously | |||||||||
Reported | As Restated | ||||||||
Balance sheet: | �� | ||||||||
Assets: | |||||||||
Prepaid pension benefit costs | 91,262 | 1,362 | |||||||
Total non-current assets | 47,065,158 | 46,975,258 | |||||||
Total assets | 56,269,092 | 56,179,192 | |||||||
Liabilities: | |||||||||
Deferred income tax liabilities — net | 3,352,171 | 2,927,567 | |||||||
Accrued long service awards | 572,303 | 449,841 | |||||||
Accrued post-retirement health care benefits | 1,841,146 | 2,983,707 | |||||||
Accrued pension and other post-retirement benefits costs | 32,007 | 1,479,918 | |||||||
Total non-current liabilities | 19,392,276 | 21,435,682 |
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As | |||||||||
Previously | |||||||||
Reported | As Restated | ||||||||
Stockholders’ equity: | |||||||||
Retained earnings — unappropriated | 19,139,393 | 17,006,087 | |||||||
Total stockholders’ equity | 20,261,342 | 18,128,036 | |||||||
Statement of income: | |||||||||
Operating expenses — personnel | 5,570,778 | 4,909,965 | |||||||
Total operating expenses | 20,020,699 | 19,359,886 | |||||||
Operating income | 13,927,067 | 14,587,880 | |||||||
Income before tax | 12,088,582 | 12,749,395 | |||||||
Tax expense | 4,003,072 | 4,178,526 | |||||||
Net income | 6,129,209 | 6,614,568 | |||||||
Net income per share — in full Rupiah amount | 304.03 | 328.10 | |||||||
Net income per ADS — in full Rupiah amount | 12,161.13 | 13,124.14 |
b. Restructuring Transactions Between Entities Under Common Control |
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5. | ACQUISITION OF KSO INVESTORS AND KSO IV |
a. Dayamitra |
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b. Pramindo |
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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 | ||||
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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 | |||
d. Amendment of the Joint Operation Scheme in Regional Division IV (“KSO IV”) |
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• | 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 | |||
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e. Pro forma operating results related to acquisition of KSO investors and KSO IV |
Unaudited | ||||||||
2003 | 2004 | |||||||
Operating revenues | 28,343,447 | 34,020,663 | ||||||
Operating income | 11,687,955 | 13,916,465 | ||||||
Income before tax | 11,399,321 | 12,071,780 | ||||||
Net income | 6,509,255 | 6,117,619 | ||||||
Net income per share — in full Rupiah amount | 322.88 | 303.45 | ||||||
Net income per ADS — in full Rupiah amount | 12,915.19 | 12,138.13 |
6. | CASH AND CASH EQUIVALENTS |
2004 | 2005 | ||||||||||
Cash on hand | 8,631 | 6,070 | |||||||||
Cash in banks | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Mandiri | 192,056 | 89,128 | |||||||||
Bank Negara Indonesia | 158,519 | 54,590 | |||||||||
Bank Rakyat Indonesia | 10,712 | 5,095 | |||||||||
Bank Pos Nusantara | 1,278 | 879 | |||||||||
Total | 362,565 | 149,692 | |||||||||
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2004 | 2005 | ||||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 98,951 | 55,797 | |||||||||
Bank Negara Indonesia | 1,765 | 2,701 | |||||||||
Bank Rakyat Indonesia | 612 | 657 | |||||||||
Total | 101,328 | 59,155 | |||||||||
Total — related parties | 463,893 | 208,847 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
ABN AMRO Bank | 81,184 | 34,453 | |||||||||
Deutsche Bank | 9,173 | 15,954 | |||||||||
Bank Bukopin | 10,190 | 15,800 | |||||||||
Bank Central Asia | 5,906 | 8,398 | |||||||||
Citibank NA | 362 | 1,595 | |||||||||
Lippo Bank | 2,265 | 1,361 | |||||||||
Bank Mega | 689 | 1,321 | |||||||||
Bank Buana Indonesia | 45 | 1,189 | |||||||||
Bank Muamalat Indonesia | 75 | 601 | |||||||||
Bank Niaga | 1,884 | 498 | |||||||||
Bank Danamon | 114 | 324 | |||||||||
Bank Bumi Putra Indonesia | — | 242 | |||||||||
Bank Internasional Indonesia | 26 | 53 | |||||||||
Total | 111,913 | 81,789 | |||||||||
Foreign currencies | |||||||||||
ABN AMRO Bank | 95 | 54,575 | |||||||||
Citibank NA | 4,416 | 5,737 | |||||||||
Deutsche Bank | 541 | 5,309 | |||||||||
Bank Central Asia | 39 | 142 | |||||||||
Standard Chartered Bank | 322 | 99 | |||||||||
Bank Internasional Indonesia | 31 | 30 | |||||||||
The Bank of Tokyo Mitsubishi | 22 | 46 | |||||||||
Total | 5,466 | 65,938 | |||||||||
Total — third parties | 117,379 | 147,727 | |||||||||
Total cash in banks | 581,272 | 356,574 | |||||||||
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2004 | 2005 | ||||||||||
Time deposits | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Mandiri | 794,371 | 1,510,009 | |||||||||
Bank Negara Indonesia | 206,195 | 660,915 | |||||||||
Bank Rakyat Indonesia | 231,805 | 246,415 | |||||||||
Bank Tabungan Negara | 75,960 | 132,455 | |||||||||
Bank Syariah Mandiri | — | 7,000 | |||||||||
Total | 1,308,331 | 2,556,794 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | — | 293,115 | |||||||||
Bank Negara Indonesia | 139,450 | 98 | |||||||||
Bank Rakyat Indonesia | 32,480 | — | |||||||||
Total | 171,930 | 293,213 | |||||||||
Total — related parties | 1,480,261 | 2,850,007 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Citibank NA | — | 310,100 | |||||||||
Standard Chartered Bank | 698,750 | 177,800 | |||||||||
Bank Niaga | 102,787 | 109,565 | |||||||||
Bank Mega | 98,906 | 99,575 | |||||||||
Bank Bukopin | 98,710 | 89,255 | |||||||||
Bank Jabar | 89,648 | 85,590 | |||||||||
Bank Danamon | 61,115 | 63,915 | |||||||||
Bank NISP | 53,650 | 50,680 | |||||||||
Bank BTPN | — | 43,255 | |||||||||
Bank Bumi Putra Indonesia | 18,303 | 19,643 | |||||||||
Bank Syariah Mega Indonesia | 16,000 | 17,000 | |||||||||
Bank Muamalat Indonesia | 7,000 | 9,000 | |||||||||
Bank Yudha Bhakti | — | 6,000 | |||||||||
Bank Nusantara Parahyangan | — | 4,000 | |||||||||
ABN AMRO Bank | 11,000 | — | |||||||||
Total | 1,255,869 | 1,085,378 | |||||||||
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2004 | 2005 | ||||||||||
Foreign currencies | |||||||||||
Deutsche Bank | 1,051,839 | 873,772 | |||||||||
Citibank NA | — | 202,883 | |||||||||
Standard Chartered Bank | 225,208 | — | |||||||||
The Hongkong and Shanghai Banking Corporation | 253,043 | — | |||||||||
Total | 1,530,090 | 1,076,655 | |||||||||
Total — third parties | 2,785,959 | 2,162,033 | |||||||||
Total time deposits | 4,266,220 | 5,012,040 | |||||||||
Total cash and cash equivalents | 4,856,123 | 5,374,684 | |||||||||
2004 | 2005 | |||||||
Rupiah | 3.00%—9.50% | 2.00%—14.50% | ||||||
Foreign currencies | 0.55%—1.95% | 0.60%— 3.70% |
7. | TRADE ACCOUNTS RECEIVABLE |
a. By Debtor |
2004 | 2005 | |||||||
Government agencies | 289,644 | 432,982 | ||||||
KSO Units | 145,810 | 111,599 | ||||||
PT Citra Sari Makmur | 20,127 | 31,242 | ||||||
PT Patra Telekomunikasi Indonesia | 8,824 | 2,921 | ||||||
PT Aplikanusa Lintasarta | 8,780 | 437 | ||||||
Others | 10,847 | 35,464 | ||||||
Total | 484,032 | 614,645 | ||||||
Allowance for doubtful accounts | (64,928 | ) | (84,275 | ) | ||||
Net | 419,104 | 530,370 | ||||||
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2004 | 2005 | |||||||
Residential and business subscribers | 3,213,598 | 3,452,176 | ||||||
Overseas international carriers | 143,539 | 196,756 | ||||||
Total | 3,357,137 | 3,648,932 | ||||||
Allowance for doubtful accounts | (457,138 | ) | (601,393 | ) | ||||
Net | 2,899,999 | 3,047,539 | ||||||
b. By Age |
2004 | 2005 | |||||||
Up to 6 months | 396,425 | 505,519 | ||||||
7 to 12 months | 14,947 | 27,390 | ||||||
13 to 24 months | 19,659 | 25,574 | ||||||
More than 24 months | 53,001 | 56,162 | ||||||
Total | 484,032 | 614,645 | ||||||
Allowance for doubtful accounts | (64,928 | ) | (84,275 | ) | ||||
Net | 419,104 | 530,370 | ||||||
2004 | 2005 | |||||||
Up to 3 months | 2,773,992 | 2,938,326 | ||||||
More than 3 months | 583,145 | 710,606 | ||||||
Total | 3,357,137 | 3,648,932 | ||||||
Allowance for doubtful accounts | (457,138 | ) | (601,393 | ) | ||||
Net | 2,899,999 | 3,047,539 | ||||||
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c. By Currency |
2004 | 2005 | |||||||
Rupiah | 447,657 | 598,533 | ||||||
United States Dollar | 36,375 | 16,112 | ||||||
Total | 484,032 | 614,645 | ||||||
Allowance for doubtful accounts | (64,928 | ) | (84,275 | ) | ||||
Net | 419,104 | 530,370 | ||||||
2004 | 2005 | |||||||
Rupiah | 3,198,875 | 3,444,914 | ||||||
United States Dollar | 158,262 | 204,018 | ||||||
Total | 3,357,137 | 3,648,932 | ||||||
Allowance for doubtful accounts | (457,138 | ) | (601,393 | ) | ||||
Net | 2,899,999 | 3,047,539 | ||||||
d. Movements in the allowance for doubtful accounts |
2003 | 2004 | 2005 | ||||||||||
Beginning balance | 502,989 | 443,892 | 522,066 | |||||||||
Additions | 296,099 | 342,895 | 478,005 | |||||||||
Bad debts write-off | (355,196 | ) | (264,721 | ) | (314,403 | ) | ||||||
Ending balance | 443,892 | 522,066 | 685,668 | |||||||||
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8. | INVENTORIES |
2004 | 2005 | |||||||
Components | 53,611 | 50,520 | ||||||
Allowance for obsolescence | (20,188 | ) | (8,605 | ) | ||||
Net | 33,423 | 41,915 | ||||||
Modules | 88,259 | 103,520 | ||||||
Allowance for obsolescence | (34,063 | ) | (39,553 | ) | ||||
Net | 54,196 | 63,967 | ||||||
SIM cards, RUIM cards and prepaid voucher blanks | 115,948 | 114,634 | ||||||
Allowance for obsolescence | (482 | ) | (189 | ) | ||||
Net | 115,466 | 114,445 | ||||||
Total | 203,085 | 220,327 | ||||||
2004 | 2005 | |||||||
Beginning balance | 40,489 | 54,733 | ||||||
Additions | 14,800 | 10,968 | ||||||
Inventory write-off | (556 | ) | (17,354 | ) | ||||
Ending balance | 54,733 | 48,347 | ||||||
9. | PREPAID EXPENSES |
2004 | 2005 | |||||||
Rental | 268,287 | 112,078 | ||||||
Salary | 218,329 | 289,632 | ||||||
Frequency license | — | 275,359 | ||||||
Insurance | 98,485 | 66,449 | ||||||
Telephone directory issuance cost | 27,246 | 26,527 | ||||||
Other | 15,722 | 7,824 | ||||||
Total | 628,069 | 777,869 | ||||||
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10. | OTHER CURRENT ASSETS |
2004 | 2005 | |||||||
Restricted time deposits — Bank Mandiri | 44,608 | 159,537 | ||||||
11. | LONG-TERM INVESTMENTS |
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: | ||||||||||||||||||||||||
Bridge Mobile Pte. Ltd. | 14.29 | — | 9,290 | — | — | 9,290 | ||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | ||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | ||||||||||||||||||
PT Mandara Selular Indonesia | 3.63 | — | — | — | — | — | ||||||||||||||||||
Medianusa Pte. Ltd. | — | 108 | (108 | ) | — | — | — | |||||||||||||||||
894 | 9,182 | — | — | 10,076 | ||||||||||||||||||||
64,648 | 9,182 | 3,420 | 5,363 | 82,613 | ||||||||||||||||||||
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2005 | ||||||||||||||||||||||||
Percentage of | Opening | Equity in | Translation | Ending | ||||||||||||||||||||
Ownership | Balance | Addition | Net Income | Adjustment | Balance | |||||||||||||||||||
Equity method: | �� | |||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 60,116 | — | 2,480 | 3,658 | 66,254 | ||||||||||||||||||
PT Patra Telekomunikasi Indonesia | 40.00 | 12,421 | 4,250 | 8,399 | 25,070 | |||||||||||||||||||
PT Pasifik Satelit Nusantara | 35.50 | — | — | — | — | — | ||||||||||||||||||
72,537 | 4,250 | 10,879 | 3,658 | 91,324 | ||||||||||||||||||||
Cost method: | ||||||||||||||||||||||||
Bridge Mobile Pte. Ltd. | 12.50 | 9,290 | — | — | — | 9,290 | ||||||||||||||||||
PT Batam Bintan Telekomunikasi | 5.00 | 587 | — | — | — | 587 | ||||||||||||||||||
PT Pembangunan Telekomunikasi Indonesia | 3.18 | 199 | — | — | — | 199 | ||||||||||||||||||
PT Mandara Selular Indonesia | 1.33 | — | — | — | — | — | ||||||||||||||||||
10,076 | — | — | — | 10,076 | ||||||||||||||||||||
82,613 | 4,250 | 10,879 | 3,658 | 101,400 | ||||||||||||||||||||
a. PT Citra Sari Makmur (“CSM”) |
b. PT Patra Telekomunikasi Indonesia (“Patrakom”) |
c. PT Pasifik Satelit Nusantara (“PSN”) |
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d. Bridge Mobile Pte. Ltd |
e. PT Batam Bintan Telekomunikasi (“BBT”) |
f. PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) |
g. PT Mandara Selular Indonesia (“Mobisel”) |
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h. Medianusa Pte. Ltd. |
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12. | PROPERTY, PLANT AND EQUIPMENT |
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 | ) | — |
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January 1, | KSO IV | December 31, | |||||||||||||||||||||||
2004 | Acquisitions | Additions | Deductions | Reclassifications | 2004 | ||||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 239 | — | 11 | — | 163 | 413 | |||||||||||||||||||
Total | 58,356,699 | 2,377,134 | 8,820,410 | (890,663 | ) | 205,682 | 68,869,262 | ||||||||||||||||||
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 | |||||||||||||||||||||||
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January 1, | Write-down of | December 31, | ||||||||||||||||||||||||
2005 | Additions | Assets | Deductions | Reclassifications | 2005 | |||||||||||||||||||||
At cost or revalued amounts: | ||||||||||||||||||||||||||
Direct acquisitions | ||||||||||||||||||||||||||
Land | 327,339 | 30,444 | — | (22,104 | ) | (1,232 | ) | 334,447 | ||||||||||||||||||
Buildings | 2,170,055 | 65,622 | — | (4,553 | ) | 336,435 | 2,567,559 | |||||||||||||||||||
Switching equipment | 10,360,100 | 324,748 | — | (13,547 | ) | 158,580 | 10,829,881 | |||||||||||||||||||
Telegraph, telex and data communication equipment | 213,855 | 2,410 | — | (120 | ) | (353 | ) | 215,792 | ||||||||||||||||||
Transmission installation and equipment | 26,922,143 | 846,944 | — | (28,747 | ) | 3,813,794 | 31,554,134 | |||||||||||||||||||
Satellite, earth station and equipment | 3,354,803 | 697,304 | — | (427,836 | ) | 1,319,733 | 4,944,004 | |||||||||||||||||||
Cable network | 17,701,074 | 868,823 | — | (20,853 | ) | 148,456 | 18,697,500 | |||||||||||||||||||
Power supply | 1,194,710 | 73,492 | — | (7,198 | ) | 51,391 | 1,312,395 | |||||||||||||||||||
Data processing equipment | 3,786,741 | 261,442 | — | (6,132 | ) | 3,800,322 | 7,842,373 | |||||||||||||||||||
Other telecommunications peripherals | 824,634 | 69,469 | — | (5,675 | ) | 15,723 | 904,151 | |||||||||||||||||||
Office equipment | 661,666 | 69,501 | — | (1,772 | ) | (79,457 | ) | 649,938 | ||||||||||||||||||
Vehicles | 191,403 | 975 | — | (5,090 | ) | (905 | ) | 186,383 | ||||||||||||||||||
Other equipment | 112,626 | 2,923 | — | — | (5 | ) | 115,544 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 53,412 | 235,354 | — | — | (266,991 | ) | 21,775 | |||||||||||||||||||
Switching equipment | — | 13,172 | — | — | — | 13,172 | ||||||||||||||||||||
Transmission installation and equipment | 175,131 | 7,518,740 | — | — | (6,979,472 | ) | 714,399 | |||||||||||||||||||
Satellite, earth station and equipment | 776,899 | — | — | — | (776,766 | ) | 133 | |||||||||||||||||||
Cable network | 25,508 | 213 | — | — | (21,950 | ) | 3,771 | |||||||||||||||||||
Power supply | 69 | 8,711 | — | — | (8,719 | ) | 61 | |||||||||||||||||||
Data processing equipment | 16,681 | 2,167,465 | — | — | (616,886 | ) | 1,567,260 | |||||||||||||||||||
Other telecommunications peripherals | — | 37,825 | — | — | (34,301 | ) | 3,524 |
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January 1, | Write-down of | December 31, | |||||||||||||||||||||||
2005 | Additions | Assets | Deductions | Reclassifications | 2005 | ||||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 413 | — | — | — | (83 | ) | 330 | ||||||||||||||||||
Transmission installation and equipment | — | 257,380 | — | — | — | 257,380 | |||||||||||||||||||
