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)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2007
PT Indosat Tbk.
Indosat Building
Jalan Medan Merdeka Barat, 21
Jakarta 10110 - Indonesia
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F ____
(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information of the Commission to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes No _X__
(If " Yes " is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .)
Consolidated Financial Statements
With Independent Auditors’ Report
December 31, 2006
With Comparative Figures for 2004 and 2005
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 AUDITORS’ REPORT
DECEMBER 31, 2006
WITH COMPARATIVE FIGURES FOR 2004 AND 2005
Table of Contents
Page
Independent Auditors’ Report
Consolidated Balance Sheets
…………………………………………………………………………...
1 - 4
Consolidated Statements of Income
……………………………………………………………………
5 - 6
Consolidated Statements of Changes in Stockholders’ Equity
………………………………………
7 - 9
Consolidated Statements of Cash Flows
………………………………………………………………
10 - 11
Notes to Consolidated Financial Statements
………………………………………………………….
12 - 110
***************************
This report is originally issued in Indonesian language.
Independent Auditors’ Report
Report No. RPC-6706
Stockholders and Boards of Commissioners and Directors
PT Indosat Tbk
We have audited the consolidated balance sheet of PT Indosat Tbk (“the Company”) and its subsidiaries as of December 31, 2006, and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated balance sheet of the Company as of December 31, 2005, and the consolidated statements of income, stockholders’ equity and cash flows for the years ended December 31, 2004 and 2005 were audited by Prasetio, Sarwoko & Sandjaja, whose report dated February 21, 2006 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards established by the Indonesian Institute of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 2006 financial statements referred to above present fairly, in all material respects, the consolidated financial position of PT Indosat Tbk and its subsidiaries as of December 31, 2006, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Indonesia.
Purwantono, Sarwoko & Sandjaja
Drs. Hari Purwantono
Public Accountant Licence No. 98.1.0065
March 5, 2007
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 audit such financial statements are those generally accepted and applied in Indonesia.
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
December 31, 2006
With Comparative Figures for 2005
(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
4,717,269
2,807,260
311,226
Short-term investments - net of
2e
allowance for decline in value
of Rp33,984 in 2005 and
Rp25,395 in 2006
38,998
-
-
Accounts receivable
2f
Trade
16
Related parties
PT Telekomunikasi
Indonesia Tbk (“Telkom”)
- net of allowance for
doubtful accounts of
Rp89,485 in 2005
and Rp81,803 in 2006
5,30
67,595
55,159
6,115
Others - net of allowance
for doubtful accounts of
Rp61,492 in 2005
and Rp59,460 in 2006
30
108,804
119,583
13,258
Third parties - net of allowance
for doubtful accounts of
Rp528,314 in 2005
and Rp423,730 in 2006
6
982,351
1,096,866
121,604
Others - net of allowance
for doubtful accounts of
Rp34,575 in 2005 and
Rp16,572 in 2006
30g
16,316
10,392
1,152
Inventories
2g
203,954
110,935
12,299
Derivative assets
2r,33
79,221
16,550
1,835
Advances
47,728
19,071
2,114
Prepaid taxes
7,14
940,155
1,051,442
116,568
Prepaid expenses
2h,2q,29,30
295,436
324,875
36,017
Other current assets
2d,30
29,165
53,299
5,909
Total Current Assets
7,526,992
5,665,432
628,097
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)
December 31, 2006
With Comparative Figures for 2005
(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 Rp1,753 in 2005
and Rp2,795 in 2006
2f,30
30,401
23,336
2,587
Deferred tax assets - net
2t,14
44,197
46,567
5,163
Investments in associated
companies - net of allowance
for decline in value of Rp56,300
in 2005 and 2006
2i,8
524
286
32
Other long-term investments - net of
allowance for decline in value of
Rp99,977 in 2005 and 2006
2i,9
2,730
8,509
943
Property and equipment
2j,2k,2p,
10,16,24
Carrying value
35,073,128
41,908,327
4,642,475
Accumulated depreciation
(13,409,736
)
(16,846,686
)
(1,864,022
)
Impairment in value
(98,611
)
(98,611
)
(10,933
)
Net
21,564,781
24,963,030
2,767,520
Goodwill and other
intangible assets - net
2c,2l,11
2,682,600
2,645,369
293,278
Long-term receivables
30g
122,281
103,121
11,432
Long-term prepaid pension - net
of current portion
2q,29,30
236,491
230,284
25,530
Long-term advances
12,30
327,351
213,771
23,700
Others
248,785
328,953
36,469
Total Non-current Assets
25,260,141
28,563,226
3,166,654
TOTAL ASSETS
32,787,133
34,228,658
3,794,751
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)
December 31, 2006
With Comparative Figures for 2005
(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
30,462
34,139
3,785
Third parties
163,617
270,292
29,966
Procurement payable
13,30
2,609,278
3,292,543
365,027
Taxes payable
2t,14
205,852
211,868
23,489
Accrued expenses
15,29,30
843,206
896,435
99,383
Unearned income
2o
488,694
571,944
63,408
Deposits from customers
26,519
93,044
10,315
Derivative liabilities
2r,33
11,539
224,293
24,866
Current maturities of:
Loans payable
2m,16
49,700
127,191
14,101
Bonds payable
2m,17
981,936
1,055,526
117,021
Other current liabilities
20,577
25,930
2,874
Total Current Liabilities
5,431,380
6,803,205
754,235
NON-CURRENT LIABILITIES
Due to related parties
30
16,607
29,440
3,264
Deferred tax liabilities - net
2t,14
865,672
1,244,502
137,971
Loans payable - net of current
maturities
2m,16
Related parties
30
630,251
635,649
70,471
Third parties
678,522
869,045
96,346
Bonds payable - net of current
maturities
2m,17
10,161,905
8,734,012
968,294
Other non-current liabilities
18,29,30
511,779
510,440
56,591
Total Non-current Liabilities
12,864,736
12,023,088
1,332,937
TOTAL LIABILITIES
18,296,116
18,826,293
2,087,172
MINORITY INTEREST
2b
175,689
200,620
22,241
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)
December 31, 2006
With Comparative Figures for 2005
(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 5,356,174,499 B shares
in 2005, and 1 A share and
5,433,933,499 B shares in 2006
19
535,617
543,393
60,243
Premium on capital stock
19
1,178,274
1,546,587
171,463
Difference in transactions of equity
changes in associated
companies/subsidiaries
2i
403,812
403,812
44,769
Stock options
2n,20
90,763
-
-
Difference in foreign currency
translation
2b
228
182
20
Retained earnings
Appropriated
49,922
66,157
7,334
Unappropriated
12,056,712
12,641,614
1,401,509
TOTAL STOCKHOLDERS’ EQUITY
14,315,328
15,201,745
1,685,338
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
32,787,133
34,228,658
3,794,751
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
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2004
2005
2006
(Note 3)
Rp
Rp
Rp
US$
OPERATING REVENUES
2o,30
Cellular
21,35,36,37
7,342,061
8,644,951
9,227,537
1,023,009
Multimedia, Data
Communication,
Internet (“MIDI”)
22
1,483,941
1,694,033
1,902,589
210,930
Fixed telecommunication
23,35,36
1,544,684
1,250,807
1,109,281
122,980
Other services
59,420
-
-
-
Total Operating Revenues
10,430,106
11,589,791
12,239,407
1,356,919
OPERATING EXPENSES
2o
Depreciation and amortization
2j,10,11
2,818,657
3,080,205
3,653,266
405,018
Personnel
2p,2q,20,
24,29,30
1,207,384
1,264,653
1,350,468
149,719
Administration and general
25,30
471,347
606,022
663,921
73,605
Maintenance
2j,30
473,388
614,595
585,158
64,874
Marketing
349,824
360,049
468,920
51,987
Compensation to
telecommunications carriers
and service providers
26,30,36
513,355
408,411
369,704
40,987
Leased circuits
30
97,667
142,210
180,168
19,974
Other costs of services
27,30
1,300,418
1,461,729
1,569,143
173,963
Total Operating Expenses
7,232,040
7,937,874
8,840,748
980,127
OPERATING INCOME
3,198,066
3,651,917
3,398,659
376,792
OTHER INCOME (EXPENSES)
2o
Gain (loss) on foreign
exchange - net
2s,5,6
(66,116
)
(79,932
)
304,401
33,747
Interest income
30
187,430
215,103
212,823
23,595
Financing cost
2m,16,17,
28,30
(1,097,531
)
(1,264,764
)
(1,248,899
)
(138,459
)
Loss on change in fair value
of derivatives - net
2r,33
(170,451
)
(44,209
)
(438,774
)
(48,645)
Amortization of goodwill
2l,11
(226,347
)
(226,352
)
(226,507
)
(25,112
)
Gain on sale of investment in
associated companies
8
286,204
14,625
-
-
Gain on sale of other long-term
investments - net
9
110,929
1,204
-
-
Others - net
14
99,085
85,117
21,202
2,351
Other Expenses - Net
(876,797
)
(1,299,208
)
(1,375,754
)
(152,523
)
EQUITY IN NET INCOME (LOSS)
OF ASSOCIATED COMPANIES
2i,8
61,489
86
(238
)
(26
)
INCOME BEFORE INCOME TAX
2,382,758
2,352,795
2,022,667
224,243
INCOME TAX EXPENSE
2t,14
Current
140,902
331,541
199,629
22,132
Deferred
583,652
366,383
376,478
41,738
Total Income Tax Expense
724,554
697,924
576,107
63,870
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)
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2006
Notes
2004
2005
2006
(Note 3)
Rp
Rp
Rp
US$
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,658,204
1,654,871
1,446,560
160,373
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(24,996
)
(31,390
)
(36,467
)(4,043
)
NET INCOME
32
1,633,208
1,623,481
1,410,093
156,330
BASIC EARNINGS PER SHARE
2v,19,31
313.91
309.04
260.90
0.03
DILUTED EARNINGS PER SHARE
2v,19,
313.63
309.04
258.82
0.03
20,31
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2v,19,31
15,695.59
15,452.16
13,045.17
1.45
DILUTED EARNINGS PER ADS
2v,19,
15,681.59
15,452.16
12,940.98
1.43
20,31
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
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah)
Year Ended December 31, 2004
Difference in Value
Difference in
from Restructuring
Transactions
Difference
Capital Stock -
Transactions of
of Equity Changes
in Foreign
Retained Earnings
Issued and
Premium on
Entities under
in Associated
Stock
Currency
Description
Notes
Fully Paid
Capital Stock
Common Control
Companies/Subsidiaries
Options
Translation
Appropriated
Unappropriated
Net
Balance as of January 1, 2004
517,750
673,075
-
403,812
24,809
316
17,890
10,402,230
12,039,882
ESOP:
Issuance of capital stock resulting from the exercise
of ESOP Phase I
2n,19, 20
10,781
207,794
-
-
(49,592
)
-
-
-
168,983
Proportionate seven months’ compensation expense relating
to ESOP Phase I and five months’ compensation expense
relating to ESOP Phase II
2n,20,24
-
-
-
-
95,990
-
-
-95,990
Increase in difference in foreign currency translation arising from
the translation of the financial statements of Satelindo
International Finance B.V. from U.S. dollars and Indosat
Finance Company B.V. from euro to rupiah - net
of applicable income taxes of Rp18 and Rp30, respectively
2b
-
-
-
-
-
113
-
-
113
Resolution during the Annual Stockholders’ General Meeting
on June 22, 2004
Declaration of cash dividend
32
-
-
-
-
-
-
-
(753,584
)
(753,584
)
Appropriation for reserve fund
32
-
-
-
-
-
-
15,700
(15,700
)
-
Net income for the year
-
-
-
-
-
-
-
1,633,208
1,633,208
Balance as of December 31, 2004
528,531
880,869
-
403,812
71,207
429
33,590
11,266,154
13,184,592
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)
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah)
Year Ended December 31, 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
and Phase II
2n,19,20
7,086
297,405
-
(71,183)
-
-
-
233,308
Proportionate seven months’ compensation expense relating to
ESOP Phase II
2n,20,24
-
-
-
90,739
-
-
-
90,739
Decrease in difference in foreign currency translation arising from the translation
of the financial statements of Satelindo International Finance B.V. from
U.S. dollars, and of Indosat Finance Company B.V. and Indosat International
Finance Company B.V. from euro to rupiah - net of applicable income
taxes of Rp64, Rp19 and Rp3, respectively
2b
-
-
-
-
(201
)
-
-
(201
)
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 year
-
-
-
-
-
-
1,623,481
1,623,481
Balance as of December 31, 2005
535,617
1,178,274
403,812
90,763
228
49,922
12,056,712
14,315,328 &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; &nb sp; &nb sp;
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 CHANGES IN STOCKHOLDERS’ EQUITY (continued)
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah)
Year Ended December 31, 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
2n,19,20,24
7,776
368,313
-
(90,763
)
-
-
-
285,326
Decrease in difference in foreign currency translation arising from the translation
of the financial statements of Indosat Finance Company B.V. and Indosat
International Finance Company B.V. from euro, and Indosat
Singapore Pte. Ltd. and Satelindo International Finance B.V. from U.S. dollar
to rupiah - net of applicable income tax benefit (expense) of Rp136,
Rp135, (Rp17) and (Rp272), respectively
2b
-
-
-
-
(46
)
-
-
(46
)
Resolution during the Annual Stockholders’ General Meeting on June 29, 2006
Declaration of cash dividend
32
-
-
-
-
-
-
(808,956
)
(808,956)
Appropriation for reserve fund
32
-
-
-
-
-
16,235
(16,235
)
-
Net income for the year
-
-
-
-
-
-
1, 410,093
1,410,093
Balance as of December 31, 2006
543,393
1,546,587
403,812
-
182
66,157
12,641,614
15,201,745 &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp;
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar)
2006
Notes
2004
2005
2006
(Note 3)
Rp
Rp
Rp
US$
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
10,537,812
11,402,721
12,177,148
1,350,016
Interest income
179,374
215,114
217,152
24,074
Refund of taxes
7
1,044,853
176,408
86,981
9,643
Interest rate swap contracts
33n,33o,33q,33r
34,143
9,174
5,250
582
Cash paid for:
Employees, suppliers and others
(4,004,149
)
(4,405,641
)
(5,081,152
)
(563,320
)
Financing cost
(1,077,747
)
(1,166,621
)
(1,237,161
)
(137,157
)
Taxes
(683,481
)
(796,369
)
(391,881
)
(43,446
)
Swap cost from cross currency
swap contracts
33a,33c-33m
(15,882
)
(42,279
)
(103,216
)
(11,443
)
Termination of swap contracts
33c,33n-33q
-
(76,475
)
(3,498
)
(388
)
Net Cash Provided by Operating
Activities
6,014,923
5,316,032
5,669,623
628,561
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of short-term
investment
141,580
1,131
47,587
5,276
Proceeds from sale of property
and equipment
10
18,490
463
1,249
138
Acquisitions of property and
equipment
10
(5,238,331
)
(6,771,870
)
(6,054,014
)
(671,176
)
Acquisition of intangible assets
11
-
-
(320,000
)
(35,477)
Purchase of other long-term
investment
9a
-
-
(5,779
)
(641)
Proceeds from sale of other long-
term investments
9
200,038
100,631
-
-
Decrease (increase) in restricted
cash and cash equivalents
(81,287
)
81,288
-
-
Proceeds from sale of subsidiaries
1d
-
40,141
-
-
Proceeds from sale of investment
in associated companies
8
498,713
14,625
-
-
Purchase of short-term investments
(77,677
)
(47,341
)
-
-
Additional advances for purchase of
property and equipment
(196,972
)
(36,550
)
-
-
Additional investment in a subsidiary
1d
-
(17,481
)
-
-
Net Cash Used in Investing Activities
(4,735,446
)
(6,634,963
)
(6,330,957
)
(701,880
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term loans
16
96,200
40,059
357,366
39,619
Proceeds from exercise of ESOP
Phase I and Phase II
20
148,993
233,309
287,910
31,919
Proceeds from bonds payable
17
-
3,484,992
31,150
3,453
Repayment of bonds payable
17
-
(51,347
)
(956,644
)
(106,058)
Cash dividend paid
32
(753,584
)
(816,591
)
(808,956
)
(89,684
)
Repayment of long-term loans
16
(1,251,580
)
(653,579
)
(84,394
)
(9,356)
Swap cost from cross currency
swap contracts
33b
(15,392
)
(64,121
)
(61,885
)
(6,861
)
Cash dividend paid by subsidiaries
to minority interest
(7,671
)
(9,046
)
(11,537
)
(1,279
)
Decrease (increase) in restricted
cash and cash equivalents
12,542
11,210
(1,685
)
(187
)
Payment for termination of
swap contracts
33b
-
(111,508
)
-
-
Repayment of short-term loans
(8,255
)
-
-
-
Net Cash Provided by (Used in)
Financing Activities
(1,778,747
)
2,063,378
(1,248,675
)
(138,434
)
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar)
2006
Notes
2004
2005
2006
(Note 3)
Rp
Rp
Rp
US$
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
(499,270
)
744,447
(1,910,009
)
(211,753
)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
4,509,508
4,010,238
4,717,269
522,979
BEGINNING BALANCE OF CASH
AND CASH EQUIVALENTS OF A
DIVESTED SUBSIDIARY
1d
-
(37,416
)
-
-
CASH AND CASH EQUIVALENTS
AT END OF YEAR
4
4,010,238
4,717,269
2,807,260
311,226
DETAILS OF CASH AND CASH
EQUIVALENTS:
Cash on hand and in banks
170,498
136,278
240,406
26,652
Time deposits with original
maturities of three months
or less
3,839,740
4,580,991
2,566,854
284,574
Cash and cash equivalents as
stated in the consolidated
balance sheets
4,010,238
4,717,269
2,807,260
311,226
SUPPLEMENTAL CASH FLOW
INFORMATION:
Transactions not affecting cash flows:
Acquisitions of property and
equipment on account
credited to procurement
payable
672,328
505,666
753,734
83,563
Acquisitions of property and
equipment on account
credited to long-term advances
-
-
113,580
12,592
Premium on capital stock
49,592
71,182
88,179
9,776
Stock options
46,398
19,556
(90,763
)
(10,062)
Bonus retained for exercise
of ESOP Phase I
19,990
-
-
-
11
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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. 38 dated November 9, 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. W7.HT.01.04.4134 dated November 28, 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.
