These Consolidated Financial Statements are Originally Issued in Indonesian Language.
PERUSAHAAN PERSEROAN (PERSERO)
PT INDONESIAN SATELLITE CORPORATION Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended December 31, 2000, 2001 And 2002
(Expressed in Rupiah)
Consolidated Financial Statements
With Independent Auditors’ Report
Years Ended December 31, 2006 and 2007
With Comparative Figures for 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
YEARS ENDED DECEMBER 31, 2006 AND 2007
WITH COMPARATIVE FIGURES FOR 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
Consolidated Statements of Cash Flows
………………………………………………………………
8 - 9
Notes to Consolidated Financial Statements
………………………………………………………….
10 - 97
***************************
This report is originally issued in Indonesian language.
Independent Auditors’ Report
Report No. RPC-8449
The Stockholders and Boards of Commissioners and Directors
PT Indosat Tbk
We have audited the consolidated balance sheets of PT Indosat Tbk (“the Company”) and subsidiaries as of December 31, 2006 and 2007, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years 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 audits. The consolidated financial statements of the Company and subsidiaries for the year ended December 31, 2005 were audited by Prasetio, Sarwoko & Sandjaja, whose report dated February 21, 2006 expressed an unqualified opinion on those statements.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the 2006 and 2007 financial statements referred to above present fairly, in all material respects, the consolidated financial position of PT Indosat Tbk and subsidiaries as of December 31, 2006 and 2007, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles in Indonesia.
Purwantono, Sarwoko & Sandjaja
Drs. Hari Purwantono
Public Accountant License No. 98.1.0065
February 15, 2008
The accompanying financial statements are not intended to present the consolidated 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 and 2007
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2006
2007
(Note 3)
Rp
Rp
US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2c,4,26
2,807,260
8,053,006
857,341
Short-term investments - net of
allowance for decline in value
of Rp25,395 in 2006 and 2007
2d
-
1,250
133
Accounts receivable
2e
Trade
5,15
Related parties - net of
allowance for doubtful
accounts of Rp141,263
in 2006 and Rp88,342 in
2007
26
174,742
133,345
14,196
Third parties - net of allowance
for doubtful accounts of
Rp423,730 in 2006 and
Rp326,142 in 2007
1,096,866
897,623
95,563
Others - net of allowance
for doubtful accounts of
Rp16,572 in 2006 and
Rp17,240 in 2007
10,392
20,901
2,225
Inventories
2f
110,935
161,573
17,202
Derivative assets
2q,29
16,550
127,717
13,597
Advances
19,071
38,017
4,047
Prepaid taxes
6,13
1,051,442
714,322
76,048
Prepaid expenses
2g,2p,25,26
324,875
618,893
65,889
Other current assets
2c,26
53,299
27,480
2,926
Total Current Assets
5,665,432
10,794,127
1,149,167
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 and 2007
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2006
2007
(Note 3)
Rp
Rp
US$
NON-CURRENT ASSETS
Due from related parties - net of
allowance for doubtful
accounts of Rp2,795 in 2006
and Rp2,257 in 2007
2e,26
23,336
56,455
6,010
Deferred tax assets - net
2s,13
46,567
87,118
9,275
Investments in associated
companies - net of allowance
for decline in value of Rp56,300
in 2006 and 2007
2h,7
286
286
30
Other long-term investments - net of
allowance for decline in value of
Rp99,977 in 2006 and 2007
2h,8
8,509
2,730
291
Property and equipment
2i,2j,2o,
9,15,22
Carrying value
41,705,278
51,164,867
5,447,127
Accumulated depreciation
(16,688,019
)
(20,493,483
)
(2,181,782
)
Impairment in value
(98,611
)
(98,611
)
(10,498
)
Net
24,918,648
30,572,773
3,254,847
Goodwill and other
intangible assets - net
2k,10
2,689,751
2,350,467
250,236
Long-term receivables
103,121
77,515
8,252
Long-term prepaid pension - net
of current portion
2p,25,26
230,284
198,360
21,118
Long-term advances
11,26
213,771
646,997
68,881
Others
328,953
518,258
55,175
Total Non-current Assets
28,563,226
34,510,959
3,674,115
TOTAL ASSETS
34,228,658
45,305,086
4,823,282
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 and 2007
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2006
2007
(Note 3)
Rp
Rp
US$
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
Related parties
26
34,139
40,488
4,310
Third parties
270,292
405,962
43,220
Procurement payable
12,26
3,292,543
6,206,649
660,774
Taxes payable
2s,13
211,868
436,450
46,465
Accrued expenses
14,25,26
896,435
1,340,435
142,706
Unearned income
2n
571,944
709,827
75,570
Deposits from customers
93,044
40,947
4,359
Derivative liabilities
2q,29
224,293
64,310
6,847
Current maturities of:
Loans payable
2l,15
127,191
494,387
52,633
Bonds payable
2l,16
1,055,526
1,860,000
198,020
Other current liabilities
26
25,930
59,126
6,295
Total Current Liabilities
6,803,205
11,658,581
1,241,199
NON-CURRENT LIABILITIES
Due to related parties
26
29,440
64,850
6,904
Deferred tax liabilities - net
2s,13
1,244,502
1,482,221
157,801
Loans payable - net of current
maturities
2l,15
Related parties
26
635,649
1,794,909
191,090
Third parties
869,045
2,454,124
261,272
Bonds payable - net of current
maturities
2l,16
8,734,012
10,088,741
1,074,070
Other non-current liabilities
17,25,26
510,440
919,560
97,898
Total Non-current Liabilities
12,023,088
16,804,405
1,789,035
TOTAL LIABILITIES
18,826,293
28,462,986
3,030,234
MINORITY INTEREST
2b
200,620
297,370
31,659
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 and 2007
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2006
2007
(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 5,433,933,499 B shares
in 2006 and 2007
18,19
543,393
543,393
57,851
Premium on capital stock
18,19
1,546,587
1,546,587
164,653
Difference in transactions of equity
changes in associated
companies/subsidiaries
2h
403,812
403,812
42,991
Difference in foreign currency
translation
2b
182
6,177
658
Retained earnings
Appropriated
66,157
80,258
8,544
Unappropriated
12,641,614
13,964,503
1,486,692
TOTAL STOCKHOLDERS’ EQUITY
15,201,745
16,544,730
1,761,389
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
34,228,658
45,305,086
4,823,282
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
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2005
2006
2007
(Note 3)
Rp
Rp
Rp
US$
OPERATING REVENUES
2n,20,26,
31,32,33
Cellular
8,644,951
9,227,537
12,752,496
1,357,660
Multimedia, Data
Communication,
Internet (“MIDI”)
1,694,033
1,902,589
2,168,584
230,872
Fixed telecommunication
1,250,807
1,109,281
1,567,415
166,870
Total Operating Revenues
11,589,791
12,239,407
16,488,495
1,755,402
OPERATING EXPENSES
2n
Cost of services
21,26
2,626,945
2,704,173
4,779,883
508,877
Depreciation and amortization
2i,2k,9,10
3,080,205
3,653,266
4,195,202
446,631
Personnel
2m,2o,2p,19,
22,25,26
1,264,653
1,350,468
1,594,786
169,784
Administration and general
23,26
606,022
663,921
706,124
75,176
Marketing
360,049
468,920
692,896
73,767
Total Operating Expenses
7,937,874
8,840,748
11,968,891
1,274,235
OPERATING INCOME
3,651,917
3,398,659
4,519,604
481,167
OTHER INCOME (EXPENSES)
2n
Interest income
26
215,103
212,823
232,411
24,743
Gain (loss) on change in fair value
of derivatives - net
2q,29
(44,209
)
(438,774
)
68,023
7,242
Financing cost
2l,15,16,
24,26
(1,264,764
)
(1,248,899
)
(1,428,604
)
(152,092
)
Amortization of goodwill
2k,10
(226,352
)
(226,507
)
(226,507
)
(24,115
)
Gain (loss) on foreign
exchange - net
2q,2r,5
(79,932
)
304,401
(155,315
)
(16,535
)
Gain on sale of investment in
associated company
7
14,625
-
-
-
Gain on sale of other long-term
investments - net
1,204
-
-
-
Others - net
13
85,117
21,202
(79,996
)
(8,517
)
Other Expenses - Net
(1,299,208
)
(1,375,754
)
(1,589,988
)
(169,274
)
EQUITY IN NET INCOME (LOSS)
OF ASSOCIATED COMPANY
2h,7
86
(238
)
-
-
INCOME BEFORE INCOME TAX
2,352,795
2,022,667
2,929,616
311,893
INCOME TAX EXPENSE
2s,13
Current
331,541
199,629
660,675
70,337
Deferred
366,383
376,478
198,842
21,169
Total Income Tax Expense
697,924
576,107
859,517
91,506
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)
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2007
Notes
2005
2006
2007
(Note 3)
Rp
Rp
Rp
US$
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,654,871
1,446,560
2,070,099
220,387
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(31,390
)
(36,467
)
(28,056
)(2,987
)
NET INCOME
1,623,481
1,410,093
2,042,043
217,400
BASIC EARNINGS PER SHARE
2u,18,27
309.04
260.90
375.79
0.04
DILUTED EARNINGS PER
2u,18,
SHARE
19,27
309.04
258.82
375.79
0.04
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2u,18,27
15,452.16
13,045.17
18,789.73
2.00
2u,18,
DILUTED EARNINGS PER ADS
19,27
15,452.16
12,940.98
18,789.73
2.00
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
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah)
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
Employee Stock Option Program (“ESOP”):
Issuance of capital stock resulting from the exercise of ESOP Phase I and
Phase II
2m,18,19
7,086
297,405
-
(71,183)
-
-
-
233,308
Proportionate seven months’ compensation expense relating to ESOP Phase II
2m,19,22
-
-
-
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. dollar, and of Indosat Finance Company B.V. and Indosat International
Finance Company B.V. from euro to rupiah - net of applicable income
tax benefit of Rp64, Rp19 and Rp3, respectively
2b
-
-
-
-
(201
)
-
-
(201)
Resolution during the Annual Stockholders’ General Meeting on June 8, 2005
Declaration of cash dividend
28
-
-
-
-
-
-
(816,591
)
(816,591)
Appropriation for reserve fund
28
-
-
-
-
-
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 &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp;
ESOP:
Issuance of capital stock resulting from the exercise of ESOP Phase II
2m,18,19
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
28
-
-
-
-
-
-
(808,956
)
(808,956)
Appropriation for reserve fund
28
-
-
-
-
-
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;
Increase 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. from U.S. dollar to rupiah -
net of applicable income tax expense of Rp1,272, Rp1,250, and Rp48, respectively
2b
-
-
-
-
5,995
-
-
5,995
Resolution during the Annual Stockholders’ General Meeting on June 5, 2007
Declaration of cash dividend
28
-
-
-
-
-
-
(705,053
)
(705,053)
Appropriation for reserve fund
28
-
-
-
-
-
14,101
(14,101
)
-
Net income for the year
-
-
-
-
-
-
2,042,043
2,042,043
Balance as of December 31, 2007
543,393
1,546,587
403,812
-
6,177
80,258
13,964,503
16,544,730
; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ; &n bsp; ;
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 CASH FLOWS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar)
2007
Notes
2005
2006
2007
(Note 3)
Rp
Rp
Rp
US$
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
11,402,721
12,177,148
16,678,536
1,775,635
Interest income
215,114
217,152
225,635
24,022
Refund of taxes
6
176,408
86,981
195,441
20,807
Termination of currency
forward contracts
29n,29t
-
-
3,702
394
Interest rate swap contracts
29v,29x,29y
9,174
5,250
1,386
147
Cash paid to/for:
Employees, suppliers and others
(4,405,641
)
(5,081,152
)
(6,975,765
)
(742,656
)
Financing cost
(1,166,621
)
(1,237,161
)
(1,367,791
)
(145,618
)
Taxes
(796,369
)
(391,881
)
(370,179
)
(39,410
)
Swap cost from cross currency
29a,29c,
swap contracts
29e-29m
(42,279
)
(103,216
)
(117,036
)
(12,460)
Termination of swap contracts
29c,
29u-29x
(76,475
)
(3,498
)
-
-
Net Cash Provided by Operating
Activities
5,316,032
5,669,623
8,273,929
880,861
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from capital contribution of
minority interest
1d
-
-
47,685
5,077
Dividend income received
8
-
-
40,105
4,270
Proceeds from sale of property
and equipment
9
463
1,249
478
51
Acquisitions of property and
equipment
9
(6,771,870
)
(6,054,014
)
(6,933,646
)
(738,172)
Additional advances for purchase of
property and equipment
(36,550
)
-
(433,226
)
(46,122)
Acquisition of intangible assets
10
-
(320,000
)
(10,532
)
(1,121)
Purchase of short-term investments
(47,341
)
-
(1,250
)
(133)
Proceeds from sale of short-term
investment
1,131
47,587
-
-
Purchase of other long-term
investment
8
-
(5,779
)
-
-
Proceeds from sale of other long-
term investments
8
100,631
-
-
-
Decrease in restricted
cash and cash equivalents
81,288
-
-
-
Proceeds from sale of investments in
subsidiaries
1d
40,141
-
-
-
Proceeds from sale of investment
in associated company
7
14,625
-
-
-
Additional investment in a subsidiary
1d
(17,481
)
-
-
-
Net Cash Used in Investing Activities
(6,634,963
)
(6,330,957
)
(7,290,386
)
(776,150)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term loans
15
40,059
357,366
4,450,924
473,855
Proceeds from bonds payable
16
3,484,992
31,150
3,000,000
319,387
Repayment of long-term loans
15
(653,579
)
(84,394
)
(1,377,742
)
(146,678)
Repayment of bonds payable
16
(51,347
)
(956,644
)
(1,050,000
)
(111,785)
Cash dividend paid
28
(816,591
)
(808,956
)
(705,053
)
(75,062)
Swap cost from cross currency
swap contracts
29b,29d
(64,121
)
(61,885
)
(61,572
)
(6,555)
Cash dividend paid by subsidiaries
to minority interest
(9,046
)
(11,537
)
(14,207
)
(1,513
)
Decrease (increase) in restricted
cash and cash equivalents
11,210
(1,685
)
(5,400
)
(575)
Proceeds from exercise of ESOP
Phase I and Phase II
19
233,309
287,910
-
-
Payment for termination of
cross currency swap contract
29b
(111,508
)
-
-
-
Net Cash Provided by (Used in)
Financing Activities
2,063,378
(1,248,675
)
4,236,950
451,074
The accompanying notes form an integral part of these consolidated financial statements.
9
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar)
2007
Notes
2005
2006
2007
(Note 3)
Rp
Rp
Rp
US$
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
744,447
(1,910,009
)
5,220,493
555,785
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
4,010,238
4,717,269
2,807,260
298,867
BEGINNING BALANCE OF CASH
AND CASH EQUIVALENTS OF
NEW (DIVESTED)
SUBSIDIARY
1d
(37,416
)
-
25,253
2,689
CASH AND CASH EQUIVALENTS
AT END OF YEAR
4
4,717,269
2,807,260
8,053,006
857,341
DETAILS OF CASH AND CASH
EQUIVALENTS:
Cash on hand and in banks
136,278
240,406
250,558
26,675
Time deposits with original
maturities of three months
or less
4,580,991
2,566,854
7,802,448
830,666
Cash and cash equivalents as
stated in the consolidated
balance sheets
4,717,269
2,807,260
8,053,006
857,341
SUPPLEMENTAL CASH FLOW
INFORMATION:
Transactions not affecting cash flows:
Acquisitions of property and
equipment credited to:
Procurement payable
505,666
753,734
2,515,646
267,821
Other non-current liabilities
-
-
266,573
28,380
Long-term advances
-
113,580
-
-
Premium on capital stock
71,182
88,179
-
-
Stock options
19,556
(90,763
)
-
-
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
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 by American Cable and Radio Corporation, an International Telephone & Telegraph subsidiary, 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) to 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 of the Republic of Indonesia.