Total | 68,869,262 | 13,552,957 | — | (543,627 | ) | 857,314 | 82,735,906 | ||||||||||||||||||
Accumulated depreciation and impairment: | |||||||||||||||||||||||||
Direct acquisitions | |||||||||||||||||||||||||
Buildings | 952,638 | 143,894 | — | (1,789 | ) | 15,095 | 1,109,838 | ||||||||||||||||||
Switching equipment | 5,601,273 | 766,155 | — | (13,547 | ) | 118,711 | 6,472,592 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 198,653 | 3,004 | — | (120 | ) | (10 | ) | 201,527 | |||||||||||||||||
Transmission installation and equipment | 8,208,259 | 3,281,208 | 552,828 | (15,239 | ) | (35,774 | ) | 11,991,282 | |||||||||||||||||
Satellite, earth station and equipment | 1,532,282 | 220,658 | — | (427,836 | ) | (19,043 | ) | 1,306,061 | |||||||||||||||||
Cable network | 8,235,661 | 2,019,324 | — | (21,012 | ) | 97,771 | 10,331,744 | ||||||||||||||||||
Power supply | 904,780 | 84,438 | — | (7,198 | ) | 50,170 | 1,032,190 | ||||||||||||||||||
Data processing equipment | 2,112,821 | 796,921 | — | (6,132 | ) | 34,521 | 2,938,131 | ||||||||||||||||||
Other telecommunications peripherals | 712,578 | 76,882 | — | (5,675 | ) | 10,198 | 793,983 | ||||||||||||||||||
Office equipment | 562,757 | 43,274 | — | (1,562 | ) | (61,331 | ) | 543,138 | |||||||||||||||||
Vehicles | 180,864 | 4,758 | — | (5,089 | ) | (932 | ) | 179,601 | |||||||||||||||||
Other equipment | 94,527 | 7,042 | — | — | (5 | ) | 101,564 | ||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 70 | 65 | — | — | (65 | ) | 70 | ||||||||||||||||||
Transmission installation and equipment | — | 27,002 | 63,940 | — | — | 90,942 | |||||||||||||||||||
Total | 29,297,163 | 7,474,625 | 616,768 | (505,199 | ) | 209,306 | 37,092,663 | ||||||||||||||||||
Net Book Value | 39,572,099 | 45,643,243 | |||||||||||||||||||||||
2004 | 2005 | |||||||
Proceeds from sale of property, plant and equipment | 67,196 | 84,621 | ||||||
Net book value | 93,285 | 38,428 | ||||||
(Loss) gain on disposal | (26,089 | ) | 46,193 | |||||
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Table of Contents
F-52
Table of Contents
Year | Rupiah | |||
2006 | 73,443 | |||
2007 | 73,443 | |||
2008 | 73,443 | |||
2009 | 73,443 | |||
2010 | 73,443 | |||
Thereafter | 142,775 | |||
Total minimum lease payments | 509,990 | |||
Interest | (258,252 | ) | ||
Net present value of minimum lease payments | 251,738 | |||
Current maturities | (16,201 | ) | ||
Long-term portion | 235,537 | |||
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Table of Contents
13. | PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS |
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 | |||||||||||||||
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 | |||||||||||||||||||
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January 1, | December 31, | ||||||||||||||||||||
2005 | Additions | Deductions | Reclassifications | 2005 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,382 | 46 | — | — | 3,428 | ||||||||||||||||
Buildings | 13,422 | 338 | — | (5,739 | ) | 8,021 | |||||||||||||||
Switching equipment | 418,137 | 25,419 | — | (168,521 | ) | 275,035 | |||||||||||||||
Transmission installation and equipment | 259,119 | 36,214 | — | (11,895 | ) | 283,438 | |||||||||||||||
Cable network | 396,140 | 13,629 | — | (141,356 | ) | 268,413 | |||||||||||||||
Other telecommunications peripherals | 103,497 | 126,187 | — | (60,380 | ) | 169,304 | |||||||||||||||
Total | 1,193,697 | 201,833 | — | (387,891 | ) | 1,007,639 | |||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,601 | 170 | — | — | 1,771 | ||||||||||||||||
Buildings | 7,077 | 480 | — | (3,191 | ) | 4,366 | |||||||||||||||
Switching equipment | 286,122 | 25,421 | — | (125,854 | ) | 185,689 | |||||||||||||||
Transmission installation and equipment | 68,966 | 26,223 | — | (11,895 | ) | 83,294 | |||||||||||||||
Cable network | 227,517 | 21,257 | — | (134,648 | ) | 114,126 | |||||||||||||||
Other telecommunications peripherals | 103,287 | 22,563 | — | (56,862 | ) | 68,988 | |||||||||||||||
Total | 694,570 | 96,114 | — | (332,450 | ) | 458,234 | |||||||||||||||
Net Book Value | 499,127 | 549,405 | |||||||||||||||||||
2004 | 2005 | |||||||
Gross amount | 1,193,697 | 1,007,639 | ||||||
Accumulated amortization: | ||||||||
Beginning balance | (984,954 | ) | (833,365 | ) | ||||
Addition (Note 35) | (82,033 | ) | (136,681 | ) | ||||
Deduction | 233,622 | 387,891 | ||||||
Ending balance | (833,365 | ) | (582,155 | ) | ||||
Net | 360,332 | 425,484 | ||||||
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Table of Contents
14. | ADVANCES AND OTHER NON-CURRENT ASSETS |
2004 | 2005 | |||||||
Prepaid rental, non-current portion | — | 428,564 | ||||||
Advances for purchase of property, plant and equipment | 1,070,065 | 253,123 | ||||||
Security deposits | 28,345 | 30,570 | ||||||
Restricted cash | 114,202 | 90,749 | ||||||
Deferred landrights charges | 93,843 | 87,863 | ||||||
Others | 65,896 | 55,168 | ||||||
Total | 1,372,351 | 946,037 | ||||||
15. | GOODWILL AND OTHER INTANGIBLE ASSETS |
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 5a) | — | 231,477 | 231,477 | ||||||||||
Addition — acquisition of KSO IV (Note 5d) | — | 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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Other | |||||||||||||
Intangible | |||||||||||||
Goodwill | Assets | Total | |||||||||||
Gross carrying amount as of December 31, 2005 | 106,348 | 7,151,111 | 7,257,459 | ||||||||||
Accumulated amortization: | |||||||||||||
Balance as of December 31, 2004 | (76,221 | ) | (1,769,813 | ) | (1,846,034 | ) | |||||||
Amortization expense for 2005 | (21,270 | ) | (896,883 | ) | (918,153 | ) | |||||||
Balance as of December 31, 2005 | (97,491 | ) | (2,666,696 | ) | (2,764,187 | ) | |||||||
Net book value | 8,857 | 4,484,415 | 4,493,272 | ||||||||||
Weighted-average amortization period | 5 years | 7.97 years |
16. | ESCROW ACCOUNTS |
2004 | 2005 | |||||||
Citibank N.A., Singapore | 30,059 | 126,128 | ||||||
Bank Mandiri | 6,222 | 6,369 | ||||||
36,281 | 132,497 | |||||||
a. Citibank N.A., Singapore |
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Table of Contents
b. Bank Mandiri |
17. | TRADE ACCOUNTS PAYABLE |
2004 | 2005 | ||||||||
Related parties | |||||||||
Payables to other telecommunications carriers | 196,127 | 99,980 | |||||||
Concession fees | 254,665 | 648,950 | |||||||
Purchases of equipment, materials and services | 192,302 | 265,459 | |||||||
Total | 643,094 | 1,014,389 | |||||||
Third parties | |||||||||
Purchases of equipment, materials and services | 3,366,320 | 4,011,444 | |||||||
Payables related to revenue-sharing arrangements | 220,158 | 106,195 | |||||||
Payables to other telecommunication providers | 24,978 | 163,646 | |||||||
Total | 3,611,456 | 4,281,285 | |||||||
Total | 4,254,550 | 5,295,674 | |||||||
2004 | 2005 | |||||||
Rupiah | 3,613,715 | 3,112,303 | ||||||
U.S. Dollar | 638,861 | 1,381,473 | ||||||
Euro | — | 796,343 | ||||||
Japanese Yen | 715 | 5,508 | ||||||
Great Britain Pound Sterling | 1,092 | 14 | ||||||
Singapore Dollar | 147 | 33 | ||||||
Myanmar KYAT | 20 | — | ||||||
Total | 4,254,550 | 5,295,674 | ||||||
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18. | ACCRUED EXPENSES |
2004 | 2005 | |||||||
Salaries and benefits | 321,237 | 452,413 | ||||||
Operations, maintenance and telecommunications services | 324,329 | 411,075 | ||||||
General, administrative and marketing | 242,597 | 444,101 | ||||||
Interest and bank charges | 163,203 | 134,299 | ||||||
Loss on procurement commitments (Note 12) | — | 79,359 | ||||||
Total | 1,051,366 | 1,521,247 | ||||||
19. | UNEARNED INCOME |
2004 | 2005 | |||||||
Prepaid pulse reload vouchers | 1,017,530 | 1,582,762 | ||||||
Other telecommunication services | 7,669 | 3,917 | ||||||
Other | 4,801 | 6,039 | ||||||
Total | 1,030,000 | 1,592,718 | ||||||
20. | SHORT-TERM BANK LOANS |
2004 | 2005 | |||||||
Bank Central Asia | 455,700 | 170,000 | ||||||
ABN AMRO Bank | 604,500 | — | ||||||
Bank Mandiri | 41,433 | — | ||||||
Bank Niaga | — | 3,800 | ||||||
Total | 1,101,633 | 173,800 | ||||||
a. Bank Central Asia |
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Table of Contents
b. ABN AMRO Bank |
c. Bank Mandiri |
d. Bank Niaga |
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Table of Contents
e. The Hongkong and Shanghai Banking Corporation (“HSBC”) |
21. | MATURITIES OF LONG-TERM LIABILITIES |
a. Current maturities |
Notes | 2004 | 2005 | ||||||||||
Two-step loans | 22 | 655,422 | 569,278 | |||||||||
Medium-term Notes | 23b | 468,976 | 144,510 | |||||||||
Bank loans | 24 | 602,516 | 634,542 | |||||||||
Liabilities of business acquisitions | 25 | 573,908 | 862,394 | |||||||||
Obligations under capital leases | 12 | — | 16,201 | |||||||||
Total | 2,300,822 | 2,226,925 | ||||||||||
b. Long-term portion |
(In billions of Rupiah) | ||||||||||||||||||||||||||||
Notes | Total | 2007 | 2008 | 2009 | 2010 | Thereafter | ||||||||||||||||||||||
Two-step loans | 22 | 4,760.2 | 497.1 | 455.6 | 441.4 | 418.0 | 2,948.1 | |||||||||||||||||||||
Bonds | 23a | 991.9 | 991.9 | — | — | — | — | |||||||||||||||||||||
Medium-term Notes | 23b | 464.8 | 464.8 | — | — | — | — | |||||||||||||||||||||
Bank loans | 24 | 1,752.1 | 697.0 | 473.7 | 233.3 | 232.4 | 115.7 | |||||||||||||||||||||
Liabilities of business acquisitions | 25 | 3,128.0 | 735.9 | 818.2 | 797.8 | 776.1 | — | |||||||||||||||||||||
Obligations under capital leases | 12 | 235.5 | 20.5 | 26.1 | 33.0 | 41.9 | 114.0 | |||||||||||||||||||||
Total | 11,332.5 | 3,407.2 | 1,773.6 | 1,505.5 | 1,468.4 | 3,177.8 | ||||||||||||||||||||||
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22. | TWO-STEP LOANS |
Interest Rate | Outstanding | |||||||||||||||
Creditors | 2004 | 2005 | 2004 | 2005 | ||||||||||||
Overseas banks | 3.10% — 13.25% | 3.10% — 10.71% | 5,889,703 | 5,250,829 | ||||||||||||
Consortium of contractors | 3.20% — 13.25% | 3.20% | 129,002 | 78,648 | ||||||||||||
Total | 6,018,705 | 5,329,477 | ||||||||||||||
Current maturities | (655,422 | ) | (569,278 | ) | ||||||||||||
Long-term portion | 5,363,283 | 4,760,199 | ||||||||||||||
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2004 | 2005 | 2004 | 2005 | ||||||||||||
U.S. Dollar | 4.00% — 7.98% | 4.00% — 6.81% | 2,397,437 | 2,232,752 | ||||||||||||
Rupiah | 8.30% — 13.25% | 8.3% — 10.71% | 2,098,948 | 1,794,149 | ||||||||||||
Japanese Yen | 3.10% | 3.10% | 1,393,318 | 1,223,928 | ||||||||||||
Total | 5,889,703 | 5,250,829 | ||||||||||||||
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Table of Contents
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2004 | 2005 | 2004 | 2005 | ||||||||||||
Japanese Yen | 3.20% | 3.20% | 119,078 | 78,648 | ||||||||||||
Rupiah | 8.30% — 13.25% | 8.30% | 9,924 | — | ||||||||||||
Total | 129,002 | 78,648 | ||||||||||||||
23. | NOTES AND BONDS |
2004 | 2005 | |||||||
Bonds | 986,564 | 991,850 | ||||||
Medium-term Notes | 1,077,703 | 609,329 | ||||||
Guaranteed Notes | 736,174 | — | ||||||
Total | 2,800,441 | 1,601,179 | ||||||
Current maturities | (468,976 | ) | (144,510 | ) | ||||
Long-term portion | 2,331,465 | 1,456,669 | ||||||
a. Bonds |
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2004 | 2005 | |||||||
Principal | 1,000,000 | 1,000,000 | ||||||
Bond issuance costs | (13,436 | ) | (8,150 | ) | ||||
Net | 986,564 | 991,850 | ||||||
b. Medium-term Notes |
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Table of Contents
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 | |||||||||||
2004 | 2005 | |||||||
Principal | 1,080,000 | 610,000 | ||||||
Debt issuance costs | (2,297 | ) | (671 | ) | ||||
1,077,703 | 609,329 | |||||||
Current maturities | (468,976 | ) | (144,510 | ) | ||||
Long-term portion | 608,727 | 464,819 | ||||||
c. Guaranteed Notes |
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24. | BANK LOANS |
2004 | 2005 | |||||||||||||||||||||||
Outstanding | Outstanding | |||||||||||||||||||||||
Original | Original | |||||||||||||||||||||||
Total Facility | Currency | Rupiah | Currency | Rupiah | ||||||||||||||||||||
Lenders | Currency | (in millions) | (in millions) | Equivalent | (in millions) | Equivalent | ||||||||||||||||||
The Export-Import Bank of Korea | US$ | 124.0 | 59.1 | 549,449 | 117.6 | 1,156,296 | ||||||||||||||||||
Citibank N.A | US$ | 113.3 | 85.9 | 798,197 | 62.5 | 614,501 | ||||||||||||||||||
EUR | 73.4 | 51.4 | 649,758 | 36.7 | 427,718 | |||||||||||||||||||
Bank Central Asia | Rp | 173,000.0 | — | 143,489 | — | 86,093 | ||||||||||||||||||
Consortium of banks | Rp | 150,000.0 | — | 117,174 | — | 74,890 | ||||||||||||||||||
Bank Mandiri | Rp | 82,425.0 | — | 59,729 | — | 14,918 | ||||||||||||||||||
Bank Niaga | Rp | 8,800.0 | — | 7,330 | — | 7,229 | ||||||||||||||||||
Bank Bukopin | Rp | 5,300.0 | — | — | — | 5,001 | ||||||||||||||||||
Deutsche Bank | Rp | — | — | 41,009 | — | — | ||||||||||||||||||
Syndicated banks | Rp | — | — | 8,088 | — | — | ||||||||||||||||||
US$ | — | 0.4 | 4,092 | — | — | |||||||||||||||||||
Total | 2,378,315 | 2,386,646 | ||||||||||||||||||||||
Current maturities of bank loans | (602,516 | ) | (634,542 | ) | ||||||||||||||||||||
Long-term portion | 1,775,799 | 1,752,104 | ||||||||||||||||||||||
a. The Export-Import Bank of Korea |
b. Citibank N.A. |
1. | Hermes Export Facility |
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Table of Contents
Amount | ||||||||
EUR | Rupiah | |||||||
Year | (in millions) | Equivalent | ||||||
2006 | 14.7 | 171,087 | ||||||
2007 | 14.7 | 171,087 | ||||||
2008 | 7.3 | 85,544 | ||||||
36.7 | 427,718 | |||||||
2. | High Performance Backbone (“HP Backbone”) Loans |
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3. | EKN-Backed Facility |
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Table of Contents
Amount | ||||||||
US$ | Rupiah | |||||||
Year | (in millions) | Equivalent | ||||||
2006 | 15.5 | 152,202 | ||||||
2007 | 15.5 | 152,202 | ||||||
2008 | 9.6 | 95,175 | ||||||
40.6 | 399,579 | |||||||
2004 | 2005 | |||||||||||||||
Foreign | Foreign | |||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||
Hermes Export Facility | EUR 51.4 | 649,758 | EUR 36.7 | 427,718 | ||||||||||||
HP Backbone loans | US$ | 29.8 | 276,727 | US$ | 21.9 | 214,922 | ||||||||||
EKN-Backed Facility | US$ | 56.1 | 521,470 | US$ | 40.6 | 399,579 | ||||||||||
Total | 1,447,955 | 1,042,219 | ||||||||||||||
Current maturities | (402,983 | ) | (401,013 | ) | ||||||||||||
Long-term portion | 1,044,972 | 641,206 | ||||||||||||||
c. Bank Central Asia |
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Table of Contents
d. Consortium of banks |
e. Bank Mandiri |
F-71
Table of Contents
f. Bank Niaga |
F-72
Table of Contents
g. Bank Bukopin |
h. Deutsche Bank AG |
i. Syndicated banks (Internet Protocol Backbone (“IP Backbone”) Loan) |
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2004 | 2005 | |||||||
Rupiah | 10.83% — 11.63% | 11.125% | ||||||
U.S. Dollar | 3.31% — 4.88% | 4.875% |
25. | LIABILITIES OF BUSINESS ACQUISITIONS |
2004 | 2005 | ||||||||
AWI transaction(Note 5c) | |||||||||
PT Aria Infotek | 479,373 | 394,294 | |||||||
The Asian Infrastructure Fund | 114,136 | 93,879 | |||||||
MediaOne International I B.V | 319,582 | 262,863 | |||||||
Less discount on promissory notes | (90,173 | ) | (57,298 | ) | |||||
822,918 | 693,738 | ||||||||
Dayamitra transaction(Note 5a) | |||||||||
TM Communication (HK) Ltd. | 139,752 | 147,791 | |||||||
Less discount on promissory notes | (11,883 | ) | (2,519 | ) | |||||
127,869 | 145,272 | ||||||||
KSO IV transaction(Note 5d) | |||||||||
MGTI | 4,305,125 | 3,868,433 | |||||||
Less discount | (938,687 | ) | (717,090 | ) | |||||
3,366,438 | 3,151,343 | ||||||||
Total | 4,317,225 | 3,990,353 | |||||||
