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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, 2006 | ||
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 Dwiwarna Share, 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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“3G” | is the generic term for third generation mobile phone technologies. 3G offers very high speed connections to cellular phones, enabling video conference and other applications requiring broadband connectivity to the internet. Users connecting to the internet from a laptop using either a cell phone and data cable or a PCcard also benefit from 3G. | |
“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. | |
“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. | |
“DSL” | (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. | |
“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. | |
“e-business” | refers to electronic business solutions including electronic payment services, Internet data centers and content and application solutions. | |
“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. |
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“existing installations” | refer to telecommunications facilities, including telephone lines, network infrastructure and related assets in existence in each KSO Division as of the beginning of each KSO Period plus certain facilities and equipment constructed or installed by TELKOM in the KSO Units after such dates to be managed by a KSO Investor. | |
“fixed cellular” | refers to a form of fixed wireless technology which uses conventional cellular network configurations to link a subscriber at a fixed location to a local exchange. | |
“fixed 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 providesend-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 |
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facilities in regional divisions. The consortium partners are owned by international operators and private domestic companies, or in cases where TELKOM has acquired the consortium partner, by TELKOM. | ||
“KSO Agreements” | refer to the agreements, as amended from time to time, governing the operation of the network in the relevant KSO region for the KSO Period. See “KSO Period.” | |
“KSO Period” | refers to the period covered by a 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” | refers to the 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. | |
“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 |
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companies. Under this scheme the private company invests in the telecommunication facilities to be operated by TELKOM. | ||
“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 “RUIM card” | (Removable User Identity Module) is a “smart” card designed to be inserted into a fixed wireless telephone that uniquely identifies a CDMA network subscription and that contains subscriber-related data such as phone numbers, service details and memory for storing messages. | |
“satellite transponder” | is the radio relay equipment embedded on a satellite that receives signals from earth and amplifies and transmits the signal back to earth. | |
“SIM” or “SIM card” | (Subscriber Identity Module) is a “smart” card designed to be inserted into a mobile cellular telephone that uniquely identifies a GSM network subscription and that contains subscriber-related data such as phone numbers, service details and memory for storing messages. | |
“SMS” | (Short Messaging Service) is a technology allowing the exchange of text messages between mobile cellular phones and between fixed wireless phones. | |
“switch” | is a mechanical, electrical or electronic device that opens or closes circuits, completes or breaks an electrical path, or selects paths or circuits, used to route traffic in a telecommunications network. | |
“trunk exchange” | is a switch that has the function of connecting one telephony switch to another telephony switch, which can be either a local or trunk switch. | |
“USO” | (Universal Service Obligation) is the service obligation imposed by the Government on all providers of telecommunications services for the purpose of providing public services in Indonesia. | |
“VoIP” | (Voice over Internet Protocol) is a means of sending voice information using the Internet Protocol. | |
“VPN” | (Virtual Private Network) is a secure private network connection, built on top of publicly-accessible infrastructure, such as the Internet or the public telephone network. VPNs typically employ some combination of encryption, digital certificates, strong user authentication and access control to provide security to the traffic |
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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 ase-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 |
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Year ended December 31, | ||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||
(US$ | ||||||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | million, | |||||||||||||||||||||||||||
dividends and ADS) | 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 | 5,448 | 6,562 | 7,439 | 7,223 | 7,131 | 792 | ||||||||||||||||||||||
Monthly subscription charges | 1,475 | 1,949 | 2,935 | 3,290 | 3,492 | 388 | ||||||||||||||||||||||
Installation charges | 130 | 223 | 201 | 197 | 170 | 19 | ||||||||||||||||||||||
Others | 211 | 163 | 70 | 71 | 186 | 21 | ||||||||||||||||||||||
Total fixed lines revenues | 7,264 | 8,897 | 10,645 | 10,781 | 10,979 | 1,220 | ||||||||||||||||||||||
Cellular | ||||||||||||||||||||||||||||
Air time charges | 5,454 | 7,678 | 9,826 | 13,666 | 19,257 | 2,140 | ||||||||||||||||||||||
Monthly subscription charges | 593 | 581 | 448 | 384 | 298 | 33 | ||||||||||||||||||||||
Features | 8 | 6 | 91 | 457 | 959 | 106 | ||||||||||||||||||||||
Connection fee charges | 172 | 194 | 56 | 64 | 109 | 12 | ||||||||||||||||||||||
Total cellular revenues | 6,227 | 8,459 | 10,421 | 14,571 | 20,623 | 2,291 | ||||||||||||||||||||||
Total telephone revenues | 13,491 | 17,356 | 21,066 | 25,352 | 31,602 | 3,511 | ||||||||||||||||||||||
Joint Operation Schemes | ||||||||||||||||||||||||||||
Minimum TELKOM Revenues (MTR) | 1,320 | 900 | 296 | 269 | 207 | 23 | ||||||||||||||||||||||
Share in Distributable KSO Revenues (DKSOR) | 801 | 583 | 350 | 319 | 275 | 30 | ||||||||||||||||||||||
Amortization of unearned initial investor payments | 7 | 3 | 11 | 1 | 7 | 1 | ||||||||||||||||||||||
Total revenue under Joint Operation Schemes | 2,128 | 1,486 | 657 | 589 | 489 | 54 | ||||||||||||||||||||||
Interconnection — net | 2,831 | 4,162 | 6,188 | 7,742 | 8,682 | 965 | ||||||||||||||||||||||
Network | 316 | 518 | 654 | 587 | 719 | 80 | ||||||||||||||||||||||
Data and Internet | 1,552 | 3,109 | 4,809 | 6,934 | 9,065 | 1,007 | ||||||||||||||||||||||
Revenue-Sharing Arrangements | 264 | 258 | 281 | 302 | 415 | 46 | ||||||||||||||||||||||
Other telecommunications services | 221 | 227 | 293 | 301 | 322 | 36 | ||||||||||||||||||||||
Total Operating Revenues | 20,803 | 27,116 | 33,948 | 41,807 | 51,294 | 5,699 | ||||||||||||||||||||||
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Year ended December 31, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||
(US$ | |||||||||||||||||||||||||
(Rp. in billion, except for data relating to shares, | million, | ||||||||||||||||||||||||
dividends and ADS) | except for | ||||||||||||||||||||||||
data relating | |||||||||||||||||||||||||
to shares, | |||||||||||||||||||||||||
dividends | |||||||||||||||||||||||||
and ADS)(1) | |||||||||||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||||||
Personnel | 4,388 | 4,440 | 4,910 | 6,563 | 8,514 | 946 | |||||||||||||||||||
Depreciation | 3,474 | 4,779 | 6,438 | 7,571 | 9,178 | 1,020 | |||||||||||||||||||
Operations, maintenance and telecommunication services | 2,290 | 3,339 | 4,530 | 5,916 | 7,496 | 833 | |||||||||||||||||||
General and administrative | 1,146 | 2,079 | 2,600 | 2,764 | 3,271 | 363 | |||||||||||||||||||
Marketing | 375 | 503 | 882 | 1,126 | 1,242 | 138 | |||||||||||||||||||
Write-down of assets | — | — | — | 617 | — | — | |||||||||||||||||||
Loss on procurement commitments | — | — | — | 79 | — | — | |||||||||||||||||||
Total Operating Expenses | 11,673 | 15,140 | 19,360 | 24,636 | 29,701 | 3,300 | |||||||||||||||||||
Operating Income | 9,130 | 11,976 | 14,588 | 17,171 | 21,593 | 2,399 | |||||||||||||||||||
Other income (expenses) | |||||||||||||||||||||||||
Gain on sale of long-term investment in Telkomsel | 3,196 | — | — | — | — | — | |||||||||||||||||||
Interest expense | (1,583 | ) | (1,383 | ) | (1,270 | ) | (1,177 | ) | (1,286 | ) | (143 | ) | |||||||||||||
Interest income | 480 | 366 | �� | 318 | 345 | 655 | 73 | ||||||||||||||||||
Gain (loss) on foreign exchange — net | 557 | 126 | (1,221 | ) | (517 | ) | 836 | 93 | |||||||||||||||||
Equity in net income (loss) of associated companies | 5 | 3 | 3 | 11 | (7 | ) | (1 | ) | |||||||||||||||||
Others — net | (36 | ) | 364 | 331 | 409 | 202 | 23 | ||||||||||||||||||
Other Income (Expenses) — net | 2,619 | (524 | ) | (1,839 | ) | (929 | ) | 400 | 45 | ||||||||||||||||
Income Before Tax | 11,749 | 11,452 | 12,749 | 16,242 | 21,993 | 2,444 | |||||||||||||||||||
Tax expense | (2,899 | ) | (3,861 | ) | (4,178 | ) | (5,184 | ) | (7,040 | ) | (782 | ) | |||||||||||||
Income before minority interest in net income of subsidiaries | 8,850 | 7,591 | 8,571 | 11,058 | 14,953 | 1,662 | |||||||||||||||||||
Minority interest in net income of subsidiaries, net | (810 | ) | (1,504 | ) | (1,956 | ) | (3,064 | ) | (3,948 | ) | (439 | ) | |||||||||||||
Net Income | 8,040 | 6,087 | 6,615 | 7,994 | 11,005 | 1,223 | |||||||||||||||||||
Weighted average shares outstanding (millions) | 20,160 | 20,160 | 20,160 | 20,160 | 20,115 | — | |||||||||||||||||||
Net income per share | 398.80 | 301.95 | 328.10 | 396.51 | 547.15 | 0.06 | |||||||||||||||||||
Net income per ADS | 15,951.80 | 12,077.83 | 13,124.14 | 15,860.25 | 21,886.00 | 2.43 | |||||||||||||||||||
Dividends declared per share(2) | 105.41 | 165.58 | 158.09 | 144.90 | 267.27 | 0.03 | |||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Net income | 8,587 | 5,791 | 6,468 | 7,840 | 12,111 | 1,346 | |||||||||||||||||||
Net income per share | 425.96 | 287.23 | 320.86 | 388.89 | 602.12 | 0.07 | |||||||||||||||||||
Net income per ADS | 17,038.21 | 11,489.40 | 12,834.47 | 15,555.74 | 24,085 | 2.68 |
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As of December 31, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||
(Rp. in | (Rp. in | (Rp. in | (Rp. in | (Rp. in | (US$ | ||||||||||||||||||||
billion) | billion) | billion) | billion) | billion) | million)(1) | ||||||||||||||||||||
Consolidated Balance Sheet Data | |||||||||||||||||||||||||
Indonesian GAAP | |||||||||||||||||||||||||
Total assets | 44,307 | 50,283 | 56,179 | 62,171 | 75,136 | 8,348 | |||||||||||||||||||
Current liabilities(4) | 9,708 | 11,170 | 11,677 | 13,513 | 20,536 | 2,282 | |||||||||||||||||||
Other liabilities | 5,383 | 6,258 | 8,222 | 7,728 | 8,095 | 899 | |||||||||||||||||||
Long-term debts | 12,006 | 11,834 | 13,214 | 11,332 | 10,249 | 1,139 | |||||||||||||||||||
Total liabilities | 27,097 | 29,262 | 33,113 | 32,573 | 38,880 | 4,320 | |||||||||||||||||||
Minority interest | 2,596 | 3,708 | 4,938 | 6,305 | 8,187 | 909 | |||||||||||||||||||
Capital stock(5) | 5,040 | 5,040 | 5,040 | 5,040 | 5,040 | 560 | |||||||||||||||||||
Total stockholders’ equity | 14,614 | 17,313 | 18,128 | 23,292 | 28,069 | 3,119 | |||||||||||||||||||
U.S. GAAP(3) | |||||||||||||||||||||||||
Total assets | 44,623 | 51,347 | 56,702 | 63,481 | 76,134 | 8,459 | |||||||||||||||||||
Total stockholders’ equity | 13,911 | 16,285 | 19,571 | 24,568 | 26,308 | 2,923 |
(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.9,000 to US$1 published by Reuters on December 31, 2006. 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 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. Dividends declared per share in 2006 represent cash dividends for 2005 of Rp.218.86 per share and interim cash dividends declared in 2006 of Rp.48.41 per share. |
(3) | U.S. GAAP amounts reflect adjustments resulting from differences in the accounting treatment of voluntary termination benefits, foreign exchange differences capitalized to assets under construction, interest capitalized on assets under construction, revenue-sharing arrangements, employee benefits, equity in net income or loss of associated companies, amortization of land rights, revenue recognition, amortization of goodwill, capital leases, acquisition of Dayamitra, asset retirement obligations, deferred income taxes, and amendment and restatement of the Joint Operation Scheme in Regional Division VII. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Summary of Significant Differences between Indonesian GAAP and U.S. GAAP” and Note 56 to the consolidated financial statements. |
(4) | Includes current maturities of long-term debts. |
(5) | As of December 31, 2005 and 2006, Issued and Paid-Up Capital Stock consists of one Series A Dwiwarna Share having a par value of Rp.250 each and 20,159,999,279 Series B Shares having a par value of Rp.250 each from an authorized capital stock comprising one Series A Dwiwarna Share and 79,999,999,999 Series B Shares. |
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Year | At period end | Average(1) | High(2) | Low(2) | |||||||||||||
(Rp. Per US$1) | |||||||||||||||||
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 | 9,020 | 9,167 | �� | 9,795 | 8,720 | ||||||||||||
First Quarter | 9,075 | 9,304 | 9,795 | 9,030 | |||||||||||||
Second Quarter | 9,300 | 9,107 | 9,520 | 8,720 | |||||||||||||
Third Quarter | 9,235 | 9,121 | 9,245 | 9,030 | |||||||||||||
Fourth Quarter | 9,020 | 9,134 | 9,228 | 9,020 | |||||||||||||
December | 9,020 | 9,087 | 9,165 | 9,020 | |||||||||||||
2007 | |||||||||||||||||
January | 9,090 | 9,067 | 9,135 | 8,950 | |||||||||||||
February | 9,160 | 9,068 | 9,160 | 9,045 | |||||||||||||
March | 9,118 | 9,164 | 9,225 | 9,100 | |||||||||||||
April | 9,083 | 9,098 | 9,120 | 9,080 | |||||||||||||
May | 8,828 | 8,844 | 9,083 | 8,672 |
(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 has identified a number of material weaknesses in its internal control over financial reporting as of December 31, 2004, 2005 and 2006, and concluded that, as of December 31, 2006, its internal control over financial reporting and disclosures controls and procedures were not effective, which could adversely impact the reliability of its internal control over financial reporting. |
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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. |
Employee unions may negatively affect TELKOM’s business. |
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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/ Per/ M.KOMINFO/02/2006, 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 be received by it based on a formula stipulated in Regulation No. 8/ Per/ M.KOMINFO/02/2006, 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. In August 2006, ITRB completed its review of RIOs submitted by large network operators, including TELKOM. ITRB issued its final RIO (DJPT No. 279/ DIRJEN/2006) with respect to TELKOM on August 4, 2006. The new interconnection tariff scheme became effective on January 1, 2007. For further |
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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 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, data communication, network access 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%. On February 8, 2006, the Government issued Decree No. 09/Per/ M.KOMINFO/02/2006 on the Procedure on Determination of Current Tariff and Adjusted Tariff of Fixed Network Basic Telephony, which established new formulas for calculating subsequent tariff increases. For further information on the tariff scheme, see Item 4. “Information on the Company — B. Business Overview — Regulations — Interconnection.” 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 TELKOM’s 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 “3G”) 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 the 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 which are part of transmission installation and equipment for the fixed wireless network can no longer be used commencing at the end of 2007. TELKOM expects that the BSS equipment will be completely replaced with the BSS equipment operating in 800 MHz by the end of June 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 the 3G network. See Item 5. “Operating and Financial Review and Prospects — A. Operating Results — Overview — Write-down of Assets, |
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Depreciation Expense, Loss on Procurement Commitments, and Operations Maintenance and Telecommunication Services Expenses.” TELKOM has incurred significant costs in replacing the BSS equipment and there can be no assurance that TELKOM will not recognize further loss as a result of such Government decisions. In addition, in response to the frequency migration regulation, TELKOM initiated a registration plan for its fixed wireless customers in June 2007. Currently, TELKOM is registering its customers to identify the number of affected customers in need of handset replacements upon the effective date of the frequency migration. TELKOM is also considering the form and amount of compensation to such customers in connection with the frequency migration which formula has not been finalized yet as of the date of this Annual Report. | ||
• | 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 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. In addition, TELKOM initiated a replacement program to replace the affected WLL services with TELKOMFlexi home services. Currently, TELKOM has identified that the number of WLL subscribers affected by the regulations consists of 173,418 subscribers and plans to complete the replacement at end of 2007. | |
• | 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 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 |
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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 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 took effect on January 1, 2007. | ||
• | 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 MoC Decree No. 28/2004, in June 2004, TELKOM submitted a letter to the ITRB highlighting the technical difficulties in implementing the three digit DLD access codes within the given deadline and the substantial costs involved, and requesting that TELKOM be allowed to continue using the “0” prefix for its DLD access prefix and that it be given an additional five-year period to implement the three digit DLD access codes. On April 1, 2005, the MoCI, to which telecommunications regulatory responsibility was transferred, announced that it would make available to Indosat the “011” DLD access in five major cities that were technically ready for interconnection, including Jakarta, and progressively extend it to all other area codes within five years. TELKOM has also been assigned “017” as its DLD access code. However, 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 — 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 |
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TELKOM’s exclusive rights, which will consist of (i) expedited issuance of an IDD license to TELKOM, which was issued on May 13, 2004; (ii) approval of the reissuance and transfer of TELKOM’s DCS 1800 license to Telkomsel, which took place on July 12, 2002; and (iii) a net cash payment to TELKOM of Rp.478.0 billion (net of tax). 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 the 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 each of 2005 and 2006 and shall then pay the remaining Rp.298.0 billion thereafter in installments or in lump-sum, depending 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 five year period. | ||
• | Identity Registration: For prepaid subscribers, there is a new obligation regulated under MoCI Decree No. 23/2005, issued on October 28, 2005. Pursuant to this Decree, TELKOM and other operators are required to obtain identity information for all prepaid customers on or prior to April 28, 2006. As of December 31, 2006, TELKOM registered over 98% of its prepaid customers and removed the remaining inactive or low-activity unregistered customers from its customer database. TELKOM’s continuing obligations to update the registry may slow down revenue growth 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 limited life spans and substantial risks exist forTELKOM-1 andTELKOM-2 to be damaged or interrupted during operation and satellite loss or reduced performance may adversely affect TELKOM’s 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 former TELKOM directors, are subject to on-going litigation, police investigations, and criminal charges. |
TELKOM is incorporated in Indonesia and it may not be possible for investors to effect service of process or to enforce judgments obtained in the United States against TELKOM. |
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Forward-looking statements reflect current expectations and may not be correct. |
ITEM 4. | INFORMATION ON THE COMPANY |
A. | History and Development of the Company |
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B. | Business Overview |
• | 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). |
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Fixed Line Services |
Fixed Wireline Services |
Fixed Wireless Services |
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Cellular Services |
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As of or for the Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006(1) | ||||||||||
Cellular subscribers | ||||||||||||
KartuHALO (Postpaid) | 1,327,549 | 1,470,755 | 1,661,925 | |||||||||
SimPATI (Prepaid) | 11,557,758 | 16,004,631 | 21,377,995 | |||||||||
Kartu As (Prepaid) | 3,405,201 | 6,793,967 | 12,557,251 | |||||||||
Deactivations(2) | ||||||||||||
KartuHALO (Postpaid) | 317,020 | 372,921 | 376,748 | |||||||||
SimPATI (Prepaid) | 8,470,819 | 15,836,633 | 27,256,632 | |||||||||
Kartu As (Prepaid) | 824,489 | 12,105,848 | 17,724,133 | |||||||||
Average monthly churn rate(3) | ||||||||||||
KartuHALO (Postpaid) | 2.3 | % | 2.1 | % | 2.0 | % | ||||||
SimPATI (Prepaid) | 6.8 | % | 8.2 | % | 11.9 | % | ||||||
Kartu As (Prepaid) | 5.0 | % | 14.9 | % | 16.8 | % | ||||||
ARPU(4) | ||||||||||||
KartuHALO (Postpaid) (Rp. ’000) | 304 | 291 | 274 | |||||||||
SimPATI (Prepaid) (Rp. ’000) | 84 | 84 | 83 | |||||||||
Kartu As (Prepaid) (Rp. ’000) | 48 | 45 | 54 |
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Period during which subscribers | ||||
SimPATI Value of Voucher | will have access to services | |||
Rp.10,000 | 37 days | |||
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 |
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 |
(1) | For 2006, prepaid subscribers could purchase SIM cards with values ranging from Rp.10,000 to Rp.50,000 and refill vouchers with values ranging from Rp.5,000 to Rp.100,000. |
(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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2004 | 2005 | 2006 | |||||||||||||||||||||||
KSO Division | MTR | DTR | MTR | DTR | MTR | DTR | |||||||||||||||||||
(Rp. in billion) | (Rp. in billion) | (Rp. in billion) | |||||||||||||||||||||||
Division IV (Central Java)(1) | 35.2 | 15.7 | — | — | — | — | |||||||||||||||||||
Division VII (Eastern Indonesia)(2) | 260.8 | 333.8 | 268.6 | 318.6 | 207.5 | 274.6 | |||||||||||||||||||
Total | 296.0 | 349.5 | 268.6 | 318.6 | 207.5 | 274.6 | |||||||||||||||||||
(1) | On January 20, 2004, TELKOM and PT Mitra Global Telekomunikasi Indonesia (“MGTI”) entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV (Central Java). See Item 10. “Additional Information — C. Material Contracts — PT Mitra Global Telekomunikasi Indonesia (MGTI)” As a result of the amended and restated KSO agreement, TELKOM acquired Regional Division IV. TELKOM consolidated Rp.1,398.0 billion, Rp.1,653.2 billion and Rp.1,662.4 billion of operating revenues from Regional Division IV (Central Java) from February 1, 2004 through December 31, 2004 and in 2005 and 2006, respectively. For 2004, MTR and DTR for Regional Division IV represented MTR and DTR generated by Regional Division IV in January 2004. |
(2) | On October 19, 2006, TELKOM and PT Bukaka Singtel International (BSI) entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division VII (Eastern Indonesia). See Item 10. “Additional Information — C. Material Contracts — PT Bukaka Singtel International (BSI).” As a result of the amended and restated KSO agreement, TELKOM acquired Regional Division VII. TELKOM consolidated Rp.796.5 billion of operating revenues from Regional Division VII (Eastern Indonesia) from October 1, 2006 through December 31, 2006. For 2006, MTR and DTR for Regional Division VII represent MTR and DTR generated by Regional Division VII in January 1, 2006 through September 30, 2006. |
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Interconnection Services |
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Year Ended December 31, | |||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||
(millions of minutes) | |||||||||||||||||||||
Mobile Cellular Interconnection(1) | |||||||||||||||||||||
Incoming paid minutes | 2,830.9 | 3,463.7 | 4,235.1 | 4,863.6 | 5,162.2 | ||||||||||||||||
Outgoing paid minutes | 3,854.5 | 4,872.1 | 6,448.0 | 7,514.9 | 7,704.2 | ||||||||||||||||
Fixed Line Interconnection(2) | |||||||||||||||||||||
Incoming paid minutes | 128.4 | 130.1 | 136.7 | 612.3 | 864.9 | ||||||||||||||||
Outgoing paid minutes | 39.6 | 30.9 | 51.1 | 493.5 | 965.2 | ||||||||||||||||
Satellite Phone Interconnection | |||||||||||||||||||||
Incoming paid minutes | 12.6 | 16.1 | 14.7 | 10.7 | 9.3 | ||||||||||||||||
Outgoing paid minutes | 5.6 | 7.5 | 8.2 | 6.5 | 4.5 | ||||||||||||||||
International Interconnection(3) | |||||||||||||||||||||
Incoming paid minutes | 303.3 | 444.1 | 427.6 | 596.4 | 861.9 | ||||||||||||||||
Outgoing paid minutes | 200.3 | 149.7 | 158.1 | 185.5 | 177.6 | ||||||||||||||||
Total | |||||||||||||||||||||
Total Incoming paid minutes | 3,275.2 | 4,054.0 | 4,814.1 | 6,083.0 | 6,898.3 | ||||||||||||||||
Outgoing paid minutes | 4,100.0 | 5,060.2 | 6,665.4 | 8,200.4 | 8,851.5 |
(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 starting 2004, Indosat. |
(3) | International interconnection minutes are derived from interconnection with Indosat’s international network and, starting 2004, incoming and outgoing calls usingTIC-007 as well. |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(millions of minutes) | ||||||||||||||||||||
Incoming paid minutes | 1,672.6 | 2,011.8 | 2,354.1 | 2,709.1 | 2,914 | |||||||||||||||
Outgoing paid minutes | 2,001.6 | 2,610.3 | 3,422.1 | 4,251.5 | 4,546 |
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Network Services |
Data and Internet Services |
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Item | TELKOMGlobal 017/01017 | 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 |
Revenue-Sharing Arrangements (PBHs) |
Other Services |
• | telephone directory services, which TELKOM provides through its majority-owned subsidiary, Infomedia; | |
• | cable and pay television and related services (42,351 subscribers as of December 31, 2006), which it provides through its majority-owned subsidiary, Indonusa; and | |
• | telex and telegram services. |
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Fixed line Network and Backbone |
As of or for the Year Ended December 31, | |||||||||||||||||||||
Operating Statistics | 2002(1) | 2003(2) | 2004(3) | 2005(3) | 2006(4) | ||||||||||||||||
Exchange capacity | |||||||||||||||||||||
Non-KSO Divisions | 6,643,688 | 7,810,766 | 8,786,887 | 9,138,167 | 10,439,658 | ||||||||||||||||
KSO Divisions(9) | 2,459,950 | 1,608,455 | 954,465 | 1,045,366 | — | ||||||||||||||||
Total | 9,103,638 | 9,419,221 | 9,741,352 | 10,183,533 | 10,439,658 | ||||||||||||||||
Installed lines | |||||||||||||||||||||
Non-KSO Divisions | 6,157,149 | 7,235,035 | 8,264,999 | 8,497,255 | 9,634,910 | ||||||||||||||||
KSO Divisions(9) | 2,234,892 | 1,548,070 | 931,999 | 998,901 | — | ||||||||||||||||
Total | 8,392,041 | 8,783,105 | 9,196,998 | 9,496,156 | 9,634,910 | ||||||||||||||||
Lines in service(5) | |||||||||||||||||||||
Non-KSO Divisions | 5,701,900 | 6,792,300 | 7,714,977 | 7,787,693 | 8,709,211 | ||||||||||||||||
KSO Divisions(9) | 2,039,608 | 1,422,028 | 844,373 | 898,438 | — | ||||||||||||||||
Total | 7,741,508 | 8,214,328 | 8,559,350 | 8,686,131 | 8,709,211 | ||||||||||||||||
Subscriber lines | |||||||||||||||||||||
Non-KSO Divisions | 5,386,430 | 6,441,973 | 7,323,304 | 7,413,769 | 8,328,179 | ||||||||||||||||
KSO Divisions(9) | 1,952,226 | 1,365,114 | 816,208 | 869,631 | — | ||||||||||||||||
Total | 7,338,656 | 7,807,087 | 8,139,512 | 8,283,400 | 8,328,179 | ||||||||||||||||
Public telephones | |||||||||||||||||||||
Non-KSO Divisions | 315,470 | 350,327 | 391,673 | 373,924 | 381,032 | ||||||||||||||||
KSO Divisions(9) | 87,382 | 56,914 | 28,165 | 28,807 | — | ||||||||||||||||
Total | 402,852 | 407,241 | 419,838 | 402,731 | 381,032 | ||||||||||||||||
Leased lines in service | |||||||||||||||||||||
Non-KSO Divisions(6) | 8,193 | 8,213 | 8,887 | 11,333 | 7,476 | ||||||||||||||||
KSO Divisions(9) | 1,879 | 1,162 | 382 | 575 | — | ||||||||||||||||
Total | 10,072 | 9,375 | 9,269 | 11,908 | 7,476 |
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As of or for the Year Ended December 31, | |||||||||||||||||||||
Operating Statistics | 2002(1) | 2003(2) | 2004(3) | 2005(3) | 2006(4) | ||||||||||||||||
Fixed wireline subscriber pulse production(7)(millions) | |||||||||||||||||||||
Non-KSO Divisions | 44,326 | 50,848 | 58,314 | 57,926 | 64,012 | ||||||||||||||||
KSO Divisions | 16,788 | 11,413 | 6,838 | 9,743 | — | ||||||||||||||||
Total | 61,114 | 62,261 | 65,152 | 67,669 | 64,012 | ||||||||||||||||
Call completion rate(%) | |||||||||||||||||||||
Local | |||||||||||||||||||||
Non-KSO Divisions | 75.8 | 76.8 | 78.6 | 80.4 | 77.1 | ||||||||||||||||
KSO Divisions(9) | 75.5 | 78.4 | 77.9 | 80.8 | — | ||||||||||||||||
Combined | 75.6 | 77.3 | 78.5 | 80.4 | 77.1 | ||||||||||||||||
Domestic long-distance | |||||||||||||||||||||
Non-KSO Divisions | 65.5 | 67.5 | 70.9 | 74.0 | 72.1 | ||||||||||||||||
KSO Divisions(9) | 68.1 | 74.7 | 74.9 | 75.8 | — | ||||||||||||||||
Combined | 66.6 | 69.5 | 71.5 | 74.3 | 72.1 | ||||||||||||||||
Fault rate(8) | |||||||||||||||||||||
Non-KSO Divisions | 4.6 | 4.4 | 3.4 | 3.8 | 3.6 | ||||||||||||||||
KSO Divisions(9) | 8.9 | 3.5 | 1.9 | 2.0 | — | ||||||||||||||||
Combined | 5.2 | 4.1 | 3.2 | 3.6 | 3.6 |
(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) | For 2006, Non-KSO Divisions refer to Divisions I, II, III, IV, V, VI and 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 443,316, 511,108, 396,926, 201,485 and 166,142 as of December 31, 2002, 2003, 2004, 2005 and 2006, 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. |
(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 VII | |||||||||||||||||||||||||||||||
Division I | Division II | and | Division IV | Division V | Division VI | (East | ||||||||||||||||||||||||||
(Sumatra) | (Jakarta) | Banten) | (Central Java) | (East Java) | (Kalimantan) | Indonesia) | Total | |||||||||||||||||||||||||
Local exchange capacity | 2,816,477 | 5,137,211 | 1,868,454 | 1,346,527 | 3,687,753 | 826,718 | 1,412,409 | 17,095,549 | ||||||||||||||||||||||||
Total lines in service | 1,875,708 | 3,829,992 | 1,087,786 | 1,268,933 | 2,824,922 | 656,969 | 1,340,754 | 12,885,064 | ||||||||||||||||||||||||
Capacity utilization(%)(1) | 66.60 | 74.55 | 58.22 | 94.24 | 76.60 | 79.47 | 94.93 | 75.37 | ||||||||||||||||||||||||
Installed lines(2) | 2,593,002 | 5,236,124 | 1,876,421 | 1,578,092 | 3,511,639 | 973,106 | 1,564,565 | 17,332,949 | ||||||||||||||||||||||||
Utilization rate(%)(1) | 72.34 | 73.15 | 57.97 | 80.41 | 80.44 | 67.51 | 85.70 | 74.34 | ||||||||||||||||||||||||
Employees(3) | 3,059 | 5,552 | 1,585 | 1,709 | 2,154 | 765 | 3,129 | 17,953 | ||||||||||||||||||||||||
Population (millions)(4) | 55.97 | 31.18 | 27.34 | 47.61 | 39.47 | 14.76 | 34.23 | 250.56 | ||||||||||||||||||||||||
TELKOM line penetration(%)(5) | 3.35 | 12.28 | 3.98 | 2.67 | 7.16 | 4.45 | 3.92 | 5.14 |
(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 includes 113,048 fixed wireless line units established under RSA scheme. |
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(3) | Does not include employees from the corporate office or 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. |
As of or for the Year Ended December 31, | |||||||||||||||||||||
2002(1) | 2003(2) | 2004(3) | 2005(3) | 2006(4) | |||||||||||||||||
Exchange capacity (MSC)(8) | |||||||||||||||||||||
Non-KSO Divisions | — | 666,050 | 1,952,644 | 2,687,348 | 6,655,891 | ||||||||||||||||
KSO Divisions(7) | — | 61,550 | 179,700 | 329,708 | — | ||||||||||||||||
Total | — | 727,600 | 2,132,344 | 3,017,056 | 6,655,891 | ||||||||||||||||
Installed lines (BTS)(8) | |||||||||||||||||||||
Non-KSO Divisions | 8,621 | 659,497 | 2,291,212 | 3,332,893 | 7,698,039 | ||||||||||||||||
KSO Divisions(7) | — | 116,150 | 179,717 | 340,568 | — | ||||||||||||||||
Total | 8,621 | 775,647 | 2,470,929 | 3,673,461 | 7,698,039 | ||||||||||||||||
Lines in service(5) | |||||||||||||||||||||
Non-KSO Divisions | 8,527 | 237,749 | 1,317,673 | 3,750,821 | 4,175,853 | ||||||||||||||||
KSO Divisions(7) | — | 27,038 | 111,695 | 311,046 | — | ||||||||||||||||
Total | 8,527 | 264,787 | 1,429,368 | 4,061,867 | 4,175,853 | ||||||||||||||||
Subscriber lines | |||||||||||||||||||||
Non-KSO Divisions | 8,510 | 237,200 | 1,313,978 | 3,739,095 | 4,163,284 | ||||||||||||||||
KSO Divisions(7) | — | 27,038 | 111,695 | 311,046 | — | ||||||||||||||||
Total | 8,510 | 264,238 | 1,425,673 | 4,050,141 | 4,163,284 | ||||||||||||||||
Public telephones | |||||||||||||||||||||
Non-KSO Divisions | 17 | 549 | 3,695 | 11,726 | 12,569 | ||||||||||||||||
KSO Divisions(7) | — | — | — | — | — | ||||||||||||||||
Total | 17 | 549 | 3,695 | 11,726 | 12,569 | ||||||||||||||||
Fixed wireless subscriber pulse production/minutes production(6)(9)(millions) | |||||||||||||||||||||
Non-KSO Divisions | 14 | 214 | 989 | 3,254 | 5,512 | ||||||||||||||||
KSO Divisions(7) | — | 4 | 125 | 299 | — | ||||||||||||||||
Total | 14 | 218 | 1,114 | 3,553 | 5,512 |
(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) | For 2006, Non-KSO Divisions refer to Divisions I, II, III, IV, V, VI and VII. |
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(5) | 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 63,005, 130,947 and 113,048 as of December 31, 2004, 2005 and 2006, respectively. |
(6) | 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. |
(7) | Divisions classified as KSO Divisions varies year to year due to KSO acquisitions in certain years. See footnotes (1) to (4) above. |
(8) | Prior to 2006, the capacities of BTS and MSC were 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 capacities of BTS and MSC in 2006 were calculated by assuming traffic allocation per subscriber of 30 mE. |
(9) | Consists of minutes usage generated from local and domestic long-distance calls, excluding calls made from pay phones and mobile cellular phones. |
Capacity | Percentage | |||||||
(number of transmission | of total | |||||||
medium circuits) | capacity | |||||||
Optical fiber cable | 21,272 | 76.01 | % | |||||
Microwave | 4,472 | 15.98 | % | |||||
Submarine cable | 1,763 | 6.30 | % | |||||
Satellite | 480 | 1.71 | % | |||||
Total | 27,987 | 100.00 | % | |||||
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Data and Internet Network |
International Network |
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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). |
Fixed Line Network Development |
• | capacity expansion of the Surabaya — Ujung Pandang — Banjarmasin (SUB) submarine backbone infrastructure; |
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• | the Jember — Denpasar submarine backbone; | |
• | the fiber optic regional junction in Bandung — Cirebon (West Java); | |
• | IP DSLAM project offering broadband access to all users in Indonesia; | |
• | capacity expansion of local exchange switches; | |
• | wireline access network in Divisions I to VI; and | |
• | expansion of theIP-based network. |
• | continue to implement the deployment of additional line units; | |
• | continue to implement the next generation network by deployment and expansion of softswitch system, IP transport, broadband access and transmission network; | |
• | continue to improve the quality of its network through enhancements in its copper access network, ring system transmission network and redundancy system for all equipment, including battery and rectifier; and | |
• | continue network integration and quality improvement through the national operational support system. |
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Data Network Development |
TELKOM-2 Satellite |
Capital Expenditures |
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Strengthening the Fixed Wireline and Fixed Wireless Business |
• | increasing its fixed line penetration rate more quickly and with lower capital expenditure per line through the rapid roll-out of fixed wireless technology, 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; | |
• | strengthening Plasa TELKOM as a point of sale for TELKOM’s services; | |
• | developing and expanding its IDD fixed line business, which TELKOM began offering to customers on June 7, 2004; and | |
• | enhancing fixed wireline access network to provide broadband capability. |
Strengthening its Backbone Network |
Maintaining Telkomsel’s Leading Position in the Industry |
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• | 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 GPRS, EDGE and 3G services), expanding network capacity and improving service quality; | |
• | ensuring that Telkomsel has the IT infrastructure in place to fulfill its vision and mission, with special focus on areas such as billing, service delivery and customer service; and | |
• | achieving service levels at par with world class mobile service providers through its call center footprint and aggressive pursuit of service oriented goals. |
Developing its Fixed Wireless Business |
Developing its Data and Internet Business |
• | increased investment in TELKOM’s broadband infrastructure (such as DSL 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 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 ase-payment services for banks and other financial institutions and wireless data content for GPRS and MMS users; | |
• | expanding the international coverage of TELKOM’s data and Internet services by entering into agreements with additional global carriers and wholesalers; and | |
• | expanding the coverage and quality of its Internet Protocol backbone to increase data and Internet traffic capacity. |
Reducing Cost of Capital |
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• | share investment risks with its suppliers; | |
• | reduce its asset base and outsource non-core businesses; and | |
• | mitigate financing, commercial, operational, technical and capacity risks. |
Increasing TELKOM and Telkomsel Synergy |