In 1999, the Government issued Law No. 36 on Telecommunications (“Telecommunications Law”) which took effect on September 8, 2000. Under the Telecommunications Law, telecommunications activities cover:
·
Telecommunications networks
·
Telecommunications services
·
Special telecommunications services.
11
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
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 of the Republic of Indonesia 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 of the Republic of Indonesia 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 18), whereby the Government of the Republic of Indonesia 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 rights.
12
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
The following are in-principle and operational licenses obtained by the Company:
License No. | Date Issued | Issuing Body | Period of License | Description |
1495/PT.003/TEL/DJPT-2001 | June 28, 2001 | Directorate General of Post and Telecommunications (“DGPT”) | - | In-principle license for Voice over Internet Protocol (“VoIP”) service. |
823/DIRJEN/2002 | April 26, 2002 | DGPT | Evaluated every 5 years | Operating license for VoIP with national coverage (Note 37b). |
KP.68/Thn 2004 | March 15, 2004 | Ministry of Communications (“MOC”) | Evaluated every 5 years | Operating license for nationwide GSM cellular mobile network (including its basic telephony services). |
KP.69/Thn 2004 | March 15, 2004 | MOC | Evaluated every 5 years | Operating license for nationwide closed fixed communications network (e.g., VSAT, frame relay, etc.). |
KP.203/Thn 2004 | May 21, 2004 | MOC | Evaluated every 5 years | Operating license for fixed network and basic telephony services which covers the provision of local, national long-distance, and international long-distance telephony services. |
PT.003/4/25 PHB 2004 | October 18, 2004 | MOC | - | In-principle license for third generation (3G) mobile communications technology. |
19/KEP/M.KOMINFO/02/2006 | February 14, 2006 | Ministry of Communications and Information Technology (“MOCIT”) | 10 years | Operating license as IMT-2000 cellular network provider using 2.1 GHz radio frequency spectrum (known as “3G’) for 1 block (2 x 5 Mhz) of frequency. (*) |
102/KEP/M.KOMINFO/10/2006 | October 11, 2006 | MOCIT | Evaluated every year | Amendment of operating license No. 68/Thn 2004 dated March 15, 2004 to include the rights and obligations of 3G services. |
181/KEP/M.KOMINFO/12/2006 | December 12, 2006 | MOCIT | - | Allocation of two nationwide frequency channels, i.e., channels 589 and 630 in the 800 MHz spectrum for Local Fixed Wireless Network Services with Limited Mobility. |
162/KEP/M.KOMINFO/05/2007 | May 2, 2007 | MOCIT | - | Temporary use of channel 548 for Local Fixed Wireless Network Services with Limited Mobility until December 2007 with obligation to pay radio frequency fee for one year.(**) |
210/DIRJEN/2007 | October 2, 2007 | DGPT | - | In-principle license as internet service provider (Note 37a). |
(*)
As one of the winners in the selection of IMT-2000 cellular providers, the Company was obliged, among others, to pay upfront fee of Rp320,000 (Note 10) and radio frequency fee.
(**)
The Company cancelled its plan to use channel 548 due to technical issues during the migration process. The Company informed the DGPT about this matter through its Letter No. 1114/I00-ICO/REL/07 dated December 27, 2007.
13
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
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 Indonesia Stock Exchange (new entity after the merger of Jakarta Stock Exchange and Surabaya Stock Exchange in November 2007) 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.
As of December 31, 2007, the Companies’ outstanding bonds issued to the public are as follows:
Bond | Effective Date | Registered with and Traded on |
1. Second Indosat Bonds in Year 2002 with Fixed and Floating Rates | November 6, 2002 | Indonesia Stock Exchange |
2. Third Indosat Bonds in Year 2003 with Fixed Rates | October 15, 2003 | Indonesia Stock Exchange |
3. Guaranteed Notes Due 2010 | October 2003 | Luxembourg Stock Exchange and Singapore Exchange Securities Trading Limited |
4. Fourth Indosat Bonds in Year 2005 with Fixed Rate | June 21, 2005 | Indonesia Stock Exchange |
5. Indosat Syari’ah Ijarah Bonds in Year 2005 | June 21, 2005 | Indonesia Stock Exchange |
6. Guaranteed Notes Due 2012 | June 22, 2005 | Luxembourg Stock Exchange and Singapore Exchange Securities Trading Limited |
7. Fifth Indosat Bonds in Year 2007 with Fixed Rates | May 29, 2007 | Indonesia Stock Exchange |
8. Indosat Sukuk Ijarah II in Year 2007 | May 29, 2007 | Indonesia Stock Exchange |
c.
Employees, Directors, Commissioners and Audit Committee
Based on resolutions of the Annual Stockholders’ General Meetings held on June 8, 2005, June 29, 2006 and June 5, 2007 which are notarized under Deed No. 40, No. 175 and No. 11, respectively, of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same dates, the composition of the Company’s Board of Commissioners and Board of Directors as of December 31, 2005, 2006 and 2007, respectively, is as follows:
2005 and 2006
2007
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
Setyanto P. Santosa
Setyanto P. Santosa
Commissioner
Sheikh Mohammed Bin
-
Suhaim Hamad Al-Thani
Commissioner
Lim Ah Doo*
Lim Ah Doo*
Commissioner
Farida Eva Riyanti Hutapea*
Setio Anggoro Dewo*
Commissioner
Soeprapto S. IP*
Soeprapto S. IP*
* Independent commissioner
14
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
1.
GENERAL (continued)
c.
Employees, Directors, Commissioners and Audit Committee (continued)
2005
2006
2007
President Director
Hasnul Suhaimi
- * and **
Johnny Swandi Sjam
Deputy President Director
Kaizad Bomi Heerjee
Kaizad Bomi Heerjee
Kaizad Bomi Heerjee
Finance Director
Wong Heang Tuck
Wong Heang Tuck
Wong Heang Tuck
Corporate Services Director
S. Wimbo S. Hardjito
S. Wimbo S. Hardjito
Wahyu Wijayadi
Information Technology Director
Joseph Chan
Joseph Chan
Roy Kannan
Lam Seng
Lam Seng
Jabotabek and Corporate Sales
Director
-
Johnny Swandi Sjam
Fadzri Sentosa
Regional Sales Director
-
Wityasmoro Sih
Syakieb A. Sungkar
Handayanto
Marketing Director
-
Wahyu Wijayadi
Guntur S. Siboro
Network Director
-
Raymond Tan
Raymond Tan
Kim Meng
Kim Meng
Consumer Market Director
Johnny Swandi Sjam
-
-
Planning and Project
Development Director
Wityasmoro Sih
Handayanto
-
-
Corporate Market Director
Wahyu Wijayadi
-
-
Network Operation and Quality
Raymond Tan
Management Director
Kim Meng
-
-
*
In the absence of a President Director, the tasks of the President Director had been carried out by the Deputy President Director.
**
On June 16, 2006, the Board of Commissioners approved the resignation of Hasnul Suhaimi effective June 8, 2006.
The composition of the Company’s Audit Committee as of December 31, 2005, 2006 and 2007 is as follows:
2005 and 2006
2007
Chairman
Lim Ah Doo
Lim Ah Doo
Member
Farida Eva Riyanti Hutapea
Setio Anggoro Dewo
Member
Soeprapto S. IP
Soeprapto S. IP
Member
Achmad Rivai
Achmad Rivai
Member
Achmad Fuad Lubis
Achmad Fuad Lubis
The Company and subsidiaries (collectively referred to hereafter as “the Companies”) have approximately 8,137, 7,786 and 7,645 employees (unaudited), including non-permanent employees, as of December 31, 2005, 2006 and 2007, respectively.
15
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries
The Company has direct and indirect ownership in the following subsidiaries:
Start of
Percentage of Ownership (%)
Commercial
Name of Subsidiary
Location
Principal Activity
Operations
2005
2006
2007
Indosat Finance Company B.V.
(“IFB”)(1)
Amsterdam
Finance
2003
100.00
100.00
100.00
Indosat International Finance
Company B.V. (“IIFB”)(1)
Amsterdam
Finance
2005
100.00
100.00
100.00
Indosat Singapore Pte. Ltd. (“ISP”)(2)
Singapore
Telecommunication
2005
100.00
100.00
100.00
PT Indosat Mega Media (“IMM”)
Jakarta
Multimedia
2001
99.85
99.85
99.85
PT Satelindo Multi Media (“SMM”)(3)
Jakarta
Multimedia
1999
99.60
99.60
99.60
PT Aplikanusa Lintasarta
(“Lintasarta”)(6)
Jakarta
Data Communication
1989
72.36
72.36
72.36
PT Starone Mitra Telekomunikasi
(”SMT”)
Semarang
Telecommunication
2006
-
14.60
55.36
PT Artajasa Pembayaran Elektronis
(“APE”)
Jakarta
Telecommunication
2000
39.80
39.80
39.80
Satelindo International
Finance B.V. (“SIB”)(4)
Amsterdam
Finance
1996
100.00
100.00
-
PT Sisindosat Lintasbuana
(“Sisindosat”)(5)
Jakarta
Information Technology
1990
-
-
-
PT Asitelindo Data Buana
(“Asiatel”)(5)
Jakarta
Multimedia
1997
-
-
-
Total Assets
(Before Eliminations)
Name of Subsidiary
2005
2006
2007
IFB(1)
2,984,732
2,762,776
2,882,340
IIFB(1)
2,462,039
2,283,380
2,382,722
ISP(2)
-
7,300
10,249
IMM
523,014
605,538
753,797
SMM(3)
10,690
10,690
10,697
Lintasarta(6)
876,201
985,605
1,075,467
SMT
-
36,460
176,444
APE
73,627
94,311
104,487
SIB(4)
8,526
7,555
-
Sisindosat(5)
-
-
-
Asiatel(5)
-
-
-
(1)
Based on shareholder’s resolutions of IFB and IIFB dated February 20, 2006, the Company made additional capital injection of EUR2,000,000 (equivalent to Rp23,352) each to IFB and IIFB on August 31, 2006.
(2)
Based on a shareholder’s resolution of ISP dated April 20, 2006, the Company agreed to make capital injection in ISP totalling US$650 (equivalent to SGD1,075,750). The Company transferred in full such amount to ISP’s bank account on April 26, 2006.
(3)
Based on a circular shareholder’s resolution of SMM, SMM would be subject to liquidation effective May 5, 2006. As of December 31, 2007, such liquidation has not yet been finalized.
(4)
Liquidated in January 2007
(5)
Sold in January 2005
(6)
Refer to Note 16 on conversion of Lintasarta’s convertible bonds in June 2007.
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 for Central Java and its surrounding areas.
Based on an amendment dated August 23, 2006 to SMT’s Articles of Association, in August 2006 the Company contributed Rp5,779 cash as part of the capital of SMT. SMT started its business operations in January 2007.
16
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
Furthermore, based on the latest amendment dated April 24, 2007 to SMT’s Articles of Association, in May 2007 the Company made additional cash capital injection amounting to Rp49,728 and in-kind contribution of Rp45,523 in form of telecommunications equipment. Based on such Articles of Association, the Company has 51.00% ownership in SMT. However, one of the stockholders decided not to make its capital injection as required. As a result, the Company’s ownership increased to 55.36%.
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, PT Satelit Palapa Indonesia (“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.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies adopted by 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, 2005, 2006 and 2007 are as follows:
a.
Basis of Consolidated Financial Statements
The consolidated financial statements are presented using the historical cost basis of accounting, except for inventories which are stated at the lower of cost or net realizable value, derivative instruments 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.
17
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation
The consolidated financial statements include the Company’s accounts and those of its subsidiaries (Note 1d).
Effective May 16, 2007, the net assets of SMT were consolidated as a result of the Company’s effective ownership of 55.36% (Note 1d), while prior to May 16, 2007, the investment in SMT was accounted for using the cost method (Note 8).
The consolidated financial statements also include the accounts of APE (Lintasarta’s 55%-owned subsidiary). The accounts of APE in 2005, 2006 and 2007 were consolidated because its financial and operating policies were controlled by Lintasarta.
The accounts of IFB, IIFB, ISP and SIB 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 IFB, IIFB, ISP and SIB 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 (including net income) of the subsidiaries which are not wholly owned. All significant inter-company transactions and balances are eliminated in consolidation.
c.
Cash and Cash Equivalents
Time deposits with original maturities of three months or less at the time of placement are considered as “Cash Equivalents”.
Cash in banks and time deposits which are pledged as collateral for long-term debts, Letter of Credit facilities and bank guarantees and time deposits with original maturities of more than three months 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”.
d.
Short-term Investments
·
Mutual fund
Mutual fund, which is classified as trading security under Statement of Financial Accounting Standards (“SAK”) 50, “Accounting for Investments in Certain Securities”, is stated at its net assets value at balance sheet date. Unrealized gain or loss from the changes in net assets value at balance sheet date is credited (charged) to current operations.
·
Time deposits with original maturities of more than three months at the time of placement are recorded at historical value.
e.
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.
18
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f.
Inventories
Inventories, which mainly consist of SIM cards, 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.
g.
Prepaid Expenses
Prepaid expenses, which mainly consist of frequency fee, 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”.
h.
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 in which the equity interest is less than 20% and which are classified as available-for-sale, are recorded at fair value, in accordance with SAK 50.
i.
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 as follows:
19
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i.
Property and Equipment (continued)
Years
Buildings
15 to 20
Submarine cables
12
Earth stations
10
Inland link
15
Switching equipment
10
Telecommunications peripherals
5
Information technology equipment
3 to 5
Office equipment
5
Building and leasehold improvements
5
Vehicles
5
Cellular technical equipment
10 to 15
Satellite technical equipment
12
Transmission and cross-connection equipment
12
Fixed Wireless Access (“FWA”) technical equipment
10
Landrights are stated at cost.
The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments which enhance the asset condition on 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 recognized in the consolidated statement of income for the year.
Properties under construction and installation are stated at cost. 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.
j.
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.
k.
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.
20
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k.
Goodwill and Other Intangible Assets (continued)
At the time of acquisition of a subsidiary, any intangible assets recognized are amortized using the straight-line method based on the estimated useful lives of the assets as follows:
Years
Customer base
- Prepaid
6
- Post-paid
5
Spectrum license
5
Brand
8
Upfront fee in connection with the license to use 2.1 GHz radio frequency bandwidth (Note 1a) is amortized using the straight-line method over 10 years.
Software that is not an integral part of the related hardware is amortized using the straight-line method over 5 years.
The Company reviews 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.
l.
Debt and Bonds Issuance Costs
Expenses incurred in connection with the issuance of debt and bonds are deducted from the proceeds thereof. The difference between the net proceeds and the nominal value of the debt or bonds is recognized as premium or discount that should be amortized over the term of the debt or bonds.
m.
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.
n.
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.
Cellular revenues are presented on a net basis, after compensation to value added service providers.
21
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition (continued)
MIDI
Frame Net, World Link and Direct Link
Revenues arising from installation service are recognized upon the completion of the installation of equipment used for network connection purposes in the customers’ premises. Revenues from monthly service fees are recognized as the services are provided.
Internet
Revenues arising from installation service are recognized at the time the installations are placed in service. Revenues from monthly service fees are recognized as the services are provided. Revenues from usage charges are recognized monthly based on the duration of internet usage or based on the fixed amount of charges depending on the arrangement with the customers.
Satellite Lease
Revenues are recognized on the straight-line basis over the lease term.
Revenues from other MIDI services are recognized when the services are rendered.
Fixed Telecommunication
International Calls
Revenues from outgoing international call traffic are recognized on the basis of the actual recorded traffic for the year and are reported on a net basis, after allocations to overseas international carriers.
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 subscribers, 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 income and recognized as income upon usage of the airtime or upon expiration of the airtime.
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.
22
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition (continued)
Interconnection Revenue
Revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month.
Operating revenues for interconnection services under interconnection agreements based on revenue-sharing arrangement (Note 32) are reported on a net basis, after interconnection expenses/charges. Operating revenues for interconnections that are not made under contractual sharing agreements, i.e., based on tariff as stipulated by the Government (Note 31), are reported on a gross basis, before interconnection expenses/charges (Note 21). These interconnection expenses/charges are accounted for as operating expenses in the year these are incurred.