12
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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.
13
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 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.
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 spectrum (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.
Based on Decree No. 102/KEP/M.KOMINFO/10/2006 dated October 11, 2006, the Government of the Republic of Indonesia, through the Ministry of Communications and Information Technology, amended the previous ministerial decree dated March 15, 2004 on the Company’s license on GSM cellular mobile network in order to include the rights and obligations of 3G services.
Based on Decree No. 181/KEP/M.KOMINFO/12/2006 dated December 12, 2006 of the Ministry of Communications and Information Technology regarding 800 Mhz Frequency Channels Allocation for Local Fixed Wireless Network Services with Limited Mobility and Mobile Cellular Network, the Company has been granted two nationwide frequency channels, i.e channels 589 and 630 in the 800 MHz spectrum for Local Fixed Wireless Network Services with Limited Mobility.
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.
14
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
c.
Employees, Directors and Commissioners
d.
e.
Based on a resolution at each of the (i) Annual Stockholders’ General Meeting held on June 22, 2004 which is notarized under Deed No. 124 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same date, (ii) 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 (iii) Annual Stockholders’ General Meeting held on June 29, 2006 which is notarized under Deed No. 175 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 December 31, 2004, 2005 and 2006, respectively, is as follows:
2004
2005 and 2006
President Commissioner
Peter Seah Lim Huat
Peter Seah Lim Huat
Commissioner
Lee Theng Kiat
Lee Theng Kiat
Commissioner
Sio Tat Hiang
Sio Tat Hiang
Commissioner
Sum Soon Lim
Sum Soon Lim
Commissioner
Roes Aryawijaya
Roes Aryawijaya
Commissioner
Umar Rusdi
Setyanto P. Santosa
Commissioner
Lim Ah Doo *
Lim Ah Doo *
Commissioner
Eva Riyanti Hutapea *
Eva Riyanti Hutapea *
Commissioner
Mohammad Ikhsan *
Soeprapto S.IP *
* Independent commissioner
Based on (i) a resolution at the Stockholders’ Extraordinary Meeting held on September 30, 2004 which is notarized under Deed No. 144 of Aullia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same date, (ii) 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 (iii) the minutes of the Company’s Board of Commissioners’ Meeting held on March 3, 2006 and a resolution at the Annual Stockholders’ General Meeting held on June 29, 2006 which are notarized under Deed No. 175 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 Directors as of December 31, 2004, 2005 and 2006, respectively, is as follows:
2004
2005
2006
President Director
- *
Hasnul Suhaimi
- * and **
Deputy President Director
Ng Eng Ho
Kaizad Bomi Heerjee
Kaizad Bomi Heerjee
Finance Director
Wong Heang Tuck
Wong Heang Tuck
Wong Heang Tuck
Corporate Services Director
Sutrisman
S. Wimbo S. Hardjito
S. Wimbo S. Hardjito
Information Technology Director
Joseph Chan
Joseph Chan
Joseph Chan
Lam Seng
Lam Seng
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
Consumer Market Director
-
Johnny Swandi Sjam
-
Planning and Project
Development Director
-
Wityasmoro Sih
-
Handayanto
15
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
2004
2005
2006
Corporate Market Director
-
Wahyu Wijayadi
-
Network Operation and Quality
-
Raymond Tan
-
Management Director Kim Meng
Business Development
Director
Wityasmoro Sih
-
-
Handayanto
Fixed Telecom and
MIDI Director
Wahyu Wijayadi
-
-
Operation and Quality
Improvement Director
Raymond Tan
-
-
Kim Meng
Cellular Marketing Director
Hasnul Suhaimi
-
-
*
In the absence of a President Director, the tasks of the President Director have been carried out by the Deputy President Director.
** On June 16, 2006, the Board of Commissioners approved the resignation of Hasnul Suhaimi effective on June 8, 2006.
The Company and its subsidiaries (collectively referred to hereafter as “the Companies”) have approximately 7,820, 8,137 and 7,786 employees, including non-permanent employees, as of
December 31, 2004, 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
2004
2005
2006
Satelindo International Finance B.V.
Amsterdam
Finance
1996
100.00
100.00
100.00
Indosat Finance Company B.V.
Amsterdam
Finance
2003
100.00
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
100.00
PT Indosat Mega Media
Jakarta
Multimedia
2001
99.85
99.85
99.85
PT Satelindo Multi Media
Jakarta
Multimedia
1999
99.60
99.60
99.60
PT Aplikanusa Lintasarta
Jakarta
Data Communication
1989
69.46
72.36
72.36
PT Artajasa Pembayaran Elektronis
Jakarta
Telecommunication
2000
45.15
39.80
39.80
PT Sisindosat Lintasbuana *
Jakarta
Information Technology
1990
96.87
-
-
PT Asitelindo Data Buana *
Jakarta
Multimedia
1997
49.40
-
-
Total Assets
(Before Eliminations)
Name of Subsidiary
2004
2005
2006
Satelindo International Finance B.V.
8,002
8,526
7,555
Indosat Finance Company B.V.
2,820,797
2,984,732
2,762,776
Indosat International Finance Company B.V.
-
2,462,039
2,283,380
Indosat Singapore Pte. Ltd.
-
-
7,300
PT Indosat Mega Media
450,288
523,014
605,538
PT Satelindo Multi Media
11,187
10,690
10,690
PT Aplikanusa Lintasarta
798,273
876,201
985,605
PT Artajasa Pembayaran Elektronis
73,964
73,627
94,311
PT Sisindosat Lintasbuana *
159,230
-
-
PT Asitelindo Data Buana *
9,822
-
-
* Sold in January 2005
16
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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. In May 2000, SIB issued Guaranteed Floating Rate Bonds. In October 2003, Satelindo repaid its borrowings from SIB by using the proceeds from the Company’s capital contributions.
In the SIB shareholder’s meeting conducted on March 28, 2006, the shareholder agreed to start SIB’s voluntary liquidation process on April 1, 2006. As of December 31, 2006, such liquidation has not yet been finalized (Note 41d).
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).
Based on an IFB shareholder’s resolution dated February 20, 2006, the Company made additional capital injection of EUR2,000,000 (in full amount, equivalent to Rp23,352) to IFB on August 31, 2006.
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).
Based on an IIFB shareholder’s resolution dated February 20, 2006, the Company made additional capital injection of EUR2,000,000 (in full amount, equivalent to Rp23,352) to IIFB on August 31, 2006.
Indosat Singapore Pte. Ltd. (“ISP”)
ISP was incorporated in Singapore on December 21, 2005 to engage in telecommunication services.
Based on an ISP shareholder’s resolution dated April 20, 2006, the Company agreed to make capital injection in ISP totaling US$650 (equivalent to SGD1,075,750, in full amount). The Company transferred in full such amount to ISP’s bank account on April 26, 2006.
17
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Indosat Mega Media (“IMM”)
IMM is engaged in providing multimedia services and creating multimedia products and programs.
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 December 31, 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 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%.
18
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Rp32,891 (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.
19
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 and its subsidiaries (collectively referred to as the “Companies”) conform with generally accepted accounting principles in Indonesia. The significant accounting principles applied consistently in the preparation of the consolidated financial statements for the years ended December 31, 2004, 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 those of its subsidiaries as follows:
Equity Interest (%)
2004
2005
2006
SIB
100.00
100.00
100.00
IFB
100.00
100.00
100.00
IIFB
-
100.00
100.00
ISP
-
100.00
100.00
IMM
99.85
99.85
99.85
SMM
99.60
99.60
99.60
Lintasarta
69.46
72.36
72.36
Sisindosat
96.87
- *
-
* sold in January 2005
The consolidated financial statements also include the accounts of APE (Lintasarta’s subsidiary which was 65%-owned in 2004 and reduced to become 55%-owned starting 2005). The accounts of APE in 2004, 2005 and 2006 were consolidated because its financial and operating policies were controlled by Lintasarta.
20
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation (continued)
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 year 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.
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”.
21
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e.
Short-term Investments
Short-term investments consist of:
·
Investment in debt securities
Investment in debt securities which are classified as available-for-sale is recorded at fair value in accordance with SAK 50, “Accounting for Investments in Certain Securities”. Unrealized gain (loss), if any, 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 are 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 historical value.
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 year.
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”.
22
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 fifteen 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.
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
23
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
Prior to
Starting
January 1, 2005
January 1, 2005
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 costs and the related accumulated depreciation are removed from the accounts, and any resulting gains or losses are reflected in income for the year.
Properties under construction and installation are stated at cost and consist mainly of cellular technical equipment, FWA technical equipment, submarine cables, transmission and cross-connection equipment, building and leasehold improvements, inland link, information technology equipment, telecommunications peripherals, satellite technical equipment and switching equipment.
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.
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
24
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 (continued)
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.
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.
25
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
MIDI (continued)
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 Telecommunication
International Calls
Revenues from services are accounted for on the accrual basis. At the end of each year, income from outgoing international call traffic is recognized on the basis of the actual recorded traffic for the year. Income from international call traffic from overseas international carriers, for which statements have not been received, is accounted for based on estimates.
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 year these are incurred.
Fixed Wireless
Fixed wireless revenues arising from usage charges 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.
26
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Telecommunication (continued)
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).
r.
Derivatives
The Company enters into and engages in currency swap and foreign exchange contracts/transactions for the purpose of managing its foreign exchange rate exposures emanating from the Company’s bonds payable in foreign currencies.
The Company applies SAK 55, “Accounting for Derivative Instruments and Hedging Activities”. SAK 55 sets forth the accounting and reporting standards for derivative transactions and hedging activities, which require that every derivative instrument (including embedded derivatives) be recognized as either asset or liability based on the fair value of each contract. Fair value is a computation of present value by using data and assumption which are commonly used. Based on the specific requirements for hedge accounting under SAK 55, the Company’s instruments do not qualify and are not designated as hedge activities for accounting purposes. Accordingly, changes in the fair value of such derivative instruments are recorded directly as a charge or credit to current operations.
27
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 December 31, 2004, 2005 and 2006, the foreign exchange rates used (in full amounts) were Rp9,290, Rp9,830 and Rp9,020 to US$1, respectively, computed by taking the average of the buying and selling rates of bank notes last published by Bank Indonesia for the year.
t.
Income Tax
Current tax expense is provided based on the estimated taxable income for the year. 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 year 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 year 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.
Amendment to tax obligations is recorded when an assessment is received or, if appealed, when the result of the appeal is determined.
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.
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 year after considering the effect of exercise of ESOP Phase I and Phase II (Note 31).
Diluted earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the year, after considering the dilutive effect caused by the stock options relating to the ESOP and convertible bonds issued by a subsidiary (Note 17).
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.
