These Consolidated Financial Statements are Originally Issued in Indonesian Language.
PERUSAHAAN PERSEROAN (PERSERO)
PT INDONESIAN SATELLITE CORPORATION Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended December 31, 2000, 2001 And 2002
(Expressed in Rupiah)
Consolidated Financial Statements
With Independent Accountants’ Review Report
Six Months Ended June 30, 2005 and 2006
PT INDOSAT Tbk
AND SUBSIDIARIES
1
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
SIX MONTHS ENDED JUNE 30, 2005 AND 2006
Table of Contents
Page
Independent Accountants’ Review Report
Consolidated Balance Sheets
…………………………………………………………………………...
1 - 4
Consolidated Statements of Income
……………………………………………………………………
5 - 6
Consolidated Statements of Changes in Stockholders’ Equity
………………………………………
7 - 8
Consolidated Statements of Cash Flows
………………………………………………………………
9 - 10
Notes to Consolidated Financial Statements
………………………………………………………….
11 - 98
***************************
This report is originally issued in Indonesian language.
Independent Accountants’ Review Report
Report No. RPC-6112
Stockholders and Boards of Commissioners and Directors
PT Indosat Tbk
We have reviewed the consolidated balance sheets of PT Indosat Tbk (“the Company”) and Subsidiaries as of June 30, 2005 and 2006, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the six months then ended. These financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with auditing standards established by the Indonesian Institute of Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Indonesia, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above in order for them to be in conformity with generally accepted accounting principles in Indonesia.
Purwantono, Sarwoko & Sandjaja
(Formerly Prasetio, Sarwoko & Sandjaja)
Drs. Hari Purwantono
Public Accountant License No. 98.1.0065
August 2, 2006
The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Indonesia. The standards, procedures and practices to review such financial statements are those generally accepted and applied in Indonesia.
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
1
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2d,4,30
6,847,523
3,671,484
394,783
Short-term investments - net
of allowance for decline in
value of Rp29,594 in 2005 and
Rp25,395 in 2006
2e
44,506
9,325
1,003
Accounts receivable
2f
Trade
16
Related parties
PT Telekomunikasi
Indonesia Tbk (“Telkom”)
- net of allowance for
doubtful accounts of
Rp80,966 in 2005
and Rp86,326 in 2006
5,30
167,317
67,644
7,273
Others - net of allowance
for doubtful accounts of
Rp65,985 in 2005
and Rp59,572 in 2006
30
135,726
160,224
17,228
Third parties - net of allowance
for doubtful accounts of
Rp448,134 in 2005
and Rp579,412 in 2006
6
1,038,094
1,039,787
111,805
Others - net of allowance
for doubtful accounts of
Rp41,649 in 2005 and
Rp32,059 in 2006
30e
19,785
12,628
1,358
Inventories
2g
177,083
71,459
7,684
Derivative assets
2r,33
21,915
23,758
2,555
Advances
46,723
27,665
2,975
Prepaid taxes
7,14
695,567
924,517
99,410
Prepaid expenses
2h,2q,29,30
172,514
178,660
19,211
Other current assets
2d,30
15,661
26,123
2,809
Total Current Assets
9,382,414
6,213,274
668,094
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
2
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
NON-CURRENT ASSETS
Due from related parties - net of
allowance for doubtful
accounts of Rp12,487 in 2005
and Rp1,860 in 2006
2f,30
33,514
33,199
3,570
Deferred tax assets - net
2t,14
37,748
47,251
5,081
Investments in associated
companies - net of allowance
for decline in value of Rp72,444
in 2005 and Rp56,300 in 2006
2i,8
505
425
46
Other long-term investments - net of
allowance for decline in value of
Rp221,567 in 2005 and
Rp99,977 in 2006
2i,9
4,730
2,730
294
Property and equipment
2j,2k,2p,
10,16,24
Carrying value
31,198,990
38,513,949
4,141,285
Accumulated depreciation
(11,862,787
)
(15,073,967
)
(1,620,857
)
Impairment in value
(99,621
)
(98,611
)
(10,603
)
Net
19,236,582
23,341,371
2,509,825
Goodwill and other
intangible assets - net
2c,2l,11
2,846,398
2,827,629
304,046
Long-term receivables
30e
125,654
114,188
12,278
Long-term prepaid pension - net
of current portion
2q,29,30
168,730
235,500
25,322
Long-term advances
12,30
194,064
240,965
25,910
Others
2d,2h,16,
30
222,425
310,987
33,439
Total Non-current Assets
22,870,350
27,154,245
2,919,811
TOTAL ASSETS
32,252,764
33,367,519
3,587,905
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
3
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
Related parties
30
13,134
19,788
2,128
Third parties
198,977
219,456
23,597
Dividend payable
30,32
826,011
815,323
87,669
Procurement payable
13,30
2,620,396
2,968,981
319,245
Taxes payable
2t,14
164,631
120,543
12,962
Accrued expenses
2o,15,29,30
859,891
796,407
85,635
Unearned income
2o
504,835
517,899
55,688
Deposits from customers
25,325
75,792
8,150
Derivative liabilities
2r,33
23,497
96,226
10,347
Current maturities of:
Loans payable
2m,16
60,899
127,880
13,750
Bonds payable
2m,17
1,030,436
5,526
594
Other current liabilities
10,420
26,023
2,798
Total Current Liabilities
6,338,452
5,789,844
622,563
NON-CURRENT LIABILITIES
Due to related parties
30
34,212
12,524
1,347
Deferred tax liabilities - net
2t,14
604,481
1,006,345
108,209
Loans payable - net of current
maturities
2m,16
Related parties
30
627,683
632,882
68,052
Third parties
664,895
937,444
100,801
Bonds payable - net of current
maturities
2m,17
10,099,857
9,929,465
1,067,684
Other non-current liabilities
18,29,30
459,453
649,536
69,843
Total Non-current Liabilities
12,490,581
13,168,196
1,415,936
TOTAL LIABILITIES
18,829,033
18,958,040
2,038,499
MINORITY INTEREST
2b
177,089
184,699
19,860
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
4
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
STOCKHOLDERS’ EQUITY
Capital stock - Rp100 par value
per A share and B share
Authorized - 1 A share and
19,999,999,999 B shares
Issued and fully paid - 1 A share
and 5,294,622,999 B shares
in 2005, and 1 A share and
5,401,323,499 B shares in 2006
19
529,462
540,132
58,079
Premium on capital stock
19
898,823
1,392,127
149,691
Difference in transactions of equity
changes in associated
companies/subsidiaries
2i
403,812
403,812
43,420
Stock options
2n,20
144,762
39,564
4,254
Difference in foreign currency
translation
2b
304
286
31
Retained earnings
Appropriated
49,922
66,157
7,114
Unappropriated
11,219,557
11,782,702
1,266,957
Total Stockholders’ Equity
13,246,642
14,224,780
1,529,546
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
32,252,764
33,367,519
3,587,905
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
5
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
OPERATING REVENUES
2o,30
Cellular
21,35,36,37
4,312,363
4,290,844
461,381
Multimedia, Data Communication,
Internet (“MIDI”)
22
820,065
927,331
99,713
Fixed Telecommunications
23,35,36,37
648,258
548,936
59,025
Total Operating Revenues
5,780,686
5,767,111
620,119
OPERATING EXPENSES
2o
Depreciation and amortization
2j,10,11
1,477,295
1,738,359
186,920
Personnel
2n,2p,2q,20,24,29,30
638,303
610,248
65,618
Administration and general
25,30
297,661
315,972
33,975
Maintenance
2j
301,667
272,133
29,262
Marketing
158,697
185,610
19,958
Compensation to telecommunications carriers
and service providers
26,30,36
207,230
181,723
19,540
Leased circuits
30
69,466
92,631
9,960
Other costs of services
27,30
713,977
802,651
86,307
Total Operating Expenses
3,864,296
4,199,327
451,540
OPERATING INCOME
1,916,390
1,567,784
168,579
OTHER INCOME (EXPENSES)
2o
Gain (loss) on foreign exchange - net
2s,5,6
(119,308
)
141,877
15,256
Interest income
30
79,488
119,323
12,830
Financing cost
2m,16,17,28,30
(595,385
)
(644,352
)
(69,285
)
Loss on change in fair value of derivatives - net
2r,33
(44,104
)
(214,461
)
(23,060
)
Amortization of goodwill
2l,11
(113,174
)
(113,253
)
(12,178
)
Loss on sale of other long-term investment
9
(1,046
)
-
-
Others - net
28,826
(33,658
)
(3,619
)
Other Expenses - Net
(764,703
)
(744,524
)
(80,056
)
EQUITY IN NET INCOME (LOSS) OF
ASSOCIATED COMPANIES
2i,8
67
(99
)
(11
)
INCOME BEFORE INCOME TAX
1,151,754
823,161
88,512
INCOME TAX EXPENSE
2t,14
Current
236,123
116,271
12,502
Deferred
111,608
137,593
14,795
Total Income Tax Expense
347,731
253,864
27,297
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
6
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
INCOME BEFORE MINORITY INTEREST
IN NET INCOME OF SUBSIDIARIES
804,023
569,297
61,215
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES
2b
(17,697
)
(20,546)
(2,209
)
NET INCOME
786,326
548,751
59,006
BASIC EARNINGS PER SHARE
2v,19,31
150.33
101.99
0.01
DILUTED EARNINGS PER SHARE
2v,19,20,31
149.63
100.46
0.01
BASIC EARNINGS PER ADS (50 B shares
per ADS)
2v,19,31
7,516.40
5,099.45
0.55
DILUTED EARNINGS PER ADS
2v,19,20,31
7,481.60
5,022.95
0.54
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
7
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah)
Six Months Ended June 30, 2005
Difference in
Transactions
Difference
Capital Stock -
of Equity Changes
in Foreign
Retained Earnings
Issued and
Premium on
in Associated
Stock
Currency
Description
Notes
Fully Paid
Capital Stock
Companies/Subsidiaries
Options
Translation
Appropriated
Unappropriated
Net
Balance as of January 1, 2005
528,531
880,869
403,812
71,207
429
33,590
11,266,154
13,184,592
ESOP:
·
Issuance of capital stock resulting from the exercise of ESOP Phase I
19
931
17,954
-
(4,285
)
-
-
-
14,600
·
Proportionate six months’ compensation expense relating to ESOP Phase II
2n,20
-
-
-
77,840
-
-
-
77,840
Decrease in difference in foreign currency translation arising from the translations
of the financial statements of Satelindo International Finance B.V. from
U.S.dollars, Indosat Finance Company B.V. and Indosat International
Finance B.V. from European euro to rupiah - net of applicable income tax of
Rp36, Rp15 and Rp2, respectively
2b
-
-
-
-
(125
)
-
-
(125
)
Resolution during the Annual Stockholders’ General Meeting on June 8, 2005
Declaration of cash dividend
32
-
-
-
-
-
-
(816,591
)
(816,591)
Appropriation for reserve fund
32
-
-
-
-
-
16,332
(16,332
)
-
Net income for the period
-
-
-
-
-
-
786,326
786,326
Balance as of June 30, 2005
529,462
898,823
403,812
144,762
304
49,922
11,219,557
13,246,642
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
8
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah)
Six Months Ended June 30, 2006
Difference in
Transactions
Difference
Capital Stock -
of Equity Changes
in Foreign
Retained Earnings
Issued and
Premium on
in Associated
Stock
Currency
Description
Notes
Fully Paid
Capital Stock
Companies/Subsidiaries
Options
Translation
Appropriated
Unappropriated
Net
Balance as of January 1, 2006
535,617
1,178,274
403,812
90,763
228
49,922
12,056,712
14,315,328
ESOP:
Issuance of capital stock resulting from the exercise of ESOP Phase II
19
4,515
213,853
-
(51,199
)
-
-
-
167,169
Increase in difference in foreign currency translation arising from the translations
of the financial statements of Indosat Finance Company B.V. and Indosat
International Finance Company B.V. from European euro, and Indosat
Singapore Pte. Ltd. from U.S. dollar to rupiah - net of applicable income
tax benefit of Rp1, Rp1 and Rp23, respectively
2b
-
-
-
-
58
-
-
58
Resolution during the Annual Stockholders’ General Meeting on June 29, 2006
Declaration of cash dividend
32
-
-
-
-
-
-
(806,526
)
(806,526)
Appropriation for reserve fund
32
-
-
-
-
-
16,235
(16,235
)
-
Net income for the period
-
-
-
-
-
-
548,751
548,751
Balance as of June 30, 2006
540,132
1,392,127
403,812
39,564
286
66,157
11,782,702
14,224,780
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
9
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from:
Customers
5,521,381
5,672,524
609,949
Interest income
84,780
121,395
13,053
Refund of taxes
7
49,186
-
-
Other income - net
83,541
-
-
Cash paid to/for:
Employees, suppliers and others
(2,404,689
)
(2,130,510
)
(229,087
)
Financing cost
(542,071)
(663,948
)
(71,392
)
Taxes
(370,362
)
(185,942
)
(19,994
)
Other expenses - net
-
(196,959
)
(21,178
)
Net Cash Provided by Operating Activities
2,421,766
2,616,560
281,351
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of short-term investment
1,885
40,269
4,330
Swap income from interest rate swap contract
33n,33p
9,174
2,583
278
Proceeds from sale of property and equipment
10
147
298
32
Acquisitions of property and equipment
10
(2,370,926
)
(2,870,656
)
(308,673
)
Acquisition of intangible assets
11
-
(320,000
)
(34,409
)
Swap cost from cross currency swap contracts
33a-l
(40,824
)
(76,895
)
(8,268
)
Purchase of short-term investments
(48,549
)
(9,300
)
(1,000
)
Proceeds from sale of other long-term investment
9
96,381
-
-
Decrease in restricted cash and
cash equivalents
81,288
-
-
Proceeds from sale of subsidiaries
1d
40,141
-
-
Payment for termination of derivatives contracts
33b,33m,33n,33o
(184,190
)
-
-
Net Cash Used in Investing Activities
(2,415,473
)
(3,233,701)
(347,710
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term loans
16
1,739
357,367
38,427
Proceeds from exercise of ESOP Phase I
and Phase II
20
14,600
167,169
17,975
Proceeds from bonds payable
17
3,484,994
31,150
3,349
Repayment of bonds payable
17
-
(956,644
)
(102,865)
Repayment of long-term loans
16
(615,280
)
(22,600
)
(2,430
)
Cash dividend paid by subsidiaries to
minority interest
(1,563)
(3,075
)
(331)
Decrease (increase) in restricted cash and
cash equivalents
571
(2,011)
(216)
Net Cash Provided by (Used in) Financing Activities
2,885,061
(428,644
)
(46,091)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
2,891,354
(1,045,785
)
(112,450
)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD
3,993,585
4,717,269
507,233
BEGINNING BALANCE OF CASH AND CASH
EQUIVALENTS OF A DIVESTED SUBSIDIARY
1d
(37,416
)
-
-
CASH AND CASH EQUIVALENTS AT END
OF PERIOD
4
6,847,523
3,671,484
394,783
See Independent Accountants’ Review Report on review of consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2006
Notes
2005
2006
(Note 3)
Rp
Rp
US$
DETAILS OF CASH AND CASH EQUIVALENTS:
Cash on hand and in banks
137,331
203,078
21,836
Time deposits with original maturities
of three months or less
6,710,192
3,468,406
372,947
Cash and cash equivalents as stated
in the consolidated balance sheets
6,847,523
3,671,484
394,783
SUPPLEMENTAL CASH FLOW INFORMATION:
Transactions not affecting cash flows:
Unpaid cash dividend declared during
the period
824,075
*
814,989
*
87,633
Acquisitions of property and equipment
on account credited to procurement
payable
931,567
496,189
53,354
Premium on capital stock
17,954
213,853
22,995
Stock options
77,840
-
-
Acquisitions of property and equipment
on account credited to long-term
advances
96,737
86,386
9,289
*including dividend of PT Aplikanusa
Lintasarta
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL
a.
Company’s Establishment
PT Indosat Tbk (“the Company”) was established in the Republic of Indonesia on November 10, 1967 within the framework of the Indonesian Foreign Investment Law No. 1 of 1967 based on the notarial deed No. 55 of Mohamad Said Tadjoedin, S.H. The deed of establishment was published in Supplement No. 24 of State Gazette No. 26 dated March 29, 1968 of the Republic of Indonesia. In 1980, the Company was sold to the Government of the Republic of Indonesia and became a State-owned Company (Persero).
On February 7, 2003, the Company received the approval from the Capital Investment Coordinating Board (BKPM) in its letter No. 14/V/PMA/2003 for the change of its legal status from a State-owned Company (Persero) into a Foreign Capital Investment Company. Subsequently, on March 21, 2003, the Company received the approval from the Ministry of Justice and Human Rights of the Republic of Indonesia on the amendment of its Articles of Association to reflect
the change of its legal status.
The Company’s Articles of Association has been amended from time to time. The latest amendment was covered by notarial deed No. 122 dated January 23, 2006 of Aulia
Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) concerning the change in the number of the Company’s issued and fully paid capital stock. The latest amendment of the Company’s Articles of Association has been reported to and accepted by the Ministry of Law and Human Rights of the Republic of Indonesia based on its letter No.C-04216 HT.01.04.TH 2006 dated February 15, 2006.
According to article 3 of its Articles of Association, the Company shall engage in providing telecommunications networks and/or services as well as informatics business by conducting
the following activities:
·
Provision of telecommunications networks and/or services and informatics business
·
Planning of services, construction of infrastructure and provision of telecommunications and informatics business facilities, including supporting resources
·
Carrying out operational services (comprising the marketing and sale of telecommunications networks and/or services and informatics business provided by the Company), maintenance, research and development of telecommunications and informatics business infrastructure and/or facilities, and providing education and training (both locally and overseas)
·
Engaging in services which are relevant to the development of telecommunications networks and/or services and informatics business.
The Company started its commercial operations in 1969.
Based on Law No. 3 of 1989 on telecommunications and pursuant to Government Regulation No. 77 of 1991, the Company had been re-confirmed as an Operating Body (“Badan Penyelenggara”) that provided international telecommunications service under the authority of the Government.
In 1999, the Government issued Law No. 36 on telecommunications (“Telecommunications Law”) which took effect on September 8, 2000. Under the Telecommunications Law, telecommunications activities cover:
·
Telecommunications networks
·
Telecommunications services
·
Special telecommunications services.
11
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
National state-owned companies, regional state-owned companies, privately owned companies and cooperatives are allowed to provide telecommunications networks and services. Individuals, government institutions and legal entities, other than telecommunications networks and service providers, are allowed to render special telecommunications services.
The Telecommunications Law prohibits activities that result in monopolistic practices and unhealthy competition, and expects to pave the way for market liberalization.
Based on the Telecommunications Law, the Company ceased as an Operating Body and has to obtain licenses from the government for the Company to engage in the provision of specific telecommunication networks and services.
On August 14, 2000, the Government of the Republic of Indonesia, through the Ministry of Communications, granted the Company an in-principle license as a nationwide Digital Communication System (“DCS”) 1800 telecommunications provider as compensation for the early termination effective August 1, 2003 of the exclusivity rights on international telecommunications services given to the Company prior to the granting of such license. On August 23, 2001, the Company obtained the operating license from the Ministry of Communications. Subsequently, based on Decree No. KP.247 dated November 6, 2001 issued by the Ministry of Communications, the operating license was transferred to the Company’s subsidiary, PT Indosat Multi Media Mobile (see “e” below).
On September 7, 2000, the Government of the Republic of Indonesia, through the Ministry of Communications, also granted the Company in-principle licenses for local and domestic long-distance telecommunications services as compensation for the termination of its exclusivity rights on international telecommunications services. On the other hand, Telkom was granted an in-principle license for international telecommunications services as compensation for the early termination of Telkom’s rights on local and domestic long-distance telecommunications services.
Based on a letter dated August 1, 2002 from the Ministry of Communications, the Company was granted an operating license for fixed local telecommunication network covering Jakarta and Surabaya. This operating license was converted to become a national license on April 17, 2003 based on Decree No. KP.130 Year 2003 of the Ministry of Communications. The values of
the above licenses granted to Telkom and the Company on the termination of their exclusive rights on local/domestic and international telecommunications services, respectively, have been determined by an independent appraiser.
Based on Announcement No. PM.2 Year 2004 dated March 30, 2004 of the Ministry of Communications regarding the Commencement of Restructuring of the Telecommunications Sector, the Company should pay to the Government the amount of Rp178,000 after tax as a result of the early termination of its exclusivity rights. In turn, the payment of any liability of the Company as a result of the early termination will be settled by the Government which is coordinated by the Ministry of State-owned Enterprises. This is in line with Article IX of a Shares Purchase Agreement dated December 15, 2002 between the Government of the Republic of Indonesia and Indonesia Communications Limited (“ICL”) (Note 19), whereby the Government agreed to undertake and covenant with ICL that it shall pay on behalf of the Company any liability, amount or claim required to be paid or suffered by the Company in relation to the surrender of above exclusivity r ights.
On June 28, 2001, the Government of the Republic of Indonesia, through the Directorate General of Post and Telecommunications, granted the Company an in-principle license for Voice over Internet Protocol (“VoIP”) service. On April 26, 2002, the Company was granted an operating license for VoIP with national coverage. The Company’s operating license for VoIP will be evaluated every 5 years from the date of issuance.
12
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
On March 15, 2004, the Government of the Republic of Indonesia, through the Ministry of Communications, granted the Company an operating license for nationwide closed fixed communications network (e.g. VSAT, frame relay, etc.) and GSM cellular mobile network (including its basic telephony services). Subsequently, on May 21, 2004, the Government, through the Ministry of Communications, also granted the Company an operating license for fixed network and basic telephony services which covers the provision of local, national long-distance, and international long-distance telephony services. The licenses granted are subject to certain minimum development and operating performance requirements. These aforementioned licenses replaced the various licenses and rights previously granted to the Company by the Government.
On October 18, 2004, the Government of the Republic of Indonesia, through the Ministry of Communications, granted the Company an in-principle license for third generation (3G) mobile communications technology.
Based on Decree No.19/KEP/M.KOMINFO/02/2006 dated February 14, 2006 of the Ministry of Communications and Information Technology, the Company has been determined as one of the winners in the selection of IMT-2000 cellular network providers using 2.1 GHz radio frequency bandwidth (known as “3G”) for 1 block (2 x 5MHz) of frequency. As a winner, the Company was obliged, among others, to pay the upfront fee of Rp320,000 (Note 11) and radio frequency fee.
The Company is domiciled at Jalan Medan Merdeka Barat No. 21, Jakarta and has 8 regional offices located in Jakarta, Bandung, Semarang, Surabaya, Medan, Palembang, Balikpapan and Makassar.
b.
Company’s Public Offerings
All of the Company’s B shares have been registered with and traded on the Jakarta Stock Exchange and Surabaya Stock Exchange since 1994. The Company’s American Depositary Shares (ADS, each representing 50 B shares) have also been traded on the New York Stock Exchange since 1994.
c.
Employees, Directors and Commissioners
Based on a resolution at the Annual Stockholders’ General Meeting held on June 8, 2005 which is notarized under Deed No. 40 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same date, the composition of the Company’s Board of Commissioners as of June 30, 2005 and 2006 is as follows:
2005 and 2006
President Commissioner
Peter Seah Lim Huat
Commissioner
Lee Theng Kiat
Commissioner
Sio Tat Hiang
Commissioner
Sum Soon Lim
Commissioner
Roes Aryawijaya
Commissioner
Setyanto P. Santosa
Commissioner
Lim Ah Doo *
Commissioner
Eva Riyanti Hutapea *
Commissioner
Soeprapto S.IP *
* Independent Commissioner
13
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
c.
Employees, Directors and Commissioners (continued)
Based on (i) a resolution at the Annual Stockholders’ General Meeting held on June 8, 2005 which is notarized under Deed No. 40 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same date and (ii) the minutes of the Company’s Board of Commissioners Meeting held on March 3, 2006, the composition of the Company’s Board of Directors as of June 30, 2005 and 2006 is as follows:
2005
2006
President Director
Hasnul Suhaimi
- *
Deputy President Director
Ng Eng Ho
Kaizad Bomi Heerjee
Planning Project
Development Director
Wityasmoro Sih Handayanto
-
Consumer Market Director
Johnny Swandi Sjam
-
Corporate Market Director
Wahyu Wijayadi
-
Finance Director
Wong Heang Tuck
Wong Heang Tuck
Corporate Services Director
S. Wimbo S. Hardjito
S. Wimbo S. Hardjito
Network Operation and Quality
Management Director
Raymond Tan Kim Meng
-
Information Technology
Director
Joseph Chan Lam Seng
Joseph Chan Lam Seng
Jabotabek and Corporate Sales
Director
-
Johnny Swandi Sjam
Regional Sales Director
-
Wityasmoro Sih Handayanto
Marketing Director
-
Wahyu Wijayadi
Network Director
-
Raymond Tan Kim Meng
*
On June 16, 2006, Board of Commissioner had approved the resignation of Hasnul Suhaimi effective on June 8, 2006. In the absence of a President Director, the tasks of the President Director are carried out by the Deputy President Director.