Current maturity — net of discount (Note 21a) | (573,908 | ) | (862,394 | ) | |||||
Long-term portion — net of discount | 3,743,317 | 3,127,959 | |||||||
26. | MINORITY INTEREST |
2004 | 2005 | ||||||||
Minority interest in net assets of subsidiaries: | |||||||||
Telkomsel | 4,857,089 | 6,208,354 | |||||||
Infomedia | 80,883 | 96,835 | |||||||
PII | 456 | — | |||||||
GSD | 4 | 4 | |||||||
Total | 4,938,432 | 6,305,193 | |||||||
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2003 | 2004 | 2005 | |||||||||||
Minority interest in net income (loss) of subsidiaries: | |||||||||||||
Telkomsel | 1,482,897 | 1,915,543 | 3,026,029 | ||||||||||
Infomedia | 22,399 | 37,088 | 37,940 | ||||||||||
Dayamitra | 11,584 | 9,139 | — | ||||||||||
Indonusa | (2,351 | ) | (1,959 | ) | — | ||||||||
Napsindo | (8,541 | ) | (2,068 | ) | — | ||||||||
PII | (2,511 | ) | (1,443 | ) | — | ||||||||
GSD | 1 | 1 | 2 | ||||||||||
Total | 1,503,478 | 1,956,301 | 3,063,971 | ||||||||||
2004 | ||||||||||||||
Percentage of | Total Paid-up | |||||||||||||
Description | Number of 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 | |||||||||||
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2005 | ||||||||||||||
Percentage of | Total Paid-up | |||||||||||||
Description | Number of 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.) | 1,992,333,765 | 9.88 | 498,083 | |||||||||||
The Bank of New York | 1,291,002,696 | 6.41 | 322,751 | |||||||||||
Board of Commissioners | ||||||||||||||
Petrus Sartono | 19,116 | — | 5 | |||||||||||
Board of Directors | ||||||||||||||
Garuda Sugardo | 16,524 | — | 4 | |||||||||||
Abdul Haris | 1,000 | — | — | |||||||||||
John Welly | 21,712 | — | 5 | |||||||||||
Guntur Siregar | 19,980 | — | 5 | |||||||||||
Public (below 5% each) | 6,556,113,775 | 32.52 | 1,639,029 | |||||||||||
Total | 20,159,999,280 | 100.00 | 5,040,000 | |||||||||||
28. | ADDITIONAL PAID-IN CAPITAL |
2004 | 2005 | |||||||
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 | ||||||
29. | DIFFERENCE IN VALUE OF RESTRUCTURING TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL |
Cross-ownership transactions and acquisition of Pramindo |
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”); |
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iii. Acquisition by Indosat of the Company’s 37.66% equity interest in PT Aplikanusa Lintasarta (“Lintasarta”) and convertible bonds of Rp4,051 million issued by Lintasarta for US$38.0 million (“Lintasarta Transaction”); and | |
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 | ||||||||||||||||||||||||||||
Paid/ | Net Assets/ | Deferred | Change | ||||||||||||||||||||||||||
(Received) | Investment | Income 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 5b) | 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 | ||||||||||||||||||||
Compensation for early termination of exclusive rights |
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30. | TELEPHONE REVENUES |
2003 | 2004 | 2005 | |||||||||||
Fixed lines | |||||||||||||
Local and domestic long-distance usage | 6,561,800 | 7,439,310 | 7,223,137 | ||||||||||
Monthly subscription charges | 1,948,830 | 2,934,899 | 3,289,750 | ||||||||||
Installation charges | 223,130 | 201,313 | 197,266 | ||||||||||
Phone cards | 34,371 | 15,561 | 10,943 | ||||||||||
Others | 128,734 | 53,938 | 60,156 | ||||||||||
Total | 8,896,865 | 10,645,021 | 10,781,252 | ||||||||||
Cellular | |||||||||||||
Air time charges | 7,677,884 | 9,825,738 | 13,666,286 | ||||||||||
Monthly subscription charges | 580,550 | 448,472 | 383,537 | ||||||||||
Connection fee charges | 194,053 | 55,797 | 64,110 | ||||||||||
Features | 6,343 | 91,291 | 457,025 | ||||||||||
Total | 8,458,830 | 10,421,298 | 14,570,958 | ||||||||||
Total Telephone Revenues | 17,355,695 | 21,066,319 | 25,352,210 | ||||||||||
2003 | 2004 | 2005 | ||||||||||
Cellular | 3,908,292 | 5,351,613 | 6,685,138 | |||||||||
International | 184,097 | 641,210 | 854,766 | |||||||||
Other | 69,759 | 195,158 | 202,180 | |||||||||
Total | 4,162,148 | 6,187,981 | 7,742,084 | |||||||||
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2003 | 2004 | 2005 | ||||||||||
Minimum Telkom Revenues | 899,862 | 295,955 | 268,629 | |||||||||
Share in Distributable KSO Revenues | 583,012 | 349,528 | 318,556 | |||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 3,433 | 11,131 | 1,462 | |||||||||
Total | 1,486,307 | 656,614 | 588,647 | |||||||||
2003 | 2004 | 2005 | ||||||||||
SMS | 2,205,058 | 3,562,726 | 5,309,244 | |||||||||
Internet | 325,890 | 554,948 | 711,375 | |||||||||
Data communication | 245,575 | 360,642 | 610,367 | |||||||||
VoIP | 328,284 | 318,854 | 292,750 | |||||||||
e-Business | 3,755 | 11,572 | 10,588 | |||||||||
Total | 3,108,562 | 4,808,742 | 6,934,324 | |||||||||
2003 | 2004 | 2005 | ||||||||||
Leased lines | 247,005 | 443,408 | 347,105 | |||||||||
Satellite transponder lease | 270,860 | 210,901 | 239,531 | |||||||||
Total | 517,865 | 654,309 | 586,636 | |||||||||
2003 | 2004 | 2005 | ||||||||||
Revenue-Sharing Arrangement revenues | 200,085 | 198,543 | 165,601 | |||||||||
Amortization of unearned income (Note 13) | 58,379 | 82,033 | 136,681 | |||||||||
Total | 258,464 | 280,576 | 302,282 | |||||||||
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2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Salaries and related benefits | 1,574,181 | 1,796,914 | 2,165,895 | |||||||||
Vacation pay, incentives and other benefits | 816,055 | 1,156,069 | 1,615,640 | |||||||||
Early retirements | 355,735 | 243,466 | 486,374 | |||||||||
Net periodic post-retirement health care benefit cost (Note 44) | 641,435 | 416,276 | 488,586 | |||||||||
Net periodic pension cost (Note 42) | 190,974 | 572,419 | 532,331 | |||||||||
Employee income tax | 468,805 | 523,787 | 856,451 | |||||||||
Long service awards (Note 43) | 219,239 | 36,861 | 201,878 | |||||||||
Housing | 116,858 | 103,459 | 113,673 | |||||||||
Medical | 9,682 | 12,190 | 18,019 | |||||||||
Other employee benefits (Note 42) | 4,439 | 11,510 | 5,954 | |||||||||
Others | 42,693 | 37,014 | 78,246 | |||||||||
Total | 4,440,096 | 4,909,965 | 6,563,047 | |||||||||
37. | OPERATING EXPENSES — OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES |
2003 | 2004 | 2005 | ||||||||||
Operations and maintenance | 1,744,806 | 2,398,159 | 3,075,092 | |||||||||
Concession fees | 610,719 | 807,309 | 1,257,376 | |||||||||
Cost of phone, SIM and RUIM cards | 181,272 | 366,661 | 582,351 | |||||||||
Electricity, gas and water | 300,432 | 385,662 | 372,526 | |||||||||
Vehicles and supporting facilities | 115,697 | 181,737 | 217,217 | |||||||||
Insurance | 157,075 | 151,297 | 136,378 | |||||||||
Leased lines | 127,021 | 132,829 | 124,253 | |||||||||
Travelling | 29,815 | 42,213 | 33,455 | |||||||||
Others | 71,856 | 63,720 | 117,693 | |||||||||
Total | 3,338,693 | 4,529,587 | 5,916,341 | |||||||||
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2003 | 2004 | 2005 | ||||||||||
Professional fees | 115,598 | 137,355 | 131,047 | |||||||||
Collection expenses | 273,767 | 358,957 | 379,056 | |||||||||
Amortization of goodwill and other intangible assets (Note 15) | 730,659 | 872,330 | 918,153 | |||||||||
Training, education and recruitment | 126,927 | 228,524 | 177,853 | |||||||||
Travel | 144,677 | 192,567 | 171,657 | |||||||||
Security and screening | 110,278 | 143,892 | 164,416 | |||||||||
General and social contribution | 113,785 | 111,838 | 204,326 | |||||||||
Printing and stationery | 50,535 | 80,972 | 50,190 | |||||||||
Meetings | 42,813 | 58,333 | 40,311 | |||||||||
Provision for doubtful accounts and inventory obsolescence | 326,419 | 357,695 | 488,973 | |||||||||
Research and development | 9,111 | 13,225 | 8,396 | |||||||||
Others | 34,208 | 44,159 | 29,573 | |||||||||
Total | 2,078,777 | 2,599,847 | 2,763,951 | |||||||||
39. | INCOME TAX |
a. Prepaid taxes |
2004 | 2005 | ||||||||
The Company | |||||||||
Refundable corporate income tax — overpayment | 38,370 | — | |||||||
38,370 | — | ||||||||
Subsidiaries | |||||||||
Corporate income tax | 34,515 | 13,352 | |||||||
Value added tax | 4,343 | 5,561 | |||||||
38,858 | 18,913 | ||||||||
77,228 | 18,913 | ||||||||
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b. Taxes payable |
2004 | 2005 | |||||||||
The Company | ||||||||||
Income tax | ||||||||||
Article 21 | 35,970 | 64,793 | ||||||||
Article 22 | 3,057 | 5,055 | ||||||||
Article 23 | 25,223 | 46,132 | ||||||||
Article 25 | 94,857 | 117,281 | ||||||||
Article 26 | 31,165 | 1,143 | ||||||||
Article 29 | 508,909 | 376,140 | ||||||||
Value added tax | 101,683 | 256,523 | ||||||||
800,864 | 867,067 | |||||||||
Subsidiaries | ||||||||||
Income tax | ||||||||||
Article 4 | 4,437 | 3,318 | ||||||||
Article 21 | 38,853 | 25,059 | ||||||||
Article 22 | 930 | — | ||||||||
Article 23 | 46,636 | 55,928 | ||||||||
Article 25 | 151,318 | 203,254 | ||||||||
Article 26 | 9,515 | 72,252 | ||||||||
Article 29 | 427,641 | 1,207,247 | ||||||||
Value added tax | 112,285 | 35,640 | ||||||||
791,615 | 1,602,698 | |||||||||
1,592,479 | 2,469,765 | |||||||||
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c. The components of income tax expense (benefit) are as follows: |
2003 | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Current | |||||||||||||
The Company | 1,886,283 | 1,922,238 | 2,034,248 | ||||||||||
Subsidiaries | 1,904,997 | 2,344,873 | 3,685,396 | ||||||||||
3,791,280 | 4,267,111 | 5,719,644 | |||||||||||
Deferred | |||||||||||||
The Company | (198,719 | ) | (330,630 | ) | (694,843 | ) | |||||||
Subsidiaries | 268,529 | 242,045 | 159,086 | ||||||||||
69,810 | (88,585 | ) | (535,757 | ) | |||||||||
3,861,090 | 4,178,526 | 5,183,887 | |||||||||||
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d. Corporate income tax is computed for each individual company as a separate legal entity (consolidated financial statements are not applicable for computing corporate income tax). |
The reconciliation of consolidated income before tax to income before tax attributable to the Company and the consolidated income tax expense are as follows: |
2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Consolidated income before tax | 11,451,795 | 12,749,395 | 16,241,424 | |||||||||
Add back consolidation eliminations | 3,332,176 | 3,936,524 | 5,737,400 | |||||||||
Consolidated income before tax and eliminations | 14,783,971 | 16,685,919 | 21,978,824 | |||||||||
Deduct income before tax of the subsidiaries | (7,009,179 | ) | (8,485,296 | ) | (12,645,854 | ) | ||||||
Income before tax attributable to the Company | 7,774,792 | 8,200,623 | 9,332,970 | |||||||||
Less: Income subject to final tax | (279,142 | ) | (206,601 | ) | (285,075 | ) | ||||||
7,495,650 | 7,994,022 | 9,047,895 | ||||||||||
Tax calculated at progressive rates | 2,248,678 | 2,398,189 | 2,714,351 | |||||||||
Non-taxable income | (1,017,791 | ) | (1,181,983 | ) | (1,724,483 | ) | ||||||
Non-deductible expenses | 328,835 | 322,884 | 315,041 | |||||||||
Deferred tax (assets) liabilities originating from previously unrecognized temporary differences, net | 71,144 | (14,940 | ) | (6,900 | ) | |||||||
Deferred tax assets that cannot be utilized, net | — | 24,045 | — | |||||||||
Corporate income tax expense | 1,630,866 | 1,548,195 | 1,298,009 | |||||||||
Final income tax expense | 56,698 | 43,413 | 41,396 | |||||||||
Total income tax expense of the Company | 1,687,564 | 1,591,608 | 1,339,405 | |||||||||
Income tax expense of the subsidiaries | 2,173,526 | 2,586,918 | 3,844,482 | |||||||||
Total consolidated income tax expense | 3,861,090 | 4,178,526 | 5,183,887 | |||||||||
The reconciliation between income before tax attributable to the Company and the estimated taxable income for the years ended December 31, 2003, 2004 and 2005 is as follows: |
2003 | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Income before tax attributable to the Company | 7,774,792 | 8,200,623 | 9,332,970 | ||||||||||
Less: Income subject to final tax | (279,142 | ) | (206,601 | ) | (285,075 | ) | |||||||
7,495,650 | 7,994,022 | 9,047,895 | |||||||||||
Temporary differences: | |||||||||||||
Depreciation of property, plant and equipment | 442,029 | 415,805 | 880,578 | ||||||||||
Gain on sale of property, plant and equipment | (25,495 | ) | (12,874 | ) | (2,143 | ) | |||||||
Allowance for doubtful accounts | 166,341 | 491,577 | 308,193 | ||||||||||
Accounts receivable written-off | (79,728 | ) | (91,865 | ) | (336,715 | ) | |||||||
Allowance for inventory obsolescence | 5,543 | 11,385 | 11,228 |
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2003 | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Inventory written-off | (693 | ) | — | (12,183 | ) | ||||||||
Accrued early retirement benefits | (538,170 | ) | (132,810 | ) | — | ||||||||
Accrued employee benefits | 262,082 | (139,064 | ) | 67,792 | |||||||||
Net periodic pension cost | (271,503 | ) | (264,796 | ) | (164,008 | ) | |||||||
Long service awards | (15,617 | ) | (46,908 | ) | 69,264 | ||||||||
Amortization of intangible assets | 751,927 | 851,060 | 896,883 | ||||||||||
Amortization of landrights | (2,356 | ) | (3,419 | ) | (3,441 | ) | |||||||
Provision for impairment of property, plant and equipment | (6,401 | ) | — | 616,768 | |||||||||
Gain on sale of long-term investments | (171,334 | ) | — | — | |||||||||
Temporary differences of KSO units | 4,782 | — | — | ||||||||||
Depreciation of property, plant and equipment under revenue-sharing arrangements | 63,424 | 82,415 | 96,114 | ||||||||||
Amortization of unearned income on revenue-sharing arrangements | (58,379 | ) | (82,033 | ) | (135,662 | ) | |||||||
Revenue from transfer of property, plant and equipment under revenue-sharing arrangements | 34,828 | — | — | ||||||||||
Interest income/receivable | (45,835 | ) | 45,835 | — | |||||||||
Payments of liability of business acquisition and the related interest | — | (233,337 | ) | (405,302 | ) | ||||||||
Consultant fees for acquisition of business | — | (27,797 | ) | — | |||||||||
Foreign exchange loss on liability of business acquisition | — | 342,073 | 190,206 | ||||||||||
Foreign exchange losses capitalized to property under construction | — | (74,283 | ) | — | |||||||||
Capital leases | — | — | 21,359 | ||||||||||
Loss on procurement commitments | — | — | 79,359 | ||||||||||
Other provisions | — | — | 114,854 | ||||||||||
Total temporary differences | 515,445 | 1,130,964 | 2,293,144 | ||||||||||
Permanent differences: | |||||||||||||
Net periodic post-retirement health care benefit cost | 634,385 | 408,498 | 483,045 | ||||||||||
Amortization of goodwill | 21,270 | 21,270 | 21,270 | ||||||||||
Amortization of discount on promissory notes | 224,931 | 109,786 | 74,632 | ||||||||||
Tax penalties | — | 14,645 | 59,850 | ||||||||||
Equity in net income of associates and subsidiaries | (3,313,831 | ) | (3,939,944 | ) | (5,748,277 | ) | |||||||
Gain on sale of long-term investments | (38,425 | ) | — | — |
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2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Income from land/building rental | (40,380 | ) | — | — | ||||||||
Others | 599,631 | 523,568 | 411,339 | |||||||||
Total permanent differences | (1,912,419 | ) | (2,862,177 | ) | (4,698,141 | ) | ||||||
Taxable income subject to corporate income tax | 6,098,676 | 6,262,809 | 6,642,898 | |||||||||
Corporate income tax expense | 1,829,585 | 1,878,825 | 1,992,852 | |||||||||
Final income tax expense | 56,698 | 43,413 | 41,396 | |||||||||
Total current income tax expense of the Company | 1,886,283 | 1,922,238 | 2,034,248 | |||||||||
Current income tax expense of the subsidiaries | 1,904,997 | 2,344,873 | 3,685,396 | |||||||||
Total current income tax expense | 3,791,280 | 4,267,111 | 5,719,644 | |||||||||