• | 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 is expected to generate additional benefits to the group; | |
• | utilizing available distribution channels to improve services and selling activities to customers (such as joint customer services officers (“CSO”)); and | |
• | sharing of operational facilities (such as sites, towers, mechanical and electrical facilities). |
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, 2006, TELKOM had more than 850 customer service points in total. Since June 2006, TELKOM expanded its services at customer service points to include electronic payment services via Electronic Data Capture (“EDC”) usingon-site terminals in 50 Plasa TELKOM points. | |
• | Call centers and Internet. TELKOM operates call centers in many cities in Indonesia, whereby customers are provided a contact number “147” to speak directly to customer service operators who are trained to handle customer requests and complaints and provideup-to-date information on |
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matters such as customer bills, promotions and service features. Corporate customers in particular locations are provided an additional toll-free number “08001TELKOM” (“0800183556”). 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 in August 2004, 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. Since August 2004, 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, 2006, TELKOM had 658 national and regional-level account managers that cover Divisions I to VII. | |
• | Service level guarantee program. TELKOM has had a service level guarantee program for its fixed line customers since June 2002 and has been implementing a service level guarantee program for TELKOMFlexi and Speedy since August 2006. 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, 2006, Telkomsel had 68 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”. | |
• | Gerai HALO service outlets. Gerai HALO service outlets are service outlets operated by third parties. As of December 31, 2006, Telkomsel had 207 Gerai HALO service outlets. | |
• | 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 provideup-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. As of December 31, 2006, Telkomsel had 740 direct retail outlets. | |
• | 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 68 GraPARI centers (as of December 31, 2006); | |
(ii) | its 207 Gerari HALO service outlets (as of December 31, 2006); | |
(iii) | a network of authorized dealers (operating 248,185 retail outlets throughout Indonesia as of December 31, 2006) selling primarily prepaid SIM cards and vouchers; | |
(iv) | joint outlets with Plasa TELKOM and PT Pos Indonesia; and | |
(v) | 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 a minimum charge of Rp.5,000 | Out-going isolation (i.e., restricted to receiving incoming calls only) | |||
II | 11-40 days | 10% of the overdue bill subject to a minimum charge of Rp.10,000 | Total isolation (i.e., no outgoing or incoming calls) | |||
III | 41-60 days | 15% of the overdue bill subject to a minimum charge of Rp.15,000 | Service disconnected | |||
IV | More than 60 days | 15% of the overdue bill subject to a minimum charge of Rp.15,000 | Service disconnected and the associated number subject to termination |
Stage | Overdue Payment | Charge | Penalty | |||
I | 1-10 days | 5% of the total outstanding receivables | Total isolation | |||
II | 11-40 days | 10% of the overdue bill | Total isolation | |||
III | 41-60 days | 15% of the overdue bill | Service disconnected | |||
IV | More than 60 days | 15% of the overdue bill | Service disconnected and the associated number subject to termination |
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Stage | Overdue Payment | Charge | Penalty | |||
I | 1-20 days | 5% of the total outstanding receivables | Total isolation | |||
II | 21-50 days | 10% of the overdue bill | Service disconnected | |||
III | More than 50 days | 15% of the overdue bill | Service disconnected and the 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 |
• | Deregulation; | |
• | Promoting competition; | |
• | Liberalization; | |
• | Restructuring; |
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• | 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 |
Exclusivity |
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Competition |
Interconnection |
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DLD and IDD Services |
• | DLD and IDD network operators may offer DLD and IDD services as part of their basic telephony services; | |
• | Each DLD and IDD operator must use a distinct 3-digit access code for its DLD and IDD services; | |
• | Customers may freely select their DLD and IDD providers; and | |
• | DLD and IDD fixed telecommunication network operators (currently only TELKOM and Indosat) may now provide DLD and IDD basic telephony services. |
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Indonesian Telecommunications Regulatory Body |
Consumer Protection |
Universal Service Obligations |
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Implementing Regulations |
Satellite regulation |
Fixed Wireless Access regulation |
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Fixed Wireline and Fixed Wireless |
Cellular |
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Operator | ||||||
Telkomsel | Indosat | Excelcomindo | ||||
Launch date | May 1995 | November 1994(2) | October 1996 | |||
2G Licensed frequency bandwidth (GSM 900 & 1800) | 30 MHz | 30 MHz | 25 MHz | |||
3G Licensed frequency bandwidth (2 GHz) | 5 MHz | 5 MHz | 5 MHz | |||
Licensed coverage | Nationwide | Nationwide | Nationwide | |||
Network coverage | Nationwide | Information not available | Information not available | |||
Market share (as of December 31, 2006)(1) | 56% | 26% | 15% | |||
Subscribers (as of December 31, 2006)(1) | 35.6 million | 16.7 million | 9.5 million |
(1) | Estimated, based on statistics compiled by TELKOM. |
(2) | In November 2003, Indosat and Satelindo merged, and Indosat has taken over Satelindo’s cellular operations. |
IDD |
VoIP |
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Satellite |
Other |
Licenses |
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Tariffs and Interconnection Charges |
• | Tariffs for the provision of telecommunications services; and | |
• | Tariffs for the provision of telecommunications networks. |
Tariffs for the Provision of Telecommunications Services |
Fixed Wireline Tariffs |
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Access charges | Business | Residential | Social | |||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||
Installation | 175,000 – 450,000 | 75,000 – 295,000 | 50,000 – 205,000 | |||||||||
Monthly Subscription | 38,400 – 57,600 | 20,600 – 32,600 | 12,500 – 18,500 |
Price per Pulse | Pulse Duration | |||||
(Rp.) | ||||||
Local | ||||||
Up to 20 km | 250 | 3 minutes (off peak) and 2 minutes (peak) | ||||
Over 20 km | 250 | 2 minutes (off peak) and 1.5 minutes (peak) |
Rounding Time | ||||||||
Block | ||||||||
Price Per Minute | Duration | |||||||
(Rp.) | ||||||||
0-20 km | 83 – 122 | 1 minute | ||||||
20-30 km | 122 – 163 | 1 minute | ||||||
30-200 km | 325 – 1,290 | 6 seconds | ||||||
200-500 km | 460 – 1,815 | 6 seconds | ||||||
Over 500 km | 570 – 2,270 | 6 seconds |
CDMA Fixed Wireless Tariffs |
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Price Per Pulse | Pulse Duration | |||||
(Rp.) | ||||||
Local | 250 | 2 minutes (off peak) and 1.5 minutes (peak) |
Rounding Time | ||||||||
Block | ||||||||
Price Per Minute | Duration | |||||||
(Rp.) | ||||||||
0-200 km | 325 – 1,290 | 6 seconds | ||||||
200-500 km | 460 – 1,815 | 6 seconds | ||||||
Over 500 km | 570 – 2,270 | 6 seconds |
Rounding Time | ||||||||
Block | ||||||||
Price Per Minute | Duration | |||||||
(Rp.) | ||||||||
Flexi to Flexi/ Fixed Wireline: | ||||||||
Local | 260 | 30 seconds | ||||||
Domestic Long-Distance | ||||||||
0-200 km | 700 – 1,100 | 30 seconds | ||||||
Over 200 km | 1,600 – 2,500 | 30 seconds | ||||||
Flexi to mobile cellular: | ||||||||
Local | 650 – 810 | 30 seconds | ||||||
Domestic Long-Distance | ||||||||
0-200 km | 1,100 – 1,540 | 30 seconds | ||||||
Over 200 km | 2,250 – 3,150 | 30 seconds |
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IDD Tariffs |
Rounding Time | ||||||||
Block | ||||||||
Region | Price Per Minute | Duration | ||||||
(Rp.) | ||||||||
Africa | 5,090 – 6,440 | 6 seconds | ||||||
Americas and Caribbean | 5,090 – 7,470 | 6 seconds | ||||||
Asia and Oceania | 4,410 – 9,630 | 6 seconds | ||||||
Europe | 5,090 – 9,630 | 6 seconds | ||||||
Middle East | 5,090 – 8,460 | 6 seconds |
Cellular Tariffs |
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. |
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Rounding Time | ||||||||
Block | ||||||||
Price Per Minute | Duration | |||||||
(Rp.) | ||||||||
Mobile cellular to mobile cellular: | ||||||||
Local | 650 – 938 | 20 seconds | ||||||
Domestic Long-Distance | ||||||||
DLD1 (neighboring point-of-charging areas) | 650 – 2,628 | 15 seconds | ||||||
DLD2 (other areas) | 650 – 3,083 | 15 seconds | ||||||
Mobile cellular to fixed line: | ||||||||
Local | 450 – 531 | 20 seconds | ||||||
Domestic Long-Distance | ||||||||
30-200 km | 650 – 1,696 | 15 seconds | ||||||
200-500 km | 785 – 2,221 | 15 seconds | ||||||
Over 500 km | 895 – 2,676 | 15 seconds | ||||||
International Long-Distance: | ||||||||
Group I | 3,675 – 5,880 | 15 seconds | ||||||
Group II | 4,237 – 6,780 | 15 seconds | ||||||
Group III | 4,687 – 7,500 | 15 seconds | ||||||
Group IV | 5,362 – 8,580 | 15 seconds | ||||||
Group V | 6,225 – 9,960 | 15 seconds | ||||||
Group VI | 7,050 – 11,280 | 15 seconds | ||||||
Group VII | 8,025 – 12,840 | 15 seconds |
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Rounding Time | |||||||||||||||||
Price Per Minute | Block Duration | ||||||||||||||||
(Rp.) | |||||||||||||||||
SimPATI | Kartu As | SimPATI | Kartu As | ||||||||||||||
Calls within Telkomsel: | |||||||||||||||||
Local | 300 – 1,500 | 1,200 | 30 seconds | per second | |||||||||||||
Domestic Long-Distance | |||||||||||||||||
Zone 1 | 300 – 4,000 | 1,200 | 30 seconds | per second | |||||||||||||
Zone 2 | 300 – 4,500 | 1,200 | 30 seconds | per second | |||||||||||||
Calls to other cellular: | |||||||||||||||||
Local | 1,300 – 1,600 | 2,400 | 30 seconds | per second | |||||||||||||
Domestic Long-Distance | |||||||||||||||||
Zone 1 | 3,500 – 4,000 | 2,400 | 30 seconds | per second | |||||||||||||
Zone 2 | 4,000 – 4,500 | 2,400 | 30 seconds | per second | |||||||||||||
Calls to fixed line/fixed wireless: | |||||||||||||||||
Local | 750 – 950 | 1,800 | 30 seconds | per second | |||||||||||||
Domestic Long-Distance | |||||||||||||||||
30-200 km | 2,000 – 2,300 | 1,800 | 30 seconds | per second | |||||||||||||
200-500 km | 3,200 – 3,720 | 1,800 | 30 seconds | per second | |||||||||||||
Over 500 km | 3,600 – 4,150 | 1,800 | 30 seconds | per second | |||||||||||||
International Long-Distance: | |||||||||||||||||
Group I-III | 7,500 – 8,000 | 8,000 | 15 seconds | 60 seconds | |||||||||||||
Group IV-VII | 11,000 – 12,000 | 12,000 | 15 seconds | 60 seconds |
Leased Line Tariffs |
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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. |
VoIP Tariffs |
Kiosk phone Tariffs |
Satellite Tariffs |
Broadband Access |
Monthly Usage | Excess Usage | |||||||||||||||
Speedy Services | Activation Fee | Monthly Fee | Allowance | Charge | ||||||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||||||
Speedy for Personal | 150,000 | 300,000 | 750MB | 700/MB | ||||||||||||
Speedy for Professional | 150,000 | 700,000 | 2.0GB | 700/MB | ||||||||||||
Speedy for Office | 150,000 | 2,000,000 | Unlimited | — | ||||||||||||
Speedy for Warnet | 150,000 | 3,000,000 | Unlimited | — |
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Monthly Usage | Excess Usage | |||||||||||||||
Speedy Services | Activation Fee | Monthly Fee | Allowance | Charge | ||||||||||||
(Rp.) | (Rp.) | (Rp.) | ||||||||||||||
Speedy for Personal | 75,000 | 200,000 | 1.0GB | 500/MB | ||||||||||||
Speedy for Professional | 75,000 | 400,000 | 3.0GB | 500/MB | ||||||||||||
Speedy for Office | 75,000 | 750,000 | Unlimited | — | ||||||||||||
Speedy for Warnet | 75,000 | 1,750,000 | Unlimited | — | ||||||||||||
Speedy Time Based | 75,000 | 200,000 | 50 hours | 25/minutes |
Tariffs for Other Services |
Tariffs for the Provision of Telecommunications Networks |
Tariffs for Interconnection and Access |
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Interconnection with Fixed line Network |
Cellular Interconnection |
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International Interconnection |
Description | Tariff | |||
Access Charge | Rp.850/successful call | |||
Usage Charge | Rp.550/paid minute |
Satellite Phone Interconnection |
VoIP Interconnection |
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C. | Business and Organizational Structure |
Subsidiaries |
Legal | ||||||||||
Ownership (%) | ||||||||||
As of | ||||||||||
December 31, | ||||||||||
Company | 2006 | Notes | Business Operations | |||||||
CONSOLIDATED | ||||||||||
A. Direct subsidiaries | ||||||||||
Fixed Phone: | ||||||||||
PT AriaWest International (“AriaWest”) | 100 | (1) | Telecommunications | |||||||
PT Dayamitra Telekomunikasi (“Dayamitra”) | 100 | (2) | Telecommunications | |||||||
PT Pramindo Ikat Nusantara (“Pramindo”) | 100 | (3) | Telecommunications construction & services | |||||||
Cellular: | ||||||||||
PT Telekomunikasi Selular (“Telkomsel”) | 65 | (4) | Telecommunications (GSM cellular phone services) | |||||||
Application, Content, Datacom: | ||||||||||
PT Multimedia Nusantara (“Metra”) | 100 | (5) | Multimedia | |||||||
PT Infomedia Nusantara (“Infomedia”) | 51 | (6) | Data and information service | |||||||
PT Indonusa Telemedia (“Indonusa”) | 96 | (7) | Pay TV | |||||||
PT Napsindo Primatel Internasional (“Napsindo”) | 60 | (8) | Telecommunications | |||||||
Property & Construction: | ||||||||||
PT Graha Sarana Duta (“GSD”) | 99.9 | (9) | Real estate, construction and services | |||||||
B. Indirect subsidiaries | ||||||||||
Telekomunikasi Selular Finance Limited (“TSFL”) | 100 | (10) | Finance | |||||||
Telkomsel Finance B.V.(“TFBV”) | 100 | (11) | Finance | |||||||
Aria West International Finance B.V. (“AWI BV”) | 100 | (12) | Finance | |||||||
PT Balebat Dedikasi Prima (“Balebat”) | 65 | (13) | Printing | |||||||
PT Finnet Indonesia (“Finnet”) | 60 | (14) | Banking data and communication |
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Legal | ||||||||||
Ownership (%) | ||||||||||
As of | ||||||||||
December 31, | ||||||||||
Company | 2006 | Notes | Business Operations | |||||||
UNCONSOLIDATED | ||||||||||
A. Direct associated companies | ||||||||||
Where TELKOM owns between 20% to 50%: | ||||||||||
PT Patra Telekomunikasi Indonesia (“Patrakom”) | 40 | (15) | VSAT services | |||||||
PT Citra Sari Makmur (“CSM”) | 25 | (16) | VSAT and other telecommunication services | |||||||
PT Pasifik Satelit Nusantara (“PSN”) | 22.38 | (17) | Satellite transponder and communications | |||||||
Where TELKOM owns less than 20%: | ||||||||||
PT Batam Bintan Telekomunikasi (“BBT”) | 5 | (18) | Fixed-phone (in Batam and Bintan islands) | |||||||
PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) | 3.18 | (19) | Telco network and equipment maintenance | |||||||
B. Indirect associated companies | ||||||||||
Bridge Mobile Pte. Ltd. (“BMP”) | 12.5 | (20) | 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 be owned by more than one shareholder. On March 6, 2007, the name of PT Aria West International was changed to PT Telekomunikasi Indonesia International (See note 54b to the consolidated financial statements). | |
(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. | |
(4) | Telkomsel was established in 1995 by TELKOM (5 1%) 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. On July 21, 2005, the Annual General Meeting of Stockholders of Metra resolved to issue additional share capital totaling Rp. 26,000 million to the Company. The Company paid the entire amount on October 21, 2005. | |
(6) | Infomedia was established in 1984 and is currently owned by TELKOM (51%) and PT Elnusa (49%), a subsidiary of PERTAMINA, an Indonesian state-owned oil company. Infomedia provides telephone directory and other information services. | |
(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. Napsindo is currently owned by TELKOM (60%) and PT Info Asia Sukses Mandiri (40%). As of January 13, 2006, Napsindo had ceased operations. On April 18, 2007, Napsindo’s NAP license was revoked |
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by the DGPT under Decree No. 109/2007 concerning the Revocation of ISP and NAP Operational Licenses. As disclosed in TELKOM’s consolidated financial statements as of and for the year ended December 31, 2006, Napsindo has ceased its operation since January 13, 2006 and accordingly, no material adverse effect on TELKOM is expected from the revocation of Napsindo’s NAP license. | ||
(9) | TELKOM acquired 100% of GSD on April 6, 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) | Telkomsel has 100% direct ownership interest in TSFL, a company established in Mauritius on April 22, 2002. TSFL’s objective is to raise funds for the development of Telkomsel’s business through the issuance of debenture stock, bonds, mortgages or any other securities. |
(11) | TFBV, a wholly owned subsidiary of Telkomsel, was established in Amsterdam, the Netherlands, on February 7, 2005, for the purpose of borrowing, lending and raising funds, including issuance of bonds, promissory notes or debt instruments. |
(12) | AWI BV, a company established in the Netherlands, is a wholly owned subsidiary of AWI. AWI BV is engaged in rendering services in the field of trade and finance service. |
(13) | Balebat is a company engaged in the printing business, domiciled in Bogor, Indonesia. On July 1, 2006 Infomedia purchased 14% of Balebat’s shares from other shareholders, thereby increasing Infomedia’s ownership interest from 51% to 65%. |
(14) | Finnet was established in January 2006 by Metra (60%), a wholly-owned subsidiary of TELKOM and PT Mekar Prana Indah, owned by Dana Pensiun Bank Indonesia/ Bank Indonesia Pension Fund and Yayasan Kesejahteraan Bank Indonesia. Finnet provides nationwide financial network services transmitting banking data ande-payments. |
(15) | 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%, and the remaining shares are owned by PT Elnusa (40%) and PT Tanjung Mustika (20%). |
(16) | 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%). |
(17) | 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 adebt-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 thedebt-to-equity conversion. In January 2006, TELKOM’s ownership interest in PSN was further diluted to 22.38% as a result of issuance of new shares to a new shareholder. |
(18) | 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. |
(19) | 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%). |
(20) | BMP 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 BMP to a new shareholder, namely, Hong Kong CSL Limited. |
Unconsolidated Associated Companies |
PT Patra Telekomunikasi Indonesia (“Patrakom”) |
PT Citra Sari Makmur (“CSM”) |
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PT Pasifik Satelit Nusantara (“PSN”) |
PT Batam Bintan Telekomunikasi (“BBT”) |
PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) |
Bridge Mobile Pte. Ltd. |
PT Mandara Selular Indonesia (“MSI”), previously referred to as PT Mobile Selular Indonesia (“Mobisel”) |
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D. | Property, Plants and Equipment |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. | Operating Results |
• | 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 the 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 the 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. |
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• | 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 the Jakarta and West Java areas commencing at the end of 2007. |
• | 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; | |
• | increased operations and maintenance expenses associated with TELKOM’s aggressive deployment of network infrastructure, mainly due to Telkomsel’s expansion of its network capacity; | |
• | increased depreciation expenses, primarily due to Telkomsel’s expansion of its network capacity and the increase in TELKOM’s fixed wireless assets; and | |
• | the amendment of the KSO agreement with PT Bukaka Singtel International (BSI) on October 19, 2006 which resulted in TELKOM obtaining the legal right to control financial and operating decisions of KSO VII, and the subsequent consolidation of KSO VII. |
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Economic Situation in Indonesia |
• | 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; and | |
• | in 2006, an appreciation from Rp.9,830 per US Dollar at December 31, 2005 to Rp.9,020 per US Dollar at December 31, 2006. |
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Limited Increases in Tariffs |
• | Local charges increased by an average of 28%; | |
• | Direct long distance charges decreased by an average of 10%; and | |
• | Monthly subscription charges increased by an average of 12% to 25%, depending on customer’s segment. |
Growth of Indonesian Cellular Market and Increase in Telkomsel’s Revenues |
Increase in TELKOM’s Interconnection Revenues |
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Increase in TELKOM’s Data and Internet Revenues |
Acquisition and Consolidation of KSO IV and VII |
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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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Intangible Assets |
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Consolidation of TELKOM’s Financial Statements |
Foreign Exchange Translations |
• | Rp.9,280 and Rp.9,300 to US$1, Rp.12,652 and Rp.12,682 to Euro1 and Rp.90.45 and Rp.90.72 to Japanese Yen1, as of December 31, 2004; | |
• | Rp.9,825 and Rp.9,835 to US$1, Rp.11,638 and Rp.11,652 to Euro1 and Rp.83.78 and Rp.83.89 to Japanese Yen1, as of December 31, 2005; and | |
• | Rp.8,995 and Rp.9,005 to US$1, Rp.11,839 and Rp.11,853 to Euro1 and Rp.75.58 and Rp.75.68 to Japanese Yen1, as of December 31, 2006. |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||||
Telephone | |||||||||||||||||||||||||||||
Fixed lines | 10,645.0 | 31.4 | 10,781.3 | 25.8 | 10,979.0 | 21.4 | 1,219.8 | ||||||||||||||||||||||
Cellular | 10,421.3 | 30.7 | 14,570.9 | 34.9 | 20,622.6 | 40.2 | 2,291.4 | ||||||||||||||||||||||
Revenue under Joint Operation Schemes (KSO) | 656.6 | 1.9 | 588.7 | 1.4 | 489.4 | 1.0 | 54.4 | ||||||||||||||||||||||
Interconnection-net | 6,188.0 | 18.2 | 7,742.1 | 18.5 | 8,681.5 | 16.9 | 964.6 | ||||||||||||||||||||||
Data and Internet | 4,808.8 | 14.2 | 6,934.3 | 16.6 | 9,065.2 | 17.7 | 1,007.2 | ||||||||||||||||||||||
Network | 654.3 | 1.9 | 586.6 | 1.4 | 718.7 | 1.4 | 79.9 | ||||||||||||||||||||||
Revenue-sharing Arrangements | 280.6 | 0.8 | 302.3 | 0.7 | 415.5 | 0.8 | 46.1 | ||||||||||||||||||||||
Other telecommunications Services | 293.2 | 0.9 | 301.0 | 0.7 | 322.1 | 0.6 | 35.8 | ||||||||||||||||||||||
Total Operating Revenues | 33,947.8 | 100.0 | 41,807.2 | 100.0 | 51,294.0 | 100.0 | 5,699.3 | ||||||||||||||||||||||
Fixed Line Telephone Revenues |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Fixed Line Telephone Revenues | |||||||||||||||||||||||||||||
Local and domestic long-distance usage | 7,439.3 | 21.9 | 7,223.1 | 17.3 | 7,130.9 | 13.9 | 792.3 | ||||||||||||||||||||||
Monthly subscription charges | 2,934.9 | 8.6 | 3,289.8 | 7.9 | 3,491.5 | 6.8 | 387.9 | ||||||||||||||||||||||
Installation charges | 201.3 | 0.6 | 197.3 | 0.5 | 170.2 | 0.3 | 18.9 | ||||||||||||||||||||||
Phone cards | 15.6 | 0.1 | 10.9 | 0.0 | 4.0 | 0.0 | 0.4 | ||||||||||||||||||||||
Others | 53.9 | 0.2 | 60.2 | 0.1 | 182.4 | 0.4 | 20.3 | ||||||||||||||||||||||
Total | 10,645.0 | 31.4 | 10,781.3 | 25.8 | 10,979.0 | 21.4 | 1,219.8 | ||||||||||||||||||||||
Cellular Telephone Revenues |
Year Ended December 31, | ||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||
Cellular Telephone Revenues | ||||||||||||||||||||||||||||
Air time charges | 9,825.7 | 28.9 | 13,666.3 | 32.7 | 19,257.3 | 37.5 | 2,139.7 | |||||||||||||||||||||
Monthly subscription charges | 448.5 | 1.3 | 383.5 | 0.9 | 297.4 | 0.6 | 33.1 | |||||||||||||||||||||
Connection fee charges | 55.8 | 0.2 | 64.1 | 0.2 | 109.2 | 0.2 | 12.1 | |||||||||||||||||||||
Features | 91.3 | 0.3 | 457.0 | 1.1 | 958.7 | 1.9 | 106.5 | |||||||||||||||||||||
Total | 10,421.3 | 30.7 | 14,570.9 | 34.9 | 20,622.6 | 40.2 | 2,291.4 | |||||||||||||||||||||
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Joint Operation Scheme (“KSO”) Revenues |
KSO revenues consist of: |
• | Initial payments made by the KSO partners, which were amortized over the life of the KSO Agreement; | |
• | Minimum TELKOM Revenues (“MTR”), being a specified minimum payment, which were payable monthly; and | |
• | Distributable KSO Revenues (“DKSOR”), being a specified percentage of KSO revenues after deduction of operating expenses and MTR obligation, which were payable monthly. |
Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
KSO Revenues | |||||||||||||||||||||||||||||
Minimum TELKOM Revenues | 296.0 | 0.9 | 268.6 | 0.6 | 207.5 | 0.4 | 23.1 | ||||||||||||||||||||||
Share in Distributable KSO Revenues | 349.5 | 1.0 | 318.6 | 0.8 | 274.6 | 0.6 | 30.5 | ||||||||||||||||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 11.1 | 0.0 | 1.5 | 0.0 | 7.3 | 0.0 | 0.8 | ||||||||||||||||||||||
Total | 656.6 | 1.9 | 588.7 | 1.4 | 489.4 | 1.0 | 54.4 | ||||||||||||||||||||||
Interconnection Revenues |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Interconnection Revenues | |||||||||||||||||||||||||||||
Cellular | 5,351.6 | 15.7 | 6,685.1 | 16.0 | 7,442.3 | 14.5 | 826.9 | ||||||||||||||||||||||
International | 641.2 | 1.9 | 854.8 | 2.0 | 1,001.4 | 1.9 | 111.3 | ||||||||||||||||||||||
Other | 195.2 | 0.6 | 202.2 | 0.5 | 237.8 | 0.5 | 26.4 | ||||||||||||||||||||||
Total | 6,188.0 | 18.2 | 7,742.1 | 18.5 | 8,681.5 | 16.9 | 964.6 | ||||||||||||||||||||||
Data and Internet Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Data and Internet Revenues | |||||||||||||||||||||||||||||
SMS | 3,562.7 | 10.5 | 5,309.2 | 12.7 | 6,730.5 | 13.1 | 747.8 | ||||||||||||||||||||||
Internet | 554.9 | 1.6 | 711.4 | 1.7 | 907.5 | 1.8 | 100.8 | ||||||||||||||||||||||
Data communication | 360.7 | 1.1 | 610.4 | 1.5 | 1,122.3 | 2.2 | 124.7 | ||||||||||||||||||||||
VoIP | 318.9 | 1.0 | 292.7 | 0.7 | 278.0 | 0.5 | 30.9 | ||||||||||||||||||||||
e-business | 11.6 | 0.0 | 10.6 | 0.0 | 26.9 | 0.1 | 3.0 | ||||||||||||||||||||||
Total | 4,808.8 | 14.2 | 6,934.3 | 16.6 | 9,065.2 | 17.7 | 1,007.2 | ||||||||||||||||||||||
Network Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Network Revenues | |||||||||||||||||||||||||||||
Satellite transponder lease | 210.9 | 0.6 | 239.5 | 0.6 | 294.1 | 0.6 | 32.7 | ||||||||||||||||||||||
Leased lines | 443.4 | 1.3 | 347.1 | 0.8 | 424.6 | 0.8 | 47.2 | ||||||||||||||||||||||
Total | 654.3 | 1.9 | 586.6 | 1.4 | 718.7 | 1.4 | 79.9 | ||||||||||||||||||||||
Revenues under Revenue-Sharing Arrangements |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Revenues Under Revenue- Sharing Arrangements | |||||||||||||||||||||||||||||
Net share in revenue earned under Revenue-Sharing Arrangements | 198.6 | 0.6 | 165.6 | 0.4 | 263.5 | 0.5 | 29.3 | ||||||||||||||||||||||
Amortization of unearned income under Revenue-Sharing Arrangements | 82.0 | 0.2 | 136.7 | 0.3 | 152.0 | 0.3 | 16.9 | ||||||||||||||||||||||
Total | 280.6 | 0.8 | 302.3 | 0.7 | 415.5 | 0.8 | 46.2 | ||||||||||||||||||||||
Other Telecommunications Services Revenues |
Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||||
Depreciation | 6,438.6 | 19.0 | 7,570.7 | 18.1 | 9,178.3 | 17.9 | 1,019.8 | ||||||||||||||||||||||
Operations, maintenance and telecommunications services | 4,529.6 | 13.3 | 5,916.3 | 14.1 | 7,495.7 | 14.6 | 832.9 | ||||||||||||||||||||||
Personnel | 4,910.0 | 14.5 | 6,563.0 | 15.7 | 8,513.8 | 16.6 | 946.0 | ||||||||||||||||||||||
General and Administrative | 2,599.8 | 7.7 | 2,764.0 | 6.6 | 3,271.5 | 6.4 | 363.5 | ||||||||||||||||||||||
Marketing | 881.9 | 2.6 | 1,126.2 | 2.7 | 1,241.5 | 2.4 | 137.9 | ||||||||||||||||||||||
Write-down of assets | — | — | 616.8 | 1.5 | — | — | — | ||||||||||||||||||||||
Loss on procurement Commitments | — | — | 79.4 | 0.2 | — | — | — | ||||||||||||||||||||||
Total Operating Expenses | 19,359.9 | 57.1 | 24,636.4 | 58.9 | 29,700.8 | 57.9 | 3,300.1 | ||||||||||||||||||||||
Depreciation Expense, Write-down of Assets and Loss on Procurement Commitments |
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Operations, Maintenance and Telecommunications Services Expenses |
Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Operations, Maintenance and Telecommunications Services Expenses | |||||||||||||||||||||||||||||
Operations and Maintenance | 2,398.2 | 7.1 | 3,075.1 | 7.3 | 4,209.1 | 8.2 | 467.7 | ||||||||||||||||||||||
Radio Frequency Usage Charges | 492.6 | 1.5 | 548.2 | 1.3 | 722.6 | 1.4 | 80.3 | ||||||||||||||||||||||
Concession fees and Universal Service Obligation (USO) charges | 314.7 | 0.9 | 709.2 | 1.7 | 881.8 | 1.7 | 98.0 | ||||||||||||||||||||||
Cost of phone, SIM and RUIM Cards | 366.7 | 1.1 | 582.3 | 1.4 | 579.3 | 1.1 | 64.4 | ||||||||||||||||||||||
Electricity, gas and Water | 385.7 | 1.1 | 372.5 | 0.9 | 417.3 | 0.8 | 46.4 | ||||||||||||||||||||||
Vehicles and supporting Facilities | 181.7 | 0.5 | 217.2 | 0.5 | 246.2 | 0.5 | 27.4 | ||||||||||||||||||||||
Insurance | 151.3 | 0.4 | 136.4 | 0.3 | 145.1 | 0.3 | 16.1 | ||||||||||||||||||||||
Leased lines | 132.8 | 0.4 | 124.2 | 0.3 | 236.4 | 0.5 | 26.3 | ||||||||||||||||||||||
Traveling | 42.2 | 0.1 | 33.5 | 0.1 | 39.1 | 0.1 | 4.3 | ||||||||||||||||||||||
Call Center | 59.6 | 0.2 | 105.0 | 0.3 | 14.7 | 0.0 | 1.6 | ||||||||||||||||||||||
Others | 4.1 | 0.0 | 12.7 | 0.0 | 4.1 | 0.0 | 0.5 | ||||||||||||||||||||||
Total | 4,529.6 | 13.3 | 5,916.3 | 14.1 | 7,495.7 | 14.6 | 833.0 | ||||||||||||||||||||||
Personnel Expenses |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
Personnel Expenses | |||||||||||||||||||||||||||||
Salaries and related benefits | 1,796.9 | 5.3 | 2,165.9 | 5.2 | 2,400.6 | 4.7 | 266.7 | ||||||||||||||||||||||
Vacation pay, incentives and other benefits | 1,156.1 | 3.4 | 1,615.6 | 3.8 | 2,209.1 | 4.3 | 245.5 | ||||||||||||||||||||||
Early retirements | 243.5 | 0.7 | 486.4 | 1.2 | 1,461.2 | 2.8 | 162.4 | ||||||||||||||||||||||
Net periodic post-retirement health care benefit cost | 416.3 | 1.2 | 488.6 | 1.2 | 604.7 | 1.2 | 67.2 | ||||||||||||||||||||||
Net periodic pension cost | 572.4 | 1.7 | 532.3 | 1.3 | 438.4 | 0.9 | 48.7 | ||||||||||||||||||||||
Employee income tax | 523.8 | 1.5 | 856.4 | 2.0 | 889.1 | 1.7 | 98.8 | ||||||||||||||||||||||
Long service awards | 36.9 | 0.1 | 201.9 | 0.5 | 215.8 | 0.4 | 24.0 | ||||||||||||||||||||||
Housing | 103.4 | 0.3 | 113.7 | 0.3 | 168.4 | 0.3 | 18.7 | ||||||||||||||||||||||
Medical | 12.2 | 0.1 | 18.0 | 0.0 | 25.1 | 0.0 | 2.8 | ||||||||||||||||||||||
Other employee benefits | 11.5 | 0.1 | 6.0 | 0.0 | 14.3 | 0.0 | 1.6 | ||||||||||||||||||||||
Others | 37.0 | 0.1 | 78.2 | 0.2 | 87.1 | 0.3 | 9.6 | ||||||||||||||||||||||
Total | 4,910.0 | 14.5 | 6,563.0 | 15.7 | 8,513.8 | 16.6 | 946.0 | ||||||||||||||||||||||
General and Administrative Expenses |
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Year Ended December 31, | |||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | |||||||||||||||||||||||
General and Administrative Expenses | |||||||||||||||||||||||||||||
Professional fees | 137.3 | 0.4 | 131.0 | 0.3 | 221.0 | 0.4 | 24.6 | ||||||||||||||||||||||
Collection expenses | 359.0 | 1.1 | 379.1 | 0.9 | 542.5 | 1.1 | 60.3 | ||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 872.3 | 2.6 | 918.2 | 2.2 | 944.4 | 1.8 | 104.9 | ||||||||||||||||||||||
Training, education and recruitment | 228.5 | 0.7 | 177.9 | 0.4 | 224.3 | 0.4 | 24.9 | ||||||||||||||||||||||
Travel | 192.6 | 0.6 | 171.7 | 0.4 | 229.7 | 0.4 | 25.5 | ||||||||||||||||||||||
Security and screening | 143.9 | 0.4 | 164.4 | 0.4 | 197.4 | 0.4 | 21.9 | ||||||||||||||||||||||
General and social contribution | 111.8 | 0.3 | 204.3 | 0.5 | 301.8 | 0.6 | 33.5 | ||||||||||||||||||||||
Printing and stationery | 81.0 | 0.2 | 50.2 | 0.1 | 51.9 | 0.1 | 5.7 | ||||||||||||||||||||||
Meetings | 58.3 | 0.2 | 40.3 | 0.1 | 64.0 | 0.1 | 7.1 | ||||||||||||||||||||||
Provision for doubtful accounts and inventory obsolescence | 357.7 | 1.1 | 489.0 | 1.2 | 458.2 | 0.8 | 50.9 | ||||||||||||||||||||||
Research and development | 13.2 | 0.0 | 8.4 | 0.0 | 8.7 | 0.0 | 1.0 | ||||||||||||||||||||||
Others | 44.2 | 0.1 | 29.5 | 0.1 | 27.6 | 0.1 | 3.2 | ||||||||||||||||||||||
Total | 2,599.8 | 7.7 | 2,764.0 | 6.6 | 3,271.5 | 6.4 | 363.5 | ||||||||||||||||||||||
Marketing Expenses |
Year Ended December 31, | ||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||||||||||||
Rp. (billion) | % | Rp. (billion) | % | Rp. (billion) | % | US$ (million) | ||||||||||||||||||||||
Marketing Expenses | ||||||||||||||||||||||||||||
Advertising | 699.6 | 2.1 | 795.6 | 1.9 | 944.3 | 1.8 | 104.9 | |||||||||||||||||||||
Customer education | 152.4 | 0.4 | 305.3 | 0.7 | 267.7 | 0.5 | 29.7 | |||||||||||||||||||||
Others | 29.9 | 0.1 | 25.3 | 0.1 | 29.5 | 0.1 | 3.3 | |||||||||||||||||||||
Total | 881.9 | 2.6 | 1,126.2 | 2.7 | 1,241.5 | 2.4 | 137.9 | |||||||||||||||||||||
Year ended December 31, 2006 compared to year ended December 31, 2005 |
Operating Revenues |
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95
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• | early retirement expenses increased by Rp.974.8 billion, or 200.4%, from Rp.486.4 billion in 2005 to Rp.1,461.2 billion in 2006. The number of employees taking early retirement increased from 1,017 in 2005 to 1,871 in 2006; | |
• | vacation pay, incentives and other benefits expenses increased by Rp.593.5 billion, or 36.7%, from Rp.1,615.6 billion in 2005 to Rp.2,209.1 billion in 2006; | |
• | salaries and related benefits increased by Rp.234.7 billion, or 10.8%, from Rp.2,165.9 billion in 2005 to Rp.2,400.6 billion in 2006, primarily due to increased base salaries; and | |
• | post retirement benefit costs increased by Rp.116.1 billion, or 23.8%, from Rp.488.6 billion in 2005 to Rp.604.7 billion in 2006. |
• | an increase in operations and maintenance expenses by Rp.1,134.0 billion to Rp.4,209.1 billion, an increase of 36.9%, due to the growth in Telkomsel’s overall capacity to support the increase in its subscribers from 24.3 million subscribers as of 2005 to 35.6 million subscribers as of 2006. The number of Telkomsel’s BTSs grew by 62.3% from 9,895 units in 2005 to 16,057 units in 2006. Telkomsel also increased the capacity of its transmitting and receiving stations and switching and Intelligent Network equipment; | |
• | total concession fees and Universal Service Obligation (USO) charges increased by Rp.172.6 billion to Rp.881.8 billion in 2006, an increase of 24.3%, primarily due to an increase of 24.7% or Rp.75.9 billion |
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in USO contribution by TELKOM and Telkomsel to the Government, from Rp.307.7 billion in 2005 to Rp.383.8 billion in 2006; | ||
• | radio frequency usage expenses increased by Rp.174.4 billion to Rp.722.6 billion, an increase of 31.8%, due to an increase in TELKOM’s and Telkomsel’s BTSs and additional annual BHP fee for 3G license. The number of TELKOM’s BTS grew by 5.7% from 1,448 units in 2005 to 1,531 units in 2006. The number of Telkomsel’s BTSs grew by 62.3% from 9,895 units in 2005 to 16,057 units in 2006; and | |
• | leased lines expenses increased by Rp.112.2 billion to Rp.236.4 billion, an increase of 90.3%, due to an increase of TELKOM’s expansion of its data network capacity. |
• | collection expenses increased by Rp.163.4 billion to Rp.542.5 billion, an increase of 43.1%, 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.33.0 billion, or 20.1%, to Rp.197.4 billion in 2006, primarily due to an increase in the salary of security guards by Rp.27.8 billion; | |
• | training, education and recruitment expenses, which increased by Rp.46.4 billion to Rp.224.3 billion, or 26.1%, following an increase in the number of TELKOM’s employee training programs; | |
• | general and social contributions expenses increased by Rp.97.5 billion, or 47.7%, to Rp.301.8 billion, primarily due to an increase in social contribution fund and community development expenses by Rp.48.9 billion to Rp.159.7 billion in 2006; | |
• | travel expenses increased by Rp.58.0 billion, or 33.8%, to Rp.229.7 billion in 2006, primarily due to an increase in local travel cost by Rp.48.5 billion; | |
• | professional fees increased by Rp.90.0 billion, or 68.7%, to Rp.221.0 billion in 2006, primarily due to an increase in management consultancy expenses by Rp.87.7 billion; and | |
• | amortization of intangible assets increased by Rp.26.2 billion, or 2.9%, to Rp.944.4 billion in 2006, due to the higher amortization amounts of the rights to operate the KSO operations as a result of the KSO VII acquisition and the up-front fees for the 3G license. |
• | a decrease in the provision for doubtful accounts and inventory obsolescence of Rp.30.8 billion, or 6.3%, to Rp.458.2 billion in 2006, resulting from the implementation of bad debt reduction programs in 2006. |
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• | gain on foreign exchange (net) increased by Rp.1,353.1 billion, or 261.8% from a net loss of Rp.516.8 billion in 2005 to a net gain of Rp.836.3 billion in 2006, primarily due to the relatively modest appreciation of the Rupiah, which resulted in translation gains on TELKOM’s US Dollar borrowings; | |
• | interest expenses increased by Rp.109.1 billion, or 9.3%, from Rp.1,177.3 billion in 2005 to Rp.1,286.4 billion in 2006, reflecting primarily increases in short-term bank loans and medium term loan of Telkomsel; | |
• | interest income increased by Rp.310.3 billion, or 90.0%, from Rp.344.7 billion in 2005 to Rp.655.0 billion in 2006, primarily due to a slight increase in the average balance of time deposits. See Note 6 to the consolidated financial statements; and | |
• | other income (net) decreased by Rp.207.2 billion, or 50.6% from Rp.409.2 billion in 2005 to Rp.202.0 billion in 2006, primarily resulting from an increase in expenses from losses on sales of fixed assets and decrease in vendor’s penalty income but offset by an increase in the penalty income on overdue services, income from the service charge of building management. |
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100
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101
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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; |
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• | 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. |
• | 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 |
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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; | ||
• | an increase in the cost of phones and SIM and RUIM cards 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 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 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 contributions 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 funding 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; |