In 2007, the Companies entered into several memoranda of understanding to amend the existing revenue-sharing arrangements and to reflect the new cost-based interconnection scheme based on Regulation No. 08/PER/M.KOMINFO/02/2006 of the MOCIT (Note 32). Under the new scheme, operating revenues for interconnection services are reported on a gross basis starting 2007. The interconnection expenses/charges are accounted for as operating expenses in the year these are incurred.
Expenses
Expenses are recognized when incurred.
o.
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.
p.
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. Actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10% of the present value of the defined benefit obligation or fair value of plan assets, whichever is greater, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees. Past 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).
23
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Derivatives
The Company enters into and engages in cross currency swap, interest rate swap and currency forward contracts/transactions for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s bonds payable in foreign currencies.
The Company applies SAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”. SAK 55 (Revised 1999) 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 (Revised 1999), the Company’s instruments do not qualify and are not designated as hedge activities for accounting purposes. The changes in the fair value of such derivative instruments are recorded directly as a charge or credit to current operations.
Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivative is presented with the host contract on the balance sheet which represents an appropriate presentation of overall future cash flows for the instrument taken as a whole.
The net changes in fair value of derivative instruments, swap cost or income and termination cost or income are charged or credited to “ Gain (Loss) on Change in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statements of income.
The gain (loss) from the settlement of currency forward contracts is credited or charged to “Gain (Loss) on Foreign Exchange - Net”, which is presented under Other Income (Expenses) in the consolidated statements of income.
r.
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 prevailing exchange rates at such date 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, 2005, 2006 and 2007, the foreign exchange rates used (in full amounts) were Rp9,830, Rp9,020 and Rp9,393, respectively, the prevailing exchange rates as of the balance sheet dates.
s.
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 carryover 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.
24
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s.
Income Tax (continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
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
carryover, which individually are either assets or liabilities, are shown at the applicable net amounts.
t.
Segment Reporting
The Companies follow SAK 5 (Revised 2000), “Segment Reporting”, in the presentation of segment reporting in their financial statements. SAK 5 (Revised 2000) 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 35.
u.
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 including the effect of exercise of ESOP, if any (Note 27).
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 of convertible bonds issued by a subsidiary (Note 16).
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.
v.
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.
25
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
3.
TRANSLATIONS OF RUPIAH INTO UNITED STATES DOLLAR
The consolidated financial statements are stated in rupiah. The translations of the rupiah into U.S. dollar (US$) are included solely for the convenience of the readers, using the prevailing rate of Rp9,393 to US$1(in full amounts) as of the balance sheet date. 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:
2006
2007
Cash on hand
Rupiah
1,350
1,563
U.S. dollar (US$21)
185
-
1,535
1,563
Cash in banks
Related parties (Note 26)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
11,978
15,910
PT Bank DKI
17,583
5,873
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
1,848
2,431
PT Bank Danamon Indonesia Tbk (“Danamon”)
515
2,278
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
178
1,612
PT Bank Internasional Indonesia Tbk (“BII”)
1,605
771
Bank Pembangunan Daerah Yogyakarta
(“BPD-DIY”)
1,321
626
PT Bank Syariah Mandiri (“Mandiri Syariah”)
1,287
612
PT Bank Pembangunan Daerah Sumatera Selatan
(“BPD-Sumsel”)
1,128
-
Others (each below Rp1,000)
1,398
1,831
U.S. dollar
Mandiri (US$575 in 2006 and US$638 in 2007)
5,188
5,996
Others (US$40 in 2006 and US$37 in 2007)
362
351
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)
82,836
41,472
Citibank N.A., Jakarta Branch (“Citibank”)
4,123
11,199
Deutsche Bank AG, Jakarta Branch (“DB”)
9,763
9,111
PT Bank Niaga Tbk (“Niaga”)
4,707
5,264
The Hongkong and Shanghai Banking Corp. Ltd.,
Jakarta Branch (“HSBC”)
6,107
2,370
Others (each below Rp5,000)
8,734
8,459
U.S. dollar
Fortis Bank, the Netherlands (US$5,442 in 2006 and
US$6,528 in 2007)
49,089
61,316
Citibank (US$1,867 in 2006 and US$3,788 in 2007)
16,843
35,580
26
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
4.
CASH AND CASH EQUIVALENTS (continued)
2006
2007
Cash in banks (continued)
Third parties (continued)
U.S. dollar (continued)
DB (US$801 in 2006 and US$2,902 in 2007)
7,227
27,261
Others (US$560 in 2006 and US$924 in 2007)
5,051
8,672
238,871
248,995
Time deposits
Related parties (Note 26)
Rupiah
Mandiri
364,285
1,953,535
BRI
50,000
685,000
Mandiri Syariah
-
454,000
Danamon
61,400
411,800
PT Bank Tabungan Negara (Persero) (“BTN”)
39,000
265,000
PT Bank DBS Indonesia (“DBS”)
-
150,000
BNI
78,715
56,746
PT Bank Pembangunan Daerah Jawa Tengah
-
20,000
BPD - DIY
1,000
1,000
PT Bank Pembangunan Daerah Sulawesi Utara
1,000
1,000
Others
-
104
U.S. dollar
DBS (US$40,000)
-
375,720
BNI (US$20,000 in 2006 and US$30,000
in 2007)
180,400
281,790
Mandiri (US$2,603 in 2006 and US$12,724 in 2007)
23,479
119,517
Danamon (US$15,000 in 2006 and US$10,000 in 2007)
135,300
93,930
BTN (US$5,000 in 2006 and 2007)
45,100
46,965
Mandiri Syariah (US$10,000)
90,200
-
Third parties
Rupiah
DB
112,175
788,685
Niaga
110,000
386,000
PT Bank Bukopin (”Bukopin”)
57,500
371,500
PT Bank Muamalat Indonesia Tbk (“Muamalat”)
70,000
225,000
BCA
54,450
216,450
PT Bank Mega Tbk
14,052
2,801
Others
6
2,061
U.S. dollar
Muamalat (US$10,000 in 2006 and US$35,000 in 2007)
90,200
328,755
Niaga (US$17,650 in 2006 and US$27,100 in 2007)
159,203
254,550
DB (US$48,950 in 2006 and US$23,061 in 2007)
441,529
216,609
Bukopin (US$18,000 in 2006 and US$10,000 in 2007)
162,360
93,930
Citibank (US$25,000)
225,500
-
2,566,854
7,802,448
Total
2,807,260
8,053,006
27
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
4.
CASH AND CASH EQUIVALENTS (continued)
Time deposits denominated in rupiah earned interest at annual rates ranging from 4.00% to 13.00% in 2005, from 3.25% to 13.20% in 2006 and from 2.25% to 11.40% in 2007, while those denominated in U.S. dollar earned interest at annual rates ranging from 0.65% to 4.25% in 2005, from 1.00% to 5.15% in 2006 and from 1.50% to 5.38% in 2007.
The interest rates on time deposits in related parties are comparable to those offered by third parties.
5.
ACCOUNTS RECEIVABLE - TRADE
This account consists of the following:
2006
2007
Related parties (Note 26):
Telkom (including US$394 in 2006 and US$268 in 2007)
136,962
38,208
Others (including US$15,762 in 2006 and US$15,850 in 2007)
179,043
183,479
Sub-total
316,005
221,687
Less allowance for doubtful accounts
141,263
88,342
Net
174,742
133,345
Third parties:
Overseas international carriers (including US$93,846 in 2006 and
US$61,322 in 2007)
855,546
575,998
Local companies (including US$13,086 in 2006 and US$21,211 in 2007)
278,339
365,802
Post-paid subscribers from:
Cellular
361,890
244,949
Fixed lines
6,936
22,742
Fixed wireless
17,885
14,274
Sub-total
1,520,596
1,223,765
Less allowance for doubtful accounts
423,730
326,142
Net
1,096,866
897,623
Total
1,271,608
1,030,968
The aging schedule of the accounts receivable - trade is as follows:
2006
2007
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Related parties - Telkom
0 - 3 months
61,270
44.74
9,299
24.34
4 - 6 months
959
0.70
4,187
10.96
Over 6 months
74,733
54.56
24,722
64.70
Total
136,962
100.00
38,208
100.00
Related parties - Others
0 - 6 months
86,274
48.19
94,673
51.60
7 - 12 months
32,135
17.95
18,372
10.01
13 - 24 months
1,431
0.80
10,998
5.99
Over 24 months
59,203
33.06
59,436
32.40
Total
179,043
100.00
183,479
100.00
28
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
5.
ACCOUNTS RECEIVABLE - TRADE (continued)
2006
2007
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Third parties
789,330
51.91
697,857
57.02
7 - 12 months
297,928
19.59
201,021
16.43
13 - 24 months
275,329
18.11
153,054
12.51
Over 24 months
158,009
10.39
171,833
14.04
Total
1,520,596
100.00
1,223,765
100.00
The changes in the allowance for doubtful accounts provided on the accounts receivable - trade are as follows:
2006
2007
Related parties - Telkom
Balance at beginning of year
89,485
81,803
Provision
587
1,770
Net effect of foreign exchange adjustment
(86
)
70
Write-off
(8,183
)
(58,272)
_
Balance at end of year
81,803
25,371
Related parties - Others
Balance at beginning of year
61,492
59,460
Provision
5,859
1,208
Net effect of foreign exchange adjustment
(7,479
)
2,303
Write-off
(412
)
-
_
Balance at end of year
59,460
62,971
Third parties
Balance at beginning of year
528,314
423,730
Provision
103,778
112,052
Net effect of foreign exchange adjustment
(3,482
)
7,772
Write-off
(204,880
)
(217,412)
Balance at end of year
423,730
326,142
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.
Management believes the established allowance is sufficient to cover probable losses from uncollectible accounts receivable.
As of December 31, 2007, approximately 2.77% of accounts receivable - trade are pledged as collateral to long-term bank loans obtained by Lintasarta (Note 15).
29
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
6.
PREPAID TAXES
This account consists of the following:
2006
2007
Claims for tax refund
797,282
610,852
Value Added Tax (“VAT”)
217,653
98,901
Others
36,507
4,569
Total
1,051,442
714,322
Claims for tax refund as of December 31, 2006 and 2007 mainly consist of the Company’s corporate income tax for fiscal years 2004, 2005 and 2006.
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 (“DGT”) for the Company’s 2004 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 DGT for the Company’s 2004 corporate income tax amounting to Rp199,552. On April 12, 2007, the Company received the refund of the tax overpayment amounting to Rp130,813 after offsetting the assessment letters on tax underpayment (“SKPKBs”) for the Company’s VAT for the periods January - March 2004 and August - October 2004, and income tax articles 23 and 26 for fiscal year 2004, including penalties and interest (Note 13).
On March 27, 2007, the Company received SKPLBs from the DGT advising the Company of its approval to refund the overpayment of 2005 corporate income tax and VAT amounting to Rp135,766 and Rp39,052, respectively, which amounts are lower than those recognized by the Company in its financial statements. The Company accepted partially the corrections on the 2005 corporate income tax and all of the corrections on the VAT, totalling Rp5,375 and charged them to current operations in 2007. On May 16, 2007, the Company received the refund amounting to Rp63,843 after offsetting the SKPKBs for the Company’s income tax articles 23 and 26 for fiscal year 2005, including penalties and interest (Note 13) and the tax collection letters (“STPs”) for other income taxes. On June 22, 2007, the Company filed an objection letter to the Tax Office regarding the remaining tax corrections on the 2005 corporate income tax. As of December 31, 2007, the Company has not received the reply to the objection letter.
30
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
7.
INVESTMENTS IN ASSOCIATED COMPANIES
As of December 31, 2006 and 2007, 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) of
Associated Carrying Location
Principal Activity Ownership(%)
CostCompanies Values
Satellite-based
PT Multi Media Asia Indonesia
Indonesia
telecommunication
26.67
56,512
(212
)
56,300
PT Swadharma Marga Inforindo
Indonesia
Property rental
20.00
100
186
286
Total
56,612
(26
)
56,586
Less allowance for decline in value
56,300
Net
286
The Company believes that the allowance for decline in value amounting to Rp56,300 as of December 31, 2006 and 2007 is adequate to cover probable losses on the above investments.
8.
OTHER LONG-TERM INVESTMENTS
As of December 31, 2006 and 2007, this account consists of the following:
2006
2007
Investments in shares of stock accounted for under the cost method - net
8,410
2,631
Equity securities which are available-for-sale *
99
99
Total
8,509
2,730
* consist of BNI and Telkom amounting to Rp89 and Rp10, respectively
Investments in shares of stock which are accounted for under the cost method:
2006 | 2007 | |||||||||||
Location | Principal Activity | Ownership (%) | Cost/Carrying Value | Ownership (%) | Cost/Carrying Value | |||||||
PT First Media Tbk (formerly PT Broadband Multimedia Tbk or “BM”)* | Indonesia | Cable television and internet network service provider | 5.00 | 50,000 | 2.29 | 50,000 | ||||||
ICO Global Communication (Holdings) Limited | Bahamas | Satellite service | 0.0087 | 49,977 | 0.0087 | 49,977 | ||||||
Asean Cableship Pte. Ltd (“ACPL”)** | Singapore | Repair and maintenance of submarine cables | 16.67 | 1,265 | 16.67 | 1,265 | ||||||
SMT (Note 2b) | Indonesia | Telecommunication | 14.60 | 5,779 | - | - | ||||||
Others | 14.68 -16.67 | 1,366 | 12.80 -14.29 | 1,366 | ||||||||
Total | 108,387 | 102,608 | ||||||||||
Less allowance for decline in value | 99,977 | 99,977 | ||||||||||
Net | 8,410 | 2,631 | ||||||||||
*
On February 5, 2007, the Company's ownership in BM was diluted to 2.29% since the Company did not exercise its pre-emptive right in relation to a Rights Issue conducted by BM.
**
On March 13, April 30 and September 28, 2007, the Company received dividend income from its investment in ACPL totalling US$4,389 (equivalent to Rp40,105).
The Companies provided 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, 2006 and 2007, which the Companies believe is adequate to cover probable losses on the investments.
31
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
9.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
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
823,075
7,668
1,436
251,269
1,080,576
Office equipment
1,379,843
86,876
52,388
130,566
1,544,897
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
34,870,150
6,921,257
86,129
-
41,705,278
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
613,418
181,385
1,437
-
793,366
Office equipment
706,220
176,205
52,093
-
830,332
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
13,281,980
3,491,631
85,592
-
16,688,019
Impairment in Value
98,611
-
-
-
98,611
Net Book Value
21,489,559
24,918,648
32
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
9.
PROPERTY AND EQUIPMENT (continued)
2007
Transactions during the Year
Balance
at Beginning
New
Balance at
of Year
Additions
Deductions
Reclassifications
SubsidiaryEnd of Year
Carrying Value
Landrights
400,597
-
-
27,504
1,000429,101
Buildings
456,091
641
-
27,047
1,213484,992
Submarine cables
885,344
-
65,397
71,171
-
891,118
Earth stations
125,347
-
-
448
-125,795
Inland link
857,946
-
-
835,282
-1,693,228
Switching equipment
375,231
-
-
13,571
-388,802
Telecommunications
peripherals
2,130,835
195,269
1,570
73,049
-2,397,583
Information technology
equipment
1,080,576
3,517
6,301
310,926
761
1,389,479
Office equipment
1,544,897
107,011
948
152,299
-
1,803,259
Building and leasehold
improvements
1,432,521
3,559
1,502
143,073
6,5641,584,215
Vehicles
17,498
3,174
608
-
-20,064
Cellular technical
equipment
25,797,738
-
190,526
3,828,700
-29,435,912
Satellite technical
equipment
1,290,575
-
-
14,813
-1,305,388
Transmission and cross-
connection equipment
479,020
-
-
3,294
-482,314
FWA technical equipment
539,633
37,202
-
145,879
-722,714
Properties under
construction and
installation
4,291,429
9,365,492
-
(5,647,056
)1,0388,010,903
Total
41,705,278
9,715,865
266,852
-
10,576
51,164,867
Accumulated Depreciation
Buildings
222,353
26,207
-
-
20248,580
Submarine cables
525,191
90,923
65,361
-
-550,753
Earth stations
118,237
4,223
-
-
-122,460
Inland link
148,869
99,875
-
-
-248,744
Switching equipment
258,697
35,609
-
-
-294,306
Telecommunications
peripherals
1,364,343
266,064
1,570
-
-1,628,837
Information technology
equipment
793,366
172,618
6,301
-
23
959,706
Office equipment
830,332
204,897
946
-
-
1,034,283
Building and leasehold
Improvements
697,636
263,264
1,502
-
331
959,729
Vehicles
9,987
2,880
598
-
-12,269
Cellular technical
equipment
10,382,388
2,658,729
190,525
-
-12,850,592
Satellite technical
equipment
985,512
147,060
-
-
-1,132,572
Transmission and cross -
connection equipment
212,424
18,830
-
-
-
231,254
FWA technical equipment
138,684
80,714
-
-
-219,398
Total
16,688,019
4,071,893
266,803
-
374
20,493,483
Impairment in Value
98,611
-
-
-
-98,611
Net Book Value
24,918,648
30,572,773
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.