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e. Deferred tax assets and liabilities |
(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Business | Statements of | December 31, | ||||||||||||||
2003 | Acquisitions | Income | 2004 | ||||||||||||||
(As restated*) | (As restated*) | ||||||||||||||||
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 | ||||||||||||
Accrued early retirement benefits | 39,843 | — | (39,843 | ) | — | ||||||||||||
Accrued employee benefits | 84,385 | — | (41,720 | ) | 42,665 | ||||||||||||
Accrued long service awards | 142,084 | — | (14,073 | ) | 128,011 | ||||||||||||
Net periodic pension cost | 511,143 | — | (77,704 | ) | 433,439 | ||||||||||||
Liabilities of business acquisitions | — | 985,609 | 24,323 | 1,009,932 | |||||||||||||
�� | |||||||||||||||||
Total deferred tax assets | 893,689 | 985,609 | (37,393 | ) | 1,841,905 | ||||||||||||
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 | ) | ||||||||||
Total deferred tax liabilities | (3,169,222 | ) | (1,055,049 | ) | 368,023 | (3,856,248 | ) | ||||||||||
Deferred tax liabilities of the Company, net | (2,275,533 | ) | (69,440 | ) | 330,630 | (2,014,343 | ) | ||||||||||
Deferred tax liabilities of the subsidiaries, net | (671,179 | ) | — | (242,045 | ) | (913,224 | ) | ||||||||||
Total deferred tax liabilities, net | (2,946,712 | ) | (2,927,567 | ) | |||||||||||||
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(Charged)/ | |||||||||||||||||
Credited to | |||||||||||||||||
December 31, | Business | Statements | December 31, | ||||||||||||||
2004 | Acquisitions | of Income | 2005 | ||||||||||||||
(As restated*) | |||||||||||||||||
The Company | |||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Allowance for doubtful accounts | 207,679 | — | (2,283 | ) | 205,396 | ||||||||||||
Allowance for inventory obsolescence | 15,494 | — | (1,842 | ) | 13,652 | ||||||||||||
Long-term investments | 4,685 | — | 1,981 | 6,666 | |||||||||||||
Accrued employee benefits | 42,665 | — | 20,338 | 63,003 | |||||||||||||
Accrued long service awards | 128,011 | — | 20,780 | 148,791 | |||||||||||||
Net periodic pension cost | 433,439 | — | (49,202 | ) | 384,237 | ||||||||||||
Capital leases | — | — | 6,408 | 6,408 | |||||||||||||
Liabilities of business acquisitions | 1,009,932 | — | (64,529 | ) | 945,403 | ||||||||||||
Accrued expenses | — | — | 58,265 | 58,265 | |||||||||||||
Total deferred tax assets | 1,841,905 | — | (10,084 | ) | 1,831,821 | ||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (2,198,654 | ) | — | 432,437 | (1,766,217 | ) | |||||||||||
Landrights | (1,571 | ) | — | (1,033 | ) | (2,604 | ) | ||||||||||
Revenue-sharing arrangements | (41,637 | ) | — | 4,461 | (37,176 | ) | |||||||||||
Intangible assets | (1,614,386 | ) | — | 269,062 | (1,345,324 | ) | |||||||||||
Total deferred tax liabilities | (3,856,248 | ) | — | 704,927 | (3,151,321 | ) | |||||||||||
Deferred tax liabilities of the Company, net | (2,014,343 | ) | — | 694,843 | (1,319,500 | ) | |||||||||||
Deferred tax liabilities of the subsidiaries, net | (913,224 | ) | — | (159,086 | ) | (1,072,310 | ) | ||||||||||
Total deferred tax liabilities, net | (2,927,567 | ) | (2,391,810 | ) | |||||||||||||
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f. Administration |
40. | BASIC EARNINGS PER SHARE |
41. | CASH DIVIDENDS AND GENERAL RESERVE |
• | Dividends for 2002 amounting to Rp3,338,109 million or Rp331.16 per share (pre-split), social contribution fund (“Dana Bina Lingkungan”) of Rp20,863 million and appropriated Rp813,664 million for general reserves. | |
• | Dividends for 2001 amounting to Rp2,125,055 million or Rp210.82 per share (pre-split), and appropriated Rp425,012 million for general reserves. | |
• | Dividends for 2000 amounting to Rp888,654 million or Rp88.16 per share (pre-split), and appropriated Rp126,950 million for general reserves. |
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42. | PENSION PLANS |
a. The Company |
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2004 | 2005 | |||||||
(As restated*) | ||||||||
Change in projected benefit obligation | ||||||||
Projected benefit obligation at beginning of year | 6,852,923 | 7,315,182 | ||||||
Service cost | 137,264 | 138,117 | ||||||
Interest cost | 740,494 | 789,830 | ||||||
Plan participants’ contributions | 43,906 | 41,371 | ||||||
Actuarial gain | (155,128 | ) | (794,180 | ) | ||||
Benefits paid | (304,277 | ) | (350,220 | ) | ||||
Projected benefit obligation at end of year | 7,315,182 | 7,140,100 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 3,671,309 | 4,884,523 | ||||||
Actual return on plan assets | 627,842 | 155,754 | ||||||
Employer contribution | 845,743 | 698,526 | ||||||
Plan participants’ contributions | 43,906 | 41,371 | ||||||
Benefits paid | (304,277 | ) | (350,220 | ) | ||||
Fair value of plan assets at end of year | 4,884,523 | 5,429,954 | ||||||
Funded status | (2,430,659 | ) | (1,710,146 | ) | ||||
Unrecognized prior service cost | 1,329,046 | 1,190,024 | ||||||
Unrecognized net actuarial gain | (346,298 | ) | (762,899 | ) | ||||
Accrued pension benefit cost | (1,447,911 | ) | (1,283,021 | ) | ||||
2004 | 2005 | |||||||
(As restated*) | ||||||||
Accrued pension benefit cost at beginning of year | 1,713,546 | 1,447,911 | ||||||
Net periodic pension cost less amounts charged to KSO Units | 563,739 | 514,976 | ||||||
Amounts charged to KSO Units under contractual agreement | 16,369 | 18,660 | ||||||
Contributions | (845,743 | ) | (698,526 | ) | ||||
Accrued pension benefit cost at end of year | 1,447,911 | 1,283,021 | ||||||
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2003 | 2004 | 2005 | ||||||||||
Discount rate | 11 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 11 | % | 10.5 | % | 10.5 | % | ||||||
Rate of compensation increase | 8 | % | 8 | % | 8.8 | % |
2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Service cost | 119,089 | 137,264 | 138,117 | |||||||||
Interest cost | 537,797 | 740,494 | 789,830 | |||||||||
Expected return on plan assets | (421,706 | ) | (436,672 | ) | (533,333 | ) | ||||||
Amortization of prior service cost | 156,784 | 139,022 | 139,022 | |||||||||
Recognized actuarial gain | (205,099 | ) | — | — | ||||||||
Amortization of unrecognized net transition obligation | 28,634 | — | — | |||||||||
Net periodic pension cost | 215,499 | 580,108 | 533,636 | |||||||||
Amount charged to KSO Units under contractual agreement | (29,896 | ) | (16,369 | ) | (18,660 | ) | ||||||
Total net periodic pension cost less amounts charged to KSO Units (Note 36) | 185,603 | 563,739 | 514,976 | |||||||||
b. Telkomsel |
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2003 | 2004 | 2005 | ||||||||||
Service cost | 3,068 | 4,155 | 10,072 | |||||||||
Interest cost | 2,499 | 3,889 | 6,650 | |||||||||
Expected return on plan assets | (1,013 | ) | (824 | ) | (832 | ) | ||||||
Amortization of prior service cost | — | 115 | 115 | |||||||||
Recognized actuarial loss | 579 | 1,158 | 1,320 | |||||||||
Amortization of unrecognized net transition obligation | 178 | — | — | |||||||||
Net periodic pension cost (Note 36) | 5,311 | 8,493 | 17,325 | |||||||||
2003 | 2004 | 2005 | ||||||||||
Discount rate | 11 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | ||||||
Rate of compensation increase | 9 | % | 9 | % | 8 | % |
2004 | 2005 | |||||||
Projected benefit obligation | (43,547 | ) | (147,103 | ) | ||||
Fair value of plan assets | 11,182 | 20,971 | ||||||
Funded status | (32,365 | ) | (126,132 | ) | ||||
Unrecognized prior service cost | 1,328 | 1,213 | ||||||
Unrecognized net actuarial loss | 20,707 | 103,391 | ||||||
Accrued pension benefit cost | (10,330 | ) | (21,528 | ) | ||||
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c. Infomedia |
2004 | 2005 | |||||||
Projected benefit obligation | (4,051 | ) | (5,225 | ) | ||||
Fair value of plan assets | 5,413 | 5,865 | ||||||
Funded status | 1,362 | 640 | ||||||
Prepaid pension benefit cost | 1,362 | 640 | ||||||
d. Obligation Under Labor Law |
43. | LONG SERVICE AWARDS |
a. The Company |
2003 | 2004 | 2005 | ||||||||||
Discount rate | 11 | % | 11 | % | 11 | % | ||||||
Rate of compensation increase | 8 | % | 8 | % | 8 | % |
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2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Accrued long service awards at beginning of year | 489,231 | 473,614 | 426,705 | |||||||||
Net periodic benefit cost (Note 36) | 207,126 | 31,148 | 192,450 | |||||||||
Benefits paid | (222,743 | ) | (78,057 | ) | (123,186 | ) | ||||||
Accrued long service awards at end of year | 473,614 | 426,705 | 495,969 | |||||||||
b. Telkomsel |
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2003 | 2004 | 2005 | ||||||||||
(As restated*) | ||||||||||||
Service cost | 88,394 | 76,163 | 87,636 | |||||||||
Interest cost | 493,596 | 411,110 | 507,994 | |||||||||
Expected return on plan assets | (56,004 | ) | (61,084 | ) | (103,498 | ) | ||||||
Amortization of prior service gain | (368 | ) | — | — | ||||||||
Recognized actuarial loss | 99,287 | — | 8,081 | |||||||||
Amortization of unrecognized net transition obligation | 24,325 | — | — | |||||||||
Net periodic post-retirement benefit cost | 649,230 | 426,189 | 500,213 | |||||||||
Amounts charged to KSO Units under contractual agreement | (7,795 | ) | (9,913 | ) | (11,627 | ) | ||||||
Total net periodic post-retirement benefit cost less amounts charged to KSO Units (Note 36) | 641,435 | 416,276 | 488,586 | |||||||||
2003 | 2004 | 2005 | ||||||||||
Discount rate | 11 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 11 | % | 8 | % | 8 | % | ||||||
Health care cost trend rate assumed for next year | 12 | % | 12 | % | 9 | % | ||||||
The ultimate trend rate | 8 | % | 8 | % | 9 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2006 | 2007 | 2006 |
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2004 | 2005 | |||||||
(As restated*) | ||||||||
Change in projected benefit obligation | ||||||||
Projected benefit obligation at beginning of year | 3,787,389 | 4,681,005 | ||||||
Service cost | 76,163 | 87,636 | ||||||
Interest cost | 411,110 | 507,994 | ||||||
Actuarial loss | 529,618 | 423,833 | ||||||
Benefits paid | (123,275 | ) | (125,979 | ) | ||||
Projected benefit obligation at end of year | 4,681,005 | 5,574,489 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 505,340 | 1,138,768 | ||||||
Actual return on plan assets | 32,173 | 45,209 | ||||||
Employer contributions | 724,530 | 435,899 | ||||||
Benefits paid | (123,275 | ) | (125,979 | ) | ||||
Fair value of plan assets at end of year | 1,138,768 | 1,493,897 | ||||||
Funded status | (3,542,237 | ) | (4,080,592 | ) | ||||
Unrecognized net actuarial loss | 558,530 | 1,032,571 | ||||||
Accrued post-retirement health care benefit cost | (2,983,707 | ) | (3,048,021 | ) | ||||
2004 | 2005 | |||||||
(As restated*) | ||||||||
Accrued post-retirement health care benefit cost at beginning of year | 3,282,048 | 2,983,707 | ||||||
Net periodic post-retirement health care benefit cost less amounts charged to KSO Units | 416,276 | 488,586 | ||||||
Amounts charged to KSO Units under contractual agreement | 9,913 | 11,627 | ||||||
Contributions | (724,530 | ) | (435,899 | ) | ||||
Accrued post-retirement health care benefit cost at end of year | 2,983,707 | 3,048,021 | ||||||
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2003 | 2004 | 2005 | ||||||||||
Service cost and interest cost | 594,958 | 723,941 | 872,159 | |||||||||
Accumulated post-retirement health care benefit obligation | 4,545,961 | 5,597,965 | 6,718,434 |
a. Government of the Republic of Indonesia |
b. Commissioners and Directors Remuneration |
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c. Indosat |
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. |
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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. |
i. Agreement on Construction and Maintenance for Jakarta-Surabaya Cable System(“J-S Cable System”). | |
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. |
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Telkomsel’s share in operating and maintenance costs amounted to Rp1,393 million, Rp2,098 million and Rp1,187 million for the years 2003, 2004 and 2005, 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. |
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d. Others |
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F-104
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2004 (As restated*) | 2005 | ||||||||||||||||
% of | % of | ||||||||||||||||
Amount | Total Assets | Amount | Total Assets | ||||||||||||||
a. Cash and cash equivalents (Note 6) | 1,944,154 | 3.46 | 3,058,854 | 4.92 | |||||||||||||
b. Temporary investments | 7,290 | 0.01 | — | — | |||||||||||||
c. Trade accounts receivable, net (Note 7) | 419,104 | 0.75 | 530,370 | 0.85 | |||||||||||||
d. Other accounts receivable | |||||||||||||||||
KSO Units | 1,300 | 0.00 | 93,959 | 0.15 | |||||||||||||
State-owned banks (interest) | 5,717 | 0.01 | 8,555 | 0.01 | |||||||||||||
Government agencies | 5,433 | 0.01 | 421 | 0.00 | |||||||||||||
Other | 16,765 | 0.03 | 16,304 | 0.03 | |||||||||||||
Total | 29,215 | 0.05 | 119,239 | 0.19 | |||||||||||||
e. Prepaid expenses (Note 9) | 22,440 | 0.04 | 299,799 | 0.48 | |||||||||||||
f. Other current assets (Note 10) | 44,608 | 0.08 | 159,537 | 0.26 | |||||||||||||
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2004 (As restated*) | 2005 | ||||||||||||||||
% of | % of | ||||||||||||||||
Amount | Total Assets | Amount | Total Assets | ||||||||||||||
g. Advances and other non-current assets (Note 14) | |||||||||||||||||
Bank Mandiri | 113,762 | 0.20 | 90,668 | 0.15 | |||||||||||||
Peruri | 813 | 0.00 | 813 | 0.00 | |||||||||||||
PT Asuransi Jasa Indonesia | 23,104 | 0.04 | — | 0.00 | |||||||||||||
Total | 137,679 | 0.24 | 91,481 | 0.15 | |||||||||||||
h. Escrow accounts (Note 16) | 6,222 | 0.01 | 6,369 | 0.01 | |||||||||||||
2004 (As restated*) | 2005 | ||||||||||||||||
% of | % of | ||||||||||||||||
Total | Total | ||||||||||||||||
Amount | Liabilities | Amount | Liabilities | ||||||||||||||
i. Trade accounts payable (Note 17) | |||||||||||||||||
Government agencies | 259,678 | 0.78 | 660,166 | 2.03 | |||||||||||||
KSO Units | 24,312 | 0.07 | 15,281 | 0.05 | |||||||||||||
Indosat | 150,631 | 0.45 | 46,372 | 0.14 | |||||||||||||
Koperasi Pegawai Telkom | 78,717 | 0.24 | 78,673 | 0.24 | |||||||||||||
PSN | 39 | 0.00 | — | — | |||||||||||||
PT INTI | 77,591 | 0.23 | 125,792 | 0.39 | |||||||||||||
Others | 52,126 | 0.16 | 88,105 | 0.27 | |||||||||||||
Total | 643,094 | 1.93 | 1,014,389 | 3.12 | |||||||||||||
j. Accrued expenses (Note 18) | |||||||||||||||||
Government agencies and state-owned ba | nks 204,50 | 4 0.62 | 395,791 | 1.22 | |||||||||||||
Employees | 321,237 | 0.97 | 452,413 | 1.39 | |||||||||||||
PT Asuransi Jasa Indonesia | 2,040 | 0.01 | 2,038 | 0.01 | |||||||||||||
Others | 9,729 | 0.03 | 38,442 | 0.11 | |||||||||||||
Total | 537,510 | 1.63 | 888,684 | 2.73 | |||||||||||||
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2004 (As restated*) | 2005 | ||||||||||||||||
% of | % of | ||||||||||||||||
Total | Total | ||||||||||||||||
Amount | Liabilities | Amount | Liabilities | ||||||||||||||
k. Short-term bank loans (Note 20) | |||||||||||||||||
Bank Mandiri | 41,433 | 0.13 | — | — | |||||||||||||
l. Two-step loans (Note 22) | 6,018,705 | 18.18 | 5,329,477 | 16.36 | |||||||||||||
m. Accrued long service awards (Note 43) | 449,841 | 1.36 | 524,524 | 1.61 | |||||||||||||
n. Accrued post-retirement health care benefits (Note 44) | 2,983,707 | 9.01 | 3,048,021 | 9.36 | |||||||||||||
o. Long-term bank loans (Note 24) | |||||||||||||||||