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• | 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. |
• | 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 penalties on overdue payments. |
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Year Ended December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Rp.(billion) | Rp.(billion) | Rp.(billion) | US$(million) | |||||||||||||
Fixed Wireline Segment results | ||||||||||||||||
External operating revenues | 18,860.8 | 19,637.4 | 20,137.8 | 2,237.5 | ||||||||||||
Inter-segment operating revenues | 4.3 | 305.4 | 514.6 | 57.2 | ||||||||||||
Total revenues | 18,865.1 | 19,942.8 | 20,652.4 | 2,294.7 | ||||||||||||
Segment expense | (12,207.7 | ) | (14,378.8 | ) | (16,257.5 | ) | (1,806.4 | ) | ||||||||
Segment result | 6,657.4 | 5,564.0 | 4,394.9 | 488.3 | ||||||||||||
Depreciation and amortization | (3,568.2 | ) | (4,006.2 | ) | (4,290.9 | ) | (476.8 | ) | ||||||||
Amortization of goodwill and other intangible assets | (851.1 | ) | (896.9 | ) | (932.7 | ) | (103.6 | ) | ||||||||
Other non-cash expenses | (244.4 | ) | (292.4 | ) | (325.1 | ) | (36.1 | ) |
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Year Ended December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Rp.(billion) | Rp.(billion) | Rp.(billion) | US$(million) | |||||||||||||
Fixed Wireless | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 575.4 | 1,449.7 | 2,806.2 | 311.8 | ||||||||||||
Inter-segment operating revenues | (51.1 | ) | (167.9 | ) | (253.4 | ) | (28.2 | ) | ||||||||
Total revenues | 524.3 | 1,281.8 | 2,552.8 | 283.6 | ||||||||||||
Segment expense | (789.6 | ) | (2,174.7 | ) | (1,815.8 | ) | (201.8 | ) | ||||||||
Segment result | (265.3 | ) | (892.9 | ) | 737.0 | 81.8 | ||||||||||
Depreciation and amortization | (230.0 | ) | (537.3 | ) | (452.8 | ) | (50.3 | ) | ||||||||
Write-down of assets and loss on procurement commitments | — | (696.1 | ) | — | — | |||||||||||
Other non-cash expenses | — | (21.6 | ) | — | — | |||||||||||
Cellular | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 14,201.8 | 20,384.9 | 28,205.1 | 3,133.9 | ||||||||||||
Inter-segment operating revenues | 534.8 | 691.2 | 863.2 | 95.9 | ||||||||||||
Total revenues | 14,736.6 | 21,076.1 | 29,068.3 | 3,229.8 | ||||||||||||
Segment expense | (6,757.2 | ) | (8,775.0 | ) | (12,839.5 | ) | (1,426.6 | ) | ||||||||
Segment result | 7,979.4 | 12,301.1 | 16,228.8 | 1,803.2 | ||||||||||||
Depreciation and amortization | (2,651.0 | ) | (3,046.6 | ) | (4,427.8 | ) | (492.0 | ) | ||||||||
Amortization of goodwill and other intangible assets | — | — | (11.7 | ) | (1.3 | ) | ||||||||||
Other non-cash expenses | (100.7 | ) | (171.2 | ) | (127.5 | ) | (14.2 | ) | ||||||||
Other | ||||||||||||||||
Segment results | ||||||||||||||||
External operating revenues | 309.7 | 335.2 | 144.9 | 16.1 | ||||||||||||
Inter-segment operating revenues | 51.1 | 70.5 | 333.9 | 37.1 | ||||||||||||
Total revenues | 360.8 | 405.7 | 478.8 | 53.2 | ||||||||||||
Segment expense | (320.7 | ) | (328.2 | ) | (384.3 | ) | (42.7 | ) | ||||||||
Segment result | 40.1 | 77.5 | 94.5 | 10.5 | ||||||||||||
Depreciation and amortization | (18.7 | ) | (23.3 | ) | (34.5 | ) | (3.8 | ) | ||||||||
Amortization of goodwill and other intangible assets | (21.3 | ) | (21.3 | ) | — | — | ||||||||||
Other non-cash expenses | (5.3 | ) | (4.8 | ) | (5.7 | ) | (0.6 | ) |
Year ended December 31, 2006 compared to year ended December 31, 2005 |
Fixed Wireline Segment |
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Fixed Wireless Segment |
Cellular Segment |
Other Segments |
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Year ended December 31, 2005 compared to year ended December 31, 2004 |
Fixed Wireline Segment |
Fixed Wireless Segment |
Cellular Segment |
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Year Ended December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Net income in accordance with: | ||||||||||||||||
Indonesian GAAP | 6,614.6 | 7,993.6 | 11,005.6 | 1,222.8 | ||||||||||||
U.S. GAAP | 6,468.6 | 7,840.1 | 12,111.5 | 1,345.7 |
Year Ended December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | |||||||||||||
Stockholders’ equity in accordance with: | ||||||||||||||||
Indonesian GAAP | 18,128.0 | 23,292.4 | 28,068.7 | 3,118.7 | ||||||||||||
U.S. GAAP | 19,570.9 | 24,568.5 | 26,308.6 | 2,923.2 |
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i. | Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized on a straight line basis over the average period until the benefits become vested. Under U.S. GAAP, prior service cost (vested and non-vested benefits) is generally deferred and amortized systematically over the estimated remaining service period for active employees and the recognized amount is recorded in the consolidated statement of income. |
ii. | Under Indonesian GAAP, the transition obligations were recognized on January 1, 2004, the date PSAK 24R was adopted. Under U.S. GAAP, the transition obligations arising from the adoption of SFAS 87 “Employers’ Accounting for Pensions” and SFAS 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” on January 1, 1992 and January 1, 1995, respectively are deferred and |
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amortized systematically over the estimated remaining service period for active employees and 20 years, respectively. In addition, different adoption dates resulted in significant difference in cumulative unrecognized actuarial gains and losses. |
i. | The Company and its subsidiaries no longer report the additional minimum liability and any corresponding intangible asset for the unfunded pension obligation as the funded status for unfunded or underfunded benefit plans is now fully recognized as a net pension liability on the balance sheet. This is similar to the Indonesian GAAP requirements. |
ii. | On adoption of SFAS 158, the unrecognised actuarial losses, prior service costs, and transition obligations were recognised, net of tax, in the accumulated other comprehensive income balance. These will continue to be amortised and reported as a component of net periodic benefit cost in the consolidated statement of income in accordance with the requirements of SFAS 87, SFAS 106 and SFAS 112. |
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2004 | 2005 | 2006 | |||||||||||
Rp. million | Rp. million | Rp. million | |||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP | 6,614,568 | 7,993,566 | 11,005,577 | ||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | |||||||||||||
Voluntary termination benefits | — | — | 1,461,149 | ||||||||||
Capitalization of foreign exchange losses, net of related depreciation of Rp.75,870 million, Rp.77,010 million and Rp.79,178 million, respectively | 1,587 | 77,010 | 79,178 | ||||||||||
Interest capitalized on assets under construction, net of related depreciation of Rp.13,392 million, Rp.17,275 million and Rp.23,270 million, respectively | 26,802 | 23,825 | 73,934 | ||||||||||
Revenue-sharing arrangements | 155,369 | 69,173 | 58,545 | ||||||||||
Pension | (148,517 | ) | (104,877 | ) | (95,788 | ) | |||||||
Post-retirement health care | (75,964 | ) | (104,466 | ) | (101,205 | ) | |||||||
Long service awards | (122,462 | ) | (90,933 | ) | 201,345 | ||||||||
Equity in net income (loss) of associated companies | (177 | ) | (192 | ) | (223 | ) | |||||||
Amortization of land rights | (13,907 | ) | (4,881 | ) | (16,947 | ) | |||||||
Revenue recognition | 54,159 | 5,046 | (4,547 | ) | |||||||||
Amortization of goodwill | 21,270 | 21,270 | 8,858 | ||||||||||
Capital leases | (3,435 | ) | (47,524 | ) | (27,580 | ) | |||||||
Adjustment for consolidation of Dayamitra | (72,361 | ) | 5,084 | 11,127 | |||||||||
Asset retirement obligations | (848 | ) | (848 | ) | (11,255 | ) | |||||||
Amendment and restatement of the Joint Operation Scheme in Regional Division VII | — | — | 4,479 |
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2004 | 2005 | 2006 | ||||||||||||
Rp. million | Rp. million | Rp. million | ||||||||||||
Deferred income tax: | ||||||||||||||
Deferred income tax on equity method investments | (11,234 | ) | (3,206 | ) | 2,053 | |||||||||
Deferred income tax effect on U.S. GAAP adjustments | 61,742 | 18,288 | (520,693 | ) | ||||||||||
(127,976 | ) | (137,231 | ) | 1,122,430 | ||||||||||
Minority interest | (18,019 | ) | (16,244 | ) | (16,559 | ) | ||||||||
Net adjustments | (145,995 | ) | (153,475 | ) | 1,105,871 | |||||||||
Net income in accordance with U.S. GAAP | 6,468,573 | 7,840,091 | 12,111,448 | |||||||||||
Net income per share — in full Rupiah amount | 320.86 | 388.89 | 602.12 | |||||||||||
Net income per ADS — in full Rupiah amount (40 Series B shares per ADS) | 12,834.47 | 15,555.74 | 24,085.00 | |||||||||||
2005 | 2006 | |||||||||
Rp. million | Rp. million | |||||||||
Stockholders’ equity according to the consolidated balance sheets prepared under Indonesian GAAP | 23,292,401 | 28,068,689 | ||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||
Voluntary termination benefits | — | 1,461,149 | ||||||||
Capitalization of foreign exchange differences — net of related depreciation | (471,876 | ) | (392,698 | ) | ||||||
Interest capitalized on property under construction — net of related depreciation | 152,439 | 226,373 | ||||||||
Revenue-sharing arrangements | (223,154 | ) | (164,609 | ) | ||||||
Pension | 1,851,509 | (115,601 | ) | |||||||
Post-retirement health care | 1,038,095 | (1,786,355 | ) | |||||||
Long service awards | (213,395 | ) | (234,052 | ) | ||||||
Equity in net income (loss) of associated companies | (18,621 | ) | (18,844 | ) | ||||||
Amortization of land rights | (83,999 | ) | (100,946 | ) | ||||||
Revenue recognition | (709,343 | ) | (713,890 | ) | ||||||
Amortization of Goodwill | 85,079 | 93,937 | ||||||||
Capital leases | (29,836 | ) | (57,416 | ) | ||||||
Adjustment for consolidation of Dayamitra | (56,644 | ) | (45,517 | ) | ||||||
Asset retirement obligations | (2,544 | ) | (13,799 | ) | ||||||
Amendment and restatement of the Joint Operation Scheme in Regional Division VII | — | 4,479 | ||||||||
Deferred income tax: | ||||||||||
Deferred income tax on equity method investments | 35,040 | 38,768 | ||||||||
Deferred income tax effect on U.S. GAAP adjustments | (66,182 | ) | 39,180 | |||||||
1,286,568 | (1,779,841 | ) | ||||||||
Minority interest | (10,481 | ) | 19,724 | |||||||
Net adjustments | 1,276,087 | (1,760,117 | ) | |||||||
Stockholders’ equity in accordance with U.S. GAAP | 24,568,488 | 26,308,572 | ||||||||
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B. | Liquidity and Capital Resources |
• | capital expenditures for existing and new network and backbone infrastructure, including a backbone transmission network on Ring JASUKA (Java, Sumatra and Kalimantan), Submarine Cable JDM (Jember-Denpasar- Mataram), the expansion of TELKOM’s fixed wireless access networks, the expansion of Submarine Cable SUB (Surabaya-UjungPandang-Banjarmasin), an additional ground satellite segment in Jakarta, fiber optic transmission network Medan-Padang, softswitch development, the installation and upgrading of fixed lines and increased capacity in its mobile cellular service conducted through Telkomsel (see “— Capital Expenditures” below); | |
• | debt service requirements relating to existing indebtedness, including two-step loans, its short-term loans with Bank Central Asia and Bank Niaga, and its medium-term notes of Rp.465 billion, IDR bonds of Rp.1 trillion, its loan facility from Bank Central Asia in relation to the construction of the Sumatra backbone network, its loan from a consortium of banks for the Regional Division V junction project, its loans from Citibank N.A. through its Hermes Export facility, the High Performance Backbone facility and the EKN-Backed facility and a loan from the Export and Import Bank of Korea in connection with the CDMA project; | |
• | installment payments of the purchase price for shares of AriaWest which are expected to be fully paid by January 31, 2009; | |
• | payments of contributions 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 | |
• | fixed monthly payments to PT Bukaka Singtel International (BSI) pursuant to the amended and restated agreement for KSO VII, commencing October 2006 and terminating in 2010. |
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Defaults and Waivers of Defaults under TELKOM Debt Facilities |
Year Ended December 31, | |||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||
Rp. (billion) | Rp. (billion) | Rp. (billion) | US$ (million) | ||||||||||||||
Net cash flows: | |||||||||||||||||
from operating activities | 16,051.5 | 21,102.7 | 26,695.2 | 2,966.1 | |||||||||||||
used in investing activities | (9,598.1 | ) | (12,212.7 | ) | (16,461.1 | ) | (1,829.0 | ) | |||||||||
used in financing activities | (6,904.9 | ) | (8,339.4 | ) | (7,382.8 | ) | (820.3 | ) | |||||||||
Change in cash and cash equivalents | (451.5 | ) | 550.6 | 2,851.3 | 316.8 | ||||||||||||
Effect of foreign exchange changes on cash and cash equivalents | 213.1 | (32.0 | ) | 89.8 | 10.0 | ||||||||||||
Cash and cash equivalents, beginning of Year | 5,094.5 | 4,856.1 | 5,374.7 | 597.2 | |||||||||||||
Cash and cash equivalents, end of year | 4,856.1 | 5,374.7 | 8,315.8 | 924.0 |
Net Cash Flows from Operating Activities |
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Year ended December 31, 2006 compared to year ended December 31, 2005. |
• | an increase of Rp.6,017.0 billion, or 40.6%, in cash receipts from cellular business, primarily due to a growth in the mobile cellular business of Telkomsel; | |
• | an increase of Rp.1,252.6 billion, or 16.9%, 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 | |
• | an increase of Rp.1,962.0 billion, or 28.2%, 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.1,510.6 billion, or 10.1%, in cash payments for operating expenses, which is in line with the increase in operating expenses (excluding depreciation and amortization); and | |
• | an increase of Rp.2,236.8 billion, or 45.3%, in cash payments for income tax, which is in line with the increase in net income. |
Year ended December 31, 2005 compared to year ended December 31, 2004. |
• | 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 | |
• | 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). |
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Year ended December 31, 2006 compared to year ended December 31, 2005. |
• | an increase of Rp.3,793.7 billion, or 31.3%, in the acquisition of property, plant and equipment, primarily due to the installation of additional transmission stations, earth stations and equipment, cable network and the investment in data processing equipment; and | |
• | an increase of Rp.436.0 billion, in the payment of the 3G license up-front fee by Telkomsel. |
Year ended December 31, 2005 compared to year ended December 31, 2004. |
• | 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. |
Net Cash Flows from Financing Activities |
Repayments of Current Indebtedness |
• | short-term borrowings of Rp.507.1 billion; | |
• | medium-term notes of Rp.145.0 billion; | |
• | long-term borrowings of Rp.1,674.5 billion; and | |
• | promissory notes of Rp.201.3 billion and capital lease obligation of Rp.14.1 billion. |
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Payment of Cash Dividends |
Date of Annual General Meeting | Dividend | Total Cash | Dividend | |||||||||
of Shareholders | Year | Dividends | Per Share | |||||||||
(Rp. billion) | (Rp.) | |||||||||||
July 30, 2004 | 2003 | 3,043.6 | 301.95 | |||||||||
June 24, 2005 | 2004 | 3,064.6 | (1) | 152.01 | ||||||||
June 30, 2006 | 2005 | 4,400.1 | 218.86 | |||||||||
December 5, 2006 | 2006 | 971.0 | (2) | 48.41 |
(1) | Including interim cash dividends distributed in December 2004 of Rp.143.4 billion. |
(2) | Interim cash dividends distributed in December 2006 of Rp.971.0 billion |
Escrow Accounts |
Current Assets |
• | an increase of Rp.2,941.1 billion, or 54.7%, in cash and cash equivalents from Rp.5,374.7 billion in 2005 to Rp.8,315.8 billion in 2006; | |
• | an increase of Rp.295.4 billion, or 38.0%, in prepaid expenses from Rp.777.9 billion in 2005 to Rp.1,073.3 billion in 2006; |
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• | an increase of Rp.139.4 billion, or 3.9%, in trade receivables from Rp.3,577.9 billion in 2005 to Rp.3,717.3 billion in 2006; | |
• | an increase of Rp.359.6 billion in claims for tax refunds from Rp.nil in 2005 to Rp.359.6 billion in 2006; and | |
• | an increase of Rp.62.4 billion, or 282.4%, in temporary investment from Rp.22.1 billion in 2005 to Rp.84.5 billion in 2006. |
• | a decrease of Rp.5.5 billion, or 3.6%, in other receivables from Rp.153.2 billion in 2005 to Rp.147.7 billion in 2006; | |
• | a decrease of Rp.152.7 billion, or 95.7%, in other current assets from Rp.159.5 billion in 2005 to Rp.6.8 billion in 2006; | |
• | a decrease of Rp.16.5 billion, or 87.3%, in prepaid taxes from Rp.18.9 billion in 2005 to Rp.2.4 billion in 2006; and | |
• | a decrease of Rp.7.0 billion, or 3.2%, in inventories from Rp.220.3 billion in 2005 to Rp.213.3 billion in 2006. |
Trade Receivables |
Other Current Assets |
Current Liabilities |
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Current Maturities of Long-term Liabilities |
Accrued Expenses |
At December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||
(Rp. in billion) | (Rp. in billion) | (Rp. in billion) | (US$ in million) | |||||||||||||
Indonesian Rupiah(1) | 4,550.0 | 4,009.0 | 8,260,0 | 917.3 | ||||||||||||
US Dollar(2),(3) | 9,904.2 | 7,993.9 | 6,002.8 | 666.6 | ||||||||||||
Japanese Yen(4) | 1,512.4 | 1,302.6 | 1,088.6 | 121.0 | ||||||||||||
Euro(5) | 649.7 | 427.7 | 261.0 | 29.0 | ||||||||||||
Total | 16,616.3 | 13,733.2 | 15,612.4 | 1,733.9 | ||||||||||||
(1) | For 2004, 2005 and 2006, the amounts also included bond issuance costs for TELKOM bonds of Rp.13.4 billion, Rp.8.15 billion and Rp.2.9 billion. In addition, the amount at December 31, 2006 included the present value of the future fixed monthly payments to be made for the deferred consideration for business combinations relating to the acquisition of KSO VII (the interest to be accreted over time amounting to Rp.536.8 billion (US$59.6 million)). |
(2) | The amounts at December 31, 2004, 2005 and 2006 translated into Rupiah at Rp.9,300, Rp.9,835, and Rp.9,005 = US$1, respectively, being the Reuters sell rates for US Dollars at each of those dates. |
(3) | The amounts at December 31, 2004 included the present values of the future payments to be made for the deferred consideration for business combinations relating to: a. the acquisition of AriaWest (the interest to be accreted over time amounting to US$9.7 million (Rp.90.2 billion)); b. the purchase of the remaining 9.68% interest in Dayamitra shares (the interest to be accreted over time amounting to US$1.3 million (Rp.11.9 billion)); and c. the acquisition of KSO IV (the interest to be accreted over time amounting to US$101.0 million (Rp.938.7 billion)). |
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(4) | The amounts at December 31, 2004, 2005 and 2006, translated into Rupiah at Rp.90.6, Rp.83.9, and Rp.75.7 = Yen 1, respectively, being the prevailing exchange rates for buying Yen at each of those dates. |
(5) | The amounts at December 31, 2004, 2005 and 2006, translated into Rupiah at Rp.12,666.9, Rp.11,651.5 and Rp.11,853.3 = Euro 1, respectively, being the prevailing exchange rate for buying Euro at each of those dates. |
• | Rp.4,476.6 billion (US$497.1 million) (including current maturities) in two-step loans through the Government; | |
• | Rp.997.1 billion (US$110.7 million) (after bond issuance costs) in IDR bonds issued by TELKOM; | |
• | Rp.465.1 billion (US$51.6 million) (including current maturities) in the indebtedness relating to TELKOM’s acquisition of 100% equity interest in AriaWest (after discount); | |
• | Rp.2,436.4 billion (US$270.6 million) representing the present value of the fixed monthly payments to be paid to MGTI in respect of the acquisition of KSO IV; | |
• | Rp.1,689.6 billion (US$187.6 million) representing the present value of the fixed monthly payments to be paid to PT Bukaka Singtel International (BSI) in respect of the acquisition of KSO VII; | |
• | Rp.464.8 billion (US$51.6 million) in medium-term notes (net of debt issuance costs) issued by TELKOM; | |
• | Rp.952.8 billion (US$105.8 million) in project financing from the Export and Import Bank of Korea in connection with the CDMA Project; | |
• | Rp.488.0 billion (Euro 22.0 million and US$25.2 million) (including current maturities) of Telkomsel’s loan from Citibank International plc through its Hermes Export facility (Rp.261.0 billion) and EKN-Backed facility (Rp.227.0 billion); and | |
• | Rp.3,166.7 billion (US$351.9 million) Telkomsel’s short-term and medium-term loans received from Mandiri, BCA, Citibank NA and BNI. |
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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 to exceed 1.5:1; | |
• | Debt to equity ratio to 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 to not exceed 3:1. |
Medium-Term Notes |
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Acquisition Indebtedness and Option Purchase Price |
Dayamitra |
AriaWest |
KSO IV |
KSO VII |
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Sumatra High Performance Backbone Network |
Bank Central Asia |
Citibank N.A. and Citibank International |
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• | Debt service coverage ratio to exceed 1.5:1 | |
• | Debt to equity ratio not to exceed: |
a. | 3:1 for the period April 10, 2002 to January 1, 2003 |
b. | 2.75:1 for the period January 2, 2003 to January 1, 2004 |
c. | 2.5:1 for the period January 2, 2004 to January 1, 2005 |
d. | 2:1 for the period January 2, 2005 to the full repayment date of the loans |
• | Debt to EBITDA ratio not to exceed: |
a. | 3.5:1 for the period April 10, 2002 to January 1, 2004 |
b. | 3:1 for the period January 2, 2004 to the full repayment date of the loans |
Regional Division V Junction Project |
Telkomsel’s Indebtedness (including facilities) |
Hermes Export Facility |
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EKN-Backed Facility |
Short-term and Medium-term Loans |
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Amount (Rp.) | |||||||||
Years Ended | Short-Term | Medium-Term | |||||||
2007 | 666,666,666,666 | 1,000,000,000,000 | |||||||
2008 | — | 1,000,000,000,000 | |||||||
2009 | — | 500,000,000,000 | |||||||
Total | 666,666,666,666 | 2,500,000,000,000 |
Dayamitra’s Indebtedness |
• | Infrastructure, which consists of the transmission and switching network and backbone (including data backbone and fixed line network backbone infrastructure), access network (including fixed wireless networks) and BTS of Fixed Wireless; | |
• | Phone, which consists of Soft Switch # 4 and 5, Local Central (V52 and QE Central), Trunk Expand, Signaling CCS#7 for Fixed Wireline and NSS or MSC for Fixed Wireless. | |
• | Multimedia, which consists of Internet access, data communication services, content and community development and e-business services; and | |
• | Service Net, which consists of various commercial services intended to increase traffic on TELKOM’s network, including interconnection, Internet network and third-party call centers. |
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Years Ended December 31, | ||||||||||||||||||||
2004(1) | 2005(1) | 2006(1) | 2007(2) | 2008(3) | ||||||||||||||||
Rp. (billion) | ||||||||||||||||||||
TELKOM (Parent Company): | ||||||||||||||||||||
Infrastructure: | ||||||||||||||||||||
Transmission Network and Backbone | 560.4 | 277.7 | 714.8 | 1,285.5 | 330.1 | |||||||||||||||
Access Network | 1,831.2 | 1,577.0 | 668.6 | 4,244.4 | 1,089.9 | |||||||||||||||
Subtotal Infrastructure | 2,391.6 | 1,854.7 | 1,383.4 | 5,529.9 | 1,420.0 | |||||||||||||||
Commercial Services: | ||||||||||||||||||||
Phone | 901.5 | 524.5 | 220.8 | 1,137.7 | 292.1 | |||||||||||||||
Multimedia | 92.7 | 334.2 | 155.9 | 767.7 | 197.1 | |||||||||||||||
Services-Net | 34.2 | 94.9 | 8.9 | 41.7 | 10.7 | |||||||||||||||
Subtotal Commercial Services | 1,028.4 | 953.6 | 385.6 | 1,947.1 | 499.9 | |||||||||||||||
Supporting Services | 295.6 | 559.5 | 434.6 | 1,014.3 | 260.5 | |||||||||||||||
Subtotal for TELKOM (Parent Company) | 3,715.6 | 3,367.8 | 2,203.6 | 8,491.3 | 2,180.4 | |||||||||||||||
TELKOM’s Subsidiaries: | ||||||||||||||||||||
Telkomsel | 4,982.7 | 10,085.7 | 16,496.0 | 18,517.0 | 18,146.7 | |||||||||||||||
Dayamitra | 50.4 | — | — | — | — | |||||||||||||||
Infomedia Nusantara | 63.0 | 37.9 | 89.1 | 127.6 | 97.7 | |||||||||||||||
Pramindo Ikat Nusantara | 1.7 | 29.4 | 12.0 | 38.1 | 45.4 | |||||||||||||||
Indonusa Telemedia | 1.4 | 8.9 | — | 82.4 | 21.8 | |||||||||||||||
Graha Sarana Duta | 3.7 | 2.4 | 2.1 | 27.3 | 8.2 | |||||||||||||||
PT Pro Infokom Indonesia | 0.6 | — | — | — | — | |||||||||||||||
PT Metra | 0.9 | 19.3 | 45.4 | 15.2 | 60.0 | |||||||||||||||
AriaWest | 0.1 | 1.1 | 47.9 | 4.0 | — | |||||||||||||||
Napsindo | 0.3 | 0.5 | — | — | — | |||||||||||||||
Subtotal for subsidiaries | 5,104.8 | 10,185.2 | 16,692.5 | 18,811.6 | 18,379.8 | |||||||||||||||
Total for TELKOM (consolidated) | 8,820.4 | 13,553.0 | 18,896.1 | 27,302.9 | 20,560.2 | |||||||||||||||
(1) | Amounts for 2004, 2005 and 2006 are actual capital expenditures. |
(2) | Amounts for 2007 are planned capital expenditures included in TELKOM’s budget and are subject to upward or downward adjustment. |
(3) | Amounts for 2008 are projected capital expenditures for such year, and actual capital expenditures may be significantly different from projected amounts. |
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Planned Investments in 2007 |
Planned Investments in Infrastructure |
Planned Investments in Commercial Services |
• | 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 IR Transport and IP Metro Junction), which includes increases in the bandwidth capacity of international internet gateway, internet multiflexing (IMUX) system for internet and data access, internet value added service in commercial services such as B2B e-commerce access, broadband access (Speedy), NGN platform services and broadband contents and applications; and | |
• | investing in service-net, including the establishment of fixed wireless services, e-commerce, internet connectivity and value added services. |
Planned Investments in Supporting Services |
• | investments in information systems to improve and increase the capability of the IT support system, billing systems, operating support system (“OSS”), customer care and billing system (“CCBS”); | |
• | buildings (for operations and equipment) and power supply; and | |
• | other supporting facilities such as network measurement tools, research and development, training equipment, and office facilities. |
Other Financing Techniques |
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Revenue Sharing |
Pay as You Grow |
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Allowances for Doubtful Accounts |
Carrying Amount of Property, Plant and Equipment and Goodwill and Other Intangible Assets |
Pension and Post-retirement Benefits |
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1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
Effect on total of service and interest cost components | 174,413 | (137,032 | ) | |||||
Effect on post-retirement benefit obligation | 1,342,138 | (1,058,800 | ) |
Income Taxes |
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Legal Contingencies |
• | upgrading of the network with soft switching technology; | |
• | development of broadband access network; | |
• | increasing relative contribution of Telkomsel to our consolidated revenues; | |
• | 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; | |
• | development of triple play, application and content multimedia services; | |
• | the acquisition of KSO VII; | |
• | competition in the market for TELKOM’s international services; | |
• | expansion of TELKOM’s international services; |
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• | fixed wireless development and deployment; | |
• | development of the flexi business unit; | |
• | implementation of competence-based human resource management; and | |
• | implementation of integrated customer centric application. |
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) | 688.0 | 688.0 | — | — | — | ||||||||||||||||
Long-Term Debts(2)(6) | 10,095.6 | 3,600.8 | 3,020.1 | 1,083.8 | 2,390.9 | ||||||||||||||||
Capital Lease Obligations(3) | 436.5 | 73.4 | 146.9 | 146.9 | 69.3 | ||||||||||||||||
Interest on Short-term Loans, Long-term Debts and Capital Lease Obligations | 3,906.5 | 1,271.8 | 1,375.2 | 547.6 | 711.9 | ||||||||||||||||
Operating Leases(4) | 1,769.1 | 483.6 | 807.9 | 313.6 | 164.0 | ||||||||||||||||
Unconditional Purchase Obligations(5) | 12,585.6 | 12,585.6 | — | — | — | ||||||||||||||||
Deferred consideration for business combination | 5,591.7 | 1,472.4 | 2,753.1 | 1,366.2 | — | ||||||||||||||||
Total | 35,073.0 | 20,175.6 | 8,103.2 | 3,458.1 | 3,336.1 | ||||||||||||||||
(1) | Related to liabilities under short term loans obtained from Bank Central Asia, Bank Mandiri, and Bank BNI. See Note 20 to the consolidated financial statements. |
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(2) | See “— Liquidity and Capital Resources — Indebtedness” above and Notes 21, 22, 23, and 24 to the consolidated financial statements. |
(3) | Related to the leases of the repeaters used for TELKOM’s telecommunication networks for TELKOMFlexi. |
(4) | Related primarily to leases of towers, computers, vehicles, land, buildings, office equipment and circuits. |
(5) | Related to commitments of TELKOM to suppliers and vendors for the purchase of telecommunications-related equipment and infrastructure. |
(6) | Excluded contractually committed rate of interest. |
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Age as of | ||||||||
Name | January 1, 2007 | Title | Since | |||||
Tanri Abeng | 64 | President Commissioner | March 10, 2004 | |||||
P. Sartono | 62 | Independent Commissioner | June 21, 2002 | |||||
Arif Arryman | 50 | Independent Commissioner | June 21, 2002 | |||||
Anggito Abimanyu | 43 | Commissioner | March 10, 2004 | |||||
Gatot Trihargo | 46 | Commissioner | March 10, 2004 |
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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, 2007 | Title | Since | |||||
Arwin Rasyid | 49 | 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 | 45 | Director of Enterprise & Wholesale | June 24, 2005 | |||||
Abdul Haris | 51 | Director of Network & Solution | March 10, 2004 | |||||
John Welly | 52 | Director of Human Resources | June 24, 2005 | |||||
Guntur Siregar | 55 | Director of Consumer | June 24, 2005 |
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Age as of | ||||||||
Name | February 28, 2007 | Title | Since | |||||
Rinaldi Firmansyah | 46 | President Director | February 28, 2007 | |||||
Sudiro Asno | 49 | Director of Finance | February 28, 2007 | |||||
Faisal Syam | 51 | Director of Human Capital & General Affairs | February 28, 2007 | |||||
I Nyoman G Wiryanata | 47 | Director of Network & Solution | February 28, 2007 | |||||
Ermady Dahlan | 53 | Director of Consumer | February 28, 2007 | |||||
Arief Yahya | 45 | Director of Enterprise & Wholesale | June 24, 2005 | |||||
Prasetio | 46 | Director of Compliance & Risk Management | February 28, 2007 | |||||
Indra Utoyo | 44 | Director of Information Technology & Supply | February 28, 2007 |
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TELKOM as at | TELKOM’s subsidiaries as at | |||||||
December 31, 2006 | December 31, 2006 | |||||||
Senior management | 169 | 167 | ||||||
Middle management | 2,331 | 529 | ||||||
Supervisors | 9,832 | 602 | ||||||
Others | 15,326 | 5,065 | ||||||
Total | 27,658 | 6,363 | ||||||
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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.) | 1,756,681,581 | 8.71% | |||||||
Series B | The Bank of New York (BoNY) | 1,487,512,256 | 7.38% | |||||||
Series B | Board of Directors and | 56,624 | <0.01% | |||||||
Commissioners |
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Government as Shareholder |
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Government as Regulator |
Government as Lender |
Government as Customer |
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Proportion of securities of TELKOM held in Indonesia and outside Indonesia |
Change in Control |
Government of the Republic of Indonesia |
Indosat |
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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 MoC of the Republic of Indonesia; | |
• | The Company has also entered into an interconnection agreement between the Company’s PSTN network and Indosat’s cellular network in connection with the implementation of Indosat Multimedia Mobile services and the settlement of the related interconnection rights and obligations; 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 through year-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; | |
• | Billing for international calls made by Telkomsel’s customers of GSM mobile cellular telecommunication is handled by Telkomsel. Telkomsel is obliged to pay Indosat’s share of revenue regardless of whether billing to customers has 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. |
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Agreement on Construction and Maintenance for the Jakarta-Surabaya Cable System (“J-S Cable System”) |
Indefeasible Right of Use Agreement |
Interconnection Revenues |
Leased Lines |
Satellite Transponder Lease |
Data communication network |
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Agreement with Government agencies and associated companies |
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Commissions for Business Competition Watch (Komisi Pengawas Persaingan Usaha) (“KPPU”) |
The Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan Republik Indonesia) (“BPK-RI”) |
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Price per Share* | |||||||||
Calendar Year | High | Low | |||||||
(In Rupiah) | |||||||||
2002 | 4,725 | 2,350 | |||||||
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 | 6,750 | 3,225 | |||||||
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 | 5,200 | 3,300 | |||||||
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 | 6,150 | 4,175 | |||||||
First Quarter | 5,125 | 4,300 | |||||||
Second Quarter | 5,350 | 4,175 | |||||||
Third Quarter | 5,800 | 4,775 | |||||||
Fourth Quarter | 6,150 | 4,925 | |||||||
2006 | 10,550 | 5,950 | |||||||
First Quarter | 7,000 | 5,950 | |||||||
Second Quarter | 8,400 | 6,750 | |||||||
Third Quarter | 8,450 | 7,100 | |||||||
Fourth Quarter | 10,550 | 8,200 | |||||||
October | 8,450 | 8,200 | |||||||
November | 10,000 | 8,500 | |||||||
December | 10,550 | 9,700 | |||||||
2007 | |||||||||
January | 10,350 | 9,450 | |||||||
February | 9,700 | 8,900 | |||||||
March | 9,850 | 9,000 | |||||||
April | 10,800 | 9,900 |
* | 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) | ||||||||||||||||
2002 | 9.77 | 5.56 | 9.83 | 5.28 | |||||||||||||
First Quarter | 8.60 | 5.56 | 8.58 | 5.48 | |||||||||||||
Second Quarter | 9.77 | 8.40 | 9.83 | 8.45 | |||||||||||||
Third Quarter | 8.70 | 7.00 | 8.70 | 7.13 | |||||||||||||
Fourth Quarter | 8.93 | 5.62 | 8.88 | 5.28 | |||||||||||||
2003 | 16.42 | 7.30 | 16.05 | 7.27 | |||||||||||||
First Quarter | 8.44 | 7.30 | 8.53 | 7.27 | |||||||||||||
Second Quarter | 12.09 | 8.19 | 11.78 | 8.33 | |||||||||||||
Third Quarter | 13.73 | 9.85 | 13.90 | 9.60 | |||||||||||||
Fourth Quarter | 16.42 | 13.13 | 16.05 | 13.40 | |||||||||||||
2004 | 23.33 | 14.13 | 23.21 | 14.08 | |||||||||||||
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 | 25.50 | 16.85 | 29.76 | 16.88 | |||||||||||||
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 | |||||||||||||
2006 | 46.68 | 24.65 | 46.70 | 23.78 | |||||||||||||
First Quarter | 31.51 | 24.65 | 31.38 | 23.78 | |||||||||||||
Second Quarter | 38.28 | 27.95 | 38.35 | 27.90 | |||||||||||||
Third Quarter | 36.56 | 30.32 | 36.15 | 30.08 | |||||||||||||
Fourth Quarter | 46.68 | 35.64 | 46.69 | 36.00 | |||||||||||||
October | 37.13 | 35.64 | 37.07 | 36.00 | |||||||||||||
November | 43.96 | 37.00 | 43.66 | 36.10 | |||||||||||||
December | 46.68 | 42.93 | 46.70 | 42.64 | |||||||||||||
2007 | |||||||||||||||||
January | 46.98 | 41.94 | 46.82 | 41.95 | |||||||||||||
February | 43.31 | 37.74 | 42.90 | 39.46 | |||||||||||||
March | 43.55 | 37.90 | 43.05 | 39.30 | |||||||||||||
April | 47.02 | 44.03 | 47.15 | 42.91 |
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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; | |
• | voting rights. The holder of each voting share is entitled to one vote at a general meeting of stockholders; | |
• | rights to share in the Company’s profits. See dividend rights; | |
• | rights to share in any surplus in the event of liquidation. Stockholders are entitled to surplus in the event of liquidation in accordance with their proportion of shareholding, provided the nominal value of the Common Stock that they hold is fully paid-up; |
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• | redemption provisions. There are no stock redemption provisions in the Articles. However, based on Article 30 of Indonesian Company Law, TELKOM may buy back at the maximum 10% of its issued shares; | |
• | reserved fund provisions. Retained earnings up to a minimum of 20% of the issued capital of the Company is to be set aside to cover potential losses suffered by the Company. If the amount in the reserved fund exceeds 20% of the issued capital of the Company, general meeting of stockholders may authorize the Company to utilize such excess funds as dividends; | |
• | liability to further capital calls. Stockholders of the Company may be asked to subscribe for new shares in the Company from time to time. Such right is to be offered to stockholders prior to being offered to third parties and may be transferred at the option of the shareholder. The Board of Directors of the Company is authorized to offer the new shares to third parties in the event that the existing shareholder is unable or unwilling to subscribe for such new shares; and | |
• | provisions discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares. The Articles do not contain any such provision. |
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Overview of Indonesian law |
Composition of Board of Directors; Independence |
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Committees |
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Disclosure regarding corporate governance |
Code of Business Conduct and Ethics |
• | Joint Planning and Process Agreement; | |
• | Equipment Supply Agreement (“ESA”); | |
• | Technical Services Agreement (“TSA”); and | |
• | Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”). |
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E. | Taxation |
Dividends |
Capital Gains |
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Stamp Duty |
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Threshold PFIC Classification Matters |
Dividends |
Sale or Other Disposition of ADSs or Common Stock |
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Passive Foreign Investment Company Considerations |
F. | Dividends and paying agents |