The Company and its subsidiaries (collectively referred to hereafter as “the Companies”) have approximately 7,931 and 7,787 employees, including non-permanent employees, as of June 30, 2005 and 2006, respectively.
d.
Structure of the Company’s Subsidiaries
The Company has direct and indirect equity ownership in the following subsidiaries:
Start of
Percentage of Ownership (%)
Commercial
Name of Subsidiary
Location
Principal Activity
Operations
2005
2006
Satelindo International Finance B.V.
Amsterdam
Finance
1996
100.00
100.00
Indosat Finance Company B.V.
Amsterdam
Finance
2003
100.00
100.00
Indosat International Finance
Company B.V.
Amsterdam
Finance
2005
100.00
100.00
Indosat Singapore Pte.Ltd.
Singapore
Telecommunication
2005
-
100.00
PT Indosat Mega Media
Jakarta
Multimedia
2001
99.85
99.85
PT Satelindo Multi Media
Jakarta
Multimedia
1999
99.60
99.60
PT Aplikanusa Lintasarta
Jakarta
Data Communication
1989
69.46
72.36
PT Starone Mitra Telekomunikasi
Semarang
Telecommunication
2006
-
51.00
PT Artajasa Pembayaran Elektronis
Jakarta
Telecommunication
2000
38.20
39.80
14
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
Total Assets
(Before Eliminations)
Name of Subsidiary
2005
2006
Satelindo International Finance B.V.
8,249
8,526
Indosat Finance Company B.V.
2,948,952
2,823,907
Indosat International Finance Company B.V.
2,432,312
2,329,520
Indosat Singapore Pte. Ltd.
-
5,863
PT Indosat Mega Media
492,862
606,869
PT Satelindo Multi Media
10,878
10,690
PT Aplikanusa Lintasarta
853,438
1,007,145
PT Starone Mitra Telekomunikasi
-
-
PT Artajasa Pembayaran Elektronis
68,457
77,257
Satelindo International Finance B.V. (“SIB”)
SIB was incorporated in Amsterdam (The Netherlands) in 1996. SIB is a financing company that only facilitates borrowings of PT Satelit Palapa Indonesia (“Satelindo” - see Note 1e) from third parties and is not involved in any other activity. On May 30, 2000, SIB issued Guaranteed Floating Rate Bonds. On October 31, 2003, Satelindo repaid its borrowings from SIB by using the proceeds from the Company’s capital contributions. Following such repayment of all borrowings, this company is now in the process of voluntary liquidation. Based on the Resolution of Shareholder on May 3, 2005, the liquidation process is effective starting June 1, 2005. As of
June 30, 2006, such liquidation has not yet been finalized.
Indosat Finance Company B.V. (“IFB”)
IFB was incorporated in Amsterdam (The Netherlands) on October 13, 2003. IFB is a company which is involved in the activities of a financing business; borrowing/lending/raising funds, including the issue of bonds, promissory notes or other securities or evidence of indebtedness; granting guarantees and trading in currencies, securities and items of property in general. In October 2003, IFB issued guaranteed notes which are due in 2010 (Note 17).
Indosat International Finance Company B.V. (“IIFB”)
IIFB was incorporated in Amsterdam (The Netherlands) on April 27, 2005. IIFB is a company which is involved in the activities of a financing business; borrowing/lending/raising funds, including the issue of bonds, promissory notes or other securities or evidence of indebtedness; granting guarantees and trading in currencies, securities and items of property in general. In June 2005, IIFB issued guaranteed notes which are due in 2012 (Note 17).
Indosat Singapore Pte. Ltd. (“ISP”)
ISP was incorporated in Singapore on December 21, 2005. It shall engage in telecommunication services.
PT Indosat Mega Media (“IMM”)
IMM is engaged in providing multimedia services and creating multimedia products and programs.
15
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
PT Satelindo Multi Media (“SMM”)
SMM was established in 1999 to engage in various activities including telecommunications services. SMM has a preliminary license to operate as a multimedia service provider and
a license to operate as an internet service provider.
Based on a circular resolution of SMM’s shareholders, SMM will be subject to liquidation effective May 5, 2006. As of June 30, 2006, such liquidation has not yet been finalized.
PT Aplikanusa Lintasarta (“Lintasarta”)
Lintasarta is engaged in system data communications services, network applications services which include providing physical infrastructure and software application, and consultation services in data communications and information system for banking and other industries. The Company’s initial investment in Lintasarta was made in 1988.
On May 16, 2001, the Company acquired Telkom’s 37.21% equity interest in Lintasarta and increased the Company’s total equity interest in Lintasarta from 32.25% to 69.46%.
On December 21, 2005, the Company entered into a Sale and Purchase Agreement, whereby the Company agreed to purchase 2.90% equity interest in Lintasarta from Dana Pensiun Bank Negara Indonesia (“DPBNI”) for Rp17,480. Such purchase of equity interest, which resulted in the recognition of goodwill, increased the Company’s ownership in Lintasarta from 69.46% to 72.36%.
PT Starone Mitra Telekomunikasi (“SMT”)
SMT was incorporated on June 15, 2006 in Semarang, Central Java as a joint venture among the Company, PT Sarana Pembangunan Jawa Tengah, PT Dawamiba Engineering and PT Trikomsel Multimedia to engage in telecommunication services, mainly for revenue-sharing scheme of fixed wireless access (“FWA”) business in Central Java and its surroundings (Note 41b).
PT Artajasa Pembayaran Elektronis (“APE”)
APE is engaged in telecommunication and information services.
On January 2, 2002, Lintasarta entered into several transfer agreements with APE whereby Lintasarta agreed to transfer certain property and equipment, rights of use of data communication equipment and application services, with a total value of Rp30,286 in exchange for APE’s shares of stock that increased Lintasarta’s equity interest in APE from 40% to 65%.
On June 21, 2005, Lintasarta sold a portion of its ownership in APE to Yayasan Kesejahteraan Karyawan Bank Indonesia (“YKKBI”) for Rp7,250, resulting in the decrease of Lintasarta’s equity interest in APE from 65% to 55%.
16
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
PT Sisindosat Lintasbuana (“Sisindosat”, which changed its name to PT Sisindokom Lintasbuana or “Sisindokom” in May 2005)
Sisindosat is engaged in providing information technology and computer services and other related services, and acts as an agent for computer software and hardware products.
The Company initially had 95.64% equity interest in Sisindosat, which had 51% equity interest in PT Asitelindo Data Buana.
On November 5, 2002, the Company converted its receivable from Sisindosat amounting to Rp42,692 to become an additional issued and fully paid capital in Sisindosat. This transaction increased the Company’s equity interest from 95.64% to 96.87%.
On December 17, 2004, the Company entered into a Conditional Sale and Purchase Agreement (“CSPA”), whereby the Company agreed to sell its 96.87% equity interest in Sisindosat to PT Aneka Spring Telekomindo (“Astel”) for Rp40,000. On January 7, 2005, the Company and Astel closed the transaction on the sale and purchase.
On January 14, 2005, based on the CSPA, the Company paid Rp2,109 to Astel for termination of Sisindosat’s employees who chose to take the termination program offered to them as a result of the sale of Sisindosat.
On January 25, 2005, the Company received the final payment amounting to Rp32,890 (net of Rp5,000 previously received on August 27, 2004 as a bidding deposit) for the sale.
PT Asitelindo Data Buana (“Asiatel”)
Asiatel is engaged in audio-text services and providing hardware/software for telecommunications services.
Since the Company sold its investment in Sisindosat on January 7, 2005 (see above), the Company no longer has indirect investment in Asiatel.
e.
Merger of the Company, Satelindo, Bimagraha and IM3
Based on Merger Deed No. 57 dated November 20, 2003 (“merger date”) of Poerbaningsih Adi Warsito, S.H., the Company, Satelindo, PT Bimagraha Telekomindo (“Bimagraha”) and PT Indosat Multi Media Mobile (“IM3”) agreed to merge, with the Company as the surviving entity. All assets and liabilities owned by Satelindo, Bimagraha and IM3 were transferred to the Company on the merger date. These three companies were dissolved by operation of law without the need to undergo the regular liquidation process.
The names “Satelindo” and “IM3” in the following notes refer to these entities before they were merged with the Company, or as the entities that entered into contractual agreements that were taken over by the Company as a result of the merger.
17
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies adopted by the Company conform with generally accepted accounting principles in Indonesia. The significant accounting principles applied consistently in the preparation of the consolidated financial statements for the six months ended June 30, 2005 and 2006 are as follows:
a.
Basis of Consolidated Financial Statements
The consolidated financial statements are presented using the historical cost basis of accounting, except for swap contracts which are stated at fair value and certain investments which are stated at fair value or net assets value.
The consolidated statements of cash flows classify cash receipts and payments into operating, investing and financing activities. The cash flows from operating activities are presented using
the direct method.
The reporting currency used in the consolidated financial statements is the Indonesian rupiah.
b.
Principles of Consolidation
The consolidated financial statements include the Company’s accounts and its Subsidiaries as follows:
Equity Interest (%)
2005
2006
SIB
100.00
100.00
IFB
100.00
100.00
IIFB
100.00
100.00
ISP
-
100.00
IMM
99.85
99.85
SMM
99.60
99.60
Lintasarta
69.46
72.36
SMT
-
51.00
The consolidated financial statements also include the accounts of APE (Lintasarta’s subsidiary which is 55% owned). The accounts of APE in 2005 and 2006 were consolidated because its financial and operating policies were controlled by Lintasarta.
The accounts of SIB, IFB, IIFB and ISP were translated into rupiah amounts at the middle rate of exchange prevailing at balance sheet date for balance sheet accounts and the average rate during the period for profit and loss accounts. The resulting differences arising from the translations of the financial statements of SIB, IFB, IIFB and ISP are presented as part of “Difference in Foreign Currency Translation” under the Stockholders’ Equity section of the consolidated balance sheets.
Minority interest in Subsidiaries represents the minority stockholders’ proportionate share in
the equity of the Subsidiaries which are not wholly owned. All significant inter-company transactions and balances are eliminated in consolidation.
18
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c.
Accounting for Acquired Businesses
For an acquisition accounted for under the pooling-of-interests method, the historical carrying amount of the net equity of the entity acquired is combined with that of the acquirer, as if they were a single entity for all periods presented, in accordance with Statement of Financial Accounting Standards (“SAK”) 38 (Revised 2004), “Accounting for Restructuring Transactions of Entities under Common Control”. The difference between the net consideration paid or received and book value, net of applicable income tax, is shown under Stockholders’ Equity as “Difference in Value from Restructuring Transactions of Entities under Common Control”. The balance of “Difference in Value from Restructuring Transactions of Entities under Common Control” can be realized to gain or loss from the time the common control no longer exists between the entities that entered into the transactions.
For acquisitions accounted for under the purchase method, the excess of the acquisition cost over the fair values of the identifiable net assets acquired at the date of acquisition is recognized as goodwill.
d.
Cash and Cash Equivalents
Time deposits with original maturities of three months or less at the time of placement or purchase are considered as “Cash Equivalents”.
Cash and cash equivalents which are pledged as collateral for long-term debts, letter of credit facilities and bank guarantees are not classified as part of “Cash and Cash Equivalents”. These are presented as part of either “Other Current Assets” or “Non-current Assets - Others”.
e.
Short-term Investments
Short-term investments consist of:
·
Investment in debt securities
Investment in debt securities which is classified as available-for-sale is recorded at fair value in accordance with SAK 50, “Accounting for Investments in Certain Securities”. Any unrealized gain (loss) at balance sheet date is credited (charged) to “Unrealized Holding Gain (Loss) on Marketable Securities”, which is a component of Stockholders’ Equity, and will be recognized as income or loss upon realization.
Investment in debt securities which is classified as trading is recorded at fair value. Any unrealized gain (loss) at balance sheet date is credited (charged) to current operations.
·
Mutual funds
Mutual funds which are classified as trading security under SAK 50 are stated at their net assets value at balance sheet date. Unrealized gains or losses from the changes in net assets value at balance sheet date are credited or charged to current operations.
·
Time deposits with original maturities of more than three months at the time of placement or purchase
The time deposits are recorded at nominal value.
19
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f.
Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on management's evaluation of
the collectibility of the accounts at the end of the period.
g.
Inventories
Inventories, which mainly consist of starter packs and pulse reload vouchers, are valued at
the lower of cost or net realizable value. Cost is determined using the moving-average method.
h.
Prepaid Expenses
Prepaid expenses, mainly salaries, rental and insurance, are expensed as the related asset is utilized. The non-current portion of prepaid expenses is shown as part of “Non-current Assets - Others”.
i.
Investments
Investments consist of:
·
Investments in associated companies
Investments in shares of stock wherein the Companies have an equity interest of at least 20% but not exceeding 50% are accounted for under the equity method, whereby the investment cost is increased or decreased by the Companies’ share of the net earnings or losses of
the investees since the date of acquisition and decreased by dividends received. Equity in net earnings (losses) is being adjusted for the straight-line amortization over five years of
the difference between the cost of such investment and the Companies’ proportionate share in the underlying fair value of the net assets at date of acquisition (goodwill).
If the Companies’ share in the equity of an investee, subsequent to transactions resulting in
a change in the equity of the investee, is different from the Companies’ share in the equity of the investee prior to such transactions, the difference is recognized by a credit or charge to “Difference in Transactions of Equity Changes in Associated Companies/Subsidiaries”, net of applicable income tax, after adjusting their equity in the investee to conform with their accounting policies.
·
Investments in shares of stock that do not have readily determinable fair value in which
the equity interest is less than 20%, and other long-term investments are carried at cost.
·
Investments in equity shares that have readily determinable fair value which are classified as available-for-sale are recorded at fair value, in accordance with SAK 50.
·
Investments in bonds which are classified as held-to-maturity securities are recorded at cost, adjusted for amortization of premium or accretion of discount to maturity.
j.
Property and Equipment
Property and equipment are stated at cost (which includes capitalization of certain borrowing cost incurred during the construction phase), less accumulated depreciation and impairment in value. Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets.
20
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j.
Property and Equipment (continued)
Based on its review and assessment, starting January 1, 2005, the Company changed the estimated useful lives of certain property and equipment. The change in the estimated useful lives was made to reflect the effect of the integration of telecommunications network by location within the country and also in consideration of the effect of technological advancement and upgrades done by the Company. Below are the estimated useful lives (in years) prior to and starting January 1, 2005:
Prior to
Starting
January 1, 2005
January 1, 2005
Buildings
3 to 20
15 to 20
Submarine cables
15
12
Earth stations
15
10
Inland link
5 to15
15
Switching equipment
15
10
Telecommunications peripherals
5 to 15
5
Information technology equipment
5 to 10
3 to 5
Office equipment
3 to 6
5
Building and leasehold improvements
5 to 15
5
Vehicles
5
5
Cellular technical equipment
5 to 15
10 to 15
Satellite technical equipment
12 to 15
12
Transmission and cross-connection equipment
5 to 24
12
Fixed Wireless Access (“FWA”) technical equipment
8
10
Landrights are stated at cost.
The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterment, which enhance the asset condition over its initial performance, are capitalized. When properties are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are removed from the accounts, and any resulting gains or losses are reflected in income for the period.
Properties under construction and installation are stated at cost and consist mainly of cellular technical equipment, submarine cables, building and leasehold improvements, FWA technical equipment, inland link, satellite technical equipment, telecommunication peripherals, transmission and cross-connection equipment, information technology equipment, switching equipment and other equipment under construction or installation.
All borrowing costs, which include interest and foreign exchange differentials that can be attributed to qualifying assets, are capitalized to the cost of properties under construction and installation. Capitalization of borrowing costs ceases when the construction or installation is completed and the constructed or installed asset is ready for its intended use.
k.
Impairment of Assets Value
In accordance with SAK 48, “Impairment of Assets Value”, the Companies review whether there is an indication of assets impairment at balance sheet date. If there is an indication of assets impairment, the Companies estimate the recoverable amount of the assets. Impairment loss is recognized as a charge to current operations.
21
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l.
Goodwill and Other Intangible Assets
At the time the Company acquires a subsidiary which is not an entity under common control, any excess of the acquisition cost over the Company’s interest in the fair value of the subsidiary’s identifiable assets, net of liabilities, as of acquisition date is recognized as goodwill. Goodwill is amortized using the straight-line method over 15 years.
At the time of acquisition of a subsidiary, any intangible assets recognized are amortized using the straight-line method based on the estimated useful lives of the assets as follows:
Years
Customer base
- Prepaid
6
- Post-paid
5
Spectrum license
5
Brand
8
Upfront fee in connection with the license to use 2.1 GHz radio frequency bandwidth (Note 1a) is amortized using the straight-line method over the license period.
The Companies review the carrying amount of goodwill and other intangible assets whenever events or circumstances indicate that their value is impaired. Impairment loss is recognized as a charge to current operations.
m.
Bonds/Debt Issuance Cost
Expenses incurred in connection with the issuance of bonds/debt are deducted from the proceeds thereof. The difference between the net proceeds and the nominal value of the bonds/debt is recognized as premium or discount that should be amortized over the term of the bonds/debt.
n.
Stock-based Compensation
In accordance with SAK 53, “Accounting for Stock-based Compensation”, compensation expenses are accrued during the vesting period based on the fair values of all stock options as of the grant date.
o.
Revenue and Expense Recognition
Cellular
Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network.
For post-paid subscribers, monthly service fees are recognized as the service is provided.
For prepaid subscribers, the activation component of starter package sales is recognized upon delivery to dealers or direct sale to end-customers. Sales of initial/reload vouchers are recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.
Revenues from interconnection fees with operators are recognized monthly on the basis of the actual recorded traffic for the month.
22
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Revenue and Expense Recognition (continued)
Cellular (continued)
Cellular revenues are presented on a net basis, after interconnection expenses and compensation to value added service providers.
MIDI
Frame Net, World Link and Direct Link
Revenues arising from installation service are recognized upon the completion of the installation of equipment used for network connection purposes in the customers’ premises. Revenues from monthly service fees are recognized as the services are provided.
Internet
Revenues arising from installation service are recognized at the time the installations are placed in service. Revenues from monthly service fees are recognized as the services are provided. Revenues from usage charges are recognized monthly based on the duration of internet usage or based on the fixed amount of charges depending on the arrangement with the customers.
Satellite Lease
Revenues are recognized on the straight-line basis over the lease term.
Revenues from other MIDI services are recognized when the services are rendered.
Fixed Telecommunications
International Calls
Revenues from services are accounted for on the accrual basis. At the end of each period, income from outgoing international call traffic is recognized on the basis of the actual recorded traffic for the period. Income from international call traffic from overseas international carriers, for which statements have not been received, is estimated based on historical data.
Operating revenues for interconnection services under interconnection agreements based on revenue-sharing arrangement (Note 37) are reported on a net basis, after interconnection expenses and after allocations to overseas international carriers. Operating revenues for interconnections that are not made under contractual sharing agreements, i.e., based on tariff as stipulated by the Government (Note 36), are reported on a gross basis, before interconnection expenses/charges (Note 26) but net of allocations to overseas international carriers. These interconnection expenses/charges are accounted for as operating expenses in the period these are incurred.
23
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Revenue and Expense Recognition (continued)
Fixed Telecommunications (continued)
Fixed Wireless
Fixed wireless revenues arising from usage changes are recognized based on the duration of successful calls made through the Company’s fixed network.
For post-paid subscribers, activation fees are recognized upon activation of new subscribers in the Company’s fixed network while monthly service fees are recognized as the service is provided.
For prepaid customers, the activation component of starter package sales is recognized upon delivery to dealers or direct sale to end-customers. Sale of initial/reload vouchers is recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.
Revenues from interconnection fees with operators are recognized monthly on the basis of the actual recorded traffic for the month.
Fixed Line
Revenues from fixed line installations are recognized at the time the installations are placed in service. Revenues from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.
Revenues from interconnection fees with operators are recognized monthly on the basis of the actual recorded traffic for the month.
Expenses
Expenses are recognized when incurred (accrual basis).
p.
Personnel Costs
Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.
q.
Pension Plan and Employee Benefits
Pension costs under the Companies’ defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation. Prior service cost is recognized over the estimated average remaining service periods of the employees.
The Companies follow SAK 24 (Revised 2004), “Employee Benefits”, which regulates the accounting and disclosure for employee benefits, both short-term (e.g. paid annual leave, paid sick leave) and long-term (e.g. long-service leave, post-employment medical benefits).
24
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
r.
Derivatives
Derivative instruments are accounted for in accordance with SAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”. SAK 55 establishes the accounting and reporting standards which require that every derivative instrument (including embedded derivatives) be recorded in the balance sheets as either an asset or a liability as measured at fair value of each contract. SAK 55 requires that changes in a derivative fair value be recognized currently in earnings unless specific hedges allow a derivative gain or loss to offset related results on the hedged item in the statements of income, and that an entity must formally document, designate and assess the effectiveness of transactions that meet hedge accounting. None of the Company’s derivative instruments are designated as hedging instruments for accounting purposes.
s.
Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded at the rates of exchange prevailing at
the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the average buying and selling rates prevailing at such date as published by Bank Indonesia and the resulting gains or losses are credited or charged to current operations, except for foreign exchange differentials that can be attributed to qualifying assets which are capitalized to assets under construction and installation.
For June 30, 2005 and 2006, the foreign exchange rates used (in full amounts) were Rp9,713 and Rp9,300 to US$1, respectively, computed by taking the average of the last buying and selling rates of bank notes published by Bank Indonesia.
t.
Income Tax
Current tax expense is provided based on the estimated taxable income for the period. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carry-forward of unused tax losses, are also recognized to the extent that such benefits are more likely than not to be realized. The tax effects for the period are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to stockholders’ equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
For each of the consolidated entities, the tax effects of temporary differences and tax loss
carry-over, which individually are either assets or liabilities, are shown at the applicable net amounts.
u.
Segment Reporting
The Companies follow Revised SAK 5, “Segment Reporting”, in the presentation of segment reporting in their financial statements. Revised SAK 5 provides more detailed guidance for identifying reportable business segments and geographical segments. The financial information which is used by management for evaluating the segment performance is presented in Note 39.
25
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
v.
Basic Earnings per Share/ADS and Diluted Earnings per Share/ADS
In accordance with SAK 56, “Earnings Per Share”, basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period (Note 31).
Diluted earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period, after considering the dilutive effect caused by convertible bonds issued by a subsidiary (Note 17) and the stock options relating to the ESOP (Note 20).
Basic/diluted earnings per ADS is computed by multiplying basic/diluted earnings per share by 50, which is equal to the number of shares per ADS.
w.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3.
TRANSLATIONS OF RUPIAH INTO UNITED STATES DOLLAR
The consolidated financial statements are stated in rupiah. The translations of the rupiah into United States dollar (US$) are included solely for the convenience of the readers, using the average buying and selling rate published by Bank Indonesia (Central Bank) on June 30, 2006 of Rp9,300
to US$1 (in full amounts). The convenience translations should not be construed as representations that the rupiah amounts have been, could have been, or could in the future be, converted into U.S. dollar at this or any other rate of exchange.
4.