28
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 December 31, 2006 of Rp9,020
to US$1 (in full amount). 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
868
1,350
U.S. dollar (US$27 in 2005 and US$21 in 2006)
270
185
1,138
1,535
Cash in banks
Related parties (Note 30)
Rupiah
Bank Pembangunan Daerah DKI Jakarta
2,955
17,583
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
26,700
11,978
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
802
1,848
PT Bank Internasional Indonesia Tbk (“BII”)
-
1,605
Bank Pembangunan Daerah Yogyakarta
853
1,321
PT Bank Mandiri Syari’ah (“Mandiri Syari’ah”)
101
1,287
PT Bank Pembangunan Daerah Sumatera Selatan
-
1,128
PT Bank Danamon Indonesia Tbk (“Danamon”)
864
515
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
1,857
178
PT Bank Tabungan Negara (Persero) (“BTN”)
625
85
Others (each below Rp500)
687
1,314
U.S. dollar
Mandiri (US$163 in 2005 and US$575 in 2006)
1,600
5,188
Others (US$10 in 2005 and US$40 in 2006)
99
362
29
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 (continued)
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)
18,116
82,836
Deutsche Bank AG, Jakarta Branch
18,752
9,763
The Hongkong and Shanghai Banking Corp. Ltd.,
Jakarta Branch
7,148
6,107
PT Bank Umum Koperasi Indonesia (“Bukopin”)
3,007
4,895
PT Bank Niaga Tbk (“Niaga”)
182
4,707
Citibank N.A., Jakarta Branch
852
4,123
PT Bank Permata Tbk
1,106
1,397
PT Bank Lippo Tbk
187
694
PT Bank Artha Graha Internasional Tbk
503
225
Others (each below Rp500)
304
1,522
U.S. dollar
Fortis Bank, The Netherlands (US$5,442)
-
49,089
Citibank N.A., Jakarta Branch (US$1,509 in 2005 and
US$1,867 in 2006)
14,835
16,843
Deutsche Bank AG, Jakarta Branch (US$2,192 in 2005
and US$801 in 2006)
21,552
7,227
Bukopin (US$276 in 2005 and US$270 in 2006)
2,718
2,430
Citibank N.A., Singapore Branch (US$651 in 2005 and
US$236 in 2006)
6,400
2,126
Others (US$238 in 2005 and US$55 in 2006)
2,335
495
135,140
238,871
Time deposits
Related parties (Note 30)
Rupiah
Mandiri
504,945
364,285
BNI
173,715
78,715
Danamon
199,400
61,400
BRI
200,000
50,000
BTN
2,000
39,000
Bank Pembangunan Daerah Yogyakarta
-
1,000
Bank Pembangunan Daerah Sulawesi Utara
1,000
1,000
Mandiri Syari’ah
150,000
-
U.S. dollar
BNI (US$25,000 in 2005 and US$20,000 in 2006)
245,750
180,400
Danamon (US$20,000 in 2005 and US$15,000 in 2006)
196,600
135,300
Mandiri Syari’ah (US$23,000 in 2005 and US$10,000 in 2006)
226,090
90,200
BTN (US$10,000 in 2005 and US$5,000 in 2006)
98,300
45,100
Mandiri (US$52,071 in 2005 and US$2,603 in 2006)
511,862
23,479
BRI (US$35,000)
344,050
-
30
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
Third parties
Rupiah
Deutsche Bank AG, Jakarta Branch
35,161
112,175
Niaga
109,800
110,000
PT Bank Muamalat Indonesia Tbk (“Muamalat”)
210,000
70,000
Bukopin
109,000
57,500
BCA
152,500
54,450
PT Bank Mega Tbk
5,595
14,052
Citibank N.A., Jakarta Branch
7,600
-
Others
6
6
U.S. dollar
Deutsche Bank AG, Jakarta Branch (US$42,406 in 2005
and US$48,950 in 2006)
416,856
441,529
Citibank N.A., Jakarta Branch (US$25,000)
-
225,500
Bukopin (US$37,000 in 2005 and US$18,000 in 2006)
363,710
162,360
Niaga (US$27,253 in 2005 and US$17,650 in 2006)
267,901
159,203
Muamalat (US$5,000 in 2005 and US$10,000 in 2006)
49,150
90,200
4,580,991
2,566,854
Total
4,717,269
2,807,260
Time deposits denominated in rupiah earned interest at annual rates ranging from 4.00% to 7.50% in 2004, from 4.00% to 13.00% in 2005 and from 3.25% to 13.20% in 2006, while those denominated in U.S. dollar earned interest at annual rates ranging from 0.54% to 1.50% in 2004, from 0.65% to 4.25% in 2005 and from 1.00% to 5.15% 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).
31
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
74,381
47.35
61,270
44.74
4 - 6 months
542
0.35
959
0.70
Over 6 months
82,157
52.30
74,733
54.56
Total
157,080
100.00
136,962
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 year
86,884
89,485
Provision
4,556
587
Write-off
-
(8,183)
Net effect of foreign exchange adjustment
295
(86)
Deduction due to sale of Sisindosat
(2,250
)
-
Balance at end of year
89,485
81,803
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
DiGi Telecommunications Sdn Bhd, Malaysia (US$9,095 in 2005
and US$22,153 in 2006)
89,402
199,823
Saudi Telecom Company, Saudi Arabia (US$8,086 in 2005 and
US$8,409 in 2006)
79,483
75,852
Telekom Malaysia Berhad, Malaysia (US$4,773 in 2005 and
US$7,483 in 2006)
46,922
67,501
Maxis International Sdn Bhd, Malaysia (US$6,284 in 2005 and
US$6,137 in 2006)
61,768
55,356
Cableview Services Sdn Bhd (“Mega TV”), Malaysia (US$3,289 in 2005
and 2006)
32,334
29,670
Celcom Malaysia Berhad, Malaysia (US$3,953 in 2005 and
US$3,239 in 2006)
38,857
29,220
DDI Corporation, Japan (US$2,389 in 2005 and US$2,254 in 2006)
23,484
20,332
NTT Communication Corporation, Japan (US$2,205 in 2005 and
US$2,229 in 2006)
21,672
20,109
32
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
Mega Media Broadcasting Network Co. Ltd., Taiwan (US$2,203 in 2005
and 2006)
21,656
19,872
UAE-Etisalat, United Arab Emirates (US$4,578 in 2005 and
US$2,161 in 2006)
45,003
19,501
Jabatan Telekom Brunei, Brunei Darussalam (US$2,992 in 2005 and
US$1,202 in 2006)
29,410
10,843
Korea International Telecommunication, Korea (US$2,229 in 2005
and US$817 in 2006)
21,909
7,370
Others (each below Rp20,000; US$26,607 in 2005 and
US$32,270 in 2006)
261,542
300,097
773,442
855,546
Local companies
PT Ratelindo
4,713
12,318
PT Satkomindo Mediyasa (US$823 in 2005 and US$701 in 2006)
8,094
6,327
PT Cakrawala Andalas Televisi (US$872 in 2005 and US$353
in 2006)
8,575
3,189
Others (each below Rp6,000, including US$9,908 in 2005 and
US$11,966 in 2006)
239,724
256,505
261,106
278,339
Post-paid subscribers from:
Cellular
444,957
361,890
Fixed wireless
16,123
17,885
Fixed line
15,037
6,936
476,117
386,711
Total
1,510,665
1,520,596
Less allowance for doubtful accounts
528,314
423,730
Net
982,351
1,096,866
The aging schedule of the accounts receivable is as follows:
2005
2006
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
0 - 6 months
727,463
48.16
789,330
51.91
7 - 12 months
306,247
20.27
297,928
19.59
13 - 24 months
235,362
15.58
275,329
18.11
Over 24 months
241,593
15.99
158,009
10.39
Total
1,510,665
100.00
1,520,596
100.00
As of December 31, 2006, approximately 1.65% of accounts receivable - trade are pledged as collateral for long-term bank loans obtained by Lintasarta (Note 16).
The changes in the allowance for doubtful accounts provided on the accounts receivable - trade from third parties are as follows:
33
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Balance at beginning of year
375,001
528,314
Provision
163,956
104,245
Write-off
(10,999
)
(204,880)
Net effect of foreign exchange adjustment
4,616
(3,949)
Deduction due to sale of Sisindosat
(4,260
)
-
Balance at end of year
528,314
423,730
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
649,608
797,282
Value Added Tax (“VAT”)
254,695
217,653
Others
35,852
36,507
Total
940,155
1,051,442
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 March 2005, Lintasarta received the payment amounting to Rp2,197 from the Tax Office for its claim for tax refund for fiscal year 2003.
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 the payment amounting to Rp119,195 from the Tax Office for the Company’s claim for tax refund for fiscal year 2003.
In December 2005, the Company received the payment of Satelindo’s claim for tax refund amounting to Rp5,830 for overpayment of income tax article 26 for fiscal year 2001.
On September 5, 2006, the Company received assessment letters on tax overpayment (“SKPLB”) from the Directorate General of Taxation for the Company’s VAT for the periods April - July 2004 and November - December 2004 totalling Rp86,981, which was collected in November 2006.
On December 4, 2006, the Company received SKPLB from the Directorate General of Taxation for the Company’s 2004 Corporate Income Tax amounting to Rp199,552.
34
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
PT Swadharma Marga Inforindo
20.00
100
424
524
Total
56,612
212
56,824
Less allowance for decline in value
56,300
-
56,300
Net
312
212
524
2006
Investments in:
PT Multi Media Asia Indonesia
26.67
56,512
(212
)56,300
PT Swadharma Marga Inforindo
20.00
100
186
286
Total
56,612
(26
)
56,586
Less allowance for decline in value
56,300
-
56,300
Net
312
(26
)
286
The changes in the carrying value of the investments in associated companies for the years ended December 31, 2005 and 2006 are as follows:
2005
2006
Equity in net income (loss) of associated companies
86
(238)
Write-off of allowance for decline in value of investment due to
sale and write-off of investment
18,912
-
Sale of investment
(50,012
)
-
Write-off of investment
(1,596
)
-
Net Change
(32,610
)
(238)
The Companies have provided allowance for decline in value amounting to Rp56,300 as of December 31, 2005 and 2006, 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.
35
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
8.
INVESTMENTS IN ASSOCIATED COMPANIES (continued)
Cambodian Indosat Telecommunication 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.
In 2005, the Company received payments totalling US$1,500 (equivalent to Rp14,625) from AZ Communication Co. Ltd. of Cambodia for the sale of its 6,590,500 shares in Camintel. In June 2006, all necessary government approvals for the sale were obtained.
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
2,631
8,410
Equity securities which are available-for-sale
99
99
Total
2,730
8,509
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
Others*
16.67 - 17.60
2,631
Total
102,608
Less allowance for decline in value*
99,977
Net
2,631
*
net of investment in PT Patra Telekomunikasi Indonesia sold in August 2005
and write-off of investment in AlphaNet Telecom Inc. in December 2005
36
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
50,000
ICO Global Communications (Holdings) Limited
0.0087
49,977
PT Starone Mitra Telekomunikasi
14.60
5,779
Others
12.80 - 16.67
2,631
Total
108,387
Less allowance for decline in value
99,977
Net
8,410
b.
Equity securities which are available-for-sale
As of December 31, 2005 and 2006, this account consists of:
BNI
89
Telkom
10
Total
99
The Companies provided an allowance for decline in value of their investments in shares of stock accounted for under the cost method amounting to Rp99,977 as of December 31, 2005 and 2006, which management believes is adequate to cover probable losses on the investments.
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.
37
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
OTHER LONG-TERM INVESTMENTS (continued)
PT Starone Mitra Telekomunikasi (“SMT”)
SMT was established on June 15, 2006 in Semarang, Central Java, by the Company,
PT Sarana Pembangunan Jawa Tengah, PT Dawamiba Engineering and PT Trikomsel Multimedia to engage in construction and operation of fixed wireless access network using Code Division Multiple Access (CDMA) 2000-1x technology in Central Java and its surroundings.
Based on an amendment dated August 23, 2006 to SMT’s Articles of Association, the Company agreed to contribute Rp51,302 to the capital of SMT that consists of Rp5,779 cash and Rp45,523 in-kind contribution. The Company’s capital contribution as of December 31, 2006 represents its initial cash contribution of Rp5,779.
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.
38
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Year
Balance
at Beginning
Divestment in
Balance at
of Year
Additions
Deductions
Reclassifications
a SubsidiaryEnd of Year
Carrying Value
Landrights
283,598
7,697
-
42,609
(5,250
)328,654
Buildings
376,075
20,394
-
38,249
(6,546
)428,172
Submarine cables
862,818
-
-
30
-
862,848
Earth stations
116,213
-
-
306
-116,519
Inland link
399,382
-
-
210,795
-610,177
Switching equipment
325,287
-
-
17,815
-343,102
Telecommunications
peripherals
1,546,503
212,383
-
83,872
(10,562
)1,832,196
Information technology
equipment
871,979
6,310
3,080
144,129
-1,019,338
Office equipment
1,131,141
154,881
350
118,573
(17,687
)1,386,558
Building and leasehold
improvements
918,483
1,743
-
209,016
-1,129,242
Vehicles
15,361
3,439
1,429
-
(1,425
)15,946
Cellular technical
equipment
17,131,651
-
-
4,007,815
-21,139,466
Satellite technical
equipment
1,243,969
-
-
28,877
-1,272,846
Transmission and cross-
connection equipment
471,476
-
-
1,179
-472,655
FWA technical equipment
317,499
-
-
117,245
-
434,744
Properties under
construction and
installation
1,810,075
6,891,100
-
(5,020,510
)-3,680,665
Total
27,821,510
7,297,947
4,859
-
(41,470
)
35,073,128
Accumulated Depreciation
Buildings
177,433
21,873
-
-
(1,994
) 197,312
Submarine cables
309,390
108,931
-
-
-418,321
Earth stations
80,365
30,716
-
-
-111,081
Inland link
61,782
33,884
-
-
-95,666
Switching equipment
173,407
50,052
-
-
-223,459
Telecommunications
peripherals
858,291
264,531
-
-
(3,805
)1,119,017
Information technology
equipment
528,608
208,168
946
-
-735,830
Office equipment
587,135
140,678
2,446
-
(13,803
)711,564
Building and leasehold
Improvements
289,774
176,942
-
-
-466,716
Vehicles
11,390
1,991
1,248
-
(1,289
)10,844
Cellular technical
equipment
6,491,206
1,723,266
-
-
-8,214,472
Satellite technical
equipment
695,875
144,166
-
-
-840,041
Transmission and cross -
connection equipment
174,288
18,958
-
-
-193,246
FWA technical equipment
22,132
50,035
-
-
-72,167
Total
10,461,076
2,974,191
4,640
-
(20,891
)13,409,736
Less impairment in value
117,258
-
1,010
-
(17,637
)98,611
Net Book Value
17,243,176
21,564,781
39
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Year
Balance
at Beginning
at End
of Year
Additions
Deductions
Reclassifications
of Year
Carrying Value
Landrights
328,654
-
-
71,943
400,597
Buildings
428,172
6,141
-
21,778
456,091
Submarine cables
862,848
-
-
22,496
885,344
Earth stations
116,519
-
-
8,828
125,347
Inland link
610,177
-
-
247,769
857,946
Switching equipment
343,102
-
-
32,129
375,231
Telecommunications
peripherals
1,832,196
223,692
13,248
88,195
2,130,835
Information technology
equipment
1,019,338
7,668
1,436
251,269
1,276,839
Office equipment
1,386,558
86,947
52,388
130,566
1,551,683
Building and leasehold
improvements
1,129,242
1,450
552
302,381
1,432,521
Vehicles
15,946
4,974
3,422
-
17,498
Cellular technical
equipment
21,139,466
4,002
15,083
4,669,353
25,797,738
Satellite technical
equipment
1,272,846
-
-
17,729
1,290,575
Transmission and cross-
connection equipment
472,655
-
-
6,365
479,020
FWA technical equipment
434,744
-
-
104,889
539,633
Properties under
construction and
installation
3,680,665
6,586,454
-
(5,975,690
)
4,291,429
Total
35,073,128
6,921,328
86,129
-
41,908,327
Accumulated Depreciation
Buildings
197,312
25,041
-
-
222,353
Submarine cables
418,321
106,870
-
-
525,191
Earth stations
111,081
7,156
-
-
118,237
Inland link
95,666
53,203
-
-
148,869
Switching equipment
223,459
35,238
-
-
258,697
Telecommunications
peripherals
1,119,017
258,525
13,199
-
1,364,343
Information technology
equipment
735,830
211,434
1,437
-
945,827
Office equipment
711,564
177,067
52,093
-
836,538
Building and leasehold
Improvements
466,716
231,472
552
-
697,636
Vehicles
10,844
2,385
3,242
-
9,987
Cellular technical
equipment
8,214,472
2,182,985
15,069
-
10,382,388
Satellite technical
equipment
840,041
145,471
-
-
985,512
Transmission and cross-
connection equipment
193,246
19,178
-
-
212,424
FWA technical equipment
72,167
66,517
-
-
138,684
Total
13,409,736
3,522,542
85,592
-
16,846,686
Less impairment in value
98,611
-
-
-
98,611
Net Book Value
21,564,781
24,963,030
40
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
10.