G. | Statement by experts |
H. | Documents on display |
I. | Subsidiary Information |
A. | Disclosure About Market Risk |
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Interest Rate Risk |
Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||||||
December 31, 2006 | Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | 2012- | Fair | ||||||||||||||||||||||||||||||||||||||
Currency | Equiv. | Rate | 2007 | 2008 | 2009 | 2010 | 2011 | 2024 | Value | ||||||||||||||||||||||||||||||||
(in million) | (Rp. in | (%) | (Rp. in | ||||||||||||||||||||||||||||||||||||||
million) | (Rp. in million) | million) | |||||||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||||||||||||||
Time deposit | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 5,601,885 | 5,601,885 | — | — | — | — | — | 5,601,885 | |||||||||||||||||||||||||||||||||
Interest | 9.96 | ||||||||||||||||||||||||||||||||||||||||
US Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 152.33 | 1,370,251 | 1,370,251 | — | — | — | — | — | 1,370,251 | ||||||||||||||||||||||||||||||||
Interest | 3.75 | ||||||||||||||||||||||||||||||||||||||||
Euro | |||||||||||||||||||||||||||||||||||||||||
Principal | 68.97 | 816,498 | 816,498 | — | — | — | — | — | 816,498 | ||||||||||||||||||||||||||||||||
Interest | 2.90 | ||||||||||||||||||||||||||||||||||||||||
Temporary Investments — Available-for-Sale Securities | |||||||||||||||||||||||||||||||||||||||||
Rupiah | 47,036 | 47,036 | — | — | — | — | — | 47,036 | |||||||||||||||||||||||||||||||||
US Dollar | 3.98 | 37,456 | 37,456 | 37,456 |
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Outstanding Balance as at | |||||||||||||||||||||||||||||||||||||||||
December 31, 2006 | Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||
Foreign | Rp. | 2012- | Fair | ||||||||||||||||||||||||||||||||||||||
Currency | Equiv. | Rate | 2007 | 2008 | 2009 | 2010 | 2011 | 2024 | Value | ||||||||||||||||||||||||||||||||
(in million) | (Rp. in | (%) | (Rp. in | ||||||||||||||||||||||||||||||||||||||
million) | (Rp. in million) | million) | |||||||||||||||||||||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||||||||||||||||||
Short-term bank loans | |||||||||||||||||||||||||||||||||||||||||
Variable Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 666,667 | 666,667 | — | — | — | — | — | 668,814 | |||||||||||||||||||||||||||||||||
Interest | 29,634 | 11.93 | 29,634 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 21,323 | 21,323 | — | — | — | — | — | 21,465 | |||||||||||||||||||||||||||||||||
Interest | 482 | 15.58 | 482 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Long-term debts(1) | |||||||||||||||||||||||||||||||||||||||||
Variable Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 4,153,501 | 1,249,265 | 1,189,326 | 690,831 | 167,431 | 140,028 | 716,620 | 4,140,064 | |||||||||||||||||||||||||||||||||
Interest | 1,504,790 | 12.31 | 446,991 | 303,419 | 161,409 | 110,983 | 93,934 | 388,054 | |||||||||||||||||||||||||||||||||
US Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 138.87 | 1,250,551 | 168,306 | 168,306 | 130,563 | 130,563 | 130,563 | 522,250 | 1,160,573 | ||||||||||||||||||||||||||||||||
Interest | 367,386 | 6.45 | 77,914 | 67,414 | 57,091 | 48,630 | 40,170 | 76,167 | |||||||||||||||||||||||||||||||||
Fixed Rate | |||||||||||||||||||||||||||||||||||||||||
Rupiah | |||||||||||||||||||||||||||||||||||||||||
Principal | 3,419,545 | 1,880,329 | 395,166 | 456,356 | 527,573 | 97,099 | 63,022 | 3,321,134 | |||||||||||||||||||||||||||||||||
Interest | 879,984 | 16.59 | 393,218 | 221,288 | 159,846 | 78,444 | 20,869 | 6,319 | |||||||||||||||||||||||||||||||||
US Dollar | |||||||||||||||||||||||||||||||||||||||||
Principal | 527.69 | 4,752,224 | 1,118,000 | 1,099,123 | 975,839 | 955,420 | 207,214 | 396,628 | 4,528,704 | ||||||||||||||||||||||||||||||||
Interest | 808,732 | 6.56 | 278,787 | 205,585 | 137,971 | 70,517 | 32,666 | 83,206 | |||||||||||||||||||||||||||||||||
Japanese Yen | |||||||||||||||||||||||||||||||||||||||||
Principal | 14,384.68 | 1,088,631 | 86,496 | 72,305 | 58,114 | 58,114 | 58,114 | 755,488 | 1,014,345 | ||||||||||||||||||||||||||||||||
Interest | 301,476 | 3.10 | 33,108 | 30,484 | 28,371 | 26,569 | 24,768 | 158,176 | |||||||||||||||||||||||||||||||||
Euro | |||||||||||||||||||||||||||||||||||||||||
Principal | 22.01 | 260,994 | 173,996 | 86,998 | — | — | — | — | 253,406 | ||||||||||||||||||||||||||||||||
Interest | 13,969 | 4.02 | 11,643 | 2,326 | — | — | — | — |
(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. |
Exchange Rate Risk |
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Outstanding Balance as | ||||||||||||||||||||||||||||||||||||
at December 31, 2006 | Expected Maturity Date | |||||||||||||||||||||||||||||||||||
Foreign | Rp. | Fair | ||||||||||||||||||||||||||||||||||
Currency | Equiv. | 2007 | 2008 | 2009 | 2010 | 2011 | 2012-2024 | Value | ||||||||||||||||||||||||||||
(in | (Rp. in | (Rp. in | ||||||||||||||||||||||||||||||||||
million) | million) | (Rp. in million) | million) | |||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||||||
US Dollar | 159.59 | 1,443,160 | 1,443,160 | — | — | — | — | — | 1,443,160 | |||||||||||||||||||||||||||
Japanese Yen | 1.95 | 148 | 148 | — | — | — | — | — | 148 | |||||||||||||||||||||||||||
Euro | 71.30 | 845,448 | 845,448 | — | — | — | — | — | 845,448 | |||||||||||||||||||||||||||
Temporary Investment | ||||||||||||||||||||||||||||||||||||
US Dollar | 3.98 | 37,446 | 37,456 | 37,456 | ||||||||||||||||||||||||||||||||
Trade accounts receivable | ||||||||||||||||||||||||||||||||||||
US Dollar | 41.03 | 368,747 | 368,747 | — | — | — | — | — | 368,747 | |||||||||||||||||||||||||||
Other accounts receivable | ||||||||||||||||||||||||||||||||||||
US Dollar | 0.56 | 5,077 | 5,077 | — | — | — | — | — | 5,077 | |||||||||||||||||||||||||||
Euro | 0.03 | 402 | 402 | — | — | — | — | — | 402 | |||||||||||||||||||||||||||
Great Britain Pound Sterling | — | 37 | 37 | — | — | — | — | — | 37 | |||||||||||||||||||||||||||
Other current assets | ||||||||||||||||||||||||||||||||||||
US Dollar | 0.1 | 937 | 937 | — | — | — | — | — | 937 | |||||||||||||||||||||||||||
Advances and other non-current assets | ||||||||||||||||||||||||||||||||||||
US Dollar | 3.59 | 32,314 | 32,314 | — | — | — | — | — | 32,314 | |||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||
Trade accounts payable | ||||||||||||||||||||||||||||||||||||
Related parties | ||||||||||||||||||||||||||||||||||||
US Dollar | 0.28 | 2,501 | 2,501 | — | — | — | — | — | 2,501 | |||||||||||||||||||||||||||
Singapore Dollar | — | 20 | 20 | — | — | — | — | — | 20 | |||||||||||||||||||||||||||
Third parties | ||||||||||||||||||||||||||||||||||||
US Dollar | 28.58 | 257,495 | 257,495 | — | — | — | — | — | 257,495 | |||||||||||||||||||||||||||
Euro | 1.55 | 18,377 | 18,377 | — | — | — | — | — | 18,377 | |||||||||||||||||||||||||||
Great Britain Pound Sterling | 0.04 | 630 | 630 | — | — | — | — | — | 630 | |||||||||||||||||||||||||||
MYR | — | 12 | 12 | — | — | — | — | — | 12 | |||||||||||||||||||||||||||
Singapore Dollar | 0.41 | 2,411 | 2,411 | — | — | — | — | — | 2,411 | |||||||||||||||||||||||||||
Other Account Payable | ||||||||||||||||||||||||||||||||||||
US Dollar | 0.06 | 573 | 573 | — | — | — | — | — | 573 | |||||||||||||||||||||||||||
Great Britain Pound Sterling | — | 2 | 2 | — | — | — | — | — | 2 | |||||||||||||||||||||||||||
Accrued expenses | ||||||||||||||||||||||||||||||||||||
US Dollar | 199.18 | 1,793,609 | 1,793,609 | — | — | — | — | — | 1,793,609 | |||||||||||||||||||||||||||
Japanese Yen | 74.13 | 5,610 | 5,610 | — | — | — | — | — | 5,610 | |||||||||||||||||||||||||||
Singapore Dollar | 0.35 | 2,039 | 2,039 | — | — | — | — | — | 2,039 | |||||||||||||||||||||||||||
Euro | 104.61 | 1,239,946 | 1,239,946 | — | — | — | — | — | 1,239,946 | |||||||||||||||||||||||||||
Long-term debts(1) | ||||||||||||||||||||||||||||||||||||
US Dollar | 666.56 | 6,002,773 | 1,286,306 | 1,267,429 | 1,106,401 | 1,085,982 | 337,776 | 918,878 | 5,689,277 | |||||||||||||||||||||||||||
Japanese Yen | 14,384.68 | 1,088,632 | 86,496 | 72,305 | 58,114 | 58,114 | 58,114 | 755,488 | 1,014,345 | |||||||||||||||||||||||||||
Euro | 22.01 | 260,994 | 173,996 | 86,998 | — | — | — | 253,406 |
(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. |
Equity Price Risk |
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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. | CONTROLS AND PROCEDURES |
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1. | The Company did not have an effective control environment based on the COSO criteria. The following material weaknesses related to the Company’s control environment were identified: |
• | The Company did not adequately design and maintain effective controls over the assignment of authority and responsibility with respect to its internal control over financial reporting and the necessary lines of communication throughout the organization. Specifically, certain key members of management had inappropriate access to the Company’s financial application systems and related data with the ability to effect accounting entries within such systems without adequate mechanisms for identifying and evaluating the results of any such actions. | |
• | The Company did not adequately design and maintain effective information technology policies, including those related to security and access to its financial application programs and data. Specifically, the Company had inadequate controls to identify and monitor conflicting user roles (i.e., segregation of duties) and lacked independent monitoring of access by employees to its financial application systems and data. | |
• | The Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of applicable generally accepted accounting principles commensurate with the Company’s financial reporting requirements. | |
• | The Company did not adequately perform a risk assessment to identify risks so as to ensure that it adequately designed and implemented effective controls that would prevent and detect material misstatements to its financial statements. |
These control environment material weaknesses contributed to the existence of the additional material weaknesses below. |
2. | The Company did not maintain effective controls, including monitoring, over its financial close and reporting process. Specifically, the Company did not maintain effective controls over the completeness and accuracy of its financial consolidation and disclosure process including matters relating to: the disclosure of fixed assets and accounting for business combinations. In addition, controls related to the accuracy of financial statement preparation and disclosures relating to consolidated statements of cash flows, segment information and the acquisition of a joint operation were not operating effectively. |
3. | The Company did not adequately design and maintain effective controls over its accounting for property, plant and equipment. Specifically, the Company’s controls were not adequately designed or operating effectively to ensure the completeness, accuracy and valuation of its fixed assets, including related additions and dispositions/retirements. |
4. | The Company did not design and maintain effective controls over its accounting for revenue and related accounts receivable. Specifically, the Company’s controls were not designed and operating effectively to ensure the completeness and accuracy of leased line revenue and provisions for uncollectible balances. In addition, the controls to ensure the completeness and accuracy of fixed line and fixed wireless revenue and collections were not operating effectively. |
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• | Form a Remediation Committee, under the coordination of the Compliance and Risk Management Director; comprised of key members of management from a variety of functions across the organization, this committee will monitor, oversee implementation and regularly report to the Board of Directors and Audit Committee on the progress of our remediation activities; | |
• | Perform a full evaluation of the assignment of authority and responsibility with respect to the Company’s internal control over financial reporting and the necessary lines of communication throughout the organization; |
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• | Commence a comprehensive review of access privileges granted to all personnel to ensure access is commensurate with their respective roles and responsibilities; | |
• | Review the design of the information technology policies and procedures, including those relating to security and access to the Company’s application programs and data; | |
• | Continue to maintain and enhance the quality of staff in accounting and finance, through a structured training and development program and by engaging with a qualified external consultant; | |
• | Develop an enterprise risk management system under the coordination of the Compliance & Risk Management Director; | |
• | Perform a comprehensive review of the existing monitoring and supervision procedures of the financial close and reporting process; | |
• | Review the design of and implement enhanced controls over the accounting for property, plant and equipment; and | |
• | Design and implement controls to ensure the completeness and accuracy of TELKOM’s leased line revenue, provision for uncollectible balances and fixed line and fixed wireless revenues and collections. |
ITEM 16. | RESERVED |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. | CODE OF ETHICS |
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ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Year Ended | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
(KPMG) | (PwC) | |||||||
(in Rp. million) | ||||||||
Audit Fees | 42,390.3 | 55,558.0 | ||||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — |
A. | Audit Fees |
B. | Audit-Related Fees |
C. | Tax Fees |
D. | All Other Fees |
E. | Audit Committee Pre-Approval Policies and Procedures |
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ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
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ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Total Number of | Total Number of Shares | Maximum Number of Shares | ||||||||||||||
Shares | Average Price Paid | Purchased as Part of | that May Yet Be Purchased | |||||||||||||
Period (2006) | Purchased | per Share in Rp. | Publicly Announced Plans(1) | Under the Plans(2) | ||||||||||||
January | — | — | — | 1,007,999,964 | ||||||||||||
February | — | — | — | 1,007,999,964 | ||||||||||||
March | — | — | — | 1,007,999,964 | ||||||||||||
April | — | — | — | 1,007,999,964 | ||||||||||||
May | 8,373,500 | 7,332.40 | 8,373,500 | 999,626,464 | ||||||||||||
June | 47,070,000 | 7,064.26 | 55,443,500 | 952,556,464 | ||||||||||||
July | 21,925,000 | 7,235.40 | 77,368,500 | 930,631,464 | ||||||||||||
August | 5,668,000 | 7,935.67 | 83,036,500 | 924,963,464 | ||||||||||||
September | 1,750,000 | 7,803.90 | 84,786,500 | 923,213,464 | ||||||||||||
October | — | — | 84,786,500 | 923,213,464 | ||||||||||||
November | 4,820,000 | 9,902.79 | 89,606,500 | 918,393,464 | ||||||||||||
December | 28,770,000 | 10,194.30 | 118,376,500 | 889,623,464 | ||||||||||||
TOTAL | 118,376,500 | 8,043.87 | 118,376,500 | 889,623,464 |
(1) | Represents Series B Shares repurchased pursuant to TELKOM’s share repurchase plan approved at TELKOM’s Extraordinary General Meeting of Shareholders on December 21, 2005. Under the share repurchase program, TELKOM may repurchase up to a maximum of 5% of issued and outstanding Series B Shares for a total repurchase amount not exceeding Rp.5.25 trillion, in accordance with the rules and regulations of the BAPEPAM and the stock exchanges on which TELKOM’s Common Stock and ADSs are trading, as well as other applicable regulatory bodies. Such repurchases are intended to be made from time to time over the eighteen month period following the announcement. Repurchases may be made at the discretion of the Company’s management through purchases of shares on the Jakarta and Surabaya Stock Exchanges, purchases of shares in ADS form on the New York Stock Exchange, off-exchange transactions and agreements, or any other legal means the Company deems appropriate. For further information on the share repurchase, see Item 7. “Major Stockholders and Related Party Transactions — A. Major Stockholders.” |
(2) | Represents a maximum of 1,007,999,964 Series B Shares (equivalent to 5% of issued and outstanding Series B Shares) initially available for repurchase under TELKOM’s share repurchase plan. |
ITEM 17. | CONSOLIDATED FINANCIAL STATEMENTS |
ITEM 18. | CONSOLIDATED FINANCIAL STATEMENTS |
ITEM 19. | EXHIBITS |
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4.1* | Settlement Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | |
4.2* | Credit Agreement between TELKOM and the AriaWest lenders, dated July 31, 2003. | |
4.3* | First Amendment to the Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated July 31, 2003. | |
4.4* | Conditional Sale and Purchase Agreement between TELKOM and the shareholders of AriaWest, dated May 8, 2002. | |
4.5* | Conditional Sale and Purchase Agreement between TELKOM and the shareholders of Pramindo, dated April 19, 2002. | |
4.6* | Cooperation Agreement on the Interconnection between TELKOM’s Fixed Network and Indosat’s Local Fixed Network and the Settlement of the Interconnection Financial Rights and Obligations between TELKOM and Indosat, dated September 3, 2002, including an English translation thereof. | |
4.7** | 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** | Agreement on Launch Services of TELKOM-2 Satellite between TELKOM and Arianespace S.A., dated November 8, 2002. | |
4.10* | Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2003. | |
4.11* | Amendment No. 1 to the Master Procurement Partnership Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 31, 2003. | |
4.12* | Service Level Agreement between TELKOM and a consortium led by Samsung Electronics, dated December 23, 2002. | |
4.13* | Loan Agreement between TELKOM and The Export-Import Bank of Korea, dated August 27, 2003. | |
4.14* | Master Procurement Partnership Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. | |
4.15* | Service Level Agreement between TELKOM and a consortium led by Ericsson, dated December 23, 2002. | |
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 Division-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 Division VII Area between TELKOM and PT Bukaka Singtel (BSI) International, dated January 14, 2003. | |
4.21* | Amendment No. 1 to the Development Contract PSTN Excellence Regional Junction Division-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 Division-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 Division-II between TELKOM and the Olex-Lucent-Brimbun consortium, dated December 20, 2002. |
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4.24* | Amendment No. 4 to the Development Contract PSTN Excellence Regional Junction Division-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 Division-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 Division-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 Division-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 Sumatra, dated June 12, 2003. | |
4.32* | Amendment No. 1 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated September 27, 2002. | |
4.33* | Amendment No. 2 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated December 30, 2002. | |
4.34+ | Amendment No. 3 to the Partnership Agreement for the Development of a PSTN Regional Junction for Regional Division V (East Java), dated December 11, 2003. | |
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 8 July 2005. |
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4.47++++ | Interconnection Agreements between TELKOM and Indosat, dated September 23, 2005 and December 1, 2005 (English Summary). | |
4.48# | Second Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated 31 March 2004. | |
4.49# | Third Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated 29 October 2004. | |
4.50# | Fourth Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated 21 February 2005. | |
4.51# | Fifth Amendment to Contract on Procurement of TELKOM-2 Satellite between TELKOM and Orbital Sciences Corporation, dated 30 August 2005. | |
4.52# | First Amendment To Supply Contract For The Procurement and Installation of Ring Jasuka Backbone between TELKOM and NEC-Siemens Consortium, dated 6 February 2006. | |
4.53# | Second Amendment of the Supply Contract for the Procurement and Installation of Ring JASUKA Backbone between TELKOM and NEC-Siemens Consortium, dated 16 March 2006. | |
4.54# | Third Amendment of the Supply Contract for the Procurement and Installation of Ring JASUKA Backbone between TELKOM and NEC-Siemens Consortium, dated 7 February 2007. | |
4.55# | Amended and Restated KSO7 Agreement, between TELKOM and PT Bukaka Singtel International, dated 19 October 2006. | |
4.56# | First Amendment of Supply Contract for Tanjung Pandan — Pontianak Capacity Expansion between TELKOM and NEC Corporation, dated 12 January 2006. | |
4.57# | Supply Agreement for Surabaya — Ujung Pandang — Banjarmasin (SUB) Capacity Expansion between TELKOM and NEC Corporation, dated 16 August 2006. | |
4.58# | First Amendment to Supply Contract for Surabaya — Ujung Pandang — Banjarmasin (SUB) Capacity Expansion between TELKOM and NEC Corporation, dated 29 December 2006. | |
4.59# | Second Amendment to Supply Contract for Surabaya — Ujung Pandang — Banjarmasin (SUB) Capacity Expansion between TELKOM and NEC Corporation, dated 26 January 2007. | |
4.60# | Third Amendment to Supply Contract for Surabaya — Ujung Pandang — Banjarmasin (SUB) Capacity Expansion between TELKOM and NEC Corporation, dated 21 February 2007. | |
4.61# | Fourth Amendment to Supply Contract for Surabaya — Ujung Pandang — Banjarmasin (SUB) Capacity Expansion between TELKOM and NEC Corporation, dated 12 March 2007. | |
4.62# | Procurement and Installation Agreement For Ring JDCS Project (JEMBER DENPASAR Cable System) between TELKOM and ZTE Consortium, dated 29 December 2006. | |
4.63# | First Amendment of Procurement and Establishment of Regional Metro Junction and Optical Access Network for Regional Division-III between TELKOM and PT Industri Telekomunikasi Indonesia (INTI), dated 31 May 2004. | |
4.64# | Second Amendment of Procurement and Establishment of Regional Metro Junction and Optical Access Network for Regional Division-III between TELKOM and PT Industri Telekomunikasi Indonesia (INTI), dated 4 September 2006. | |
4.65# | Third Amendment of Procurement and Establishment of Regional Metro Junction and Optical Access Network for Regional Division-III between TELKOM and PT Industri Telekomunikasi Indonesia (INTI), dated 27 November 2006. | |
4.66# | Partnership Agreement for FWA CDMA Expansion Project NSS, BSS and PDN System in DIVRE I and DIVRE IV between TELKOM and Huawei Consortium, dated 6 January 2006. | |
4.67# | Agreement for Procurement and Installation on the CDMA 2000-IX Equipment in Division Regional V East Java between TELKOM and Samsung Consortium dated 8 June 2006. | |
4.68# | First Amendment to Agreement for Procurement and Installation on CDMA 2000-IX Equipment in Divre V East Java between TELKOM and Samsung Consortium, dated 1 August 2006. | |
4.69# | Second Amendment to Agreement for Procurement and Installation on CDMA 2000-IX Equipment in Divre V East Java between TELKOM and Samsung Consortium, dated 18 December 2006. |
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4.70# | Procurement and Installation Agreement of MSOAN Package III Divre-I Sumatera between TELKOM and PT Industri Telekomunikasi Indonesia (INTI), dated 29 June 2006. | |
4.71# | First Amendment to the Procurement and Installation Agreement of MSOAN Package III Divre-I Sumatera between TELKOM and PT Industri Telekomunikasi Indonesia (INTI), dated 29 December 2006. | |
4.72# | Procurement and Installation Agreement of OSP for Regional Metro Junction (RMJ) Banda Aceh — Sigli Divre I Sumatera between TELKOM and PT Telekomindo Primakarya, dated 3 July 2006. | |
4.73# | Procurement and Installation Agreement of Digital Micro Wave Radio (“GMD Radio”) for Regional Metro Junction (RMJ) Package II Java and Kalimantan, between TELKOM and PT Fujitsu Indonesia dated 3 July 2006. | |
4.74# | Procurement and Installation Agreement of MSOAN Divre II year 2005 Phase II Location Divre II between TELKOM and ZTE — Temasindo Consortium 6 October 2005. | |
4.75# | First Amendment to Procurement and Installation Agreement of MSOAN Divre II year 2005 Phase II Location Divre II between TELKOM and ZTE — Temasindo Consortium dated 30 December 2005. | |
4.76# | Second Amendment to Procurement and Installation Agreement of MSOAN Divre II year 2005 Phase II Location Divre II between TELKOM and ZTE — Temasindo Consortium dated 15 September 2006. | |
4.77# | Procurement and Installation Agreement on IP Core Backbone Expansion Package-1 between TELKOM and PT Siemens Indonesia, dated 26 September 2006. | |
4.78# | Procurement and Installation Agreement on Expansion of Interface VS.2, E1 Circuit, E1 PRA, CCS#7P, Clip and Enhancement of PSTN Central EWSD between TELKOM and PT Siemens Indonesia, dated 27 September 2006. | |
4.79# | Procurement and Installation Agreement for FWA CDMA Expansion Project NSS, BSS and PDN System in Divre V between TELKOM and Samsung Consortium dated 13 October 2006. | |
4.80# | Agreement for Procurement and Installation for FWA CDMA Expansion Project NSS, BSS and PDN Systems in Divre VI between TELKOM and ZTE Consortium, dated 28 November 2006. | |
4.81# | Procurement and Installation Agreement on Expansion of Interface VS.2, E1 Circuit, E1 PRA, CCS#7P, Clip and Enhancement of PSTN Central 5ESS between TELKOM and PT Lintas Teknologi Indonesia, dated 29 November 2006. | |
4.82# | Procurement and Installation Agreement on Expansion of Interface VS.2, E1 Circuit, E1 PRA, CCS#7P, Clip and Enhancement of PSTN Central NEAX between TELKOM and PT NEC Indonesia, dated 30 November 2006. | |
4.83# | Agreement for Procurement and Installation for Optical Access Network (OAN) Project Package-III between TELKOM and Huawei Consortium, dated 30 November 2006. | |
4.84# | Agreement for Procurement and Installation for FWA CDMA Expansion Project NSS, BSS and PDN Systems in Divre III between TELKOM and Huawei Consortium, dated 8 December 2006. | |
4.85# | Agreement for Procurement and Installation for FWA CDMA Expansion Project NSS, BSS and PDN Systems in Divre II between TELKOM and Huawei Consortium, dated 8 December 2006. | |
4.86# | Agreement for Procurement and Installation for Optical Access Network (OAN) Project Package-IV between TELKOM and Alcatel-INTI Consortium dated 18 December 2006. | |
4.87# | First Amendment to Procurement and Installation Agreement of MSOAN Divre I Sumatera Package I between TELKOM and PT Dharmala Kumala Utama, dated 28 December 2006. | |
4.88# | Procurement and Installation Agreement of MSOAN Aceh Area Divre I Sumatera between TELKOM and PT NEC Indonesia, dated 16 August 2006. | |
4.89# | First Amendment to Procurement and Installation Agreement of MSOAN Aceh Area Divre I Sumatera between TELKOM and PT NEC Indonesia, dated 29 December 2006. |
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4.90# | Agreement for Procurement and Installation for Secondary Cable Network Package I between TELKOM and Olex Cables Indonesia (OLEXINDO), dated 29 December 2006. | |
4.91# | Agreement for Procurement and Installation for Optical Access Network (OAN) Project Package-I (Divre I and Divre III) between TELKOM and Opnet — Olexindo Consortium, dated 29 December 2006. | |
4.92# | Agreement for Procurement and Installation for Optical Access Network (OAN) Project Package-II (DIVRE-II) between TELKOM and Opnet — Olexindo Consortium, dated 29 December 2006. | |
4.93# | Contract on the CDMA2000-1X Initial Purchase Order Between TELKOM and SAMSUNG Electronics Co., Ltd., dated 9 October 2002. | |
* | Filed with Amendment No. 2 to the Annual Report on 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. | |
+++ | Filed with original Annual Report on Form 20-F for the year ended December 31, 2005 filed June 23, 2006 and incorporated herein by reference. | |
++++ | Filed with Amendment No. 1 to the Annual Report on Form 20-F/A for the year ended December 31, 2005 filed June 29, 2006 and incorporated herein by reference. | |
# | Filed herewith. |
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PERUSAHAAN PERSEROAN (PERSERO) | |
P.T. TELEKOMUNIKASI INDONESIA Tbk. |
By: | /s/ Rinaldi Firmansyah |
Rinaldi Firmansyah | |
President Director |
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Page | ||||
Reports of Independent Registered Public Accounting Firms | F-2 | |||
Consolidated Financial Statements | ||||
1. Consolidated Balance Sheets | F-8 | |||
2. Consolidated Statements of Income | F-10 | |||
3. Consolidated Statements of Changes in Stockholders’ Equity | F-11 | |||
4. Consolidated Statements of Cash Flows | F-14 | |||
5. Notes to Consolidated Financial Statements | F-16 |
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F-2
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• | The Company did not adequately design and maintain effective controls over the assignment of authority and responsibility with respect to its internal control over financial reporting and the necessary lines of communication throughout the organization. Specifically, certain key members of management had inappropriate access to the Company’s financial application systems and related data with the ability to effect accounting entries within such systems without adequate mechanisms for identifying and evaluating the results of any such actions. | |
• | The Company did not adequately design and maintain effective information technology policies, including those related to security and access to its financial application programs and data. Specifically, the Company had inadequate controls to identify and monitor conflicting user roles (i.e., |
F-3
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segregation of duties) and lacked independent monitoring of access by employees to its financial application systems and data. | ||
• | The Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of applicable generally accepted accounting principles commensurate with the Company’s financial reporting requirements. | |
• | The Company did not adequately perform a risk assessment to identify risks so as to ensure that it adequately designed and implemented effective controls that would prevent and detect material misstatements to its financial statements. |
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F-5
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F-6
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F-7
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Notes | 2005 | 2006 | |||||||||||||||
Rp. | Rp. | US$ (Note 3) | |||||||||||||||
ASSETS | |||||||||||||||||
CURRENT ASSETS | |||||||||||||||||
Cash and cash equivalents | 2c,2f,6,46 | 5,374,684 | 8,315,836 | 923,982 | |||||||||||||
Temporary investments | 2c,2g,46 | 22,064 | 84,492 | 9,388 | |||||||||||||
Trade receivables | 2c,2h,7,46 | ||||||||||||||||
Related parties — net of allowance for doubtful accounts of Rp.84,275 million in 2005 and Rp.85,053 million in 2006 | 530,370 | 520,689 | 57,854 | ||||||||||||||
Third parties — net of allowance for doubtful accounts of Rp.601,393 million in 2005 and Rp.699,736 million in 2006 | 3,047,539 | 3,196,588 | 355,176 | ||||||||||||||
Other receivables — net of allowance for doubtful accounts of Rp.4,402 million in 2005 and Rp.1,685 million in 2006 | 2c,2h,46 | 153,247 | 147,735 | 16,415 | |||||||||||||
Inventories — net of allowance for obsolescence of Rp.48,347 million in 2005 and Rp.48,098 million in 2006 | 2i,8 | 220,327 | 213,329 | 23,703 | |||||||||||||
Prepaid expenses | 2c,2j,9,46 | 777,869 | 1,073,329 | 119,259 | |||||||||||||
Claim for tax refund | 40a | — | 359,582 | 39,954 | |||||||||||||
Prepaid taxes | 40b | 18,913 | 2,390 | 266 | |||||||||||||
Other current assets | 2c,10,46 | 159,537 | 6,822 | 758 | |||||||||||||
Total Current Assets | 10,304,550 | 13,920,792 | 1,546,755 | ||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||
Long-term investments — net | 2g,11 | 101,400 | 89,197 | 9,911 | |||||||||||||
Property, plant and equipment — net of accumulated depreciation of Rp.37,092,663 million in 2005 and Rp.45,043,380 million in 2006 | 2k,2l,12 | 45,643,243 | 54,267,060 | 6,029,673 | |||||||||||||
Property, plant and equipment under revenue-sharing arrangements — net of accumulated depreciation of Rp.458,234 million in 2005 and Rp.493,381 million in 2006 | 2m,13,49 | 549,405 | 965,632 | 107,292 | |||||||||||||
Prepaid pension benefit cost | 2r,43c | 640 | 103 | 11 | |||||||||||||
Advances and other non-current assets | 2c,2k,14,46 | 946,037 | 1,454,283 | 161,587 | |||||||||||||
Goodwill and other intangible assets — net of accumulated amortization of Rp.2,764,187 million in 2005 and Rp.3,708,590 million in 2006 | 2x,5,15 | 4,493,272 | 4,436,605 | 492,956 | |||||||||||||
Escrow accounts | 2c,16,46 | 132,497 | 2,073 | 230 | |||||||||||||
Total Non-current Assets | 51,866,494 | 61,214,953 | 6,801,660 | ||||||||||||||
TOTAL ASSETS | 62,171,044 | 75,135,745 | 8,348,415 | ||||||||||||||
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Notes | 2005 | 2006 | |||||||||||||||
Rp. | Rp. | US$ (Note 3) | |||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||
Trade payables | 2c,17,46 | ||||||||||||||||
Related parties | 1,014,389 | 1,116,496 | 124,055 | ||||||||||||||
Third parties | 4,281,285 | 5,801,457 | 644,606 | ||||||||||||||
Other payables | 6,677 | 9,219 | 1,024 | ||||||||||||||
Taxes payable | 2s,40c | 2,469,765 | 2,569,002 | 285,446 | |||||||||||||
Dividends payable | 3,276 | 1,380 | 153 | ||||||||||||||
Accrued expenses | 2c,18,46 | 1,521,247 | 3,475,698 | 386,189 | |||||||||||||
Unearned income | 19 | 1,592,718 | 2,037,772 | 226,419 | |||||||||||||
Advances from customers and suppliers | 223,086 | 161,262 | 17,918 | ||||||||||||||
Short-term bank loans | 2c,20,46 | 173,800 | 687,990 | 76,443 | |||||||||||||
Current maturities of long-term liabilities | 2c,21,46 | 2,226,925 | 4,675,409 | 519,490 | |||||||||||||
Total Current Liabilities | 13,513,168 | 20,535,685 | 2,281,743 | ||||||||||||||
NON-CURRENT LIABILITIES | |||||||||||||||||
Deferred tax liabilities — net | 2s,40g | 2,391,810 | 2,665,397 | 296,155 | |||||||||||||
Unearned income on revenue-sharing arrangements | 2m,13,49 | 425,484 | 817,174 | 90,797 | |||||||||||||
Unearned initial investor payments under joint operation scheme | 2n,48 | 7,311 | — | — | |||||||||||||
Accrued long service awards | 2c,2r,44,46 | 524,524 | 596,325 | 66,258 | |||||||||||||
Accrued post-retirement health care benefits | 2c,2r,45,46 | 3,048,021 | 2,945,728 | 327,303 | |||||||||||||
Accrued pension and other post-retirement benefits costs | 2r,43 | 1,330,664 | 1,070,622 | 118,958 | |||||||||||||
Long-term liabilities — net of current maturities | |||||||||||||||||
Obligations under capital leases | 2l,12 | 235,537 | 217,108 | 24,123 | |||||||||||||
Two-step loans — related party | 2c,22,46 | 4,760,199 | 4,006,935 | 445,215 | |||||||||||||
Notes and bonds | 23 | 1,456,669 | — | — | |||||||||||||
Bank loans | 2c,24,46 | 1,752,104 | 2,487,913 | 276,435 | |||||||||||||
Deferred consideration for business combinations | 25 | 3,127,959 | 3,537,082 | 393,009 | |||||||||||||
Total Non-current Liabilities | 19,060,282 | 18,344,284 | 2,038,253 | ||||||||||||||
MINORITY INTEREST | 26 | 6,305,193 | 8,187,087 | 909,676 | |||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||
Capital stock — Rp.250 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 | 560,000 | |||||||||||||
Additional paid-in capital | 28 | 1,073,333 | 1,073,333 | 119,259 | |||||||||||||
Treasury stock (118,376,500 shares) | 2p,29 | — | (952,211 | ) | (105,801 | ) | |||||||||||
Difference in value of restructuring transactions between entities under common control | 30 | 90,000 | 180,000 | 20,000 | |||||||||||||
Difference due to change of equity in associated companies | 2g | 385,595 | 385,595 | 42,844 | |||||||||||||
Unrealized holding gain (loss) from available-for-sale securities | 2g | (748 | ) | 8,865 | 985 | ||||||||||||
Translation adjustment | 2g | 233,253 | 227,669 | 25,297 | |||||||||||||
Retained earnings Appropriated | 1,803,397 | 1,803,397 | 200,377 | ||||||||||||||
Unappropriated | 14,667,571 | 20,302,041 | 2,255,782 | ||||||||||||||
Total Stockholders’ Equity | 23,292,401 | 28,068,689 | 3,118,743 | ||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 62,171,044 | 75,135,745 | 8,348,415 | ||||||||||||||
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Notes | 2004 | 2005 | 2006 | |||||||||||||||||||
Rp. | Rp. | Rp. | US$ (Note 3) | |||||||||||||||||||
OPERATING REVENUES | ||||||||||||||||||||||
Telephone | 2q,31 | |||||||||||||||||||||
Fixed lines | 10,645,021 | 10,781,252 | 10,979,033 | 1,219,893 | ||||||||||||||||||
Cellular | 10,421,298 | 14,570,958 | 20,622,647 | 2,291,405 | ||||||||||||||||||
Interconnection — net | 2q,32,46 | 6,187,981 | 7,742,084 | 8,681,461 | 964,607 | |||||||||||||||||
Joint operation schemes | 2n,33,48 | 656,614 | 588,647 | 489,414 | 54,379 | |||||||||||||||||
Data and Internet | 2q,34 | 4,808,742 | 6,934,324 | 9,065,187 | 1,007,243 | |||||||||||||||||
Network | 2q,35,46 | 654,309 | 586,636 | 718,738 | 79,860 | |||||||||||||||||
Revenue-sharing arrangements | 2m,36,49 | 280,576 | 302,282 | 415,477 | 46,163 | |||||||||||||||||
Other telecommunications services | 293,225 | 301,001 | 322,051 | 35,783 | ||||||||||||||||||
Total Operating Revenues | 33,947,766 | 41,807,184 | 51,294,008 | 5,699,333 | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||
Personnel | 37 | 4,909,965 | 6,563,047 | 8,513,765 | 945,974 | |||||||||||||||||
Depreciation | 2k,2l,2m,12,13,14 | 6,438,557 | 7,570,739 | 9,178,343 | 1,019,816 | |||||||||||||||||
Write-down of assets | 2k,12 | — | 616,768 | — | — | |||||||||||||||||
Loss on procurement commitments | 12 | — | 79,359 | — | — | |||||||||||||||||
Operations, maintenance and telecommunication services | 38,46 | 4,529,587 | 5,916,341 | 7,495,728 | 832,859 | |||||||||||||||||
General and administrative | 39 | 2,599,847 | 2,763,951 | 3,271,427 | 363,492 | |||||||||||||||||
Marketing | 881,930 | 1,126,229 | 1,241,504 | 137,946 | ||||||||||||||||||
Total Operating Expenses | 19,359,886 | 24,636,434 | 29,700,767 | 3,300,087 | ||||||||||||||||||
OPERATING INCOME | 14,587,880 | 17,170,750 | 21,593,241 | 2,399,246 | ||||||||||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||||||||||
Interest income | 46 | 317,941 | 344,686 | 654,984 | 72,776 | |||||||||||||||||
Interest expense | 46 | (1,270,136 | ) | (1,177,268 | ) | (1,286,354 | ) | (142,928 | ) | |||||||||||||
Gain (loss) on foreign exchange — net | 2e | (1,220,760 | ) | (516,807 | ) | 836,328 | 92,925 | |||||||||||||||
Equity in net income (loss) of associated companies | 2g,11 | 3,420 | 10,879 | (6,619 | ) | (735 | ) | |||||||||||||||
Others — net | 331,050 | 409,184 | 202,025 | 22,447 | ||||||||||||||||||
Other income (expenses) — net | (1,838,485 | ) | (929,326 | ) | 400,364 | 44,485 | ||||||||||||||||
INCOME BEFORE TAX | 12,749,395 | 16,241,424 | 21,993,605 | 2,443,731 | ||||||||||||||||||
TAX (EXPENSE) BENEFIT | 2s,40d | |||||||||||||||||||||