33
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
9.
PROPERTY AND EQUIPMENT (continued)
During the years ended December 31, 2005, 2006 and 2007, sales of certain property and equipment were made as follows:
2005
2006
2007
Proceeds from sales
463
1,249
478
Net book value
(219
)
(537
)
(49
)
Gain
244
712
429
Depreciation expense charged to the consolidated statements of income amounted to Rp2,974,191, Rp3,491,631 and Rp4,071,893 in 2005, 2006 and 2007, respectively.
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, 2007, approximately 0.29% of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 15).
As of December 31, 2007, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$86,171 and Rp33,701,497, including insurance on the Company‘s satellite amounting to US$14,000. Management believes that the sum insured is sufficient to cover possible losses arising from fire, explosion, lightning, aircraft damage and other natural disasters.
The details of the Companies’ properties under construction and installation as of December 31, 2006 and 2007 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
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 December 2007
Inland link
27 - 84
52,289
January - June 2007
Others (each below Rp50,000)
41 - 99
57,809
January - April 2007
Total
4,291,429
2007
Cellular technical equipment
15 - 95
4,661,020
March - December 2008
Transmission and cross-connection equipment
29 - 98
1,174,721
March - December 2008
Building and leasehold improvements
60 - 99
1,149,994
January - June 2008
Satellite technical equipment
3
536,518
September 2009
FWA technical equipment
25 - 95
234,646
January - June 2008
Inland link
42 - 99
119,138
January - June 2008
Others (each below Rp50,000)
41 - 99
134,866
January - September
2008
Total
8,010,903
Borrowing costs (interest expense) capitalized to properties under construction and installation for the years ended December 31, 2005, 2006 and 2007 amounted to Rp65,204, Rp62,154 and Rp29,071, respectively.
34
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
10.
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.
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
The changes in the goodwill and other intangible assets account are as follows:
2006
2007
Balance at beginning of year
2,757,822
2,689,751
Additions:
- Non-integral software
71
10,532
- Upfront fee for 3G license (Note 1a)
320,000
-
Amortization of goodwill
(226,507
)
(226,507)
Amortization of other intangible assets
(161,635
)
(123,309
)
Balance at end of year
2,689,751
2,350,467
11.
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.
12.
PROCUREMENT PAYABLE
This account consists of payables for capital and operating expenditures procured from the following:
2006
2007
Related parties (Note 26) (including US$1,017 in 2006 and US$3,648
in 2007)
70,187
168,158
Third parties (including US$218,601 in 2006 and US$419,567 in 2007)
3,222,356
6,038,491
Total
3,292,543
6,206,649
35
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE
This account consists of the following:
2006
2007
Estimated corporate income tax payable,
less tax prepayments of Rp189,276 in 2006
and Rp374,278 in 2007
10,353
286,397
Income tax:
Article 21
87,778
85,848
Article 22
3,412
3,754
Article 23
70,161
21,691
Article 25
23,265
28,132
Article 26
7,284
1,049
VAT
3,044
1,674
Others
6,571
7,905
Total
211,868
436,450
The reconciliation between income before income tax and estimated taxable income of the Company for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Income before income tax per consolidated statements of income
2,352,795
2,022,667
2,929,616
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations
(91,286
)
(129,605
)
(83,443
)
Income before income tax of the Company
2,261,509
1,893,062
2,846,173
Positive adjustments
Accrual of employee benefits - net
72,804
98,255
151,455
Provision for doubtful accounts
164,885
88,248
108,573
Donation
19,494
15,787
26,764
Provision for termination, gratuity and compensation benefits
of employees
16,283
11,386
15,632
Representation and entertainment
10,779
8,031
13,417
Amortization of goodwill and other intangible assets
-
-
7,721
Net periodic pension cost
-
-
6,768
Amortization of debt and bonds issuance costs and discount
(Notes 15 and 16)
-
3,940
1,677
Assessments for income taxes
and related penalties
30,572
73,994
-
Compensation expense for ESOP (Note 19)
90,739
-
-
Others
24,436
49,221
111,130
Negative adjustments
Depreciation - net
(985,529
)
(1,213,527
)
(780,225)
Write-off of accounts receivable
(5,329
)
(199,627
)
(271,102)
Interest income already subjected
to final tax
(193,795
)
(183,613
)
(206,948)
Equity in net income of investees
(152,244
)
(180,626
)
(139,649
)
Realization of stock option resulting from the exercise of
ESOP Phase I and Phase II
(71,182
)
(90,763
)
-
Net periodic pension cost
(36,423
)
(13,704
)
-
Amortization of goodwill and other intangible assets
(36,219
)
(6,872
)
-
Sale of investment in subsidiary (Note 1d)
(109,691
)
-
-
36
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE (continued)
2005
2006
2007
Negative adjustments (continued)
Capitalization of interest expense and personnel expenses
to property and equipment (Notes 9 and 22)
(108,151
)
-
-
Write-off of other long-term investment
(103,590
)
-
-
Sale of investment in associated company (Note 7)
(14,697
)
-
-
Amortization of debt and bonds issuance costs and discount
(Notes 15 and 16)
(1,069
)
-
-
Others
(9,315
)
(172
)
(4,416
)
Estimated taxable income of
the Company
864,267
353,020
1,886,970
The computation of the income tax expense for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Estimated taxable income of the Company
864,267
353,020
1,886,970
Income tax expense - current (at statutory tax rates)
Company
259,263
105,888
566,073
Subsidiaries
72,278
93,741
94,602
Total income tax expense - current
331,541
199,629
660,675
Income tax expense (benefit) deferred - effect of temporary
differences at enacted maximum tax rate (30%)
Company
Depreciation - net
295,659
364,058
234,067
Write-off of accounts receivable
1,598
59,888
81,330
Equity in net income of investees
45,673
54,188
41,895
Accrual of employee benefits
(21,841
)
(29,477
)
(45,436
)
Provision for doubtful accounts
(49,465
)
(26,474
)
(32,572
)
Provision for termination, gratuity
and compensation benefits of employees
(4,885
)
(3,416
)
(4,689)
Amortization of goodwill and other intangible assets
10,866
2,062
(2,316)
Net periodic pension cost
10,927
4,111
(2,030)
Amortization of debt and bonds issuance costs and
discount (Notes 15 and 16)
321
(1,182
)
(503)
Compensation expense for ESOP
(5,867
)
27,229
-
Loss on sale of investments in subsidiary and associated
company
37,316
-
-
Capitalization of interest expense and personnel expenses
to property and equipment (Notes 9 and 22)
32,445
-
-
Write-off of other long-term investment
31,077
-
-
Adjustments due to tax audit
-
(62,956
)
-
Others
(5,059
)
(10,950
)
(31,690
)
378,765
377,081
238,056
Subsidiaries
(12,382
)
(603
)
(39,214
)
Net income tax expense - deferred
366,383
376,478
198,842
Total income tax expense
697,924
576,107
859,517
37
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE (continued)
The computation of the estimated income tax payable and claim for tax refund for the years ended December 31, 2006 and 2007 is as follows:
2006
2007
Income tax expense - current
Company
105,888
566,073
Subsidiaries
93,741
94,602
Total income tax expense - current
199,629
660,675
Less prepayments of income tax of the Company
Article 22
64,986
97,754
Article 23
117,799
46,611
Article 25
231,672
160,929
Total prepayments of income tax of the Company
414,457
305,294
Less prepayments of income tax of Subsidiaries
Article 22
2,600
885
Article 23
50,426
20,112
Article 25
30,362
47,987
Total prepayments of income tax of Subsidiaries
83,388
68,984
Total prepayments of income tax
497,845
374,278
Estimated income tax payable
Company
-
260,779
Subsidiaries
10,353
25,618
Total estimated income tax payable
10,353
286,397
Claim for tax refund (presented as part of
“Prepaid Taxes”)
Company
308,569
-
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 30% to the income before income tax and the income tax expense as shown in the consolidated statements of income for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Income before income tax per consolidated statements
of income
2,352,795
2,022,667
2,929,616
Income tax expense at the applicable tax rate of 30%
705,839
606,800
878,885
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
46,003
53,783
43,669
38
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE (continued)
2005
2006
2007
Tax effect on permanent differences
Employee benefits
7,302
6,433
16,979
Donation
5,863
4,797
8,045
Interest income already subjected
to final tax
(64,647
)
(63,434
)
(70,395)
Assessments for income taxes and related penalties
9,823
25,302
(670
)
Others
1,794
4,829
(1,948
)
Valuation allowance adjustment
(14,912
)
-
-
Adjustment due to tax audit and others
859
(62,403
)
(15,048
)
Income tax expense per consolidated
statements of income
697,924
576,107
859,517
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of December 31, 2006 and 2007 are as follows:
2006
2007
Deferred tax assets
Accrual of employee benefits - net
128,621
178,747
Allowance for doubtful accounts
171,195
122,437
Allowance for decline in value of investments in associated
company and
other long-term investments
46,883
46,883
Pension cost
24,487
26,517
Allowance for short-term investment
7,618
7,618
Total
378,804
382,202
Deferred tax liabilities
Property and equipment
1,406,071
1,641,735
Investments in subsidiaries/associated companies - net of
amortization of goodwill and other intangible assets
205,841
212,134
Deferred debt and bonds issuance costs and discount
5,731
5,228
Difference in transactions of equity changes in associated
companies/subsidiaries
1,752
1,752
Others
868
3,437
Total
1,620,263
1,864,286
Deferred tax liabilities - net
1,241,459
1,482,084
39
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE (continued)
The breakdown by entity of the deferred tax assets and liabilities outstanding as of December 31, 2006 and 2007 is as follows:
2006
2007
Deferred Tax
Deferred Tax
Deferred Tax
Deferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
1,241,459
-
1,482,084
Subsidiaries
Lintasarta
46,567
-
71,177
-
IMM
-
2,048
2,806
-
APE
-
995
-
137
SMT
-
-
13,135
-
SMM
-
-
-
-
Total
46,567
1,244,502
87,118
1,482,221
The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation of property and equipment.
The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the doubtful accounts are written off, the allowance for decline in value of investments in associated companies and other long-term investments is realized upon sale of the investments, and the pension cost is paid. The deferred tax liabilities relate to the differences in the book and tax bases of property and equipment, investments in subsidiaries/associated companies, and debt and bonds issuance costs and discount.
A valuation allowance has been established for certain deferred tax assets of a subsidiary. This valuation allowance reduces tax assets to an amount which is more likely than not to be realized.
On January 19, 2005, the Company received SKPKB/STP from the DGT covering Satelindo’s 2003 VAT 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 DGT 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 carryover 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 Decision Letter No. KEP-1716/WPJ.07/BD.05/2006 from the Tax Office declining the Company’s appeal on the tax correction. On January 10, 2007, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the tax correction.
As of December 31, 2007, no provision for probable loss on such loss carryover adjustment was made in the consolidated financial statements as the Company believes that it has computed its corporate income tax in accordance with the tax regulations.
40
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
13.
TAXES PAYABLE (continued)
On December 4, 2006, the Company received SKPKB/STP from the DGT 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 amounting to Rp8 and Rp60,493 (including penalties and interest), respectively, for fiscal year 2004 (Note 6). The Company accepted the SKPKB for income tax article 23. On February 28, 2007, the Company submitted an objection letter to the Tax Office regarding the tax correction on income tax article 26. As of December 31, 2007, the Company has not received the reply to the objection letter.
On March 27, 2007, the Company received SKPKBs from the DGT for the Company’s income tax articles 23 and 26 amounting to Rp28,479 and Rp82,126 (including penalties and interest), respectively, for fiscal year 2005 (Note 6). The Company accepted a part of the tax correction of income tax article 23 amounting to Rp3,039 which was charged to current operations in 2007. On June 22, 2007 and June 11, 2007, the Company submitted its objection letters to the Tax Office regarding the SKPKBs of income tax article 23 for the remaining tax corrections and article 26, respectively. As of December 31, 2007, the Company has not received the reply to the objection letters.
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 other subsidiaries, the differences will be deductible from ordinary income as a result of a merger.
The tax losses carryover of SMM and SMT as of December 31, 2007 can be carried forward through 2012 based on the following schedule:
Year of Expiration
Amount
2008
356
2009
2,035
2010
1,885
2011
14,191
2012
30,204
Total
48,671
14.
ACCRUED EXPENSES
This account consists of the following:
2006
2007
Radio frequency fee
94,962
233,146
Network repairs and maintenance
132,062
222,594
Employee benefits
137,399
215,720
Interest
203,055
202,936
Marketing
53,112
134,950
Concession fee
65,584
82,790
Universal Service Obligation (“USO”)
69,602
60,741
Consultancy fees
38,761
50,186
Outsourcing
2,413
21,991
Dividend penalty to the Government (Note 30j)
20,633
-
Others (each below Rp20,000)
78,852
115,381
Total
896,435
1,340,435
41
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
15.
LOANS PAYABLE
This account consists of the following:
2006
2007
Related parties
Mandiri - net of unamortized debt issuance cost of Rp5,091
-
1,994,909
Syndicated Loan Facility 2
BNI - net of unamortized debt issuance cost of Rp2,131
515,514
-
Mandiri - net of unamortized debt issuance cost of Rp457
120,135
-
Third parties - net of unamortized debt issuance cost of Rp5,096
in 2006 and Rp7,128 in 2007; and unamortized debt discount of
Rp37,191 in 2007
996,236
2,748,511
Total loans payable
1,631,885
4,743,420
Less current maturities:
Related parties
-
200,000
Third parties
127,191
294,387
Total current maturities
127,191
494,387
Long-term portion
1,504,694
4,249,033
The details of the loans from related parties are as follows:
a.
Mandiri
On September 18, 2007, the Company obtained a five-year unsecured credit facility from Mandiri amounting to Rp2,000,000 for the purchase of telecommunications equipment. The loan bears interest at (i) fixed annual rates for the first two years (9.75% on the first year and 10.5% on the second year), and (ii) floating rates for the remaining years based on the prevailing annual rate of 3-month JIBOR plus 1.5% per annum. The interest is payable quarterly. The repayment of the loan drawdowns will be made annually, as follows: (a) 10% of the total loan drawdowns in the 1st and 2nd years after the first drawdown, (b) 15% of the total loan drawdowns in the 3rd and 4th years after the first drawdown, and (c) 50% of the total loan drawdowns in the 5th year after the signing date of the agreement.
On September 27 and December 27, 2007, the Company made the first and second loan drawdowns totalling Rp2,000,000.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
b.
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
Tranche
Amount
BCA
C
975,000
Mandiri *
B
900,000
BNI
*
C
900,000
Danamon *
A
240,000
Bukopin
A
150,000
Total
3,165,000
* related parties
42
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
15.
LOANS PAYABLE (continued)
b.