CASH AND CASH EQUIVALENTS
This account consists of the following:
2005
2006
Cash on hand
Rupiah
1,162
1,220
U.S. dollar (US$22 in 2005 and US$14 in 2006)
216
133
1,378
1,353
Cash in banks
Related parties (Note 30)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
21,182
12,704
Bank Pembangunan Daerah DKI Jakarta
3,558
3,412
PT Bank Danamon Indonesia Tbk (“Danamon”)
4,685
2,121
Bank Pembangunan Daerah Yogyakarta
743
1,342
Bank Pembangunan Daerah Sumatera Selatan
-
901
PT Bank Internasional Indonesia Tbk (“BII”)
595
759
PT Bank Mandiri Syari’ah (“Mandiri Syari’ah”)
1,168
706
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
1,304
523
26
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2005
2006
Cash in banks (Note 30) (continued)
Related parties (continued)
Rupiah (continued)
PT Bank Rakyat Indonesia (Persero) Tbk (”BRI”)
677
240
Others (each below Rp500)
609
647
U.S. dollar
Mandiri (US$230 in 2005 and US$1,524 in 2006)
2,238
14,172
Others (US$32 in 2005 and US$116 in 2006)
306
1,077
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)
19,048
8,487
Deutsche Bank AG, Jakarta Branch
23,424
7,938
The Hongkong and Shanghai Banking Corp. Ltd.,
Jakarta Branch
-
7,422
PT Bank Niaga Tbk (“Niaga”)
749
5,921
PT Bank Permata Tbk
625
4,813
PT Bank Umum Koperasi Indonesia (“Bukopin”)
543
2,502
Citibank N.A., Jakarta Branch
3,165
1,058
PT Bank Artha Graha Internasional Tbk
551
506
PT Bank Mega Tbk (“Mega”)
582
-
Others (each below Rp500)
974
674
U.S. dollar
Deutsche Bank AG, Jakarta Branch (US$4,309 in 2005
and US$11,509 in 2006)
41,857
107,032
Citibank N.A., Jakarta Branch (US$609 in 2005 and
US$1,058 in 2006)
5,915
9,838
Citibank N.A., Singapore Branch (US$1 in 2005 and
US$480 in 2006)
12
4,467
Bukopin (US$250)
-
2,324
Niaga (US$53)
513
-
Others (US$96 in 2005 and US$15 in 2006)
930
139
135,953
201,725
Time deposits
Related parties (Note 30)
Rupiah
Mandiri
905,623
623,085
Danamon
655,000
125,900
Mandiri Syari’ah
347,000
70,000
PT Bank Tabungan Negara (Persero) (“BTN”)
7,750
54,500
BNI
126,715
25,215
BRI
497,000
10,000
Bank Pembangunan Daerah Sulawesi Utara
3,500
-
27
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2005
2006
Time deposits (continued)
Related parties (continued)
U.S. dollar
BRI (US$22,000 in 2005 and US$25,000 in 2006)
213,686
232,500
BNI (US$25,000)
-
232,500
Danamon (US$20,000 in 2005 and US$15,000 in 2006)
194,260
139,500
Mandiri Syari’ah (US$15,000 in 2005 and 2006)
145,695
139,500
BTN (US$10,000)
-
93,000
Mandiri (US$171,449 in 2005 and US$1,509 in 2006)
1,665,281
14,036
Third parties
Rupiah
Deutsche Bank AG, Jakarta Branch
223,155
234,167
BCA
1,500
201,500
Niaga
94,100
123,500
Standard Chartered Bank, Jakarta Branch
-
75,000
Bukopin
430,500
38,000
PT Bank Muamalat Indonesia Tbk (“Muamalat”)
210,000
35,000
Citibank N.A., Jakarta Branch
-
30,000
PT Bank Mega Tbk
18,852
10,552
Others
6
6
U.S. dollar
Deutsche Bank AG, Jakarta Branch (US$40,289 in 2005
and US$33,028 in 2006)
391,329
307,160
Niaga (US$14,636 in 2005 and US$30,300 in 2006)
142,155
281,785
Bukopin (US$25,000 in 2005 and US$30,000 in 2006)
242,825
279,000
Muamalat (US$10,000)
-
93,000
BCA (US$20,000)
194,260
-
6,710,192
3,468,406
Total
6,847,523
3,671,484
Time deposits denominated in rupiah earned interest at annual rates ranging from 6.00% to 7.81% in 2005 and from 6.00% to 13.00% in 2006, while those denominated in U.S. dollar earned interest at annual rates ranging from 0.60% to 3.00% in 2005 and from 1.38% to 4.75% in 2006.
The interest rates on time deposits in related parties are comparable to those offered by third parties.
5.
ACCOUNTS RECEIVABLE - TRADE - TELKOM
This account represents receivables for uncollected international calls, telex and telegram charges to subscribers which were billed by Telkom, and receivables from cellular interconnection revenue net of interconnection charges payable to Telkom for these services and for leased circuits, and other charges (Note 30).
28
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
5.
ACCOUNTS RECEIVABLE - TRADE - TELKOM (continued)
The aging schedule of the accounts receivable is as follows:
2005
2006
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
0 - 3 months
156,581
63.07
78,633
51.07
4 - 6 months
37,846
15.24
112
0.07
over 6 months
53,856
21.69
75,225
48.86
Total
248,283
100.00
153,970
100.00
The changes in the allowance for doubtful accounts provided on the trade accounts receivable from Telkom are as follows:
2005
2006
Balance at beginning of period
86,884
89,485
Reversal
(3,929
)
(3,111)
Deduction due to sale of Sisindosat
(2,250
)
-
Net effect of foreign exchange adjustment
261
(48)
Balance at end of period
80,966
86,326
The net effect of foreign exchange adjustment was due to the strengthening or weakening of the rupiah vis-à-vis the U.S. dollar in relation to U.S. dollar accounts previously provided with allowance and was credited or charged to “Gain (Loss) on Foreign Exchange - Net”.
Management believes the established allowance is sufficient to cover probable losses from uncollectible accounts receivable.
6.
ACCOUNTS RECEIVABLE - TRADE - THIRD PARTIES
This account consists of the following:
2005
2006
Overseas international carriers
Saudi Telecom Company, Saudi Arabia (US$9,719 in 2005 and
US$12,467 in 2006)
94,396
115,939
DiGi Telecommunications Sdn Bhd (previously Mutiara
Telecommunications Sdn Bhd), Malaysia (US$7,545 in 2005 and
US$10,929 in 2006)
73,280
101,639
Telekom Malaysia Berhad, Malaysia (US$4,640 in 2005 and
US$6,037 in 2006)
45,067
56,147
Maxis International Sdn Bhd, Malaysia (US$4,615 in 2005 and
US$5,983 in 2006)
44,821
55,645
UAE-Etisalat, United Arab Emirates (US$4,351 in 2005 and
US$5,810 in 2006)
42,267
54,038
Cableview Services Sdn Bhd (“Mega TV”), Malaysia (US$3,289 in 2005
and 2006)
31,949
30,591
Mega Media Broadcasting Network Co. Ltd., Taiwan (US$2,203 in 2005
and 2006)
21,398
20,489
DDI Corporation, Japan (US$2,591 in 2005 and US$2,056 in 2006)
25,168
19,157
29
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
ACCOUNTS RECEIVABLE - TRADE - THIRD PARTIES (continued)
2005
2006
Overseas international carriers (continued)
Celcom Malaysia Berhad, Malaysia (US$4,005 in 2005 and
US$1,278 in 2006)
38,896
11,886
Jabatan Telekom Brunei, Brunei Darussalam (US$3,213 in 2005 and
US$945 in 2006)
31,204
8,788
TT dotCom Sdn Bhd, Malaysia (US$1,328 in 2005 and
US$693 in 2006)
12,900
6,442
Reach Hongkong, Hongkong (US$2,523 in 2005 and US$665 in 2006)
24,508
6,181
MCI Worldcom, U.S.A. (US$4,167 in 2005 and US$595 in 2006)
40,482
5,548
Korea International Telecommunication, Korea (US$609 in 2005 and
US$425 in 2006)
5,911
3,955
AT&T, U.S.A. (US$1,045)
10,151
-
Others (each below Rp20,000, including US$26,124 in 2005 and
US$31,148 in 2006)
269,624
298,627
812,022
795,072
Local companies
PT Ratelindo
4,960
8,930
PT Satkomindo Mediyasa (US$1,040 in 2005 and US$798 in 2006)
8,755
7,422
PT Cakrawala Andalas Televisi (US$1,057 in 2005 and US$611
in 2006)
10,271
5,680
PT Cyberindo Aditama (US$1,409 in 2005 and US$304 in 2006)
13,683
2,832
Others (each below Rp6,000, including US$9,333 in 2005 and
US$11,457 in 2006)
222,253
260,202
259,922
285,066
Post-paid subscribers from:
Cellular
397,570
503,763
Fixed line
5,515
19,103
Fixed wireless
11,199
16,195
414,284
539,061
Total
1,486,228
1,619,199
Less allowance for doubtful accounts
448,134
579,412
Net
1,038,094
1,039,787
The aging schedule of the accounts receivable is as follows:
2005
2006
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
0 - 6 months
765,739
51.52
777,216
48.00
7 - 12 months
268,341
18.05
272,342
16.82
13 - 24 months
234,314
15.77
284,590
17.58
over 24 months
217,834
14.66
285,051
17.60
Total
1,486,228
100.00
1,619,199
100.00
As of June 30, 2006, approximately 3.03% of accounts receivable - trade are pledged as collateral for long-term bank loans obtained by Lintasarta (Note 16).
30
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
ACCOUNTS RECEIVABLE - TRADE - THIRD PARTIES (continued)
The changes in the allowance for doubtful accounts provided on the accounts receivable - trade from third parties are as follows:
2005
2006
Balance at beginning of period
375,001
528,314
Provision
68,102
73,448
Write-off
-
(18,141)
Deduction due to sale of Sisindosat
(4,259
)
-
Net effect of foreign exchange adjustment
9,290
(4,209)
Balance at end of period
448,134
579,412
The net effect of foreign exchange adjustment was due to the strengthening or weakening of the rupiah vis-à-vis the U.S. dollar in relation to U.S. dollar accounts previously provided with allowance and was credited or charged to “Gain (Loss) on Foreign Exchange - Net”.
There are no significant concentrations of credit risk, except for the trade accounts receivable from Telkom (Note 5).
Management believes the established allowance is sufficient to cover probable losses from uncollectible accounts receivable.
7.
PREPAID TAXES
This account consists of the following:
2005
2006
481,933
770,945
Value Added Tax (“VAT”)
134,773
113,906
Others
78,861
39,666
Total
695,567
924,517
Claims for tax refund in 2005 and 2006 mainly consist of the Company’s claims for tax refund from the excess prepayments of the Company’s income tax articles 22, 23 and 25 over the Company’s current income tax expense.
In June 2005, the Company received the payment of IM3’s claims for tax refund from the Tax Office amounting to Rp49,186 consisting of the excess prepayment of IM3’s income tax articles 22, 23 and 25 over its current income tax expense for fiscal years 2001 - 2003 and refund for prepaid VAT for fiscal year 2003.
In September 2005, the Company received payment amounting to Rp119,195 form the Tax Office for the Company’s claim for tax refund for fiscal year 2003.
31
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
8.
INVESTMENTS IN ASSOCIATED COMPANIES
This account consists of the following investments which are accounted for under the equity method:
Company’s
Portion of
Accumulated
Equity in
Undistributed
Net Income (Loss)
Equity
of Associated
Carrying
Interest (%)
Cost
Companies
Value
2005
Investments in:
PT Multi Media Asia Indonesia
26.67
56,512
(212
)56,300
Cambodian Indosat Telecommunication S.A.
49.00
14,697
(149
)14,548
PT Yasawirya Indah Mega Media
35.00
5,000
(3,404
)1,596
PT Swadharma Marga Inforindo
20.00
100
405
505
Total
76,309
(3,360
)72,949
Less allowance for decline in value
72,444
-
72,444
Net
3,865
(3,360
)505
2006
Investments in:
PT Multi Media Asia Indonesia
26.67
56,512
(212
)56,300
PT Swadharma Marga Inforindo
20.00
100
325
425
Total
56,612
113
56,725
Less allowance for decline in value
56,300
-
56,300
Net
312
113
425
The changes in the carrying value of the investments in associated companies for the six months ended June 30, 2005 and 2006 are as follows:
2005
2006
Equity in net income (loss) of associated companies
67
(99)
Deduction in the carrying value of the investment due to sale of
investment in Sisindosat
(32,696
)
-
Net Change
(32,629
)
(99)
The economic difficulties faced by Indonesia (Note 40) have substantially affected the Companies’ long-term investments in associated companies. Due to the decline in the value of their investments, the Companies have provided allowance for decline in value amounting to Rp72,444 and Rp56,300 as of June 30, 2005 and 2006, respectively, which the Companies believe is adequate to cover probable losses on those investments.
PT Multi Media Asia Indonesia (“M2A”)
M2A, established in 1997, is engaged in providing satellite-based telecommunications services. Based on a subscription agreement in 1997 among the Company, PT Pasifik Satelit Nusantara (“PSN”) and M2A (“the Parties”), the Parties agreed that the Company would participate as
a stockholder of M2A, which was previously wholly owned by PSN, by acquiring 485,000,000 new shares of M2A with an aggregate nominal value of US$20,000, representing 26.67% equity interest in M2A. The Parties also agreed that the Company’s investment in M2A would not be less than 20% of the fully paid capital if M2A issued its new shares to Telkom and allocated not more than 5% of
the fully paid capital to the Government of the Republic of Indonesia.
32
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
8.
INVESTMENTS IN ASSOCIATED COMPANIES (continued)
Cambodian Indosat Telecommunications S.A. (“Camintel”)
The Company’s investment in Camintel, a joint venture between the Company and the Kingdom of Cambodia, was made in 1995. The main business of the joint venture is to undertake
the rehabilitation, expansion, operation and maintenance of telecommunications facilities formerly owned by United Nations Transitional Authority in Cambodia (“UNTAC”), and to provide telecommunications and other services in Cambodia.
On August 11, 2005, the Company entered into a shares sale and purchase agreement to sell its 6,590,500 shares in Camintel to a third party for US$1,500.
On August 12 and October 27, 2005, the Company received the payment of the selling price in two installments of US$150 and US$1,350, respectively (equivalent to Rp14,625).
9.
OTHER LONG-TERM INVESTMENTS
This account consists of the following:
2005
2006
Investments in:
Shares of stock accounted for under the cost method - net
4,631
2,631
Convertible bonds - net
-
-
Equity securities which are available-for-sale
99
99
Total
4,730
2,730
a.
Investments in shares of stock which are accounted for under the cost method
2005
Equity
Cost/
Interest (%)
Carrying Value
PT Broadband Multimedia Tbk
5.00
50,000
ICO Global Communications (Holdings) Limited
0.0087
49,977
AlphaNet Telecom Inc.
-
32,149
Others (cost/carrying value below
Rp4,000 each)
10.00 - 16.67
4,631
Total
136,757
Less allowance for decline in value
132,126
Net
4,631
33
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
OTHER LONG-TERM INVESTMENTS (continued)
a.
Investments in shares of stock which are accounted for under the cost method (continued)
2006
Equity
Cost/
Interest (%)
Carrying Value
PT Broadband Multimedia Tbk
5.00
50,000ICO Global Communications (Holdings) Limited0.0087
49,977
Others (cost/carrying value below
Rp4,000 each) (a)
16.67 - 17.60
2,631
Total
102,608
Less allowance for decline in value(a)
99,977
Net
2,631
(a)
net of investment in PT Patra Telekomunikasi Indonesia sold in August 2005
and write-off of investment in AlphaNet Telecom Inc. in December 2005
b.
Investments in convertible bonds
This account consists of:
2005
2006
AlphaNet Telecom Inc.
71,441
-
PT Yasawirya Indah Mega Media
18,000
-
Total(b)
89,441
-
Less allowance for decline in value(b)
89,441
-
Net
-
-
(b)
The Company and IMM wrote off their investments in December 2005.
c.
Equity securities which are available-for-sale
As of June 30, 2005 and 2006, this account consists of:
BNI
89
Telkom
10
Total
99
The economic difficulties faced by Indonesia (Note 40) have substantially affected the Companies’ other long-term investments. Consequently, the Companies provided an allowance for decline in value of their investments in shares of stock accounted for under the cost method and in convertible bonds amounting to Rp221,567 and Rp99,977 as of June 30, 2005 and 2006, respectively, which management believes is adequate to cover probable losses on the investments.
34
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
OTHER LONG-TERM INVESTMENTS (continued)
PT Broadband Multimedia Tbk (“BM”)
On April 20, 2004, the Company entered into a shares sale and purchase agreement to purchase from a third party such third party’s 5% equity interest in BM for Rp50,000. BM is engaged in cable television and internet network provider services.
ICO Global Communications (Holdings) Limited (“I-CO”)
In 1995, the Company subscribed to the shares of I-CO, a subsidiary of The International Mobile Satellite Organization that is domiciled in the Bahamas. I-CO provides satellite constellation and related mobile services from, and based on, the satellites.
AlphaNet Telecom Inc. (“ATI”)
ATI, a company incorporated in Canada, was engaged in the design, development, installation, operation and worldwide marketing of fax messaging and information service to business travellers, the hotel industry and users of personal computers and personal digital assistants. “Inn Fax”, “Follow Fax” and “Follow Fax PC” were the registered trademarks of ATI. The Company had a 14.5% equity interest in ATI and an investment in convertible bonds of ATI with a principal amount of CAD35,000,000.
In 1999, based on a resolution of its Board of Directors, ATI announced that it had filed an announcement of bankruptcy with the Toronto Stock Exchange. Based on this fact, the Company provided 100% allowance for losses on its investments in ATI.
As a result of ATI’s liquidation process, the Company received on March 9, 2001 the amount of Rp12,923 (CAD2,028,670) from the sale of ATI’s assets. On September 23, 2004, the Company received the last liquidation payment amounting to Rp8,557 (CAD1,208,272) from ATI’s trustee. As the liquidation process has been completed, the Company wrote off its investment in ATI in 2005.
Other
On January 28, 2005, the Company sold its investment in The International Telecommunications Satellite Organization (acquired in 1985) for US$10,539 (equivalent to Rp96,381) resulting in a loss amounting to Rp1,046. On April 7, 2005, the Company received the proceeds from the sale.
35
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
10.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
2005
Transactions during the Period
Balance
at Beginning
Divestment in
Balance at
of Period
Additions
Deductions
Reclassifications
a SubsidiaryEnd of Period
Carrying Value
Landrights
283,598
14,468
-
10,263
(5,250)303,079
Buildings
376,075
-
-
14,628
(6,546)384,157
Submarine cables
862,818
-
-
22
-
862,840
Earth stations
116,213
-
-
-
-116,213
Inland link
399,382
-
-
76,767
-476,149
Switching equipment
325,287
-
-
7,848
-333,135
Telecommunications
peripherals
1,546,503
113,779
-
38,387
(10,562)1,688,107
Information technology
equipment
871,979
659
946
58,951
-930,643
Office equipment
1,131,141
60,394
319
51,037
(17,687)1,224,566
Building and leasehold
improvements
918,483
616
-
110,693
-
1,029,792
Vehicles
15,361
940
436
-
(1,425)14,440
Cellular technical
equipment
17,131,651
-
-
1,321,667
-18,453,318
Satellite technical
equipment
1,243,969
-
-
21,536
-1,265,505
Transmission and cross-
connection equipment
471,476
-
-
779
-472,255
FWA technical equipmen
t
317,499
-
-
1,138
-
318,637
Properties under
construction and
installation
1,810,075
3,229,795
-
(1,713,716
)-3,326,154
Total
27,821,510
3,420,651
1,701
-
(41,470)31,198,990
Accumulated Depreciation
Buildings
177,433
10,619
-
-
(1,994)186,058
Submarine cables
309,390
55,369
-
-
-364,759
Earth stations
80,365
23,002
-
-
-103,367
Inland link
61,782
15,706
-
-
-77,488
Switching equipment
173,407
29,921
-
-
-203,328
Telecommunications
peripherals
858,291
148,475
-
-
(3,805)1,002,961
Information technology
equipment
528,608
116,453
946
-
-644,115
Office equipment
587,135
62,121
304
-
(13,803)635,149
Building and leasehold
improvements
289,774
84,622
-
-
-374,396
Vehicles
11,390
958
437
-
(1,289)10,622
Cellular technical
equipment
6,491,206
780,795
-
-
-7,272,001
Satellite technical
equipment
695,875
71,302
-
-
-767,177
Transmission and cross-
connection equipment
174,288
9,274
-
-
-183,562
FWA technical equipment
22,132
15,672
-
-
-37,804
Total
10,461,076
1,424,289
1,687
-
(20,891)11,862,787
Less impairment in value
117,258
-
-
-
(17,637
)
99,621
Net Book Value
17,243,176
19,236,582
36
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
10.
PROPERTY AND EQUIPMENT (continued)
2006
Balance
Transactions during the Period
Balance
at Beginning
at End
of Period
Additions
Deductions
Reclassifications
of Period
Carrying Value
Landrights
328,654
-
-
14,607
343,261
Buildings
428,172
5,545
-
18,124
451,841
Submarine cables
862,848
-
-
11,526
874,374
Earth stations
116,519
-
-
6,560
123,079
Inland link
610,177
-
-
191,697
801,874
Switching equipment
343,102
-
-
14,039
357,141
Telecommunications
peripherals
1,832,196
97,412
9,978
50,119
1,969,749
Information technology
equipment
1,019,338
2,736
1,436
115,014
1,135,652
Office equipment
1,386,558
35,872
801
43,630
1,465,259
Building and leasehold
improvements
1,129,242
694
-
163,897
1,293,833
Vehicles
15,946
1,620
195
-
17,371
Cellular technical
equipment
21,139,466
-
-
2,468,752
23,608,218
Satellite technical
equipment
1,272,846
-
-
3,278
1,276,124
Transmission and cross-
connection equipment
472,655
-
-
5,915
478,570
FWA technical equipment
434,744
-
-
71,252
505,996
Properties under
construction and
installation
3,680,665
3,309,352
-
(3,178,410
)
3,811,607
Total
35,073,128
3,453,231
12,410
-
38,513,949
Accumulated Depreciation
Buildings
197,312
12,415
-
-
209,727
Submarine cables
418,321
55,794
-
-
474,115
Earth stations
111,081
3,976
-
-
115,057
Inland link
95,666
24,515
-
-
120,181
Switching equipment
223,459
17,367
-
-
240,826
Telecommunications
peripherals
1,119,017
124,096
9,978
-
1,233,135
Information technology
equipment
735,830
100,578
1,436
-
834,972
Office equipment
711,564
84,103
801
-
794,866
Building and leasehold
improvements
466,716
108,045
-
-
574,761
Vehicles
10,844
1,086
195
-
11,735
Cellular technical
equipment
8,214,472
1,030,439
-
-
9,244,911
Satellite technical
equipment
840,041
72,548
-
-
912,589
Transmission and cross-
connection equipment
193,246
9,641
-
-
202,887
FWA technical equipment
72,167
32,038
-
-
104,205
Total
13,409,736
1,676,641
12,410
-
15,073,967
Less impairment in value
98,611
-
-
-
98,611
Net Book Value
21,564,781
23,341,371
Submarine cables represent the Company’s proportionate investment in submarine cable circuits jointly constructed, operated, maintained and owned with other countries, based on the respective contracts and/or the construction and maintenance agreements.
37
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
10.
PROPERTY AND EQUIPMENT (continued)
During the six months ended June 30, 2006 and 2005, sales of certain property and equipment were made as follows:
2005
2006
Proceeds from sale
147
298
Net book value
(14
)
-
Gain
133
298
Depreciation expense charged to statements of income amounted to Rp1,424,289 and Rp1,676,641 in 2005 and 2006, respectively.
In 2004, the Company recognized impairment loss on Sisindosat property and equipment amounting to Rp17,637 due to the impairment of its investment in Sisindosat as indicated by the sales price of Sisindosat being below the amount of the Company’s investment. Following the sale of the Company’s investment in Sisindosat in January 2005 (Note 1d), such impairment loss was derecognized due to the derecognition of Sisindosat’s property and equipment.
Management believes that there is no further impairment in assets value or recovery of the impairment reserve as contemplated in SAK 48.
As of June 30, 2006, approximately 0.70% of property and equipment are pledged as collateral to letter of credit facilities obtained by Lintasarta (Note 16).
As of June 30, 2006, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$102,390 and Rp23,624,677, including insurance on the Company‘s satellite amounting to US$12,000. Management believes that the sum insured is sufficient to cover possible losses arising from fire, explosion, lightning, aircraft damage and other natural disasters.
Starting January 1, 2005, the Company changed the estimated useful lives of certain of its property and equipment (Note 2j). The effects of the change are to increase income before income tax as follows:
Period
Amount
Six months ended June 30, 2006
106,124
Six months ending December 31, 2006
96,578
Year ending December 31, 2007
197,357
Year ending December 31, 2008
153,148
Year ending December 31, 2009
135,174
Year ending December 31, 2010
81,620
38
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
10.