PROPERTY AND EQUIPMENT (continued)
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.
During the years ended December 31, 2004, 2005 and 2006, sales of certain property and equipment were made as follows:
2004
2005
2006
Proceeds from sales
18,490
463
1,249
Net book value
(17,072
)
(219
)
(537)
Gain
1,418
244
712
Depreciation expense charged to the statement of income amounted to Rp2,712,643, Rp2,974,191 and Rp3,522,542 in 2004, 2005 and 2006, respectively.
In 2003, Lintasarta provided Rp1,010 as impairment reserve on its assets. In 2005, the reserve was debited against the related properties under construction and installation due to the permanent decrease in value of the assets.
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 (Note 27). 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 December 31, 2006, approximately 0.54% of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 16).
As of December 31, 2006, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$133,778 and Rp30,086,728, 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
Year ended December 31, 2006
202,702
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
41
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 December 31, 2005 and 2006 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
2005
Cellular technical equipment
60 - 95
3,453,533
January - June 2006
Telecommunications peripherals
88 - 98
81,986
January - March 2006
FWA technical equipment
79 - 89
61,192
January - February 2006
Building and leasehold improvements
63 - 82
41,284
January - March 2006
Information technology equipment
67 - 87
15,960
January - April 2006
Office equipment
63 - 83
7,128
January - March 2006
Inland link
86 - 96
5,097
January - March 2006
Building
79 - 89
2,006
January - February 2006
Switching equipment
79 - 89
1,749
February - March 2006
Others
34 - 96
10,730
January - August 2006
Total
3,680,665
2006
Cellular technical equipment
14 - 99
3,134,860
January - April 2007
FWA technical equipment
33 - 90
465,233
January - April 2007
Submarine cables
92
356,034
January - April 2007
Transmission and cross-connection equipment
47 - 62
125,341
February - December 2007
December 2007
Building and leasehold improvements
24 - 97
99,863
January-December 2007
Inland link
27 - 84
52,289
January - June 2007
Information technology equipment
80 - 88
7,387
January - April 2007
Telecommunications peripherals
41 - 92
5,927
January 2007
Satellite technical equipment
99
4,796
January 2007
Switching equipment
99
2,768
January - February 2007
Others
99
36,931
January - April 2007
Total
4,291,429
Borrowing costs (interest expense) capitalized to properties under construction and installation for the years ended December 31, 2004, 2005 and 2006 amounted to Rp83,064, Rp65,204 and Rp62,154, respectively.
11.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arose from the acquisition of equity interest in Bimagraha and Satelindo in 2001 and 2002, respectively, 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
42
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
11.
GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
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
Year ended December 31, 2006
271,798
Year ending December 31, 2007
(84,603
)
The details of goodwill and other intangible assets are as follows:
2005
2006
Balance at beginning of year
3,012,578
2,682,600
Addition (Notes 1a and 1d)
2,388
320,000
Amortization of goodwill
(226,352
)
(226,507)
Amortization of other intangible assets
(106,014
)
(130,724)
Balance at end of year
2,682,600
2,645,369
The addition to goodwill and other intangible assets in 2005 represented the purchase of additional Company’s equity interest in Lintasarta (Note 1d), while 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.
13.
PROCUREMENT PAYABLE
This account consists of the following:
2005
2006
Ericsson AB, Sweden (US$33,482 in 2005 and US$69,938 in 2006)
329,128
630,841
PT Ericsson Indonesia (including US$7,570 in 2005 and
US$26,819 in 2006)
204,959
413,365
PT Siemens Indonesia (including US$5,972 in 2005 and
US$8,511 in 2006)
124,014
309,002
PT Alcatel Indonesia (including US$4,976 in 2005 and
US$10,260 in 2006)
122,517
227,576
Siemens Aktiengesellschaft, Germany (US$29,060 in 2005 and
US$23,755 in 2006)
285,660
214,266
PT Nokia Network (including US$2,166 in 2005 and
US$7,833 in 2006)
25,410
122,324
PT ZTE Indonesia (including US$13,251)
-
120,195
43
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
PROCUREMENT PAYABLE (continued)
2005
2006
PT Karya Mitra Nugraha
11,608
103,714
Huawei Tech Investment Co. Ltd., Hong Kong (including US$5,031
in 2005 and US$11,057 in 2006)
49,455
99,732
PT Huawei Tech Investment (including US$3,391)
-
62,633
Siemens Mobile Communications S.p.A, Italy (US$9,282
in 2005 and US$6,545 in 2006)
91,246
59,040
Alcatel CIT, France (US$14,468 in 2005 and US$6,322 in 2006)
142,545
57,024
PT Industri Telekomunikasi Indonesia (Persero) (including
US$1,275 in 2005 and US$705 in 2006)
27,669
33,667
Kopindosat
(including US$9 in 2005 and US$24 in 2006)
44,853
33,458
PT Lintas Teknologi Indonesia (including US$3,987 in 2005
and US$2,067 in 2006)
44,280
22,959
PT Sisindokom Lintasbuana (including US$1,842 in 2005
and US$1,806 in 2006)
22,975
21,789
Nokia Corporation, Finland (US$21,157 in 2005 and
US$2,288 in 2006)
207,974
20,637
PT NEC Indonesia (including US$3,866 in 2005 and
US$2,063 in 2006)
39,959
19,684
PT Dawamiba Engineering
38,382
18,928
PT Senopati Sellularindo
47,732
16,515
ZTE Corporation, China (including US$6,375 in 2005
and US$1,566 in 2006)
62,666
14,207
PT Kopnatel Jaya (including US$10 in 2006)
27,358
12,419
PT Bukit Jaya Abadi
22,839
6,179
PT Bahyutama Kerta Mukti
23,910
3,148
PT Berca Hardayaperkasa (including US$1,953 in 2005 and
US$54 in 2006)
21,195
1,786
PT Sumacom Mitra (US$2,145)
21,085
-
Others (each below Rp20,000,including US$21,922
in 2005 and US$21,353 in 2006)
569,859
647,455
Total
2,609,278
3,292,543
14.
TAXES PAYABLE
This account consists of the following:
2005
2006
Estimated corporate income tax payable,
less tax prepayments of Rp330,614 in 2005
and Rp189,276 in 2006
927
10,353
Income tax:
Article 21
88,290
87,778
Article 22
3,343
3,412
Article 23
45,891
70,161
Article 25
18,766
23,265
Article 26
46,472
7,284
VAT
960
3,044
Others
1,203
6,571
Total
205,852
211,868
44
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The reconciliation between income before income tax and estimated taxable income of the Company for the years ended December 31, 2004, 2005 and 2006 is as follows:
2004
2005
2006
Income before income tax per consolidated statements of income
2,382,758
2,352,795
2,022,667
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations
(112,210
)
(91,286
)
(129,605)
Income before income tax of the Company
2,270,548
2,261,509
1,893,062
Positive adjustments
Accrual of employee benefits
51,300
72,804
98,255
Provision for doubtful accounts
34,246
164,885
88,248
Assessments for income taxes
and related penalties
1,616
30,572
73,994
Employee benefits
5,201
20,345
17,001
Donation
20,645
19,494
15,787
Provision for termination, gratuity and compensation benefits
of employees
8,823
16,283
11,386
Representation and entertainment
14,787
10,779
8,031
Amortization of debt and bonds issuance cost (Notes 16 and 17)
-
-
3,940
Compensation expense for ESOP (Note 20)
95,990
90,739
-
Loss from decline in value of investments in associated
companies and other long-term investments
48,683
-
-
Gain on sale of investment in associated companies
7,688
-
-
Others
6,123
4,091
68,893
Negative adjustments
Depreciation - net
(772,515
)
(985,529
)
(1,213,527)
Write-off of accounts receivable
(6,184
)
(5,329
)
(199,627)
Interest income already subjected
to final tax
(178,616
)
(193,795
)
(183,613)
Equity in net income of investees
(156,882
)
(152,244
)
(180,626)
Realization of stock option resulting from the exercise of
ESOP Phase I and Phase II
(49,592
)
(71,182
)
(90,763)
Net periodic pension cost
(15,964
)
(36,423
)
(13,704)
Amortization of goodwill and other intangible assets
(82,663
)
(36,219
)
(6,872)
Sale of a subsidiary (Note 1d)
-
(109,691
)
-
Capitalization of interest expense and personnel expenses
to property and equipment (Note 24)
(101,702
)
(108,151
)
-
Write-off of other long-term investment
-
(103,590
)
-
Sale of an associated company (Note 9)
-
(14,697
)
-
Amortization of debt and bonds issuance cost (Notes 16 and 17)
(314
)
(1,069
)
-
Gain from sale of property and equipment
(465
)
(160
)
(172)
Others
-
(9,155
)
(36,673)
Estimated taxable income of
the Company before
tax losses carry-over
1,200,753
864,267
353,020
Tax losses carry-over at beginning of year
(934,637
)
-
-
Estimated taxable income of the Company
266,116
864,267
353,020
45
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 years ended December 31, 2004, 2005 and 2006 is as follows:
2004
2005
2006
Estimated taxable income of the Company
266,116
864,267
353,020
Income tax expense - current (at statutory tax rates)
Company
79,817
259,263
105,888
Subsidiaries
61,085
72,278
93,741
Total income tax expense - current
140,902
331,541
199,629
Income tax expense (benefit) - deferred
Company - effect of temporary differences at enacted
maximum tax rate (30%)
Depreciation - net
231,754
295,659
364,058
Write-off of accounts receivable
1,855
1,598
59,888
Equity in net income of investees
47,065
45,673
54,188
Compensation expense for ESOP
(13,919
)
(5,867
)
27,229
Net periodic pension cost
4,789
10,927
4,111
Amortization of goodwill and other intangible assets
24,799
10,866
2,062
Gain on sale of property and equipment
139
48
52
Accrual of employee benefits
(15,390
)
(21,841
)
(29,477)
Provision for doubtful accounts
(10,274
)
(49,465
)
(26,474)
Provision for termination, gratuity
and compensation benefits of employees
(2,647
)
(4,885
)
(3,416)
Amortization of debt and bonds issuance cost
(Notes 16 and 17)
94
321
(1,182)
Loss (gain) on sale of subsidiary, investment in associated
companies and other long-term investment
(2,306
)
37,316
-
Capitalization of interest expense and personnel expenses
to property and equipment (Notes 10 and 24)
30,511
32,445
-
Write-off of other long-term investment
-
31,077
-
Tax loss carry-over
280,392
-
-
Loss from decline in value of investments in associated
companies and other long-term investments
(14,605
)
-
-
Adjustments due to tax audit
-
-
(62,956)
Others
(4,735
)
(5,107
)
(11,002)
557,522
378,765
377,081
Subsidiaries
Effect of temporary differences at enacted
maximum tax rate (30%)
Write-off of accounts receivable
3,316
1,677
6,789
Loss from decline in value of other long-term investments
12,404
6,900
1,116
Depreciation - net
(4,834
)
(3,438
)
(9,755)
Write-off of (provision for) doubtful accounts
7,961
(3,185
)
(825)
Loss from decline in value of short-term investments
-
(2,577
)
-
Tax loss
(21,762
)
(565
)
-
Others
(2,646
)
3,718
2,072
Valuation allowance - net
31,691
(14,912
)
-
26,130
(12,382
)
(603)
Net income tax expense - deferred
583,652
366,383
376,478
Income tax expense - net
724,554
697,924
576,107
46
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The computation of the estimated income tax payable and claim for tax refund for the years ended December 31, 2005 and 2006 is as follows:
2005
2006
Income tax expense - current
Company
259,263
105,888
Subsidiaries
72,278
93,741
Total income tax expense - current
331,541
199,629
Less prepayments of income tax of the Company
Article 22
108,631
64,986
Article 23
128,046
117,799
Article 25
217,980
231,672
Total prepayments of income tax of the Company
454,657
414,457
Less prepayments of income tax of subsidiaries
Article 22
2,928
2,600
Article 23
45,975
50,426
Article 25
23,479
30,362
Total prepayments of income tax of subsidiaries
72,382
83,388
Total prepayments of income tax
527,039
497,845
Estimated income tax payable
Company
-
-
Subsidiaries
927
10,353
Total estimated income tax payable
927
10,353
Claims for tax refund (presented as part of
“Prepaid Taxes”)
Company
195,394
308,569
Subsidiaries
1,031
-
Total claims for tax refund
196,425
308,569
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 years ended December 31, 2004, 2005 and 2006 is as follows:
2004
2005
2006
Income before income tax per consolidated statements of income
2,382,758
2,352,795
2,022,667
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
90,976
153,344
179,275
Combined income, net of loss, before income tax of
the Company and Subsidiaries
2,473,734
2,506,139
2,201,942
47
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
2004
2005
2006
Income tax expense at the applicable tax rate of 30%
742,120
751,842
660,583
Tax effect on permanent differences
Assessments for income taxes and related penalties
2,362
9,823
25,302
Employee benefits
2,251
7,302
6,433
Donation
6,194
5,863
4,797
Interest income already subjected
to final tax
(57,473
)
(64,647
)
(63,434)
Others
3,032
1,794
4,829
Valuation allowance adjustment
31,690
(14,912
)
-
Adjustment due to tax audit and others
(5,622
)
859
(62,403
)
Income tax expense - net per consolidated
statements of income
724,554
697,924
576,107
The tax effects of significant temporary differences between financial and tax reporting which are outstanding as of December 31, 2005 and 2006 are as follows:
2005
2006
Company
Deferred tax assets
Allowance for doubtful accounts
204,610
171,195
Accrual of employee benefits - net
95,729
128,621
Allowance for decline in value of investments in associated
companies and
other long-term investments
46,883
46,883
Pension cost
28,598
24,487
Allowance for short-term investment
7,618
7,618
Compensation expense for ESOP
27,229
-
Total
410,667
378,804
Deferred tax liabilities
Property and equipment
1,104,918
1,406,071
Investments in subsidiaries/associated companies - net of
amortization of goodwill and other intangible assets
160,593
205,841
Deferred bonds and loans issuance costs and discount
6,914
5,731
Difference in transactions of equity changes in associated
companies/subsidiaries
1,752
1,752
Others
887
868
Total
1,275,064
1,620,263
Deferred tax liabilities - net
864,397
1,241,459
48
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
2005
2006
Subsidiaries (APE & SMM in 2005 and 2006, and IMM in 2006)
Deferred tax assets
Tax loss carry-over
4,350
1,283
Allowance for doubtful accounts
508
705
Others
27
545
4,885
2,533
Valuation allowance
(4,708
)
(1,640)
Net
177
893
Deferred tax liabilities
Property and equipment
255
3,345
Others
1,197
591
Total
1,452
3,936
Deferred tax liabilities - net
1,275
3,043
Deferred tax liabilities - net
865,672
1,244,502
Subsidiaries (Lintasarta in 2005 and 2006 and IMM in 2005)
Deferred tax assets
Property and equipment
23,951
36,928
Allowance for doubtful accounts
9,569
3,387
Others
11,112
7,479
Total
44,632
47,794
Deferred tax liabilities
Others
435
1,227
Deferred tax assets - net
44,197
46,567
49
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The breakdown by entity of the foregoing deferred tax assets and liabilities outstanding as of December 31, 2005 and 2006 is as follows:
2005
2006
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
864,397
-
1,241,459
Subsidiaries
Lintasarta
37,094
-
46,567
-
IMM
7,103
-
2,048
APE
-
1,275
-
995
SMM
-
-
-
-
Total
44,197
865,672
46,5671,244,502
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 accrued employee benefits are paid, the allowance for decline in value of investments in associated companies and other long-term investments are realized upon sale of the investments, and the tax loss carry-over is utilized. 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”.