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 9.30% to 11.92% in 2005. The interest rate was fixed at 9.3% per annum in 2006 and up to March 31, 2007. During April - June 2007 and July - December 2007, the annual floating interest rates were 10.6% and 10.5%, respectively.
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 loans would mature on April 1, 2008. However, the amendment provided early repayment option for the Company, commencing from April 1, 2007 up to the maturity date. Any repayment made before April 1, 2007 would require the Company to pay penalty amounting to 1% of such repaid amount.
·
The loan interest rates would be 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 was higher.
On September 6, 2007, the Company paid in full the balance of the loans amounting to Rp1,250,000 for the principal amount and Rp24,792 for the last interest installment.
The loans from third parties consist of the following:
2006
2007
BCA - net of unamortized debt issuance cost of Rp5,091
-
1,994,909
Goldman Sachs International
Principal, net of unamortized debt discount of Rp37,191
-
397,109
Foreign Exchange (FX) Conversion Option
-
76,767
Finnish Export Credit Ltd. - net of unamortized debt
issuance cost of Rp2,588 in 2006 and Rp2,038 in 2007
305,896
247,817
Investment Credit Facility 4 from Niaga
40,446
22,446
Investment Credit Facility 5 from Niaga
-
9,463
Syndicated Loan Facility 2 (refer to previous section on loans
from related parties)
BCA - net of unamortized debt issuance cost of Rp2,508
609,255
-
Investment Credit Facility 3 from Niaga
39,139
-
Investment Credit Facility 2 from Niaga
1,500
-
Total
996,236
2,748,511
Less current maturities
127,191
294,387
Long-term portion
869,045
2,454,124
43
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
15.
LOANS PAYABLE (continued)
a.
BCA
On August 28, 2007, the Company obtained a five-year unsecured credit facility from BCA amounting to Rp1,600,000 for the repayment of Syndicated Loan Facility 2 and the purchase of telecommunications equipment. The loan bears interest at (i) fixed annual rates for the first two years (9.75% on the first year and 10.5% on the second year), and (ii) floating rates for the remaining years based on the prevailing annual rate of 3-month JIBOR plus 1.5% per annum. On September 20, 2007, the Company obtained additional credit facility of Rp400,000. As a result, the credit facility has become Rp2,000,000. The interest is payable quarterly. The repayment of the loan drawdowns will be made annually, as follows: (a) 10% of the total loan drawdowns in the 1st and 2nd years after the first drawdown, (b) 15% of the total loan drawdowns in the 3rd and 4th years after the first drawdown, and (c) 50% of the total loan drawdowns in the 5th year after the first drawdown.
On September 27, October 26 and December 27, 2007, the Company made the first, second and third loan drawdowns totalling Rp2,000,000.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
b.
Goldman Sachs International (“GSI”)
On May 30, 2007, the Company received from GSI a loan amounting to Rp434,300 which was received in U.S. dollar amounting to US$50,000 for financing the purchase of telecommunications equipment. The loan will mature on May 30, 2013. The loan bears interest at the fixed annual rate of 8.75% applied on the Rp434,300, which is payable quarterly every February 28, May 30, August 30 and November 30 commencing on August 30, 2007 up to May 30, 2012.
The loan agreement provides an option for GSI to convert the loan payable into a U.S. dollar loan of US$50,000 on May 30, 2012 (“FX Conversion Option”). The fair value of the FX Conversion Option as of December 31, 2007 amounted to US$8,173 (equivalent to Rp76,767). If GSI takes such option, starting May 30, 2012, the loan will bear interest at the fixed annual rate of 6.45% applied on the US$50,000 principal and both U.S. dollar principal and interest thereon will be due on May 30, 2013.
Based on the loan agreement, the Company is required to notify GSI regarding the following events which can result in loan termination, such as (i) certain changes affecting withholding taxes in the United Kingdom or Indonesia, (ii) default under Guaranteed Notes due 2012 (Note 16), (iii) default under the Company’s USD Notes and IDR Bonds (Note 16), (iv) redemption, purchase or cancellation of the Guaranteed Notes Due 2012 (Note 16) and there are no USD Indosat Notes outstanding upon such redemption, purchase or cancellation, and (v) change of control in the Company.
c.
Finnish Export Credit Ltd. (“FEC”)
On May 12, 2006, the Company obtained a 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%. The loan, together with the related interest, is payable semi-annually until March 12, 2011.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
44
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
15.
LOANS PAYABLE (continued)
d.
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 telecommunications equipment, computers and other supporting facilities. The loan bears interest at the prevailing annual rate of 3-month Certificates of Bank Indonesia plus 3% per annum. The quarterly repayment of the principal started on November 29, 2006, at Rp4,500 each quarter up to February 28, 2009.
The loan is collateralized by all equipment (Note 9) purchased from the proceeds of the credit facility and trade accounts receivable from frame relay (Note 5).
The loan also has the same restrictive covenants as the Investment Credit Facilities 2, 3 and 5 from Niaga.
e.
Investment Credit Facility 5 from Niaga
On July 10, 2007, Lintasarta obtained a credit facility from Niaga amounting to Rp50,000 for the purchase of telecommunications equipment, computers and other supporting facilities. The loan bears interest at the prevailing annual rate of 1-month Certificate of Bank Indonesia plus 2.25% per annum. The quarterly repayment of the principal will start on October 10, 2008 at Rp5,000 each quarter up to January 10, 2011. As of December 31, 2007, Lintasarta has already drawn from this credit facility the amount of Rp9,463.
The loan is collateralized by all equipment (Note 9) purchased from the proceeds of the credit facility.
The loan also has the same restrictive covenants as the Investment Credit Facilities 2, 3 and 4 from Niaga.
f.
Investment Credit Facility 3 from Niaga
On June 29, 2004, Lintasarta obtained a loan from a credit facility from Niaga for the purchase of telecommunications equipment, computers and other supporting facilities amounting to Rp98,000. The loan bears interest at 3-month time deposits rate guaranteed by Bank Indonesia plus 3.5% per annum. The quarterly repayment of the principal started on September 29, 2005, at Rp9,800 each quarter up to December 29, 2007.
The loan is collateralized by all equipment (Note 9) purchased from the proceeds of the credit facility, trade accounts receivable from frame relay (Note 5) and trade accounts receivable from one of Lintasarta’s customers.
The loan also has the same restrictive covenants as the Investment Credit Facilities 2, 4 and 5 from Niaga.
g.
Investment Credit Facility 2 from Niaga
On August 14, 2003, Lintasarta obtained a credit facility from Niaga amounting to Rp15,000 to finance a letter of credit facility. The full amount was drawn down in 2004 and bore interest at 3-month time deposit rate guaranteed by Bank Indonesia plus a spread of 3% per annum. The loan was payable in quarterly installments of Rp1,500 starting November 14, 2004 and in February 2007, the final installment was paid.
45
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
15.
LOANS PAYABLE (continued)
g.
Investment Credit Facility 2 from Niaga (continued)
The loan was collateralized by all equipment (Note 9) purchased from the proceeds of the credit facilities and trade accounts receivable from frame relay (Note 5).
Lintasarta was required to obtain prior written approval from Niaga if:
-
The combined ownership of the Company and Yayasan Kesejahteraan Karyawan Bank Indonesia in Lintasarta became less than 51% during the facility period.
-
Lintasarta obtained new debts (Note 16).
-
Lintasarta invested in other than Lintasarta’s current business.
Lintasarta was also required to maintain certain financial ratios including the Debt Service Coverage Ratio of not less than 1.2 : 1.
The scheduled principal payments from 2008 to 2013 of all the loans payable as of December 31, 2007 are as follows:
Twelve months ending December 31,
2012 and
2008
2009
2010
2011
2013
Total
In rupiah
Mandiri
200,000
200,000
300,000
300,000
1,000,000
2,000,000
BCA
200,000
200,000
300,000
300,000
1,000,000
2,000,000
GSI
-
-
-
-
434,300
434,300
Niaga
23,000
8,909
-
-
-31,909
Sub-total
423,000
408,909
600,000
600,000
2,434,300
4,466,209
In U.S. dollar
FEC (US$26,600)
71,387
71,387
71,387
35,693
-
249,854
GSI (US$8,173)
-
-
-
-
76,767
76,767
Sub-total
71,387
71,387
71,387
35,693
76,767
326,621
Total
494,387
480,296
671,387
635,693
2,511,067
4,792,830
Less:
- unamortized debt discount
(37,191)
- unamortized debt issuance costs
(12,219)
Net
4,743,420
The amortization of debt issuance costs and debt discount on the loans amounted to Rp9,576 in 2005, Rp10,928 in 2006 and Rp9,132 in 2007 (Note 24).
46
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE
This account consists of the following:
2006
2007
Guaranteed Notes Due 2010 (US$300,000) - net of unamortized
notes issuance cost of Rp17,432 in 2006
and Rp13,389 in 2007
2,688,568
2,804,511
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost of Rp7,629
-
2,592,371
Third Indosat Bonds in Year 2003 with Fixed Rates - net of unamortized
bonds issuance cost of Rp14,855 in 2006 and Rp8,622 in 2007
2,485,145
2,491,378
Guaranteed Notes Due 2012 (US$250,000) - net of unamortized notes
discount of Rp13,398 in 2006 and Rp11,338 in 2007; and unamortized
notes issuance cost of Rp28,105 in 2006 and Rp23,781 in 2007
2,213,497
2,313,131
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of unamortized
bonds issuance cost of Rp7,117 in 2006 and Rp5,842 in 2007
807,883
809,158
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized bonds
issuance cost of Rp1,179
-
398,821
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost of Rp2,523 in 2006 and Rp2,071 in 2007
282,477
282,929
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
1,075,000
200,000
Limited Bonds II issued by Lintasarta*
31,150
31,150
Limited Bonds I issued by Lintasarta**
25,292
25,292
Indosat Syari’ah Mudharabah Bonds in Year 2002
175,000
-
Convertible Bonds issued by Lintasarta***
5,526
-
Total bonds payable
9,789,538
11,948,741
Less current maturities
1,055,526
1,860,000
Long-term portion
8,734,012
10,088,741
*
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 in 2006
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 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 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.
47
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010 (continued)
The net proceeds, after deducting the underwriting fee and offering expenses, were received on November 5, 2003 and 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.
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 amendment to the indenture included, among others, the change in the limit of the permitted debt that could be incurred by IFB and Lintasarta, and IFB’s ability to incur new debt (Note 24).
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 July 2007) and Ba2 (released in October 2007) ratings from Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”), respectively.
Fifth Indosat Bonds in Year 2007 with Fixed Rates
On May 29, 2007, the Company issued its Fifth Indosat Bonds in Year 2007 with Fixed Rates (“Fifth Indosat Bonds”), with BRI as the trustee. The bonds have a total face value of Rp2,600,000. The bonds consist of two series:
·
Series A bonds amounting to Rp1,230,000 which bear interest at the fixed rate of 10.20% per annum starting May 29, 2007. These bonds will mature on May 29, 2014.
·
Series B bonds amounting to Rp1,370,000 which bear interest at the fixed rate of 10.65% per annum starting May 29, 2007. These bonds will mature on May 29, 2017.
The bonds will mature before the maturity dates if, after the 1stanniversary of the bonds, the Company exercises its option to buy back part or all of the bonds at market price temporarily or as an early settlement.
PT Kustodian Sentral Efek Indonesia (“KSEI”), acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
Starting August 29, 2007 and every quarter thereafter up to May 29, 2014.
Series B
:
Starting August 29, 2007 and every quarter thereafter up to May 29, 2017.
The Company received the proceeds of the bonds on May 31, 2007.
The net proceeds, after deducting the underwriting fee and offering expenses, were used for capital expenditure to expand the Company’s cellular network.
48
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Fifth Indosat Bonds in Year 2007 with Fixed Rates (continued)
Based on the bonds indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
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 to all of the Company’s other liabilities including the bonds.
Based on the latest rating report released in May 2007, the bonds haveidAA+ (stable outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”).
Third Indosat Bonds in Year 2003 with Fixed Rates
On October 15, 2003, the Company issued at face value its Third Indosat Bonds in Year 2003 with Fixed Rates (“Third Indosat Bonds”), 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.
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.
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 to all of the Company’s other liabilities including the bonds.
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 2007, the bonds haveidAA+ (stable outlook) rating from Pefindo.
49
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
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 net proceeds, after deducting the underwriting fee and offering expenses, were received on June 23, 2005 and used for general corporate purposes, including capital expenditures.
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.
Based on the latest rating report, the notes have BB (released in July 2007) and Ba2 (released in October 2007) ratings from S&P and Moody’s, respectively.
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 Bonds”), 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 were used for capital expenditure to expand the Company’s cellular network.
50
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Fourth Indosat Bonds in Year 2005 with Fixed Rate (continued)
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 to all of the Company’s other liabilities including the bonds.
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 2007, the bonds haveidAA+ (stable outlook) rating from Pefindo.
Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”)
On May 29, 2007, the Company issued its Sukuk Ijarah II, with BRI as the trustee. The bonds have a total face value of Rp400,000. The bonds will mature on May 29, 2014.
The bonds will mature before maturity date if, after the 1stanniversary of the bonds, the Company exercises its option to buy back part or all of the bonds at market price.
Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp40,800, payable on a quarterly basis starting August 29, 2007 up to May 29, 2014.
The proceeds of the bonds were used for capital expenditure to expand the Company’s cellular network.
The Company received the proceeds of the bonds on May 31, 2007.
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 to all of the Company’s other liabilities including the bonds.
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 2007, the bonds haveidAA(sy)+ (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.
Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp34,200, 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.
51
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”) (continued)
·
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 were used for capital expenditure to expand the Company’s cellular network.
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.
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 2007, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
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 Bonds”), 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 bore interest at the fixed rate of 15.75% per annum starting February 6, 2003. The Series A bonds matured 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 bore 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 were 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.
52
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (continued)
-
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.
On November 6, 2007, the Company paid in full the Second Indosat Bonds Series A and C totalling Rp875,000.
Based on the latest rating report released in May 2007, the bonds haveidAA+ (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 maximum limit of the floating rate is 19% and the minimum limit is 11% 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 15).
The proceeds of the Limited Bonds II were 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 maximum limit of the floating rate is 19% and the minimum limit is 11% per annum. Lintasarta paid interest on the bonds quarterly starting September 2, 2003.
53
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Limited Bonds I issued by Lintasarta (continued)
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 I 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 maximum limit of the floating rate is 19% and the minimum limit is 11% 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 15).
Indosat Syari’ah Mudharabah Bonds in Year 2002 (“Syari’ah Mudharabah Bonds”)
On November 6, 2002, the Company issued its Syari’ah Mudharabah Bonds, with BRI as the trustee. The bonds had a total face value of Rp175,000 in Rp50 denomination and matured on November 6, 2007.
Each bondholder was entitled to a revenue-sharing income [Pendapatan Bagi Hasil (“PBH”)], which was determined on the basis of the bondholder’s portion (Nisbah) of the Shared Revenue (Pendapatan Yang Dibagihasilkan). Shared Revenue referred 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 were 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 Mudharabah 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, paid quarterly the revenue-sharing income on the bonds starting February 6, 2003 until November 6, 2007.
54
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
Indosat Syari’ah Mudharabah Bonds in Year 2002 (“Syari’ah Mudharabah Bonds”) (continued)
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 have been specifically used as a 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 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 was required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating report released in May 2007, the bonds hadidAA(sy)+ (stable outlook) rating from Pefindo.
On November 6, 2007, the Company paid in full the Syari’ah Mudharabah Bonds amounting to Rp175,000.
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 bore interest at the annual fixed rate of 19% and paid on a quarterly basis. The bonds were converted into Lintasarta’s common stock at par value of Rp1,000,000 per share on the bonds’ maturity date on June 3, 2007 (Notes 1d and 2u).
On May 23, 2003, Lintasarta obtained approval from Niaga on the issuance of the Convertible Bonds (Note 15).
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 had been changed to become a floating rate. The floating rate was determined using the average rate for 6-month rupiah time deposits with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The maximum limit of the floating rate was 19% and the minimum limit was 11% per annum. The first amendment was effective starting July 1, 2004.