Bank Mandiri | 59,729 | 0.18 | 14,918 | 0.05 | |||||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R (see Note 4a). |
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2003 | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||
External operating revenues | 15,905,112 | 163,384 | 10,797,555 | 249,872 | 27,115,923 | — | 27,115,923 | |||||||||||||||||||||
Inter-segment operating revenues | 71,938 | 50,715 | 337,100 | 30,824 | 490,577 | (490,577 | ) | — | ||||||||||||||||||||
Total revenues | 15,977,050 | 214,099 | 11,134,655 | 280,696 | 27,606,500 | (490,577 | ) | 27,115,923 | ||||||||||||||||||||
Segment expense | (10,350,686 | ) | (246,165 | ) | (4,802,283 | ) | (275,499 | ) | (15,674,633 | ) | 534,649 | (15,139,984 | ) | |||||||||||||||
Segment result | 5,626,364 | (32,066 | ) | 6,332,372 | 5,197 | 11,931,867 | 44,072 | 11,975,939 | ||||||||||||||||||||
Interest expense | (1,383,446 | ) | ||||||||||||||||||||||||||
Interest income | 366,024 | |||||||||||||||||||||||||||
Gain on foreign exchange — net | 126,121 | |||||||||||||||||||||||||||
Other income (expenses) — net | 364,338 | |||||||||||||||||||||||||||
Tax expense | (3,861,090 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 2,819 | |||||||||||||||||||||||||||
Income before minority interest | 7,590,705 | |||||||||||||||||||||||||||
Unallocated minority interest | (1,503,478 | ) | ||||||||||||||||||||||||||
Net income | 6,087,227 | |||||||||||||||||||||||||||
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2003 | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||
Segment assets | 35,896,448 | 1,382,038 | 15,320,547 | 357,940 | 52,956,973 | (3,880,055 | ) | 49,076,918 | ||||||||||||||||||||
Investments in associates | 64,648 | — | — | — | 64,648 | — | 64,648 | |||||||||||||||||||||
Unallocated corporate assets | 1,141,683 | |||||||||||||||||||||||||||
Total consolidated assets | 50,283,249 | |||||||||||||||||||||||||||
Segment liabilities | (4,752,981 | ) | (27,576 | ) | (1,312,045 | ) | (55,731 | ) | (6,148,333 | ) | 2,427,484 | (3,720,849 | ) | |||||||||||||||
Unallocated corporate liabilities | (25,541,368 | ) | ||||||||||||||||||||||||||
Total consolidated liabilities | (29,262,217 | ) | ||||||||||||||||||||||||||
Capital expenditures | (4,320,024 | ) | (1,378,377 | ) | (5,348,783 | ) | (61,672 | ) | (11,108,856 | ) | — | (11,108,856 | ) | |||||||||||||||
Depreciation and amortization | (3,090,414 | ) | (35,809 | ) | (1,680,554 | ) | (9,824 | ) | (4,816,601 | ) | 11,916 | (4,804,685 | ) | |||||||||||||||
Amortization of goodwill and other intangible assets | (709,389 | ) | — | — | (21,270 | ) | (730,659 | ) | — | (730,659 | ) | |||||||||||||||||
Other non-cash expenses | (210,646 | ) | — | (113,904 | ) | (4,308 | ) | (328,858 | ) | — | (328,858 | ) | ||||||||||||||||
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2004 (As restated*) | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||
External operating revenues | 18,860,835 | 575,436 | 14,201,786 | 309,709 | 33,947,766 | — | 33,947,766 | |||||||||||||||||||||
Inter-segment operating revenues | 4,302 | (51,083 | ) | 534,790 | 51,063 | 539,072 | (539,072 | ) | — | |||||||||||||||||||
Total revenues | 18,865,137 | 524,353 | 14,736,576 | 360,772 | 34,486,838 | (539,072 | ) | 33,947,766 | ||||||||||||||||||||
Segment expenses | (12,207,726 | ) | (789,599 | ) | (6,757,243 | ) | (320,698 | ) | (20,075,266 | ) | 715,380 | (19,359,886 | ) | |||||||||||||||
Segment result | 6,657,411 | (265,246 | ) | 7,979,333 | 40,074 | 14,411,572 | 176,308 | 14,587,880 | ||||||||||||||||||||
Interest expense | (1,270,136 | ) | ||||||||||||||||||||||||||
Interest income | 317,941 | |||||||||||||||||||||||||||
Loss on foreign exchange — net | (1,220,760 | ) | ||||||||||||||||||||||||||
Other income (expenses) — net | 331,050 | |||||||||||||||||||||||||||
Tax expense | (4,178,526 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 3,420 | |||||||||||||||||||||||||||
Income before minority interest | 8,570,869 | |||||||||||||||||||||||||||
Unallocated minority interest | (1,956,301 | ) | ||||||||||||||||||||||||||
Net income | 6,614,568 | |||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||
Segment assets | 34,493,795 | 3,048,671 | 18,988,939 | 414,165 | 56,945,570 | (2,396,426 | ) | 54,549,144 | ||||||||||||||||||||
Investments in associates | 73,323 | — | 9,290 | — | 82,613 | — | 82,613 | |||||||||||||||||||||
Unallocated corporate assets | 1,547,435 | |||||||||||||||||||||||||||
Total consolidated assets | 56,179,192 | |||||||||||||||||||||||||||
Segment liabilities | (2,821,945 | ) | (86,780 | ) | (1,712,623 | ) | (87,346 | ) | (4,708,694 | ) | 987,442 | (3,721,252 | ) | |||||||||||||||
Unallocated corporate liabilities | (29,391,472 | ) | ||||||||||||||||||||||||||
Total consolidated liabilities | (33,112,724 | ) | ||||||||||||||||||||||||||
Capital expenditures | (4,340,591 | ) | (1,807,518 | ) | (4,982,744 | ) | (66,691 | ) | (11,197,544 | ) | — | (11,197,544 | ) | |||||||||||||||
Depreciation and amortization | (3,568,196 | ) | (229,983 | ) | (2,651,028 | ) | (18,740 | ) | (6,467,947 | ) | 14,590 | (6,453,357 | ) | |||||||||||||||
Amortization of goodwill and other intangible assets | (851,060 | ) | — | — | (21,270 | ) | (872,330 | ) | — | (872,330 | ) | |||||||||||||||||
Other non-cash expenses | (244,356 | ) | — | (100,737 | ) | (5,338 | ) | (350,431 | ) | — | (350,431 | ) | ||||||||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R (see Note 4a). |
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2005 | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||
External operating revenues | 19,637,386 | 1,449,725 | 20,384,856 | 335,217 | 41,807,184 | — | 41,807,184 | |||||||||||||||||||||
Inter-segment operating revenues | 305,382 | (167,935 | ) | 691,188 | 70,475 | 899,110 | (899,110 | ) | — | |||||||||||||||||||
Total revenue | 19,942,768 | 1,281,790 | 21,076,044 | 405,692 | 42,706,294 | (899,110 | ) | 41,807,184 | ||||||||||||||||||||
Segment expense | (14,378,819 | ) | (2,174,656 | ) | (8,774,996 | ) | (328,184 | ) | (25,656,655 | ) | 1,020,221 | (24,636,434 | ) | |||||||||||||||
Segment result | 5,563,949 | (892,866 | ) | 12,301,048 | 77,508 | 17,049,639 | 121,111 | 17,170,750 | ||||||||||||||||||||
Interest expense | (1,177,268 | ) | ||||||||||||||||||||||||||
Interest income | 344,686 | |||||||||||||||||||||||||||
Loss on foreign exchange — net | (516,807 | ) | ||||||||||||||||||||||||||
Other income (expenses) — net | 409,184 | |||||||||||||||||||||||||||
Tax expense | (5,183,887 | ) | ||||||||||||||||||||||||||
Equity in net income of associated companies | 10,879 | |||||||||||||||||||||||||||
Income before minority interest | 11,057,537 | |||||||||||||||||||||||||||
Unallocated minority interest | (3,063,971 | ) | ||||||||||||||||||||||||||
Net income | 7,993,566 | |||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||
Segment assets | 33,980,509 | 3,617,374 | 25,444,587 | 455,644 | 63,498,114 | (2,260,681 | ) | 61,237,433 | ||||||||||||||||||||
Investments in associates | 92,110 | — | 9,290 | — | 101,400 | — | 101,400 | |||||||||||||||||||||
Unallocated corporate assets | 832,211 | |||||||||||||||||||||||||||
Total consolidated assets | 62,171,044 | |||||||||||||||||||||||||||
Segment liabilities | (2,890,445 | ) | (459,284 | ) | (2,547,874 | ) | (111,620 | ) | (6,009,223 | ) | 886,435 | (5,122,788 | ) | |||||||||||||||
Unallocated corporate liabilities | (27,450,662 | ) | ||||||||||||||||||||||||||
Total consolidated liabilities | (32,573,450 | ) | ||||||||||||||||||||||||||
Capital expenditures | (2,037,866 | ) | (1,388,876 | ) | (10,085,755 | ) | (40,460 | ) | (13,552,957 | ) | — | (13,552,957 | ) | |||||||||||||||
Depreciation and amortization | (4,006,246 | ) | (537,284 | ) | (3,046,632 | ) | (23,322 | ) | (7,613,484 | ) | 11,919 | (7,601,565 | ) | |||||||||||||||
Write-down of assets and loss on procurement commitments | — | (696,127 | ) | — | — | (696,127 | ) | — | (696,127 | ) | ||||||||||||||||||
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2005 | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Amortization of goodwill and other intangible assets | (896,883 | ) | — | — | (21,270 | ) | (918,153 | ) | — | (918,153 | ) | |||||||||||||||||
Other non-cash expenses | (292,357 | ) | (21,582 | ) | (171,192 | ) | (4,783 | ) | (489,914 | ) | — | (489,914 | ) | |||||||||||||||
• | Minimum Telkom Revenue (“MTR”) |
• | Distributable KSO Revenues (“DKSOR”) |
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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. |
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Fixed Line Telephone Tariffs |
• | 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. |
Mobile Cellular Telephone Tariffs |
a. Air time |
1. Cellular to cellular | : | 2 times airtime rate | ||||
2. Cellular to PSTN | : | 1 time airtime rate | ||||
3. PSTN to cellular | : | 1 time airtime rate | ||||
4. Card phone to cellular | : | 1 time airtime rate plus 41% surcharge |
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b. Usage tariffs |
Interconnection Tariffs |
i. Interconnection with Fixed line Network |
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ii. Cellular Interconnection |
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iii. International Interconnection |
Description | Tariff | |
Access Charge | Rp850/successful call | |
Usage Charge | Rp550/successful paid minute |
iv. Satellite Phone Interconnection |
v. VoIP Interconnection |
Public Phone Kiosk (“Wartel”) Tariff |
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Tariff for Other Services |
Universal Service Obligation (“USO”) |
a. Capital Expenditures |
Amounts in | ||||||||
Foreign Currencies | Equivalent | |||||||
Currencies | (in millions) | in Rupiah | ||||||
Rupiah | — | 2,601,352 | ||||||
U.S. Dollar | 265 | 2,602,313 | ||||||
Euro | 119 | 1,386,487 | ||||||
Japanese Yen | 52 | 4,355 | ||||||
Total | 6,594,507 | |||||||
(i) Procurement Agreements |
In August 2004, Telkomsel entered into the following agreements with Motorola Inc. and PT Motorola Indonesia, Ericsson AB and PT Ericsson Indonesia, Nokia Corporation and PT Nokia Network, and Siemens AG, for the maintenance and procurement of equipment and related services: |
• | Joint Planning and Process Agreement | |
• | Equipment Supply Agreement (“ESA”) | |
• | Technical Service Agreement (“TSA”) | |
• | Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”) |
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The agreements contain lists of charges (“Price List”) to be used in determining the fees payable by Telkomsel for all equipment and related services to be procured during the roll-out period upon the issuance of Purchase Order (“PO”). | |
The agreements are valid and effective as of the execution date (“Effective Date”) by the respective parties for a period of three years, provided that the suppliers are able to meet requirements set out in each PO. In the event that the suppliers fail to meet those requirements, Telkomsel may terminate the agreements at its sole discretion with a prior written notice. | |
In accordance with the agreements, the parties also agreed that the charges specified in the Price List will also apply to equipment and technical services (ESA and TSA) and services (SITAC and CME) acquired from the suppliers between May 26, 2004 and the Effective Date (“Pre-Effective Date Pricing”), except for those acquired from Siemens under TSA which are applicable for certain equipment and the related maintenance services acquired or rendered between July 1, 2004 and the Effective Date. Prices as well as discounts thereon are subject to a quarterly review. |
(ii) CDMA Procurement Agreement with Samsung Consortium |
On October 9, 2002, the Company signed an Initial Purchase Order Contract for CDMA 2000-IX with Samsung Consortium for Base Station Subsystem (“BSS”) procurement in Regional Divisions V, VI and VII and on December 23, 2002, the Company signed a Master Procurement Partnership Agreement (“MPPA”), which is related to the construction of Network and Switching Subsystem (“NSS”) for nationwide and BSS for Regional Divisions IV, V, VI, and VII. As of December 31, 2005, the Company’s remaining purchase commitment in connection with this MPPA amounted to US$5.6 million and Rp1,826 million. | |
Samsung Consortium will service and maintain the CDMA 2000 IX system that it constructs, pursuant to a Service Level Agreement dated the same date as the MPPA in return for an annual consideration of US$11.6 million. |
(iii) CDMA Procurement Agreement with Ericsson CDMA Consortium |
The Company and Ericsson CDMA Consortium entered into a Master Procurement Partnership Agreement (“MPPA”) on December 23, 2002. The MPPA is related to the construction of BSS for Regional Division II. As of December 31, 2005, the Company’s remaining purchase commitment in connection with this MPPA amounted to US$6.8 million and Rp12,753 million. | |
Ericsson Consortium will service and maintain the CDMA 2000 IX system that it constructs, pursuant to a Service Level Agreement dated the same date as the MPPA in return for an annual consideration of US$5.3 million. |
(iv) MPPA with PT INTI |
The Company and PT INTI signed an MPPA on August 26, 2003 whereby PT INTI is appointed to construct a CDMA fixed wireless access network and integrate such network with the Company’s existing network and all ancillary services relating thereto in West Java and Banten. As of December 31, 2005, the Company’s remaining purchase commitment in connection with this MPPA amounted to US$355,275 and Rp233 million. |
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PT INTI will service and maintain the CDMA 2000 IX system that it constructs, pursuant to a Service Level Agreement dated the same date as the MPPA in return for an annual consideration of US$2.3 million. |
(v) MPPA with Motorola |
On March 24, 2003, the Company signed an MPPA with Motorola, Inc. Under the MPPA, Motorola is obliged to construct a CDMA fixed wireless access network and integrate such network with the Company’s existing network and all ancillary services relating thereto in Regional Division I. As of December 31, 2005, the Company’s remaining purchase commitment in connection with this MPPA amounted to US$422,424 and Rp1,307 million. | |
Motorola, Inc. will service and maintain the CDMA 2000 IX system that it constructs, pursuant to a Service Level Agreement dated the same date as the MPPA in return for an annual consideration of US$3 million. |
(vi) | Metro Junction and Optical Network Access Agreement for Regional Division III with PT INTI |
On November 12, 2003, the Company entered into an agreement with PT INTI for the construction and procurement of an optical network, as well as a network management system and other related services and equipment, with respect to Regional Division III (West Java). Under this agreement and its amendment, the Company is obliged to pay PT INTI total consideration of approximately US$6.6 million and Rp111,655 million. As of December 31, 2005, the Company has paid and/or accrued a total of US$2.9 million plus Rp59,018 million. |
(vii) | Ring JASUKA Backbone with NEC-Siemens Consortium |
On June 10, 2005, the Company entered into an agreement with NEC-Siemens Consortium for the procurement and installation of an optical cable transmission of RING I (link Jakarta — Tanjung Pandan — Pontianak — Batam — Dumai — Pekanbaru — Palembang — Jakarta) and RING II (link Medan — Padang — Pekanbaru — Medan). Under this agreement, the Company is obliged to pay NEC-Siemens Consortium total consideration of approximately US$46.9 million and Rp169,642 million. This agreement is based on a turnkey arrangement. As of December 31, 2005, no payment has been made by the Company. |