On August 9, 2005, the Company received SKPKB/STP from the Directorate General of Taxation for the Company’s 2003 VAT amounting to Rp1,734 (including penalties and interest) and income tax articles 4(2), 22, 23, and 26 totalling Rp937 (including penalties and interest). The assessments were fully settled by the Company in August 2005.
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. On October 13, 2006, the Company received the Decision Letter No. KEP-1716/WPJ.07/BD.05/2006 from the Tax Office declining the Company’s appeal on the tax correction arising from the corporate income tax audit for the fiscal year 2003. As of December 31, 2006, 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 (Note 41b).
50
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
On December 4, 2006, the Company received SKPKB/STP from the Directorate General of Taxation for the Company’s VAT for the periods January - March 2004 and August - October 2004 totalling Rp8,238 (including penalties and interest) and income tax articles 23 and 26 totalling Rp60,501 (including penalties and interest). The Company accepted the SKPKB of income tax article 23. As of December 31, 2006, the Company is in the process of preparing an objection letter to the Tax Office regarding the SKPKB of income tax article 26 (Note 41g).
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 tax losses carry-over of SMM as of December 31, 2006 can be carried forward through 2010 based on the following schedule:
Year of Expiration
Amount
2008
356
2009
2,035
2010
1,885
Total
4,276
15.
ACCRUED EXPENSES
This account consists of the following:
2005
2006
Interest
188,572
138,579
Employee benefits143,255
137,399
Network repairs and maintenance
151,771
132,062
Radio frequency fee
3,033
94,962
Universal Service Obligation (“USO”) (Note 41h)
78,788
69,602
Concession fee
65,275
65,584
Marketing
46,153
53,112
Consultancy fees
14,583
38,761
Rental
12,720
12,736
Link
18,870
9,797
Utilities
3,300
5,029
Outsourcing
21,735
2,413
Others
95,151
136,399
Total
843,206
896,435
51
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 Rp6,531
in 2005 and Rp2,131 in 2006
511,114
515,514
Mandiri - net of unamortized debt issuance cost of Rp1,455
in 2005 and Rp457 in 2006
119,137
120,135
Third parties - net of unamortized debt issuance cost of Rp7,700
in 2005 and Rp5,096 in 2006
728,222
996,236
Total loans payable
1,358,473
1,631,885
Less current maturities
Third parties
49,700
127,191
Long-term portion
1,308,773
1,504,694
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
52
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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 Master Restructuring Agreement, 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 11.00% - 12.67% per annum in 2004 and from 9.30% to 11.92% in 2005. The rate was fixed at 9.30% per annum in 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:
·
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 such repaid amount.
·
The loan bears interest as follows:
-
April 1, 2005 - March 31, 2007 : fixed interest at the rate of 9.3% per annum
-
April 1, 2007 - March 31, 2008 : 10.5% per annum or a reference rate plus margin rate of 2.5%, whichever rate is higher.
As of December 31, 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
(15,686
)
(5,096)
Net
1,234,314
1,244,904
* related parties
The amortization of debt issuance cost charged to operations amounted to Rp9,457 in 2004, Rp9,576 in 2005 and Rp10,590 in 2006.
53
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
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 Rp7,700
in 2005 and Rp2,508 in 2006
604,063
609,255
Finnish Export Credit Ltd. - net of unamortized debt
issuance cost of Rp2,588
-
305,896
Investment Credit Facility 4 from Niaga
38,320
40,446
Investment Credit Facility 3 from Niaga
78,339
39,139
Import Sight Letter of Credit (“L/C”) Facility and Investment
Credit Facility 2 from Niaga
7,500
1,500
Total
728,222
996,236
Less current maturities
49,700
127,191
Long-term portion
678,522
869,045
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. Principal and interest are payable semi-annually.
As of December 31, 2006, the outstanding balance of the loan amounted to US$34,200 (equivalent to Rp308,484).
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 Rp338 in 2006.
b.
Investment Credit Facility 4 from Niaga
On August 29, 2005, Lintasarta obtained a 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 Certificates of Bank Indonesia plus 3% per annum. The first quarterly repayment of the principal has a grace period of 14 months from the date of the loan agreement. The quarterly repayment of the principal will start on November 29, 2006, at Rp4,500 each quarter up to February 28, 2009.
The loan is collateralized by all equipment (Note10) purchased from the proceeds of the credit facility and receivables from frame relay (Note 6).
The loan also has the same restrictive covenants as the Investment Credit Facilities 2 and 3 from Niaga.
54
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
LOANS PAYABLE (continued)
c.
Investment Credit Facility 3 from Niaga
On June 29, 2004, Lintasarta obtained a loan from a credit facility from Niaga for the purchase of telecommunication equipment, computer and other supporting facilities amounting to Rp98,000 wherein Rp13,018 or the equivalent of US$1,574 was used to finance Import Sight L/C facility - see point d below. The loan bears interest at 3-month time deposits rate guaranteed by Bank Indonesia plus 3.5% per annum. The first quarterly 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.
The loan is collateralized by all equipment (Note 10) 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 Facilities 2 and 4 from Niaga.
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 “c” above). This Import Sight L/C facility expired on December 31, 2004.
·
Investment credit facility 2 amounting to Rp15,000 to finance the above facility. The loan from this facility 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.
The loan is collateralized by all equipment (Note 10) purchased from the proceeds of the credit facilities and receivables from frame relay (Note 6).
Lintasarta is required to obtain prior 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.
55
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 (continued)
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. However, based on addendum
No. 214/AMD/CBG/JKT/05 dated August 29, 2005 of the credit agreement, this requirement restricting 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 scheduled principal payments from 2007 to 2011 of all the loans payable as of December 31, 2006 are as follows:
Twelve months ending December 31,
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
58,639
18,000
4,446
-
-
81,085
In U.S. dollar
FEC (US$34,200)
68,552
68,552
68,552
68,552
34,276
308,484
Total
127,191
1,336,552
72,998
68,552
34,276
1,639,569
Less unamortized debts issuance cost
7,684
Net
1,631,885
* please refer to previous discussion on early repayment option
17.
BONDS PAYABLE
As of December 31, 2005 and 2006, this account consists of:
2005
2006
Guaranteed Notes Due 2010 (US$300,000) - net of unamortized
notes issuance cost of Rp21,171 in 2005
and Rp17,432 in 2006
2,927,829
2,688,568
Third Indosat Bonds in Year 2003 with Fixed Rate - net of
unamortized bonds issuance cost of Rp20,345 in 2005
and Rp14,855 in 2006
2,479,655
2,485,145
Guaranteed Notes Due 2012 (US$250,000) - net of unamortized
notes discount of Rp15,312 in 2005 and Rp13,398 in 2006; and
unamortized notes issuance cost of Rp32,122 in 2005 and
Rp28,105 in 2006
2,410,066
2,213,497
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 Rp8,247 in 2005 and
Rp7,117 in 2006
806,753
807,883
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost of Rp2,924 in 2005 and Rp2,523 in 2006
282,076
282,477
56
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
2005
2006
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***
5,526
5,526
First Indosat Bonds in Year 2001 with Fixed and Floating Rates
951,500
-
Total bonds payable
11,143,841
9,789,538
Less current maturities
981,936
1,055,526
Long-term portion
10,161,905
8,734,012
*
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 Rp14,473 issued to the Company
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 notes 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.
57
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010 (continued)
The amortization of notes issuance cost charged to operations amounted to Rp3,199 in 2004, Rp3,458 in 2005 and Rp3,739 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 (Note 28).
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.
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, pays 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.
58
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 (continued)
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 Rp4,613 in 2004, Rp4,485 in 2005 and Rp5,490 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.
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 Rp2,949 in 2005 and Rp5,931 in 2006.
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.
59
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
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 starting February 6, 2003. The Series A bonds will mature on November 6, 2007.
·
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.
-
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 aspari-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+ (stable outlook) rating from Pefindo.
60
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
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.
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 Rp540 in 2005 and Rp1,130 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.
61
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”) (continued)
The amortization of bonds issuance cost charged to operations amounted to Rp193 in 2005 and Rp401 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:
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 aspari-passu security for all of the Company’s other liabilities including the bonds.
62
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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).
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).
63
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
17.
BONDS PAYABLE (continued)
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 consisted of two series, had a total face value of Rp1,000,000 in Rp50 denomination and matured on April 12, 2006.
The Series A bonds amounting to Rp827,200 bore 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 bore 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 were 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, paid quarterly interest on the bonds starting July 12, 2001 until April 12, 2006.
The bonds were neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that had been specifically used as security to its other creditors, were used aspari-passu security for all of the Company’s other liabilities including the bonds.
The proceeds of the bonds had 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 was required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating report released in April 2005, the bonds hadidAA+ (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 was equal to 101.175% of the principal amount repurchased, plus the accrued and unpaid interest (totalling Rp50,562).
64
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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 December 31, 2006 are as follows:
Twelve months ending December 31,
2011 and
2007
2008
2009
2010
thereafterTotal
In U.S. dollar
Guaranteed Notes *
Due 2010
(US$300,000)
-
-
-
2,706,000
-
2,706,000
Due 2012
(US$250,000)
-
-
-
-
2,255,000
2,255,000
Sub-total
-
-
-
2,706,000
2,255,000
4,961,000
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
1,860,000
56,442
640,000
1,300,000
4,906,442
Convertible bonds of Lintasarta which will be converted into Lintasarta’s shares of common stock
5,526
Total
9,872,968
Less:
-
unamortized notes issuance cost
(45,537
)
-
unamortized bonds issuance cost
(24,495
)
-
unamortized notes discount
(13,398
)
Net
9,789,538
* 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 post-retirement benefits, benefits under Labor Law No. 13/2003 (Note 29), other employee benefits and deposits from customers.
65
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
CAPITAL STOCK
The Company’s capital stock ownership as of December 31, 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
40.54
Government of the Republic
of Indonesia
776,624,999
77,662
14.50
Commissioner:
Roes Aryawijaya
135,000
14
0.00
Directors:
Wahyu Wijayadi
252,500
25
0.01
Hasnul Suhaimi
240,000
24
0.01
Wityasmoro Sih Handayanto
200,000
20
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%)
2,407,327,000
240,733
44.94
Total
5,356,174,500
535,617
100.00
2006
A Share
Government of the Republic
of Indonesia
1
-
-
B Shares
Indonesia Communications
Limited, Mauritius
2,171,250,000
217,125
39.96
Government of the Republic
of Indonesia
776,624,999
77,662
14.29
Indonesia Communications Pte.
Ltd., Singapore
46,340,000
4,634
0.85
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:
Wityasmoro Sih Handayanto
287,500
28
0.01
Wahyu Wijayadi
252,500
25
0.01
Raymond Tan Kim Meng
222,500
22
0.01
Joseph Chan Lam Seng
150,000
15
0.00
Wong Heang Tuck
150,000
15
0.00
Johnny Swandi Sjam
30,000
3
0.00
S. Wimbo S. Hardjito
2,500
-
-
Others (each holding below 5%)
2,438,218,500
243,822
44.87
Total
5,433,933,500
543,393
100.00
66
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
CAPITAL STOCK (continued)
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 dated March 2, 2004 from ICL to the Company 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 (Notes 41c and 41f).
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 December 31, 2006, ICL and ICLS owned an aggregate of 2,217,590,000 B shares, representing 40.81% ownership interest in the Company.