Current tax | (4,267,111 | ) | (5,719,644 | ) | (7,097,202 | ) | (788,578 | ) | ||||||||||||||
Deferred tax | 88,585 | 535,757 | 57,275 | 6,364 | ||||||||||||||||||
(4,178,526 | ) | (5,183,887 | ) | (7,039,927 | ) | (782,214 | ) | |||||||||||||||
INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES | 8,570,869 | 11,057,537 | 14,953,678 | 1,661,517 | ||||||||||||||||||
MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES — net | 26 | (1,956,301 | ) | (3,063,971 | ) | (3,948,101 | ) | (438,678 | ) | |||||||||||||
NET INCOME | 6,614,568 | 7,993,566 | 11,005,577 | 1,222,839 | ||||||||||||||||||
BASIC EARNINGS PER SHARE | 2t,41 | |||||||||||||||||||||
Net income per share | 328.10 | 396.51 | 547.15 | 0.06 | ||||||||||||||||||
Net income per ADS (40 Series B shares per ADS) | 13,124.14 | 15,860.25 | 21,886.00 | 2.43 | ||||||||||||||||||
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Difference in | |||||||||||||||||||||||||||||||||||||||||
value of | |||||||||||||||||||||||||||||||||||||||||
restructuring | Difference | ||||||||||||||||||||||||||||||||||||||||
transactions | due to change | Unrealized | |||||||||||||||||||||||||||||||||||||||
Additional | between entities | of equity | holding gain on | Retained earnings | Total | ||||||||||||||||||||||||||||||||||||
Capital | paid-in | under common | in 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 | 13,700,255 | 14,694,212 | |||||||||||||||||||||||||||||||
Unrealized holding gain on available- for-sale securities | 2g | — | — | — | — | 884 | — | — | — | 884 | |||||||||||||||||||||||||||||||
Foreign currency translation of associated company | 2g | — | — | — | — | — | 5,363 | — | — | 5,363 | |||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on July 30, 2004 Declaration of cash dividends | 2w,42 | — | — | — | — | — | — | — | (3,043,614 | ) | (3,043,614 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 42 | — | — | — | — | — | — | 121,745 | (121,745 | ) | — | ||||||||||||||||||||||||||||||
Declaration of interim cash dividends | 2w,42 | — | — | — | — | — | — | — | (143,377 | ) | (143,377 | ) | |||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | 6,614,568 | 6,614,568 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2004 | 5,040,000 | 1,073,333 | (7,288,271 | ) | 385,595 | 884 | 229,595 | 1,680,813 | 17,006,087 | 18,128,036 | |||||||||||||||||||||||||||||||
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Difference in | |||||||||||||||||||||||||||||||||||||||||
value of | |||||||||||||||||||||||||||||||||||||||||
restructuring | Difference | ||||||||||||||||||||||||||||||||||||||||
transactions | due to change | Unrealized | |||||||||||||||||||||||||||||||||||||||
Additional | between entities | of equity | holding gain (loss) on | Retained earnings | Total | ||||||||||||||||||||||||||||||||||||
Capital | paid-in | under common | in 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, 2005 | 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 accounting policy for restructuring transactions between entities under common control | 4,30 | — | — | 7,288,271 | — | — | — | — | (7,288,271 | ) | — | ||||||||||||||||||||||||||||||
Unrealized holding loss on available- for-sale securities | 2g | — | — | — | — | (1,632 | ) | — | — | — | (1,632 | ) | |||||||||||||||||||||||||||||
Foreign currency translation of associated company | 2g,11 | — | — | — | — | — | 3,658 | — | — | 3,658 | |||||||||||||||||||||||||||||||
Compensation for early termination of exclusive rights | 30 | — | — | 90,000 | — | — | — | — | — | 90,000 | |||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on June 24, 2005 Declaration of cash dividends | 2w,42 | — | — | — | — | — | — | — | (2,921,227 | ) | (2,921,227 | ) | |||||||||||||||||||||||||||||
Appropriation for general reserve | 42 | — | — | — | — | — | — | 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-12
Table of Contents
Difference in | ||||||||||||||||||||||||||||||||||||||||||||
value of | ||||||||||||||||||||||||||||||||||||||||||||
restructuring | Difference | |||||||||||||||||||||||||||||||||||||||||||
transactions | due to change | Unrealized | ||||||||||||||||||||||||||||||||||||||||||
Additional | between entities | of equity | holding gain (loss) on | Retained earnings | Total | |||||||||||||||||||||||||||||||||||||||
Capital | paid-in | under common | in associated | available-for-sale | Translation | stockholders’ | ||||||||||||||||||||||||||||||||||||||
Description | Notes | stock | capital | Treasury stock | control | companies | securities | adjustment | Appropriated | Unappropriated | equity | |||||||||||||||||||||||||||||||||
Rp. | Rp. | Rp. | Rp. | Rp. | Rp. | Rp. | Rp. | Rp. | Rp. | |||||||||||||||||||||||||||||||||||
Balance as of January 1, 2006 | 5,040,000 | 1,073,333 | — | 90,000 | 385,595 | (748 | ) | 233,253 | 1,803,397 | 14,667,571 | 23,292,401 | |||||||||||||||||||||||||||||||||
Unrealized holding gain on available- for-sale securities | 2g | — | — | — | — | — | 9,613 | — | — | — | 9,613 | |||||||||||||||||||||||||||||||||
Foreign currency translation of associated company | 2g,11 | — | — | — | — | — | — | (5,584 | ) | — | — | (5,584 | ) | |||||||||||||||||||||||||||||||
Compensation for early termination of exclusive rights | 30 | — | — | — | 90,000 | — | — | — | — | — | 90,000 | |||||||||||||||||||||||||||||||||
Resolved during the Annual General Meeting of the Stockholders on June 30, 2006 Declaration of cash dividends | 2w,42 | — | — | — | — | — | — | — | — | (4,400,090 | ) | (4,400,090 | ) | |||||||||||||||||||||||||||||||
Payment of interim cash dividends | 2w,42 | — | — | — | — | — | — | — | — | (971,017 | ) | (971,017 | ) | |||||||||||||||||||||||||||||||
Treasury stock acquired — at cost | 29 | — | — | (952,211 | ) | — | — | — | — | — | — | (952,211 | ) | |||||||||||||||||||||||||||||||
Net income for the year | — | — | — | — | — | — | — | — | 11,005,577 | 11,005,577 | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2006 | 5,040,000 | 1,073,333 | (952,211 | ) | 180,000 | 385,595 | 8,865 | 227,669 | 1,803,397 | 20,302,041 | 28,068,689 | |||||||||||||||||||||||||||||||||
F-13
Table of Contents
2004 | 2005 | 2006 | |||||||||||||||||
Rp. | Rp. | Rp. | US$ (Note 3) | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||
Cash receipts from operating revenues | |||||||||||||||||||
Telephone | |||||||||||||||||||
Fixed lines | 10,084,558 | 10,668,915 | 10,673,901 | 1,185,989 | |||||||||||||||
Cellular | 10,497,763 | 14,825,437 | 20,842,406 | 2,315,823 | |||||||||||||||
Interconnection — net | 5,766,444 | 7,403,322 | 8,655,917 | 961,768 | |||||||||||||||
Joint operation schemes | 547,487 | 614,652 | 596,423 | 66,269 | |||||||||||||||
Data and Internet | 4,973,559 | 6,952,323 | 8,914,019 | 990,447 | |||||||||||||||
Other services | 1,689,941 | 1,445,668 | 1,285,275 | 142,808 | |||||||||||||||
Total cash receipts from operating revenues | 33,559,752 | 41,910,317 | 50,967,941 | 5,663,104 | |||||||||||||||
Cash payments for operating expenses | (12,270,643 | ) | (14,954,742 | ) | (16,465,320 | ) | (1,829,480 | ) | |||||||||||
Cash receipt (refund) from (to) customers | (78,028 | ) | (55,343 | ) | (57,580 | ) | (6,398 | ) | |||||||||||
Cash generated from operations | 21,211,081 | 26,900,232 | 34,445,041 | 3,827,226 | |||||||||||||||
Interest received | 321,677 | 341,848 | 642,959 | 71,440 | |||||||||||||||
Income tax paid | (4,132,359 | ) | (4,938,916 | ) | (7,175,681 | ) | (797,298 | ) | |||||||||||
Interest paid | (1,348,919 | ) | (1,200,484 | ) | (1,217,131 | ) | (135,237 | ) | |||||||||||
Net Cash Provided by Operating Activities | 16,051,480 | 21,102,680 | 26,695,188 | 2,966,131 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||
Proceeds from sale of temporary investments and maturity of time deposits | 285,264 | 227,633 | 46,081 | 5,120 | |||||||||||||||
Purchase of temporary investments and placements in time deposits | (404,268 | ) | (226,054 | ) | (98,896 | ) | (10,988 | ) | |||||||||||
Proceeds from sale of property, plant and equipment | 67,196 | 84,621 | 17,269 | 1,919 | |||||||||||||||
Proceeds from insurance claim | — | 27,580 | — | — | |||||||||||||||
Acquisition of property, plant and equipment | (8,568,862 | ) | (12,106,930 | ) | (15,900,628 | ) | (1,766,736 | ) | |||||||||||
Increase in advances for the purchase of | — | ||||||||||||||||||
property, plant and equipment | (1,063,382 | ) | (212,187 | ) | (293,920 | ) | (32,658 | ) | |||||||||||
Decrease in advances and others | 123,026 | 874 | 38,395 | 4,266 | |||||||||||||||
Business combinations, net of cash (paid) acquired | (27,797 | ) | (4,000 | ) | 143,648 | 15,961 | |||||||||||||
Acquisition of intangible assets | — | — | (436,000 | ) | (48,444 | ) | |||||||||||||
Proceeds from sale of long-term investments | — | — | 22,561 | 2,507 | |||||||||||||||
Cash dividends received | — | — | 382 | 42 | |||||||||||||||
Acquisition of long-term investments | (9,290 | ) | (4,250 | ) | — | — | |||||||||||||
Net Cash Used in Investing Activities | (9,598,113 | ) | (12,212,713 | ) | (16,461,108 | ) | (1,829,011 | ) | |||||||||||
F-14
Table of Contents
2004 | 2005 | 2006 | |||||||||||||||
Rp. | Rp. | Rp. | US$ (Note 3) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Cash dividends paid | (3,129,225 | ) | (2,980,640 | ) | (5,371,102 | ) | (596,789 | ) | |||||||||
Cash dividends paid to minority shareholders of subsidiaries | (682,366 | ) | (1,694,261 | ) | (2,067,696 | ) | (229,744 | ) | |||||||||
Increase in escrow accounts | (1,341,546 | ) | (96,216 | ) | (2,073 | ) | (230 | ) | |||||||||
Proceeds from short-term borrowings | 1,062,183 | 739,153 | 1,020,000 | 113,333 | |||||||||||||
Repayments of short-term borrowings | — | (1,733,862 | ) | (507,133 | ) | (56,348 | ) | ||||||||||
Payments for debt issuance cost | (2,394 | ) | — | — | — | ||||||||||||
Proceeds from Medium-term Notes | 1,080,000 | — | — | — | |||||||||||||
Repayments of Medium-term Notes | — | (470,000 | ) | (145,000 | ) | (16,111 | ) | ||||||||||
Redemption of Telkomsel’s notes | (504,101 | ) | (780,565 | ) | — | — | |||||||||||
Proceeds from long-term borrowings | 2,386,748 | 569,995 | 2,532,313 | 281,368 | |||||||||||||
Repayments of long-term borrowings | (5,734,156 | ) | (1,723,126 | ) | (1,674,516 | ) | (186,057 | ) | |||||||||
Payment for purchase of treasury stock | — | — | (952,211 | ) | (105,801 | ) | |||||||||||
Repayments of promissory notes | (40,008 | ) | (164,186 | ) | (201,307 | ) | (22,368 | ) | |||||||||
Repayments of obligations under capital leases | — | (5,643 | ) | (14,095 | ) | (1,566 | ) | ||||||||||
Net Cash Used in Financing Activities | (6,904,865 | ) | (8,339,351 | ) | (7,382,820 | ) | (820,313 | ) | |||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (451,498 | ) | 550,616 | 2,851,260 | 316,807 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 213,149 | (32,055 | ) | 89,892 | 9,988 | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 5,094,472 | 4,856,123 | 5,374,684 | 597,187 | |||||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 4,856,123 | 5,374,684 | 8,315,836 | 923,982 | |||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||||||||
Noncash investing and financing activities: | |||||||||||||||||
Payment of insurance premium through the incurrence of long-term debt | 11,658 | — | — | — | |||||||||||||
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 | — | 1,770,925 | 196,769 | |||||||||||||
Acquisition of property, plant and equipment through capital leases | — | 257,380 | 8,440 | 938 | |||||||||||||
Exchange of property, plant and equipment | — | — | 440,358 | 48,929 | |||||||||||||
Acquisition of property, plant and equipment through incurrence of payable | 3,029,489 | 3,786,014 | 4,540,200 | 504,467 | |||||||||||||
Acquisition of property, plant and equipment through Revenue-Sharing Arrangements | 330,633 | 201,833 | 543,651 | 60,406 |
F-15
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-16
Table of Contents
i. Telecommunications networks | |
ii. Telecommunications services | |
iii. Special telecommunications |
F-17
Table of Contents
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 |
President Commissioner | : Tanri Abeng | |
Commissioner | : Anggito Abimanyu | |
Commissioner | : Gatot Trihargo | |
Independent Commissioner | : Arif Arryman | |
Independent Commissioner | : Petrus Sartono | |
President Director | : Rinaldi Firmansyah | |
Director of Finance | : Sudiro Asno | |
Director of Network and Solution | : I Nyoman Gede Wiryanata | |
Director of Enterprise and Wholesale | : Arief Yahya | |
Director of Human Capital and General Affairs | : Faisal Syam | |
Director of Consumer | : Ermady Dahlan | |
Chief Information Technology Officer | : Indra Utoyo | |
Director of Compliance and Risk Management | : Prasetio |
b. | Public offering of shares of the Company |
F-18
Table of Contents
F-19
Table of Contents
c. | Subsidiaries |
Percentage of | Total Assets Before | |||||||||||||||||||||||
Ownership | Start of | Eliminations | ||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Subsidiaries | Domicile | Nature of Business | 2005 | 2006 | Operations | 2005 | 2006 | |||||||||||||||||
% | % | |||||||||||||||||||||||
PT Pramindo Ikat Nusantara | Medan | Telecommunications construction & services | 100 | 100 | 1995 | 1,356,634 | 1,372,524 | |||||||||||||||||
PT AriaWest International | Jakarta | Telecommunications | 100 | 100 | 1995 | 1,127,772 | 806,542 | |||||||||||||||||
PT Multimedia Nusantara | Jakarta | Multimedia | 100 | 100 | 1998 | 53,738 | 94,187 | |||||||||||||||||
PT Graha Sarana Duta | Jakarta | Real estate, construction and services | 99.99 | 99.99 | 1982 | 101,910 | 134,840 | |||||||||||||||||
PT Dayamitra Telekomunikasi | Jakarta | Telecommunications | 100 | 100 | 1995 | 622,662 | 503,299 | |||||||||||||||||
PT Indonusa Telemedia | Jakarta | Pay TV | 96 | 96 | 1997 | 66,445 | 66,862 | |||||||||||||||||
PT Telekomunikasi Selular | Jakarta | Telecommunications | 65 | 65 | 1995 | 25,754,321 | 37,300,784 | |||||||||||||||||
PT Napsindo Primatel Internasional | Jakarta | Telecommunications | 60 | 60 | 1999 | 7,884 | 6,297 | |||||||||||||||||
PT Infomedia Nusantara | Jakarta | Data and information service | 51 | 51 | 1984 | 376,160 | 437,028 |
Ownership | ||||||||||||||||||
Percentage | ||||||||||||||||||
by | ||||||||||||||||||
Subsidiaries | Start of | |||||||||||||||||
Commercial | ||||||||||||||||||
Indirect Subsidiaries | Stockholders | Domicile | Nature of Business | 2005 | 2006 | Operations | ||||||||||||
% | % | |||||||||||||||||
Telekomunikasi Selular Finance Limited | PT Telekomunikasi Selular | Mauritius | Finance | 100 | 100 | 2002 | ||||||||||||
Telkomsel Finance B.V. | PT Telekomunikasi Selular | Netherlands | Finance | 100 | 100 | 2005 | ||||||||||||
Aria West International Finance B.V. | PT AriaWest International | Netherlands | Finance | 100 | 100 | 1996 | ||||||||||||
PT Balebat Dedikasi Prima | PT Infomedia Nusantara | Indonesia | Printing | 51 | 65 | 2000 | ||||||||||||
PT Finnet Indonesia | PT Multimedia Nusantara | Indonesia | Banking data and communication | — | 60 | 2006 |
PT Pramindo Ikat Nusantara (“Pramindo”) |
F-20
Table of Contents
PT AriaWest International (“AWI”) |
PT Multimedia Nusantara (“Metra”) |
PT Graha Sarana Duta (“GSD”) |
PT Dayamitra Telekomunikasi (“Dayamitra”) |
PT Indonusa Telemedia (“Indonusa”) |
F-21
Table of Contents
PT Telekomunikasi Selular (“Telkomsel”) |
a. Mobile telecommunication services with radio frequency bandwith in the 900 MHz and 1800 MHz bands; | |
b. Mobile telecommunication services IMT-2000 with radio frequency bandwith in the 2.1 GHz bands (3G); and | |
c. Basic telecommunication services. |
PT Napsindo Primatel Internasional (“Napsindo”) |
PT Infomedia Nusantara (“Infomedia”) |
F-22
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”) |
PT Finnet Indonesia (“Finnet”) |
PT Pro Infokom Indonesia (“PII”) |
d. | Authorization of the financial statements |
F-23
Table of Contents
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a. | Basis for preparation of financial statements |
b. | Principles of consolidation |
c. | Transactions with related parties |
d. | Acquisitions of subsidiaries |
F-24
Table of Contents
e. | Foreign currency translation |
f. | Cash and cash equivalents |
g. | Investments |
i. | Time deposits |
ii. | Investments in securities |
F-25
Table of Contents
F-26
Table of Contents
F-27
Table of Contents
Years | ||||
Buildings | 20 | |||
Switching equipment | 5-15 | |||
Telegraph, telex and data communication equipment | 5-15 | |||
Transmission installation and equipment | 5-20 | |||
Satellite, earth station and equipment | 3-15 | |||
Cable network | 5-15 | |||
Power supply | 3-10 | |||
Data processing equipment | 3-10 | |||
Other telecommunications peripherals | 5 | |||
Office equipment | 2-5 | |||
Vehicles | 5-8 | |||
Other equipment | 5 |
F-28
Table of Contents
m. | Revenue-sharing arrangements |
n. | Joint operation schemes |
F-29
Table of Contents
o. | Deferred charges for landrights |
p. | Treasury stock |
q. | Revenue and expense recognition |
i. | Fixed line telephone revenues |
ii. | Cellular and fixed wireless telephone revenues |
• | Connection fees for service connection are recognized as revenues at the time the connection occurs. | |
• | Airtime and charges for value added services are recognized based on usage by subscribers. | |
• | Monthly subscription charges are recognized as revenues when incurred by subscribers. |
• | Sale of SIM and RUIM card is recognized as revenue upon delivery of the starter packs to distributors, dealers or directly to customers. | |
• | Sale of pulse reload vouchers (either bundled in starter packs or sold as separate items) is recognized initially as unearned income and recognized proportionately as usage revenue based on duration of successful calls made and the value added services used by the subscribers or the expiration of the unused stored value of the voucher. |
iii. | Interconnection revenues |
F-30
Table of Contents
iv. | Data and internet revenues |
v. | Revenues from network |
r. | Employee benefits |
i. | Pension and post-retirement health care benefit plans |
ii. | Long service awards (“LSA”) |
iii. | Early retirement benefits |
F-31
Table of Contents
s. | Income tax |
t. | Basic earnings per share and earnings per American Depositary Share (“ADS”) |
u. | Segment information |
v. | Derivative instruments |
F-32
Table of Contents
w. | Dividends |
x. | Intangible Assets |
y. | Use of estimates |
3. | TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS |
F-33
Table of Contents
4. | CHANGES IN ACCOUNTING POLICY |
5. | ACQUISITIONS OF KSO INVESTORS, KSO IV AND KSO VII |
a. | Dayamitra |
F-34
Table of Contents
Rp. | |||||
Purchase consideration — net | 1,351,299 | ||||
Fair value of net assets acquired: | |||||
— Cash and cash equivalents | 93,652 | ||||
— Distributable KSO revenue receivable | 62,398 | ||||
— Other current assets | 9,450 | ||||
— Property, plant and equipment | 1,401,479 | ||||
— Intangible assets | 1,276,575 | ||||
— Other non-current assets | 19,510 | ||||
— Current liabilities | (236,265 | ) | |||
— Deferred tax liabilities | (581,816 | ) | |||
— Non-current liabilities | (693,684 | ) | |||
Fair value of net assets | 1,351,299 | ||||
�� |
1. | Option Agreement |
F-35
Table of Contents
2. | Escrow Agreement |
b. | Pramindo |
F-36
Table of Contents
Rp | ||||
Purchase consideration — net of discount on promissory notes | 3,338,653 | |||
Historical amount of net assets | 1,061,437 | |||
Difference in value for 100% ownership | 2,277,216 | |||
Difference adjusted to stockholders’ equity for Indosat’s 13% ownership in Pramindo | 296,038 | |||
Rp. | ||||
Purchase consideration — net of discount on promissory notes | 3,338,653 | |||
Fair value of net assets acquired: | ||||
— Cash and cash equivalents | 141,475 | |||
— Distributable KSO revenue receivable | 187,468 | |||
— Other current assets | 13,839 | |||
— Property, plant and equipment | 1,807,338 | |||
— Intangible assets | 2,752,267 | |||
— Other non-current assets | 160,139 | |||
— Current liabilities | (284,120 | ) | ||
— Deferred tax liabilities | (1,115,645 | ) | ||
— Non-current liabilities | (620,146 | ) | ||
Fair value of net assets | 3,042,615 | |||
Difference adjusted to equity for 13% Indosat’s ownership in Pramindo | 296,038 | |||
Total purchase consideration | 3,338,653 | |||
F-37
Table of Contents
c. | AWI |
Rp. | ||||
Distributable KSO revenue receivable | 540,267 | |||
Property, plant and equipment | 1,556,269 | |||
Intangible assets | 1,982,564 | |||
Other assets | 34,372 | |||
Deferred tax liabilities | (393,794 | ) | ||
Fair value of net assets acquired | 3,719,678 | |||
Borrowings assumed | (2,577,926 | ) | ||
Total purchase consideration | 1,141,752 | |||
F-38
Table of Contents
d. | Amendment and Restatement of the Joint Operation Scheme in Regional Division IV (“KSO IV”) |
• | The rights to operate fixed-line telecommunications services had been 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 had been 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 the existing property, plant and equipment (including new additional installations) and inventories will be transferred to the Company at no cost. | |
• | The Company’s rights to receive Minimum TELKOM Revenues (“MTR”) and share in Distributable KSO Revenues (“DKSOR”) under the original KSO agreement were amended so that MGTI receives fixed monthly payments (“Fixed Investor Revenues”) beginning in February 2004 through December 2010 totaling US$517.1 million and the Company is entitled to the balance of KSO revenues net of operating expenses and payments to MGTI for Fixed Investor Revenues. In addition, payments for Fixed Investor Revenues must be made to MGTI before any payments can be made to the Company. | |
• | In the event funds in KSO IV are insufficient to pay Fixed Investor Revenues to MGTI, the Company is required to pay the shortfall to MGTI. |
Rp. | ||||
Property, plant and equipment | 2,377,134 | |||
Intangible assets | 908,228 | |||
Total purchase consideration | 3,285,362 | |||
F-39
Table of Contents
e. | Amendment and Restatement of the Joint Operation Scheme in Regional Division VII (“KSO VII”) |
• | The rights to operate fixed-line telecommunications services had been transferred to the Company, where KSO VII is operated under the management, supervision, control and responsibility of the Company. | |
• | The responsibilities for funding construction of new telecommunication facilities and payments of operating expenses incurred in KSO VII had been assigned to the Company. | |
• | The risk of loss from damages or destruction of assets operated by KSO VII will be transferred to the Company. | |
• | At the end of the KSO period (December 31, 2010), all rights, title and interest of BSI in existing property, plant and equipment (including new additional installations) and inventories will 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 BSI receives fixed monthly payments (“Fixed Investor Revenues”) amounting to Rp.55.64 billion beginning in October 2006 through June 2007 and amounting to Rp.44.25 billion in July 2007 through December 2010. The Company is entitled to the balance of KSO revenues net of operating expenses and payments to BSI for Fixed Investor Revenues. In addition, payments for Fixed Investor Revenues must be made to BSI before any payments could be made to the Company. | |
• | In the event funds in KSO VII are insufficient to pay Fixed Investor Revenues to BSI, the Company is required to pay the shortfall to BSI. |
F-40
Table of Contents
Rp. | |||||
Purchase consideration — at present value | 1,770,925 | ||||
Fair value of net assets acquired: | |||||
— Cash and cash equivalents | 143,648 | ||||
— Receivables | 266,337 | ||||
— Other current assets | 69,960 | ||||
— Property, plant and equipment | 1,288,888 | ||||
— Deferred tax assets | 6,993 | ||||
— Property, plant and equipment under revenue sharing arrangements | 452,205 | ||||
— Intangible assets | 451,736 | ||||
— Current liabilities | (456,637 | ) | |||
— Unearned income on revenue sharing arrangements | (452,205 | ) | |||
Fair value of net assets | 1,770,925 | ||||
f. | Pro forma operating results related to acquisition of KSO VII |
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Table of Contents
Unaudited | ||||||||
2005 | 2006 | |||||||
Operating revenues | 43,331,841 | 52,410,229 | ||||||
Operating income | 17,568,948 | 21,896,658 | ||||||
Income before tax | 16,461,991 | 22,205,996 | ||||||
Net income | 8,147,616 | 11,245,085 | ||||||
Net income per share — in full Rupiah amount | 404.15 | 559.05 | ||||||
Net income per ADS — in full Rupiah amount | 16,165.91 | 22,362.13 |
6. | CASH AND CASH EQUIVALENTS |
2005 | 2006 | ||||||||||
Cash on hand | 6,070 | 8,281 | |||||||||
Cash in banks | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Negara Indonesia | 54,590 | 207,365 | |||||||||
Bank Mandiri | 89,128 | 136,481 | |||||||||
Bank Rakyat Indonesia | 5,095 | 15,395 | |||||||||
Bank Pos Nusantara | 879 | 1,447 | |||||||||
Total | 149,692 | 360,688 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 55,797 | 32,039 | |||||||||
Bank Negara Indonesia | 2,701 | 5,818 | |||||||||
Bank Rakyat Indonesia | 657 | 607 | |||||||||
Total | 59,155 | 38,464 | |||||||||
Total — related parties | 208,847 | 399,152 | |||||||||
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Table of Contents
2005 | 2006 | ||||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Deutsche Bank | 15,954 | 18,274 | |||||||||
Bank Central Asia | 8,398 | 15,326 | |||||||||
Bank Bukopin | 15,800 | 8,058 | |||||||||
ABN AMRO Bank | 34,453 | 4,851 | |||||||||
BPD Papua | — | 2,717 | |||||||||
Bank Niaga | 498 | 2,104 | |||||||||
Citibank NA | 1,595 | 1,426 | |||||||||
Bank Mega | 1,321 | 941 | |||||||||
Bank Permata | — | 927 | |||||||||
Lippo Bank | 1,361 | 700 | |||||||||
Bank Danamon | 324 | 338 | |||||||||
Bank Muamalat Indonesia | 601 | 252 | |||||||||
Bank Bumiputera Indonesia | 242 | 158 | |||||||||
Bank Buana Indonesia | 1,189 | 123 | |||||||||
Bank Internasional Indonesia | 53 | 31 | |||||||||
Total | 81,789 | 56,226 | |||||||||
Foreign currencies | |||||||||||
ABN AMRO Bank | 54,575 | 51,781 | |||||||||
Citibank NA | 5,737 | 8,568 | |||||||||
Deutsche Bank | 5,309 | 2,921 | |||||||||
Standard Chartered Bank | 99 | 91 | |||||||||
Bank Central Asia | 142 | 89 | |||||||||
Bank Internasional Indonesia | 30 | 48 | |||||||||
The Bank of Tokyo Mitsubishi | 46 | 33 | |||||||||
Total | 65,938 | 63,531 | |||||||||
Total — third parties | 147,727 | 119,757 | |||||||||
Total cash in banks | 356,574 | 518,909 | |||||||||
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Table of Contents
2005 | 2006 | ||||||||||
Time deposits | |||||||||||
Related parties | |||||||||||
Rupiah | |||||||||||
Bank Negara Indonesia | 660,915 | 2,131,515 | |||||||||
Bank Mandiri | 1,510,009 | 1,361,098 | |||||||||
Bank Rakyat Indonesia | 246,415 | 635,000 | |||||||||
Bank Tabungan Negara | 132,455 | 294,890 | |||||||||
Bank Syariah Mandiri | 7,000 | — | |||||||||
Total | 2,556,794 | 4,422,503 | |||||||||
Foreign currencies | |||||||||||
Bank Mandiri | 293,115 | 732,631 | |||||||||
Bank Negara Indonesia | 98 | 98 | |||||||||
Total | 293,213 | 732,729 | |||||||||
Total — related parties | 2,850,007 | 5,155,232 | |||||||||
Third parties | |||||||||||
Rupiah | |||||||||||
Bank Niaga | 109,565 | 199,135 | |||||||||
Bank Jabar | 85,590 | 196,795 | |||||||||
Standard Chartered Bank | 177,800 | 142,500 | |||||||||
Bank Danamon | 63,915 | 130,560 | |||||||||
Bank Muamalat Indonesia | 9,000 | 115,420 | |||||||||
Bank Mega | 99,575 | 95,690 | |||||||||
Bank Bukopin | 89,255 | 90,780 | |||||||||
Bank BTPN | 43,255 | 55,100 | |||||||||
Bank NISP | 50,680 | 47,065 | |||||||||
ABN AMRO Bank | — | 35,000 | |||||||||
Bank Internasional Indonesia | — | 27,190 | |||||||||
Deutsche Bank | — | 17,300 | |||||||||
Bank Syariah Mega Indonesia | 17,000 | 15,700 | |||||||||
Bank Yudha Bhakti | 6,000 | 8,045 | |||||||||
Bank Nusantara Parahyangan | 4,000 | 3,000 | |||||||||
Bank Permata | — | 102 | |||||||||
Citibank NA | 310,100 | — | |||||||||
Bank Bumiputera Indonesia | 19,643 | — | |||||||||
Total | 1,085,378 | 1,179,382 | |||||||||
F-44
Table of Contents
2005 | 2006 | ||||||||||
Foreign currencies | |||||||||||
Deutsche Bank | 873,772 | 816,497 | |||||||||
Citibank NA | 202,883 | 632,122 | |||||||||
Bank Bukopin | — | 3,608 | |||||||||
Bank Mega | — | 1,805 | |||||||||
Total | 1,076,655 | 1,454,032 | |||||||||
Total — third parties | 2,162,033 | 2,633,414 | |||||||||
Total time deposits | 5,012,040 | 7,788,646 | |||||||||
Total cash and cash equivalents | 5,374,684 | 8,315,836 | |||||||||
2005 | 2006 | |||||||
Rupiah | 2.00% — 14.50% | 4.00% — 16.00% | ||||||
Foreign currencies | 0.60% — 3.70% | 1.65% — 5.10% |
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Table of Contents
7. | TRADE RECEIVABLES |
a. | By Debtor |
Related parties: |
2005 | 2006 | |||||||
Government agencies | 432,982 | 518,943 | ||||||
PT Citra Sari Makmur | 31,242 | 20,627 | ||||||
PT Patra Telekomunikasi Indonesia | 2,921 | 13,751 | ||||||
PT Graha Informatika Nusantara | 1,880 | 6,949 | ||||||
PT Pasifik Satelit Nusantara | 2,401 | 4,286 | ||||||
Kopegtel | 8,959 | 4,256 | ||||||
PT Aplikanusa Lintasarta | 437 | 3,217 | ||||||
KSO VII | 111,599 | — | ||||||
Others | 22,224 | 33,713 | ||||||
Total | 614,645 | 605,742 | ||||||
Allowance for doubtful accounts | (84,275 | ) | (85,053 | ) | ||||
Net | 530,370 | 520,689 | ||||||
Third parties: |
2005 | 2006 | |||||||
Residential and business subscribers | 3,452,176 | 3,551,270 | ||||||
Overseas international carriers | 196,756 | 345,054 | ||||||
Total | 3,648,932 | 3,896,324 | ||||||
Allowance for doubtful accounts | (601,393 | ) | (699,736 | ) | ||||
Net | 3,047,539 | 3,196,588 | ||||||
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Table of Contents
b. | By Age |
Related parties: |
2005 | 2006 | |||||||
Up to 6 months | 505,519 | 490,643 | ||||||
7 to 12 months | 27,390 | 30,007 | ||||||
13 to 24 months | 25,574 | 14,468 | ||||||
More than 24 months | 56,162 | 70,624 | ||||||
Total | 614,645 | 605,742 | ||||||
Allowance for doubtful accounts | (84,275 | ) | (85,053 | ) | ||||
Net | 530,370 | 520,689 | ||||||
Third parties: |
2005 | 2006 | |||||||
Up to 3 months | 2,938,326 | 2,932,542 | ||||||
More than 3 months | 710,606 | 963,782 | ||||||
Total | 3,648,932 | 3,896,324 | ||||||
Allowance for doubtful accounts | (601,393 | ) | (699,736 | ) | ||||
Net | 3,047,539 | 3,196,588 | ||||||
c. | By Currency |
Related parties |
2005 | 2006 | |||||||
Rupiah | 598,533 | 597,415 | ||||||
United States Dollar | 16,112 | 8,327 | ||||||
Total | 614,645 | 605,742 | ||||||
Allowance for doubtful accounts | (84,275 | ) | (85,053 | ) | ||||
Net | 530,370 | 520,689 | ||||||
Third parties |
2005 | 2006 | |||||||
Rupiah | 3,444,914 | 3,535,904 | ||||||
United States Dollar | 204,018 | 360,420 | ||||||
Total | 3,648,932 | 3,896,324 | ||||||
Allowance for doubtful accounts | (601,393 | ) | (699,736 | ) | ||||
Net | 3,047,539 | 3,196,588 | ||||||
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Table of Contents
d. | Movements in the allowance for doubtful accounts |
2004 | 2005 | 2006 | ||||||||||
Beginning balance | 443,892 | 522,066 | 685,668 | |||||||||
Additions | 342,895 | 478,005 | 453,045 | |||||||||
Bad debts write-off | (264,721 | ) | (314,403 | ) | (353,924 | ) | ||||||
Ending balance | 522,066 | 685,668 | 784,789 | |||||||||
8. | INVENTORIES |
2005 | 2006 | |||||||
Components | 50,520 | 57,074 | ||||||
Allowance for obsolescence | (8,605 | ) | (4,360 | ) | ||||
Net | 41,915 | 52,714 | ||||||
Modules | 103,520 | 109,978 | ||||||
Allowance for obsolescence | (39,553 | ) | (43,549 | ) | ||||
Net | 63,967 | 66,429 | ||||||
SIM cards, RUIM cards and prepaid voucher blanks | 114,634 | 94,375 | ||||||
Allowance for obsolescence | (189 | ) | (189 | ) | ||||
Net | 114,445 | 94,186 | ||||||
Total | 220,327 | 213,329 | ||||||
2004 | 2005 | 2006 | ||||||||||
Beginning balance | 40,489 | 54,733 | 48,347 | |||||||||
Additions | 14,800 | 10,968 | 5,207 | |||||||||
Inventory write-off | (556 | ) | (17,354 | ) | (5,456 | ) | ||||||
Ending balance | 54,733 | 48,347 | 48,098 | |||||||||
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9. | PREPAID EXPENSES |
2005 | 2006 | |||||||
Frequency license | 275,359 | 425,482 | ||||||
Salary | 289,632 | 356,227 | ||||||
Rental | 112,078 | 200,092 | ||||||
Insurance | 66,449 | 40,710 | ||||||
Telephone directory issuance cost | 26,527 | 29,692 | ||||||
Others | 7,824 | 21,126 | ||||||
Total | 777,869 | 1,073,329 | ||||||
10. | OTHER CURRENT ASSETS |
2005 | 2006 | |||||||
Restricted time deposits — Bank Mandiri (Note 46) | 159,537 | 6,822 | ||||||
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11. | LONG-TERM INVESTMENTS |
2005 | ||||||||||||||||||||||||
Percentage | ||||||||||||||||||||||||
of | Beginning | Share of | 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 | ||||||||||||||||||||
2006 | ||||||||||||||||||||||||
Percentage | Share of | |||||||||||||||||||||||
of | Beginning | Net Income | Translation | Ending | ||||||||||||||||||||
Ownership | Balance | Addition | (Loss) | Adjustment | Balance | |||||||||||||||||||
Equity method: | ||||||||||||||||||||||||
PT Citra Sari Makmur | 25.00 | 66,254 | — | (7,556 | ) | (5,584 | ) | 53,114 | ||||||||||||||||
PT Patra Telekomunikasi Indonesia | 40.00 | 25,070 | — | 937 | — | 26,007 | ||||||||||||||||||
PT Pasifik Satelit Nusantara | 22.38 | — | — | — | — | — | ||||||||||||||||||
91,324 | — | (6,619 | ) | (5,584 | ) | 79,121 | ||||||||||||||||||
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 | 0.00 | — | — | — | — | — | ||||||||||||||||||
10,076 | — | — | — | 10,076 | ||||||||||||||||||||
101,400 | — | (6,619 | ) | (5,584 | ) | 89,197 | ||||||||||||||||||
a. | PT Citra Sari Makmur (“CSM”) |
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Table of Contents
b. | PT Patra Telekomunikasi Indonesia (“Patrakom”) |
c. | PT Pasifik Satelit Nusantara (“PSN”) |
d. | Bridge Mobile Pte. Ltd |
e. | PT Batam Bintan Telekomunikasi (“BBT”) |
F-51
Table of Contents
f. | PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”) |
g. | PT Mandara Selular Indonesia (“Mobisel”) |
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Table of Contents
12. | PROPERTY, PLANT AND EQUIPMENT |
January 1, | Write-down of | December 31, | ||||||||||||||||||||||||
2005 | Additions | Assets | Deductions | Reclassifications | 2005 | |||||||||||||||||||||
At cost | ||||||||||||||||||||||||||
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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Table of Contents
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 | |||||||||||||||||||||||
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Table of Contents
January 1, | Acquisition | December 31, | ||||||||||||||||||||||||
2006 | KSO VII | Additions | Deductions | Reclassifications | 2006 | |||||||||||||||||||||
At cost | ||||||||||||||||||||||||||
Direct acquisitions | ||||||||||||||||||||||||||
Land | 334,447 | — | 64,891 | — | — | 399,338 | ||||||||||||||||||||
Buildings | 2,567,559 | 1,944 | 108,868 | — | 80,302 | 2,758,673 | ||||||||||||||||||||
Switching equipment | 10,829,881 | 241,040 | 129,011 | (1,950 | ) | 10,137,530 | 21,335,512 | |||||||||||||||||||
Telegraph, telex and data communication equipment | 215,792 | — | — | (2,172 | ) | (23,919 | ) | 189,701 | ||||||||||||||||||
Transmission installation and equipment | 31,554,134 | 107,014 | 760,937 | (785,515 | ) | 2,984,732 | 34,621,302 | |||||||||||||||||||
Satellite, earth station and equipment | 4,944,004 | 9,757 | 290,668 | (3 | ) | 324,383 | 5,568,809 | |||||||||||||||||||
Cable network | 18,697,500 | 909,876 | 538,985 | (6,316 | ) | (624,728 | ) | 19,515,317 | ||||||||||||||||||
Power supply | 1,312,395 | 9,719 | 65,904 | (1,823 | ) | 1,883,491 | 3,269,686 | |||||||||||||||||||
Data processing equipment | 7,842,373 | 6,438 | 308,528 | (18,964 | ) | (2,805,528 | ) | 5,332,847 | ||||||||||||||||||
Other telecommunications peripherals | 904,151 | 2,381 | 14,183 | (2 | ) | (294,082 | ) | 626,631 | ||||||||||||||||||
Office equipment | 649,938 | 70 | 98,709 | (2,235 | ) | 13,477 | 759,959 | |||||||||||||||||||
Vehicles | 186,383 | 580 | 7,173 | (4,718 | ) | (17,640 | ) | 171,778 | ||||||||||||||||||
Other equipment | 115,544 | 69 | 2,914 | — | (5,434 | ) | 113,093 | |||||||||||||||||||
Property under construction: | ||||||||||||||||||||||||||
Buildings | 21,775 | — | 72,620 | — | (59,290 | ) | 35,105 | |||||||||||||||||||
Switching equipment | 13,172 | — | 3,806,405 | — | (2,484,621 | ) | 1,334,956 | |||||||||||||||||||
Transmission installation and equipment | 714,399 | — | 9,952,261 | — | (7,679,566 | ) | 2,987,094 | |||||||||||||||||||
Satellite, earth station and equipment | 133 | — | — | — | (133 | ) | — | |||||||||||||||||||
Cable network | 3,771 | — | 4,366 | (5,375 | ) | 4,397 | 7,159 | |||||||||||||||||||
Power supply | 61 | — | 743,403 | — | (725,820 | ) | 17,644 | |||||||||||||||||||
Data processing equipment | 1,567,260 | — | 121,201 | — | (1,688,445 | ) | 16 | |||||||||||||||||||
Other telecommunications peripherals | 3,524 | — | — | — | (3,524 | ) | — | |||||||||||||||||||
Leased assets | ||||||||||||||||||||||||||
Vehicles | 330 | — | — | — | (330 | ) | — | |||||||||||||||||||
Transmission installation and equipment | 257,380 | — | — | — | 8,440 | 265,820 | ||||||||||||||||||||
Total | 82,735,906 | 1,288,888 | 17,091,027 | (829,073 | ) | (976,308 | ) | 99,310,440 | �� | |||||||||||||||||
F-55
Table of Contents
January 1, | Acquisition | December 31, | |||||||||||||||||||||||
2006 | KSO VII | Additions | Deductions | Reclassifications | 2006 | ||||||||||||||||||||
Accumulated depreciation and impairment | |||||||||||||||||||||||||
Direct acquisitions | |||||||||||||||||||||||||
Buildings | 1,109,838 | — | 172,492 | — | 7,690 | 1,290,020 | |||||||||||||||||||
Switching equipment | 6,472,592 | — | 2,412,237 | (1,950 | ) | 2,312,126 | 11,195,005 | ||||||||||||||||||
Telegraph, telex and data communication equipment | 201,527 | — | 463 | (2,172 | ) | (14,082 | ) | 185,736 | |||||||||||||||||
Transmission installation and equipment | 11,991,282 | — | 2,889,113 | (345,654 | ) | (2,370,798 | ) | 12,163,943 | |||||||||||||||||
Satellite, earth station and equipment | 1,306,061 | — | 411,947 | (3 | ) | 229,870 | 1,947,875 | ||||||||||||||||||
Cable network | 10,331,744 | — | 1,760,530 | (3,691 | ) | (592,705 | ) | 11,495,878 | |||||||||||||||||
Power supply | 1,032,190 | — | 224,572 | (1,523 | ) | 245,196 | 1,500,435 | ||||||||||||||||||
Data processing equipment | 2,938,131 | — | 1,031,187 | (18,964 | ) | (262,154 | ) | 3,688,200 | |||||||||||||||||
Other telecommunications peripherals | 793,983 | — | 17,121 | (2 | ) | (223,557 | ) | 587,545 | |||||||||||||||||
Office equipment | 543,138 | — | 41,676 | (2,235 | ) | 10,459 | 593,038 | ||||||||||||||||||
Vehicles | 179,601 | — | 3,663 | (4,718 | ) | (17,528 | ) | 161,018 | |||||||||||||||||
Other equipment | 101,564 | — | 5,205 | — | (5,558 | ) | 101,211 | ||||||||||||||||||
Leased assets | |||||||||||||||||||||||||
Vehicles | 70 | — | — | — | (70 | ) | — | ||||||||||||||||||
Transmission installation and equipment | 90,942 | — | 42,534 | — | — | 133,476 | |||||||||||||||||||
Total | 37,092,663 | — | 9,012,740 | (380,912 | ) | (681,111 | ) | 45,043,380 | |||||||||||||||||
Net Book Value | 45,643,243 | 54,267,060 | |||||||||||||||||||||||
2005 | 2006 | |||||||
Proceeds from sale of property, plant and equipment | 84,621 | 17,269 | ||||||