b. | Agreements on Derivative Transactions |
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2004 | 2005 | |||||||
(in millions) | (in millions) | |||||||
Citibank — U.S. Dollar | 25 | 30 | ||||||
The Hongkong and Shanghai Banking Corporation — Euro | — | 30 | ||||||
Deutsche Bank — U.S. Dollar | 15 | — | ||||||
Standard Chartered Bank — Euro | 15 | — |
c. | Borrowings and other credit facilities |
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d. | Operating Leases |
Year | Rp | |||
2006 | 474,790 | |||
2007 | 493,585 | |||
2008 | 452,820 | |||
2009 | 274,307 | |||
2010 | 269,013 | |||
Thereafter | 851,425 | |||
Total | 2,815,940 | |||
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2004 | 2005 | |||||||||||||||||
Foreign | Foreign | |||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||||
Assets | ||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||
U.S. Dollar | 74.80 | 694,116 | 81.96 | 805,489 | ||||||||||||||
Euro | 88.10 | 1,114,704 | 59.14 | 689,472 | ||||||||||||||
Japanese Yen | 0.98 | 89 | — | — | ||||||||||||||
Trade accounts receivable | ||||||||||||||||||
Related parties | ||||||||||||||||||
U.S. Dollar | 3.92 | 36,375 | 1.64 | 16,112 | ||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 16.19 | 150,223 | 19.46 | 191,199 | ||||||||||||||
Other accounts receivable | ||||||||||||||||||
U.S. Dollar | 1.12 | 10,355 | 0.30 | 2,910 | ||||||||||||||
Euro | — | — | 0.01 | 88 | ||||||||||||||
Other current assets | ||||||||||||||||||
U.S. Dollar | 4.61 | 42,792 | 13.63 | 133,926 | ||||||||||||||
Euro | 0.01 | 157 | — | — | ||||||||||||||
Advances and other non-current assets | ||||||||||||||||||
U.S. Dollar | 6.90 | 64,056 | 2.25 | 22,162 | ||||||||||||||
Escrow accounts | ||||||||||||||||||
U.S. Dollar | 3.24 | 30,059 | 12.89 | 126,128 | ||||||||||||||
Total Assets | 2,142,926 | 1,987,486 | ||||||||||||||||
Liabilities | ||||||||||||||||||
Trade accounts payable | ||||||||||||||||||
Related parties | ||||||||||||||||||
U.S. Dollar | 19.13 | 177,892 | 15.09 | 148,423 | ||||||||||||||
Myanmar KYAT | 0.01 | 20 | — | — | ||||||||||||||
Singapore Dollar | — | 1 | — | — | ||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 49.57 | 460,969 | 125.40 | 1,233,050 | ||||||||||||||
Euro | — | — | 68.30 | 796,343 | ||||||||||||||
Japanese Yen | 7.88 | 715 | 66.03 | 5,508 | ||||||||||||||
Singapore Dollar | 0.03 | 146 | 0.01 | 33 | ||||||||||||||
Great Britain Pound Sterling | 0.06 | 1,092 | — | 14 |
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2004 | 2005 | |||||||||||||||||
Foreign | Foreign | |||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||||
Accrued expenses | ||||||||||||||||||
Euro | 26.54 | 336,572 | 8.79 | 102,509 | ||||||||||||||
U.S. Dollar | 24.08 | 223,931 | 21.01 | 206,639 | ||||||||||||||
Japanese Yen | 20.41 | 1,852 | 52.85 | 4,433 | ||||||||||||||
Singapore Dollar | 0.37 | 2,135 | 0.42 | 2,497 | ||||||||||||||
Australian Dollar | 0.07 | 507 | — | — | ||||||||||||||
Dutch Guilder | 0.48 | 1,795 | — | — | ||||||||||||||
Short-term bank loans | ||||||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 118.46 | 1,101,633 | — | — | ||||||||||||||
Advances from customers and suppliers | ||||||||||||||||||
U.S. Dollar | 0.42 | 3,947 | 0.15 | 1,474 | ||||||||||||||
Current maturities of long-term liabilities | ||||||||||||||||||
U.S. Dollar | 116.29 | 1,081,478 | 150.43 | 1,479,401 | ||||||||||||||
Euro | 14.64 | 185,643 | 14.67 | 171,087 | ||||||||||||||
Japanese Yen | 1,142.91 | 103,688 | 1,142.91 | 95,876 | ||||||||||||||
Long-term liabilities | ||||||||||||||||||
U.S. Dollar | 830.22 | 7,721,068 | 662.39 | 6,514,501 | ||||||||||||||
Japanese Yen | 15,527.59 | 1,408,708 | 14,384.68 | 1,206,700 | ||||||||||||||
Euro | 36.60 | 464,108 | 22.01 | 256,631 | ||||||||||||||
Total liabilities | 13,277,900 | (12,225,119 | ) | |||||||||||||||
Net liabilities | (11,134,974 | ) | (10,237,633 | ) | ||||||||||||||
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54. | 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 |
Under Indonesian GAAP, termination benefits are recognized as liabilities when certain criteria are met (e.g. the enterprise is demonstratively committed to provide termination benefits as a result of an offer made in order to encourage early retirement). | |
Under U.S. GAAP, termination benefits are recognized as liabilities when the employees accept the offer and the amount can be reasonably estimated. |
b. Foreign Exchange Differences Capitalized to Property Under Construction |
Under Indonesian GAAP, foreign exchange gains and losses resulting from borrowings used to finance property under construction are capitalized. Capitalization of foreign exchange gains and losses ceases when the construction of the qualifying asset is substantially completed and the constructed property is ready for its intended use. | |
Under U.S. GAAP, foreign exchange gains and losses are charged to current operations. |
c. Interest Capitalized on Property under Construction |
Under Indonesian GAAP, qualifying assets, to which interest cost can be capitalized, should be those that take a substantial period of time to get ready for its intended use or sale, i.e. minimum 12 months. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of interest cost eligible for capitalization on that asset should be determined based on the actual interest cost incurred on that borrowing during the period of construction less any investment income on the temporary investment of those borrowings. |
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Under U.S. GAAP, there is no minimum limit (i.e.12-month requirement) on the length of the construction period in which the interest cost could be capitalized. Interest income arising from any unused borrowings is recognized directly to current operations. |
d. Revenue-Sharing Arrangements |
Under Indonesian GAAP, property, plant and equipment built by an investor under revenue-sharing arrangements are recognized as property, plant and equipment under revenue-sharing arrangements in the accounting records of the party to whom ownership in such properties will be transferred at the end of the revenue-sharing period, with a corresponding initial credit to unearned income. The property, plant and equipment are depreciated over their useful lives, while the unearned income is amortized over the revenue-sharing period. The Company records its share of the revenues earned net of amounts due to the investors. | |
Under U.S. GAAP, the revenue-sharing arrangements are recorded in a manner similar to capital leases where the fixed assets and obligation under revenue-sharing arrangements are reflected on the balance sheet. All the revenues generated from the revenue-sharing arrangements are recorded as a component of operating revenues, while a portion of the investors’ share of revenue from the revenue-sharing arrangements is recorded as interest expense and the balance is treated as a reduction of the obligation under revenue-sharing arrangements. |
e. Employee benefit plans |
As of January 1, 2005, the Company adopted PSAK 24R in accounting for pension benefit cost,post-retirement health care benefit cost and long service award benefit cost for Indonesian GAAP purposes. PSAK 24R requires the adoption of its provisions retrospectively as of January 1, 2004 (Note 4a). Prior to 2004, there were no differences between Indonesian GAAP and U.S. GAAP with respect to the accounting forpost-retirement health care benefit cost and long service award benefit cost while for pension benefit cost, there were some differences as follows: |
i. | Under Indonesian GAAP, the prior service cost attributable to the increases in pension benefits for pensioners were directly charged to expense in those years. Under U.S. GAAP, because the majority of plan participants are still active, such prior service cost is deferred and amortized systematically over the estimated remaining service period for active employees. | |
ii. | Under Indonesian GAAP, the Company amortized the cumulative unrecognized actuarial gain or loss over four years. Under U.S. GAAP, any cumulative unrecognized actuarial gain or loss exceeding 10 percent of the greater of the projected benefit obligation or the fair value of plan assets is recognized in the statement of income on a straight-line basis over the expected average remaining service period. | |
iii. | Under Indonesian GAAP, recognition of a minimum liability is not required. Under U.S. GAAP, the Company would be required to recognize an additional minimum liability when the accumulated benefit obligation exceeds the fair value of the plan assets, and an equal amount would be recognized as an intangible asset, provided that the asset recognized does not exceed the amount of unrecognized prior service cost. |
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Starting in 2004, the differences between the Company’s accounting for pension benefit cost, post-retirement health care benefit cost and long service award benefit cost under Indonesian GAAP and U.S. GAAP are as follows: |
i. | Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized over the vesting period. Under U.S. GAAP, prior service cost (vested andnon-vested benefits) is generally deferred and amortized systematically over the estimated remaining service period for active employees. | |
ii. | Different dates of implementation caused significant differences in cumulative unrecognized actuarial gains and losses. However, the cumulative unrecognized actuarial gains and losses under Indonesian GAAP is now recognized in a manner similar to U.S. GAAP. | |
iii. | Under Indonesian GAAP, the transition obligation was recognized on January 1, 2004, the date PSAK 24R was adopted. Under U.S. GAAP, the transition obligation is deferred and amortized systematically over the estimated remaining service period for active employees. | |
iv. | The difference between Indonesian GAAP and U.S. GAAP in connection with the recognition of minimum liability remains unchanged. |
f. Equity in Net Income or Loss of Associated Companies |
The Company records its equity in net income or loss of associated companies based on the associates’ financial statements that have been prepared under Indonesian GAAP. | |
For U.S. GAAP reporting purposes, the Company recognizes the effect of the differences between U.S. GAAP and Indonesian GAAP at the investee level in the investment accounts and its share of the net income or loss and other comprehensive income or loss of those associates. |
g. Land Rights |
In Indonesia, the title of land rests with the State under the Basic Agrarian Law No. 5 of 1960. Land use is accomplished through land rights whereby the holder of the right enjoys the full use of the land for a stated period of time, subject to extensions. The land rights generally are freely tradeable and may be pledged as security under borrowing agreements. Under Indonesian GAAP, land ownership is not depreciated unless it can be foreseen that the possibility for the holder to obtain an extension or renewal of the rights is remote. | |
Under U.S. GAAP, the cost of land rights is amortized over the economic useful life which represents the contractual period of the land rights. |
h. Revenue Recognition |
Under Indonesian GAAP, revenues from cellular and fixed wireless services connection fees are recognized as income when the connection takes place (for postpaid service) or at the time of delivery of starter packs to distributors, dealers or customers (for prepaid service). | |
Installation fees for wire line services are recognized at the time of installation. The revenue from calling cards (“Kartu Telepon”) is recognized when the Company sells the card. |
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Under U.S. GAAP, revenue from front-end fees and incremental costs up to, but not exceeding such fees, are deferred and recognized over the expected term of the customer relationship. Revenues from calling cards are recognized upon usage or expiration. |
i. Goodwill |
Under Indonesian GAAP, goodwill is amortized over a period, not exceeding 20 years, that it is expected to benefit the Company. | |
Under U.S. GAAP, goodwill is not amortized but rather subjected to an annual test for impairment. |
j. Capital Leases |
Under Indonesian GAAP, a leased asset is capitalized only if all of the following criteria are met: (a) the lessee has an option to purchase the leased asset at the end of the lease period at a price agreed upon at the inception of the lease agreement, and (b) the sum of periodic lease payments, plus the residual value, will cover the acquisition price of the leased asset and related interest, and (c) there is a minimum lease period of 2 years. | |
Under U.S. GAAP, a leased asset is capitalized if one of the following criteria is met: (a) there is an automatic transfer of ownership at the end of the lease term; or (b) the lease contains a bargain purchase option; or (c) the lease term is for 75% or more of the economic life of the asset; or (d) the net present value of minimum lease payments are at least 90% of the fair value of the asset. |
k. Acquisition of Dayamitra |
On May 17, 2001 the Company acquired a 90.32% interest in Dayamitra and contemporaneously acquired a call option to buy the other 9.68% at a fixed price at a stated future date, and provided to the minority interest holder a put option to sell the other 9.68% to the Company under those same terms; meaning that the fixed price of the call is equal to the fixed price of the put option. Under U.S. GAAP, the Company should account for the option contracts on a combined basis with the minority interest and account for it as a financing of the purchase of the remaining 9.68% minority interest. As such, under U.S. GAAP, the Company has consolidated 100% of Dayamitra and attributed the stated yield earned under the combined derivative and minority interest position to interest expense since May 17, 2001. | |
On December 14, 2004, the Company exercised the option to acquire the 9.68% interest in Dayamitra. | |
Under Indonesian GAAP, prior to December 14, 2004, the Company accounted for the remaining 9.68% of Dayamitra as minority interest. In addition, the option price that has been paid by the Company was presented as “Advance payments for investments in shares of stock.” The Company started consolidating the remaining 9.68% of Dayamitra on December 14, 2004 following the exercise of the option. |
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The difference in the timing of the 9.68% ownership interest recognition gives rise to differences in the timing and amounts of purchase consideration and liability recognized under Indonesian GAAP and U.S. GAAP. |
l. Reversal of Difference Due to Change of Equity in Associated Companies |
Under Indonesian GAAP, differences previously credited directly to equity as a result of equity transactions in associated companies are released to the statement of income upon the sale of an interest in the associate in proportion with the percentage of the interest sold. | |
Under U.S. GAAP, it is the Company’s policy to include differences resulting from equity transactions in associated companies in equity. Such amounts can not be released to the statement of income and consequently remain in equity indefinitely. |
m. Asset Retirement Obligations |
Under Indonesian GAAP, legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of long-lived assets are charged to current operations as incurred. | |