In connection with the exercise of ESOP Phase I and Phase II from August 1, 2004 and August 1, 2005, respectively, 256,433,500 B shares have been issued as of December 31, 2006 (Note 20) at a total premium of Rp873,512.
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 [i.e. Rp1,567.4 (in full amount)] 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.
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 [i.e. Rp3,702.6 (in full amount)] 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. It was also resolved that the undistributed ESOP shares from ESOP Phase I would be reallocated for distribution in ESOP Phase II.
67
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
20.
STOCK OPTIONS (continued)
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
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.
The Company recognized the following compensation expense relating to ESOP as part of “Operating Expenses - Personnel” (Note 24):
2004
2005
ESOP Phase I
Seven months’ compensation expense
31,123
-
ESOP Phase II
Five months’ compensation expense
64,867
-
Seven months’ compensation expense
-
90,739
Total
95,990
90,739
The numbers of forfeited shares at the end of the vesting period of ESOP Phase I and ESOP Phase II were 162,500 (equivalent to Rp75) and 2,279,000 (equivalent to Rp2,584) shares, respectively
(Note 24).
As of December 31, 2006, the number of stock options under ESOP Phase I and Phase II exercised by the employees is 121,428,000 and 135,005,500 shares, respectively (Note 19).
68
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
21.
OPERATING REVENUES - CELLULAR
This account consists of:
2004
2005
2006
Usage charges
4,218,800
4,794,098
5,317,871
Features
2,131,015
2,815,242
3,022,735
Interconnection income
707,544
746,755
697,265
Connection fee
103,625
191,264
103,506
Monthly subscription charges
130,413
21,048
9,924
Others
50,664
76,544
76,236
Total
7,342,061
8,644,951
9,227,537
The above interconnection income includes interconnection income from related parties amounting to Rp541,660, Rp464,748 and Rp409,075 in 2004, 2005 and 2006, respectively (Note 30).
22.
OPERATING REVENUES - MIDI
This account consists of:
2004
2005
2006
Related parties
World link and direct link
69,658
91,067
90,190
Frame net
98,842
92,840
87,800
IP VPN
12,108
15,700
54,555
Application services
41,700
42,507
53,472
Internet
35,441
87,789
43,217
Leased line
11,860
20,961
27,795
Satellite lease
24,998
14,549
16,441
Digital data network
28,451
14,838
9,357
Packet net
14,826
8,419
-
Others
3,492
10,890
7,528
Sub-total
341,376
399,560
390,355
Third parties
Internet
253,675
302,452
378,820
Frame net
275,058
296,586
299,476
World link and direct link
216,922
240,909
211,901
IP VPN
7,241
29,903
189,773
Digital data network
117,256
125,569
142,097
Leased line
81,578
116,485
118,697
Satellite lease
127,934
135,581
108,032
Application services
12,908
18,371
19,393
TV link
10,985
20,902
14,181
Packet net
5,185
4,237
5,687
Others
33,823
3,478
24,177
Sub-total
1,142,565
1,294,473
1,512,234
Total
1,483,941
1,694,033
1,902,589
69
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
23.
OPERATING REVENUES - FIXED TELECOMMUNICATION
The “Operating Revenues - Fixed Telecommunication” account represents the Company’s share of revenue from the following:
2004
2005
2006
International Calls
Incoming calls
859,146
643,861
541,744
Outgoing calls
595,555
441,256
315,995
Fixed Wireless
11,366
86,236
149,906
Fixed Line
71,699
74,405
98,886
Others
6,918
5,049
2,750
Total
1,544,684
1,250,807
1,109,281
Net settlements from other foreign telecommunication carriers of international telephone services amounted to Rp640,924, Rp743,076 and Rp804,733 in 2004, 2005 and 2006, respectively.
Operating revenues from related parties amounted to Rp856,929, Rp368,420 and Rp154,597 in 2004, 2005 and 2006, respectively. These amounts represent 55.48%, 29.45% and 13.94% of total operating revenues - fixed telecommunication in 2004, 2005 and 2006, respectively (Note 30).
24.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2004
2005
2006
Salaries
259,688
262,799
328,781
Incentives and other employee benefits
203,228
276,449
257,003
Employee income tax
161,167
178,787
205,702
Bonuses
216,987
167,755
166,610
Outsourcing
112,868
128,971
116,316
Postretirement healthcare benefit
48,133
81,146
86,152
Early retirement *
-
-
69,630
Medical expense
38,110
45,978
52,566
Pension (Note 29)
33,931
(3,018
)
30,174
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 29)
13,253
18,770
20,233
ESOP compensation expense (Note 20)
95,990
90,739
-
Others
24,029
16,277
17,301
Total
1,207,384
1,264,653
1,350,468
«
On June 27, 2006, the Company’s Directors issued Decree No. 051/DIREKSI/2006, “Additional Benefits for Voluntarily Resigned Employees”. Under this decree, employees qualified for early retirement and who voluntarily resigned after the approval from the Board of Directors were given benefits of additional remuneration, traveling and training packages. As of December 31, 2006, there were 169 employees who took the option.
The personnel expenses capitalized to properties under construction and installation in 2004, 2005, and 2006 amounted to Rp18,638, Rp42,947 and Rp39,794, respectively.
70
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
OPERATING EXPENSES - ADMINISTRATION AND GENERAL
This account consists of:
2004
2005
2006
Rent
90,057
90,489
127,525
Provision for doubtful accounts
33,786
161,208
110,224
Professional fees
48,575
32,816
85,153
Travel
55,211
69,225
76,875
Utilities
27,662
36,932
49,601
Insurance
33,772
35,385
35,552
Catering
29,127
29,850
31,683
Training, education and research
30,673
39,124
28,879
Office supplies and stationery
20,673
22,723
16,581
Public relations
13,809
14,868
15,779
Communications
30,140
23,303
12,257
Others
57,862
50,099
73,812
Total
471,347
606,022
663,921
26.
OPERATING EXPENSES - COMPENSATION TO TELECOMMUNICATIONS CARRIERS AND SERVICE PROVIDERS
This account consists of compensation to telecommunications carriers and service providers, as follows:
2004
2005
2006
Telkom
492,132
390,136
343,854
Other telecommunications carriers and
service providers
21,223
18,275
25,850
Total
513,355
408,411
369,704
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.
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.
71
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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:
2004
2005
2006
Domestic
Interconnection revenues
1,570,272
1,833,368
1,838,945
Interconnection charges
(1,072,923
)
(1,413,829
)
(1,572,293
)
Net
497,349
419,539
266,652
Overseas
Revenues from international carriers
1,006,750
909,774
898,615
Charges from international carriers
(365,826
)
(166,698
)
(93,882)
Net
640,924
743,076
804,733
27.
OPERATING EXPENSES - OTHER COSTS OF SERVICES
This account consists of:
2004
2005
2006
Radio frequency fee
175,854
352,023
461,468
Cost of SIM cards and pulse reload vouchers
426,497
346,900
330,387
Utilities
103,090
148,113
204,580
Rent
123,626
171,667
148,683
Concession fee
99,763
111,627
115,305
USO (Note 36)
70,376
82,172
86,779
Delivery and transportation
29,113
44,793
54,591
Billing and collection
25,129
66,298
50,359
Wartel (“Phone Kiosk”) commission
33,481
14,722
19,604
Communications
25,567
16,170
14,698
Insurance
19,370
13,799
3,684
Cost of software sold
83,051
-
-
Impairment loss on property and equipment (Note 10)
17,637
-
-
Others
67,864
93,445
79,005
Total
1,300,418
1,461,729
1,569,143
72
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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:
2004
2005
2006
Interest on loans
1,075,911
1,240,802
1,204,642
Amortization of debts/bonds issuance
cost and discount (Notes 16 and 17)
17,269
21,201
27,619
Solicitation fee (Note 17)
-
-
13,481
Bank charges
4,351
2,761
3,157
Total
1,097,531
1,264,764
1,248,899
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.
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.
73
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
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:
·
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 total contributions of the Company, Satelindo and Lintasarta to Jiwasraya amounted to Rp69,216, Rp73,263 and Rp9,999 for the years ended December 31, 2004, 2005 and 2006, respectively.
The net periodic pension cost for the pension plans for the years ended December 31, 2004, 2005 and 2006 was calculated based on the actuarial valuations as of December 31, 2004, 2005 and 2006, respectively. The actuarial valuation was prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2004
2005
2006
Annual discount rate
10.0%
13.0%
10.5%
Expected annual rate of return on plan assets
10.0%
10.0%
10.0%
Annual rate of increase in compensation
6.0 - 9.0%
3.0 - 9.0%
3.0 - 9.0%
Mortality rate
CSO 1980
CSO 1980
CSO 1980
74
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
a.
The composition of the net periodic pension cost (income) for the years ended December 31, 2004, 2005 and 2006 is as follows:
2004
2005
2006
Service cost
34,656
26,354
37,660
Interest cost
49,191
54,533
63,649
Return on plan assets
(54,745
)
(69,957
)
(71,135
)
Net amortization
4,829
740
-
Curtailment gain
-
(14,688
)
-
Net periodic pension cost (income) (Note 24)
33,931
(3,018
)
30,174
b.
The funded status of the plans as of December 31, 2005 and 2006 is as follows:
2005
2006
Projected benefit obligation
(498,401
)
(644,903
)
Plan assets at fair value
718,259
727,656
Excess of plan assets over projected benefit obligation
219,858
82,753
Unrecognized actuarial loss
38,614
150,821
Prepaid pension cost - net
258,472
233,574
c.
Movements in the prepaid (accrued) pension cost during the years ended December 31, 2005 and 2006 are as follows:
2005
2006
Beginning balance
Company
203,088
255,899
Lintasarta
(20,897
)
2,573
Net periodic pension income (cost)
Company
(10,453
)
(26,842
)
Lintasarta
13,471
(3,332
)
Contribution by
Company
63,264
-
Lintasarta
9,999
9,999
Refund from Jiwasraya
Company
-
(3,761
)
Lintasarta
-
(962
)
Ending balance
Company
255,899
225,296
Lintasarta
2,573
8,278
75
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
d.
Prepaid pension cost consists of:
2005
2006
Prepaid pension:
Current portion (presented as part of “Prepaid Expenses”)
Company
20,899
3,172
Lintasarta
1,082
118
21,981
3,290
Long-term portion
Company
235,000
222,124
Lintasarta
1,491
8,160
236,491
230,284
258,472
233,574
Plan assets as of December 31, 2005 and 2006 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
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 years ended December 31, 2004, 2005 and 2006 amounted to Rp20,445, Rp17,233 and Rp16,686, 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
The Companies also accrue benefits under Labor Law No. 13/2003 (“Labor Law”) dated March 25, 2003. The Companies’ employees will receive the benefits under this law or defined benefit pension plan, whichever amounts are higher.
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
The net periodic Labor Law cost for the years ended December 31, 2004, 2005 and 2006 was calculated based on the actuarial valuations as of December 31, 2004, 2005 and 2006, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2004
2005
2006
Annual discount rate
10.0%
13.0%
10.5%
Annual rate of increase in compensation
8.0 - 9.0%
3.0 - 11.0%
10.0%
a.
The composition of the periodic Labor Law cost for the years ended December 31, 2004, 2005 and 2006 is as follows:
2004
2005
2006
Service cost
8,840
11,600
11,709
Interest cost
3,213
7,117
7,230
Net amortization
1,200
53
1,294
Periodic Labor Law cost (Note 24)
13,253
18,770
20,233
b.
The composition of the accrued Labor Law cost as of December 31, 2005 and 2006 is as follows:
2005
2006
Projected benefit obligation
(85,952
)
(88,219
)
Unrecognized actuarial loss
29,997
18,819
Accrued Labor Law cost
(55,955
)
(69,400)
c.
Movements in the accrued Labor Law cost during the years ended December 31, 2005 and 2006 are as follows:
2005
2006
Beginning balance
Company
(35,303
)
(51,586)
Lintasarta
(2,812
)
(3,887)
IMM
(191
)
(482)
Periodic Labor Law cost
Company
(17,404
)
(18,102
)
Lintasarta
(1,075
)
(1,563
)
IMM
(291
)
(568
)
77
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
2005
2006
Benefit payment
Company
1,121
6,716
IMM
-
72
Ending balance
Company
(51,586
)
(62,972
)
Lintasarta
(3,887
)
(5,450
)
IMM
(482
)
(978
)
As of December 31, 2006, Labor Law cost included in accrued expenses amounted to Rp1,689 (Note 15) for the current portion and Rp67,711 in non-current liabilities for the long-term portion (Note 18).