PROPERTY AND EQUIPMENT (continued)
The details of the Companies’ properties under construction and installation as of June 30, 2005 and 2006 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
2005
Cellular technical equipment
55 - 95
2,999,842
July - October 2005
Inland link
84 - 94
98,554
July - November 2005
FWA technical equipment
70 - 78
98,033
July - November 2005
Telecommunications peripherals
90 - 96
47,576
July - December 2005
Building and leasehold improvements
64 - 90
32,517
July - August 2005
Information technology equipment
60 - 76
11,521
July 2005
Building
5 - 82
5,671
July - December 2005
Switching equipment
95
937
July 2005
Satellite technical equipment
95
17
July 2005
Submarine cables
95
7
July 2005
Others
60 - 97
31,479
July - August 2005
Total
3,326,154
2006
Cellular technical equipment
68 - 86
3,494,943
July - September 2006
Submarine cables
5
98,662
December 2006
Building and leasehold improvements
71 - 76
65,915
July - December 2006
FWA technical equipment
94 - 99
54,253
July - September 2006
Inland link
69 - 79
38,061
July 2006 - March 2007
Satellite technical equipment
99
14,513
July - September 2006
Telecommunications peripherals
99
13,616
July - December 2006
Transmission and cross-connection equipment
97 - 99
6,766
July - December 2006
Information technology equipment
66 - 88
6,258
July 2006 - April 2007
Switching equipment
88 - 90
2,403
July - September 2006
Others
20 - 99
16,217
July - September 2006
Total
3,811,607
Borrowing costs (interest expense) capitalized to properties under construction and installation for the six months ended June 30, 2005 and 2006 amounted to Rp5,278 and Rp40,519, respectively.
39
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
11.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arose from the acquisition of equity interest in Bimagraha and Satelindo in 2001 and 2002, respectively (Note 1e), and from the acquisition of additional equity interest in Lintasarta in 2005 (Note 1d).
The details of the other intangible assets arising from the acquisition of Satelindo in 2002 are as follows:
Amount
Customer base
- Post-paid
154,220
- Prepaid
73,128
Spectrum license
222,922
Brand
147,178
Total
597,448
Starting January 2003, the Company changed its goodwill amortization period from 5 years to 15 years. The effect of the change is an increase (decrease) in income before income tax as follows:
Period
Amount
Six months ended June 30, 2006
135,899
Six months ending December 31, 2006
135,899
Year ending December 31, 2007
(84,603
)
The details of goodwill and other intangible assets are as follows:
2005
2006
Balance at beginning of period
3,012,578
2,682,600
Addition (Note 1a)
-
320,000
Amortization of goodwill
(113,174
)
(113,253)
Amortization of other intangible assets
(53,006
)
(61,718)
Balance at end of period
2,846,398
2,827,629
The addition to goodwill and other intangible assets in 2006 represents the payment of the upfront fee to the Ministry of Communications and Information Technology in connection with the selection of the Company as one of the IMT - 2000 cellular network providers using 2.1 GHz radio frequency bandwidth in Indonesia (Note 1a).
12.
LONG-TERM ADVANCES
This account represents advances to suppliers and contractors for the procurement or construction of property and equipment which will be reclassified to the related property and equipment accounts upon the receipt of the property and equipment purchased or after the construction or installation of the property and equipment has reached a certain percentage of completion.
40
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
PROCUREMENT PAYABLE
This account consists of the following:
2005
2006
PT Nokia Network (including US$834 in 2005 and
US$24,060 in 2006)
9,199
402,339
Siemens Aktiengesellschaft, Germany (including US$19,204
in 2005 and US$33,360 in 2006)
186,529
310,248
Ericsson AB, Sweden (including US$67,601 in 2005 and
US$33,357 in 2006)
656,610
310,220
PT Ericsson Indonesia (including US$568 in 2005 and
US$19,342 in 2006)
24,552
279,291
Nokia Corporation, Finland (including US$13,762 in 2005 and
US$27,884 in 2006)
133,675
259,325
PT Siemens Indonesia (including US$3,674 in 2005 and
US$8,696 in 2006)
78,699
244,989
PT Alcatel Indonesia (including US$4,673 in 2005 and
US$4,725 in 2006)
70,322
230,060
Siemens Mobile Communications S.p.A, Italy (including
US$3,756 in 2005 and US$10,147 in 2006)
36,483
94,369
Alcatel CIT, France (including US$15,155 in 2005 and
US$8,213 in 2006)
147,522
76,703
Huawei Tech Investment Co Ltd, Hongkong (US$8,109)
-
75,410
ZTE Corporation, China (including US$2,218 in 2005
and US$4,554 in 2006)
21,935
42,294
PT Huawei Tech Investment (including US$854)
-
36,888
PT Industri Telekomunikasi Indonesia (Persero) (including
US$2,273 in 2006)
17,562
35,296
PT Kopnatel Jaya
33,513
33,820
Kopindosat
49,774
33,598
PT Sisindokom Lintasbuana (including US$4,025 in 2005 and
US$2,045 in 2006)
39,914
27,402
PT Dawamiba Engineering
44,263
22,703
PT Varindo Buana Abadi (including US$169 in 2005 and
US$1,881 in 2006)
2,513
20,474
PT Senopati Sellularindo
61,892
19,823
PT Bahyutama Kerta Mukti
27,082
18,031
PT Bukit Jaya Abadi
24,072
11,719
NT System Company Limited, Hongkong (including US$2,560
in 2005 and US$1,097 in 2006)
24,863
10,205
PT Bukaka Teknik Utama
25,237
5,570
PT Karya Mitra Nugraha
33,991
5,384
PT Ciptakomunindo Pradipta
33,123
3,512
PT Gihon Telekomunikasi Indonesia
24,000
2,716
PT Sekar Kedaton Nusantara
29,221
2,179
28,8861,057
PT Ekaprasarana Primatel (including US$2,953 in 2005 and
US$103 in 2006)
28,886
1,057
PT ZTE Indonesia (US$3,653)
38,749
-
Sumacom Mitra (US$3,390)
34,581
-
PT Alvarid Mas (US$3,042)
33,711
-
Others (including US$25,557 in 2005 and US$16,796 in 2006,
each below Rp20,000)
647,923
353,356
Total
2,620,396
2,968,981
41
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE
This account consists of the following:
2005
2006
Estimated corporate income tax payable,
less tax prepayments of Rp181,123 in 2005
and Rp93,814 in 2006
55,000
22,457
Income tax:
Article 21
21,120
11,903
Article 22
2,899
2,281
Article 23
40,969
49,728
Article 25
20,049
21,515
Article 26
19,219
5,051
VAT
828
2,811
Others
4,547
4,797
Total
164,631
120,543
The reconciliation between income before income tax and estimated taxable income of the Company for the six months ended June 30, 2005 and 2006 is as follows:
2005
2006
Income before income tax per consolidated statements of income
1,151,754
823,161
Subsidiaries’ income before income tax and effect of inter-company
consolidation eliminations
(51,246
)
(73,537)
Income before income tax of the Company
1,100,508
749,624
Positive adjustments
Accrual of employee benefits – net
12,080
60,105
Provision for doubtful accounts
77,612
59,325
Amortization of goodwill and other intangible assets
(22,206
)
8,658
Donation
8,948
4,409
Representation and entertainment
5,937
4,154
Amortization of debts and bonds issuance cost and discount
(4,753
)
1,659
Assessments for income taxes, VAT
and related penalties
12,472
764
Compensation expense for ESOP (Note 20)
77,840
-
Others
11,481
64,939
Negative adjustments
Depreciation - net
(348,981
)
(413,154)
Interest income already subjected to final tax
(70,170
)
(104,906)
Equity in net income of investees
(59,316
)
(101,043)
Capitalization of interest expense and personnel expenses
to property and equipment (Notes 10 and 24)
(20,269
)
(60,114)
Realization of stock option resulting from the exercise of ESOP Phase I
and Phase II
(4,285
)
(51,199)
Write-off of accounts receivable
-
(16,585)
Net periodic pension cost
(8,031
)
(6,641)
Gain from sale of property and equipment
(76
)
(52)
Sale of investment in subsidiary (Note 1d)
(109,951
)
-
Estimated taxable income of the Company
658,840
199,943
42
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The computation of the income tax expense for the six months ended June 30, 2005 and 2006 is as follows:
2005
2006
Estimated taxable income of the Company
658,840
199,943
Income tax expense - current (at statutory tax rates)
Company
197,635
59,965
Subsidiaries
38,488
56,306
Total income tax expense - current
236,123
116,271
Income tax expense - deferred
Effect of temporary differences at enacted maximum tax rate (30%)
Company
Depreciation - net
104,694
123,946
Equity in net income of investees
17,795
30,313
Capitalization of interest expense and personnel expense
to property and equipment
(Notes 10 and 24)
6,081
18,034
Compensation expense for ESOP
(22,067
)
15,360
Write-off of accounts receivable
-
4,976
Net periodic pension cost
2,409
1,992
Gain on sale of property and equipment
23
16
Accrual of employee benefits - net
(5,069
)
(21,060)
Provision for doubtful accounts
(23,284
)
(17,797)
Amortization of goodwill and other intangible assets
6,662
(2,597)
Amortization of debts and bonds issuance cost and discount
1,426
(498)
Sale of investment in subsidiary
32,985
-
Others
(5,107
)
(11,777)
116,548
140,908
Subsidiaries
Provision for doubtful accounts
(1,005
)
280
Depreciation – net
(3,265
)
(4,750)
Others
(670
)
1,155
(4,940
)
(3,315)
Net income tax expense - deferred
111,608
137,593
Total income tax expense
347,731
253,864
The computation of the estimated income tax payable and claim for tax refund for the six months ended June 30, 2005 and 2006 is as follows:
2005
2006
Income tax expense - current
Company
197,635
59,965
Subsidiaries
38,488
56,306
Total income tax expense – current
236,123
116,271
43
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
2005
2006
Less prepayments of income tax of the Company
Article 22
11,143
12,898
Article 23
29,826
58,015
Article 25
108,989
116,099
Total prepayments of income tax of the Company
149,958
187,012
Less prepayments of income tax of Subsidiaries
Article 22
1,362
925
Article 23
17,938
19,052
Article 25
11,865
13,872
Total prepayments of income tax of Subsidiaries
31,165
33,849
Total prepayments of income tax
181,123
220,861
Estimated income tax payable
Company
47,677
-
Subsidiaries
7,323
22,457
Total estimated income tax payable
55,000
22,457
Claim for tax refund (presented as part of
“Prepaid Taxes”)
Company
-
(127,047)
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 30% to the combined income before income tax of the Company and Subsidiaries, and the income tax expense as shown in the consolidated statements of income for the six months ended June 30, 2005 and 2006 is as follows:
2005
2006
Income before income tax per consolidated statements of income
1,151,754
823,161
Company’s equity in Subsidiaries’ income before income tax and
reversal of
inter-company consolidation eliminations
56,506
100,313
Combined income before income tax of the
Company and Subsidiaries
1,208,260
923,474
Income tax expense at the applicable tax rate of 30%
362,478
277,042
Tax effect on permanent differences
Assessments for income taxes, VAT and related penalties
3,697
7,564
Representation and entertainment
1,781
1,835
Donation
2,687
1,323
Employee benefits
1,098
675
Interest income already subjected to final tax
(23,846
)
(35,627)
Others
(550
)
383
Adjustment due to tax audit and others
(70
)
669
Valuation allowance adjustment
456
-
Total income tax expense per consolidated statements of income
347,731
253,864
44
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The tax effects of significant temporary differences between financial and tax reporting which are outstanding as of June 30, 2005 and 2006 are as follows:
2005
2006
Company
Deferred tax assets
Allowance for doubtful accounts
180,026
217,431
Accrual of employee benefits - net
74,072
116,789
Allowance for decline in value of investments in associated
companies and
other long-term investments
82,324
46,883
Pension cost
37,115
26,606
Compensation expense for ESOP
43,429
11,869
Allowance for short-term investment
7,619
7,618
Others
-
11,776
Total
424,585
438,972
Deferred tax liabilities
Property and equipment
887,564
1,246,914
Investments in subsidiaries/associated companies - net of
amortization of goodwill and other intangible assets
128,544
188,309
Deferred bonds and loans issuance costs and discount
8,018
6,416
Difference in transactions of equity changes in associated
companies/subsidiaries
1,801
1,752
Others
871
911
Total
1,026,798
1,444,302
Deferred tax liabilities - net
602,213
1,005,330
Subsidiaries (IMM in 2005; APE in 2005 and 2006)
Deferred tax assets
Allowance for doubtful accounts
7,761
162
Allowance for decline in value of other long-term investments
10,294
-
Tax loss carry-over
4,082
-
Others
470
40
22,607
202
Valuation allowance
(20,077
)
-
Net
2,530
202
Deferred tax liabilities
Investments in subsidiaries/associated companies
1,891
747
Property and equipment
98
-
Others
2,809
470
Total
4,798
1,217
Deferred tax liabilities - net
2,268
1,015
Deferred tax liabilities - net
604,481
1,006,345
45
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
2005
2006
Subsidiaries (Lintasarta in 2005; IMM and Lintasarta in 2006)
Deferred tax assets
Property and equipment
24,744
29,715
Allowance for doubtful accounts
2,423
9,801
Others
11,031
8,126
Total
38,198
47,642
Deferred tax liabilities
Others
(450
)
(391)
Deferred tax assets - net
37,748
47,251
The breakdown by entity of the foregoing deferred tax assets and liabilities outstanding as of June 30, 2005 and 2006 is as follows:
2005
2006
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
602,213
-
1,005,330
Subsidiaries
Lintasarta
37,748
-
40,841
-
IMM
-
940
6,410
-
APE
-
1,328
-
1,015
Total
37,748
604,481
47,251
1,006,345
The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the doubtful accounts are written off, the decrease in the carrying value of investments in subsidiaries/associated companies and the allowance for decline in value of investments in associated companies and other long-term investments are realized upon sale of the investments, the tax loss carry-over is utilized, and the accrued employee benefits are paid. The deferred tax liabilities relate to the differences in the book and tax bases of property and equipment, goodwill and other intangible assets, and investments in associated companies/subsidiaries.
A valuation allowance has been established for certain deferred tax assets. This valuation allowance reduces tax assets to an amount which is more likely than not to be realized.
Under the current tax laws of Indonesia, the Company and Subsidiaries submit their respective tax returns on the basis of self-assessment. The tax authorities may assess or amend taxes within ten years after the fiscal year when the tax became payable. Any loss on income tax basis can be carried forward and used to offset against future taxable income for a maximum period of five years.
On January 19, 2005, the Company received assessment letters on tax underpayment (“SKPKB”/”STP”) from the Directorate General on Taxation for 2003 VAT of Satelindo amounting to Rp9,677 (including penalties and interest). The assessments have been fully paid by the Company and are presented as part of “Other Income (Expenses) - Others - net”.
46
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
In 2005, as a result of the corporate income tax audit for fiscal year 2003, the Company’s tax loss carry-over as of December 31, 2003 amounting to Rp934,637 was adjusted by the Tax Office to become Rp501,179. On October 31, 2005, the Company submitted an objection letter to the Tax Office regarding the above tax correction. As of June 30, 2006, the Company has not yet received the final decision letter from the Tax Office on the objection made. No provision for probable loss on such loss carry-over adjustment was made in the consolidated financial statements as the Company believes that the Company has computed its corporate income tax in accordance with the tax regulations.
No income tax was provided for SMM in 2005 and 2006 because it was in tax loss position during those periods.
The Company provides for deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in its investment in domestic subsidiaries as the Company believes that for certain subsidiaries the investment will be recovered through the sale of the shares which is a taxable transaction and for certain subsidiaries the differences will be deductible from ordinary income as a result of a merger.
The above treatment was also applied to the merged subsidiaries up to the merger date (Note 1e).
15.
ACCRUED EXPENSES
This account consists of the following:
2005
2006
Network repairs and maintenance
185,331
193,132
Employee benefits
202,111
147,020
Interest
177,731
139,432
Concession fee
81,383
58,227
Marketing
23,253
54,013
Radio frequency fee
30,395
45,728
Universal Service Obligation (“USO”)
41,076
41,134
Consultancy fees
31,994
37,555
Link
29,105
14,618
Outsourcing
19,589
12,647
Rental
15,217
10,370
Others
22,706
42,531
Total
859,891
796,407
16.
LOANS PAYABLE
This account consists of the following:
2005
2006
Related parties
Syndicated loan facility 2
BNI - net of unamortized debt issuance cost of Rp8,570
in 2005 and Rp4,386 in 2006
509,075
513,259
Mandiri - net of unamortized debt issuance cost of Rp1,984
in 2005 and Rp969 in 2006
118,608
119,623
Third parties - net of unamortized debt issuance cost of Rp10,107
in 2005 and Rp8,025 in 2006
725,794
1,065,324
Total loans payable
1,353,477
1,698,206
47
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
2005
2006
Less current maturities
Third parties
60,899
127,880
Long-term portion
1,292,578
1,570,326
The details of the loans from related parties are as follows:
Syndicated Loan Facility 2
On October 2, 2003, the Company entered into a syndicated loan agreement covering Rp3,165,000 with the following syndicated banks:
Bank
Amount
BCA
975,000
Mandiri *
900,000
BNI
*
900,000
Danamon *
240,000
Bukopin
150,000
Total
3,165,000
* related parties
The facility is divided into 3 tranches:
Tranche
Bank
Amount
A
Danamon
240,000
Bukopin 150,000
B
Mandiri
900,000
C
BCA
975,000
BNI
900,000
Total
3,165,000
On December 8, 2003, the Company drew Rp200,000 and Rp1,800,000 from its facility under Tranches B and C, respectively. Based on the loan agreement, the Company should use the proceeds of the loans to repay IM3’s debts and Satelindo’s debts based on the MRA, and/or for capital expenditure financing, and/or for other corporate general needs if IM3’s debts are repaid using other facility.
The interest rates ranged from 9.30% - 11.92% per annum for the six months ended June 30, 2005. The rate was fixed at 9.30% per annum for the six months ended June 30, 2006.
On December 7, 2004, the Company paid the first semi-annual installments amounting to Rp73,125, Rp61,875 and Rp22,220 to BCA, BNI and Mandiri, respectively.
On March 31, 2005, the Company made early payments of the loans amounting to Rp290,112, Rp245,480 and Rp57,188 to BCA, BNI and Mandiri, respectively. On the same date, the Company also entered into agreements amending the loan agreement with BCA, BNI and Mandiri. The amendments covered, among others, the following:
48
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
Syndicated Loan Facility 2 (continued)
·
The remaining balance of the loan will mature on April 1, 2008. However, the amendment provides early repayment option for the Company, commencing from April 1, 2007 up to the maturity date. Any repayment made before April 1, 2007 will require the Company to pay penalty amounting to 1% of the repaid amount.
·
The loan bears interest as follows:
-
April 1, 2005 - March 31, 2007 : fixed interest rate of 9.3% per annum
-
April 1, 2007 - March 31, 2008 : 10.5% or a reference rate plus margin rate of 2.5%, whichever rate is higher.
As of June 30, 2005 and 2006, the outstanding balances of the loans are as follows:
Bank
2005
2006
BCA
611,763
611,763
BNI*
517,645
517,645
Mandiri*
120,592
120,592
Balance
1,250,000
1,250,000
Unamortized debt issuance cost
(20,661
)
(10,525)
Net
1,229,339
1,239,475
* related parties
The amortization of debt issuance cost charged to operations amounted to Rp4,601 in 2005 and Rp5,161 in 2006.
The loans from third parties consist of the following:
2005
2006
Syndicated Loan Facility 2 (refer to previous section on loans
from related parties)
BCA - net of unamortized debt issuance cost of Rp10,107
in 2005 and Rp5,170 in 2006
601,656
606,593
Finnish Export Credit Ltd. - net of unamortized debt
issuance cost of Rp2,855
-
350,545
Investment Credit Facility 3 from Niaga
97,939
58,739
Investment Credit Facility 4 from Niaga
-
44,947
Import Sight Letter of Credit (“L/C”) Facility and Investment
Credit Facility 2 from Niaga
10,500
4,500
Investment Credit Facility 1 from Niaga
15,699
-
Total
725,794
1,065,324
Less current maturities
60,899
127,880
Long-term portion
664,895
937,444
49
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
a. Finnish Export Credit Ltd. (“FEC”)
On May 12, 2006, the Company obtained a new credit facility from FEC amounting to US$38,000 with ABN-AMRO Bank N.V., Jakarta Branch as the "arranger" and ABN-AMRO Bank N.V., Stockholm Branch as the "facility agent” to be used for the purchase of telecommunications equipment. The loan bears interest at the fixed annual rate of 4.15% and will mature on May 12, 2011. The repayment of the loan and its interest will be made in semi-annual installments.
As of June 30, 2006, the Company has fully drawn the amount of this facility.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
The amortization of debt issuance cost charged to operations amounted to Rp71 in 2006.
b.
Investment Credit Facility 3 from Niaga
On June 29, 2004, Lintasarta obtained a loan from a new credit facility from Niaga amounting to Rp98,000 for the purchase of telecommunication equipment, computer and other supporting facilities. The loan bears interest at 3-month time deposits rate guaranteed by Bank Indonesia plus 3.5% per annum. The repayment of principal has a grace period up to June 29, 2005. The quarterly repayment of the principal will start on September 29, 2005, at Rp9,800 each quarter up to December 29, 2007. As of June 30, 2005 and 2006, the outstanding balances of the loan amounted to Rp97,939 and Rp58,739, respectively (of which Rp13,018 or the equivalent of US$1,574 was used to finance Import Sight L/C facility - see point d below).
The loan is collateralized by all equipment purchased from the proceeds of the credit facility, receivables from frame relay (Note 6) and trade receivables from one of Lintasarta’s customers.
Based on addendum No. 215/AMD/CBG/JKT/05 dated August 29, 2005 of the credit agreement, the loan covenant that restricted Lintasarta from declaring dividend of more than 50% of the current year’s net income has been replaced with the requirement for Lintasarta to maintain a Debt Service Coverage Ratio of not less than 1.2 : 1.
The loan also has the same restrictive covenants as the Investment Credit Facility 1 from Niaga.
c.
Investment Credit Facility 4 from Niaga
On August 29, 2005, Lintasarta obtained a new credit facility from Niaga amounting to Rp45,000 for the purchase of telecommunication equipment. The loan from the facility bears interest at the prevailing annual rate of 3-month Certificate of Bank Indonesia plus 3% per annum. The repayment of principal has a grace period of 14 months from the date of loan agreement. The quarterly repayment of the principal will start on November 29, 2006, at Rp4,500 each quarter up to
February 28, 2009. As of June 30, 2006, Lintasarta has drawn Rp44,947 from the facility.
The loan is collateralized by all equipment purchased from the proceeds of the credit facility and receivables from frame relay (Note 6).
50
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
d.
Import Sight L/C Facility and Investment Credit Facility 2 from Niaga
On August 14, 2003, Lintasarta obtained facilities from Niaga as follows:
·
Import Sight L/C facility for the purchase of telecommunication equipment, computer and other supporting facilities amounting to US$10,000 wherein Rp15,000 of the facility would be financed through investment credit facility 2 and the remainder would be financed by Lintasarta itself. The expiry date of the facility was extended from August 14, 2004 to December 31, 2004. As of December 31, 2004, Lintasarta had already used this facility to the extent of US$5,101. The facility used was financed by investment credit facility 2 amounting to US$1,827 or equivalent to Rp15,000 (see below) and the remaining balance of US$3,274 was financed by Lintasarta itself amounting to US$1,700 and by investment credit facility 3 amounting to US$1,574 (see point “b” above). This facility expired on December 31, 2004.
·
Investment credit facility 2 amounting to Rp15,000 to finance the above facility. This loan bears interest at 3-month time deposit rate guaranteed by Bank Indonesia plus 2.75% (subsequently changed to 3% on October 1, 2003) per annum. Lintasarta had a grace period until
August 14, 2004 to start paying the interest on the loan. The repayment of the principal started on November 14, 2004, with installments amounting to Rp1,500 payable quarterly up to February 14, 2007. As of June 30, 2006, Lintasarta has fully drawn the amount of this facility.
The loan is collateralized by all equipment purchased from the proceeds of the credit facilities and receivables from frame relay (Note 6).
Based on addendum No. 214/AMD/CBG/JKT/05 dated August 29, 2005 of the credit agreement, the loan covenant that restricted Lintasarta from declaring dividend of more than 50% of the current year’s net income has been replaced with the requirement for Lintasarta to maintain a Debt Service Coverage Ratio of not less than 1.2 : 1.
The loan also has the same restrictive covenants as the Investment Credit Facility 1 from Niaga.
e. Investment Credit Facility 1 from Niaga
On October 16, 2001, Lintasarta obtained investment credit facility from Niaga amounting to Rp117,000. In 2002, Lintasarta drew Rp113,199 from the facility. This loan bears interest at 3-month time deposit rate guaranteed by Bank Indonesia plus 3.25% (subsequently changed to 2.75% on April 8, 2002 and 3% on October 1, 2003) per annum. The repayment of the principal started on January 6, 2003, with installments amounting to Rp9,750 payable quarterly up to October 6, 2005.