Net book value | 38,428 | 7,806 | ||||||
Gain on disposal | 46,193 | 9,463 | ||||||
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Year | 2005 | 2006 | ||||||
2006 | 73,443 | — | ||||||
2007 | 73,443 | 73,443 | ||||||
2008 | 73,443 | 73,443 | ||||||
2009 | 73,443 | 73,443 | ||||||
2010 | 73,443 | 73,443 | ||||||
2011 | 73,443 | 73,443 | ||||||
Later | 69,332 | 69,332 | ||||||
Total minimum lease payments | 509,990 | 436,547 | ||||||
Interest | (258,252 | ) | (198,904 | ) | ||||
Net present value of minimum lease payments | 251,738 | 237,643 | ||||||
Current maturities (Note 21a) | (16,201 | ) | (20,535 | ) | ||||
Long-term portion (Note 21b) | 235,537 | 217,108 | ||||||
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13. | PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS |
January 1, | December 31, | ||||||||||||||||
2005 | Additions | 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 | |||||||||||||||
January 1, | Acquisition of | December 31, | |||||||||||||||||||
2006 | KSO VII | Additions | Reclassifications | 2006 | |||||||||||||||||
At cost: | |||||||||||||||||||||
Land | 3,428 | — | — | 1,218 | 4,646 | ||||||||||||||||
Buildings | 8,021 | — | — | (2,911 | ) | 5,110 | |||||||||||||||
Switching equipment | 275,035 | 108,810 | 27,294 | (45,846 | ) | 365,293 | |||||||||||||||
Transmission installation and equipment | 283,438 | 19,219 | 7,837 | (14,129 | ) | 296,365 | |||||||||||||||
Cable network | 268,413 | 321,756 | 56,119 | (27,443 | ) | 618,845 | |||||||||||||||
Other telecommunications peripherals | 169,304 | 2,420 | 196 | (3,166 | ) | 168,754 | |||||||||||||||
Total | 1,007,639 | 452,205 | 91,446 | (92,277 | ) | 1,459,013 | |||||||||||||||
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January 1, | Acquisition of | December 31, | |||||||||||||||||||
2006 | KSO VII | Additions | Reclassifications | 2006 | |||||||||||||||||
Accumulated depreciation: | |||||||||||||||||||||
Land | 1,771 | — | 212 | 720 | 2,703 | ||||||||||||||||
Buildings | 4,366 | — | 360 | (1,800 | ) | 2,926 | |||||||||||||||
Switching equipment | 185,689 | — | 25,774 | (39,122 | ) | 172,341 | |||||||||||||||
Transmission installation and equipment | 83,294 | — | 33,870 | (13,911 | ) | 103,253 | |||||||||||||||
Cable network | 114,126 | — | 30,949 | (20,335 | ) | 124,740 | |||||||||||||||
Other telecommunications peripherals | 68,988 | — | 21,597 | (3,167 | ) | 87,418 | |||||||||||||||
Total | 458,234 | — | 112,762 | (77,615 | ) | 493,381 | |||||||||||||||
Net Book Value | 549,405 | 965,632 | |||||||||||||||||||
2004 | 2005 | 2006 | ||||||||||
Gross amount | 1,193,697 | 1,007,639 | 1,459,013 | |||||||||
Accumulated amortization: | ||||||||||||
Beginning balance | (984,954 | ) | (833,365 | ) | (582,155 | ) | ||||||
Addition (Note 36) | (82,033 | ) | (136,681 | ) | (151,961 | ) | ||||||
Deduction | 233,622 | 387,891 | 92,277 | |||||||||
Ending balance | (833,365 | ) | (582,155 | ) | (641,839 | ) | ||||||
Net | 360,332 | 425,484 | 817,174 | |||||||||
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14. | ADVANCES AND OTHER NON-CURRENT ASSETS |
2005 | 2006 | |||||||
Prepaid rent, long-term portion | 428,564 | 621,834 | ||||||
Advances for purchase of property, plant and equipment | 253,123 | 354,730 | ||||||
Equipment not used in operation-net | 4,236 | 203,002 | ||||||
Restricted cash | 90,749 | 91,862 | ||||||
Deferred landrights charges | 87,863 | 82,529 | ||||||
Security deposits | 30,570 | 32,072 | ||||||
Others | 50,932 | 68,254 | ||||||
Total | 946,037 | 1,454,283 | ||||||
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15. | GOODWILL AND OTHER INTANGIBLE ASSETS |
Other | |||||||||||||||||
intangible | |||||||||||||||||
Goodwill | assets | License | Total | ||||||||||||||
Gross carrying amount: | |||||||||||||||||
Balance 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 | |||||||||||||||
Gross carrying amount: | |||||||||||||||||
Balance as of December 31, 2005 | 106,348 | 7,151,111 | — | 7,257,459 | |||||||||||||
Addition-3G License Telkomsel | — | — | 436,000 | 436,000 | |||||||||||||
Addition-KSO VII acquisition (Note 5e) | — | 451,736 | — | 451,736 | |||||||||||||
Balance as of December 31, 2006 | 106,348 | 7,602,847 | 436,000 | 8,145,195 | |||||||||||||
Accumulated amortization: | |||||||||||||||||
Balance as of December 31, 2005 | (97,491 | ) | (2,666,696 | ) | — | (2,764,187 | ) | ||||||||||
Amortization expense for 2006 | (8,857 | ) | (923,867 | ) | (11,679 | ) | (944,403 | ) | |||||||||
Balance as of December 31, 2006 | (106,348 | ) | (3,590,563 | ) | (11,679 | ) | (3,708,590 | ) | |||||||||
Net book value | — | 4,012,284 | 424,321 | 4,436,605 | |||||||||||||
Weighted-average amortization period | 5 years | 7.58 years | 9.5 years |
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16. | ESCROW ACCOUNTS |
2005 | 2006 | |||||||
Citibank N.A., Singapore | 126,128 | — | ||||||
Bank Mandiri | 6,369 | — | ||||||
Bank Danamon | — | 1,849 | ||||||
Bank Negara Indonesia | — | 116 | ||||||
Bank Internasional Indonesia | — | 108 | ||||||
132,497 | 2,073 | |||||||
a. | Citibank N.A., Singapore |
b. | Bank Mandiri |
c. | Bank Danamon, Bank Internasional Indonesia, and Bank Negara Indonesia |
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17. | TRADE PAYABLES |
2005 | 2006 | ||||||||
Related parties | |||||||||
Concession fees | 648,950 | 818,121 | |||||||
Payables to other telecommunications providers | 99,980 | 102,702 | |||||||
Purchases of equipment, materials and services | 265,459 | 195,673 | |||||||
Total | 1,014,389 | 1,116,496 | |||||||
Third parties | |||||||||
Purchases of equipment, materials and services | 4,011,444 | 5,499,254 | |||||||
Payables to other telecommunication providers | 163,646 | 111,963 | |||||||
Payables related to revenue-sharing arrangements | 106,195 | 190,240 | |||||||
Total | 4,281,285 | 5,801,457 | |||||||
Total | 5,295,674 | 6,917,953 | |||||||
2005 | 2006 | |||||||
Rupiah | 3,112,303 | 6,636,507 | ||||||
U.S. Dollar | 1,381,473 | 259,996 | ||||||
Euro | 796,343 | 18,377 | ||||||
Singapore Dollar | 33 | 2,431 | ||||||
Great British Pound Sterling | 14 | 630 | ||||||
Myanmar Kyat | — | 12 | ||||||
Japanese Yen | 5,508 | — | ||||||
Total | 5,295,674 | 6,917,953 | ||||||
18. | ACCRUED EXPENSES |
2005 | 2006 | |||||||
Early retirement program | — | 1,528,429 | ||||||
Salaries and benefits | 452,413 | 710,814 | ||||||
Operations, maintenance and telecommunications services | 411,075 | 555,653 | ||||||
General, administrative and marketing | 444,101 | 492,054 | ||||||
Interest and bank charges | 134,299 | 188,748 | ||||||
Loss on procurement commitments (Note 12) | 79,359 | — | ||||||
Total | 1,521,247 | 3,475,698 | ||||||
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19. | UNEARNED INCOME |
2005 | 2006 | |||||||
Prepaid pulse reload vouchers | 1,582,762 | 1,976,868 | ||||||
Other telecommunication services | 3,917 | 3,492 | ||||||
Others | 6,039 | 57,412 | ||||||
Total | 1,592,718 | 2,037,772 | ||||||
20. | SHORT-TERM BANK LOANS |
2005 | 2006 | |||||||
Bank Central Asia | 170,000 | 233,334 | ||||||
Bank Mandiri | — | 233,333 | ||||||
Bank Negara Indonesia | — | 200,000 | ||||||
Bank Niaga | 3,800 | 13,323 | ||||||
Bank Bumiputera Indonesia | — | 8,000 | ||||||
Total | 173,800 | 687,990 | ||||||
a. | Bank Central Asia |
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b. | Bank Mandiri |
c. | Bank Negara Indonesia (“BNI”) |
d. | Bank Niaga |
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e. | Bank Bumiputera Indonesia |
21. | MATURITIES OF LONG-TERM LIABILITIES |
a. | Current maturities |
Notes | 2005 | 2006 | ||||||||||
Bank loans | 24 | 634,542 | 1,669,146 | |||||||||
Notes and Bonds | 23 | 144,510 | 1,461,955 | |||||||||
Deferred consideration for business combinations | 25 | 862,394 | 1,054,095 | |||||||||
Two-step loans | 22 | 569,278 | 469,678 | |||||||||
Obligations under capital leases | 12 | 16,201 | 20,535 | |||||||||
Total | 2,226,925 | 4,675,409 | ||||||||||
b. | Long-term portion |
(In billions of Rupiah) | ||||||||||||||||||||||||||||
Notes | Total | 2008 | 2009 | 2010 | 2011 | Later | ||||||||||||||||||||||
Two-step loans | 22 | 4,006.9 | 432.1 | 419.3 | 396.0 | 368.6 | 2,390.9 | |||||||||||||||||||||
Bank loans | 24 | 2,487.9 | 1,450.9 | 717.8 | 213.1 | 106.1 | — | |||||||||||||||||||||
Deferred consideration for business combinations | 25 | 3,537.1 | 1,102.4 | 1,141.4 | 1,188.1 | 105.2 | — | |||||||||||||||||||||
Obligations under capital leases | 12 | 217.1 | 26.0 | 33.0 | 41.9 | 116.2 | — | |||||||||||||||||||||
Total | 10,249.0 | 3,011.4 | 2,311.5 | 1,839.1 | 696.1 | 2,390.9 | ||||||||||||||||||||||
22. | TWO-STEP LOANS |
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Interest Rate | Outstanding | |||||||||||||||
Creditors | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Overseas banks | 3.10% — 10.71% | 3.10% — 13.67% | 5,250,829 | 4,434,041 | ||||||||||||
Consortium of contractors | 3.20% | 3.20% | 78,648 | 42,572 | ||||||||||||
Total | 5,329,477 | 4,476,613 | ||||||||||||||
Current maturities (Note 21a) | (569,278 | ) | (469,678 | ) | ||||||||||||
Long-term portion (Note 21b) | 4,760,199 | 4,006,935 | ||||||||||||||
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2005 | 2006 | 2005 | 2006 | ||||||||||||
U.S. Dollar | 4.00% — 6.81% | 4.00% — 6.48% | 2,232,752 | 1,795,782 | ||||||||||||
Rupiah | 8.30% — 10.71% | 11.23% — 13.67% | 1,794,149 | 1,592,198 | ||||||||||||
Japanese Yen | 3.10% | 3.10% | 1,223,928 | 1,046,061 | ||||||||||||
Total | 5,250,829 | 4,434,041 | ||||||||||||||
Interest Rate | Outstanding | |||||||||||||||
Currencies | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Japanese Yen | 3.20% | 3.20% | 78,648 | 42,572 | ||||||||||||
Total | 78,648 | 42,572 | ||||||||||||||
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a. Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1 for the two-step loans originating from World Bank and Asian Development Bank (“ADB”), respectively. | |
b. Internal financing (earnings before depreciation and interest expenses) should exceed 50% and 20% compared to annual average capital expenditures for loans originating from World Bank and ADB, respectively. |
23. | NOTES AND BONDS |
2005 | 2006 | |||||||
Bonds | 991,850 | 997,137 | ||||||
Medium-term Notes | 609,329 | 464,818 | ||||||
�� | ||||||||
Total | 1,601,179 | 1,461,955 | ||||||
Current maturities (Note 21a) | (144,510 | ) | (1,461,955 | ) | ||||
Long-term portion | 1,456,669 | — | ||||||
a. | Bonds |
2005 | 2006 | |||||||
Principal | 1,000,000 | 1,000,000 | ||||||
Bond issuance costs | (8,150 | ) | (2,863 | ) | ||||
Net | 991,850 | 997,137 | ||||||
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1. Debt service coverage ratio should exceed 1.5:1 | |
2. Debt to equity ratio should not exceed: |
a. 3:1 for the period January 1, 2002 to December 31, 2002 | |
b. 2.5:1 for the period January 1, 2003 to December 31, 2003 | |
c. 2:1 for the period January 1, 2004 to the redemption date of the bonds |
3. Debt to EBITDA ratio should not exceed 3:1 |
b. | Medium-term Notes |
Series | Principal | Maturity | Interest Rate | ||||||||||
A | 290,000 | June 15, 2005 | 7.70 | % | |||||||||
B | 225,000 | December 15, 2005 | 7.95 | % | |||||||||
C | 145,000 | June 15, 2006 | 8.20 | % | |||||||||
D | 465,000 | June 15, 2007 | 9.40 | % | |||||||||
Total | 1,125,000 | ||||||||||||
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2005 | 2006 | |||||||
Principal | 610,000 | 465,000 | ||||||
Debt issuance costs | (671 | ) | (182 | ) | ||||
609,329 | 464,818 | |||||||
Current maturities | (144,510 | ) | (464,818 | ) | ||||
Long-term portion | 464,819 | — | ||||||
1. Debt service coverage ratio should exceed 1.5:1 | |
2. Debt to equity ratio should not exceed 2:1 | |
3. Debt to EBITDA ratio should not exceed 3:1 |
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24. | BANK LOANS |
2005 | 2006 | |||||||||||||||||||||||
2006 | 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 | 117.6 | 1,156,296 | 105.8 | 952,842 | ||||||||||||||||||
Bank Mandiri | Rp. | 950,000.0 | — | 14,918 | — | 950,000 | ||||||||||||||||||
Bank Central Asia | Rp. | 923,000.0 | — | 86,093 | — | 778,698 | ||||||||||||||||||
Citibank N.A | US$ | 113.3 | 62.5 | 614,501 | 39.2 | 352,612 | ||||||||||||||||||
Euro | 73.4 | 36.7 | 427,718 | 22.0 | 260,994 | |||||||||||||||||||
Rp. | 500,000.0 | — | — | — | 500,000 | |||||||||||||||||||
Bank BNI | Rp. | 300,000.0 | — | — | — | 300,000 | ||||||||||||||||||
Consortium of banks | Rp. | 150,000.0 | — | 74,890 | — | 32,606 | ||||||||||||||||||
Lippo Bank | Rp. | 18,500.0 | — | — | — | 18,401 | ||||||||||||||||||
Bank Niaga | Rp. | 11,300.0 | — | 7,229 | — | 6,705 | ||||||||||||||||||
Bank Bukopin | Rp. | 5,300.0 | — | 5,001 | — | 4,201 | ||||||||||||||||||
Total | 2,386,646 | 4,157,059 | ||||||||||||||||||||||
Current maturities of bank loans (Note 21a) | (634,542 | ) | (1,669,146 | ) | ||||||||||||||||||||
Long-term portion (Note 21b) | 1,752,104 | 2,487,913 | ||||||||||||||||||||||
a. | The Export-Import Bank of Korea |
b. | Bank Mandiri |
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c. | Bank Central Asia |
1. EBITDA to interest ratio should exceed 4:1 |
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2. EBITDA to interest and principal ratio should exceed 1.5:1 | |
3. Debt to EBITDA ratio should not exceed 3:1 |
d. | Citibank N.A. |
Amount | ||||||||
Euro | Rupiah | |||||||
Year | (in millions) | equivalent | ||||||
2007 | 14.7 | 173,996 | ||||||
2008 | 7.3 | 86,998 | ||||||
22.0 | 260,994 | |||||||
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2. | High Performance Backbone (“HP Backbone”) Loans |
1. Debt service coverage ratio should exceed 1.5:1 | |
2. Debt to equity ratio should not exceed: |
a. 3:1 for the period April 10, 2002 to January 1, 2003 | |
b. 2.75:1 for the period January 2, 2003 to January 1, 2004 | |
c. 2.5:1 for the period January 2, 2004 to January 1, 2005 | |
d. 2:1 for the period January 2, 2005 to the full repayment date of the loans |
3. Debt to EBITDA ratio should not exceed: |
a. 3.5:1 for the period April 10, 2002 to January 1, 2004 | |
b. 3:1 for the period January 2, 2004 to the full repayment date of the loans |
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3. | EKN-Backed Facility |
Amount | ||||||||
US$ (in | Rupiah | |||||||
Year | millions) | Equivalent | ||||||
2007 | 15.5 | 139,660 | ||||||
2008 | 9.7 | 87,333 | ||||||
�� | 25.2 | 226,993 | ||||||
4. | Medium Term Loan |
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2005 | 2006 | |||||||||||||||||
Foreign | Foreign | |||||||||||||||||
Currencies | Rupiah | Currencies | Rupiah | |||||||||||||||
(in millions) | Equivalent | (in millions) | Equivalent | |||||||||||||||
Hermes Export Facility | Euro | 36.7 | 427,718 | 22.0 | 260,994 | |||||||||||||
HP Backbone loans | US$ | 21.9 | 214,922 | 14.0 | 125,619 | |||||||||||||
EKN-Backed Facility | US$ | 40.6 | 399,579 | 25.2 | 226,993 | |||||||||||||
Medium Term Loan | Rp. | — | — | — | 500,000 | |||||||||||||
Total | 1,042,219 | 1,113,606 | ||||||||||||||||
Current maturities | (401,013 | ) | (584,821 | ) | ||||||||||||||
Long-term portion | 641,206 | 528,785 | ||||||||||||||||
e. | Bank Negara Indonesia (“BNI”) |
f. | Consortium of banks |
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1. Debt to equity ratio should not exceed 3:1 | |
2. EBITDA to interest expense should exceed 5:1 |
g. | Bank Niaga |
h. | Bank Bukopin |
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i. | Bank Lippo |
25. | DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS |
2005 | 2006 | ||||||||
AWI transaction(Note 5c) | |||||||||
PT Aria Infotek | 394,294 | 257,870 | |||||||
The Asian Infrastructure Fund | 93,879 | 61,398 | |||||||
MediaOne International I B.V | 262,863 | 171,914 | |||||||
Less discount on promissory notes | (57,298 | ) | (26,064 | ) | |||||
693,738 | 465,118 | ||||||||
Dayamitra transaction(Note 5a) | |||||||||
TM Communication (HK) Ltd. | 147,791 | — | |||||||
Less discount on promissory notes | (2,519 | ) | — | ||||||
145,272 | — | ||||||||
KSO IV transaction(Note 5d) | |||||||||
MGTI | 3,868,433 | 2,874,128 | |||||||
Less discount | (717,090 | ) | (437,710 | ) | |||||
3,151,343 | 2,436,418 | ||||||||
KSO VII transaction(Note 5e) | |||||||||
BSI | — | 2,226,431 | |||||||
Less discount | — | (536,790 | ) | ||||||
— | 1,689,641 | ||||||||
Total | 3,990,353 | 4,591,177 | |||||||
Current maturity — net of discount (Note 21a) | (862,394 | ) | (1,054,095 | ) | |||||
Long-term portion — net of discount (Note 21b) | 3,127,959 | 3,537,082 | |||||||
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26. | MINORITY INTEREST |
2005 | 2006 | ||||||||
Minority interest in net assets of subsidiaries: | |||||||||
Telkomsel | 6,208,354 | 8,074,595 | |||||||
Infomedia | 96,835 | 110,912 | |||||||
Metra | — | 1,573 | |||||||
GSD | 4 | 7 | |||||||
Total | 6,305,193 | 8,187,087 | |||||||
2004 | 2005 | 2006 | |||||||||||
Minority interest in net income (loss) of subsidiaries: | |||||||||||||
Telkomsel | 1,915,543 | 3,026,029 | 3,913,743 | ||||||||||
Infomedia | 37,088 | 37,940 | 36,784 | ||||||||||
Dayamitra | 9,139 | — | — | ||||||||||
Indonusa | (1,959 | ) | — | — | |||||||||
Napsindo | (2,068 | ) | — | — | |||||||||
PII | (1,443 | ) | — | — | |||||||||
GSD | 1 | 2 | 2 | ||||||||||
Metra | — | — | (2,428 | ) | |||||||||
Total | 1,956,301 | 3,063,971 | 3,948,101 | ||||||||||
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27. | CAPITAL STOCK |
2005 | ||||||||||||||
Percentage | Total Paid-up | |||||||||||||
Description | Number of Shares | of 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 (Note 1a): | ||||||||||||||
Petrus Sartono | 19,116 | — | 5 | |||||||||||
Board of Directors (Note 1a): | ||||||||||||||
Garuda Sugardo | 16,524 | — | 4 | |||||||||||
Guntur Siregar | 19,980 | — | 5 | |||||||||||
John Welly | 21,712 | — | 5 | |||||||||||
Abdul Haris | 1,000 | — | — | |||||||||||
Public (individually less than 5%) | 6,556,113,775 | 32.52 | 1,639,029 | |||||||||||
Total | 20,159,999,280 | 100.00 | 5,040,000 | |||||||||||
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2006 | ||||||||||||||
Percentage | Total Paid-up | |||||||||||||
Description | Number of Shares | of 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.) | 1,756,681,581 | 8.71 | 439,170 | |||||||||||
The Bank of New York | 1,487,512,256 | 7.38 | 371,878 | |||||||||||
Board of Commissioners (Note 1a): | ||||||||||||||
Petrus Sartono | 19,116 | — | 5 | |||||||||||
Board of Directors (Note 1a): | ||||||||||||||
Garuda Sugardo | 16,524 | — | 4 | |||||||||||
Guntur Siregar | 19,980 | — | 5 | |||||||||||
John Welly | 4 | — | — | |||||||||||
Abdul Haris | 1,000 | — | — | |||||||||||
Public (individually less than 5%) | 6,476,901,607 | 32.13 | 1,619,226 | |||||||||||
Total | 20,041,622,780 | 99.41 | 5,010,406 | |||||||||||
Treasury Stock (Note 29) | 118,376,500 | 0.59 | 29,594 | |||||||||||
Total | 20,159,999,280 | 100.00 | 5,040,000 | |||||||||||
28. | ADDITIONAL PAID-IN CAPITAL |
2005 | 2006 | |||||||
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. | TREASURY STOCK |
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2006 | ||||||||
Number of share | Rp. | |||||||
Balance as of January 1, 2006 | — | — | ||||||
Number of shares acquired | 118,376,500 | 952,211 | ||||||
Balance as of December 31, 2006 | 118,376,500 | 952,211 | ||||||
Rp. | ||||
Weighted average | 8,044 | |||
Minimum | 6,633 | |||
Maximum | 10,620 |
30. | DIFFERENCE IN VALUE OF RESTRUCTURING TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL |
Cross-ownership transactions and acquisition of Pramindo |
i. The acquisition by the Company of Indosat’s 35% equity interest in Telkomsel for US$945.0 million (“Telkomsel Transaction”); | |
ii. The acquisition by Indosat of the Company’s 22.5% equity interest in PT Satelit Palapa Indonesia (“Satelindo”) for US$186.0 million (“Satelindo Transaction”); | |
iii. The acquisition by Indosat of the Company’s 37.66% equity interest in PT Aplikanusa Lintasarta (“Lintasarta”) and convertible bonds of Rp.4,051 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 in | ||||||||||||||||||||||||||
(Received) | Investment | Income Tax | 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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2004 | 2005 | 2006 | |||||||||||
Fixed lines | |||||||||||||
Local and domestic long-distance usage | 7,439,310 | 7,223,137 | 7,130,861 | ||||||||||
Monthly subscription charges | 2,934,899 | 3,289,750 | 3,491,497 | ||||||||||
Installation charges | 201,313 | 197,266 | 170,205 | ||||||||||
Phone cards | 15,561 | 10,943 | 4,036 | ||||||||||
Others | 53,938 | 60,156 | 182,434 | ||||||||||
Total | 10,645,021 | 10,781,252 | 10,979,033 | ||||||||||
Cellular | |||||||||||||
Air time charges | 9,825,738 | 13,666,286 | 19,257,290 | ||||||||||
Monthly subscription charges | 448,472 | 383,537 | 297,450 | ||||||||||
Connection fee charges | 55,797 | 64,110 | 109,251 | ||||||||||
Features | 91,291 | 457,025 | 958,656 | ||||||||||
Total | 10,421,298 | 14,570,958 | 20,622,647 | ||||||||||
Total Telephone Revenues | 21,066,319 | 25,352,210 | 31,601,680 | ||||||||||
2004 | 2005 | 2006 | ||||||||||
Cellular | 5,351,613 | 6,685,138 | 7,442,340 | |||||||||
International | 641,210 | 854,766 | 1,001,304 | |||||||||
Others | 195,158 | 202,180 | 237,817 | |||||||||
Total | 6,187,981 | 7,742,084 | 8,681,461 | |||||||||
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2004 | 2005 | 2006 | ||||||||||
Minimum TELKOM Revenues | 295,955 | 268,629 | 207,516 | |||||||||
Share in Distributable KSO Revenues | 349,528 | 318,556 | 274,587 | |||||||||
Amortization of unearned initial investor payments under Joint Operation Schemes | 11,131 | 1,462 | 7,311 | |||||||||
Total | 656,614 | 588,647 | 489,414 | |||||||||
2004 | 2005 | 2006 | ||||||||||
SMS | 3,562,726 | 5,309,244 | 6,730,463 | |||||||||
Internet | 554,948 | 711,375 | 907,467 | |||||||||
Data communication | 360,642 | 610,367 | 1,122,285 | |||||||||
VoIP | 318,854 | 292,750 | 278,057 | |||||||||
e-Business | 11,572 | 10,588 | 26,915 | |||||||||
Total | 4,808,742 | 6,934,324 | 9,065,187 | |||||||||
2004 | 2005 | 2006 | ||||||||||
Leased lines | 443,408 | 347,105 | 424,633 | |||||||||
Satellite transponder lease | 210,901 | 239,531 | 294,105 | |||||||||
Total | 654,309 | 586,636 | 718,738 | |||||||||
2004 | 2005 | 2006 | ||||||||||
Revenue-Sharing Arrangements revenues | 198,543 | 165,601 | 263,516 | |||||||||
Amortization of unearned income (Note 13) | 82,033 | 136,681 | 151,961 | |||||||||
Total | 280,576 | 302,282 | 415,477 | |||||||||
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2004 | 2005 | 2006 | ||||||||||
Salaries and related benefits | 1,796,914 | 2,165,895 | 2,400,631 | |||||||||
Vacation pay, incentives and other benefits | 1,156,069 | 1,615,640 | 2,209,056 | |||||||||
Early retirements program (Note 18) | 243,466 | 486,374 | 1,461,150 | |||||||||
Employee income tax | 523,787 | 856,451 | 889,083 | |||||||||
Net periodic post-retirement health care benefit cost (Note 45) | 416,276 | 488,586 | 604,748 | |||||||||
Net periodic pension cost (Note 43) | 572,419 | 532,331 | 438,383 | |||||||||
Long service awards (Note 44) | 36,861 | 201,878 | 215,840 | |||||||||
Housing | 103,459 | 113,673 | 168,416 | |||||||||
Medical | 12,190 | 18,019 | 25,117 | |||||||||
Other employee benefits (Note 43) | 11,510 | 5,954 | 14,341 | |||||||||
Others | 37,014 | 78,246 | 87,000 | |||||||||
Total | 4,909,965 | 6,563,047 | 8,513,765 | |||||||||
38. | OPERATING EXPENSES — OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES |
2004 | 2005 | 2006 | ||||||||||
Operations and maintenance | 2,398,159 | 3,075,092 | 4,209,145 | |||||||||
Concession fees and Universal Service Obligation (USO) charges | 314,741 | 709,190 | 881,757 | |||||||||
Radio frequency usage charges | 492,568 | 548,186 | 722,600 | |||||||||
Cost of phone, SIM and RUIM cards | 366,661 | 582,351 | 579,334 | |||||||||
Electricity, gas and water | 385,662 | 372,526 | 417,349 | |||||||||
Vehicles and supporting facilities | 181,737 | 217,217 | 246,184 | |||||||||
Leased lines | 132,829 | 124,253 | 236,394 | |||||||||
Insurance | 151,297 | 136,378 | 145,075 | |||||||||
Call center | 59,634 | 104,989 | 14,679 | |||||||||
Travelling | 42,213 | 33,455 | 39,106 | |||||||||
Others | 4,086 | 12,704 | 4,105 | |||||||||
Total | 4,529,587 | 5,916,341 | 7,495,728 | |||||||||
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2004 | 2005 | 2006 | ||||||||||
Amortization of goodwill and other intangible assets (Note 15) | 872,330 | 918,153 | 944,403 | |||||||||
Collection expenses | 358,957 | 379,056 | 542,466 | |||||||||
Provision for doubtful accounts and inventory obsolescence | 357,695 | 488,973 | 458,252 | |||||||||
General and social contribution | 111,838 | 204,326 | 301,826 | |||||||||
Travelling | 192,567 | 171,657 | 229,670 | |||||||||
Training, education and recruitment | 228,524 | 177,853 | 224,321 | |||||||||
Professional fees | 137,355 | 131,047 | 221,043 | |||||||||
Security and screening | 143,892 | 164,416 | 197,416 | |||||||||
Meetings | 58,333 | 40,311 | 63,953 | |||||||||
Stationery and printing | 80,972 | 50,190 | 51,864 | |||||||||
Research and development | 13,225 | 8,396 | 8,653 | |||||||||
Others | 44,159 | 29,573 | 27,560 | |||||||||
Total | 2,599,847 | 2,763,951 | 3,271,427 | |||||||||
2005 | 2006 | |||||||||
b. Prepaid taxes | ||||||||||
Subsidiaries | ||||||||||
Corporate income tax | 13,352 | — | ||||||||
Value added tax | 5,561 | 896 | ||||||||
Income tax Article 23 — Services Delivery | — | 1,494 | ||||||||
18,913 | 2,390 | |||||||||
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2005 | 2006 | ||||||||||
c. Taxes payable | |||||||||||
The Company | |||||||||||
Income taxes | |||||||||||
Article 21 — Individual income tax | 64,793 | 80,626 | |||||||||
Article 22 — Witholding tax on goods delivery and import | 5,055 | 3,137 | |||||||||
Article 23 — Witholding tax on services delivery | 46,132 | 36,258 | |||||||||
Article 25 — Installment of corporate income tax | 117,281 | 128,291 | |||||||||
Article 26 — Witholding tax on non-resident income tax | 1,143 | 73,872 | |||||||||
Article 29 — Underpayment of corporate income tax | 376,140 | 602,159 | |||||||||
Value added tax | 256,523 | 275,657 | |||||||||
867,067 | 1,200,000 | ||||||||||
Subsidiaries | |||||||||||
Income taxes | |||||||||||
Article 4 — Final tax | 3,318 | 7,829 | |||||||||
Article 21 — Individual income tax | 25,059 | 55,340 | |||||||||
Article 22 — Witholding tax on goods delivery and import | — | 639 | |||||||||
Article 23 — Witholding tax on services delivery | 55,928 | 75,577 | |||||||||
Article 25 — Installment of corporate income tax | 203,254 | 272,803 | |||||||||
Article 26 — Witholding tax on non-resident income tax | 72,252 | 34,115 | |||||||||
Article 29 — Underpayment of corporate income tax | 1,207,247 | 808,838 | |||||||||
Value added tax | 35,640 | 113,861 | |||||||||
1,602,698 | 1,369,002 | ||||||||||
2,469,765 | 2,569,002 | ||||||||||
2004 | 2005 | 2006 | |||||||||||
Current | |||||||||||||
The Company | 1,922,238 | 2,034,248 | 2,536,459 | ||||||||||
Subsidiaries | 2,344,873 | 3,685,396 | 4,560,743 | ||||||||||
4,267,111 | 5,719,644 | 7,097,202 | |||||||||||
Deferred | |||||||||||||
The Company | (330,630 | ) | (694,843 | ) | (713,200 | ) | |||||||
Subsidiaries | 242,045 | 159,086 | 655,925 | ||||||||||
(88,585 | ) | (535,757 | ) | (57,275 | ) | ||||||||
4,178,526 | 5,183,887 | 7,039,927 | |||||||||||
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2004 | 2005 | 2006 | ||||||||||
Consolidated income before tax | 12,749,395 | 16,241,424 | 21,993,605 | |||||||||
Add back consolidation eliminations | 3,936,524 | 5,737,400 | 7,529,604 | |||||||||
Consolidated income before tax and eliminations | 16,685,919 | 21,978,824 | 29,523,209 | |||||||||
Less: income before tax of the subsidiaries | (8,485,296 | ) | (12,645,854 | ) | (16,694,373 | ) | ||||||
Income before tax attributable to the Company | 8,200,623 | 9,332,970 | 12,828,836 | |||||||||
Less: income subject to final tax | (206,601 | ) | (285,075 | ) | (690,760 | ) | ||||||
7,994,022 | 9,047,895 | 12,138,076 | ||||||||||
Tax calculated at progressive rates | 2,398,189 | 2,714,351 | 3,641,405 | |||||||||
Non-taxable income | (1,181,983 | ) | (1,724,483 | ) | (2,256,896 | ) | ||||||
Non-deductible expenses | 322,884 | 315,041 | 321,880 | |||||||||
Deferred tax assets originating from previously unrecognized temporary differences, net | (14,940 | ) | (6,900 | ) | — | |||||||
Deferred tax assets that cannot be utilized, net | 24,045 | — | (3,071 | ) | ||||||||
Corporate income tax expense | 1,548,195 | 1,298,009 | 1,703,318 | |||||||||
Final income tax expense | 43,413 | 41,396 | 119,940 | |||||||||
Total income tax expense of the Company | 1,591,608 | 1,339,405 | 1,823,258 | |||||||||
Income tax expense of the Subsidiaries | 2,586,918 | 3,844,482 | 5,216,669 | |||||||||
Total consolidated income tax expense | 4,178,526 | 5,183,887 | 7,039,927 | |||||||||
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2004 | 2005 | 2006 | |||||||||||
Income before tax attributable to the Company | 8,200,623 | 9,332,970 | 12,828,836 | ||||||||||
Less: income subject to final tax | (206,601 | ) | (285,075 | ) | (690,760 | ) | |||||||
7,994,022 | 9,047,895 | 12,138,076 | |||||||||||
Temporary differences: | |||||||||||||
Depreciation of property, plant and equipment | 415,805 | 880,578 | 746,190 | ||||||||||
Gain on sale of property, plant and equipment | (12,874 | ) | (2,143 | ) | (41,269 | ) | |||||||
Allowance for doubtful accounts | 491,577 | 308,193 | 265,385 | ||||||||||
Trade receivables written-off | (91,865 | ) | (336,715 | ) | (118,668 | ) | |||||||
Allowance for inventory obsolescence | 11,385 | 11,228 | 5,501 | ||||||||||
Inventory written-off | — | (12,183 | ) | (1,928 | ) | ||||||||
Accrued early retirement benefits | (132,810 | ) | — | 1,528,429 | |||||||||
Accrued employee benefits | (139,064 | ) | 67,792 | 27,105 | |||||||||
Net periodic pension cost | (264,796 | ) | (164,008 | ) | (275,486 | ) | |||||||
Long service awards | (46,908 | ) | 69,264 | 94,094 | |||||||||
Amortization of intangible assets | 851,060 | 896,883 | 923,867 | ||||||||||
Amortization of landrights | (3,419 | ) | (3,441 | ) | (3,988 | ) | |||||||
Provision for impairment of property, plant and equipment | — | 616,768 | — | ||||||||||
Depreciation of property, plant and equipment under revenue-sharing arrangements | 82,415 | 96,114 | 112,762 | ||||||||||
Interest income/receivable | 45,835 | — | — | ||||||||||
Amortization of unearned income on revenue-sharing arrangements | (82,033 | ) | (135,662 | ) | (153,465 | ) | |||||||
Payments of deferred consideration for business combinations | (233,337 | ) | (405,302 | ) | (484,276 | ) | |||||||
Consultant fees for acquisition of business | (27,797 | ) | — | — | |||||||||
Foreign exchange loss/(gain) on deferred consideration for business combinations | 342,073 | 190,206 | (273,555 | ) | |||||||||
Foreign exchange losses capitalized to property under construction | (74,283 | ) | — | — | |||||||||
Capital leases | — | 21,359 | 20,000 | ||||||||||
Loss on purchase commitments | — | 79,359 | — | ||||||||||
Other provisions | — | 114,854 | (3,600 | ) | |||||||||
Total temporary differences | 1,130,964 | 2,293,144 | 2,367,098 | ||||||||||
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2004 | 2005 | 2006 | |||||||||||
Permanent differences: | |||||||||||||
Net periodic post-retirement health care benefit cost | 408,498 | 483,045 | 596,108 | ||||||||||
Amortization of goodwill | 21,270 | 21,270 | 8,858 | ||||||||||
Amortization of discount on promissory notes | 109,786 | 74,632 | 46,183 | ||||||||||
Tax penalties | 14,645 | 59,850 | (2,925 | ) | |||||||||
Equity in net income of associates and subsidiaries | (3,939,944 | ) | (5,748,277 | ) | (7,522,986 | ) | |||||||
Gain on sales of investment | — | — | (10,397 | ) | |||||||||
Others | 523,568 | 411,339 | 435,104 | ||||||||||
Total permanent differences | (2,862,177 | ) | (4,698,141 | ) | (6,450,055 | ) | |||||||
Taxable income | 6,262,809 | 6,642,898 | 8,055,119 | ||||||||||
Corporate income tax expense | 1,878,825 | 1,992,852 | 2,416,519 | ||||||||||
Final income tax expense | 43,413 | 41,396 | 119,940 | ||||||||||
Total current income tax expense of the Company | 1,922,238 | 2,034,248 | 2,536,459 | ||||||||||
Current income tax expense of the Subsidiaries | 2,344,873 | 3,685,396 | 4,560,743 | ||||||||||
Total current income tax expense | 4,267,111 | 5,719,644 | 7,097,202 | ||||||||||
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(Charged)/ | |||||||||||||
credited to | |||||||||||||
December 31, | statements of | December 31, | |||||||||||
2004 | income | 2005 | |||||||||||
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 | ||||||||||
Deferred consideration for business combinations | 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 | ) | 535,757 | (2,391,810 | ) | ||||||||
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(Charged)/ | |||||||||||||||||||||
Credited to | |||||||||||||||||||||
December 31, | Statements of | Business | Prior Year | December 31, | |||||||||||||||||
2005 | Income | Acquisition | Overpayment | 2006 | |||||||||||||||||
The Company | |||||||||||||||||||||
Deferred tax assets: | |||||||||||||||||||||
Allowance for doubtful accounts | 205,396 | 57,925 | — | — | 263,321 | ||||||||||||||||
Allowance for inventory obsolescence | 13,652 | 447 | — | — | 14,099 | ||||||||||||||||
Long-term investments | 6,666 | (6,666 | ) | — | — | — | |||||||||||||||
Accrued for employee benefits | 63,003 | 466,659 | — | — | 529,662 | ||||||||||||||||
Accrued long service awards | 148,791 | 28,228 | — | — | 177,019 | ||||||||||||||||
Net periodic pension cost | 384,237 | (81,977 | ) | — | — | 302,260 | |||||||||||||||
Capital Leases | 6,408 | 6,000 | — | — | 12,408 | ||||||||||||||||
Deferred consideration for business combinations | 945,403 | (227,349 | ) | 531,278 | — | 1,249,332 | |||||||||||||||
Accrued expenses | 58,265 | (1,080 | ) | — | — | 57,185 | |||||||||||||||
Total deferred tax assets | 1,831,821 | 242,187 | 531,278 | — | 2,605,286 | ||||||||||||||||
Deferred tax liabilities: | |||||||||||||||||||||
Difference between book and tax property, plant and equipment’s net book value | (1,766,217 | ) | 205,534 | (386,666 | ) | — | (1,947,349 | ) | |||||||||||||
Landrights | (2,604 | ) | (1,196 | ) | — | — | (3,800 | ) | |||||||||||||
Revenue-sharing arrangements | (37,176 | ) | (10,485 | ) | — | — | (47,661 | ) | |||||||||||||
Intangible assets | (1,345,324 | ) | 277,160 | (137,619 | ) | — | (1,205,783 | ) | |||||||||||||
Total deferred tax liabilities | (3,151,321 | ) | 471,013 | (524,285 | ) | — | (3,204,593 | ) | |||||||||||||
Deferred tax liabilities of the Company, net | (1,319,500 | ) | 713,200 | 6,993 | — | (599,307 | ) | ||||||||||||||
Deferred tax liabilities of the subsidiaries, net | (1,072,310 | ) | (655,925 | ) | — | (337,855 | ) | (2,066,090 | ) | ||||||||||||
Total deferred tax liabilities, net | (2,391,810 | ) | 57,275 | 6,993 | (337,855 | ) | (2,665,397 | ) | |||||||||||||
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a. | The Company |
F-97
Table of Contents
2004 | 2005 | 2006 | ||||||||||
Change in projected benefit obligation | ||||||||||||
Projected benefit obligation at beginning of year | 6,852,923 | 7,315,182 | 7,140,100 | |||||||||
Service cost | 137,264 | 138,117 | 187,960 | |||||||||
Interest cost | 740,494 | 789,830 | 768,586 | |||||||||
Plan participants’ contributions | 42,838 | 41,371 | 43,918 | |||||||||
Actuarial gain (loss) | (216,025 | ) | (874,573 | ) | 286,733 | |||||||
Expected benefits paid | (242,312 | ) | (269,827 | ) | (305,916 | ) | ||||||
Projected benefit obligation at end of the year | 7,315,182 | 7,140,100 | 8,121,381 | |||||||||
Change in plan assets | ||||||||||||
Fair value of plan assets at beginning of year | 3,671,309 | 4,884,523 | 5,429,954 | |||||||||
Expected return on plan assets | 436,672 | 533,333 | 677,602 | |||||||||
Employer contribution | 845,743 | 698,526 | 693,497 | |||||||||
Plan participants’ contributions | 42,838 | 41,371 | 43,918 | |||||||||
Actuarial gain (loss) | 130,273 | (457,972 | ) | 671,693 | ||||||||
Expected benefits paid | (242,312 | ) | (269,827 | ) | (305,916 | ) | ||||||
Fair value of plan assets at end of the year | 4,884,523 | 5,429,954 | 7,210,748 | |||||||||
Funded status | (2,430,659 | ) | (1,710,146 | ) | (910,633 | ) | ||||||
Unrecognized prior service cost | 1,329,046 | 1,190,024 | 1,051,002 | |||||||||
Unrecognized net actuarial gain | (346,298 | ) | (762,899 | ) | (1,143,369 | ) | ||||||
Accrued pension benefit cost | (1,447,911 | ) | (1,283,021 | ) | (1,003,000 | ) | ||||||
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2004 | 2005 | 2006 | ||||||||||
Accrued pension benefit cost at beginning of the year | 1,713,546 | 1,447,911 | 1,283,021 | |||||||||
Net periodic benefit cost less amounts charged to KSO Units | 563,739 | 514,976 | 397,317 | |||||||||
Amounts charged to KSO Units under contractual agreement | 16,369 | 18,660 | 16,159 | |||||||||
Employer contributions | (845,743 | ) | (698,526 | ) | (693,497 | ) | ||||||
Accrued pension benefit cost at end of the year | 1,447,911 | 1,283,021 | 1,003,000 | |||||||||
2004 | 2005 | 2006 | ||||||||||
Discount rate | 11% | 11% | 10.5% | |||||||||
Expected long-term return on plan assets | 10.5% | 10.5% | 12% | |||||||||
Rate of compensation increase | 8% | 8.8% | 8% |
2004 | 2005 | 2006 | ||||||||||
Service Cost | 137,264 | 138,117 | 187,960 | |||||||||
Interest Cost | 740,494 | 789,830 | 768,586 | |||||||||
Expected return on plan assets | (436,672 | ) | (533,333 | ) | (677,602 | ) | ||||||
Amortization of prior service cost | 139,022 | 139,022 | 139,022 | |||||||||
Recognized actuarial loss (gain) | — | — | (4,490 | ) | ||||||||
Net periodic pension cost | 580,108 | 533,636 | 413,476 | |||||||||
Amount charged to KSO Units under contractual agreement | (16,369 | ) | (18,660 | ) | (16,159 | ) | ||||||
Total net periodic pension cost less amounts charged to KSO Units (Note 37) | 563,739 | 514,976 | 397,317 | |||||||||
b. | Telkomsel |
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2004 | 2005 | 2006 | ||||||||||
Projected benefit obligation | (43,547 | ) | (147,103 | ) | (230,172 | ) | ||||||
Fair value of plan assets | 11,182 | 20,971 | 29,904 | |||||||||
Unfunded status | (32,365 | ) | (126,132 | ) | (200,268 | ) | ||||||
Unrecognized items in the balance sheet: | ||||||||||||
Unrecognized prior service cost | 1,328 | 1,213 | 1,098 | |||||||||
Unrecognized net actuarial loss | 20,707 | 103,391 | 166,676 | |||||||||
Accrued pension benefit cost | (10,330 | ) | (21,528 | ) | (32,494 | ) | ||||||
2004 | 2005 | 2006 | ||||||||||
Service cost | 4,155 | 10,072 | 21,321 | |||||||||
Interest cost | 3,889 | 6,650 | 16,169 | |||||||||
Expected return on plan assets | (824 | ) | (832 | ) | (2,124 | ) | ||||||
Amortization of past service cost | 115 | 115 | 115 | |||||||||
Recognized actuarial loss | 1,158 | 1,320 | 5,216 | |||||||||
Net periodic pension cost (Note 37) | 8,493 | 17,325 | 40,697 | |||||||||
2004 | 2005 | 2006 | ||||||||||
Discount rate | 11 | % | 11 | % | 10.5 | % | ||||||
Expected long-term return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | ||||||
Rate of compensation increase | 9 | % | 8 | % | 8 | % |
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c. | Infomedia |
2004 | 2005 | 2006 | ||||||||||
Projected benefit obligation | (4,051 | ) | (5,225 | ) | (6,188 | ) | ||||||
Fair value of plan assets | 5,413 | 5,865 | 6,291 | |||||||||