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)
2,890,855
1,114,271
8.823.26
Accounts receivable - trade
Telkom
157,080
136,962
0.48
0.40
StarHub Pte. Ltd. (“StarHub”), Singapore
39,130
46,354
0.12
0.14
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
43,167
43,359
0.130.13
Singapore Telecommunications Ltd
(“SingTel”), Singapore
20,338
27,757
0.06
0.08
State-owned banks
28,350
15,821
0.090.05
PT Pos Indonesia (Persero)
9,760
9,187
0.03
0.03
PT Citra Sari Makmur (“CSM”)
5,013
5,914
0.02
0.02
PSN
-
3,839
-
0.01
Lembaga Kantor Berita Negara Antara
-
2,045
-
0.01
Telkomsel
2,733
1,494
0.010.00
Cable & Wireless Optus
(“Optus”), Australia
892
-
0.00
-
Others
20,913
23,273
0.06
0.07
Total
327,376
316,005
1.00
0.94
Less allowance for doubtful accounts
150,977
141,263
0.46
0.43
Net
176,399
174,742
0.540.51
Prepaid expenses
Ministry of Communications and
Information Technology
118,902
150,676
0.360.44
Jiwasraya
21,981
3,290
0.070.01
Kopindosat
8,969
2,376
0.030.01
Others
2,362
2,702
0.010.01
Total
152,214
159,044
0.470.47
78
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Other current assets
State-owned banks
18,872
15,049
0.060.04
Others
865
6
0.00
0.00
Total
19,737
15,055
0.060.04
Due from related parties
Key management personnel
18,567
11,032
0.060.03
Kopindosat
6,197
6,197
0.020.02
Telkomsel
7,048
5,881
0.020.02
BNI
-
1,213
-
0.00
Others
342
1,808
0.00
0.01
Total
32,154
26,131
0.100.08
Less allowance for doubtful accounts
1,753
2,795
0.01
0.01
Net
30,401
23,336
0.090.07
Long-term prepaid pension
Jiwasraya
236,491
230,284
0.720.67
Long-term advances
Kopindosat
4,328
2,800
0.020.01
Others
1,341
1,106
0.000.00
Total
5,669
3,906
0.020.01
Non-current assets - others
State-owned banks
1,200
32,649
0.000.10
Telkom
26,086
21,681
0.08
0.06
Kopindosat
-
7,430
-
0.02
Others
-
2,853
-
0.01
Total
27,286
64,613
0.080.19
Accounts payable - trade
Telkomsel
22,716
27,280
0.12
0.14
Telkom6,0003,169
0.03
0.02
Optus
-
1,417
-
0.01
Others
1,746
2,273
0.010.01
Total
30,462
34,139
0.160.18
Procurement payable
PT Industri Telekomunikasi
Indonesia
27,669
33,667
0.150.18
Kopindosat
44,853
33,458
0.240.18
PT SCS Astra Graphia Technologies
2,549
3,062
0.01
0.02
Total
75,071
70,187
0.40
0.38
79
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Accrued expenses
Ministry of Communications and
Information Technology
147,096
230,148
0.801.22
Ministry of Finance
-
20,633
-
0.11
Key management personnel
8,995
8,861
0.050.05
Kopindosat
7,893
2,037
0.040.01
BNI
12,303
-
0.07
-
Telkom
1,740
-
0.01
-
Total
178,027
261,679
0.971.39
Due to related parties
PT Pos Indonesia (Persero)
4,100
11,937
0.02
0.06
Comnet
4,597
6,649
0.02
0.04
TVRI
2,262
4,973
0.010.03
State-owned banks
1,875
1,875
0.010.01
Kopindosat
1,518
1,490
0.010.01
Others
2,255
2,516
0.020.01
Total
16,607
29,440
0.090.16
Loans payable
State-owned banks
630,251
635,649
3.44
3.38
Other non-current liabilities
Telkomsel
14,773
13,109
0.08
0.07
Others
2,832
990
0.02
0.01
Total
17,605
14,099
0.10
0.08
Percentage to Respective Income
or Expenses
Amount
(%)
2004
2005
2006
2004
20052006
Operating revenues
Telkom
1,140,163
806,211
545,060
10.93
6.96
4.45
State-owned banks
221,727
184,291
131,397
2.13
1.59
1.07
SingTel
39,300
29,162
66,564
0.38
0.250.54
StarHub
15,141
37,860
66,213
0.15
0.330.54
CSM
8,607
11,192
11,058
0.08
0.100.09
Lembaga Kantor Berita
Negara Antara
22,933
21,324
7,628
0.220.180.06
PSN
5,283
3,949
5,490
0.050.030.04
Ministry of
Communications
and Information
Technology
3,339
486
5,383
0.03
0.000.04
PT Angkasa Pura
(Persero)
5,717
6,334
4,652
0.05
0.050.04
PT Garuda Indonesia
(Persero)
6,559
3,255
470
0.06
0.030.00
Telkomsel
198,126
59,121
(13,539
)
1.900.51(0.11
)
Optus
5,540
(1,029
)
(437
)
0.05
(0.01)0.00
Others
67,530
70,572
124,088
0.650.611.00
Total
1,739,965
1,232,728
954,027
16.6810.637.76
80
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Income
or Expenses
Amount
(%)
2004
2005
2006
2004
20052006
Operating expenses
Personnel
Key management
personnel
160,003
108,190
108,589
2.211.37
1.23
Kopindosat
102,500
113,112
39,726
1.42
1.42
0.45
Jiwasraya
33,931
(3,018
)
30,174
0.47(0.04)0.34
Total
296,434
218,284
178,489
4.10
2.75
2.02
Administration and
general
Kopindosat
10,388
49,478
48,560
0.140.620.55
PLN
13,782
20,249
41,203
0.19
0.26
0.47
UGBDN
4,567
4,066
5,628
0.06
0.050.06
Others
3,443
30,005
968
0.05
0.380.01
Total
32,180
103,798
96,359
0.44
1.31
1.09
Maintenance
Kopindosat
5,769
14,788
6,838
0.080.190.08PT Industri
Telekomunikasi
Indonesia
-
3,096
5,001
-
0.040.06
SingTel
2,216
1,950
1,204
0.03
0.020.01
StarHub
165
-
-
0.00
--
Total
8,150
19,834
13,043
0.110.250.15
Compensation to
telecommunications
carriers and service
providers
Telkom
492,132
390,136
343,854
6.80
4.913.89
Others
525
-
1,108
0.01
-0.01
Total
492,657
390,136
344,962
6.814.913.90
Leased circuits
Comnet
31,979
32,523
34,146
0.440.410.39
SingTel
18,289
19,529
13,359
0.25
0.250.15
StarHub
2,477
6,796
1,835
0.030.090.02
Intelsat
18,227
-
-
0.25
-
-
Total
70,972
58,848
49,340
0.970.750.56
Other costs of services
Ministry of
Communications
and Information
Technology
345,993
545,822
663,552
4.78
6.88
7.51
Pemda DKI Jakarta
1,642
77
15
0.02
0.00
0.00
Others
8,186
2,555
2,355
0.110.03
0.03
Total
355,821
548,454
665,922
4.916.91
7.54
81
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Income
or Expenses
Amount
(%)
2004
2005
2006
2004
20052006
Other income
(expenses)
Interest income
(expense) - net
State-owned banks
(41,069
)
33,376
46,841
4.56
(2.57
)
(3.40)
Others
3,265
37,321
18,839
(0.36
)(2.86
)
(1.37
)
Net
(37,804
)
70,697
65,680
4.20
(5.43)(4.77
)
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 BNI and Mandiri (Note 16).
b.
Telkom
(1)
a.
Fixed telecommunication 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.
82
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
a.
Fixed telecommunication services (continued)
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 telecommunication 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.
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.
83
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
(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 sixth amendment agreement dated September 29, 2006. Transponder lease expense charged to operations amounted to Rp14,516 in 2004, Rp8,025 in 2005 and Rp7,083 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
Amount
Respective Income or Expenses (%)
2004
2005
2006
2004
20052006
Net operating
revenues
1,140,163
806,211
545,060
10.936.964.45
Operating
expenses
492,132
390,136
343,854
6.804.91
3.88
c.
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.
d.
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.
84
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
d.
Telkomsel (continued)
·
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 years ended December 31, 2004, 2005 and 2006 are as follows:
2004
2005
2006
Interconnection revenues
185,210
683,577
707,850
Interconnection charges
(431,543
)
(653,645
)
(758,632
)
Net revenues (charges)
(246,333
)
29,932
(50,782
)
e.
Jiwasraya
Jiwasraya is a state-owned life insurance company that provides services to the Companies in managing the Companies’ pension plans.
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 December 31, 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
99.00
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
-
85
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 (continued)
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.
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 Rp18,567 and Rp11,032, respectively, and are presented as part of “Due from Related Parties”. Those given to non-key management personnel amounting to Rp3,597 and Rp2,817 as of
December 31, 2005 and 2006, respectively, are presented as part of “Accounts Receivable - Others” for the current portion, and Rp122,281 and Rp103,121 as of December 31, 2005 and 2006, respectively, as “Long-term Receivables” for the non-current portion.
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.
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.
StarHub
Affiliate
Operating revenues -
international calls
2.
SingTel
Affiliate
Operating revenues -
international calls
3.
TVRI
Affiliate
Operating revenues - MIDI
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.
Ministry of Communications
Government agency
Operating revenues - MIDI and
and Information Technology
concession fee
86
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
9.
PT Industri Telekomunikasi
Indonesia (Persero)
Affiliate
Procurement payable
10.
PT SCS Astra Graphia
Technologies
Affiliate
Procurement payable
11.
Ministry of Finance
Government agency
Other expenses - dividend penalty
12.
Comnet
Affiliate
Other cost of services - rent of
transmission channel
13.
PT Angkasa Pura (Persero)
Affiliate
Operating revenues - MIDI
14.
PT Garuda Indonesia (Persero)
Affiliate
Operating revenues - MIDI
15.
PLN
Affiliate
Utilities expense
16.
UGBDN
Affiliate
Rent expense
31.
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
2004
2005
2006
Numerator for basic earnings per
share - net income
1,633,208
1,623,481
1,410,093
Dilutive effect of convertible bonds (Note 17)
-
-
(11,262
)
Numerator for diluted earnings per share
1,633,208
1,623,481
1,398,831
Denominator - number of shares
Denominator for basic earnings per share:
Weighted-average number of shares
outstanding during the year (including
effect of exercise of ESOP Phase I
and Phase II)
5,202,760,294
5,253,249,519
5,404,654,859
Denominator for basic earnings per
share - adjusted weighted-average
number of shares after effect of exercise
of ESOP Phase I and Phase II
5,202,760,294
5,253,249,519
5,404,654,859
Dilutive effect of ESOP Phase II (Note 20)
4,646,308
-
-
Denominator for diluted earnings
per share
5,207,406,602
5,253,249,519
5,404,654,859
87
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
EARNINGS PER SHARE (continued)
2004
2005
2006
Basic earnings per share
313.91
309.04
260.90
Diluted earnings per share
313.63
309.04
258.82
Basic earnings per ADS (50 B shares
per ADS)
15,695.59
15,452.16
13,045.17
Diluted earnings per ADS
15,681.59
15,452.16
12,940.98
32.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meeting held on June 22, 2004, the stockholders resolved to, among others:
a.
Approve the utilization of 2003 net income (before restatement) as follows:
·
Rp15,700 for reserve fund
·
Rp145.55 per share for dividend distribution
·
Remaining amount for reinvestment and working capital.
a.
Pay the dividend on July 29, 2004, 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 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.
88
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 December 31, 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
20,053
-
-10,938
b.
Goldman Sachs Capital Market, L.P.,
New York (“GSCM”)(1)
100,000
-
-
--
c.
JPMorgan Chase Bank, Singapore
Branch (“JPMorgan”)(2)
25,000
-
-
--
d.
Goldman Sachs International (“GSI”)
100,000
55,260
-
-31,202
e.
GSI
25,000
3,908
-
-34,511
f.
GSI
75,000
-
1,303
16,550
-
g.
Merrill Lynch Capital Market Bank
Limited (“MLCMB”)
25,000
-
2,863
-10,705
h.
MLCMB
25,000
-
7,373
-
45,650
i.
StandChart
25,000
-
-
-34,215
j.
MLCMB
25,000
-
-
-22,151
k.
StandChart
25,000
-
-
-
18,022
l.
StandChart
25,000
-
-
-
7,584
m.
The Hongkong and Shanghai Banking
Corporation Limited, Jakarta
Branch (“HSBC”)
25,000
-
-
-7,286
Sub-total
79,221
11,539
16,550
222,264
Interest Rate Swap:
n.
Barclays Capital, London
(“Barclays”)(3)
50,000
-
-
--
o.
HSBC(1)
25,000
-
-
--
p.
ABN(1)
50,000
-
-
--
q.
GSCM
(4)
25,000
-
-
--
r.
GSCM
25,000
-
-
-2,029
Sub-total
-
-
-
2,029
Total
79,221
11,539
16,550
224,293
(1)
terminated in May 2005
(2)
terminated in October 2005
(3)
terminated in April 2005
(4)
terminated in October 2006
The net change in fair value of the swap contracts totalling Rp170,451, Rp44,209 and Rp438,774 in 2004, 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 Rp79,221 and Rp16,550 as of December 31, 2005 and 2006, respectively, and “Derivative liabilities” presented under current liabilities amounted to Rp11,539 and Rp224,293 as of December 31, 2005 and 2006, respectively.
89
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 which is effective starting April 13, 2004. 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 Rp5,086, Rp13,865 and Rp16,911 in 2004, 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 that existed prior to August 9, 2004. 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 Rp10,797 and Rp29,142 in 2004 and 2005, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
On May 13, 2005, the Company early 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 Rp111,507). 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 was less than Rp14,000 to US$1 (in full amounts),
the Company would 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 was higher than Rp14,000 to US$1 (in full amounts),
the Company would 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 early 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.
90
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 Rp34,979 and Rp61,885 in 2005 and 2006, respectively, 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 Rp5,642 and Rp9,689 in 2005 and 2006, respectively, 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$75,000 per annum. Total swap cost amounting to Rp12,180 and Rp22,995 in 2005 and 2006, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
g.
On September 20, 2005, the Company entered into a cross currency swap contract with MLCMB which is effective starting September 22, 2005. Based on the contract, the Company will receive, at termination date on June 22, 2012, the following:
·
If the rupiah/US$ 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 Rp3,640 and Rp6,892 in 2005 and 2006, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
91
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
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 Rp1,265 and Rp12,677 in 2005 and 2006, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
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 Rp10,817 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 Rp9,375 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 Rp6,685 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. 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 Rp4,897 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
g.
On August 8, 2006, the Company entered into a cross currency swap contract with HSBC. Based on the contract, the Company will swap at termination date on November 5, 2010, a total of Rp225,000 for US$25,000. The contract provides for the Company to make semi-annual payments every May 5 and November 5 up to and including termination date at the fixed rate of 4.00% of US$25,000 per annum. Total swap cost amounting to Rp2,277 in 2006 is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
92
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
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
h.
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. The swap income arising from this transaction amounting to Rp17,524 in 2004 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 Barclays, every May 5 and November 5, commencing on May 5, 2006 up to termination date.
On April 15, 2005, the Company early 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
i.
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 Rp1,648 and Rp9,174 in 2004 and 2005, respectively, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
On May 12, 2005, the Company early 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.
93
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
DERIVATIVES (continued)
Interest Rate Swap Contracts (continued)
j.
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 interest rate swap contracts that existed prior to January 20, 2005 and all related cash flows were cancelled effective January 20, 2005 and the fair value of the 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 early 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.
k.
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 was 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 Rp3,860 in 2006, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
On October 16, 2006, the Company early terminated its interest rate swap contract with GSCM. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$380 (equivalent to Rp3,498), which was made on October 20, 2006.
l.
On July 18, 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, 2006, the Company agreed to pay at the fixed rate of 5.90% of US$25,000 per annum, in semi-annual intervals, every June 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 semi-annual range up to 2012. The swap income arising from this transaction amounting to Rp1,389 in 2006, is presented as part of “Loss on Change in Fair Value of Derivatives - Net” under Other Income (Expenses).
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.
34.
COMMITMENTS AND CONTINGENCIES
a.
As of December 31, 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$243,452, EUR317,034 (in full amount, equivalent to US$417) and Rp1,392,587 (Note 41i).