55
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
16.
BONDS PAYABLE (continued)
The scheduled principal payments of all the bonds payable outstanding as of December 31, 2007 are as follows:
Twelve months ending December 31,
2011 and
2008
2009
2010
thereafter*
Total
In U.S. dollar
Guaranteed Notes *
Due 2010 (US$300,000)
-
-
2,817,900
-
2,817,900
Due 2012 (US$250,000)
-
-
-
2,348,250
2,348,250
Sub-total
-
-
2,817,900
2,348,250
5,166,150
In rupiah
Fifth Indosat Bonds *
-
-
-
2,600,000
2,600,000
Third Indosat Bonds *
1,860,000
-
640,000
-2,500,000
Fourth Indosat Bonds *
-
-
-
815,000
815,000
Sukuk Ijarah II *
-
-
-
400,000
400,000
Syari’ah Ijarah Bonds *
-
-
-
285,000
285,000
Second Indosat Bonds *
-
-
-
200,000
200,000
Limited Bonds II of Lintasarta
-
31,150
-
-
31,150
Limited Bonds I of Lintasarta
-
25,292
-
-
25,292
Sub-total
1,860,000
56,442
640,000
4,300,000
6,856,442
Total
1,860,000
56,442
3,457,900
6,648,250
12,022,592
Less:
-
unamortized notes issuance cost
(37,170
)
-
unamortized bonds issuance cost
(25,343
)
-
unamortized notes discount
(11,338
)
Net
11,948,741
* Refer to previous discussion on early repayment options for each bond/note.
The amortization of bonds issuance cost, notes issuance cost and discount amounted to Rp11,625 in 2005, Rp16,691 in 2006 and Rp18,829 in 2007 (Note 24).
17.
OTHER NON-CURRENT LIABILITIES
This account consists mainly of non-current portions of post-retirement benefits, benefits under Labor Law No. 13/2003 (Note 25), other employee benefits and deposits from customers.
56
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
18.
CAPITAL STOCK
The Company’s capital stock ownership as of December 31, 2006 and 2007 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
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
JP Morgan Chase Bank U.S. Resident
(Norbax, Inc.)
316,633,950
31,663
5.83
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%)
2,121,584,550
212,159
39.04
Total
5,433,933,500
543,393
100.00
2007
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
JP Morgan Chase Bank U.S. Resident
(Norbax, Inc.) (Note 40)
316,633,950
31,663
5.83
Indonesia Communications Pte.
Ltd., Singapore
46,340,000
4,634
0.85
Commissioner:
Lee Theng Kiat
135,000
14
0.00
Directors:
Raymond Tan Kim Meng
222,500
22
0.01
Wahyu Wijayadi
152,500
15
0.00
Wong Heang Tuck
75,000
8
0.00
Johnny Swandi Sjam
30,000
3
0.00
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
2,122,459,550
212,246
39.06
Total
5,433,933,500
543,393
100.00
57
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
18.
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.
On May 5, 2006, Indonesia Communications Pte. Ltd., Singapore (“ICLS”), a wholly-owned subsidiary of STT Communications Limited (“STTC”), informed the Indonesian Capital Market and Financial Institutions Supervisory Agency (Badan Pengawas Pasar Modal dan Lembaga Keuangan) (“Bapepam-LK”) that ICLS acquired 46,340,000 “B” shares of the Company from the market.
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.
On March 1, 2007, STTC sold its 25% ownership in Asia Mobile Holdings Pte. Ltd. (“AMH”) to Qatar Telecom (“Qtel”). As a result, STTC’s ownership in AMH decreased to 75%. AMH directly owned ICL and ICLS.
As of December 31, 2006 and 2007, ICL and ICLS owned an aggregate of 2,217,590,000 “B” shares, representing 40.81% ownership 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 had been issued as of July 31, 2006 (Note 19) at a total premium of Rp873,512.
19.
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 were equal to 5% of the Company’s issued and fully paid capital with nominal value of Rp100 per share by implementing Bapepam-LK Regulation No. IX.D.4, “Capital Increases Without Pre-emptive Rights”, which would be allocated to the employees through an Employee Stock Option Program (“ESOP”). The exercise price for ESOP Phase I was 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.
58
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
19.
STOCK OPTIONS (continued)
The ESOP had been distributed in two phases:
a.
Phase I: 50% of the ESOP shares or 129,437,500 stock options had been 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 was one year commencing August 1, 2004.
b.
Phase II: 50% of the ESOP shares or 129,437,500 stock options had been 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 was 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 was 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.
The total fair values of stock options distributed under ESOP Phase I and Phase II were 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, 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 was the same as that for the original ESOP Phase II, which was up to July 31, 2005.
The Company recognized proportionate seven months’ compensation expense in 2005 relating to ESOP Phase II in the amount of Rp90,739 as part of Operating Expenses - Personnel (Note 22).
The numbers of forfeited shares at the end of the vesting period of ESOP Phase I and ESOP Phase II were 162,500 shares (equivalent to Rp75) and 2,279,000 shares (equivalent to Rp2,584), respectively.
At the end of each exercise period, the numbers of stock options under ESOP Phase I and Phase II exercised by the employees were 121,428,000 and 135,005,500 shares, respectively (Note 18).
59
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
20.
OPERATING REVENUES
This account consists of the following:
2005
2006
2007
Cellular
Usage charges
4,794,098
5,317,871
6,542,933
Features
2,815,242
3,022,735
4,185,286
Interconnection revenues (Note 33)
746,755
697,265
1,847,486
Connection fee
191,264
103,506
79,115
Monthly subscription charges
21,048
9,924
20,372
Others
76,544
76,236
77,304
Sub-total
8,644,951
9,227,537
12,752,496
MIDI
Internet
390,241
422,037
570,041
IP VPN
45,603
244,328
396,644
World link and direct link
331,976
302,091
370,804
Frame net
389,426
387,276
305,125
Leased line
137,446
146,492
163,043
Digital data network
140,407
151,454
100,266
Application services
60,878
72,865
98,626
Satellite lease
150,130
124,473
95,682
TV link
21,338
14,765
6,947
Others
26,588
36,808
61,406
Sub-total
1,694,033
1,902,589
2,168,584
Fixed Telecommunication
International Calls
Incoming calls
643,861
541,744
964,865
Outgoing calls
441,256
315,995
265,323
Fixed Wireless
86,236
149,906
218,702
Fixed Line
74,405
98,886
117,384
Others
5,049
2,750
1,141
Sub-total
1,250,807
1,109,281
1,567,415
Total
11,589,791
12,239,407
16,488,495
Operating revenues from related parties amounted to Rp1,232,728, Rp954,027 and Rp2,082,642 for the three years ended December 31, 2005, 2006 and 2007, respectively. These amounts represent 10.64%, 7.79% and 12.63% of total operating revenues in 2005, 2006 and 2007, respectively (Note 26).
60
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
21.
OPERATING EXPENSES - COST OF SERVICES
This account consists of the following:
2005
2006
2007
Interconnection (Note 33)
218,152
184,261
1,518,127
Maintenance
614,595
585,158
765,638
Radio frequency fee
331,449
461,468
759,747
Leased circuits
248,418
280,077
331,830
Cost of SIM cards and pulse reload vouchers
346,900
330,387
323,349
Utilities
148,113
204,580
289,079
Rent
231,628
213,300
261,855
Concession fee
111,627
115,305
145,917
USO (Note 32)
82,172
86,779
109,377
Delivery and transportation
44,793
54,591
74,517
Billing and collection
66,298
50,359
51,529
Installation
5,470
21,264
35,213
License
21,523
15,290
20,335
Communications
16,170
14,698
5,681
Insurance
13,799
3,684
3,836
Others
125,838
82,972
83,853
Total
2,626,945
2,704,173
4,779,883
Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers
(Note 2n).
The operating revenues from interconnection services are presented on a gross basis, except for those which are under contractual sharing arrangements (Note 2n). In 2007, the Company entered into several memoranda of understanding to amend the existing revenue-sharing arrangements and to reflect the new cost-based interconnection scheme based on Regulation No. 08/PER/M.KOMINFO/02/2006 of the Ministry of Communications and Information Technology (Note 33).
The effect of these new sharing arrangements on the Company’s 2007 consolidated financial statements is to increase the operating revenues and operating expenses by Rp1,381,383 each.
61
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
22.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2005
2006
2007
Salaries
262,799
328,781
348,282
Bonuses
167,755
166,610
301,587
Incentives and other employee benefits
276,449
257,003
275,282
Employee income tax
178,787
205,702
230,379
Outsourcing
128,971
116,316
135,683
Post-retirement healthcare benefits (Note 25)
81,146
86,152
106,109
Medical expense
45,978
52,566
61,616
Early retirement*
-
69,630
58,104
Pension (Note 25)
(3,018
)
30,174
47,266
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 25)
18,770
20,233
23,594
ESOP compensation expense (Note 19)
90,739
-
-
Others
16,277
17,301
6,884
Total
1,264,653
1,350,468
1,594,786
*
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 package. As of December 31, 2006 and 2007, there were 169 and 108 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation in 2005, 2006 and 2007 amounted to Rp42,947, Rp39,794 and Rp51,979, respectively.
23.
OPERATING EXPENSES - ADMINISTRATION AND GENERAL
This account consists of:
2005
2006
2007
Rent
90,489
127,525
125,271
Provision for doubtful accounts
161,208
110,224
115,030
Professional fees
32,816
85,153
96,322
Travel
69,225
76,875
88,789
Utilities
36,932
49,601
54,701
Training, education and research
39,124
28,879
33,273
Insurance
35,385
35,552
27,193
Catering
29,850
31,683
26,726
Others (each below Rp20,000)
110,993
118,429
138,819
Total
606,022
663,921
706,124
62
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
24.
OTHER EXPENSES - FINANCING COST
This account consists of:
2005
2006
2007
Interest on loans
1,240,802
1,204,642
1,396,142
Amortization of debt and bonds issuance
costs and discount (Notes 15 and 16)
21,201
27,619
27,961
Bank charges
2,761
3,157
4,501
Solicitation fee (Note 16)
-
13,481
-
Total
1,264,764
1,248,899
1,428,604
25.
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.
On March 1, 2007, the Company entered into an agreement with Jiwasraya to provide defined death insurance plan to 1,276 employees as of January 1, 2007, who are not covered by the defined benefit pension plan as stated above. Based on the agreement, a participating employee will receive:
63
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
·
Expiration benefit equivalent to the cash value at the normal retirement age, or
·
Death benefit not due to accident equivalent to 100% of insurance money plus cash value when the employee dies not due to accident, or
·
Death benefit due to accident equivalent to 200% of insurance money plus cash value when the employee dies due to accident.
The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, the Company made payment for additional premium of Rp275 for additional 55 employees.
On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefits 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 10 annual premium installments totalling Rp1,653 which are payable starting 2005 until 2015.
The total contributions of the Company and Lintasarta to Jiwasraya amounted to Rp73,263, Rp9,999 and Rp17,843 for the years ended December 31, 2005, 2006 and 2007, respectively.
The net periodic pension cost for the pension plans for the years ended December 31, 2005, 2006 and 2007 was calculated based on the actuarial valuations as of December 31, 2005, 2006 and 2007, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
64
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
2005
2006
2007
Annual discount rate
13.0%
10.5%
10.0%
Expected annual rate of return on plan assets
10.0%
10.0%
4.5 - 9.0%
Annual rate of increase in compensation
3.0 - 9.0%
3.0 - 9.0%
3.0 - 9.0%
Mortality rate
CSO 1980
CSO 1980
TMI 1999
a.
The composition of the net periodic pension cost (income) for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Interest cost
54,533
63,649
63,417
Service cost
26,354
37,660
38,801
Net amortization
740
-
5,577
Immediate recognition of past service cost -
vested benefit
-
-
4,078
Return on plan assets
(69,957
)
(71,135
)
(64,607)
Curtailment gain
(14,688
)
-
-
Net periodic pension cost (income) (Note 22)
(3,018
)
30,174
47,266
b.
The funded status of the plans as of December 31, 2006 and 2007 is as follows:
2006
2007
Plan assets at fair value
727,656
730,787
Projected benefit obligation
(644,903
)
(672,145)
Excess of plan assets over projected benefit obligation
82,753
58,642
Unrecognized actuarial loss
150,821
142,349
Net prepaid pension cost
233,574
200,991
c.
Movements in the prepaid pension cost during the years ended December 31, 2006 and 2007 are as follows:
2006
2007
Beginning balance
Company
255,899
225,296
Lintasarta
2,573
8,278
Net periodic pension cost
Company
(26,842
)
(43,394)
Lintasarta
(3,332
)
(3,872)
Refund from Jiwasraya
Company
(3,761
)
(1,976
)
Lintasarta
(962
)
(1,184
)
65
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
2006
2007
Contribution to Jiwasraya
Company
-
7,875
Lintasarta
9,999
9,968
Ending balance
Company
225,296
187,801
Lintasarta
8,278
13,190
d.
Prepaid pension cost consists of:
2006
2007
Prepaid pension:
Current portion (presented as part of “Prepaid Expenses”)
Company
3,172
2,128
Lintasarta
118
503
3,290
2,631
Long-term portion
Company
222,124
185,673
Lintasarta
8,160
12,687
230,284
198,360
233,574
200,991
Plan assets as of December 31, 2006 and 2007 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, 2005, 2006 and 2007 amounted to Rp17,233, Rp16,686 and Rp15,842, 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 Company, Lintasarta and IMM also accrue benefits under Labor Law No. 13/2003 (“Labor Law���) dated March 25, 2003. Their employees will receive the benefits under this law or defined benefit pension plan, whichever amount is higher.
66
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
The net periodic pension cost under the Labor Law for the years ended December 31, 2005, 2006 and 2007 was calculated based on the actuarial valuations as of December 31, 2005, 2006 and 2007, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2005
2006
2007
Annual discount rate
13.0%
10.5%
10.0%
Annual rate of increase in compensation
3.0 - 11.0%
10.0%
10.0%
a.
The composition of the periodic pension cost under the Labor Law for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Service cost
11,600
11,709
13,201
Interest cost
7,117
7,230
9,160
Net amortization
53
1,294
662
Immediate recognition of past service cost -
vested benefit
-
-
571
Periodic pension cost (Note 22)
18,770
20,233
23,594
b.
The composition of the accrued pension cost under the Labor Law as of December 31, 2006 and 2007 is as follows:
2006
2007
Projected benefit obligation
88,219
104,527
Unrecognized actuarial loss
(18,819
)
(16,191
)
Accrued pension cost
69,400
88,336
c.
Movements in the accrued pension cost under the Labor Law during the years ended December 31, 2006 and 2007 are as follows:
2006
2007
Beginning balance
Company
51,586
62,972
Lintasarta
3,887
5,450
IMM
482
978
Pension cost
Company
18,102
20,290
Lintasarta
1,563
1,563
IMM
568
1,741
67
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
2006
2007
Benefit payment
Company
(6,716
)
(4,658
)
IMM
(72
)
-
Ending balance
Company
62,972
78,604
Lintasarta
5,450
7,013
IMM
978
2,719
As of December 31, 2006 and 2007, the current portion of pension cost under the Labor Law included in accrued expenses (Note 14) amounted to Rp1,689 and Rp1,828, respectively, and the non-current portion included in other non-current liabilities (Note 17) amounted to Rp67,711 and Rp86,508, respectively.
Post-retirement Healthcare
The Company provides post-retirement healthcare benefits to its employees who leave the Company after the employees fulfill the early retirement requirement. The spouse and children who have been registered in the Administration of the Company are also eligible to receive benefits. If the employees die, the spouse and children are still eligible for the post-retirement healthcare until the spouse dies or remarries and the children reach the age of 25 or get married.
The utilization of post-retirement healthcare is limited to an annual maximum ceiling that refers to monthly pension from Jiwasraya as follows:
·
16 times the Jiwasraya monthly pension for a pensioner who receives monthly pension from Jiwasraya.