On October 6, 2005, Lintasarta repaid in full the Investment Credit Facility 1 from Niaga.
The loan was collateralized by all equipment purchased from the proceeds of the credit facility, receivables from frame relay (Note 6) and time deposit placed in Niaga amounting to Rp10,000 (presented as part of “Non-current Assets - Others”). Based on amendment No. 201/CBG/JKT/2004 dated June 29, 2004 of the credit agreement, the loan was also secured by trade receivables from one of Lintasarta’s customers. Lintasarta was required to obtain written approval from Niaga if:
-
The combined ownership of the Company and YKKBI in Lintasarta became less than 51% during the facility period.
-
Lintasarta obtained new debts (Note 17).
-
Lintasarta invested in other than Lintasarta’s current business.
Lintasarta was also required to maintain certain financial ratios and its dividends distribution should not be more than 50% of the current year’s net income.
51
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
The scheduled principal payments from 2007 to 2011 of all the loans payable as of June 30, 2006 are as follows:
Twelve months ending June 30,
2007
2008
2009
2010
2011
Total
In rupiah
Syndicated Loan
Facility*
BCA
-
611,763
-
-
-611,763
BNI
-
517,645
-
-
-517,645
Mandiri
-
120,592
-
-
-120,592
Niaga
57,200
37,539
13,447
-
-108,186
In U.S. dollar
FEC (US$38,000)
70,680
70,680
70,680
70,680
70,680353,400
Total
127,880
1,358,219
84,127
70,680
70,680
1,711,586
Less unamortized debts issuance cost
13,380
Net
1,698,206
* please refer to previous discussion on early repayment option
17.
BONDS PAYABLE
As of June 30, 2005 and 2006, this account consists of:
2005
2006
Guaranteed Notes Due 2010 (US$300,000) - net of unamortized
notes issuance cost of Rp22,934 in 2005
and Rp19,338 in 2006
2,890,849
2,770,662
Third Indosat Bonds in Year 2003 with Fixed Rate - net of
unamortized bonds issuance cost of Rp22,840 in 2005
and Rp17,687 in 2006
2,477,160
2,482,313
Guaranteed Notes Due 2012 (US$250,000) - net of unamortized
notes discount of Rp16,216 in 2005 and Rp14,373 in 2006; and
unamortized notes issuance cost of Rp24,618 in 2005 and
Rp30,150 in 2006
2,387,416
2,280,477
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
1,075,000
1,075,000
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of
unamortized bonds issuance cost of Rp8,617 in 2005 and
Rp7,699 in 2006
806,383
807,301
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost of Rp3,057 in 2005 and Rp2,730 in 2006
281,943
282,270
Indosat Syari’ah Mudharabah Bonds in Year 2002
175,000
175,000
Limited Bonds II issued by Lintasarta*
-
31,150
Limited Bonds I issued by Lintasarta**
30,436
25,292
Convertible Bonds issued by Lintasarta***
6,106
5,526
First Indosat Bonds in Year 2001 with Fixed and Floating Rates
1,000,000
-
Total bonds payable
11,130,293
9,934,991
Less current maturities
1,030,436
5,526
Long-term portion
10,099,857
9,929,465
*
after elimination of limited bonds II amounting to Rp35,000 issued to the Company
**
after elimination of limited bonds I amounting to Rp9,564 issued to the Company
***
after elimination of convertible bonds amounting to Rp13,893 in 2005 and Rp14,473 in 2006 issued to the Company
52
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010
In October 2003, the Company, through IFB, issued Guaranteed Notes Due 2010 with fixed rate.
The notes have a total face value of US$300,000. The notes bear interest at the fixed rate of 7.75% per annum payable in semi-annual installments on May 5 and November 5 of each year, commencing May 5, 2004. The notes will mature on November 5, 2010.
The notes are redeemable at the option of IFB, in whole or in part at any time on or after November 5, 2008. The notes are redeemable at prices equal to 103.8750%, 101.9375% and 100.0000% of the principal amount during the 12-month period commencing on November 5 of 2008, 2009 and 2010, respectively. In addition, prior to November 5, 2006, IFB may redeem up to a maximum of 35% of the original aggregate principal amount, with the proceeds of one or more public equity offerings of the Company, at a price equal to 107.75% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. The notes are also redeemable at the option of IFB, in whole but not in part, at any time, at a price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest and additional amount to the date of redemption, in the event of certain changes affecting withholding taxes in Indonesia and The Nethe rlands that would require IFB or the Company to pay an additional amount in respect of any note in excess of certain amounts. Upon a change in control of IFB (including sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of IFB’s assets), the holder of the notes has the right to require IFB to repurchase all or any part of such holder’s notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
The Company received the proceeds of the notes on November 5, 2003.
The net proceeds, after deducting the underwriting fee and offering expenses, were used primarily to repay a portion of Indosat’s (including Satelindo’s and IM3’s) outstanding indebtedness amounting to Rp1,500,000 and US$447,500.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The Notes are unconditionally and irrevocably guaranteed by the Company.
The amortization of notes issuance cost charged to operations amounted to Rp1,695 in 2005 and Rp1,833 in 2006.
On January 11, 2006, IFB released a consent solicitation statement (the “solicitation”) relating to its outstanding Guaranteed Notes Due 2010. The primary purpose of the solicitation was to modify certain covenants under the indenture of Guaranteed Notes Due 2010 to conform with the terms in the indenture of Guaranteed Notes Due 2012. The proposed amendment to the indenture includes, among others, the change in the limit of the permitted debt that can be incurred by IFB and Lintasarta, and IFB’s ability to incur new debt.
On January 24, 2006, IFB received consents from holders of the Guaranteed Notes Due 2010 representing an aggregate principal amount of US$239,526 or 79.842% of the outstanding Notes.
Based on the latest rating report, the notes currently have BB (released in December 2005) and Ba3 (released in March 2006) ratings from Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”), respectively.
53
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Third Indosat Bonds in Year 2003 with Fixed Rate
On October 15, 2003, the Company issued at face value its Third Indosat Bonds in Year 2003 with Fixed Rate (“Third Indosat Bond”), with BRI as the trustee. The bonds have a total face value of Rp2,500,000 in Rp50 denomination. The bonds consist of two series:
·
Series A bonds amounting to Rp1,860,000 which bear interest at the fixed rate of 12.5% per annum for 5 years starting October 22, 2003
·
Series B bonds amounting to Rp640,000 which bear interest at the fixed rate of 12.875% per annum for 7 years starting October 22, 2003.
The bonds will mature if the Company exercises the following options:
·
Early Settlement Option
:
the Company has the right to make early payment for all the Series A bonds on the 4th anniversary of the bonds at 100% of the bonds’ nominal value. The Company has also the right to make early payment for all the Series B bonds on the 4th and 6th anniversaries of the bonds at 100% of the bonds’ nominal value.
·
Buy-back Option
:
after the 1stanniversary of the bonds, the Company has the right to buy back part or all of the bonds at market price temporarily or as an early settlement.
PT Kustodian Sentral Efek Indonesia (“KSEI”), acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
Starting January 22, 2004 and every quarter thereafter up to October 22, 2008
Series B
:
Starting January 22, 2004 and every quarter thereafter up to October 22, 2010
The proceeds of the bonds were used as capital injection to Satelindo which, in turn, used the proceeds to repay its debts and Guaranteed Floating Rate Bonds (Note 1d - SIB).
The bonds are neither collateralized nor guaranteed by other parties.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The amortization of bonds issuance cost charged to operations amounted to Rp1,990 in 2005 and Rp2,658 in 2006.
Based on the latest rating report released in May 2006, the bonds currently haveidAA+ (stable outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”).
Guaranteed Notes Due 2012
On June 22, 2005, the Company, through IIFB, issued Guaranteed Notes Due 2012 with fixed rate. The notes have a total face value of US$250,000 and were issued at 99.323% of their principal amount. The notes bear interest at the fixed rate of 7.125% per annum payable in semi-annual installments due on June 22 and December 22 of each year, commencing December 22, 2005. The notes will mature on June 22, 2012.
54
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2012 (continued)
The notes will be redeemable at the option of IIFB, in whole or in part at any time on or after June 22, 2010 at prices equal to 103.5625%, 101.7813% and 100.0000% of the principal amount during the
12-month period commencing June 22, 2010, 2011 and 2012, respectively, plus accrued and unpaid interest and additional amounts, if any. In addition, prior to June 22, 2008, IIFB may redeem up to a maximum of 35% of the original aggregate principal amount, with the proceeds of one or more public equity offerings of the Company, at a price equal to 107.125% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. The notes are also redeemable at the option of IIFB, in whole but not in part, at any time, at a price equal to 103.5625% of the principal amount thereof, plus any accrued and unpaid interest and additional amounts to the date of redemption, in the event of certain changes affecting withholding taxes in Indonesia and The Netherlands that would require IIFB or the Company to pay an additional amount in respect of any note in excess of certain amounts. Upon a change in control of IIFB (including sale, transfer, assignment, lease, conveyance or other disposition o f all or substantially all of IIFB’s assets), the holder of the notes has the right to require IIFB to repurchase all or any part of such holder’s notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
The Company received the proceeds of the notes on June 23, 2005.
The net proceeds, after deducting the underwriting fee and offering expenses, were used for general corporate purposes, including capital expenditures.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The Notes are unconditionally and irrevocably guaranteed by the Company.
The amortization of notes discount and issuance cost charged to operations amounted to Rp101 and Rp2,911 in 2005 and 2006, respectively.
Based on the latest rating report, the notes currently have BB (released in December 2005) and Ba3 (released in March 2006) ratings from S&P and Moody’s, respectively.
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
On November 6, 2002, the Company issued its Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (“Second Indosat Bond”), with BRI as the trustee. The bonds have a total face value of Rp1,075,000 in Rp50 denomination. The bonds consist of three series:
·
Series A bonds amounting to Rp775,000 which bear interest at the fixed rate of 15.75% per annum for 5 years starting February 6, 2003
·
Series B bonds amounting to Rp200,000 which bear interest at the fixed rate of 16% per annum for 30 years starting February 6, 2003. The bonds mature if the Company or the bondholder exercises the following options:
-
Buy Option
:
the Company has the right to make early payment for all the Series B bonds on the 5th, 10th, 15th, 20th and 25th anniversaries of the bonds at 101% of the bonds’ nominal value.
55
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (continued)
-
Sell Option
:
the bondholder has the right to ask for early settlement from the Company at 100% of the bonds’ nominal value: 1) at any time, if the rating of the bonds decreases toidAA- or lower (Special Sell Option) or 2) on the 15th, 20th and 25th anniversaries of the bonds (Regular Sell Option).
·
Series C bonds amounting to Rp100,000 which bear interest at the fixed rate of 15.625% per annum for the first year starting February 6, 2003 and floating rates for the succeeding years until November 6, 2007. The floating rates are determined using the last interest rate for three-month period of Certificates of Bank Indonesia, plus 1.625% margin. The floating rates should have a maximum limit of 18.5% and a minimum limit of 15% per annum.
KSEI, acting as payment agent, shall pay interest on the bonds, as follows:
Series A and C
:
Starting February 6, 2003 and every quarter thereafter up to November 6, 2007
Series B
:
Starting February 6, 2003 and every quarter thereafter up to November 6, 2032
-
Buy Option
:
February 6, 2003 and every quarter thereafter up to November 6, 2007, 2012, 2017, 2022 and 2027
-
Sell Option
:
February 6, 2003 and every quarter thereafter up to November 6, 2017, 2022 and 2027.
The bonds are neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that have been specifically used as security to its other creditors, are used as pari-passu security for all of the Company’s other liabilities including the bonds.
The proceeds of the bonds were used to repay the working capital loan from Mandiri and time loan facility from BCA.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating report released in May 2006, the bonds haveidAA+ rating (stable outlook) from Pefindo.
Fourth Indosat Bonds in Year 2005 with Fixed Rate
On June 21, 2005, the Company issued its Fourth Indosat Bonds in Year 2005 with Fixed Rate (“Fourth Indosat Bond”), with BRI as the trustee. The bonds have a total face value of Rp815,000 in Rp50 denomination. The bonds bear interest at the fixed rate of 12% per annum, payable on
a quarterly basis. The bonds will mature on June 21, 2011.
The bonds will mature before maturity date if the Company exercises the following options:
·
Early Settlement Option
:
the Company has the right to make early payment for all the bonds on the 4th anniversary of the bonds at 100% of the bonds’ nominal value.
·
Buy-back Option
:
after the 1stanniversary of the bonds, the Company has the right to buy back part or all of the bonds at market price.
56
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Fourth Indosat Bonds in Year 2005 with Fixed Rate (continued)
The proceeds of the bonds are used for capital expenditure to expand the Company’s cellular network.
The bonds are not collateralized by any specific Company assets nor guaranteed by other parties and rankpari passu with other unsecured debts.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The amortization of bonds issuance cost charged to operations amounted to Rp25 in 2005 and Rp548 in 2006.
Based on the latest rating report released in May 2006, the bonds haveidAA+ (stable outlook) rating from Pefindo.
Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”)
On June 21, 2005, the Company issued its Syari’ah Ijarah Bonds, with BRI as the trustee. The bonds have a total face value of Rp285,000 in Rp50 denomination. The bonds will mature on June 21, 2011.
Each bondholder is entitled to a fixed Ijarah return (“Cicilan Imbalan Ijarah”) amounting to Rp8,550, payable on a quarterly basis starting September 21, 2005 up to June 21, 2011.
The bonds will mature before maturity date if the Company exercises the following options:
·
Early Settlement Option
:
the Company has the right to make early payment for all the bonds on the 4th anniversary of the bonds at 100% of the bonds’ nominal value.
·
Buy-back Option
:
after the 1stanniversary of the bonds, the Company has the right to buy back part or all of the bonds at market price.
The proceeds of the bonds are used for capital expenditure to expand the Company’s cellular network.
The bonds are not collateralized by any specific Company assets nor guaranteed by other parties.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The amortization of bonds issuance cost charged to operations amounted to Rp9 in 2005 and Rp194 in 2006.
Based on the latest rating report released in May 2006, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
Indosat Syari’ah Mudharabah Bonds in Year 2002 (“Syari’ah Bonds”)
On November 6, 2002, the Company issued its Syari’ah Bonds, with BRI as the trustee. The bonds have a total face value of Rp175,000 in Rp50 denomination and will mature on November 6, 2007.
Each bondholder is entitled to a revenue-sharing income [Pendapatan Bagi Hasil (“PBH”)], which is determined on the basis of the bondholder’s portion (Nisbah) of the Shared Revenue (Pendapatan Yang Dibagihasilkan). Shared revenue refers to the operating revenue of Satelindo and IMM earned from their satellite and internet services, respectively. The bondholders’ portions (expressed in percentages) of the satellite and internet services revenue are as follows:
57
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Indosat Syari’ah Mudharabah Bonds in Year 2002 (“Syari’ah Bonds”) (continued)
Percentage (%)
Year
Satellite
Internet
1
6.91
10.75
2
6.91
9.02
3
6.91
7.69
4
6.91
6.56
5
6.91
5.50
Based on an agreement reached between the Company and the bondholders in the Syari’ah Bondholders’ General Meeting held on October 1, 2003, the shared revenue which previously referred to the operating revenue of Satelindo earned from its satellite services was changed to the operating revenue of the Company earned from the same services. The bondholders’ portions (expressed in percentages) of the Company’s satellite revenue also changed as follows:
Year
Percentage (%)
1
6.91
2
9.34
3
9.34
4
9.34
5
9.34
KSEI, acting as payment agent, pays quarterly the revenue-sharing income on the bonds starting February 6, 2003 until November 6, 2007.
The bonds are not collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that have been specifically used as a security to its other creditors, are used as pari-passu security for all of the Company’s other liabilities including the bonds.
The proceeds of the bonds replaced the Company’s internal funds used for the development of its cellular business through the acquisition of Satelindo.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating report released in May 2006, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
Limited Bonds II issued by Lintasarta
On June 14, 2006, Lintasarta entered into an agreement with its stockholders for the former to issue limited bonds II amounting to Rp66,150. The limited bonds represent unsecured bonds which will mature on June 14, 2009 and bear interest at the floating rates determined using the average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The floating rate limits range from 11% to 19% per annum. The interest is payable on a quarterly basis starting September 14, 2006.
On July 17, 2006, Lintasarta obtained approval from Niaga on the issuance of the limited bonds II (Note 16).
58
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Limited Bonds II issued by Lintasarta (continued)
The proceeds of the limited bonds II are used for capital expenditure to expand Lintasarta’s telecommunication peripherals.
Limited Bonds I issued by Lintasarta
In June 2003, Lintasarta entered into an agreement with its stockholders for the former to issue limited bonds I amounting to Rp40,000. The limited bonds represented unsecured bonds which matured on June 2, 2006 and bore interest at the fixed rate of 16% per annum for the first year and floating rates for the succeeding years. The floating rates were determined using the average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The floating rate limits ranged from 11% to 19% per annum. Lintasarta paid interest on the bonds quarterly starting September 2, 2003.
On the maturity date, Lintasarta paid a certain portion of limited bonds I amounting to Rp5,144 and subsequently extended the maturity date of the remaining balance of Rp34,856 until June 2, 2009. The extension of maturity date was made based on the first amendment dated June 14, 2006 of the Limited Bonds Agreement. These bonds bear interest at floating rates determined using the average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The floating rate limits range from 11% to 19% per annum. The interest is payable on a quarterly basis.
On July 17, 2006, Lintasarta obtained approval from Niaga on the changes in maturity date and nominal value of the limited bonds I (Note 16).
Convertible Bonds issued by Lintasarta
At Lintasarta’s Stockholders’ Annual General Meeting held in March 2002, the stockholders approved, among others, the declaration of cash dividend amounting to Rp25,300 of which Rp4,149 (net of tax) was paid in June 2002. The remaining dividend was distributed in the form of unsecured convertible bonds, which bear interest at the annual fixed rate of 19% and payable on a quarterly basis. The bonds will be converted into Lintasarta’s common stock at par value of Rp1,000,000 per share on the bonds’ maturity date on June 3, 2007.
On May 23, 2003, Lintasarta obtained approval from Niaga on the issuance of the convertible bonds (Note 16).
Based on the first amendment dated July 12, 2004 of the Convertible Bonds Agreement, the fixed interest rate of the convertible bonds issued by Lintasarta has been changed to become a floating rate. The floating rate is determined using the average rate for 6-month rupiah time deposits with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The floating rate should have a maximum limit of 19% and a minimum limit of 11%. The first amendment is effective starting July 1, 2004.
First Indosat Bonds in Year 2001 with Fixed and Floating Rates
On April 12, 2001, the Company issued its First Indosat Bonds in Year 2001 with Fixed and Floating Rates (“First Indosat Bond”), with BRI as the trustee. The bonds, which consist of two series, have a total face value of Rp1,000,000 in Rp50 denomination and will mature on April 12, 2006.
59
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
First Indosat Bonds in Year 2001 with Fixed and Floating Rates (continued)
The Series A bonds amounting to Rp827,200 bear interest at the fixed rate of 18.5% per annum for 5 years starting April 12, 2001. The Series B bonds amounting to Rp172,800 bear interest at the fixed rate of 18.5% per annum for the first year starting April 12, 2001 and floating rates for the succeeding years. The floating rates are determined using the average for 5 working days of the average 3-month rupiah time deposits with Mandiri, BCA, BNI and Danamon, plus a fixed premium of 2.25%.
The floating rates should have a maximum limit of 21% and a minimum limit of 16% per annum. KSEI, acting as payment agent, pays quarterly interest on the bonds starting July 12, 2001 until April 12, 2006.
The bonds are neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that have been specifically used as security to its other creditors, are used as pari-passu security for all of the Company’s other liabilities including the bonds.
The proceeds of the bonds have been used for developing cellular business through a subsidiary (IM3), the Company’s domestic network, and internet and multimedia infrastructure; improving the service and quality of international direct dialing and related services; and increasing submarine cable capacity.
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating report released in April 2005, the bonds haveidAA+ (stable outlook) rating from Pefindo.
On September 12 and 13, 2005, the Company repurchased a portion of the Series A bonds with total principal amount of Rp48,500 at a price which is equal to 101.175% of the principal amount repurchased, plus the accrued and unpaid interest (totalling Rp50,562).
On April 12, 2006, the Company repaid in full the First Indosat Bonds in Year 2001 amounting to Rp951,500 for the principal amount and Rp42,927 for the last quarterly interest.
The scheduled principal payments of all the bonds payable outstanding as of June 30, 2006 are as follows:
Twelve months ending June 30,
2012 and
2007
2008
2009
2011
thereafterTotal
In U.S. dollar
Guaranteed Notes *
Due 2010
(US$300,000)
-
-
-
2,790,000
-
2,790,000
Due 2012
(US$250,000)
-
-
-
-
2,325,000
2,325,000
Sub-total
-
-
-
2,790,000
2,325,000
5,115,000
60
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Twelve months ending June 30,
2012 and
2007
2008
2009
2011
thereafter*
Total
In rupiah
Third Indosat Bonds *
-
-
1,860,000
640,000
-2,500,000
Second Indosat Bonds *
-
875,000
-
-
200,000
1,075,000
Fourth Indosat Bonds *
-
-
-
815,000
-
815,000
Syari’ah Ijarah Bonds *
-
-
-
285,000
-
285,000
Syari’ah Bonds
-
175,000
-
-
-175,000
Limited Bonds II
of Lintasarta
-
-
31,150
-
-
31,150
Limited Bonds I
of Lintasarta
-
-
25,292
-
-
25,292
Sub-total
-
1,050,000
1,916,442
1,740,000
200,000
4,906,442
Convertible bonds of Lintasarta which will be converted into
Lintasarta’s shares of common stock
5,526
Total
10,026,968
Less:
-
unamortized notes issuance cost
(49,488
)
-
unamortized bonds issuance cost
(28,116
)
-
unamortized notes discount
(14,373
)
Net
9,934,991
* Please refer to previous discussion on options for each bond/note.
18.
OTHER NON-CURRENT LIABILITIES
This account consists mainly of non-current portions of defined benefit pension plan (Note 29), post-retirement benefits, benefits under Labor Law No. 13/2003, other employee benefits and deposits from customers.
19.
CAPITAL STOCK
The Company’s capital stock ownership as of June 30, 2005 and 2006 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
2005
A Share
Government of the Republic
of Indonesia
1
-
-
B Shares
Indonesia Communications
Limited, Mauritius
2,171,250,000
217,125
41.01
Government of the Republic
of Indonesia
776,624,999
77,662
14.67
Commissioner:
Roes Aryawijaya
135,000
14
0.00
Directors:
Wahyu Wijayadi
252,500
25
0.01
Hasnul Suhaimi
240,000
24
0.01
61
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
CAPITAL STOCK (continued)
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
2005 (continued)
B Shares (continued)
Directors: (continued)
Wityasmoro Sih Handayanto
200,000
20
0.00
Ng Eng Ho
169,000
17
0.00
Joseph Chan Lam Seng
90,000
9
0.00
Johnny Swandi Sjam
30,000
3
0.00
Raymond Tan Kim Meng
22,500
2
0.00
S. Wimbo S. Hardjito
2,500
-
-
Others (each holding below 5%)
2,345,606,500
234,561
44.30
Total
5,294,623,000
529,462
100.00
2006
A Share
Government of the Republic
of Indonesia
1
-
-
B Shares
Indonesia Communications
Limited, Mauritius
2,171,250,000
217,125
40.20
Government of the Republic
of Indonesia
776,624,999
77,662
14.38
Indonesia Communications Pte.
Ltd., Singapore
46,340,000
4,634
0.86
Commissioners:
Lee Theng Kiat
135,000
14
0.00
Roes Aryawijaya
135,000
14
0.00
Setyanto P. Santosa
135,000
14
0.00
Directors:
Joseph Chan Lam Seng
427,500
43
0.01
Wityasmoro Sih Handayanto
387,500
38
0.01
Wahyu Wijayadi
302,500
30
0.01
Wong Heang Tuck
290,000
29
0.01
Raymond Tan Kim Meng
222,500
22
0.00
Johnny Swandi Sjam
30,000
3
0.00
S. Wimbo S. Hardjito
2,500
-
-
Others (each holding below 5%)
2,405,041,000
240,504
44.52
Total
5,401,323,500
540,132
100.00
The “A” share is a special share held by the Government of the Republic of Indonesia and has special voting rights. The material rights and restrictions which are applicable to the “B” shares are also applicable to the “A” share, except that the Government may not transfer the “A” share, and it has a veto right with respect to (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation and acquisition; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution and liquidation of the Company. The “A” share also has the right to appoint one director and one commissioner of the Company.