Funded status | 1,362 | 640 | 103 | |||||||||
Prepaid pension benefit cost | 1,362 | 640 | 103 | |||||||||
d. | Obligation Under Labor Law |
a. | The Company |
2004 | 2005 | 2006 | ||||||||||
Discount rate | 11 | % | 11 | % | 10.5 | % | ||||||
Rate of compensation increase | 8 | % | 8 | % | 8 | % |
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2004 | 2005 | 2006 | ||||||||||
Accrued long service awards at beginning of year | 473,614 | 426,705 | 495,969 | |||||||||
Net periodic benefit cost less amounts charged to KSO Units (Note 37) | 31,148 | 192,450 | 150,741 | |||||||||
Amounts to charged to KSO Units under contractual agreement | — | — | 10,321 | |||||||||
Benefits paid | (78,057 | ) | (123,186 | ) | (66,968 | ) | ||||||
Accrued long service awards at end of year | 426,705 | 495,969 | 590,063 | |||||||||
Benefits to be paid for early retirement program (Note 18) | — | — | (67,279 | ) | ||||||||
Accrued long service awards — non current | 426,705 | 495,969 | 522,784 | |||||||||
b. | Telkomsel |
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2004 | 2005 | 2006 | ||||||||||
Change in projected benefit obligation | ||||||||||||
Projected benefit obligation at beginning of the year | 3,787,389 | 4,681,005 | 5,574,489 | |||||||||
Service cost | 76,163 | 87,636 | 107,513 | |||||||||
Interest cost | 411,110 | 507,994 | 605,573 | |||||||||
Actuarial loss | 506,397 | 423,606 | 836,334 | |||||||||
Expected benefits paid | (100,054 | ) | (125,752 | ) | (138,566 | ) | ||||||
Projected benefit obligation at end of the year | 4,681,005 | 5,574,489 | 6,985,343 | |||||||||
Change in plan assets | ||||||||||||
Fair value of plan assets at beginning of the year | 505,340 | 1,138,768 | 1,493,897 | |||||||||
Expected return on plan assets | 61,084 | 103,498 | 145,264 | |||||||||
Employer contributions | 724,530 | 435,899 | 714,854 | |||||||||
Actuarial gain (loss) | (52,132 | ) | (58,516 | ) | 37,812 | |||||||
Expected benefits paid | (100,054 | ) | (125,752 | ) | (138,566 | ) | ||||||
Fair value of plan assets at end of the year | 1,138,768 | 1,493,897 | 2,253,261 | |||||||||
Funded status | (3,542,237 | ) | (4,080,592 | ) | (4,732,082 | ) | ||||||
Unrecognized net actuarial loss | 558,530 | 1,032,571 | 1,786,354 | |||||||||
Accrued post-retirement health care benefit cost | (2,983,707 | ) | (3,048,021 | ) | (2,945,728 | ) | ||||||
2004 | 2005 | 2006 | ||||||||||
Service cost | 76,163 | 87,636 | 107,513 | |||||||||
Interest cost | 411,110 | 507,994 | 605,573 | |||||||||
Expected return on plan assets | (61,084 | ) | (103,498 | ) | (145,264 | ) | ||||||
Recognized actuarial loss | — | 8,081 | 44,738 | |||||||||
Net periodic post-retirement benefit cost | 426,189 | 500,213 | 612,560 | |||||||||
Amounts charged to KSO Units under contractual agreement | (9,913 | ) | (11,627 | ) | (7,812 | ) | ||||||
Total net periodic post-retirement health care benefits cost less amounts charged to KSO Units (Note 37) | 416,276 | 488,586 | 604,748 | |||||||||
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2004 | 2005 | 2006 | ||||||||||
Accrued post-retirement health care benefit cost at beginning of year | 3,282,048 | 2,983,707 | 3,048,021 | |||||||||
Net periodic post-retirement health care benefit cost less amounts charged to KSO Units (Note 37) | 416,276 | 488,586 | 604,748 | |||||||||
Amounts charged to KSO Units under contractual agreement | 9,913 | 11,627 | 7,812 | |||||||||
Employer contributions | (724,530 | ) | (435,899 | ) | (714,853 | ) | ||||||
Accrued post-retirement health care benefits cost at end of the year | 2,983,707 | 3,048,021 | 2,945,728 | |||||||||
2004 | 2005 | 2006 | ||||||||||
Discount rate | 11 | % | 11 | % | 10.5 | % | ||||||
Expected long-term return on plan assets | 8 | % | 8 | % | 8.5 | % | ||||||
Health care cost trend rate assumed for next year | 12 | % | 9 | % | 12 | % | ||||||
Ultimate health care cost trend rate | 8 | % | 9 | % | 8 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2007 | 2006 | 2011 |
2004 | 2005 | 2006 | ||||||||||
Service cost and interest cost | 723,941 | 872,159 | 1,011,620 | |||||||||
Accumulated post-retirement health care benefit obligation | 5,597,965 | 6,718,434 | 8,327,481 |
a. | Government of the Republic of Indonesia |
F-104
Table of Contents
b. | Commissioners and Directors Remuneration |
c. | Indosat |
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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. |
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. |
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iii. Telkomsel receives 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”). |
ii. | Indefeasible Right of Use Agreement |
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d. | Others |
(i) The Company provides telecommunication services to substantially all Government agencies in Indonesia which the transaction is treated as well as the transaction with third parties customers. | |
(ii) The Company has entered into agreements with Government agencies and associated companies, namely CSM, Patrakom and KSO VII (for the years 2004 and 2005, and for the period January — September 2006), for utilization of the Company’s satellite transponders or frequency channels. Revenue earned from these transactions amounted to Rp.51,046 million, Rp.66,804 million and Rp.87,275 million in 2004, 2005 and 2006, respectively, representing 0.2% of total operating revenues for each year. | |
(iii) The Company provides leased lines to associated companies, namely CSM, Patrakom and PSN. The leased lines can be used by the associated companies for telephone, telegraph, data, telex, facsimile or other telecommunications services. Revenue earned from these transactions amounted to Rp.25,714 million, Rp.30,678 million and Rp.44,368 million in 2004, 2005 and 2006, respectively, representing 0.1% of the total operating revenues for each year. |
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(iv) The Company purchases property and equipment including construction and installation services from a number of related parties. These related parties include, among others, PT Industri Telekomunikasi Indonesia (“PT INTI”) and Koperasi Pegawai TELKOM. Total purchases made from these related parties amounted to Rp.268,901 million, Rp.337,648 million and Rp.153,541 million in 2004, 2005 and 2006, respectively, representing 2.4%, 2.5% and 0.9% of the total fixed asset purchased in 2004, 2005 and 2006, respectively. | |
(v) PT INTI is also a major contractor and supplier of equipment, including construction and installation services for Telkomsel. Total purchases from PT INTI in 2004, 2005 and 2006 amounted to Rp.217,668 million, Rp.67,555 million and Rp.90,519 million, respectively, representing 1.9%, 0.5% and 0.5% of the total fixed assets purchased in 2004, 2005, and 2006, respectively. | |
(vi) Telkomsel has an agreement with PSN for the lease of PSN’s transmission link. Based on the agreement, which was made on March 14, 2001, the minimum lease period is 2 years since the operation of the transmission link and is extendable subject to agreement by both parties. The lease charges amounted to Rp.49,710 million, Rp.95,206 million and Rp.131,414 million in 2004, 2005 and 2006, respectively, representing 0.3%, 0.4% and 0.4% of the total operating expenses for each year. | |
(vii) The Company and its subsidiaries carry insurance on their property, plant and equipment against property losses, inventory and on employees’ social security obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga Kerja and PT Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance premiums charged amounted to Rp.148,279 million, Rp.58,338 million and Rp.105,463 million in 2004, 2005 and 2006, respectively, representing 0.8%, 0.2% and 0.4% of total operating expenses in 2004, 2005 and 2006, respectively. | |
(viii) The Company and its subsidiaries maintain current accounts and time deposits in several state-owned banks. In addition, some of those banks are appointed as collecting agents for the Company. Total placements in form of current accounts and time deposits, and mutual funds in state-owned banks amounted to Rp.3,315,428 million and Rp.5,737,676 million as of December 31, 2005 and 2006, respectively, representing 5.3% and 7.6% of the total assets as of December 31, 2005 and 2006, respectively. Interest income recognized during 2004, 2005 and 2006 were Rp.150,367 million, Rp.123,951 million and Rp.405,176 million representing 47.3%, 36% and 62% of total interest income in 2004, 2005 and 2006, respectively. | |
(ix) The Company’s subsidiaries have loans from state-owned banks. Interest expense on the loans for 2004, 2005 and 2006 amounted to Rp.9,115 million, Rp.5,055 million and Rp.86,270 million, respectively, representing 0.7%, 0.4% and 6.7% of the total interest expense in 2004, 2005 and 2006, respectively. | |
(x) The Company leases buildings, purchases materials and construction services, and utilizes maintenance and cleaning services from Dana Pensiun TELKOM and PT Sandhy Putra Makmur, a subsidiary of Yayasan Sandikara Putra TELKOM — a foundation managed by Dharma Wanita TELKOM. Total charges from these transactions amounted to Rp.24,921 million, Rp.39,146 million and Rp.79,599 million in 2004, 2005 and 2006, respectively, representing 0.1%, 0.2% and 0.3% of the total operating expenses in 2004, 2005 and 2006, respectively. | |
(xi) The Company and its subsidiaries earned (were charged for) interconnection revenues (charges) from PSN, with a total of (Rp.5,495 million), Rp.1,072 million and Rp.9,715 million in 2004, |
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2005 and 2006, respectively, representing (0.02%), less than 0.01% and less than 0.02% of the total operating revenues in 2004, 2005 and 2006, respectively. | |
(xii) In addition to revenues earned under the KSO Agreement (Note 48), the Company also earned income from building rental, repairs and maintenance services and training services provided to the KSO Units, amounting to Rp.18,449 million, Rp.26,769 million and Rp.14,549 million in 2004, 2005 and 2006, respectively, representing 0.1%, 0.1% and less than 0.1% of the total operating revenues in 2004, 2005 and 2006, respectively. | |
(xiii) The Company has revenue-sharing arrangements with Koperasi Pegawai TELKOM (“Kopegtel”). Kopegtel’s share in the revenues from these arrangements amounted to Rp.20,560 million, Rp.31,909 million and Rp.28,913 million in 2004, 2005 and 2006, respectively, representing 0.1% of the total operating revenues for each year. | |
(xiv) Telkomsel has operating lease agreements with Patrakom and CSM for the usage of their transmission link for a period of 3 years, subject to extensions. The lease charges amounted to Rp.25,032 million, Rp.123,857 million and Rp.192,146 million in 2004, 2005 and 2006, respectively, representing 0.1%, 0.5% and 0.6% of the total operating expenses in 2004, 2005 and 2006, respectively. | |
(xv) Kisel is a cooperative that was established by Telkomsel’s employees to engage in car rental services, printing and distribution of customer bills, collection and other services principally for the benefit of Telkomsel. For these services, Kisel charged Telkomsel Rp.109,548 million, Rp.78,714 million and Rp.322,851 million in 2004, 2005 and 2006, respectively. Telkomsel also has dealership agreements with Kisel for distribution of SIM cards and pulse reload vouchers. Total SIM cards and pulse reload vouchers which were sold to Kisel amounted to Rp.816,591 million, Rp.1,158,559 million and Rp.1,568,701 million in 2004, 2005 and 2006, respectively. | |
(xvi) Infomedia provides electronic media and call center services to KSO Unit VII (for the years 2004 and 2005, and for the period January — September 2006) based on an agreement dated March 4, 2003. Revenue earned from these transactions in 2004, 2005 and 2006 amounted to Rp.5,541 million, Rp.9,221 million and Rp.6,874 million, representing 0.02% 0.02% and 0.01% of total operating revenues in 2004, 2005 and 2006, respectively. | |
(xvii) The Company has also seconded a number of its employees to related parties to assist them in operating their business. In addition, the Company provided certain of its related parties with the right to use its buildings free of charge. | |
(xviii) Telkomsel has procurement agreements with PT Graha Informatika Nusantara, a subsidiary of Dana Pensiun TELKOM for installation and maintenance of equipment. Total procurement for installations of equipment amounted to Rp. nil, Rp.127,661 million and Rp.102,982 million in 2004, 2005 and 2006, respectively; and for maintenance of equipment amounted to Rp. nil, Rp.36,486 million and Rp.45,422 million in 2004, 2005 and 2006, respectively. |
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Table of Contents
2005 | 2006 | ||||||||||||||||
% of Total | % of Total | ||||||||||||||||
Amount | Assets | Amount | Assets | ||||||||||||||
a. Cash and cash equivalents (Note 6) | 3,058,854 | 4.92 | 5,554,384 | 7.39 | |||||||||||||
b. Temporary investments | 22,064 | 0.04 | 84,492 | 0.11 | |||||||||||||
c. Trade receivables, net (Note 7) | 530,370 | 0.85 | 520,689 | 0.69 | |||||||||||||
d. Other receivables | |||||||||||||||||
KSO Units | 93,959 | 0.15 | — | — | |||||||||||||
State-owned banks (interest) | 8,555 | 0.01 | 19,242 | 0.03 | |||||||||||||
Government agencies | 421 | 0.00 | 716 | 0.00 | |||||||||||||
Other | 16,304 | 0.03 | 3,133 | 0.00 | |||||||||||||
Total | 119,239 | 0.19 | 23,091 | 0.03 | |||||||||||||
e. Prepaid expenses (Note 9) | 299,799 | 0.48 | 451,845 | 0.60 | |||||||||||||
f. Other current assets (Note 10) | 159,537 | 0.26 | 6,822 | 0.01 | |||||||||||||
g. Advances and other non-current assets (Note 14) | |||||||||||||||||
Bank Mandiri | 90,668 | 0.15 | 91,862 | 0.12 | |||||||||||||
Peruri | 813 | 0.00 | 813 | 0.00 | |||||||||||||
Total | 91,481 | 0.15 | 92,675 | 0.12 | |||||||||||||
h. Escrow accounts (Note 16) | 6,369 | 0.01 | 116 | 0.00 | |||||||||||||
i. Trade payables (Note 17) | |||||||||||||||||
Government agencies | 660,166 | 2.03 | 828,771 | 2.13 | |||||||||||||
KSO Units | 15,281 | 0.05 | — | — | |||||||||||||
Indosat | 46,372 | 0.14 | 71,417 | 0.18 | |||||||||||||
Koperasi Pegawai TELKOM | 78,673 | 0.24 | 103,758 | 0.27 | |||||||||||||
PSN | — | — | 62 | 0.00 | |||||||||||||
PT INTI | 125,792 | 0.39 | 37,820 | 0.10 | |||||||||||||
Others | 88,105 | 0.27 | 74,668 | 0.19 | |||||||||||||
Total | 1,014,389 | 3.12 | 1,116,496 | 2.87 | |||||||||||||
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2005 | 2006 | ||||||||||||||||
% of Total | % of Total | ||||||||||||||||
Amount | Assets | Amount | Assets | ||||||||||||||
j. Accrued expenses (Note 18) | |||||||||||||||||
Government agencies and state-owned banks | 395,791 | 1.22 | 93,101 | 0.24 | |||||||||||||
Employees | 452,413 | 1.39 | 2,239,243 | 5.76 | |||||||||||||
PT Asuransi Jasa Indonesia | 2,038 | 0.01 | — | — | |||||||||||||
Others | 38,442 | 0.11 | — | — | |||||||||||||
Total | 888,684 | 2.73 | 2,332,344 | 6.00 | |||||||||||||
k. Short-term bank loans (Note 20) | |||||||||||||||||
Bank Mandiri | — | — | 233,333 | 0.60 | |||||||||||||
Bank BNI | — | — | 200,000 433,333 | 0.51 1.11 | |||||||||||||
Total | 5,329,477 | 16.36 | 4,476,613 | 11.51 | |||||||||||||
l. Two-step loans (Note 22) | |||||||||||||||||
m. Accrued long service awards (Note 44) | 524,524 | 1.61 | 596,325 | 1.53 | |||||||||||||
n. Accrued post-retirement health care benefits (Note 45) | 3,048,021 | 9.36 | 2,945,728 | 7.58 | |||||||||||||
o. Long-term bank loans (Note 24) | 14,918 | 0.05 | 950,000 | 2.44 | |||||||||||||
Bank Mandiri | — | — | 300,000 | 0.77 | |||||||||||||
Bank BNI | |||||||||||||||||
Total | |||||||||||||||||
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2004 | ||||||||||||||||||||||||||||
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 segment 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 | |||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | (1,220,760 | ) | ||||||||||||||||||||||||||
Other income (expenses) — net | 331,050 | |||||||||||||||||||||||||||
Tax expense | (4,178,526 | ) | ||||||||||||||||||||||||||
Equity in net income (loss) 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 | ) | ||||||||||||||||
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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 segment revenues | 19,942,768 | 1,281,790 | 21,076,044 | 405,692 | 42,706,294 | (899,110 | ) | 41,807,184 | ||||||||||||||||||||
Segment expenses | (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 | |||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | (516,807 | ) | ||||||||||||||||||||||||||
Other income (expenses) — net | 409,184 | |||||||||||||||||||||||||||
Tax expense | (5,183,887 | ) | ||||||||||||||||||||||||||
Equity in net income (loss) 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 | ) | ||||||||||||||||||
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 | ) | |||||||||||||||
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2006 | ||||||||||||||||||||||||||||
Fixed | Fixed | Total Before | Total | |||||||||||||||||||||||||
Wireline | Wireless | Cellular | Other | Elimination | Elimination | Consolidated | ||||||||||||||||||||||
Segment results | ||||||||||||||||||||||||||||
External operating revenues | 20,137,847 | 2,806,204 | 28,205,052 | 144,905 | 51,294,008 | — | 51,294,008 | |||||||||||||||||||||
Inter-segment operating revenues | 514,589 | (253,397 | ) | 863,268 | 333,849 | 1,458,309 | (1,458,309 | ) | — | |||||||||||||||||||
Total segment revenues | 20,652,436 | 2,552,807 | 29,068,320 | 478,754 | 52,752,317 | (1,458,309 | ) | 51,294,008 | ||||||||||||||||||||
Segment expenses | (16,257,545 | ) | (1,815,803 | ) | (12,839,526 | ) | (384,263 | ) | (31,297,137 | ) | 1,596,370 | (29,700,767 | ) | |||||||||||||||
Segment result | 4,394,891 | 737,004 | 16,228,794 | 94,491 | 21,455,180 | 138,061 | 21,593,241 | |||||||||||||||||||||
Interest expense | (1,286,354 | ) | ||||||||||||||||||||||||||
Interest income | 654,984 | |||||||||||||||||||||||||||
Gain (loss) on foreign exchange — net | 836,328 | |||||||||||||||||||||||||||
Other income (expenses) — net | 202,025 | |||||||||||||||||||||||||||
Tax expense | (7,039,927 | ) | ||||||||||||||||||||||||||
Equity in net income (loss) of associated companies | (6,619 | ) | ||||||||||||||||||||||||||
Income before minority interest | 14,953,678 | |||||||||||||||||||||||||||
Unallocated minority interest | (3,948,101 | ) | ||||||||||||||||||||||||||
Net income | 11,005,577 | |||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||
Segment assets | 33,406,552 | 5,856,074 | 37,280,255 | 575,823 | 77,118,704 | (2,072,156 | ) | 75,046,548 | ||||||||||||||||||||
Investments in associates | 79,907 | — | 9,290 | — | 89,197 | — | 89,197 | |||||||||||||||||||||
Total consolidated assets | 75,135,745 | |||||||||||||||||||||||||||
Total consolidated liabilities | (26,270,257 | ) | (1,714,144 | ) | (12,688,285 | ) | (284,995 | ) | (40,957,681 | ) | 2,077,712 | (38,879,969 | ) | |||||||||||||||
Capital expenditures | (1,822,867 | ) | (338,795 | ) | (14,838,596 | ) | (90,769 | ) | (17,091,027 | ) | — | (17,091,027 | ) | |||||||||||||||
Depreciation and amortization | (4,290,872 | ) | (452,766 | ) | (4,427,771 | ) | (34,536 | ) | (9,205,945 | ) | 9,916 | (9,196,029 | ) | |||||||||||||||
Amortization of goodwill and other intangible assets | (932,724 | ) | — | (11,679 | ) | — | (944,403 | ) | — | (944,403 | ) | |||||||||||||||||
Other non-cash expenses | (325,055 | ) | — | (127,521 | ) | (5,676 | ) | (458,252 | ) | — | (458,252 | ) | ||||||||||||||||
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Fixed Line Telephone Tariffs |
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• | Local charges increased by an average of 28% | |
• | Direct long distance charges decreased by an average of 10% | |
• | Monthly subscription charges increased by an average of 12% to 25%, depending on customer’s segment. |
Mobile Cellular Telephone Tariffs |
a. | Airtime |
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 |
1. Usage local tariffs charged to a cellular subscriber who makes a call to a fixed line (“PSTN”). For the use of network, the tariffs per minute are computed at 50% of the prevailing local PSTN tariffs. | |
2. The long-distance usage tariffs between two different service areas charged to a cellular subscriber are the same as the prevailing tariffs for domestic long-distance call (“SLJJ”) applied to PSTN subscribers. |
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 | Rp.850/ successful call | |
Usage charge | Rp.550/ successful paid minute |
iv. | Satellite Phone Interconnection |
v. | VoIP Interconnection |
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Public Phone Kiosk (“Wartel”) Tariff |
Tariff for Other Services |
Universal Service Obligation (“USO”) |
a. | Capital Expenditures |
Amounts in | ||||||||
Currencies | Foreign Currencies | Equivalent | ||||||
(in millions) | in Rupiah | |||||||
Rupiah | — | 6,484,482 | ||||||
U.S. Dollar | 504 | 4,554,896 | ||||||
Euro | 130 | 1,546,220 | ||||||
Total | 12,585,598 | |||||||
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(i) | Procurement Agreements |
• | Joint Planning and Process Agreement | |
• | Equipment Supply Agreement (“ESA”) | |
• | Technical Service Agreement (“TSA”) | |
• | Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”) |
(ii) | Metro Junction and Optical Network Access Agreement for Regional Division III with PT INTI |
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(iii) | Ring JASUKA Backbone with NEC-Siemens Consortium |
(iv) | Expansion NSS, BSS and PDN FWA CDMA System Project in Regional Division I and IV with Huawei Consortium |
(v) | CDMA 2000 IX in Regional Division V with PT Samsung Telecommunication Indonesia |
(vi) | Expansion of Submarine Cable System Capacity Surabaya-Ujung Pandang-Banjarmasin with NEC Corporation |
(vii) | PSTN Interface Expansion and Enhancement in 114 locations with PT Siemens Indonesia |
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(viii) | Expansion NSS, BSS and PDN FWA CDMA System Project in Regional Division V with Samsung Consortium |
(ix) | Expansion NSS, BSS and PDN System Project in Regional Division VI with ZTE Consortium |
(x) | Interface Expansion V.52, E1, Circuit, E1 PRA, CCS#7, CLIP and Enhancement PSTN Central 5ESS Project with PT Lintas Teknologi Indonesia |
(xi) | Optical Access Network (“OAN”) Project Batch III in Regional Division IV with Huawei Consortium |
(xii) | Expansion NSS, BSS and PDN System Project in Regional Division II with Huawei Consortium |
(xiii) | Expansion NSS, BSS and PDN System Project in Regional Division III with Huawei Consortium |
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(xiv) | Optical Access Network (“OAN”) Project Batch IV in Regional Division VI with Alcatel — Inti Consortium |
(xv) | Optical Access Network (“OAN”) Project Batch I in Regional Divison I and III with Opnet-Olexindo Consortium |
(xvi) | Optical Access Network (“OAN”) Project Batch II in Regional Division II with Opnet-Olexindo Consortium |
(xvii) | Ring JDCS (Jember-Denpasar Cable System) with ZTE Consortium. |
b. | Borrowings and other credit facilities |
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c. | Others |
(i) | Employee Benefits |
(ii) | 3G License |
1. Pay an annual right of usage (BHP) fee which is determined based on a certain formula over the license term of 10 years. The BHP for the first year was paid in March 2006. The commitments as of December 31, 2006 arising from the BHP up to the expiry period of the license using the formula set forth in the decision letter are as follow: |
Radio Frequency Usage | ||||||||||||
Year | BI Rates (%) | Index (multiplier) | Tariff | |||||||||
1 | — | — | 20% x HL | |||||||||
2 | R1 | I1 = (1 + R1 | ) | 40% x I1 x HL | ||||||||
3 | R2 | I2 = I1(1 + R2 | ) | 60% x I2 x HL | ||||||||
4 | R3 | I3 = I2(1 + R3 | ) | 100% x I3 x HL | ||||||||
5 | R4 | I4 = I3(1 + R4 | ) | 130% x I4 x HL | ||||||||
6 | R5 | I5 = I4(1 + R5 | ) | 130% x I5 x HL | ||||||||
7 | R6 | I6 = I5(1 + R6 | ) | 130% x I6 x HL | ||||||||
8 | R7 | I7 = I6(1 + R7 | ) | 130% x I7 x HL | ||||||||
9 | R8 | I8 = I7(1 + R8 | ) | 130% x I8 x HL | ||||||||
10 | R9 | I9 = I8(1 + R9 | ) | 130% x I9 x HL |
Notes: | ||
Ri | = average Bank Indonesia rate from previous year | |
HL (auction price) | = Rp. 160 billion | |
Index | = adjustment to the bidding price for respective year |
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2. Provide roaming access for the existing 3G operators | |
3. Contribute to USO development | |
4. Construct a 3G network which cover at least the following provinces: |
Minimum number | ||||
Year | of provinces | |||
1 | 2 | |||
2 | 5 | |||
3 | 8 | |||
4 | 10 | |||
5 | 12 | |||
6 | 14 |
5. Issue a performance bond each year amounting to Rp.20 billion or 5% of the annual fee to be paid for the subsequent year, whichever is higher. Such performance bond shall be redeemed by the Government if Telkomsel is not able to meet the requirements set out in the above mentioned decision letter or upon cancellation/termination of the license, or if Telkomsel decides to return the license voluntarily. |
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2005 | 2006 | ||||||||||||||||
Foreign | Rupiah | Foreign | Rupiah | ||||||||||||||
Currencies | Equivalent | Currencies | Equivalent | ||||||||||||||
(in millions) | (in millions) | ||||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | |||||||||||||||||
U.S. Dollar | 81.96 | 805,489 | 159.59 | 1,443,160 | |||||||||||||
Euro | 59.14 | 689,472 | 71.30 | 845,448 | |||||||||||||
Japanese Yen | — | — | 1.95 | 148 | |||||||||||||
Trade receivables | |||||||||||||||||
Related parties | |||||||||||||||||
U.S. Dollar | 1.64 | 16,112 | 0.93 | 8,327 | |||||||||||||
Third parties | |||||||||||||||||
U.S. Dollar | 19.46 | 191,199 | 40.10 | 360,420 | |||||||||||||
Other receivables | |||||||||||||||||
U.S. Dollar | 0.30 | 2,910 | 0.56 | 5,077 | |||||||||||||
Euro | 0.01 | 88 | 0.03 | 402 | |||||||||||||
Great Britain Poundsterling | — | — | — | 37 | |||||||||||||
Other current assets | |||||||||||||||||
U.S. Dollar | 13.63 | 133,926 | 0.10 | 937 | |||||||||||||
Advances and other non-current assets | |||||||||||||||||
U.S. Dollar | 2.25 | 22,162 | 3.59 | 32,314 | |||||||||||||
Escrow accounts | |||||||||||||||||
U.S. Dollar | 12.89 | 126,128 | — | — | |||||||||||||
Total assets | 1,987,486 | 2,696,270 | |||||||||||||||
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2005 | 2006 | |||||||||||||||||
Foreign | Rupiah | Foreign | Rupiah | |||||||||||||||
Currencies | Equivalent | Currencies | Equivalent | |||||||||||||||
(in millions) | (in millions) | |||||||||||||||||
Liabilities | ||||||||||||||||||
Trade payables | ||||||||||||||||||
Related parties | ||||||||||||||||||
U.S. Dollar | 15.09 | 148,423 | 0.28 | 2,501 | ||||||||||||||
Singapore Dollar | — | — | — | 20 | ||||||||||||||
Third parties | ||||||||||||||||||
U.S. Dollar | 125.40 | 1,233,050 | 28.58 | 257,495 | ||||||||||||||
Euro | 68.30 | 796,343 | 1.55 | 18,377 | ||||||||||||||
Japanese Yen | 66.03 | 5,508 | — | — | ||||||||||||||
Singapore Dollar | 0.01 | 33 | 0.41 | 2,411 | ||||||||||||||
Great Britain Pound Sterling | — | 14 | 0.04 | 630 | ||||||||||||||
Myanmar Kyat | — | — | — | 12 | ||||||||||||||
Other payables | ||||||||||||||||||
U.S. Dollar | — | — | 0.06 | 573 | ||||||||||||||
Great Britain Pound Sterling | — | — | — | 2 | ||||||||||||||
Accrued expenses | ||||||||||||||||||
U.S. Dollar | 21.01 | 206,639 | 199.18 | 1,793,609 | ||||||||||||||
Euro | 8.79 | 102,509 | 104.61 | 1,239,946 | ||||||||||||||
Japanese Yen | 52.85 | 4,433 | 74.13 | 5,610 | ||||||||||||||
Singapore Dollar | 0.42 | 2,497 | 0.35 | 2,039 | ||||||||||||||
Advances from customers and suppliers U.S. Dollar | 0.15 | 1,474 | — | — | ||||||||||||||
Current maturities of long-term liabilities | ||||||||||||||||||
U.S. Dollar | 150.43 | 1,479,401 | 142.84 | 1,286,306 | ||||||||||||||
Euro | 14.67 | 171,087 | 14.68 | 173,996 | ||||||||||||||
Japanese Yen | 1,142.91 | 95,876 | 1,142.91 | 86,496 | ||||||||||||||
Long-term liabilities | ||||||||||||||||||
U.S. Dollar | 662.39 | 6,514,501 | 523.76 | 4,716,467 | ||||||||||||||
Euro | 22.01 | 256,631 | 7.34 | 86,998 | ||||||||||||||
Japanese Yen | 14,384.68 | 1,206,700 | 13,241.77 | 1,002,137 | ||||||||||||||
Total liabilities | 12,225,119 | 10,675,625 | ||||||||||||||||
Net liabilities | (10,237,633 | ) | (7,979,355 | ) | ||||||||||||||
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56. | SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA |
(1) Description of differences between Indonesian GAAP and U.S. GAAP |
a. Voluntary Termination Benefits | |
Under Indonesian GAAP, voluntary termination benefits are recognized as liabilities when the Company is demonstratively committed to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy. | |
Under U.S. GAAP, voluntary termination benefits liabilities are recognized only when the employees have accepted the offer and the related amount can be reasonably estimated. | |
b. Foreign Exchange Differences Capitalized to Assets under Construction | |
Under Indonesian GAAP, foreign exchange gains and losses resulting from borrowings used to finance the construction of the qualifying assets are capitalized as part of the cost of the qualifying |
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assets. 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 credited and charged to the consolidated statement of income. | |
c. Interest Capitalized on Assets under Construction | |
Under Indonesian GAAP, qualifying assets, to which interest cost can be capitalized, should be those that take a minimum of 12 months to get ready for their intended use or sale. To the extent that funds are borrowed specifically to finance the construction of a qualifying asset, the amount of the 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. | |
Under U.S. GAAP, there is no minimum limit (i.e., a minimum12-month construction period requirement) on the length of the construction period in which the interest cost could be capitalized. The amount of interest cost to be capitalized for qualifying assets is intended to be that portion of the interest cost incurred during the construction periods that theoretically could have been avoided if expenditures for the assets had not been made. The interest cost need not arise from borrowings specifically made to acquire the qualifying assets. The amount capitalized in a period is determined by applying an interest rate to the average amount of accumulated expenditures for the assets during the period. 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 the revenues from the revenue-sharing arrangements is recorded as interest expense with the balance treated as a reduction of the obligation under revenue-sharing arrangements. | |
e. Employee Benefits | |
As of January 1, 2005, the Company and its subsidiaries adopted PSAK 24R in accounting for the costs of pension benefit, post-retirement health care benefit and long service awards for Indonesian GAAP purposes. PSAK 24R requires the adoption of its provisions retrospectively as of January 1, 2004. |
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The differences between the accounting by the Company and its subsidiaries for the pension benefit and post-retirement health care benefit under Indonesian GAAP and U.S. GAAP for the years ended December 31, 2004, 2005 and 2006 are as follows: |
i. Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized on a straight line basis over the average period until the benefits become vested. Under U.S. GAAP, prior service cost (vested and non-vested benefits) is generally deferred and amortized systematically over the estimated remaining service period for active employees and the recognized amount is recorded in the consolidated statement of income. | |
ii. Under Indonesian GAAP, the transition obligations were recognized on January 1, 2004, the date PSAK 24R was adopted. Under U.S GAAP, the transition obligations arising from the adoption of SFAS 87 “Employers’ Accounting for Pensions” and SFAS 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” on January 1, 1992 and January 1, 1995, respectively, are deferred and amortized systematically over the estimated remaining service period for active employees and 20 years, respectively. In addition, different adoption dates resulted in significant difference in cumulative unrecognized actuarial gains and losses. |
Under Indonesian GAAP, recognition of a minimum liability for the pension plans is not required. Under U.S. GAAP, for the years ended December 31, 2004 and 2005, the Company and its subsidiaries were required to recognize an additional minimum liability when the accumulated benefits obligation exceeded the fair value of the plan assets with the equal amount recognized as an intangible asset, provided that the asset recognized did not exceed the amount of unrecognized prior service cost. If the additional liability required to be recognized exceeded unrecognized prior service cost, the excess was reported in other comprehensive income, net of tax. | |
In addition, there is a difference between the accounting by the Company for certain benefits under long service awards under Indonesian GAAP and U.S. GAAP for the years ended December 31, 2004, 2005 and 2006. Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized on a straight line basis over the average period until the benefits become vested. The amortized amount is recorded as a component of net periodic benefit cost for the year. Under U.S. GAAP, the obligation for the accumulating post-retirement benefits is measured in accordance with the guidance in SFAS 87, as permitted by SFAS 112 “Employers’ Accounting for Post-employment Benefits”. The prior service cost is deferred and amortized systematically over the estimated remaining service period for active employees and the recognized amount is recorded in the consolidated statement of income. | |
In September 2006, the FASB issued SFAS 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statement No. 87, 88, 106 and 132R”. The requirements of SFAS 158 to recognize the funded status and to provide the required disclosures are effective as of the end of the year ended after December 15, 2006. The Company and its subsidiaries have adopted the above recognition and disclosure requirements of SFAS 158 as of the end of the year ended December 31, 2006. |
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SFAS 158 does not change the determination of net periodic benefit costs under SFAS 87, SFAS 106 and SFAS 112. The impacts of the adoption of SFAS 158 as of the end of the year ended 31 December 2006 are as follow: |
i. The Company and its subsidiaries no longer report the additional minimum liability and any corresponding intangible asset for the unfunded pension obligation as the funded status for unfunded or underfunded benefit plans is now fully recognized as a net pension liability on the balance sheet. This is similar to the Indonesian GAAP requirements. | |
ii. On adoption of SFAS 158, the unrecognised actuarial losses, prior service costs, and transition obligations were recognised, net of tax, in the accumulated other comprehensive income balance. These will continue to be amortised and reported as a component of net periodic benefit cost in the consolidated statement of income in accordance with the requirements of SFAS 87, SFAS 106 and SFAS 112. |
f. Equity in Net Income or Loss of Associated Companies | |
The Company records its equity in net income or loss of its associated companies based on those associated companies’ 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 associated companies. | |
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 collateral for 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, fees from connection of mobile cellular and fixed wireless services are recognized as revenue when connection takes place (for postpaid service). Sales of starter packs are recognized as revenue upon delivery to distributors, dealers, or customers (for prepaid services). Installation fees for wire line services are recognized at the time of installation. Revenues from calling cards are recognized when the Company sells the cards. | |
Under U.S. GAAP, revenue from front-end fees and incremental costs up to, but not exceeding such fees, are deferred and recognized as income over the expected term of the customer relationships. Revenues from calling cards are recognized upon usage or expiration. |
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i. Amortisation of Goodwill | |
Under Indonesian GAAP, goodwill is amortized over a period not exceeding 20 years. | |
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, (b) the sum of periodic lease payments, plus the residual value, will cover the acquisition price of the leased asset and the related interest, and (c) there is a minimum lease period of 2 years. | |
Under U.S. GAAP, a leased asset is capitalized when any one of the following criteria is met: (a) there is an automatic transfer of ownership at the end of the lease term, (b) the lease contains a bargain purchase option, (c) the lease term is for 75% or more of the economic life of the asset, and (d) the net present value of the minimum lease payments amounts to 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 remaining 9.68% interest at a fixed price at a stated future date, and provided to the minority interest holder a put option to sell its 9.68% interest to the Company under those same terms. The fixed price of the call equaled the fixed price of the put option. Under U.S. GAAP, the Company accounted for the option contracts on a combined basis together with the minority interest and as a financing arrangement for 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 call 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% interest in Dayamitra as minority interest. In addition, the option price paid by the Company was presented as “Advance payments for investments in shares of stock.” The Company started consolidating the remaining 9.68% interest in Dayamitra only on December 14, 2004 following the exercise of the option. | |
The difference in the timing of the recognition of the 9.68% ownership interest gives rise to differences in the timing and amounts of the purchase consideration recognized under Indonesian GAAP and U.S. GAAP. | |
l. Asset Retirement Obligations | |
Under Indonesian GAAP, costs associated with the retirement of long-lived assets that the Company and its subsidiaries must cover by law as a result from the acquisition, construction, |
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development and/or the normal operation of long-lived assets are charged to the consolidated statement of income as incurred. | |
Under U.S. GAAP, the estimated fair value of such obligation is accrued at the time of the 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 their contractual agreements to determine whether the Company and its subsidiaries are required to settle any obligations as a result of the prevailing laws, statute and ordinance, or by legal construction of a contract under the doctrine of promissory estoppel. A present value technique is used to estimate the fair value of the obligations. The cash flows used in the estimates of fair value have incorporated the assumptions relating to the timing and the amount of the possible cash flows. Accretion expense resulting from the passage of time is recognized in the consolidated statement of income. In subsequent periods, changes resulting from the revisions to the timing and the amount of the original estimate of undiscounted cash flows are recognized as an increase or decrease in (a) the carrying amount of the liability, and (b) the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset. | |