·
16 times the equality monthly pension for a pensioner who became permanent employee after September 1, 2000.
·
16 times the last monthly pension for a pensioner who retired after July 1, 2003 and does not receive Jiwasraya monthly pension.
The net periodic post-retirement healthcare cost for the years ended December 31, 2005, 2006 and 2007 was calculated based on the actuarial valuations as of December 31, 2005, 2006 and 2007, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2005
2006
2007
Annual discount rate
13.0%
10.5%
10.0%
Ultimate cost trend rate
8.0%
8.0%
6.0%
Next year trend rate
18.0%
16.0%
18.0%
Period to reach ultimate cost trend rate
5 years
4 years
6 years
68
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
25.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
a.
The composition of the periodic post-retirement healthcare cost for the years ended December 31, 2005, 2006 and 2007 is as follows:
2005
2006
2007
Interest cost
39,245
41,413
54,944
Service cost
18,550
28,043
32,627
Net amortization
23,351
15,529
18,538
Additional benefits due to early retirement
-
1,167
-
Periodic post-retirement
healthcare cost (Note 22)
81,146
86,152
106,109
b.
The composition of the accrued post-retirement healthcare cost as of December 31, 2006 and 2007 is as follows:
2006
2007
Projected benefit obligation
526,231
767,828
Unrecognized actuarial loss
(253,273
)
(396,022
)
Accrued post-retirement healthcare cost
272,958
371,806
c.
Movements in the accrued post-retirement healthcare cost during the years ended December 31, 2006 and 2007 are as follows:
2006
2007
Beginning balance
190,686
272,958
Net periodic post-retirement healthcare cost
86,152
106,109
Benefit payment
(3,880
)
(7,261)
Ending balance
272,958
371,806
d.
The effect of 1% increase in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs and accumulated post-retirement healthcare benefit obligation as of December 31, 2005, 2006 and 2007 and for the years then ended as follows:
2005
2006
2007
Service and interest costs
79,730
96,680
137,426
Accumulated post-retirement healthcare
benefit obligation
493,762
579,973
943,774
As of December 31, 2006 and 2007, the current portion of post-retirement healthcare cost included in accrued expenses (Note 14) amounted to Rp6,209 and Rp9,661, respectively, and the non-current portion included in other non-current liabilities (Note 17) amounted to Rp266,749 and Rp362,145, respectively.
69
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
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 (%)
2006
2007
2006
2007
Cash and cash equivalents (Note 4)
State-owned banks
915,450
3,919,899
2.67
8.65
Private banks
198,820
1,034,499
0.59
2.29
Total
1,114,270
4,954,398
3.26
10.94
Accounts receivable - trade (Note 5)
StarHub Pte. Ltd. (“StarHub”), Singapore
46,354
53,452
0.13
0.12
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
43,359
43,745
0.130.10
Telkom
136,962
38,208
0.40
0.08
State-owned banks
15,821
32,253
0.04
0.07
PSN
3,839
11,618
0.01
0.03
PT Pos Indonesia (Persero)
9,187
9,329
0.03
0.02
PT Citra Sari Makmur (“CSM”)
5,914
4,875
0.020.01
PT Telekomunikasi Selular (“Telkomsel”)
1,494
4,110
0.00
0.01
Lembaga Kantor Berita Negara
(“LKBN”) Antara
2,045
1,049
0.01
0.00
Singapore Telecommunications Ltd.
(“SingTel”), Singapore
27,757
945
0.08
0.00
Others
23,273
22,103
0.07
0.05
Total
316,005
221,687
0.92
0.49
Less allowance for doubtful accounts
141,263
88,342
0.41
0.20
Net
174,742
133,345
0.51
0.29
Prepaid expenses
MOCIT
150,676
397,946
0.44
0.87
Kopindosat
2,376
2,810
0.000.01
Jiwasraya
3,290
2,631
0.01
0.01
Others
2,702
3,494
0.01
0.01
Total
159,044
406,881
0.46
0.90
Other current assets
State-owned banks
15,049
16,667
0.04
0.04
Others
6
7
0.00
0.00
Total
15,055
16,674
0.04
0.04
Due from related parties
Directorate General of Customs and
Excise
-
24,668
-
0.06
Telkomsel
5,881
22,401
0.020.05
Kopindosat
6,197
5,949
0.02
0.01
Key management personnel
11,032
2,084
0.030.00
State-owned banks
1,213
1,480
0.00
0.00
Others
1,808
2,130
0.01
0.01
Total
26,131
58,712
0.08
0.13
Less allowance for doubtful accounts
2,795
2,257
0.01
0.01
Net
23,336
56,455
0.07
0.12
Long-term prepaid pension
Jiwasraya
230,284
198,360
0.67
0.44
70
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2006
2007
2006
2007
Long-term advances
Nexwave
-
3,557
-
0.01
PT Industri Telekomunikasi
Indonesia (Persero)
-
3,472
-
0.01
Kopindosat
2,800
2,464
0.01
0.00
PT SCS Astra Graphia Technologies
1,106
68
0.00
0.00
Total
3,906
9,561
0.01
0.02
Non-current assets - others
State-owned banks
32,649
36,654
0.10
0.08
Telkom
21,681
22,370
0.06
0.05
Kopindosat
7,430
10,669
0.02
0.03
Others
2,853
5,231
0.01
0.01
Total
64,613
74,924
0.19
0.17
Accounts payable - trade
Telkomsel
27,280
13,213
0.14
0.05
Optus
1,492
2,226
0.01
0.01
Telkom
3,169
1,646
0.02
0.00
Kopindosat
-
557
-
0.00
Others
2,198
22,846
0.01
0.08
Total
34,139
40,488
0.18
0.14
Procurement payable
(Note 12)
PT Industri Telekomunikasi
Indonesia (Persero)
33,667
92,931
0.18
0.33
Kopindosat
33,458
37,441
0.18
0.13
NexWave
-
16,638
-
0.06
PT Personel Alih Daya
-
14,652
-
0.05
PT SCS Astra Graphia Technologies
3,062
6,496
0.01
0.02
Total
70,187
168,158
0.37
0.59
Accrued expenses
MOCIT
230,148
376,677
1.22
1.32
Key management personnel
8,861
26,046
0.05
0.09
Kopindosat
2,037
21,991
0.01
0.08
Ministry of Finance
20,633
6,170
0.11
0.02
Total
261,679
430,884
1.39
1.51
Other current liabilities
Directorate General of Customs and
Excise
-
24,184
-
0.08
Telkomsel
1,664
2,560
0.01
0.01
Starhub
135
177
0.00
0.00
Total
1,799
26,921
0.01
0.09
71
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2006
2007
2006
2007
Due to related parties
Telkom
600
45,487
0.00
0.16
Indonesia Comnet Plus (“Comnet”)
6,649
5,373
0.04
0.02
TVRI
4,973
2,262
0.03
0.01
State-owned banks
1,875
1,875
0.01
0.01
Kopindosat
1,490
1,509
0.01
0.00
PT Pos Indonesia (Persero)
11,937
48
0.06
0.00
Others
1,916
8,296
0.01
0.03
Total
29,440
64,850
0.16
0.23
Loans payable
State-owned banks
635,649
1,994,909
3.38
7.01
Other non-current liabilities
Telkomsel
13,109
11,445
0.07
0.04
StarHub
-
855
-
0.00
Others
990
-
0.00
-
Total
14,099
12,300
0.07
0.04
Percentage to Respective Income
Amount
or Expenses (%)
2005
2006
2007
2005
20062007
Operating revenues
Telkom
806,211
545,060
1,172,722
6.96
4.45
7.11
Telkomsel
59,121
(13,539
)
393,831
0.51
(0.11)2.39
State-owned banks
184,291
131,397
201,144
1.591.07
1.22
Private banks
924
1,118
52,014
0.01
0.01
0.32
StarHub
37,860
66,213
49,133
0.330.540.30
SingTel
29,162
66,564
46,255
0.25
0.54
0.28
CSM
11,192
11,058
7,948
0.100.09
0.05
PSN
3,949
5,490
7,166
0.03
0.05
0.04
MOCIT
486
5,383
6,915
0.00
0.05
0.04
PT Angkasa Pura
(Persero)
6,334
4,652
5,535
0.06
0.040.03
LKBN Antara
21,324
7,628
3,568
0.18
0.06
0.02
PT Garuda Indonesia
(Persero)
3,255
470
485
0.03
0.00
0.00
Others
68,619
122,533
135,926
0.59
1.00
0.83
Total
1,232,728
954,027
2,082,642
10.64
7.79
12.63
Operating expenses
Cost of services
MOCIT
525,248
663,552
1,015,041
6.62
7.50
8.48
Telkom
390,136
343,854
973,793
4.91
3.89
8.14
Telkomsel
-
-
474,337
-
-
3.96
Comnet
32,523
34,146
34,254
0.410.39
0.29
SingTel
21,479
14,563
23,563
0.27
0.16
0.20
PT Personel Alih Daya
-
-
17,090
-
-
0.14
StarHub
6,796
1,835
10,355
0.090.020.09
Kopindosat
14,788
6,838
5,432
0.190.08
0.04
PT Industri
Telekomunikasi
Indonesia
(Persero)
3,096
5,001
1,571
0.04
0.06
0.01
Others
2,632
3,478
8,331
0.030.04
0.07
Total
996,698
1,073,267
2,563,767
12.56
12.1421.42
72
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income
Amount
or Expenses (%)
2005
2006
2007
2005
20062007
Personnel
Kopindosat
113,112
39,726
135,911
1.43
0.45 1.14
Key management
personnel
108,190
108,589
127,350
1.36
1.23
1.06
Jiwasraya
(3,018
)
30,174
47,266
(0.04
)
0.34
0.39
Total
218,284
178,489
310,527
2.752.02
2.59
Administration and
general
PT Perusahaan Listrik
Negara (“PLN”)
20,249
41,203
41,747
0.260.470.35
Kopindosat
49,478
48,560
39,863
0.620.55
0.33
Usaha Gedung Bank
Dagang Negara
(“UGBDN”)
4,066
5,628
4,976
0.050.06
0.04
Others
30,005
968
7,763
0.38
0.01
0.07
Total
103,798
96,359
94,349
1.311.09
0.79
Other income (expenses)
Interest income
State-owned banks
105,955
107,022
103,294
8.16
7.78
6.49
Others
37,217
21,224
34,916
2.86
1.54
2.20
143,172
128,246
138,210
11.02
9.32
8.69
Financing cost
State-owned banks
(72,579
)
(60,181
)
(66,482
)
(5.59
)
(4.38
)
(4.18
)
Others
(4,116
)
(6,231
)
(7,010
)
(0.31
)
(0.45
)
(0.44
)
(76,695
)
(66,412
)
(73,492
)
(5.90
)
(4.83
)
(4.62
)
Net
66,477
61,834
64,718
5.12
4.49
4.07
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.
State-owned banks
Affiliate
Cash and cash equivalents,
loans payable and operating
revenues - MIDI
2.
Private banks
Affiliate
Cash and cash equivalents,
loans payable and operating
revenues - MIDI
3.
StarHub
Affiliate
Operating revenues -
international calls
73
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
4.
TVRI
Affiliate
Operating revenues - MIDI
5.
Telkom (Notes 30l and 33)
Affiliate
Operating revenues - cellular,
fixed telecommunication and
MIDI, compensation to other
telecommunications carriers
and service providers
6.
PT Pos Indonesia (Persero)
Affiliate
Operating revenues - MIDI
7.
PSN
Affiliate
Operating revenues - MIDI
8.
CSM
Affiliate
Operating revenues - MIDI
9.
Telkomsel (Note 33)
Affiliate
Operating revenues - cellular and
fixed telecommunication
10.
LKBN Antara
Affiliate
Operating revenues - MIDI
11.
SingTel
Affiliate
Operating revenues - fixed
telecommunication
12.
MOCIT
Government agency
Operating revenues - MIDI,
cost of services - concession
fee, radio frequency fee and
USO
13.
Kopindosat
Affiliate
Personnel expenses,
administration and general
expenses
14.
Jiwasraya
Affiliate
Long-term prepaid pension
15.
Directorate General of Customs
and Excise
Government agency
Other current liabilities
16.
Key management personnel
Affiliate
Personnel expenses, and prepaid/
unamortized portions of
housing and transformation
advances, and transformation
incentives
74
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
17.
NexWave
Affiliate
Procurement payable
18.
PT Industri Telekomunikasi
Indonesia (Persero)
Affiliate
Procurement payable
19.
Optus
Affiliate
Operating revenues - fixed
telecommunication
20.
PT Personel Alih Daya
Affiliate
Personnel expenses and
cost of services -
maintenance
21.
PT SCS Astra Graphia
Technologies
Affiliate
Procurement payable
22.
Ministry of Finance
Government agency
Accrued expenses
23.
Comnet
Affiliate
Cost of services - leased circuits -
rent of transmission channel
24.
PT Angkasa Pura (Persero)
Affiliate
Operating revenues - MIDI
25.
PT Garuda Indonesia (Persero)
Affiliate
Operating revenues - MIDI
26.
PLN
Affiliate
Cost of services - utilities expense
27.
UGBDN
Affiliate
Cost of services - rent expense
75
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
27.
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
2005
2006
2007
Numerator for basic earnings per
share - net income
1,623,481
1,410,093
2,042,043
Dilutive effect of convertible bonds (Note 16)
-
(11,262
)
-
Numerator for diluted earnings per share
1,623,481
1,398,831
2,042,043
Denominator - weighted-average number
of shares outstanding during the year
(including effect of exercise of ESOP)
5,253,249,519
5,404,654,859
5,433,933,500
Basic earnings per share
309.04
260.90
375.79
Diluted earnings per share
309.04
258.82
375.79
Basic earnings per ADS (50 B shares
per ADS)
15,452.16
13,045.17
18,789.73
Diluted earnings per ADS
15,452.16
12,940.98
18,789.73
28.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meetings (“ASGM”), the stockholders approved, among others, the appropriation of annual net income for reserve fund and cash dividend distribution, and the utilization of the remaining amount for reinvestment and working capital.
ASGM Date | Reserve Fund (Rp) | Dividend per Share (Rp) | Dividend Payment Date | |||
2004 Net Income | ||||||
June 8, 2005 | 16,332 | 154.23 | July 15, 2005 | |||
2005 Net Income | ||||||
June 24, 2006 | 16,235 | 149.32 | August 8, 2006 | |||
2006 Net Income | ||||||
June 5, 2007 | 14,101 | 129.75 | July 13, 2007 |
Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia.
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
29.
DERIVATIVES
During 2006 and 2007, the Company entered into several swap and currency forward contracts. Listed below is information related to the contracts and their fair values as of December 31, 2006 and 2007:
Fair Value (Rp)
Notional
2006
2007
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap Contracts:
a.
Standard Chartered Bank, Jakarta
Branch (“StandChart”)
25,000
-
10,938
8,973
-
b.
Goldman Sachs Capital Market, L.P.,
New York (“GSCM”)(3)
100,000
-
-
--
c.
JPMorgan Chase Bank, Singapore
Branch (“JPMorgan”)(4)
25,000
-
-
--
d.
GSI
100,000
-
31,202
66,489
-
e.
GSI
25,000
-
34,511
-20,678
f.
GSI
75,000
16,550
-
21,255
-
g.
Merrill Lynch Capital Market Bank
Limited (“MLCMB”)
25,000
-
10,705
-952
h.
MLCMB
25,000
-
45,650
-28,634
i.
StandChart
25,000
-
34,215
-5,758
j.
MLCMB
25,000
-
22,151
-8,288
k.
StandChart
25,000
-
18,022
6,853
-
l.
StandChart
25,000
-
7,584
17,126
-
m.
HSBC
25,000
-
7,286
6,666
-
Sub-total
16,550
222,264
127,36264,310
Currency Forward Contracts:
n.
GSCM(8)
10,000
-
-
--
o.
StandChart
2,000
-
-
98
-
p.
JPMorgan
3,000 or 6,000
-
-
257
-
q.