Based on a letter from ICL to the Company dated March 2, 2004 regarding a notification of pledge of shares with respect to shares of the Company, ICL informed the Company that ICL pledged substantially all of its B Shares as collateral for a loan facility obtained by STT Communications Limited, the sole shareholder of ICL, from third parties.
On May 5, 2006, Indonesia Communications Pte. Ltd., Singapore (“ICLS”), a wholly-owned subsidiary of STT Communications Limited (“STTC”), informed BAPEPAM that ICLS acquired 46,340,000 B shares of the Company from the market. As of June 30, 2006, ICL and ICLS owned an aggregate of 2,217,590,000 B shares, representing 41.06% ownership interest in the Company.
62
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
CAPITAL STOCK (continued)
In connection with the exercise of ESOP Phase I and Phase II from August 1, 2004 and August 1, 2005, respectively, 223,823,500 B shares have been issued as of June 30, 2006 (Note 20) at a total premium of Rp719,052.
20.
STOCK OPTIONS
At the Company’s Annual Stockholders’ General Meeting held on June 26, 2003, the stockholders resolved to, among others, issue 258,875,000 Company B shares in reserve which are equal to 5% of the Company’s issued and fully paid capital with nominal value of Rp100 per share by implementing BAPEPAM Regulation No. IX.D.4, “Capital Increases Without Pre-emptive Rights”, which will be allocated to the employees through an Employee Stock Option Program (“ESOP”). The exercise price for ESOP Phase I is 90% of the average closing price of the Company’s shares within 25 consecutive exchange days in the regular market prior to the announcement for the above-mentioned Annual Stockholders’ General Meeting [i.e., Rp1,567.4 (in full amount)].
The ESOP will be distributed in two phases:
a.
Phase I: 50% of the ESOP shares or 129,437,500 stock options will be distributed to the Company’s and its subsidiaries’ permanent employees and Boards of Directors and Commissioners from August 1, 2003 with one year vesting period. The exercise period for the options is one year commencing August 1, 2004.
b.
Phase II: 50% of the ESOP shares or 129,437,500 stock options will be distributed to the Company’s and its subsidiaries’ permanent employees and Boards of Directors and Commissioners from August 1, 2004 with one year vesting period. The exercise period for the options is one year commencing August 1, 2005.
At the Company’s Annual Stockholders’ General Meeting held on June 22, 2004, the stockholders resolved, among others, that the exercise price for ESOP Phase II is 90% of the average closing price of the Company’s shares within 25 consecutive exchange days in the regular market prior to the announcement for the 2004 Annual Stockholders’ General Meeting [i.e., Rp3,702.6 (in full amount)]. It is also resolved that the undistributed ESOP shares from ESOP Phase I will be reallocated for distribution in ESOP Phase II.
In 2004, the Company made an adjustment to decrease the compensation expense of ESOP Phase I as a result of options being forfeited amounting to Rp3,609.
The total fair values of stock options distributed under ESOP Phase I and Phase II are Rp55,932 and Rp155,681, respectively.
The fair values of stock options under ESOP Phase I and Phase II were computed by adopting the Black-Scholes option pricing model and applying the following assumptions:
Phase I
Phase II
Risk-free interest rate
10.00%
8.90%
Expected dividend yield
4.36%
3.50%
Expected volatility
36.50%
37.00%
Expected option period
2 years
2 years
63
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
20.
STOCK OPTIONS (continued)
Based on a Decree dated January 28, 2005 of the Board of Directors, the 7,847,000 forfeited shares under ESOP Phase I were added to the total shares to be distributed in ESOP Phase II resulting in the number of shares allocated in ESOP Phase II to become 137,284,500 shares. The vesting period for the additional shares granted in ESOP Phase II is the same as the original ESOP Phase II, which was up to July 31, 2005.
In 2005, the Company recognized proportionate six months’ compensation expense relating to ESOP Phase II amounting to Rp77,840 as part of “Operating Expenses - Personnel” (Note 24) in the statements of income.
At the end of the exercise period of ESOP Phase I (July 29, 2005), there were 162,500 shares forfeited.
As of June 30, 2006, the number of stock options under ESOP Phase I and Phase II exercised by the employees is 121,428,000 and 102,395,500 shares, respectively (Note 19).
21.
OPERATING REVENUES - CELLULAR
This account consists of:
2005 2006
Usage charges
2,552,059
2,420,617
Features
1,213,574
1,426,614
Interconnection income
375,158
358,598
Connection fee
71,948
55,449
Monthly subscription charges
23,821
3,893
Others
75,803
25,673
Total
4,312,363
4,290,844
The above interconnection income includes interconnection income from related parties amounting to Rp245,756 and Rp221,985 in 2005 and 2006, respectively (Note 30).
22.
OPERATING REVENUES - MIDI
This account consists of:
2005
2006
Related parties
Internet
9,805
46,298
World link and direct link
35,904
44,121
Frame net
50,502
40,796
IPVPN
6,492
24,477
Application services
42,438
20,168
Leased line
10,421
9,105
Satellite lease
15,225
6,443
Digital data network
6,721
4,239
Others
6,862
8,347
Sub-total
184,370
203,994
64
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
22.
OPERATING REVENUES - MIDI (continued)
2005
2006
Third parties
Internet
178,383
160,731
Frame net
116,055
157,550
World link and direct link
91,521
103,326
IPVPN
33,057
79,737
Digital Data Network
59,193
73,161
Satellite lease
59,197
61,630
Leased line
59,024
60,154
Application services
16,183
12,696
Others
23,082
14,352
Sub-total
635,695
723,337
Total
820,065
927,331
23.
OPERATING REVENUES - FIXED TELECOMMUNICATIONS
The “Operating Revenues - Fixed Telecommunications” account represents the Company’s share of revenue from the following:
2005
2006
International calls
Incoming calls
342,207
250,850
Outgoing calls
232,582
176,991
Fixed wireless
32,585
68,960
Fixed line
36,447
48,136
Others
4,437
3,999
Total
648,258
548,936
Net settlements from other foreign telecommunications carriers of international telephone services amounted to Rp333,667 and Rp375,435 in 2005 and 2006, respectively.
Operating revenues from related parties amounted to Rp226,191 and Rp60,144 in 2005 and 2006, respectively. These amounts represent 34.89% and 9.80% of total operating revenues - fixed telecommunications in 2005 and 2006, respectively (Note 30).
24.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2005
2006
Salaries
131,038
167,119
Incentives and other employee benefits
95,935
123,807
Bonuses
96,006
76,823
Employee income tax
89,383
69,956
Outsourcing
59,364
69,702
Postretirement healthcare benefit
44,644
39,504
Medical expense
22,034
26,538
65
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
OPERATING EXPENSES - PERSONNEL (continued)
2005
2006
Separation, appreciation and compensation expense
under Labor Law No.13/2003 (Note 29)
11,653
12,793
Pension (Note 29)
9,210
10,991
ESOP compensation expense (Note 20)
77,840
-
Others
1,196
13,015
Total
638,303
610,248
The personnel expenses capitalized to properties under construction and installation amounted to Rp14,991 in 2005 and Rp19,595 in 2006.
25.
OPERATING EXPENSES - ADMINISTRATION AND GENERAL
This account consists of:
2005
2006
Provision for doubtful accounts
68,102
73,448
Rent
45,962
61,070
Travel
37,817
32,438
Utilities
16,266
23,534
Professional fees
16,313
23,503
Insurance
16,735
19,795
Catering
10,577
17,485
Training, education and research
25,375
12,450
Office supplies and stationery
7,228
7,675
Communication
15,871
7,153
Public relations
10,972
5,277
Others
26,443
32,144
Total
297,661
315,972
26.
OPERATING EXPENSES - COMPENSATION TO TELECOMMUNICATIONS CARRIERS AND SERVICE PROVIDERS
This account consists of compensation to telecommunications carriers and service providers, as follows:
2005
2006
Telkom
199,075
170,745
Other telecommunications carriers and service providers
8,155
10,978
Total
207,230
181,723
The compensation expenses consist of interconnection and other expenses of the Company.
Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers.
66
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
26.
OPERATING EXPENSES - COMPENSATION TO TELECOMMUNICATIONS CARRIERS AND SERVICE PROVIDERS (continued)
Other expenses charged by Telkom relate to the billings for the use of circuit, infrastructure rental and billing processing services provided by Telkom (Note30). Other expenses charged by other telecommunications carriers mainly consist of billings for the use of their circuits.
The Company, Satelindo and IM3 have interconnection arrangements with domestic and overseas operators (Notes 30 and 36). The operating revenues from interconnection services are presented on a net basis, except for those which are based on tariff as stipulated by the Government (Note 2o). The details of interconnection revenues which are presented on a net basis and shown as part of Operating Revenues, are as follows:
2005
2006
Domestic
Interconnection revenues
921,443
649,881
Interconnection charges
(702,158
)
(332,447)
Net
219,285
317,434
Overseas
Revenues from international carriers
437,069
416,992
Charges from international carriers
(103,402
)
(41,557)
Net
333,667
375,435
27.
OPERATING EXPENSES - OTHER COSTS OF SERVICES
This account consists of:
2005
2006
Cost of SIM cards and pulse reload vouchers
189,028
240,493
Radio frequency fee
168,191
198,149
Utilities
61,232
93,264
Rent
79,188
67,514
Concession fee
59,739
55,615
USO (Note 36)
26,986
40,558
Delivery and transportation
19,145
24,317
Billing and collection
30,129
24,149
Wartel (“Phone Kiosk”) commission
6,535
9,799
Licence fees
12,707
7,981
Communication network
10,069
6,405
Insurance
6,366
1,948
Others
44,662
32,459
Total
713,977
802,651
67
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
OTHER EXPENSES - FINANCING COST
This account consists of:
2005
2006
Interest on loans
586,228
616,027
Solicitation fee
-
13,401
Amortization of debts/bonds issuance cost (Notes 16 and 17)
8,381
12,437
Bank charges
736
1,548
Amortization of bonds discount (Note 17)
40
939
Total
595,385
644,352
29.
PENSION PLAN
The Company, Satelindo and Lintasarta have defined benefit and defined contribution pension plans covering substantially all of their qualified permanent employees.
Defined Benefit Pension Plan
The Company, Satelindo and Lintasarta provide defined benefit pension plans to their respective employees under which pension benefits to be paid upon retirement are based on the employees’ most recent basic salary and number of years of service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plans. Pension contributions are determined by periodic actuarial calculations performed by Jiwasraya. The employees contribute 3% - 3.5% of their basic salary to the plans and the Companies contribute any remaining amount required to fund their respective plans.
Based on an amendment dated December 22, 2000 of the Company’s pension plan, which was further amended on March 29, 2001, the benefits and premium payment pattern were changed.
Before the amendment, the premium was regularly paid annually until the plan would be fully funded and the benefits consisted of retirement benefit (regular monthly or lump-sum pension) and death insurance. In conjunction with the amendment, the plan would be fully funded after making installment payments up to January 2002 of the required amount to fully fund the plan determined as of September 1, 2000. The amendment also includes an additional benefit in the form of thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri (“Moslem Holiday”).
The amendment covers employees registered as participants of the pension plan as of
September 1, 2000 and includes an increase in basic salary pension by 9% compounded annually starting from September 1, 2001. The amendment also stipulates that there will be no increase in the premium even in cases of mass employee terminations or changes in marital status.
The total premium installments based on the amendment amounted to Rp355,000, which was paid on due dates.
In 2002, the Company made additional payments to Jiwasraya amounting to Rp20,433 for additional pension benefits which will be received by the directors when they retire.
On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefit and premium payment pattern of the former’s pension plan. The amendment covers employees registered as participants of the pension plan as of December 25, 2002 up to June 25, 2003. Other new conditions include the following:
68
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
·
An increase in pension basic salary at 6% compounded annually starting from December 25, 2002
·
Thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri
·
An increase in periodic payment of retirement benefit at 6% compounded annually starting one year after receiving periodic retirement benefit for the first time
·
If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.
On April 15, 2005, Lintasarta entered into an agreement with Jiwasraya to replace their existing agreement. Based on the new agreement, the benefits and premium payment pattern were changed. This agreement is effective starting January 1, 2005. The total premium installments based on the agreement amount to Rp61,623 which is payable in 10 annual installments starting 2005 until 2015.
The new agreement covers employees registered as participants of the pension plan as of April 1, 2003. The conditions under the new agreement include the following:
·
An increase in basic salary pension by 3% (previously was estimated at 8%) compounded annually starting April 1, 2003
·
An increase in periodic payment of retirement benefit at 5% compounded annually starting one year after receiving periodic retirement benefit for the first time
·
If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.
On May 2, 2005, Lintasarta entered into an agreement with Jiwasraya to amend the above agreement. The amendment covers employees registered as participants of the pension plan as of April 1, 2003 up to November 30, 2004 with additional total premium installments amounting to Rp1,653 which is payable in 10 annual installments starting 2005 until 2015.
The contribution of Lintasarta to Jiwasraya amounted to Rp9,999 each for the six months ended
June 30, 2005 and 2006.
The composition of the net periodic pension cost for the six months ended June 30, 2005 and 2006 is as follows:
2005
2006
Service cost
20,415
14,890
Interest cost
28,110
31,821
Net amortization
427
-
Return on plan assets
(34,798
)
(35,720)
Net periodic pension cost
14,154
10,991
The net periodic pension cost for the pension plans for the six months ended June 30, 2005 and 2006 was calculated based on the actuarial valuations as of December 31, 2004 and 2005, respectively.
69
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
The actuarial valuation was prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2005
2006
Annual discount rate
10%
13%
Expected annual rate of return on plan assets
10%
10%
Annual rate of increase in compensation
6 - 9%
3 - 9%
Mortality table
CSO 1980
CSO 1980
The funded status of the plans as of June 30, 2005 and 2006 is as follows:
2005
2006
Projected benefit obligation
(619,626
)
(545,112
)
Plan assets at fair value
715,913
763,978
Excess of plan assets over projected benefit obligation
96,287
218,866
Unrecognized actuarial loss
81,749
38,614
Prepaid pension cost
178,036
257,480
Prepaid pension cost - net consists of:
2005
2006
Prepaid pension:
Current portion (presented as part of “Prepaid Expenses”)
Company
22,905
20,899
Lintasarta
-
1,081
22,905
21,980
Long-term portion
Company
168,730
224,551
Lintasarta
-
10,949
168,730
235,500
Accrued pension - Lintasarta
(188
)
-
Other non-current liabilities -
Lintasarta (Note 18)
(13,411
)
-
Net
178,036
257,480
Plan assets as of June 30, 2005 and 2006 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
70
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
PENSION PLAN (continued)
Defined Contribution Pension Plan
In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3’s employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10% - 20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of the employees for the six months ended June 30, 2005 and 2006 amounted to Rp8,575 and Rp8,439, respectively. The plan assets are being administered and managed by seven financial institutions appointed by the Company and Satelindo, based on the choice of the employees.
Labor Law No. 13/2003
On June 20, 2000, the Ministry of Manpower issued Decree No. KEP-150/Men/2000 (“KEP-150”) regarding the settlement of work dismissal and determination of separation, appreciation and compensation benefits by companies. Subsequently, KEP-150 was revoked by Labor Law No. 13/2003 dated March 25, 2003. The Companies’ employees will receive the benefits under this new law at the minimum. As of June 30, 2005 and 2006, the balances of accruals provided by the Companies in accordance with this law amounted to Rp43,697 and Rp67,076, respectively (Note 18). The accruals provided as of June 30, 2005 and 2006 were determined on the basis of actuarial computations. Such benefits provided are included in Personnel Expenses in the consolidated statements of income.
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES
The details of the accounts and the significant transactions entered into with related parties (affiliates, unless otherwise indicated) are as follows:
Amount
Percentage to Total Assets/Liabilities (%)
2005
2006
2005
2006
Cash and cash equivalents
State-owned banks (Note 4)
4,798,575
1,798,340
14.88
5.39
Accounts receivable - trade
Telkom
248,283
153,970
0.77
0.46
StarHub Pte. Ltd. (“StarHub”),
Singapore
27,402
48,358
0.080.14
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
42,689
40,888
0.13
0.12
Singapore Telecommunications Ltd.
(“SingTel”), Singapore
25,219
39,075
0.08
0.12
State-owned banks
23,458
35,128
0.07
0.11
PT Pos Indonesia (Persero)
9,632
9,234
0.03
0.03
LKBN Antara
675
4,752
0.00
0.01
PT Citra Sari Makmur (“CSM”)
5,849
4,127
0.02
0.01
PT Telekomunikasi Selular (“Telkomsel”)
20,396
2,940
0.06
0.01
PSN
1,823
2,474
0.01
0.01
Cable & Wireless Optus
(“Optus”), Australia
3,923
-
0.01
-
Others
40,645
32,820
0.13
0.10
Total
449,994
373,766
1.39
1.12
Less allowance for doubtful accounts
146,951
145,898
0.46
0.44
Net
303,043
227,868
0.93
0.68
71
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2005
2006
2005
2006
Prepaid expenses
Jiwasraya
22,905
21,980
0.07
0.07
Kopindosat
8,969
6,959
0.03
0.02
Others
3,012
2,175
0.01
0.01
Total
34,886
31,114
0.11
0.10
Other current assets
State-owned banks
4,600
15,859
0.02
0.05
Due from related parties - net
Key management personnel
19,019
15,402
0.06
0.05
Telkomsel
4,978
10,850
0.02
0.03
Kopindosat
6,197
6,197
0.020.02
BNI
897
1,031
0.00
0.00
Optus
2,388
97
0.01
0.00
PT Yasawirya Indah Mega Media (“YIMM”)
10,413
-
0.03
-
Others
2,109
1,482
0.01
0.00
Total
46,001
35,059
0.15
0.10
Less allowance for doubtful accounts
12,487
1,860
0.04
0.01
Net
33,514
33,199
0.11
0.09
Long-term prepaid pension
Jiwasraya
168,730
235,500
0.520.71
Long-term advances
Kopindosat
7,529
3,070
0.02
0.01
Others
395
829
0.00
0.00
Total
7,924
3,899
0.02
0.01
Non-current assets - others
State-owned banks
10,231
31,602
0.030.09
Telkom
26,784
25,736
0.08
0.08
Total
37,015
57,338
0.11
0.17
Accounts payable - trade
Telkomsel
-
14,352
-
0.08
Telkom
7,750
1,935
0.04
0.01
Kopindosat
2,169
1,185
0.01
0.01
Others
3,215
2,316
0.02
0.01
Total
13,134
19,788
0.07
0.11
Dividend payable
ICL
334,872
324,211
1.761.71
Government of the Republic
of Indonesia
119,779
115,966
0.630.61
ICLS
-
6,919
-
0.04
Others
7,484
8,460
0.040.04
Total
462,135
455,556
2.432.40
72
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2005
2006
2005
2006
Procurement payable
PT Industri Telekomunikasi
Indonesia (Persero)
17,562
35,296
0.090.19
Kopindosat
49,774
33,598
0.260.18
PT NexWave
12,652
1,981
0.07
0.01
Others
9,690
3,045
0.050.02
Total
89,678
73,920
0.47
0.40
Accrued expenses
Ministry of Communications and
Information Technology
152,854
145,089
0.80
0.77
Key management personnel
53,027
24,421
0.28
0.13
Kopindosat
24,575
12,647
0.13
0.07
Telkom
3,495
1,740
0.02
0.01
Others
31,573
1,963
0.17
0.01
Total
265,524
185,860
1.40
0.99
Due to related parties
PT Pos Indonesia (Persero)
1,006
4,900
0.01
0.03
TVRI
2,262
2,262
0.01
0.01
State-owned banks
2,178
1,875
0.01
0.01
Kopindosat
1,530
1,530
0.01
0.01
Telkom
25,745
-
0.14
-
Others
1,491
1,957
0.01
0.01
Total
34,212
12,524
0.19
0.07
Loans payable (including current
maturities)
State-owned banks
627,683
632,882
3.303.34
Other non-current liabilities
Jiwasraya
13,411
-
0.07
-
Percentage to Respective
Amount
Income or Expenses (%)
2005
2006
2005
2006
Operating revenues
Telkom
431,855
311,508
7.47
5.40
State-owned banks
88,640
87,406
1.53
1.52
SingTel
7,547
35,538
0.13
0.62
StarHub
10,222
22,240
0.18
0.39
Telkomsel
44,943
6,453
0.780.11
LKBN Antara
8,546
5,511
0.150.11
CSM
4,279
5,010
0.070.09
PSN
1,701
3,299
0.03
0.06
PT Angkasa Pura (Persero)
3,227
2,476
0.050.04
PT Garuda Indonesia
(Persero)
1,825
314
0.03
0.00
Others
53,532
6,368
0.93
0.11
Total
656,317
486,123
11.35
8.45
73
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective
Amount
Income or Expenses (%)
2005
2006
2005
2006
Operating expenses
Personnel
Key management personnel
70,484
66,240
1.82
1.58
Kopindosat
59,364
65,852
1.54
1.57
Jiwasraya
14,154
10,991
0.37
0.26
Total
144,002
143,083
3.73
3.41
Administration and general
Kopindosat
24,358
24,065
0.63
0.57
Telkom
10,828
8,178
0.270.19
PT Usaha Gedung Bank Dagang
Negara (“UGBDN”)
1,624
2,666
0.040.06
Total
36,810
34,909
0.94
0.82
Compensation to telecommunications
carriers and
service providers
Telkom
199,075
170,745
5.15
4.07
Others
2,146
-
0.06
-
Total
201,221
170,745
5.21
4.07
Leased circuits
Comnet
16,361
17,437
0.420.42
SingTel
10,509
7,811
0.27
0.19
StarHub
3,564
1,307
0.09
0.03
Total
30,434
26,555
0.78
0.64
Other costs of services
Ministry of Communications and Information Technology
254,916
294,322
6.60
7.01
PT Pos Indonesia (Persero)
12,238
-
0.32
-
Others
14,064
1,052
0.36
0.03
Total
281,218
295,374
7.28
7.04
Other income (expenses)
Interest income - net
State-owned banks
10,176
41,174
1.33
5.53
The following are the significant agreements/transactions with related parties:
a.
State-owned banks
The Companies place a substantial amount of their cash and cash equivalents in various state-owned banks. Interest rates on these placements are comparable to those offered by third-party banks.
The Company also obtained loans from Mandiri and BNI (Note 16).
74
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
b.
Telkom
(1)
a.
Fixed telecommunications services
The Company and Satelindo have an agreement with Telkom, a majority state-owned local telecommunications services company, for the provision of international telecommunications services to the public. The principal matters covered by the agreement are as follows:
·
Telkom provides the local network for customers to make or receive international calls. The Company and Satelindo provide the international network for the customers. The international telecommunications services include international calls, telex, telegram, packet net, TV link, frame net, etc.
·
The Company, Satelindo and Telkom are responsible for their respective telecommunications facilities.
·
Telkom handles customer billing and collection, except for leased circuits and public phones located at the international gateways. The Company and Satelindo pay Telkom 1% of the collections made by Telkom, plus the billing process expenses which are fixed at Rp82 (in full amount) per record of outgoing call, as compensation for billing processing (Note 26).
·
The compensation arrangement for the services provided is based on interconnection tariffs (Note36) determined by the Ministry of Communications.
On September 23, 2005, the Company and Telkom signed an agreement regarding the interconnection of local, long-distance and international fixed networks.
The principal matters covered by the agreement are as follows:
·
Interconnection between the Company’s and Telkom’s local, long-distance and international fixed networks enables the Company’s fixed telecommunications service subscribers to make or receive calls to or from Telkom’s subscribers or international gateways.
·
The Company’s and Telkom’s international services are accessible and continuously open to each other’s fixed networks.
·
The Company and Telkom are responsible for their respective telecommunications facilities.
·
The compensation arrangement for the services provided is based on interconnection tariffs determined by both parties.
·
Each party handles subscriber billing and collection for the other party’s international calls service used by the other party’s subscribers. Each party has to pay the other party 1% of the collections made by the other party, plus the billing process expenses which are fixed at Rp82 (in full amount) per record of outgoing call as compensation for billing processing.
Receivables from Telkom are settled according to payments received by Telkom from the respective customers. These receivables are non-interest bearing.