m. Deferred Income Taxes | |
Under Indonesian GAAP, the Company does not recognize deferred taxes on temporary differences between the carrying amounts and the tax bases of its 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 carrying amounts and the tax bases of equity method investments. | |
n. 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 the current market assessment 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 asset. An impaired asset is written down to its estimated fair value based on its quoted market price in an active market or its discounted estimated future cash flows. Reversals of previously recognized impairment losses are prohibited. | |
Through the year ended December 31, 2004, there were no impairment charges recognized by the Company or its subsidiaries. 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 was less than their carrying amount. Therefore, for U.S. GAAP reporting purposes, |
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these assets were written down to their estimated fair value based on their discounted estimated future cash flows. The estimated fair value of the impaired assets determined under U.S. GAAP was the same as that determined under Indonesian GAAP and accordingly, there were no differences between Indonesian GAAP and U.S. GAAP. | |
o. Gains (Losses) on Disposals of Property, Plant and Equipment | |
Under Indonesian GAAP, the Company and its subsidiaries classify the gains (losses) on disposals of property, plant and equipment as a component of other income (expense) which is excluded from determination of operating income. | |
Under U.S. GAAP, the gains (losses) on disposals of property, plant and equipment are classified as a component of operating expenses and hence included in the determination of operating income. For the years ended December 31, 2004, 2005 and 2006, the operating income would have been higher (lower) by (Rp.26,089) million, Rp.46,193 million, and (Rp.47,983) million, respectively, and other income (expenses) would have been lower (higher) by the same amounts due to the inclusion of the gains (losses) on disposals of property, plant and equipment in the determination of operating income. | |
p. Reclassification 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 existed as of January 1, 2005. | |
Under U.S. GAAP, the difference in value of restructuring transactions between entities under common control remains in equity indefinitely as part of the additional paid-in capital. | |
q. Available-For-Sale Securities | |
Under Indonesian GAAP, available-for-sale securities are carried at fair value and changes in fair value are recognized in “Unrealized holding gain (loss) on available-for-sale securities” under stockholders’ equity section. | |
Under U.S. GAAP, available-for-sale securities are carried at fair value and any unrealized gains or losses are reported as a component of other comprehensive income under stockholders’ equity section. | |
r. Cumulative Translation Adjustments | |
Under Indonesian GAAP, investments in foreign companies using the equity method are reported by translating the assets and the liabilities of these companies as of the balance sheet date using the rate of exchange prevailing at that date. Revenues and expenses are translated using the exchange rates at the date of transaction or the average exchange rate for the year for practical reasons. The resulting translation adjustments are reported as part of “Translation Adjustments” in the stockholders’ equity section. | |
Under U.S. GAAP, the resulting translation adjustments are reported in other comprehensive income under stockholders’ equity section. |
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s. Amendment and Restatement of the Joint Operation Scheme in Regional Division VII | |
As discussed in Note 5e, the Company has accounted for the amendment and restatement of the KSO VII agreement as a business combination using the purchase method of accounting. | |
Under Indonesian GAAP, the fair value of the unearned income relating to the revenue-sharing arrangements was deemed to be equal to the fair value of the property, plant and equipment under those revenue-sharing arrangements based on the accounting treatment of revenue sharing agreements under Indonesian GAAP. Under U.S. GAAP, the fair value of the obligation under the revenue-sharing arrangements has been determined to be Rp.473,754 million based on the present value of the estimated future payments to BSI’s business partners under the revenue-sharing arrangements. | |
Under Indonesian GAAP, the excess of the acquisition cost over the Company’s interest in the fair value of identifiable asset acquired and liabilities assumed is recorded as goodwill. After assigning the purchase consideration to all other identifiable assets and liabilities, the remaining residual amount was allocated to the intangible asset representing the right to operate the business in the KSO VII area, to be amortized over the remaining KSO VII term of 4.3 years. As a result, there was no goodwill recognized under Indonesian GAAP. For U.S. GAAP reporting purposes, the right to operate the KSO VII operation represented a reacquired right and was recognized by the Company as a separate intangible asset under EITF 04-1 “Accounting for Preexisting Relationships between the Parties to a Business Combination”. The intangible asset was directly valued to determine its fair value in accordance with the requirements in EITF Topic No. D-108 “Use of the Residual Method to Value Acquired Assets Other Than Goodwill”. The excess of the purchase consideration over the net of the amounts assigned to assets acquired and liabilities assumed of Rp.61,386 million was recognized as goodwill. |
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(2) The significant adjustments to the consolidated net income for the years ended December 31, 2004, 2005 and 2006 and to the consolidated stockholders’ equity as of December 31, 2005 and 2006 which would be required if U.S. GAAP had been applied, instead of Indonesian GAAP, in the consolidated financial statements are set forth below: |
Note | 2004 | 2005 | 2006 | |||||||||||||||
Net income according to the consolidated statements of income prepared under Indonesian GAAP | 6,614,568 | 7,993,566 | 11,005,577 | |||||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | ||||||||||||||||||
Voluntary termination benefits | (a | ) | — | — | 1,461,149 | |||||||||||||
Capitalization of foreign exchange losses, net of related depreciation of Rp.75,870 million, Rp.77,010 million and Rp.79,178 million, respectively | (b | ) | 1,587 | 77,010 | 79,178 | |||||||||||||
Interest capitalized on assets under construction, net of related depreciation of Rp.13,392 million, Rp.17,275 million and Rp.23,270 million, respectively | (c | ) | 26,802 | 23,825 | 73,934 | |||||||||||||
Revenue-sharing arrangements | (d | ) | 155,369 | 69,173 | 58,545 | |||||||||||||
Pension | (e | ) | (148,517 | ) | (104,877 | ) | (95,788 | ) | ||||||||||
Post-retirement health care | (e | ) | (75,964 | ) | (104,466 | ) | (101,205 | ) | ||||||||||
Long service awards | (e | ) | (122,462 | ) | (90,933 | ) | 201,345 | |||||||||||
Equity in net income (loss) of associated companies | (f | ) | (177 | ) | (192 | ) | (223 | ) | ||||||||||
Amortization of land rights | (g | ) | (13,907 | ) | (4,881 | ) | (16,947 | ) | ||||||||||
Revenue recognition | (h | ) | 54,159 | 5,046 | (4,547 | ) | ||||||||||||
Amortization of goodwill | (i | ) | 21,270 | 21,270 | 8,858 | |||||||||||||
Capital leases | (j | ) | (3,435 | ) | (47,524 | ) | (27,580 | ) | ||||||||||
Adjustment for consolidation of Dayamitra | (k | ) | (72,361 | ) | 5,084 | 11,127 | ||||||||||||
Asset retirement obligations | (1 | ) | (848 | ) | (848 | ) | (11,255 | ) | ||||||||||
Amendment and restatement of the Joint Operation Scheme in Regional Division VII | (s | ) | — | — | 4,479 | |||||||||||||
Deferred income tax: | ||||||||||||||||||
Deferred income tax on equity method investments | (m | ) | (11,234 | ) | (3,206 | ) | 2,053 | |||||||||||
Deferred income tax effect on U.S. GAAP adjustments | 61,742 | 18,288 | (520,693 | ) | ||||||||||||||
(127,976 | ) | (137,231 | ) | 1,122,430 | ||||||||||||||
Minority interest | (18,019 | ) | (16,244 | ) | (16,559 | ) | ||||||||||||
Net adjustments | (145,995 | ) | (153,475 | ) | 1,105,871 | |||||||||||||
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Note | 2004 | 2005 | 2006 | |||||||||||||
Net income in accordance with U.S. GAAP | 6,468,573 | 7,840,091 | 12,111,448 | |||||||||||||
Net income per share — in full Rupiah amount | 320.86 | 388.89 | 602.12 | |||||||||||||
Net income per ADS — in full Rupiah amount (40 Series B shares per ADS) | 12,834.47 | 15,555.74 | 24,085.00 | |||||||||||||
Note | 2005 | 2006 | |||||||||||||
Stockholders’ equity according to the consolidated balance sheets prepared under Indonesian GAAP | 23,292,401 | 28,068,689 | |||||||||||||
U.S. GAAP adjustments — increase (decrease) due to: | |||||||||||||||
Voluntary termination benefits | (a | ) | — | 1,461,149 | |||||||||||
Capitalization of foreign exchange differences — net of related depreciation | (b | ) | (471,876 | ) | (392,698 | ) | |||||||||
Interest capitalized on assets under construction — net of related depreciation | (c | ) | 152,439 | 226,373 | |||||||||||
Revenue-sharing arrangements | (d | ) | (223,154 | ) | (164,609 | ) | |||||||||
Pension | (e | ) | 1,851,509 | (115,601 | ) | ||||||||||
Post-retirement health care | (e | ) | 1,038,095 | (1,786,355 | ) | ||||||||||
Long service awards | (e | ) | (213,395 | ) | (234,052 | ) | |||||||||
Equity in net income (loss) of associated companies | (f | ) | (18,621 | ) | (18,844 | ) | |||||||||
Amortization of land rights | (g | ) | (83,999 | ) | (100,946 | ) | |||||||||
Revenue recognition | (h | ) | (709,343 | ) | (713,890 | ) | |||||||||
Amortization of goodwill | (i | ) | 85,079 | 93,937 | |||||||||||
Capital leases | (j | ) | (29,836 | ) | (57,416 | ) | |||||||||
Adjustment for consolidation of Dayamitra | (k | ) | (56,644 | ) | (45,517 | ) | |||||||||
Asset retirement obligations | (l | ) | (2,544 | ) | (13,799 | ) | |||||||||
Amendment and restatement of the Joint Operation Scheme in Regional Division VII | (s | ) | — | 4,479 | |||||||||||
Deferred income tax: | |||||||||||||||
Deferred income tax on equity method investments | (m | ) | 35,040 | 38,768 | |||||||||||
Deferred income tax effect on U.S. GAAP adjustments | (66,182 | ) | 39,180 | ||||||||||||
1,286,568 | (1,779,841 | ) | |||||||||||||
Minority interest | (10,481 | ) | 19,724 | ||||||||||||
Net adjustments | 1,276,087 | (1,760,117 | ) | ||||||||||||
Stockholders’ equity in accordance with U.S. GAAP | 24,568,488 | 26,308,572 | |||||||||||||
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2004 | 2005 | 2006 | |||||||||||
Stockholders’ equity at beginning of year | 16,284,692 | 19,570,912 | 24,568,488 | ||||||||||
Changes during the year: | |||||||||||||
Net income under U.S. GAAP | 6,468,573 | 7,840,091 | 12,111,448 | ||||||||||
Dividends | (3,186,991 | ) | (2,921,227 | ) | (5,371,107 | ) | |||||||
Accumulated other comprehensive income, net of tax | 4,638 | (11,288 | ) | (4,138,046 | ) | ||||||||
Compensation for early termination of exclusive rights | — | 90,000 | 90,000 | ||||||||||
Treasury stock | — | — | (952,211 | ) | |||||||||
Stockholders’ equity at end of period | 19,570,912 | 24,568,488 | 26,308,572 | ||||||||||
2005 | 2006 | |||||||
Consolidated balance sheets | ||||||||
Current assets | 10,952,600 | 14,639,334 | ||||||
Non-current assets | 52,527,929 | 61,495,104 | ||||||
Total assets | 63,480,529 | 76,134,438 | ||||||
Current liabilities | 13,796,402 | 19,682,445 | ||||||
Non-current liabilities | 18,799,964 | 21,976,058 | ||||||
Total liabilities | 32,596,366 | 41,658,503 | ||||||
Minority interest in net assets of subsidiaries | 6,315,675 | 8,167,363 | ||||||
Stockholders’ equity | 24,568,488 | 26,308,572 | ||||||
Total liabilities and stockholders’ equity | 63,480,529 | 76,134,438 | ||||||
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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: |
2004 | 2005 | 2006 | |||||||||||
Consolidated income before tax in accordance with U.S. GAAP | 12,570,911 | 16,089,111 | 23,634,675 | ||||||||||
Income tax in accordance with U.S. GAAP at 30% statutory tax rate | 3,771,273 | 4,826,733 | 7,090,402 | ||||||||||
Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%) | |||||||||||||
Net periodic post-retirement health care benefit cost | 139,834 | 169,534 | 200,841 | ||||||||||
Amortization of discount on promissory notes and other borrowing costs | 136,994 | 62,132 | 13,882 | ||||||||||
Tax penalty | 1,941 | 24,155 | 25,288 | ||||||||||
Employee benefits | 24,719 | 18,618 | 28,931 | ||||||||||
Permanent differences of the KSO Units | 17,213 | 17,458 | 39,544 | ||||||||||
Income which was already subject to final tax | (30,743 | ) | (68,336 | ) | (137,915 | ) | |||||||
Adjustment to deferred tax liability in relation with property, plant, and equipment | — | — | 131,664 | ||||||||||
Others | 66,787 | 118,511 | 165,929 | ||||||||||
Total | 356,745 | 342,072 | 468,164 | ||||||||||
Income tax expense in accordance with U.S. GAAP | 4,128,018 | 5,168,805 | 7,558,566 | ||||||||||
For the year ended December 31, 2004, 2005 and 2006, all of the Company’s operating revenues occurred in Indonesia, and accordingly, the Company has not been subject to income tax in other countries. |
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2005 | 2006 | ||||||||
Deferred tax assets | |||||||||
Current | |||||||||
Unearned income | 38,706 | 37,943 | |||||||
Allowance for doubtful accounts | 248,260 | 298,797 | |||||||
Allowance for inventories obsolescence | 13,884 | 14,212 | |||||||
Tax losses carried forwards | 123,309 | — | |||||||
Accrued expense | 63,002 | 124,536 | |||||||
Deferred consideration for business combinations | 159,411 | 260,596 | |||||||
Others | 58,783 | 6,697 | |||||||
705,355 | 742,781 | ||||||||
Non-current | |||||||||
Unearned income | 179,660 | 176,225 | |||||||
Long-term investments | 41,706 | 38,768 | |||||||
Deferred consideration for business combinations | 785,992 | 1,006,149 | |||||||
Accrued long service awards | 225,454 | 247,235 | |||||||
Accrued pension and other post-retirement benefits costs | — | 344,750 | |||||||
Others | 50,881 | 45,854 | |||||||
1,283,693 | 1,858,981 | ||||||||
Total deferred tax assets (before offset) | 1,989,048 | 2,601,762 | |||||||
Deferred tax liabilities | |||||||||
Current | |||||||||
Prepaid expenses | (38,096 | ) | (65,301 | ) | |||||
Non-current | |||||||||
Property, plant and equipment | (2,882,932 | ) | (3,908,247 | ) | |||||
Intangible assets | (1,327,225 | ) | (1,186,358 | ) | |||||
Prepaid pension benefit costs | (163,747 | ) | — | ||||||
(4,373,904 | ) | (5,094,605 | ) | ||||||
Total deferred tax liabilities (before offset) | (4,412,000 | ) | (5,159,906 | ) | |||||
Net deferred tax liabilities | |||||||||
presented after offset in the consolidated balance sheets as follows: | |||||||||
Current deferred tax assets | 628,553 | 678,070 | |||||||
Current deferred tax liabilities | — | (590 | ) | ||||||
Non-current deferred tax assets | — | 6,171 | |||||||
Non-current deferred tax liabilities | (3,051,505 | ) | (3,241,795 | ) |
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As of the end of the year ended December 31, 2006, the Company and its subsidiaries adopted SFAS 158 and recognized deferred tax assets arising from the transition obligations, the prior service costs and the actuarial losses totaling Rp.606,015 million directly in the accumulated other comprehensive income. | |
Deferred tax assets relating to deferred consideration for business combinations have arisen due to the tax deductions that could be claimed on the fixed monthly payments to MGTI and BSI for corporate income tax calculation. | |
b. Fair Values 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 amounts approximate fair values because of the short-term nature of the financial assets. | |
Short-term bank loans | |
The carrying amounts approximate fair values because of the short-term nature of the financial liabilities. | |
Long-term liabilities | |
The fair values of long-term liabilities other than bonds and guaranteed notes are estimated by discounting the future cash flows of each liability at rates currently offered to the Company and its subsidiaries for similar debts of comparable maturities by the bankers of the Company and its subsidiaries. | |
The fair values of bonds and guaranteed notes are based on market prices at the balance sheet date. |
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The estimated fair values of the Company’s and its subsidiaries’ financial assets and liabilities are as follows: |
�� | |||||||||
Carrying | |||||||||
Amount | Fair Value | ||||||||
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 | |||||||
Deferred consideration for business combinations | 3,990,353 | 4,162,814 | |||||||
2006 | |||||||||
Cash and cash equivalents | 8,315,836 | 8,315,836 | |||||||
Temporary investments | 84,492 | 84,492 | |||||||
Short-term bank loans | 687,990 | 687,990 | |||||||
Long-term liabilities: | |||||||||
Two-step loans | 4,476,613 | 4,160,725 | |||||||
Bonds | 997,137 | 1,027,305 | |||||||
Medium-term notes | 464,819 | 460,316 | |||||||
Bank loans | 4,845,048 | 4,765,933 | |||||||
Deferred consideration for business combinations | 4,591,177 | 4,695,899 |
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 assets and liabilities. |
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c. Comprehensive Income |
2004 | 2005 | 2006 | ||||||||||
Net income under U.S. GAAP | 6,468,573 | 7,840,091 | 12,111,448 | |||||||||
Unrealized holding gain (loss) on available-for-sale securities | 884 | (1,632 | ) | 9,613 | ||||||||
Foreign currency translation adjustments of associated companies, net of tax of Rp.l,609 million, Rp.l,097 million and (Rp.l,675) million in 2004, 2005 and 2006, respectively | 3,754 | 2,560 | (3,909 | ) | ||||||||
Minimum pension liability adjustments, net of tax of Rp. nil, Rp.5,235 million and Rp. nil in 2004, 2005 and 2006, respectively | — | (12,216 | ) | — | ||||||||
6,473,211 | 7,828,803 | 12,117,152 | ||||||||||
The components of accumulated other comprehensive income are as follow: |
2004 | 2005 | 2006 | |||||||||||
Unrealized holding gain (loss) on available-for-sale securities | 884 | (748 | ) | 8,865 | |||||||||
Foreign currency translation adjustments of associated companies | 160,716 | 163,276 | 159,367 | ||||||||||
Minimum pension liability adjustments | — | (12,216 | ) | — | |||||||||
Adjustments arising from the SFAS 158 adoption: | |||||||||||||
Transition obligations | — | — | (241,301 | ) | |||||||||
Prior service costs | — | — | (1,055,840 | ) | |||||||||
Actuarial losses | — | — | (2,858,825 | ) | |||||||||
161,600 | 150,312 | (3,987,734 | ) | ||||||||||
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d. Employee Benefits |
The Company | |
The disclosures under SFAS 132 (Revised 2003) “Employers’ Disclosures about Pensions and Other Postretirement Benefits” and SFAS 106 are as follows: |
Pension | Health Care | |||||||||||||||||||||||
2004 | 2005 | 2006 | 2004 | 2005 | 2006 | |||||||||||||||||||
Components of Net Periodic Benefit Cost | ||||||||||||||||||||||||
Service cost | 137,264 | 138,117 | 187,960 | 76,163 | 87,636 | 107,513 | ||||||||||||||||||
Interest cost | 740,494 | 789,830 | 768,586 | 411,110 | 507,994 | 605,573 | ||||||||||||||||||
Expected return on plan assets | (436,672 | ) | (533,333 | ) | (677,602 | ) | (61,084 | ) | (103,498 | ) | (145,264 | ) | ||||||||||||
Amortization of prior service cost (gain) | 201,265 | 201,265 | 201,265 | (367 | ) | (367 | ) | (367 | ) | |||||||||||||||
Recognized actuarial loss (gain) | 57,641 | 21,244 | — | 52,006 | 88,589 | 121,986 | ||||||||||||||||||
Amortization of transition obligation | 28,634 | 28,634 | 28,634 | 24,325 | 24,325 | 24,325 | ||||||||||||||||||
Net periodic benefit cost | 728,626 | 645,757 | 508,843 | 502,153 | 604,679 | 713,766 | ||||||||||||||||||
Amounts charged to KSO Units under contractual agreement | (16,369 | ) | (18,660 | ) | (16,159 | ) | (9,913 | ) | (11,627 | ) | (7,812 | ) | ||||||||||||
Total net periodic benefit cost less amounts charged to KSO Units | 712,257 | 627,097 | 492,684 | 492,240 | 593,052 | 705,954 | ||||||||||||||||||
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Pension | Health Care | |||||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | 7,315,182 | 7,140,100 | 4,681,005 | 5,574,489 | ||||||||||||
Service cost | 138,117 | 187,960 | 87,636 | 107,513 | ||||||||||||
Interest cost | 789,830 | 768,586 | 507,994 | 605,573 | ||||||||||||
Plan participants’ contributions | 41,371 | 43,918 | — | — | ||||||||||||
Actuarial (gain) loss | (794,180 | ) | 306,254 | 423,833 | 850,037 | |||||||||||
Benefits paid | (350,220 | ) | (325,437 | ) | (125,979 | ) | (152,269 | ) | ||||||||
Benefit obligation at end of year | 7,140,100 | 8,121,381 | 5,574,489 | 6,985,343 | ||||||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 4,884,523 | 5,429,954 | 1,138,768 | 1,493,897 | ||||||||||||
Actual return on plan assets | 155,754 | 1,368,816 | 45,209 | 196,778 | ||||||||||||
Employer contributions | 698,526 | 693,498 | 435,899 | 714,854 | ||||||||||||
Plan participants’ contributions | 41,371 | 43,918 | — | — | ||||||||||||
Benefits paid | (350,220 | ) | (325,437 | ) | (125,979 | ) | (152,269 | ) | ||||||||
Fair value of plan assets at end of year | 5,429,954 | 7,210,749 | 1,493,897 | 2,253,260 | ||||||||||||
Funded status | (1,710,146 | ) | (910,632 | ) | (4,080,592 | ) | (4,732,083 | ) | ||||||||
Unrecognized prior service cost (gain) | 1,660,300 | — | (1,199 | ) | — | |||||||||||
Unrecognized net actuarial loss | 536,918 | — | 1,852,943 | — | ||||||||||||
Unrecognized net transition obligation | 91,623 | — | 218,924 | — | ||||||||||||
Prepaid (accrued) cost | 578,695 | (910,632 | ) | (2,009,924 | ) | (4,732,083 | ) | |||||||||
The assumptions used by the independent actuary to determine the benefit obligation of the plans as of December 31, 2005 and 2006 were as follows: |
Pension | Health Care | |||||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Discount rate | 11 | % | 10.5 | % | 11 | % | 10.5 | % | ||||||||
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, 2004, 2005 and 2006 were as follows: |
Pension | Health Care | |||||||||||||||||||||||
2004 | 2005 | 2006 | 2004 | 2005 | 2006 | |||||||||||||||||||
Discount rate | 11 | % | 11 | % | 10.5 | % | 11 | % | 11 | % | 10.5 | % | ||||||||||||
Expected long-term return on plan assets | 11 | % | 10.5 | % | 12.0 | % | 11 | % | 8 | % | 8.5 | % | ||||||||||||
Rate of compensation increase | 8 | % | 8 | % | 8 | % | — | — | — |
Future health care cost trend rates at December 31, 2004, 2005 and 2006 were assumed as follows: |
2004 | 2005 | 2006 | ||||||||||
Health care cost trend assumed for next year | 12 | % | 9 | % | 12 | % | ||||||
Ultimate health care cost trend rate | 8 | % | 9 | % | 8 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2007 | 2006 | 2011 |
The actuarial valuations for the defined benefit pension plan and post-retirement health care plan as of December 31, 2004, 2005 and 2006 were prepared on March 15, 2005, February 27, 2006 and April 24, 2007 respectively, by an independent actuary. | |
The discount rates were based on the Government Bond yields. The rates of compensation increase assumed were based on the long-term inflation rates in the order of between 6% and 7%. The expected long-term returns on the plan assets were based on the average rate of earnings expected on the funds invested or to be invested. | |
Assumed future health care cost trends have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in the assumed future 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 | 174,413 | (137,032 | ) | |||||
Effect on post-retirement benefit obligation | 1,342,138 | (1,058,800 | ) |
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The investment policies established by management for the pension plan require a minimum of 95% of the fund to be invested in the following asset types and a minimum overall rate of return of 10%; |
Based on Percentage | ||||
of Fund Invested | ||||
Time deposits | Up to 100 | % | ||
Deposits on call | Up to 100 | % | ||
Certificates of deposit | Up to 100 | % | ||
Listed shares | Up to 50 | % | ||
Listed debt securities | Up to 50 | % | ||
Unlisted shares and debt securities | Up to 20 | % | ||
Real estate | Up to 15 | % | ||
Mutual funds | Up to 50 | % | ||
Certificates by Bank Indonesia | Up to 100 | % | ||
Securities by the Indonesian Government | Up to 75 | % |
The weighted average asset allocations of the Company’s pension plan at December 31, 2005 and 2006, by asset category, were as follows: |
Plan Assets | ||||||||
as of | ||||||||
December 31 | ||||||||
Asset Category | 2005 | 2006 | ||||||
Debt securities | 75 | % | 74 | % | ||||
Deposit securities | 7 | % | 4 | % | ||||
Equity securities | 11 | % | 18 | % | ||||
Real estate | 1 | % | 1 | % | ||||
Others | 6 | % | 3 | % | ||||
Total | 100 | % | 100 | % | ||||
Equity securities included the Company’s common stock in the amounts of Rp.l24,189 million (2.3 percent of the total plan assets) and Rp.238,495 million (3.3 percent of the total plan assets) at December 31, 2005 and 2006, respectively. | |
Debt securities included the Company’s bonds in the amounts of Rp.223,736 million (4.1 percent of the total plan assets) and Rp.217,531 million (3 percent of the total plan assets) at December 31, 2005 and 2006, respectively. |
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Management has established investment policies for the health care benefit plan which require a minimum of 95% of the fund to be invested in the following asset types: |
Based on | ||||
Percentage of Fund Invested | ||||
Time deposits | Up to 100% | |||
Deposits on call | Up to 100% | |||
Listed shares | Not exceeding 50% | |||
Listed debt securities | Not exceeding 50% | |||
Mutual funds | Not exceeding 50% | |||
Certificates by Bank Indonesia | Up to 50% | |||
Securities by the Indonesian Government | Not exceeding 75% |
The weighted average asset allocations of the Company’s post-retirement health care plan at December 31, 2005 and 2006, by asset category, were as follows: |
Plan Assets | ||||||||
as of | ||||||||
December 31 | ||||||||
Asset Category | 2005 | 2006 | ||||||
Deposit securities | 60 | % | 18 | % | ||||
Debt securities | 31 | % | 30 | % | ||||
Equity securities | 4 | % | 1 | % | ||||
Mutual fund | 4 | % | 32 | % | ||||
Others | 1 | % | 19 | % | ||||
Total | 100 | % | 100 | % | ||||
Debt securities included the Company’s medium-term notes and bonds in the amounts of Rp.232,394 million (15.6 percent of the total plan assets) and Rp.l83,700 million (8.1 percent of the total plan assets) at December 31, 2005 and 2006, respectively. | |
Equity securities include the Company’s stocks amounting to Rp.7,548 million (0.33 percent of the total plan assets) at December 31, 2006 (December 31, 2005: Rp. nil). | |
Contributions | |
The Company expected to contribute Rp.700,161 million to its defined benefit pension plan and Rp.900,000 million to its post-retirement health care plan during 2007. |
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Telkomsel | |
Pension plan |
2004 | 2005 | 2006 | ||||||||||
Service cost | 6,300 | 12,901 | 25,432 | |||||||||
Interest cost | 5,199 | 8,412 | 18,900 | |||||||||
Expected return on plan assets | (824 | ) | (832 | ) | (2,126 | ) | ||||||
Amortization of prior service cost | 125 | 24 | 24 | |||||||||
Recognized actuarial loss | 1,157 | 1,920 | 6,080 | |||||||||
Amortization of transition obligation | 458 | 458 | 458 | |||||||||
Net periodic benefit cost | 12,415 | 22,883 | 48,768 | |||||||||
The following table presents the changes in the benefit obligations, the changes in the plan assets, the funded status of the plan and the accrued cost amounts recognized in Telkomsel’s U.S. GAAP balance sheets as of December 31, 2005 and 2006 |
2005 | 2006 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at beginning of year | 59,145 | 173,680 | ||||||
Service cost | 12,901 | 25,432 | ||||||
Interest cost | 8,412 | 18,900 | ||||||
Actuarial loss | 96,151 | 51,056 | ||||||
Benefits paid | (2,929 | ) | (3,732 | ) | ||||
Benefit obligation at end of year | 173,680 | 265,336 | ||||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of year | 11,182 | 20,971 | ||||||
Actual return on plan assets | (2,210 | ) | (18,792 | ) | ||||
Employer contributions | 14,928 | 29,731 | ||||||
Benefits paid | (2,929 | ) | (2,006 | ) | ||||
Fair value of plan assets at end of year | 20,971 | 29,904 | ||||||
Funded status | (152,709 | ) | (235,432 | ) | ||||
Unrecognized prior service cost | 274 | — | ||||||
Unrecognized net actuarial loss | 120,725 | — | ||||||
Unrecognized transition obligation | 6,190 | — | ||||||
Accrued cost | (25,520 | ) | (235,432 | ) | ||||
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As of December 31, 2005, Telkomsel recognized an additional minimum pension liability as follows: |
2005 | ||||
Accumulated benefit obligation | 70,406 | |||
Fair value of plan assets | (20,971 | ) | ||
Unfunded accumulated benefits (required minimum liability) | 49,435 | |||
Accrued pension cost | (25,520 | ) | ||
Additional liability under US GAAP | 23,915 | |||
Intangible assets | 6,464 | |||
Other comprehensive income | 17,451 | |||
As of December 31, 2006, the accrued cost amount recognized for pension benefits of Rp235,432 million consisted of non-current portion only. | |
The actuarial calculation for the pension plan was prepared by an independent actuary. The measurement date used to determine pension benefit measures for the pension plan is December 31 of each of the years. | |
The assumptions used by the independent actuary to determine the benefit obligation of the plan as of 31 December 31, 2005 and 2006 were as follows: |
2005 | 2006 | |||||||
Discount rate | 11 | % | 10.5 | % | ||||
Rate of compensation increase | 8 | % | 8 | % |
The assumptions used by the independent actuary to determine the net periodic pension cost of the plan for the years ended December 31, 2004, 2005 and 2006 were as follows: |
2004 | 2005 | 2006 | ||||||||||
Discount rate | 11 | % | 11 | % | 10.5 | % | ||||||
Expected long-term return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | ||||||
Rate of compensation increase | 9 | % | 9 | % | 8 | % |
Telkomsel’s pension plan is managed by PT Asuransi Jiwasraya, a state owned insurance company (see Notes 43). |
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Expected Future Benefit Payments | |
The expected benefit payments by TELKOM and its subsidiaries are as follows: |
Pension | Health Care | |||||||
2007 | 339,742 | 179,510 | ||||||
2008 | 403,002 | 203,823 | ||||||
2009 | 484,607 | 234,110 | ||||||
2010 | 578,307 | 267,492 | ||||||
2011 | 658,813 | 302,419 | ||||||
2012-2016 | 4,374,074 | 2,116,311 |
Adoption of SFAS 158 | |
The incremental effects of adopting the provision of SFAS 158 as of December 31, 2006 are presented in the following table. This adoption had no effect on the Company’s consolidated statement of income for the year ended December 31, 2006, or for any prior periods presented and it will not affect the Company’s operating result in the future. |
Prior to Adopting | Effect of Adopting | December 31, 2006 | ||||||||||
SFAS 158 | SFAS 158 | as Reported | ||||||||||
Prepaid (accrued) pension cost | 702,653 | (1,864,859 | ) | (1,162,206 | ) | |||||||
Accrued post retirement healthcare | (2,008,838 | ) | (2,723,246 | ) | (4,732,084 | ) | ||||||
Accrued long service awards | (602,112 | ) | (222,002 | ) | (824,114 | ) | ||||||
Deferred tax assets (liabilities) | (30,162 | ) | 606,015 | 575,853 | ||||||||
Intangible asset | 6,464 | (6,464 | ) | — | ||||||||
Minority interest | — | 66,806 | 66,806 | |||||||||
Accumulated other comprehensive income | 12,216 | 4,143,750 | 4,155,966 |
The amounts recognized in accumulated other comprehensive income at December 31, 2006 consisted of: |
Post- | ||||||||||||||||||||||||
Retirement | ||||||||||||||||||||||||
Pension | Health | Long Service | ||||||||||||||||||||||
Benefit | Care | Awards | Total | Deferred Tax | Net of Tax | |||||||||||||||||||
Transition obligations | 66,715 | 194,599 | — | 261,314 | 20,013 | 241,301 | ||||||||||||||||||
Prior service costs | 1,459,198 | (833 | ) | 50,335 | 1,508,700 | 452,860 | 1,055,840 | |||||||||||||||||
Actuarial losses | 296,054 | 2,529,480 | 171,667 | 2,997,201 | 138,376 | 2,858,825 | ||||||||||||||||||
Total | �� | 1,821,967 | 2,723,246 | 222,002 | 4,767,215 | 611,249 | 4,155,966 | |||||||||||||||||
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The transition obligations, prior service costs and net actuarial losses included in accumulated other comprehensive income as of December 31, 2006 and expected to be recognized in net periodic costs for the year ending December 31, 2007 are as follows: |
Post- | ||||||||||||||||
Retirement | Long Service | |||||||||||||||
Pension | Healthcare | Awards | Total | |||||||||||||
Transition obligations | 28,932 | 24,325 | — | 53,257 | ||||||||||||
Prior service costs | 201,281 | (367 | ) | 6,892 | 207,806 | |||||||||||
Actuarial losses | 6,013 | 183,645 | 12,625 | 202,283 | ||||||||||||
Gross before taxes | 236,226 | 207,603 | 19,517 | 463,346 | ||||||||||||
Deferred taxes | (70,868 | ) | — | (5,855 | ) | (76,723 | ) | |||||||||
Net of taxes | 165,358 | 207,603 | 13,662 | 386,623 | ||||||||||||
e. Operating lease | |
For the years ended December 31, 2004, 2005 and 2006, the Company and its subsidiaries recorded operating lease expenses for land and building, vehicle and office equipment totalling to Rp.710,569 million, Rp.551,882 million and Rp.729,839 million, respectively. | |
Telkomsel entered into a non-cancelable office lease agreement up to 2008. The minimum lease payment for 2007 and 2008 amounting US$5.2 million (equivalent to Rp.46,989 million) for each year. | |
f. Recent Accounting Pronouncements | |
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” which establishes a framework for measuring fair value in US GAAP. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant attribute. SFAS 157 shall be effective for financial statements issued for fiscal years beginning after November 15, 2007, and for an interim period within that fiscal year. The Company is currently evaluating what effect, if any, the adoption of SFAS 157 will have on the Company’s consolidated financial statements. | |
SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115”. In February 2007, the FASB issued SFAS 159. Under the provisions of SFAS 159, companies may choose to account for financial assets and financial liabilities (as well as certain non-financial instruments that are similar to financial instruments) at fair value on an instrument-by-instrument basis. Changes in fair value shall be recognized in earnings for each reporting period. SFAS 159 shall be effective as of the beginning of the fiscal year that begins after November 15, 2007. The Company is currently evaluating what effect, if any, the adoption of SFAS 159 will have on the Company’s consolidated financial statements. | |
In June 2006, FASB issued FIN 48 “Accounting for Uncertainty in Income Taxes — An interpretation of FASB Statement No. 109”. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes” and prescribes a recognition threshold and the measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognizing, classification, interest and penalties, accounting |
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in interim periods, disclosure, and transition. The requirements in FIN 48 are effective after December 15, 2006. The Company is currently evaluating what effect, if any, the adoption of FIN 48 will have on the Company’s consolidated financial statements. |
2004 | 2005 | 2006 | |||||||||||
Net income | 6,614,568 | 7,993,566 | 11,005,577 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation of property, plant and equipment | 6,438,557 | 7,570,739 | 9,178,343 | ||||||||||
Write-down of assets | — | 616,768 | 58,252 | ||||||||||
Loss on procurement commitments | — | 79,359 | — | ||||||||||
Interest income | (317,941 | ) | (344,686 | ) | (654,984 | ) | |||||||
Interest expense | 1,270,136 | 1,177,268 | 1,286,354 | ||||||||||
Foreign exchange (gain) loss | 1,192,842 | 420,419 | (883,831 | ) | |||||||||
Equity in net income of associated companies | (3,420 | ) | (10,879 | ) | 6,619 | ||||||||
(Gain) loss on sale of property, plant and equipment | 26,089 | (46,193 | ) | (9,463 | ) | ||||||||
Insurance proceeds | — | (27,580 | ) | — | |||||||||
Loss on redemption of Telkomsel’s bonds | 44,628 | 19,038 | — | ||||||||||
Loss on sale of long-term investments | — | — | (22,561 | ) | |||||||||
Amortization of goodwill and other intangible assets | 872,330 | 918,153 | 944,403 | ||||||||||
Amortization of unearned income | (93,164 | ) | (149,824 | ) | (159,272 | ) | |||||||
Amortization of deferred charges | 25,751 | 26,921 | 28,462 | ||||||||||
Provision for doubtful accounts and inventory obsolescence | 357,096 | 488,973 | 458,252 | ||||||||||
Compensation for early termination of exclusivity right | — | — | 90,000 | ||||||||||
Income tax expense | 4,178,526 | 5,183,887 | 7,097,202 | ||||||||||
Minority interest in net income of subsidiaries | 1,956,301 | 3,063,971 | 3,948,101 |
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2004 | 2005 | 2006 | |||||||||||
Changes in assets and liabilities: | |||||||||||||
Trade receivables | (670,103 | ) | (706,726 | ) | (353,826 | ) | |||||||
Other receivables | 95,757 | (124,746 | ) | 46,344 | |||||||||
Inventories | (58,329 | ) | (28,211 | ) | 6,948 | ||||||||
Prepaid expenses | (179,573 | ) | (578,364 | ) | (217,718 | ) | |||||||
Prepaid taxes | 173,189 | (1,217 | ) | — | |||||||||
Prepaid pension benefit costs | 208 | 722 | — | ||||||||||
Trade payables | (47,618 | ) | 284,599 | 405,434 | |||||||||
Other payables | (96,022 | ) | 1,602 | 646 | |||||||||
Taxes payable | (105,991 | ) | 156,089 | 91,040 | |||||||||
Accrued expenses | (65,078 | ) | 419,465 | 1,986,005 | |||||||||
Unearned income | 266,774 | 562,719 | 454,970 | ||||||||||
Advances from customers and suppliers | (78,028 | ) | (55,343 | ) | (75,245 | ) | |||||||
Accrued pension and other post-retirement benefit costs | (246,867 | ) | (149,254 | ) | (102,294 | ) | |||||||
Accrued long service awards | (41,196 | ) | 74,683 | 71,801 | |||||||||
Accrued post-retirement health care benefits | (298,341 | ) | 64,314 | (240,521 | ) | ||||||||
Interest paid | (1,348,919 | ) | (1,200,484 | ) | (1,217,131 | ) | |||||||
Interest received | 321,677 | 341,848 | 642,959 | ||||||||||
Income tax paid | (4,132,359 | ) | (4,938,916 | ) | (7,175,678 | ) | |||||||
Total adjustment | 9,436,912 | 13,109,114 | 15,689,611 | ||||||||||
Net cash provided by operating activities | 16,051,480 | 21,102,680 | 26,695,188 | ||||||||||
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