Under U.S. GAAP, the estimated fair value of such obligations is accrued at the time of acquisition with an equal amount capitalized to the related long-lived assets and depreciated over the useful life of the assets. The Company and its subsidiaries identified their asset retirement obligations by reviewing contractual agreements to identify whether the Company and its subsidiaries are required to settle any obligations as a result of the prevailing laws, statute, ordinance, written or by legal construction of a contract under the doctrine of promissory estoppel. |
n. Deferred Income Taxes |
Under Indonesian GAAP, the Company does not recognize deferred taxes on temporary differences between the financial statement carrying amounts and tax bases of equity method investments when it is not probable that these differences will reverse in the foreseeable future. | |
Under U.S. GAAP, deferred taxes are recognized in full on temporary differences between the financial statement carrying amounts and tax bases of equity method investments. |
o. Impairment of Assets |
Under Indonesian GAAP, an impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of a fixed asset is the greater of its net selling price or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss can be reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized. | |
Under U.S. GAAP, an impairment loss is recognized whenever the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the |
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asset. An impaired asset is written down to its estimated fair value based on quoted market prices in active markets or discounting estimated future cash flows. When an impairment loss is recognized, the adjusted carrying amount of fixed asset becomes its new cost basis and reversals of previously recognized impairment losses are prohibited. | |
Through the year ended December 31, 2004, there were no impairment charges recognized by the Company. As discussed in Note 12, in 2005, the Company recognized impairment charges on BSS equipment which are part of transmission installation and equipment of fixed wireless assets. The sum of the expected future cash flows (undiscounted and without interest charges) relating to these impaired assets is less than the carrying amount of the assets and therefore, for U.S. GAAP reporting purposes, these assets have been written down to their estimated fair value based on discounted estimated future cash flows. The estimated fair values of the impaired assets determined under U.S. GAAP are the same as those determined under Indonesian GAAP; accordingly, there were no differences between Indonesian GAAP and U.S. GAAP. |
p. | Gain (loss) on Disposal of Property, Plant and Equipment |
Under Indonesian GAAP, the Company classifies gain (loss) on disposal of property, plant and equipment as a component of other income (expense) which is excluded from determination of operating income. | |
Under U.S. GAAP, gain (loss) on disposal of property, plant and equipment is classified as a component of operating expenses and hence included in the determination of operating income. For the years ended December 31, 2003, 2004 and 2005, operating income would have been higher (lower) by Rp182,883 million, (Rp26,089) million and Rp46,193 million, respectively, and other income (expenses) would have been lower (higher) by the same amounts due to the inclusion of the gain (loss) on disposal of property, plant and equipment in the determination of operating income. |
q. | Reversal of Difference in Value of Restructuring Transactions Between Entities Under Common Control |
Under Indonesian GAAP, the Company is required to reclassify the difference in value of restructuring transactions between entities under common control as of January 1, 2005 as a direct adjustment to retained earnings when the common control relationship between the transacting parties no longer exists as of January 1, 2005. | |
Under U.S. GAAP, difference in value of restructuring transactions between entities under common control remains in equity indefinitely as part of the additional paid-in capital. |
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Note | 2003 | 2004 | 2005 | ||||||||||||||
(As restated*) | |||||||||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP | 6,087,227 | 6,614,568 | 7,993,566 | ||||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | |||||||||||||||||
Termination benefits | (a | ) | (670,981 | ) | — | — | |||||||||||
Capitalization of foreign exchange gains and losses, net of related depreciation of (Rp76,756) million, (Rp75,870) million and (Rp77,010) million, respectively | (b | ) | 76,756 | 1,587 | 77,010 | ||||||||||||
Interest capitalized on property under construction, net of related depreciation of (Rp8,787) million, (Rp13,392) million and (Rp17,275) million, respectively | (c | ) | 39,077 | 26,802 | 23,825 | ||||||||||||
Revenue-sharing arrangements | (d | ) | 23,159 | 155,369 | 69,173 | ||||||||||||
Pension | (e | ) | (109,334 | ) | (148,517 | ) | (104,877 | ) | |||||||||
Post-retirement health care | (e | ) | — | (75,964 | ) | (104,466 | ) | ||||||||||
Long service awards | (e | ) | — | (122,462 | ) | (90,933 | ) | ||||||||||
Equity in net income (loss) of associated companies | (f | ) | (170 | ) | (177 | ) | (192 | ) | |||||||||
Amortization of land rights | (g | ) | (10,212 | ) | (13,907 | ) | (4,881 | ) | |||||||||
Revenue recognition | (h | ) | (53,226 | ) | 54,159 | 5,046 | |||||||||||
Goodwill | (i | ) | 21,270 | 21,270 | 21,270 | ||||||||||||
Capital leases | (j | ) | 6,882 | (3,435 | ) | (47,524 | ) | ||||||||||
Adjustment for consolidation of Dayamitra | (k | ) | (24,476 | ) | (72,361 | ) | 5,084 | ||||||||||
Reversal of difference due to change of equity in associated companies | (l | ) | (38,425 | ) | — | — | |||||||||||
Asset retirement obligations | (m | ) | (848 | ) | (848 | ) | (848 | ) |
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Note | 2003 | 2004 | 2005 | |||||||||||||||
(As restated*) | ||||||||||||||||||
Deferred income tax: | ||||||||||||||||||
Deferred income tax on equity method investments | (n | ) | 119,456 | (11,234 | ) | (3,206 | ) | |||||||||||
Deferred income tax effect on U.S. GAAP adjustments | 323,089 | 61,742 | 18,288 | |||||||||||||||
(297,983 | ) | (127,976 | ) | (137,231 | ) | |||||||||||||
Minority interest | 1,396 | (18,019 | ) | (16,244 | ) | |||||||||||||
Net adjustments | (296,587 | ) | (145,995 | ) | (153,475 | ) | ||||||||||||
Net income in accordance with U.S. GAAP | 5,790,640 | 6,468,573 | 7,840,091 | |||||||||||||||
Net income per share — in full Rupiah amount | 287.23 | 320.86 | 388.89 | |||||||||||||||
Net income per ADS — in full Rupiah amount (40 Series B shares per ADS) | 11,489.40 | 12,834.47 | 15,555.74 | |||||||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R (see Note 4a). |
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Note | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Stockholders’ equity according to the consolidated balance sheets prepared under Indonesian GAAP | 18,128,036 | 23,292,401 | |||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | |||||||||||||
Capitalization of foreign exchange differences — net of related depreciation | (b | ) | (548,886 | ) | (471,876 | ) | |||||||
Interest capitalized on property under construction — net of related depreciation | (c | ) | 128,614 | 152,439 | |||||||||
Revenue-sharing arrangements | (d | ) | (292,327 | ) | (223,154 | ) | |||||||
Pension | (e | ) | 1,973,837 | 1,851,509 | |||||||||
Post-retirement health care | (e | ) | 1,142,561 | 1,038,095 | |||||||||
Long service awards | (e | ) | (122,462 | ) | (213,395 | ) | |||||||
Equity in net income (loss) of associated companies | (f | ) | (18,429 | ) | (18,621 | ) | |||||||
Amortization of land rights | (g | ) | (79,118 | ) | (83,999 | ) | |||||||
Revenue recognition | (h | ) | (714,389 | ) | (709,343 | ) | |||||||
Goodwill | (i | ) | 63,809 | 85,079 | |||||||||
Capital leases | (j | ) | 17,688 | (29,836 | ) | ||||||||
Adjustment for consolidation of Dayamitra | (k | ) | (61,728 | ) | (56,644 | ) | |||||||
Asset retirement obligations | (m | ) | (1,696 | ) | (2,544 | ) | |||||||
Deferred income tax: | |||||||||||||
Deferred income tax on equity method investments | (n | ) | 39,343 | 35,040 | |||||||||
Deferred income tax effect on U.S. GAAP adjustments | (89,704 | ) | (66,182 | ) | |||||||||
1,437,113 | 1,286,568 | ||||||||||||
Minority interest | 5,763 | (10,481 | ) | ||||||||||
Net adjustments | 1,442,876 | 1,276,087 | |||||||||||
Stockholders’ equity in accordance with U.S. GAAP | 19,570,912 | 24,568,488 | |||||||||||
* | The 2004 figures have been restated due to the adoption of PSAK 24R (see Note 4a). |
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2003 | 2004 | 2005 | |||||||||||
Stockholders’ equity at beginning of year | 13,910,864 | 16,284,692 | 19,570,912 | ||||||||||
Changes during the year: | |||||||||||||
Net income under U.S. GAAP | 5,790,640 | 6,468,573 | 7,840,091 | ||||||||||
Dividends | (3,338,109 | ) | (3,186,991 | ) | (2,921,227 | ) | |||||||
Accumulated other comprehensive income, net of tax | (78,703 | ) | 4,638 | (11,288 | ) | ||||||||
Difference in value of restructuring transactions between entities under common control | — | — | 90,000 | ||||||||||
Stockholders’ equity at end of year | 16,284,692 | 19,570,912 | 24,568,488 | ||||||||||
2004 | 2005 | |||||||
Consolidated balance sheets | ||||||||
Current assets | 9,610,433 | 10,952,600 | ||||||
Non-current assets | 47,091,387 | 52,527,929 | ||||||
Total assets | 56,701,820 | 63,480,529 | ||||||
Current liabilities | 11,650,470 | 13,796,402 | ||||||
Non-current liabilities | 20,547,769 | 18,799,964 | ||||||
Total liabilities | 32,198,239 | 32,596,366 | ||||||
Minority interest in net assets of subsidiaries | 4,932,669 | 6,315,675 | ||||||
Stockholders’ equity | 19,570,912 | 24,568,488 | ||||||
Total liabilities and stockholders’ equity | 56,701,820 | 63,480,529 | ||||||
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(3) | Additional financial statement disclosures required by U.S. GAAP and U.S. SEC |
a. Income Tax |
The reconciliation between the expected income tax provision in accordance with U.S. GAAP and the actual provision for income tax recorded in accordance with U.S. GAAP is as follows: |
2003 | 2004 | 2005 | |||||||||||
Consolidated income before tax in accordance with U.S. GAAP | 10,711,267 | 12,570,911 | 16,089,111 | ||||||||||
Income tax in accordance with U.S. GAAP at 30% statutory tax rate | 3,213,380 | 3,771,273 | 4,826,733 | ||||||||||
Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | |||||||||||||
Net periodic post-retirement health care benefit cost | 188,375 | 139,834 | 169,534 | ||||||||||
Amortization of discount on promissory notes and other borrowing costs | 132,876 | 136,994 | 62,132 | ||||||||||
Tax penalty | 16,521 | 1,941 | 24,155 | ||||||||||
Employee benefits | 6,342 | 24,719 | 18,618 | ||||||||||
Permanent differences of the KSO Units | 16,739 | 17,213 | 17,458 | ||||||||||
Income which was already subject to final tax | (61,876 | ) | (30,743 | ) | (68,336 | ) | |||||||
Others | (93,812 | ) | 66,787 | 118,511 | |||||||||
Total | 205,165 | 356,745 | 342,072 | ||||||||||
Provision for income tax in accordance with U.S. GAAP | 3,418,545 | 4,128,018 | 5,168,805 | ||||||||||
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For the three-year period ended December 31, 2005, all of the Company’s operating revenues occurred in Indonesia, and accordingly, the Company has not been subject to income tax in other countries. |
2004 | 2005 | |||||||
Deferred tax assets | ||||||||
Trade accounts receivable | 228,889 | 248,260 | ||||||
Inventories | 15,494 | 13,884 | ||||||
Tax loss carryforwards | 239,501 | 123,309 | ||||||
Accrued long service awards | 172,399 | 225,454 | ||||||
Deferral of revenue | 220,538 | 218,366 | ||||||
Long-term investments | 44,029 | 41,706 | ||||||
Liabilities of business acquisitions | 1,009,932 | 945,403 | ||||||
Accrued employee benefits | 46,043 | 63,002 | ||||||
Others | 40,532 | 103,445 | ||||||
Total | 2,017,357 | 1,982,829 | ||||||
Deferred tax liabilities | ||||||||
Property, plant and equipment | (3,215,173 | ) | (2,882,932 | ) | ||||
Intangible assets | (1,592,645 | ) | (1,327,225 | ) | ||||
Pension benefit cost | (153,177 | ) | (163,747 | ) | ||||
Prepaid expenses | (34,290 | ) | (31,877 | ) | ||||
Total | (4,995,285 | ) | (4,405,781 | ) | ||||
Total deferred tax liabilities — net | (2,977,928 | ) | (2,422,952 | ) | ||||
b. Fair Value of Financial Instruments |
The following methods and assumptions are used to estimate the fair value of each class of financial instruments: |
Cash and cash equivalents and temporary investments |
The carrying amount approximates fair value because of the short-term nature of the instruments. |
Short-term bank loans |
The carrying amount approximates fair value because of the short-term nature of the instruments. |
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Long-term liabilities |
The fair value of long-term liabilities other than bonds and guaranteed notes is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s bankers. | |
The fair value of bonds and guaranteed notes is based on market prices at balance sheet date. |
The estimated fair values of the Company and its subsidiaries’ financial instruments are as follows: |
Carrying | Fair | ||||||||
Amount | Value | ||||||||
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 | |||||||
Bonds | 986,564 | 1,245,208 | |||||||
Medium-term notes | 1,077,703 | 1,100,032 | |||||||
Guaranteed notes | 736,174 | 863,184 | |||||||
Bank loans | 2,378,315 | 2,462,916 | |||||||
Liabilities of business acquisitions | 4,317,225 | 5,033,748 | |||||||
2005 | |||||||||
Cash and cash equivalents | 5,374,684 | 5,374,684 | |||||||
Temporary investments | 22,064 | 22,064 | |||||||
Short-term bank loans | 173,800 | 173,800 | |||||||
Long-term liabilities: | |||||||||
Two-step loans | 5,329,477 | 5,001,102 | |||||||
Bonds | 991,850 | 1,031,040 | |||||||
Medium-term notes | 609,329 | 582,220 | |||||||
Bank loans | 2,386,646 | 2,267,269 | |||||||
Liabilities of business acquisitions | 3,990,353 | 4,162,814 |
The methods and assumptions followed to determine the fair value estimates are inherently judgmental and involve various limitations, including the following: |
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 subsidiaries would record upon disposal/termination of the financial instruments. |
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c. Comprehensive Income |
2003 | 2004 | 2005 | ||||||||||
Net income under U.S. GAAP | 5,790,640 | 6,468,573 | 7,840,091 | |||||||||
Unrealized holding gain (loss) on available-for-sale securities | — | 884 | (1,632 | ) | ||||||||
Foreign currency translation adjustments of associates | (78,703 | ) | 3,754 | 2,560 | ||||||||
Minimum pension liability adjustments | — | — | (12,216 | ) | ||||||||
5,711,937 | 6,473,211 | 7,828,803 | ||||||||||
Adjustments to net income to arrive at comprehensive income include unrealized holding gains (losses) on available-for-sale securities, foreign currency translation adjustments and minimum pension liability adjustments. The foreign currency translation adjustments of associates are reported net of income tax of Rp67,270 million, Rp1,609 million and Rp1,097 million for the years ended December 31, 2003, 2004 and 2005, respectively. The minimum pension liability adjustment for 2005 is reported net of income tax of Rp5,235 million. The components of accumulated other comprehensive income are as follows: |
2003 | 2004 | 2005 | ||||||||||
Unrealized holding gain (loss) on available-for-sale securities | — | 884 | (748 | ) | ||||||||