94
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Unserved Issued PO
Ericsson AB and
PT Ericsson
Indonesia
Jabotabek
US$21,227 and Rp25,424
US$8,875 and Rp13,011
Siemens AG and
PT Siemens
Indonesia
Sumatra and
Nusa Tenggara
US$329 and Rp133,767
US$147 and Rp43,671
Alcatel CIT and
PT Alcatel
Indonesia
Kalimantan
US$3,888 and Rp73,850
US$2,537 and Rp14,595
·
On September 29, 2006, the Company entered into WCDMA/HSDPA Radio Access Network Development Project Agreement with PT Ericsson Indonesia and Ericsson AB. The total contract prices under this agreement amounted to US$55,220 and Rp216,039. As of December 31, 2006, the Company has issued several POs totalling US$31,008 and Rp119,476. The issued POs that have not been served amounted to US$21,867 and Rp75,395.
·
On September 25, 2006, the Company entered into Single Intelligent Network Agreement with PT Ericsson Indonesia and Ericsson AB. The total contract prices under this agreement amounted to US$67,091 and Rp92,364. As of December 31, 2006, the Company has issued several POs totalling US$8,931 and Rp9,619. The issued POs that have not been served amounted to US$3,220 and Rp3,468.
·
On March 13, 2006, the Company entered into IN Decentralization and IVR Expansion Agreement with PT Ericsson Indonesia and Ericsson AB. This agreement was amended on April 26, 2006. The total contract prices, as amended, under this agreement amounted to US$16,688 and Rp16,500. As of December 31, 2006, the Company has issued several POs totalling US$12,787 and Rp16,500. The issued POs that have not been served amounted to US$5,372 and Rp7,244.
·
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. The latest amendment to these agreements was made on December 29, 2006. The total contract prices, as amended, under these agreements amounted to US$26,492 and Rp135,225. As of December 31, 2006, the Company has issued several POs for the full amount of the contract prices. The issued POs that have not been served amounted to US$7,722 and Rp69,125.
·
On July 1, 2005, the Company entered into 2005 - 2008 BSS Expansion Agreement with PT Nokia Networks. This agreement was amended on June 30, 2006. The total contract prices, as amended, under this agreement amounted to US$107,989 and Rp257,357. As of
December 31, 2006, the Company has issued several POs for the full amount of the contract price. The issued POs that have not been served amounted to US$15,411 and Rp49,461.
95
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 PT Ericsson Indonesia and Ericsson AB. The latest amendment to these agreements 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 December 31, 2006, the Company has issued several POs for the full amount of the contract prices. The issued POs that have not been served amounted to US$3,135 and Rp53,010.
b.
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.
The facilities expired on February 28, 2006 and were extended for 12 months.
As of December 31, 2006, the Company has not used these facilities.
c.
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.
96
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
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 December 31, 2006, the facilities have not been terminated and the Company has not used these facilities.
d.
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. On April 25, 2005, the Company was discharged as the CBP.
As of December 31, 2006, the balance of the funds which are under the Company’s custody (including interest earned) amounted to US$22,666. 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.
e.
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.
97
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
COMMITMENTS AND CONTINGENCIES (continued)
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.
Based on the Circular Resolution dated September 18, 2006 of the Company’s Board of Directors, after carefully considering the input made by the Government of Indonesia at the Company’s Stockholders’ Annual General Meeting held on June 29, 2006, the Board of Directors agreed to amicably settle such dividend penalty in such amount and terms of payment acceptable to the MOF. Up to December 31, 2006, no resolution has been agreed between the Company and the MOF.
In 2006, the Company accrued the penalty in the amount of Rp20,633 representing its estimate of the penalty it will pay to the Government.
f.
The Company has committed to pay annual radio frequency fee over the 3G license period, provided the Company holds the 3G license (Note 1a). The amount of annual payment is based on the scheme of payment set out in the Regulation No. 7/PER/M.KOMINFO/2/2006 dated
February 8, 2006 of the Ministry of Communications and Information Technology.
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.
98
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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.
99
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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 December 31, 2006, the Company has not yet applied such regulation since it is still waiting for further guidance on the implementation of tariff formula.
c.
Fixed telecommunication 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 December 31, 2006, the Company has not yet applied such regulation since it is still waiting for further guidance on the implementation of tariff formula.
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
100
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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)
For a ten-year period effective January 1, 1995, the Company (Indosat only, not including Satelindo - Note 1e) was originally exempted from the obligation to pay USO.
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.
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.
101
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
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.
(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 December 31, 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.
102
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
36.
INTERCONNECTION TARIFFS (continued)
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. Subsequently, on August 4, 2006, the Directorate General of Post and Telecommunication issued decree No. 278/DIRJEN/2006 which approved the Reference Interconnection Offer (“RIO”) of the Company and two other dominant telecommunication operators (Telkom and Telkomsel).
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 telecommunications 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 December 31, 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 revenues (charges) from the operators are as follows:
2004
2005
2006
Excelcom
(18,955
)
(30,239
)
(34,675)
Komselindo
3,992
3,432
2,028
Net
charges
(14,963
)
(26,807
)
(32,647)
103
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
38.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
The Companies’ monetary assets and liabilities denominated in various foreign currencies as of December 31, 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
181,510
1,637,216
Accounts receivable
Trade
123,088
1,110,254
Others
357
3,221
Derivative assets
1,835
16,552
Other current assets
939
8,470
Due from related parties
534
4,816
Non-current assets - others
1,279
11,537
Total assets
309,542
2,792,066
Liabilities:
Accounts payable - trade
10,095
91,057
Procurement payable
219,618
1,980,954
Accrued expenses
22,379
201,856
Deposits from customers
901
8,125
Derivative liabilities
24,866
224,293
Loans payable (including current maturities)
34,200
308,484
Bonds payable
550,000
4,961,000
Other non-current liabilities
6,300
56,830
Total liabilities
868,359
7,832,599
Net liabilities position
558,817
5,040,533
*
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.
104
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
39.
SEGMENT INFORMATION (continued)
Consolidated information by industry segment follows:
Major Segments
Fixed
OtherSegment
Cellular
Telecommunication
MIDI
ServicesTotal
2004
Operating Revenues
Revenues from external customers
7,342,061
1,544,684
1,483,941
59,42010,430,106
Inter-segment revenues
(100,282
)
100,282
176,778
134,339311,117
Total revenues
7,241,779
1,644,966
1,660,719
193,75910,741,223
Inter-segment revenues elimination
(311,117)
Operating revenues - net
10,430,106
Income
Operating income (loss)
2,438,107
575,709
269,935
(85,685)3,198,066
Gain on sale of investment in
associated company
286,204
Interest income
187,430
Gain on sale of other long-term
investment
110,929
Equity in net income of
associated companies
61,489
Financing cost
(1,097,531)
Income tax expense
(724,554)
Amortization of goodwill
(226,347)
Loss on change in fair value
of derivatives - net
(170,451)
Loss on foreign exchange - net
(66,116)
Others - net
99,085
Income before Minority Interest in
Net Income of Subsidiaries
1,658,204
Other Information
Segment assets
20,490,078
1,803,385
3,003,617
160,56725,457,647
Unallocated assets
6,058,820
Inter-segment assets elimination
(3,644,000)
Assets - net
27,872,467
Segment liabilities
13,861,414
1,069,168
977,572
65,90815,974,062
Unallocated liabilities
1,508,706
Inter-segment liabilities elimination
(2,794,893)
Liabilities - net
14,687,875
Capital expenditure
4,611,015
507,556
790,817
1,2715,910,659
Depreciation and amortization
2,209,323
182,040
425,002
2,2922,818,657
105
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Telecommunication
MIDI
Total
2005
Operating revenues
Revenues from external customers
8,644,951
1,250,807
1,694,03311,589,791
Inter-segment revenues
(115,727
)
115,727
269,462269,462
Total operating revenues
8,529,224
1,366,534
1,963,49511,859,253
Inter-segment revenues elimination
(269,462
)
Operating revenues - net
11,589,791
Income
Operating income
2,639,498
615,091
397,3283,651,917
Interest income
215,103
Gain on sale of investment in associated company
14,625
Gain on sale of other long-term investments - net
1,204
Equity in net income of associated companies
86
Financing cost
(1,264,764
)
Income tax expense
(697,924
)
Amortization of goodwill
(226,352
)
Loss on foreign exchange - net
(79,932)
Loss on change in fair value of derivatives - net
(44,209)
Others - net
85,117
Income before Minority Interest in Net Income
of Subsidiaries
1,654,871
Other Information
Segment assets
28,303,265
1,149,005
3,269,09132,721,361
Unallocated assets
6,410,391
Inter-segment assets elimination
(6,344,619
)
Assets - net
32,787,133
Segment liabilities
19,857,524
904,541
960,832
21,722,897
Unallocated liabilities
2,142,746
Inter-segment liabilities elimination
(5,393,838
)
Liabilities - net
18,471,805
Capital expenditure
6,330,401
306,349
661,197
7,297,947
Depreciation and amortization
2,431,356
214,206
434,643
3,080,205
106
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Telecommunication
MIDI
Total
2006
Operating revenues
Revenues from external customers
9,227,537
1,109,281
1,902,589
12,239,407
Inter-segment revenues
(222,650
)
222,650
318,119
318,119
Total operating revenues
9,004,887
1,331,931
2,220,708
12,557,526
Inter-segment revenues elimination
(318,119
)
Operating revenues - net
12,239,407
Income
Operating income
2,291,923
627,611
479,125
3,398,659
Gain on foreign exchange - net
304,401
Interest income
212,823
Financing cost
(1,248,899
)
Income tax expense
(576,107
)
Loss on change in fair value of derivatives - net
(438,774
)
Amortization of goodwill
(226,507
)
Equity in net loss of associated companies
(238
)
Others - net
21,202
Income before Minority Interest in Net Income
of Subsidiaries
1,446,560
Other Information
Segment assets
30,550,224
1,552,003
3,738,044
35,840,271
Unallocated assets
4,520,191
Inter-segment assets elimination
(6,131,804
)
Assets - net
34,228,658
Segment liabilities
19,665,806
760,291
931,646
21,357,743
Unallocated liabilities
2,633,240
Inter-segment liabilities elimination
(4,964,070
)
Liabilities - net
19,026,913
Capital expenditure
5,961,152
366,718
593,458
6,921,328
Depreciation and amortization
2,967,185
182,702
503,379
3,653,266
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.
107
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
41.
SUBSEQUENT EVENTS
a.
On January 2, 2007, the Company and GSCM entered into a currency forward contract with notional amount of US$10,000 and USD/IDR fixing rate of Rp8,995 to US$1 (in full amounts). Based on the contract:
·
If the USD/IDR fixing rate is lower than Rp9,600 to US$1 (in full amounts), the Company will buy US$10,000 at USD/IDR fixing rate on the respective settlement dates.
·
If the USD/IDR fixing rate is higher than Rp9,600 to US$1 (in full amounts), there will be no settlement on the respective settlement dates.
b.
On January 10, 2007, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the tax correction arising from the corporate income tax audit for fiscal year 2003 (Note 14).
c.
On January 17, 2007, ICL, the Company’s majority shareholder, notified the Company regarding the plan of Qatar Telecom (“Qtel”) to make 25% equity investment in Asia Mobile Holdings Pte. Ltd. (“AMH”). Upon the closing of the transaction, STTC will effectively control 75% of the equity of AMH, which directly owns ICL and ICLS (Note 19).
d.
Based on an online extract from the Dutch Chamber of Commerce, the registration of SIB ended on January 17, 2007. Consequently, the liquidation process of SIB has been officially recognized since that date.
e.
On February 15, 2007, the Company and StandChart entered into a currency forward contract with notional amount of US$2,000 and USD/IDR fixing rate of Rp8,950 to US$1 (in full amounts). Based on the contract:
·
If the USD/IDR fixing rate is lower than Rp9,215 to US$1 (in full amounts), the Company will buy US$2,000 at USD/IDR fixing rate on the respective settlement dates.
·
If the USD/IDR fixing rate is at/higher than Rp9,215 to US$1 (in full amounts), there will be no settlement on the respective settlement dates.
f.
On February 27, 2007, the Company received a notification letter from Standard Chartered Bank, security agent, releasing the pledge of ICL's investment in the Company's equity shares in relation to the loan facility obtained by STTC (Note 19).
g.
On February 28, 2007, the Company submitted an objection letter to the Tax Office regarding the tax correction arising from the income tax article 26 audit for fiscal year 2004 (Note 14).
h.
Based on letter No. 40/DJPT.3/KOMINFO/II/2007 dated March 3, 2007 of the Ministry of Communications and Information Technology, the Ministry requested the Company to settle the USO liabilities of Satelindo amounting to Rp19,257 (Note 15).
i.
As of March 5, 2007, the average buying and selling rate of bank notes published by Bank Indonesia is Rp9,200 to US$1 (in full amounts), while as of December 31, 2006, the average buying and selling rate was Rp9,020 to US$1 (in full amounts). Using the exchange rate as of March 5, 2007, the Companies suffered foreign exchange loss amounting to approximately Rp100,587 on the foreign currency liabilities, net of foreign currency assets, as of March 5, 2007 (Note 38).
108
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
41.
SUBSEQUENT EVENTS (continued)
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 December 31, 2006 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of December 31, 2006 as disclosed in Note 34a are approximately Rp2,243,595, if translated at the rate as of March 5, 2007.
42.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the 2004 and 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
Amounts
2004
Consolidated Statements of Cash Flows
Cash flows from operating
Cash flows from financing
activities - employees and
activities - cash dividend paid by
suppliers
subsidiaries to minority interest
(7,671
)
Cash flows from investing
Cash flows from operating
activities - swap income from
activities - interest rate swap
interest rate swap contracts
contracts
34,143
Cash flows from investing
Cash flows from operating
activities - swap cost from
activities - swap cost from
cross currency swap contracts
cross currency swap contracts
(15,882
)
Cash flows from financing
activities - swap cost from
cross currency swap contracts
(15,392
)
2005
Consolidated Statements of Cash Flows
Cash flows from operating
Cash flows from financing
activities - employees and
activities - cash dividend paid by
suppliers
subsidiaries to minority interest
(9,046)
Cash flows from investing
Cash flows from operating
activities - swap income from
activities - interest rate swap
interest rate swap contracts
contracts
9,174
Cash flows from investing
Cash flows from operating
activities - payment for
activities - termination
termination of swap contracts
of swap contracts
(76,475
)
109
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006
With Comparative Figures for 2004 and 2005
(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
Amounts
2005 (continued)
Consolidated Statements of Cash Flows (continued)
Cash flows from financing
activities - payment for termination
of swap contract
(111,508
)
Cash flows from investing
Cash flows from operating
activities - swap cost from
activities - swap cost from
cross currency swap contracts
cross currency swap contracts
(42,279
)
Cash flows from financing
activities - swap cost from
cross currency swap contract
(64,121
)
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 March 5, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PT Indosat Tbk.
Date : March 26, 2007
By :
_______________________________
Name : Kaizad B. Heerjee
Title : Deputy President Director
110