Under a cooperation agreement with Telkom, the compensation of Telkom relating to leased circuit/channel services, such as world link and bit link, is calculated at 15% of the Company’s collected revenues from such services.
The Company and Satelindo also lease circuits from Telkom to link Jakarta, Medan and Surabaya.
75
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
b.
Telkom (continued)
(1)
b.
Cellular Services
Satelindo and IM3 also have agreements with Telkom for the interconnection of Satelindo and IM3’s GSM mobile cellular telecommunications network with Telkom’s Public Switched Telephone Network (“PSTN”), enabling Satelindo’s and IM3’s customers to make outgoing calls to or receive incoming calls from Telkom’s customers. The interconnection tariffs are determined by the Ministry of Communications (Note 36).
Furthermore, on December 1, 2005, the Company and Telkom signed an agreement regarding the interconnection between the Company’s cellular telecommunication network with Telkom’s fixed telecommunication network. Under this agreement, the interconnection between the Company’s cellular telecommunication network and Telkom’s fixed telecommunication network enables the Company’s cellular subscribers to make or receive calls to or from Telkom’s fixed telecommunication subscribers.
(2)
In 1994, Satelindo entered into a Land Transfer Agreement with Telkom for the transfer of Telkom’s rights to use 134,925 square meters of land located at Daan Mogot, West Jakarta, where Satelindo’s earth control station is currently situated. The Land Transfer Agreement enables Satelindo to use the land for a period of 30 years from the date of the agreement, for a price equivalent to US$40,000 less Rp43,220, and could be extended based on mutual agreement. This agreement was subsequently superseded by Land Rental Agreement dated December 6, 2001, generally under the same terms as those of the Land Transfer Agreement.
(3)
In 1999, Lintasarta entered into an agreement with Telkom, whereby Telkom agreed to lease transponder to Lintasarta. This agreement has been amended several times, the latest amendment of which is based on the fifth amendment agreement dated May 1, 2006. Transponder lease expense charged to operations amounted to Rp4,125 in 2005 and Rp2,758 in 2006 which is presented as part of “Operating Expenses - Compensation to Telecommunications Carriers and Service Providers”.
The following is a summary of the significant transactions between the Companies and Telkom:
Percentage to Respective
Amount
Income or Expenses (%)
2005
2006
2005
2006
Net operating revenues
431,855
311,508
7.47
5.40
Operating expenses
199,075
170,745
5.15
4.07
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
c.
Telkomsel
The Company, Satelindo and IM3 have interconnection transactions with Telkomsel, a subsidiary of Telkom, under contractual sharing agreements which provide the following:
·
The Company’s and Satelindo’s international gateway exchanges are interconnected with Telkomsel’s GSM mobile cellular telecommunications network to make outgoing or receive incoming international calls through the Company’s and Satelindo’s international gateway exchanges.
·
The Company and Satelindo receive as compensation for the interconnection, a portion of Telkomsel’s revenues from the related services that are made through the Company’s and Satelindo’s international gateway exchanges.
·
Satelindo and IM3 also have agreements with Telkomsel for the interconnection of Satelindo’s and IM3’s GSM mobile cellular telecommunications network with Telkomsel’s network, enabling Telkomsel’s customers to make calls to or receive calls from Satelindo’s and IM3’s customers.
·
The agreements are renewable annually.
Net interconnection revenues (charges) from Telkomsel for the six months ended June 30, 2005 and 2006 are as follows:
2005
2006
Interconnection revenues
341,708
340,726
Interconnection charges
(318,055
)
(356,577)
Net revenues (charges)
23,653
(15,851)
d.
Jiwasraya
Jiwasraya is a state-owned life insurance company that provides services to the Companies in managing the Companies’ pension plans.
e.
Key Management Personnel
The amounts due from key management personnel represent portions of housing and transportation allowances which were given in advance by the Companies to their employees and transformation incentive (incentive given to employees to encourage them to adapt to
the transformation of the business of the Company from fixed line international provider to cellular operator) which are amortized over the average remaining service period of the employees.
The prepaid/unamortized portions of housing and transportation advances and transformation incentives which were given to key management personnel in 2005 and 2006 amounted to Rp19,019 and Rp15,402, respectively, and are presented as part of “Due from Related Parties”. Those given to non-key management personnel amounting to Rp2,794 and Rp3,741 as of
June 30, 2005 and 2006, respectively, are presented as part of “Accounts Receivable - Others” for
the current portion, and Rp125,654 and Rp114,188 as of June 30, 2005 and 2006, respectively, as “Long-term Receivables” for the non-current portion.
77
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
f.
Kopindosat
Kopindosat is a cooperative established by the Company’s employees to engage in various activities from which it earns revenues, such as providing housing and car loans and other consumer loans principally to the Company’s employees, as well as car, house and equipment rental and other services principally to the Company.
Kopindosat and certain of its subsidiaries are under the supervision of the Company’s management. The Company also seconded several of its employees on a temporary basis to support Kopindosat and its subsidiaries in conducting their businesses and to provide managerial training for the Company’s employees. In addition, the Company provides Kopindosat and certain of its subsidiaries some office spaces in its buildings for use in their businesses.
As of June 30, 2005 and 2006, Kopindosat has investments in the following entities:
Equity Interest (%)
2005
2006
PT Persada Alih Daya
-
99.00
PT Puri Perkasa Farmindo
95.00
88.00
Lintasarta
0.66
0.66
IMM
0.50
0.15
PT Duta Sukses Utama
90.00
-
PT Mutiara Data Caraka Lintas
15.00
-
Sisindokom (formerly Sisindosat)
0.53
-
Kopindosat distributes annually to the Company’s employees a portion of its profit earned during the preceding fiscal year. The Company initially makes the distribution (charged to a receivable account) to the employees which is subsequently reimbursed by Kopindosat. The timing of such reimbursement, which has historically occurred within the year of distribution, is subject to negotiations between the Company and Kopindosat. The receivable is non-interest bearing.
g.
PSN
In 1997, Satelindo entered into an operation agreement with PSN, an investee of Telkom, in respect of the Palapa-C satellites. In accordance with the agreement, Satelindo agreed to operate and control the Palapa-C satellites through Satelindo’s Master Control Station (“MCS”) located at Daan Mogot, West Jakarta. Under the agreement, PSN shall pay an annual operation fee of US$323 to Satelindo. The operation fee is payable in quarterly installments.
The agreement was amended in 1999 relating to the de-orbit of one of the satellites.
The management believes that the allowance provided on accounts receivable - trade and others from related parties is adequate to cover possible loss from uncollectible accounts.
78
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
The relationship and nature of account balances/transactions with other related parties are as follows:
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
1.
TVRI
Affiliate
Operating revenues - MIDI
2.
StarHub
Affiliate
Operating revenues -
international calls
3.
SingTel
Affiliate
Operating revenues -
international calls
4.
PT Pos Indonesia (Persero)
Affiliate
Operating revenues - MIDI
5.
Lembaga Kantor Berita
Negara Antara
Affiliate
Operating revenues - MIDI
6.
CSM
Affiliate
Operating revenues - MIDI
7.
Optus
Affiliate
Operating revenues -
international calls
8.
YIMM
Associated company
Interest-bearing loan
9.
PT Industri Telekomunikasi
Indonesia (Persero)
Affiliate
Procurement payable
10.
Ministry of Communications and
Information Technology
Government agency
Operating revenues - MIDI and
concession fee
11.
PT NexWave
Affiliate
Procurement payable
12.
PT Garuda Indonesia (Persero)
Affiliate
Operating revenues - MIDI
13.
PT Angkasa Pura (Persero)
Affiliate
Operating revenues - MIDI
14.
UGBDN
Affiliate
Rent expense
15.
Comnet
Affiliate
Other cost of services - rent of
transmission channel
31.
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
2005
2006
Numerator for basic earnings per share
786,326
548,751
Dilutive effect of convertible bonds (Note 17)
-
(6,756
)
Numerator for diluted earnings per share
786,326
541,995
79
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
EARNINGS PER SHARE (continued)
2005
2006
Denominator - number of shares
Denominator for basic earnings per share
Weighted-average number of shares outstanding
during the period (including effect of exercise of
ESOP Phase I and Phase II)
5,230,709,735
5,380,476,076
Dilutive effect of ESOP Phase II (Note 20)
24,328,237
14,693,700
Denominator for diluted earnings per share
5,255,037,972
5,395,169,776
Basic earnings per share
150.33
101.99
Diluted earnings per share
149.63
100.46
Basic earnings per ADS (50 B shares per ADS)
7,516.40
5,099.45
Diluted earnings per ADS
7,481.60
5,022.95
32.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meeting held on June 8, 2005, the stockholders resolved to, among others:
a.
Approve the utilization of 2004 net income as follows:
·
Rp16,332 for reserve fund
·
Rp154.23 per share for dividend distribution
·
Remaining amount for reinvestment and working capital.
b.
Pay the dividend on July 15, 2005, except the dividend for the Government which would be paid in accordance with the prevailing laws and regulations.
At the Company’s Annual Stockholders’ General Meeting held on June 29, 2006, the stockholders resolved to, among others:
a.
Approve the utilization of 2005 net income as follows:
·
Rp16,235 for reserve fund
·
Rp149.32 per share for dividend distribution
·
Remaining amount for reinvestment and working capital.
b.
Pay the dividend on August 8, 2006, except the dividend for the Government which will be paid in accordance with the prevailing laws and regulations.
80
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES
During 2005 and 2006, the Company entered into several swap contracts. Listed below is information related to the contracts and their fair values as of June 30, 2005 and 2006:
Fair Value (Rp)
Notional
2005
2006
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap:
a. Standard Chartered Bank, Jakarta
Branch (“StandChart”)
25,000
4,084
-
-
4,395
b. Goldman Sachs Capital Market, L.P.,
New York (“GSCM“)(1)
100,000
-
-
--
c. JPMorgan Chase Bank, Singapore
Branch (“JPMorgan”)(2)
25,000
-
9,657
--
d. Goldman Sachs International (“GSI”)
100,000
17,831
-
-16,420
e. GSI
25,000
-
13,840
-21,028
f. GSI
75,000
-
-
1,178
-
g. Merrill Lynch Capital Market Bank
Limited (“MLCMB”)
25,000
-
-
-7,450
h. MLCMB
25,000
-
-
-30,169
i. StandChart
25,000
-
-
-9,754
j. MLCMB
25,000
-
-
-7,010
k. StandChart
25,000
-
-
6,370
-
l. StandChart
25,000
-
-
15,507
-
Sub-total
21,915
23,497
23,055
96,226
Interest Rate Swap:
m. Barclays Capital, London
(“Barclays”)
(3)
50,000
-
-
--
n. The Hongkong and Shanghai
Banking Corporation Limited,
Jakarta Branch (“HSBC”)(1)
25,000
-
-
--
o. ABN(1)
50,000
-
-
--
p. GSCM
25,000
-
-
703
-
Sub-total
-
-
703
-
Total
21,915
23,497
23,758
96,226
(1)
terminated in May 2005
(2)
terminated in October 2005
(3)
terminated in April 2005
The net change in fair value of the swap contracts totalling Rp44,104 and Rp214,461 in 2005 and 2006, respectively, is presented as “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses) in the consolidated statements of income. “Derivative assets” presented under current assets amounted to Rp21,915 and Rp23,758 as of June 30, 2005 and 2006. “Derivative liabilities” presented under current liabilities amounted to Rp23,497 and Rp96,226 as of June 30, 2005 and 2006, respectively.
81
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
The following are the details of the swap contracts:
Cross Currency Swap Contracts
a.
On April 23, 2004, the Company entered into a cross currency swap contract with StandChart. Based on the contract, the Company will swap at the termination date on November 5, 2008, a total of Rp214,625 for US$25,000. The contract provides for the Company to make semi-annual payments, every May 5 and November 5, up to the termination date, at 6-month U.S. dollar LIBOR plus 2.60% per annum. Total swap cost amounting to Rp5,995 and Rp7,721 in 2005 and 2006, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
b.
On August 9, 2004, the Company entered into a new cross currency swap contract with GSCM to roll over the outstanding balance under its 3 previous cross currency swap contracts with GSCM. Based on the contract, the Company would swap at termination date on November 5, 2010, a total of Rp840,650 for US$100,000. The contract provided for the Company to make semi-annual payments, every May 5 and November 5, up to termination date, at 6-month U.S. dollar LIBOR plus 2.62% per annum. Total swap cost amounting to Rp29,142 in 2005 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
On May 13, 2005, the Company terminated its cross currency swap contract with GSCM. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$11,750 (equivalent to Rp111,508). The payment was made on May 16, 2005.
c.
On November 5, 2004, the Company entered into a cross currency swap contract with JPMorgan. Based on the contract:
·
If the spot rate at termination date is less than Rp14,000 to US$1 (in full amounts),
the Company will swap at the termination date on November 5, 2010, a total of Rp225,000 for US$25,000.
·
If the spot rate at termination date is higher than Rp14,000 to US$1 (in full amounts),
the Company will swap at the termination date on November 5, 2010, a certain rupiah amount [i.e., equivalent to US$25,000 multiplied by exchange rate of Rp9,000 (in full amount) plus the excess of actual spot rate over Rp14,000 (in full amount)] for US$25,000.
The contract provided for the Company to make semi-annual payments every May 5 and November 5 up to termination date at the fixed rate of 5% of Rp225,000 per annum. Total swap cost amounting to Rp5,687 in 2005 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
The contract provided early termination option for JPMorgan and the Company on
November 5, 2008 or November 5, 2009.
On October 28, 2005, the Company terminated its cross currency swap contract with JPMorgan. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$380 (equivalent to Rp3,792), which was made on November 1, 2005.
82
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
d.
On May 13, 2005, the Company entered into a cross currency swap contract with GSI. Based on the contract which is effective starting May 5, 2005, the Company will swap at termination date on November 5, 2010, a total of Rp832,250 for US$100,000. Based on the contract, the Company will make semi-annual payments every May 5 and November 5 up to termination date, at (i) fixed rate of 6.96% for US$50,000 and at (ii) 6-month U.S. dollar LIBOR plus 2.62% per annum for US$50,000 and will receive (i) semi-annual payments in the amount of 6-month U.S. dollar LIBOR per annum multiplied by US$11,750 during the period May 13, 2005 through May 13, 2008 and
(ii) the amount of US$11,750 on May 13, 2008. Total swap cost amounting to Rp29,817 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
e.
On May 13, 2005, the Company entered into a cross currency swap contract with GSI which is effective starting May 5, 2005. Based on the contract, the Company will swap at termination date on November 5, 2010, a total of Rp245,000 for US$25,000. The contract provides for the Company to make semi-annual payments every May 5 and November 5 up to termination date, at the fixed rate of 4.30% of US$25,000 per annum. Total swap cost amounting to Rp4,656 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
f.
On August 22, 2005, the Company entered into a cross currency swap contract with GSI which is effective starting June 22, 2005. Based on the contract, the Company will swap at termination date on June 22, 2012, a certain rupiah amount equivalent to US$75,000 multiplied by certain predetermined exchange rate for US$75,000.The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to termination date at the fixed rate of 3.28% of US$75,000 per annum. Total swap cost amounting to Rp11,622 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
g.
On September 20, 2005, the Company entered into a cross currency swap contract with MLCMB which is effective starting September 22, 2005. Based on the contract, the Company will receive, at termination date on June 22, 2012, the following:
·
If the rupiah/US$ spot rate at termination date is less than Rp9,500 to US$1 (in full amounts), the Company will receive zero amount from MLCMB.
·
If the rupiah/US$ spot rate at termination date is greater than Rp9,500, but less than or equal to Rp14,000 to US$1 (in full amounts), the Company will receive a certain U.S. dollar amount which equals to US$25,000 multiplied by (1 - Rp9,500/rupiah/US$ spot rate) (in full amount).
·
If the rupiah/US$ spot rate at termination date is greater than Rp14,000 to US$1 (in full amounts), the Company will receive a certain US$ amount which equals to US$25,000 multiplied by (Rp14,000 - Rp9,500)/rupiah/US$ spot rate (in full amounts).
The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to termination date at the fixed rate of 2.99% of US$25,000 per annum. Total swap cost amounting to Rp3,493 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
b.
On November 16, 2005, the Company entered into a cross currency swap contract with MLCMB which is effective starting November 18, 2005. Based on the contract, the Company will swap at the termination date on June 22, 2012, a total of Rp245,000 for US$25,000. The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to termination date at the fixed rate of 5.50% of US$25,000 per annum. Total swap cost amounting to Rp6,425 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
83
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
c.
On January 11, 2006, the Company entered into a cross currency swap contract with StandChart which is effective starting January 13, 2006. Based on the contract, the Company will swap at termination date on June 22, 2012, a total of Rp236,250 for US$25,000. The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to and including termination date at the fixed rate of 4.78% of US$25,000 per annum. Total swap cost amounting to Rp5,304 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
d.
On March 1, 2006, the Company entered into a cross currency swap contract with MLCMB which is effective starting March 3, 2006. Based on the contract, the Company will swap at the termination date on June 22, 2012, a total of Rp229,975 for US$25,000. The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to termination date at the fixed rate of 4.15% of US$25,000 per annum. Total swap cost amounting to Rp4,578 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
e.
On March 15, 2006, the Company entered into a cross currency swap contract with StandChart which is effective starting March 17, 2006. Based on the contract, the Company will swap at termination date on June 22, 2012, a total of Rp228,550 for US$25,000. The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to and including termination date at the fixed rate of 3.75% of US$25,000 per annum. Total swap cost amounting to Rp2,361 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
f.
On May 12, 2006, the Company entered into a cross currency swap contract with StandChart which is effective starting May 12, 2006. Based on the contract, the Company will swap at termination date on June 22, 2012, a total of Rp217,500 for US$25,000. The contract provides for the Company to make semi-annual payments every June 22 and December 22 up to and including termination date at the fixed rate of 3.45% of US$25,000 per annum. Total swap cost amounting to Rp918 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
All cross-currency swap contracts with GSI (Notes 33d, 33e and 33f) are structured to include credit-linkage with the Company as the reference entity and with the Company’s (i) bankruptcy, (ii) failure to pay on certain debt obligations or (iii) restructuring of certain debt obligations as the relevant Credit Events. Upon the occurrence of any of these Credit Events, the Company’s obligations and those of GSI under these swap contracts will terminate without any further payments or settlements being made by or owed to either party, including a payment by either party of any marked-to-market value of the swap contracts.
Interest Rate Swap Contracts
g.
On February 10, 2004, the Company and Barclays entered into an interest swap contract with a notional amount of US$50,000. Based on the contract, the Company agreed to pay at floating rate, in semi-annual intervals, every May 5 and November 5 up to the termination date on November 5, 2010, 6-month U.S. dollar LIBOR plus 0.45% (subsequently changed to 1.33%*), in exchange for 7.75% per annum, times the actual number of days in which the 6-month U.S. dollar LIBOR was to be located in the pre-determined annual (subsequently changed to semi-annual*) range. The range was to be pre-determined annually (subsequently changed to semi-annually*) up to 2010 and would take effect on May 5 (subsequently changed to May 5 and November 5*) of each year.
84
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Interest Rate Swap Contracts (continued)
The contract provided early termination option for Barclays, every May 5 and November 5, commencing on May 5, 2006 up to termination date.
On April 15, 2005, the Company terminated its interest rate swap contract with Barclays. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$3,880 (equivalent to Rp37,124). The payment was made on April 21, 2005.
* effective on September 15, 2004
h.
On May 7, 2004, the Company and HSBC entered into an interest swap contract with a notional amount of US$25,000. Based on the contract, the Company agreed to pay at floating rate, in annual intervals, every November 5 up to the termination date on November 5, 2006, 12-month U.S. dollar LIBOR plus 3.50% in exchange for 7.75% per annum. The swap income arising from this transaction amounting to Rp9,174 in 2005 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
On May 12, 2005, the Company terminated its interest rate swap contract with HSBC. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$1,060 (equivalent to Rp10,065). The payment was made on May 13, 2005.
i.
On January 20, 2005, the Company entered into an interest rate swap contract with ABN with a notional amount of US$50,000. Based on the contract which was effective starting May 5, 2005,
the existing interest rate swap contracts and all related cash flows were cancelled effective January 20, 2005 and the fair value of the existing interest rate swap contracts as of
January 20, 2005 was transferred into the new interest rate swap contract. Based on the contract, the Company agreed to pay at floating rate, in semi-annual intervals, on November 5, 2005 and thereafter every May 5 and November 5 up to the termination date on November 5, 2008,
6-month U.S. dollar LIBOR plus 3.15% in exchange for 7.75% per annum times the actual number of days in which the 6-month U.S.dollar LIBOR was located in the pre-determined ranges up to the termination date.
On May 12, 2005, the Company terminated its interest rate swap contract with ABN. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$2,685 (equivalent to Rp25,494). The payment was made on May 13, 2005.
j.
On March 15, 2006, the Company entered into an interest swap contract with GSCM with
a notional amount of US$25,000. Based on the contract which is effective starting
December 22, 2005, the Company agreed to pay at the fixed rate of 4.90% of US$25,000 per annum, in quarterly intervals, every March 22, June 22, September 22 and December 22 up to the termination date on June 22, 2012, in exchange for 7.125% per annum times certain index located in the pre-determined quarter range up to 2012. The swap income arising from this transaction amounting to Rp2,583 in 2006, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
34.
COMMITMENTS AND CONTINGENCIES
a.
As of June 30, 2006, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$164,354, EUR408,855 (in full amount, equivalent to US$520) and Rp970,191 (Note 41c).
85
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
The significant commitments on capital expenditures are as follows:
·
The Company has issued several Purchase Orders (“POs”) for the provision of equipment and services in the installation of BSS Roll-out 2006 to the following major vendors:
Vendor
Area Covered
Total PO Amount
Nokia Corporation and
PT Nokia Network
Java and Bali
US$35,105 and Rp63,178
Ericsson AB and
PT Ericsson Indonesia
Jabotabek
US$19,115
Siemens AG and
PT Siemens Indonesia
Sumatra and Nusa Tenggara
US$324 and Rp143,986
PT Alcatel Indonesia
Kalimantan
Rp73,850
·
On July 28, 2005, the Company entered into Supply and Installation Agreements of PDH and SDH Microwave Radio Equipment for West Java, Central Java, Bali and Nusa Tenggara Islands with PT Alcatel Indonesia, Alcatel CIT, and Alcatel Italy (“Alcatel”), whereby Alcatel agreed to provide equipment and services in the installation of Cellular Transmission (PDH and SDH Microwave Radio). These agreements were amended on May 31, 2006. The total contract prices, as amended, under these agreements amounted to US$14,669 and Rp98,494.
As of June 30, 2006, the Company has issued several POs, which relate to the purchase commitments under these agreements. The POs that have not been served amounted to US$3,732 and Rp43,188 as of June 30, 2006.
·
On July 4, 2005, the Company entered into Supply and Installation of Base Station Subsystem (“BSS”) Back-up Plan and BSS Network Tender 2005 Agreements with Siemens AG (“Siemens”), whereby Siemens agreed to provide equipment and services in the installation of BSS Back-up Plan and BSS Network Tender 2005 for total contract amounts of US$18,086 and Rp133,895, respectively.
As of June 30, 2006, the Company has issued several POs which relate to the purchase commitments under these agreements. The POs that have not been served amounted to Rp10,870 as of June 30, 2006.
·
On July 1, 2005, the Company entered into 2005 - 2008 BSS Expansion Agreement with PT Nokia Networks (“Nokia”), whereby Nokia agreed to provide equipment and services in the installation of BSS for total contract amounts of US$76,282 and Rp175,608.
As of June 30, 2006, the Company has issued several POs which relate to the purchase commitment under this agreement. The POs that have not been served amounted to US$1,216 and Rp5,863 as of June 30, 2006.
·
On July 1, 2005, the Company entered into 2005 BSS Roll-out Agreement for Sulawesi, Maluku and Papua with Huawei Tech Investment Co. Ltd. and PT Huawei Tech Investment (“Huawei”), whereby Huawei agreed to provide equipment and services for the installation of BSS. This agreement was amended on June 30, 2006. The total contract prices, as amended, under this agreement amounted to US$9,264 and Rp59,390.
As of June 30, 2006, the Company has issued several POs which relate to the purchase commitment under this agreement. The POs that have not been served amounted to US$2,653 and Rp31,209 as of June 30, 2006.
86
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
·
On March 15, 2005, the Company entered into Supply and Installation of BSS, MSC and IN Expansion Agreements with Ericsson, whereby Ericsson agreed to provide equipment and services in the installation of BSS, MSC and IN. These agreements have been amended from time to time, the latest amendment of which was made on February 13, 2006. The total contract prices, as amended, under these agreements amounted to US$64,335 and Rp93,982.