Foreign currency translation adjustments of associates | 156,962 | 160,716 | 163,276 | |||||||||
Minimum pension liability adjustments | — | — | (12,216 | ) | ||||||||
156,962 | 161,600 | 150,312 | ||||||||||
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The Company |
The disclosures under SFAS No. 132 (Revised 2003) and SFAS No. 106 are as follows: |
Pension | Health Care | |||||||||||||||||||||||
2003 | 2004 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||
Components of Net Periodic Benefit Cost | ||||||||||||||||||||||||
Service cost | 119,089 | 137,264 | 138,117 | 88,394 | 76,163 | 87,636 | ||||||||||||||||||
Interest cost | 537,797 | 740,494 | 789,830 | 493,596 | 411,110 | 507,994 | ||||||||||||||||||
Expected return on plan assets | (421,706 | ) | (436,672 | ) | (533,333 | ) | (56,004 | ) | (61,084 | ) | (103,498 | ) | ||||||||||||
Amortization of prior service cost (gain) | 201,265 | 201,265 | 201,265 | (367 | ) | (367 | ) | (367 | ) | |||||||||||||||
Recognized actuarial loss (gain) | (43,020 | ) | 57,641 | 21,244 | 99,286 | 52,006 | 88,589 | |||||||||||||||||
Amortization of transition obligation | 28,634 | 28,634 | 28,634 | 24,325 | 24,325 | 24,325 | ||||||||||||||||||
Net periodic benefit cost | 422,059 | 728,626 | 645,757 | 649,230 | 502,153 | 604,679 | ||||||||||||||||||
Amounts charged to KSO Units under contractual agreement | (29,896 | ) | (16,369 | ) | (18,660 | ) | (7,795 | ) | (9,913 | ) | (11,627 | ) | ||||||||||||
Total net periodic benefit cost less amounts charged to KSO Units | 392,163 | 712,257 | 627,097 | 641,435 | 492,240 | 593,052 | ||||||||||||||||||
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The following table presents the change in benefit obligation, the change in plan assets, funded status of the plan and the net amount recognized in the Company’s U.S. GAAP balance sheets as of December 31, 2004 and 2005: |
Pension | Health Care | |||||||||||||||
2004 | 2005 | 2004 | 2005 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | 6,852,923 | 7,315,182 | 3,787,389 | 4,681,005 | ||||||||||||
Service cost | 137,264 | 138,117 | 76,163 | 87,636 | ||||||||||||
Interest cost | 740,494 | 789,830 | 411,110 | 507,994 | ||||||||||||
Plan participants’ contributions | 43,906 | 41,371 | — | — | ||||||||||||
Actuarial (gain) loss | (155,128 | ) | (794,180 | ) | 529,618 | 423,833 | ||||||||||
Benefits paid | (304,277 | ) | (350,220 | ) | (123,275 | ) | (125,979 | ) | ||||||||
Benefit obligation at end of year | 7,315,182 | 7,140,100 | 4,681,005 | 5,574,489 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 3,671,309 | 4,884,523 | 505,340 | 1,138,768 | ||||||||||||
Actual return on plan assets | 627,842 | 155,754 | 32,173 | 45,209 | ||||||||||||
Employer contributions | 845,743 | 698,526 | 724,530 | 435,899 | ||||||||||||
Plan participants’ contributions | 43,906 | 41,371 | — | — | ||||||||||||
Benefits paid | (304,277 | ) | (350,220 | ) | (123,275 | ) | (125,979 | ) | ||||||||
Fair value of plan assets at end of year | 4,884,523 | 5,429,954 | 1,138,768 | 1,493,897 | ||||||||||||
Funded status | (2,430,659 | ) | (1,710,146 | ) | (3,542,237 | ) | (4,080,592 | ) | ||||||||
Unrecognized prior service cost (gain) | 1,861,565 | 1,660,300 | (1,566 | ) | (1,199 | ) | ||||||||||
Unrecognized net actuarial loss | 974,763 | 536,918 | 1,459,408 | 1,852,943 | ||||||||||||
Unrecognized net transition obligation | 120,257 | 91,623 | 243,249 | 218,924 | ||||||||||||
Net amount recognized | 525,926 | 578,695 | (1,841,146 | ) | (2,009,924 | ) | ||||||||||
The accumulated benefit obligation of the Company’s defined benefit pension plan was Rp4,656,605 million and Rp4,829,227 million as of December 31, 2004 and 2005, respectively. | |
The measurement date used to determine pension and health care benefit measures for the pension plan and the health care plan is December 31 for each of the years. | |
The assumptions used by the independent actuary to determine the benefit obligation of the plans as of December 31, 2004 and 2005 were as follows: |
Pension | Health Care | |||||||||||||||
2004 | 2005 | 2004 | 2005 | |||||||||||||
Discount rate | 11 | % | 11 | % | 11 | % | 11 | % | ||||||||
Rate of compensation increase | 8 | % | 8.8 | % | — | — |
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The assumption used by the independent actuary to determine the net periodic benefit cost of the plans for the years ended December 31, 2003, 2004 and 2005 were as follows: |
Pension | Health Care | |||||||||||||||||||||||
2003 | 2004 | 2005 | 2003 | 2004 | 2005 | |||||||||||||||||||
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 | % | — | — | — |
Assumed health care cost trend rates at December 31, 2003, 2004 and 2005 are as follows: |
2003 | 2004 | 2005 | ||||||||||
Health care cost trend assumed for next year | 12% | 12% | 9% | |||||||||
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 8% | 8% | 9% | |||||||||
Year that the rate reaches the ultimate trend rate | 2006 | 2007 | 2006 |
The actuarial valuations for the defined benefit pension plan and post-retirement health care plan as of December 31, 2003, 2004 and 2005 were prepared on May 21, 2004, March 15, 2005, and February 27, 2006, respectively, by an independent actuary. | |
Discount rate is based on the Government Bond yields, i.e., 11.38%. The rate of compensation increase assumed is based on long-term inflation in the order of 6% — 7%. The expected long-term return on plan assets is based on the average rate of earnings expected on the funds invested or to be invested. | |
Assumed health care cost trends have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects: |
1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | 159,073 | (126,008 | ) | |||||
Effect on post-retirement benefit obligation | 1,143,943 | (908,400 | ) |
The Company’s pension plan weighted average asset allocations at December 31, 2004 and 2005, by asset category, are as follows: |
Plan Assets | ||||||||
as of | ||||||||
December 31 | ||||||||
Asset Category | 2004 | 2005 | ||||||
Debt securities | 71 | % | 75 | % | ||||
Deposit securities | 17 | % | 7 | % | ||||
Equity securities | 7 | % | 11 | % | ||||
Real estate | 1 | % | 1 | % | ||||
Other | 4 | % | 6 | % | ||||
Total | 100 | % | 100 | % | ||||
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Equity securities include the Company’s common stock in the amounts of Rp96,063 million (2.0 percent of total plan assets) and Rp124,189 million (2.3 percent of total plan assets) at December 31, 2004 and 2005, respectively. | |
Debt securities include the Company’s bonds in the amounts of Rp159,253 million (3.3 percent of total plan assets) and Rp223,736 million (4.1 percent of total plan assets) at December 31, 2004 and 2005, respectively. | |
The Company’s post-retirement health care plan weighted average asset allocations at December 31, 2004 and 2005, by asset category, are as follows: |
Plan Assets | ||||||||
as of | ||||||||
December 31 | ||||||||
Asset Category | 2004 | 2005 | ||||||
Debt securities | 15 | % | 31 | % | ||||
Deposit securities | 84 | % | 60 | % | ||||
Equity securities | — | 4 | % | |||||
Other | 1 | % | 5 | % | ||||
Total | 100 | % | 100 | % | ||||
Contributions |
Expected Future Benefit Payments |
Health | ||||||||
Pension | Care | |||||||
2006 | 387,235 | 138,566 | ||||||
2007 | 351,742 | 152,035 | ||||||
2008 | 394,299 | 170,277 | ||||||
2009 | 472,327 | 191,692 | ||||||
2010 | 565,764 | 216,647 | ||||||
2011 — 2015 | 3,824,443 | 1,558,154 |
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Telkomsel |
Pension plan |
2003 | 2004 | 2005 | ||||||||||
Service cost | 4,679 | 6,300 | 12,901 | |||||||||
Interest cost | 3,337 | 5,199 | 8,412 | |||||||||
Expected return on plan assets | (1,013 | ) | (824 | ) | (832 | ) | ||||||
Amortization of prior service cost | — | 125 | 24 | |||||||||
Recognized actuarial loss | 587 | 1,157 | 1,920 | |||||||||
Amortization of transition obligation | 458 | 458 | 458 | |||||||||
Net periodic benefit cost | 8,048 | 12,415 | 22,883 | |||||||||
2004 | 2005 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 47,646 | 59,145 | ||||||
Service cost | 6,300 | 12,901 | ||||||
Interest cost | 5,199 | 8,412 | ||||||
Actuarial loss | — | 96,151 | ||||||
Benefits paid | — | (2,929 | ) | |||||
Benefit obligation at end of year | 59,145 | 173,680 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 8,504 | 11,182 | ||||||
Actual return on plan assets | 2,678 | (2,210 | ) | |||||
Employer contributions | — | 14,928 | ||||||
Benefits paid | — | (2,929 | ) | |||||
Fair value of plan assets at end of year | 11,182 | 20,971 | ||||||
Funded status | (47,963 | ) | (152,709 | ) | ||||
Unrecognized prior service cost | 2,048 | 274 | ||||||
Unrecognized net actuarial loss | 20,820 | 120,725 | ||||||
Unrecognized transition obligation | 6,648 | 6,190 | ||||||
Net amount recognized | (18,447 | ) | (25,520 | ) | ||||
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2004 | 2005 | |||||||
Accumulated benefit obligation | 26,045 | 70,406 | ||||||
Fair value of plan assets | (11,182 | ) | (20,971 | ) | ||||
Unfunded accumulated benefits (required minimum liability) | 14,863 | 49,435 | ||||||
Accrued pension cost | (18,447 | ) | (25,520 | ) | ||||
Additional liability under U.S. GAAP | — | 23,915 | ||||||
Intangible asset | — | 6,464 | ||||||
Other comprehensive income | — | 17,451 | ||||||
2004 | 2005 | |||||||
Discount rate | 11 | % | 11 | % | ||||
Rate of compensation increase | 9 | % | 8 | % |
2003 | 2004 | 2005 | ||||||||||
Discount rate | 12 | % | 11 | % | 11 | % | ||||||
Expected long-term return on plan assets | 12 | % | 7.5 | % | 7.5 | % | ||||||
Rate of compensation increase | 10 | % | 9 | % | 9 | % |
e. Recent U.S. Accounting Pronouncements |
SFAS No. 123R,“Share-Based Payment.” In December 2004, the FASB issued SFAS No. 123R which requires companies to measure compensation cost for share-based payments at fair value. It is not expected that the adoption of SFAS No. 123R will have a material effect on the Company’s consolidated financial statements. | |
SFAS No. 151“Inventory Cost — an amendment of ARB No. 43, Chapter 4.” In November 2004, the FASB issued SFAS No. 151 which requires certain abnormal expenditures to be recognized as expenses in current period. It also requires that the amount of fixed production overhead allocated to inventory be based on the normal capacity of the production facilities. SFAS No. 151 is effective for financial statements for fiscal years beginning after June 15, 2005. It is not expected that the adoption of SFAS No. 151 will have a material effect on the Company’s consolidated financial statements. | |
SFAS No. 153“Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.” In December 2004, the FASB issued SFAS No. 153, which is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. SFAS No. 153 requires that |
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exchanges of productive assets be accounted for at fair value unless fair value can not be reasonably determined or the transaction lacks commercial substance. It is not expected that the adoption of this standard will have a material effect on the Company’s consolidated financial statements. |
SFAS No. 154“Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3.” In May 2005, the FASB issued SFAS No. 154 which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. SFAS No. 154 shall be effective for all accounting changes and any error corrections occurring after January 1, 2006. | |
FSP No. FAS 13-1“Accounting for Rental Costs Incurred During a Construction Period.” In October 2005, the FASB issued FSP No. FAS 13-1 which requires a reporting entity to recognize rental costs associated with ground or building operating leases that are incurred during a construction period as rental expense in income from continuing operations. FSP No. FAS 13-1 is applied in the first reporting period beginning after December 15, 2005. It is not expected that the adoption of FSP No. FAS 13-1 will have a material effect on the Company’s consolidated financial statements. | |
SFAS No. 155,“Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” In February 2006, the FASB issued SFAS No. 155 which amends SFAS No. 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principal cash flows. SFAS No. 155 also amends SFAS No. 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is a derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. It is not expected that the adoption of SFAS No. 155 will have a material effect on the Company’s consolidated financial statements. |
55. | RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES |
2003 | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Net income | 6,087,227 | 6,614,568 | 7,993,566 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation of property, plant and equipment | 4,779,520 | 6,438,557 | 7,570,739 | ||||||||||
Write-down of assets | — | — | 616,768 |
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2003 | 2004 | 2005 | |||||||||||
(As restated*) | |||||||||||||
Loss on procurement commitments | — | — | 79,359 | ||||||||||
Interest income | (366,024 | ) | (317,941 | ) | (344,686 | ) | |||||||
Interest expense | 1,383,446 | 1,270,136 | 1,177,268 | ||||||||||
Foreign exchange (gain) loss | (363,505 | ) | 1,192,842 | 420,419 | |||||||||
Equity in net income of associated companies | (2,819 | ) | (3,420 | ) | (10,879 | ) | |||||||
(Gain) loss on sale of property, plant and equipment | (182,883 | ) | 26,089 | (46,193 | ) | ||||||||
Insurance proceeds | — | — | (27,580 | ) | |||||||||
Loss on redemption of Telkomsel’s bonds | — | 44,628 | 19,038 | ||||||||||
Loss on sale of long-term investments | 46,595 | — | — | ||||||||||
Amortization of goodwill and other intangible assets | 730,659 | 872,330 | 918,153 | ||||||||||
Amortization of unearned income | (61,812 | ) | (93,164 | ) | (149,824 | ) | |||||||
Amortization of deferred charges | 26,555 | 25,751 | 26,921 | ||||||||||
Provision for doubtful accounts and inventory obsolescence | 326,419 | 357,096 | 488,973 | ||||||||||
Income tax expense | 3,861,090 | 4,178,526 | 5,183,887 | ||||||||||
Minority interest in net income of subsidiaries | 1,503,478 | 1,956,301 | 3,063,971 | ||||||||||
Changes in assets and liabilities: | |||||||||||||
Trade accounts receivable | (827,772 | ) | (670,103 | ) | (706,726 | ) | |||||||
Other accounts receivable | 6,784 | 95,757 | (124,746 | ) | |||||||||
Inventories | 76,486 | (58,329 | ) | (28,211 | ) | ||||||||
Prepaid expenses | (84,690 | ) | (179,573 | ) | (578,364 | ) | |||||||
Prepaid taxes | (127,607 | ) | 173,189 | (1,217 | ) | ||||||||
Prepaid pension benefit costs | (260,041 | ) | 208 | 722 | |||||||||
Trade accounts payable | 593,826 | (47,618 | ) | 284,599 | |||||||||
Other accounts payable | (27,837 | ) | (96,022 | ) | 1,602 | ||||||||
Taxes payable | 477,961 | (105,991 | ) | 156,089 | |||||||||
Accrued expenses | (779,917 | ) | (65,078 | ) | 419,465 | ||||||||
Unearned income | 317,650 | 266,774 | 562,719 | ||||||||||
Advances from customers and suppliers | (30,884 | ) | (78,028 | ) | (55,343 | ) | |||||||
Accrued pension and other post-retirement benefit costs | 7,041 | (246,867 | ) | (149,254 | ) | ||||||||
Accrued long service awards | (3,504 | ) | (41,196 | ) | 74,683 | ||||||||
Accrued post-retirement health care benefits | 460,757 | (298,341 | ) | 64,314 | |||||||||
Interest paid | (1,178,332 | ) | (1,348,919 | ) | (1,200,484 | ) | |||||||
Interest received | 369,982 | 321,677 | 341,848 | ||||||||||
Income tax paid | (3,905,317 | ) | (4,132,359 | ) | (4,938,916 | ) | |||||||
Net cash provided by operating activities | 12,852,532 | 16,051,480 | 21,102,680 | ||||||||||
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