As of June 30, 2006, the Company has issued several POs which relate to the purchase commitments under these agreements. The POs that have not been served amounted to US$11,989 and Rp61,679 as of June 30, 2006.
b.
On May 31, 2000, Lintasarta obtained Standby L/C and Bank Guarantee facilities from Niaga. The facilities consist of the following:
·
Standby L/C facility amounting to US$5,000 for the importation of electronic and telecommunication equipment and amounting to US$100 for the payment to Lintasarta’s supplier. On August 6, 2003, the facility was rolled over until August 6, 2004 but the facility amount was reduced to US$1,000. The facility has been rolled over until August 6, 2006.
As of June 30, 2006, Lintasarta has not used this facility.
·
Bank guarantee facility amounting to US$3,000. On August 6, 2003, this facility was rolled over until August 6, 2004 but the facility amount was reduced to US$500. The facility has been rolled over until August 6, 2006. As of June 30, 2006, no drawdowns have been made from the reduced facility.
c.
On July 20, 2005, the Company obtained facilities from HSBC to fund the Company’s short-term working capital needs. The facilities consist of the following:
·
Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp16,000). Interest will be charged on daily balances at 3.75% per annum and 6% per annum below the HSBC Best Lending Rate for the loan denominated in rupiah and U.S. dollar, respectively. Interest is payable on a monthly basis by debiting the Company’s current account.
·
Revolving loan facility amounting to US$5,000 (including revolving loan denominated in rupiah amounting to Rp40,000). The loan matures at the maximum period of six months and can be drawn in tranches with minimum amounts of US$500. Interest will be charged on daily balances at 3% per annum and 6.3% per annum below the HSBC Term Lending Rate for the loan denominated in rupiah and U.S. dollar, respectively. Interest is payable on a monthly basis by debiting the Company’s current account.
Based on the loan/overdraft facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The Company also obtained treasury facilities from HSBC as follows:
·
Currency swap limit (weighted) amounting to US$7,000 to facilitate the Company’s requirement for hedging genuine foreign currency and international rate exposure through currency swap and/or interest rate swap, with a maximum maturity of 5 years.
·
Exposure risk limit (weighted) amounting to US$3,000 to facilitate the Company’s requirement for hedging genuine foreign currency exposures through spot and forward transactions with maximum maturity of 3 months.
87
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
The facilities expired on February 28, 2006 and were extended for 12 months.
As of June 30, 2006, the Company has not used these facilities.
d.
On August 25, 2005, the Company obtained facilities from Deutsche Bank AG, Jakarta Branch to finance the Company’s general working capital. The facilities consist of the following:
·
Loan facility amounting to Rp25,000, which can be drawn as advances with
a minimum amount of Rp100 for each advance. Each advance will mature at the maximum period of six months and bears interest as follows:
-
The interest on each advance with maturity of three months or less shall be payable at 1.7% per annum over Certificates of Bank Indonesia rates.
-
The interest on each advance with maturities of over three months but less than six months shall be payable at 2.5% per annum over three-month Certificates of Bank Indonesia rates.
Based on the loan facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
·
Bank guarantee facility amounting to US$2,000. The loan from the facility matures at the maximum period of one year. The Company is required to pledge its cash deposit/cash margin/current account in Deutsche Bank AG, Jakarta Branch for the issuance of bank guarantee.
The facilities expired on November 30, 2005 and were extended for 12 months. The facilities shall be automatically extended for further 12-month periods upon expiration, unless early notification of non-extension is made in writing.
As of June 30, 2006, the Company has not used these facilities.
e.
In 1994 and 1998, the Company was appointed as a Financial Administrator (“FA”) and Central Billing Party (“CBP”), respectively, by a consortium which was established to build and sell/lease Asia Pacific Cable Network (“APCN”) submarine cable in countries in the Asia-Pacific Region. As an FA, the Company collected and distributed funds from the sale of APCN’s IRU and Defined Underwritten Capacity (“DUC”) and Occasional Commercial Use (“OCU”) service, while as a CBP, the Company managed funds from the members of the consortium for upgrading the APCN cable.
The funds received from the sale of IRU and DUC, OCU services and funds received for upgrading the APCN cable did not belong to the Company and, therefore, were not recorded in the Company’s books. However, the Company managed these funds in separate accounts. Subsequently, on April 25, 2005, the Company was discharged as the CBP.
As of June 30, 2006, the balance of the funds which are under the Company’s custody (including interest earned) amounted to US$22,292. Besides receiving their share of the funds from the sale of IRU, the members of the consortium also received their share of the interest earned by the above funds.
88
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
f.
Based on letters No. S-5341/LK/2002 and No. S-5327/LK/2002, both dated December 4, 2002, of the Ministry of Finance (“MOF”) of the Republic of Indonesia, the Company was fined 2% interest per month as penalty (for a maximum period of 24 months) for the late payment of
the Government’s dividends. The Company paid the dividends in accordance with the payment schedule approved in its Stockholders’ Annual General Meeting.
The penalties amounted to Rp20,633 and Rp38,096 for the dividends from the Company’s net income in 1999 and 2000, respectively. In its letter No. 002/GUI/KU.300/03dated January 6, 2003, the Company requested the MOF to reconsider its decision to impose the penalties.
On December 1, 2003, the MOF through its letter No. S-6287/LK/2003, refused to reconsider its decision. Based on the letter, the penalty for the dividend from the Company’s net income in 2000 has been increased from Rp38,096 to Rp42,902.
Based on letter No. S-20/MBU.S/2004 dated January 28, 2004 of the Ministry of State-owned Enterprises of the Republic of Indonesia, the Ministry requested the MOF to reconsider its decision to penalize the Company for the late payment of dividends to the Government.
On February 5, 2004, the MOF, in its letter No. S-498/LK/2004, reminded the Company to settle the penalties.
In response to letter No. S-20/MBU.S/2004 dated January 28, 2004 from the Ministry of
State-owned Enterprises (see above), the MOF through its letter No. S-126/MK.6/2004 dated March 15, 2004 stated that the request of the Ministry of State-owned Enterprises to release the Company from the penalty on late payment of dividends was difficult to consider as there was no regulation for the release of the penalty on the late payments of dividends.
On June 15, 2005, the MOF, in its letter No. S-1680/AP/2005, reconfirmed the Company’s penalties amounting to Rp63,535 and requested the Company to immediately settle the penalties.
As of June 30, 2006, the Company has not accrued the penalties because, in the opinion of its legal counsels, the Company has assurance that it may not be liable to pay them.
In the Company’s Stockholders’ Annual General Meeting held on June 29, 2006, the representative of the Government expressed its concern over, and urged the Company to pay, the penalties. In the light of this new development, the Company is re-assessing its options to resolve this issue with the Government as soon as practicable.
35.
TARIFF SYSTEM
a.
International telecommunications services
The service rates (“tariffs”) for overseas exchange carriers are set based on the international telecommunications regulations established by the International Telecommunications Union (“ITU”). These regulations require the international telecommunications administrations to establish and revise, under mutual agreement, accounting rates to be applied among them, taking into account the cost of providing specific telecommunications services and relevant recommendations from the Consultative Committee on International Telegraph and Telephone (“CCITT”). The rates are divided into terminal shares payable to the administrations of terminal countries and, where appropriate, into transit shares payable to the administrations of transit countries.
The ITU also regulates that the monetary unit to be used, in the absence of special arrangements, shall be the Special Drawing Right (“SDR”) or the Gold Franc which is equivalent to 1/3.061SDR. Each administration shall, subject to applicable national law, establish the charges to be collected from its customers.
89
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
TARIFF SYSTEM (continued)
a.
International telecommunications services (continued)
The tariffs billed to domestic subscribers for international calls originating in Indonesia, also known as collection rates, are established in a decision letter of the Ministry of Communications, which rates are generally higher than the accounting rates. During the period 1996 to 1998,
the Ministry of Communications made tariff changes effective January 1, 1997, March 15, 1998 and November 15, 1998.
b.
Cellular services
Tariffs for cellular providers are set on the basis of Regulation No. KM.27/PR.301/MPPT-98 dated February 23, 1998 of the Ministry of Tourism, Posts and Telecommunications (subsequently renamed “Ministry of Communications” and most recently as “Ministry of Communications and Information Technology”). Under this regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges.
The maximum tariff for connection fee is Rp200,000 (in full amount) per new connection number. The maximum tariff for monthly charges is Rp65,000 (in full amount). Usage charges consist of the following:
1.
Airtime
The maximum airtime tariff charged to the originating cellular subscriber is Rp325 (in full amount) per minute. The details of the tariff system are as follows:
a.
Cellular to cellular
: 2 times airtime rate
b.
Cellular to PSTN
: 1 time airtime rate
c.
PSTN to cellular
: 1 time airtime rate
d.
Card phone to cellular
: 1 time airtime rate plus 41% surcharge
2.
Usage
a.
Usage tariff charged to a cellular subscriber who makes a call to another subscriber using PSTN network is similar to the usage tariff of PSTN, which is applied on a time differentiation basis. For the use of local PSTN network, the tariff is computed at 50% of the prevailing local PSTN tariff.
b.
Long-distance usage tariff between two different service areas without using PSTN network is similar to the prevailing tariff on domestic long-distance call (“SLJJ”) for
a PSTN subscriber.
The maximum tariff for active roaming is Rp1,000 (in full amount) per call and is charged to in-roaming cellular subscriber who makes a call.
Tariffs for prepaid customers are also regulated by the Ministry of Communications in its Decree No. KM.79 Year 1998 dated December 14, 1998, and are typically higher than tariffs for post-paid subscribers. Cellular operators are allowed to set their own tariffs. However, the maximum usage tariffs for prepaid customers may not exceed 140% of peak time tariffs for post-paid subscribers.
90
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
TARIFF SYSTEM (continued)
b.
Cellular services (continued)
Regulation No. KM.27/PR.301/MPPT-98 dated February 23, 1998 and Decree No. KM.79 Year 1998 of the Ministry of Tourism, Posts and Telecommunications (subsequently renamed “Ministry of Communications” and most recently as “Ministry of Communications and Information Technology”) were subsequently superseded by Regulation No. 12/Per/M.KOMINFO/02/2006 dated February 28, 2006 of the Ministry of Communications and Information Technology regarding basic telephony tariff for cellular mobile network service.
As of June 30, 2006, the Company has not yet applied such regulation since it is still waiting for further guidance on the basis of the tariff computation.
c.
Fixed telecommunications services
In February 2006, the Ministry of Communications and Information Technology released Regulation No. 09/Per/M.KOMINFO/02/2006 regarding basic telephony tariff for fixed network service.
As of June 30, 2006, the Company has not yet applied such regulation since it is still waiting for further guidance on the basis of the tariff computation.
36.
INTERCONNECTION TARIFFS
Interconnection tariffs among domestic telecommunications operators are regulated by the Ministry of Communications through its decree No. KM.108/PR.301/MPPT-94 dated December 28, 1994. The decree was updated several times with the latest update being decree No. KM.37 Year 1999 dated June 11, 1999. This decree, along with decree No. KM.46/PR.301/MPPT-98 dated February 27, 1998, prescribed interconnection tariff structures between mobile cellular telecommunications network and PSTN, mobile cellular telecommunications network and international telecommunications network, mobile cellular telecommunications network and other domestic mobile cellular telecommunications network, international telecommunications network and PSTN, and between two domestic PSTNs.
Based on the decree of the Ministry of Communications, the interconnection tariff arrangements are as follows:
1.
Structure of Interconnection Tariff
a.
Between international and domestic PSTN
Based on decision letter No.KM.37 Year 1999 dated June 11, 1999 of the Ministry of Communications, the interconnection tariffs are as follows:
Tariff
Basis
Access charge
Rp850 per call
Number of successful outgoing
and incoming calls
Usage charge
Rp550 per paid minute
Duration of successful outgoing
and incoming calls
USO
Rp750 per call
Number of successful outgoing
and incoming calls
For a ten-year period effective January 1, 1995, the Company (Indosat only, not including Satelindo) was originally exempted from the obligation to pay USO to Telkom.
Based on a letter from the Ministry of Communications, the access and usage charges to be paid by an international telecommunications carrier to a domestic carrier for the next
ten years up to 2004 are not to exceed 25% of the international telecommunications carrier’s international telecommunications revenue.
91
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
36.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariff (continued)
a.
Between international and domestic PSTN (continued)
Based on regulation No. 28 year 2005 dated July 5, 2005 of the Government of the Republic of Indonesia, the USO tariff has been changed from Rp750 per successful international outgoing or incoming call to 0.75% of annual gross revenues. Based on the decision letter of the Ministry of Communications and Information Technology, bad debts and compensation to other telecommunication carriers can be deducted in computing annual gross revenues. The Company applied the new tariff starting January 1, 2005 (Note 27).
b.
Between domestic PSTN and another domestic PSTN
Interconnection charges for domestic telecommunication traffic (local and long-distance) between a domestic PSTN and another domestic PSTN are based on agreements made by those domestic PSTN telecommunication carriers.
c.
Between cellular telecommunications network and domestic PSTN
Based on the Ministry of Tourism, Posts and Telecommunications Decree
No. KM.46/PR.301/MPPT-98 (“Decree No. 46”) dated February 27, 1998 which became effective starting April 1, 1998, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to a PSTN subscriber,
the cellular operator pays the PSTN operator 50% of the prevailing tariff for local calls.
For local calls from the PSTN to a cellular subscriber, the cellular operator receives
the airtime charged by the PSTN operator to its subscribers.
(2)
SLJJ
For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariff, which portion ranges from 15% of
the prevailing SLJJ tariff plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariff plus the airtime charges in cases where the entire long-distance portion is carried by the cellular operator.
For SLJJ which originates from a cellular telecommunications network to a PSTN subscriber, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariff, which portion ranges from 15% of the tariff in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariff in cases where the entire long-distance portion is carried by the cellular operator.
d.
Between cellular telecommunications network and another cellular telecommunications network
Based on Decree No. 46, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the cellular operator pays the PSTN operator 50% of the prevailing tariff for local calls.
92
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
36.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariff (continued)
d.
Between cellular telecommunications network and another cellular telecommunications network (continued)
(2)
SLJJ
For SLJJ which originates from a cellular telecommunications network, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariff, which portion ranges from 15% of the tariff in cases where the entire long-distance portion is not carried by
the cellular operator, to 85% of the tariff in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, and to 100% if the call is delivered to the same cellular operator.
e.
Between international PSTN and cellular telecommunications network
Starting from 1998, the interconnection tariff for international cellular call traffic to/from overseas from/to domestic cellular subscribers, regardless of whether the traffic is made through domestic PSTN or not, is based on the same tariff applied to traffic made through domestic PSTN as mentioned in “a” above. However, up to June 30, 2006, as agreed mutually with the cellular telecommunications operators, the Company (including Satelindo until it was merged - Note 1e) still applied the original contractual sharing agreements regarding the interconnection tariffs (Note37).
f.
Between international gateway exchanges
Interconnection charges for international telecommunications traffic between international gateway exchanges are based on agreements between international telecommunications carriers and international telecommunications joint ventures.
2.
RevenueSharing
Revenue from access and usage charges from international telecommunications traffic with telecommunications networks owned by more than one domestic telecommunications carrier which is not regulated by this decree, is to be proportionally shared with each carrier, which proportion is to be bilaterally arranged between the carriers.
KM.37 Year 1999 and Decree No. 46 were subsequently superseded by Decree No.32 Year 2004 of the Ministry of Communications which provides cost-based interconnection to replace the current revenue-sharing arrangement. Under the decree, the operator of the network on which calls terminate will determine the interconnection charge to be received by it based on a formula to be mandated by the government, which will be intended to have the effect of requiring that operators charge for calls based on the cost of carrying such calls.
The effective date of this decree, which was originally set to start on January 1, 2005, was subsequently postponed until January 1, 2007 based on Regulation No. 08/Per/ M. KOMINFO/02/2006 dated February 8, 2006 of the Ministry of Communications and Information Technology.
93
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
37.
INTERCONNECTION AGREEMENTS WITH OTHER CELLULAR TELECOMMUNICATIONS OPERATORS
The Company, Satelindo and IM3 have interconnection agreements with each of PTExcelcomindo Pratama or “Excelcom” and Komselindo (for the interconnection agreement with Telkomsel,
see Note 30). The principal matters covered by the agreements are as follows:
·
The Company’s and Satelindo’s international gateway exchanges are interconnected with mobile cellular telecommunication operators’ networks to make outgoing or receive incoming international calls through the Company’s and Satelindo’s international gateway exchanges.
·
The Company and Satelindo receive, as compensation for the interconnection, a portion of
the cellular telecommunications operators’ revenues from the related services that are made through the Company’s and Satelindo’s international gateway exchanges.
·
Satelindo and IM3 also have an agreement with the above operators for the interconnection of Satelindo’s and IM3’s GSM mobile cellular telecommunications network with the above operators’ network, enabling the above operators’ customers to make calls/send short message services (“SMS”) to or receive calls/SMS from Satelindo’s and IM3’s customers.
·
The agreements are renewable annually.
As of June 30, 2006, the latest agreement with Komselindo was signed on July 6, 2004, while the latest agreement with Excelcom was signed on May 12, 2003. The Company (including Satelindo and IM3 until they were merged - Note 1e) and the above operators still continue their business under the agreements by applying the original compensation formula.
Net interconnection charges (revenues) from the operators are as follows:
2005
2006
Excelcom
18,961
20,857
Komselindo
(1,211
)
(735)
Net charges
17,750
20,122
38.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
The Companies’ monetary assets and liabilities denominated in various foreign currencies as of June 30, 2006 (converted to equivalent U.S. dollar if currency is other than U.S. dollar) are as follows:
Amount in
Equivalent
U.S. Dollar
Rupiah *
Assets:
Cash and cash equivalents
209,803
1,951,169
Accounts receivable
Trade
114,430
1,064,197
Others
546
5,078
Derivative assets
2,555
23,758
Other current assets
1,979
18,403
Due from related parties
584
5,433
Non-current assets - others
1,235
11,490
Total assets
331,132
3,079,528
94
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
38.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)
Amount in
Equivalent
U.S. Dollar
Rupiah *
Liabilities:
Accounts payable - trade
9,712
90,322
Procurement payable
207,496
1,929,713
Accrued expenses
25,669
238,722
Deposits from customers
2,058
19,136
Derivative liabilities
10,347
96,226
Other current liabilities
122
1,132
Loans payable (including current maturities)
38,000
353,400
Bonds payable
550,000
5,115,000
Total liabilities
843,404
7,843,651
Net liabilities position
512,272
4,764,123
*
translated using the average of the buying and selling rates prevailing at balance sheet date as published by Bank Indonesia
39.
SEGMENT INFORMATION
The Companies manage and evaluate their operations in three major reportable segments: cellular, fixed telecommunication and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Companies operate in one geographical area only, so no geographical information on segments is presented.
Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2005
Operating revenues
Revenues from external customers
4,312,363
648,258
820,065
5,780,686
Inter-segment revenues
(58,698
)
58,698
118,370118,370
Total operating revenues
4,253,665
706,956
938,4355,899,056
Inter-segment revenues elimination
(118,370
)
Operating revenues - net
5,780,686
Income
Operating income
1,371,019
344,027
201,344
1,916,390
Interest income
79,488
Equity in net income of associated companies
67
Loss on change in fair value of derivatives - net
(44,104)
Loss on foreign exchange - net
(119,308
)
Amortization of goodwill
(113,174
)
Income tax expense
(347,731)
Financing cost
(595,385)
Loss on sale of other long-term investment
(1,046)
Others - net
28,826
Income before Minority Interest in Net Income
of Subsidiaries
804,023
95
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
39.
SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2005 (continued)
Other Information
Segment assets
26,112,998
1,174,760
3,168,360
30,456,118
Unallocated assets
8,047,395
Inter-segment assets elimination
(6,250,749
)
Assets - net
32,252,764
Liabilities segment
19,796,465
933,067
1,030,11321,759,645
Unallocated liabilities
2,479,127
Inter-segment liabilities elimination
(5,409,739
)
Liabilities – net
18,829,033
Capital expenditure
2,953,784
162,414
304,453
3,420,651
Depreciation and amortization
1,148,014
115,011
214,270
1,477,295
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2006
Operating revenues
Revenues from external customers
4,290,844
548,936
927,331
5,767,111
Inter-segment revenues
(110,117
)
110,117
157,319
157,319
Total operating revenues
4,180,727
659,053
1,084,650
5,924,430
Inter-segment revenues elimination
(157,319
)
Operating revenues - net
5,767,111
Income
Operating income
995,481
328,056
244,247
1,567,784
Gain on foreign exchange - net
141,877
Interest income
119,323
Financing cost
(644,352
)
Income tax expense
(253,864
)
Loss on change in fair value of derivatives - net
(214,461
)
Amortization of goodwill
(113,253
)
Equity in net loss of associated company
(99)
Others - net
(33,658
)
Income before Minority Interest in Net Income
of Subsidiaries
569,297
Other Information
Segment assets
29,669,361
1,128,336
3,617,074
34,414,771
Unallocated assets
5,209.025
Inter-segment assets elimination
(6,256,277
)
Assets - net
33,367,519
Segment liabilities
19,521,620
631,452
1,014,763
21,167,835
Unallocated liabilities
3,201,470
Inter-segment liabilities elimination
(5,411,263
)
Liabilities – net
18,958,042
Capital expenditure
3,048,885
134,683
269,663
3,453,231
Depreciation and amortization
1,409,101
90,710
238,548
1,738,359
96
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
40.
ECONOMIC CONDITIONS
The operations of the Companies have been affected and may continue to be affected for
the foreseeable future by the economic conditions in Indonesia that may contribute to volatility in currency values and negatively impact economic growth. Economic improvements and sustained recovery are dependent upon several factors such as fiscal and monetary actions being undertaken by the Government and others, actions that are beyond the control of the Companies.
41.
SUBSEQUENT EVENTS
a.
On July 18, 2006,the Company and Goldman Sachs Capital Markets, L.P. (“GSCM”) entered into an interest swap contract with a notional amount of US$25,000. Based on the contract, the Company agreed to pay semi-annually, every June 22 and December 22 starting December 22, 2006 up to the termination date on June 22, 2012 at a fixed rate of 5.90%, in exchange for 7.125% per annum, times certain index located in the pre-determined semi-annual range up to 2012.
The contract provides early termination option for GSCM starting on June 22, 2007 and semi-annually thereafter with five (5) New York business days prior notice.
b.
On August 2, 2006, the Company paid the first installment amounting to Rp5,779 of its capital contribution in SMT, a subsidiary (Note 1d).
c.
As of August 2, 2006, the average buying and selling rate of bank notes published by Bank Indonesia is Rp9,100 to US$1 (in full amounts), while as of June 30, 2006, the average buying and selling rate was Rp9,300 to US$1 (in full amounts). Using the exchange rate as of August 2, 2006, the Companies earned foreign exchange gain amounting to approximately Rp102,454 on the foreign currency liabilities, net of foreign currency assets, as of June 30, 2006 (Note 38).
The translation of the foreign currency liabilities, net of foreign currency assets, should not be construed as a representation that these foreign currency liabilities and assets have been, could have been, or could in the future be, converted into rupiah at the rate as of August 2, 2006 or at any other rate of exchange, and could result in the above-mentioned foreign exchange gain.
The commitments for the capital expenditures and operating leases denominated in foreign currencies as of June 30, 2006 as disclosed in Note 34a are approximately Rp1,500,353, if translated at the rate as of August 2, 2006.
d.
Up to August 2, 2006, additional 32,610,000 stock options from ESOP Phase II have been exercised by the employees (Note 20).
42.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the 2005 consolidated financial statements which have been reclassified to conform with the presentation of accounts in the 2006 consolidated financial statements:
As Previously Reported
As Reclassified
Amount
Consolidated Balance Sheet
Non-current assets - others
Cash and cash equivalents
18,278
Current assets - other current assets
8,916
Accrued expenses
Other non-current liabilities
244,394
97
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2005 and 2006 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
42.
RECLASSIFICATION OF ACCOUNTS (continued)
As Previously Reported
As Reclassified
Amount
Consolidated Statement of Income
Operating expenses - compensation
Operating revenues - fixed
to telecommunications carriers
telecommunications
(12,056
)
and service providers
Operating expenses - other cost of
Operating revenues - cellular
(91,502
)
services
43.
COMPLETION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The management of the Company is responsible for the preparation of the accompanying consolidated financial statements that were completed on August 2, 2006.
98