StandChart(11)
1,500 or 3,000
-
-
--
r.
JPMorgan(9)
3,000 or 6,000
-
-
--
s.
StandChart(11)
1,500 or 3,000
-
-
--
t.
GSCM
(10)
10,000
-
-
--
Sub-total
-
-
355
-
Interest Rate Swap Contracts:
u.
Barclays Capital, London
(“Barclays”)(1)
50,000
-
-
--
v.
HSBC(2)
25,000
-
-
--
w.
ABN-Amro Bank N.V., London Branch
(“ABN”)(5)
50,000
-
-
--
x.
GSCM
(6)
25,000
-
-
--
y.
GSCM
(7)
25,000
-
2,029
--
Sub-total
-
2,029
--
Total
16,550
224,293
127,717
64,310
(1)
contract entered into in February 2004 and terminated in April 2005
(2)
contract entered into in May 2004 and terminated in May 2005
(3)
contract entered into in August 2004 and terminated in May 2005
(4)
contract entered into in November 2004 and terminated in October 2005
(5)
contract entered into in January 2005 and terminated in May 2005
(6)
contract entered into in March 2006 and terminated in October 2006
(7)
contract entered into in July 2006 and terminated in June 2007
(8)
contract entered into in January 2007 and terminated in June 2007
(9)
contract entered into in May 2007 and terminated in August 2007
(10)
contract entered into in May 2007 and terminated in July 2007
(11)
contract entered into in May 2007 and settled in December 2007
77
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
29.
DERIVATIVES (continued)
The net changes in fair value of the swap and currency forward contracts and embedded derivative (Note 15b), swap cost or income and termination cost or income amounting to (Rp44,209), (Rp438,774) and Rp68,023 in 2005, 2006 and 2007, respectively, were charged or credited to “Gain (Loss) on Changes in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statements of income.
The following are the details of the contracts:
Cross Currency Swap Contracts
No. | Counter-parties | Contract Period | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid (Rp) | ||
2005 | 2006 | 2007 | |||||
a. | StandChart Branch (“StandChart”) | April 23, 2004 - November 5, 2008 | 6-month U.S. dollar LIBOR plus 2.60% | Every May 5 and November 5 | 13,865 | 16,911 | 18,335 |
b. | GSCM(i) | August 9, 2004 - November 5, 2010 | 6-month U.S. dollar LIBOR plus 2.62% | Every May 5 and November 5 | 29,142 | - | - |
c. | JPMorgan(ii) | November 5, 2004 - November 5, 2010 | 5% of Rp225,000 | Every May 5 and November 5 | 5,687 | - | - |
d. | GSI | May 13, 2005 -November 5, 2010 | (i) Fixed rate of 6.96% per annum for US$50,000 and (ii) 6-month U.S. dollar LIBOR plus 2.62% per annum for US$50,000, netted with (i) 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 | Every May 5 and November 5 | 34,979 | 61,885 | 61,572 |
e. | GSI | May 13, 2005 - November 5, 2010 | 4.30% of US$25,000 | Every May 5 and November 5 | 5,642 | 9,689 | 9,866 |
f. | GSI | August 22, 2005 - June 22, 2012 | 3.28% of US$75,000 | Every June 22 and December 22 | 12,180 | 22,995 | 22,873 |
g. | MLCMB | September 20, 2005 - June 22, 2012 | 2.99% of US$25,000 | Every June 22 and December 22 | 3,640 | 6,892 | 6,793 |
h. | MLCMB | November 16, 2005 - June 22, 2012 | 5.50% of US$25,000 | Every June 22 and December 22 | 1,265 | 12,677 | 12,495 |
i. | StandChart | January 11, 2006 - June 22, 2012 | 4.78% of US$25,000 | Every June 22 and December 22 | - | 10,817 | 11,111 |
j. | MLCMB | March 1, 2006 - June 22, 2012 | 4.15% of US$25,000 | Every June 22 and December 22 | - | 9,375 | 9,613 |
k. | StandChart | March 15, 2006 - June 22, 2012 | 3.75% of US$25,000 | Every June 22 and December 22 | - | 6,685 | 8,717 |
l. | StandChart | May 12, 2006 - June 22, 2012 | 3.45% of US$25,000 | Every June 22 and December 22 | - | 4,897 | 8,019 |
m. | HSBC | August 8, 2006 - November 5, 2010 | 4.00% of US$25,000 | Every May 5 and November 5 | - | 2,278 | 9,214 |
(i)
On May 13, 2005, the Company early terminated this cross currency swap contract with GSCM. Based on the termination confirmation, the Company was required to make termination payment in the amount of US$11,750 (equivalent to Rp111,508). The payment was made on May 16, 2005.
(ii)
On October 28, 2005, the Company early terminated this 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.
All cross currency swap contracts with GSI (contract Nos. d, e and f) 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 be terminated 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.
78
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
29.
DERIVATIVES (continued)
Currency Forward Contracts
No. | Counter-parties | Contract Period | IDR/USD Fixing Rate (in full amounts) | Settlement Dates |
n. | GSCM(iii) | January 2, 2007 - July 5, 2007 | Rp8,955 to US$1 | May 4, 2007, June 6, 2007 and July 5, 2007 |
o. | StandChart | February 15, 2007 - February 20, 2008 | Rp8,950 to US$1 | Every month starting March 20, 2007 to February 20, 2008 |
p. | JPMorgan | April 24, 2007 - April 28, 2008 | Spot rate on the settlement date | Every month starting May 25, 2007 to April 28, 2008 |
q. | StandChart | May 1, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 4, 2007 to December 28, 2007 |
r. | JPMorgan(iv) | May 3, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 27, 2007 to December 28, 2007 |
s. | StandChart | May 4, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 8, 2007 to December 28, 2007 |
t. | GSCM(v) | May 10, 2007 - November 20, 2007 | Rp8,790 to US$1 | Every month starting August 20, 2007 to November 20, 2007 |
(iii)
On June 8, 2007, the Company early terminated this currency forward contract with GSCM. Based on the termination confirmation, the Company was entitled to receive termination settlement in the amount of US$76 (equivalent to Rp688). The full settlement was received on June 12, 2007.
(iv)
On August 24, 2007, this contract was terminated and there was no cash flow that resulted from the termination pursuant to certain clauses of the contract.
(v)
On July 5, 2007, the Company early terminated this currency forward contract with GSCM. Based on the termination confirmation, the Company was entitled to receive termination settlement in the amount of US$335 (equivalent to Rp3,014), which was subsequently received on July 10, 2007.
Interest Rate Swap Contracts
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income Receipt Date | Amount of Swap Income Received (Rp) | |||
2005 | 2006 | 2007 | ||||||
u. | Barclays(vi) | February 10, 2004 - November 5, 2010 | 6-month U.S. dollar LIBOR plus 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 semi-annual range | Every May 5 and November 5 | - | - | - | |
v. | HSBC(vii) | May 7, 2004 - November 5, 2006 | 12-month U.S. dollar LIBOR plus 3.50%, in exchange for 7.75% per annum | Every November 5 | 9,174 | - | - | |
w. | ABN-Amro Bank N.V., London Branch (“ABN”)(viii) | January 20, 2005 - 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 | November 5, 2005 and thereafter every May 5 and November 5 | - | - | - | |
x. | GSCM(ix) | March 15, 2006 - June 22, 2012 | 4.90% of US$25,000 per annum, in exchange for 7.125% per annum times certain index located in the pre-determined quarter range up to 2012 | Every March 22, June 22, September 22 and December 22 | - | 3,860 | - | |
y. | GSCM(x) | July 18, 2006 - June 22, 2012 | 5.90% of US$25,000 per annum, in exchange for 7.125% per annum times certain index located in the pre-determined semi-annual range up to 2012 | Every June 22 and December 22 | - | 1,390 | 1,386 | |
(vi)
On April 15, 2005, the Company early terminated this 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), which was made on April 21, 2005.
(vii)
On May 12, 2005, the Company early terminated this 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), which was made on May 13, 2005.
(viii)
On May 12, 2005, the Company early terminated this 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), which was made on May 13, 2005.
(ix) On October 16, 2006, the Company early terminated this contract. 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.
(x)
On June 22, 2007, GSCM took the early termination option for this contract.
79
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
30.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES
a.
As of December 31, 2007, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$458,336 and Rp3,406,043 (Note 37i).
The significant commitments on capital expenditures are as follows:
Contract Date | Contract Description | Vendor | Amount of Contract/POs Already Issued | Amount of Contract/POs Not Yet Served |
June 29, 2007 | Palapa D Satellite In-Orbit Delivery (“Palapa D Satellite”) | Thales Alenia Space | US$217,600 | US$160,135 |
May 16, 2007 | Supply of GSM Cellular Infrastructure | PT Nokia Networks, Nokia Siemens Networks Oy and Nokia Siemens Networks GmbH & Co.KG. | US$73,981 and Rp423,201 | US$57,555 and Rp371,089 |
April 20, 2007 | Telecommunication Equipment Supply and Service | PT Alcatel Lucent Indonesia and Alcatel Shanghai Bell Co. Ltd. | US$12,057 and Rp386,409 | US$1,740 and Rp262,793 |
April 3, 2007 | Supply of GSM Infrastructure | PT Ericsson Indonesia and Ericsson AB | US$103,718 and Rp290,091 | US$18,686 and Rp115,999 |
September 29, 2006 | WCDMA/HSDPA Radio Access Network Development Project | PT Ericsson Indonesia and Ericsson AB | US$55,220 and Rp216,039 | US$23,723 and Rp106,865 |
September 25, 2006 | Single Intelligent Network | PT Ericsson Indonesia and Ericsson AB | US$67,091 and Rp92,364 | US$37,423 and Rp17,992 |
July 28, 2005 | Supply and Installation of PDH and SDH Microwave Radio Equipment for West Java, Central Java, Bali and Nusa Tenggara Islands | PT Alcatel Indonesia, Alcatel CIT and Alcatel Italy | US$13,702 and Rp183,617 | US$1,379 and Rp102,192 |
b.
On November 27, 2007, the Company signed two facility agreements with HSBC France and one facility agreement with HSBC Indonesia to finance its new telecommunications satellite. Th e s e combined export credit and commercial financing facilities consist of the following:
·
12-year COFACE Term Facility Agreement (“COFACE Facility”) amounting to US$15 7 ,243 to finance the payment of 85% of the French Content under the Palapa D Satellite Contract plus 100% of the C OFACE Premium .. The loan bears interest at the fixed annual rate of 5.69% which is payable semi-annually.
·
12-year Sinosure Term Facility Agreement (“Sinosure Facility”) amounting to US$44,200 to finance the payment of 85% of the Launch Service Contract .. The loan bears interest at floating rates based on U.S. dollar LIBOR plus 0.35% per annum, which is payable semi-annually.
·
9-year Commercial Facility Agreement amounting to US$27,037 to financ e the construction and launc h of the s atellite and the payment of the Sinosure Premium in connection with the Sinosure Facility .. The loan bears interest at floating rates based on U.S. dollar LIBOR plus 1.45% per annum, which is payable semi-annually.
As of December 31, 2007, the Company has not yet utilized these facilities (Note 37e).
a.
On November 1, 2007, the Company obtained a five-year credit facility from DBS with a maximum amount of Rp500,000. The loan bears interest at (i) fixed annual rates for the first two years (9.7% in the first year and 10.4% in the second year), and (ii) floating rates for the remaining years based on prevailing annual interest rate of Certificates of Bank Indonesia plus 1.5%. The interest is payable quarterly.
80
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
30.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
Based on the credit facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
As of December 31, 2007, the Company has not yet utilized this facility (Note 37f).
b.
On May 25, 2007, the Company and six other telecommunication operators signed a memorandum of understanding on the construction of national optical fiber network Palapa Ring for the eastern part of Indonesia (“Palapa Ring Project Phase I”) wherein the Company will share 10% of the total project cost of Rp3,000,000. In addition, they also agreed to equally bear the cost of preparation and implementation (“preparation cost”) of Palapa Ring Project Phase I up to the amount of Rp2,000. If the preparation cost exceeds Rp2,000, there will be further discussion among them. However, one of the telecommunication operators has subsequently decided not to join the project.
On November 10, 2007, the Company and five other telecommunication operators (including Telkom, a related party) signed the agreement on the consortium for the construction and maintenance of Palapa Ring wherein the Company agreed to bear 13.36% of the total project cost of US$225,037. This agreement replaced the previous memorandum of understanding.
As of December 31, 2007, the Company has not made any payment for the project.
c.
On April 27, 2007, the Company joined Asia-America Gateway Consortium (“AAG”) by signing Construction & Maintenance Agreement (“C&MA”). AAG is a sea cable consortium which consists of 19 member companies. The Company has committed to invest US$5,000 (as of December 31, 2007, the Company has paid the amount of US$583) for voting interest of 0.9031%, as a member of the consortium. The capital cost incurred in connection with the engineering, provision, construction and installation of AAG shall be borne by the members in the proportions of their voting interests.
d.
On January 23, 2007, the Company obtained a credit facility of US$10,000 or its IDR equivalent from StandChart to fund the Company’s short-term working capital needs. The credit facility is a revolving loan that will be available until December 31, 2007. After the full amount of the facility is drawn, this credit facility continues to become available for a period of one up to six months that can be further extended. The revolving loan bears interest at SIBOR plus 1.25% per annum, and at the prevailing annual rate of one-month Certificates of Bank Indonesia plus 1.70% per annum for the portions of the revolving loan denominated in U.S. dollar and rupiah, respectively.
As of December 31, 2007, the Company has not utilized this facility and is still in the process of extending such facility agreement (Note 37h).
e.
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 payment scheme set out in Regulation No. 7/PER/M.KOMINFO/2/2006 dated February 8, 2006 of the Ministry of Communications and Information Technology.
81
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
30.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
f.
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 matures within a 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 maturity of over three months but less than six months is payable at 2.5% per annum over three-month Certificates of Bank Indonesia rates.
Based on the loan facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
·
Bank guarantee facility amounting to US$2,000. The loan from the facility matures at the maximum period of one year. The Company is required to pledge its cash deposit/cash margin/current account in Deutsche Bank AG (Jakarta Branch) for the issuance of bank guarantee.
The facilities expired on November 30, 2005 and were extended for 12 months. The facilities shall be automatically extended for further 12-month periods upon expiration, unless early notification of non-extension is made in writing.
As of December 31, 2007, the facilities have not been terminated and the Company has not utilized these facilities.
a.
On July 20, 2005, the Company obtained facilities from HSBC to fund the Company’s short-term working capital needs. These facilities were amended on May 14, 2007 to extend the maturity date to February 28, 2008. 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 portions denominated in rupiah and U.S. dollar, respectively.
·
Revolving loan facility amounting to US$5,000 (including revolving loan denominated in rupiah amounting to Rp40,000). The loan matures within a maximum period of six months and can be drawn in tranches with minimum amounts of US$500 and Rp500 for loans denominated in U.S. dollar and rupiah, respectively. Interest will be charged on daily balances at 3% per annum and 6% per annum below the HSBC Term Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.
Based on the loan facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
82
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
30.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
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 a maximum maturity of 3 months.
Subsequent to the above-mentioned May 14, 2007 amendment, the treasury facilities from HSBC were amended to become exposure risk limit (weighted)/facility foreign exchange option (“FX option”) totalling US$21,000 to facilitate the Company’s requirement for hedging genuine foreign currency exposures through spot, forward, currency swap and interest rate swap transactions with maximum maturity of 5 years, and FX option with a maximum maturity of 1 year.
As of December 31, 2007, the Company has not utilized the facilities.
a.
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. However, on December 1, 2003, the MOF through its letter No. S-6287/LK/2003 increased the penalty for the dividend from the Company’s net income in 2000 from Rp38,096 to Rp42,902.
In 2006, the Company accrued the penalty in the amount of Rp20,633 (Note 14) representing its estimate of the penalty it will pay to the Government and pertaining to the dividend from the Company’s 1999 net income.
Based on its letter No. S-416/MK.02/2007 dated September 12, 2007, the MOF decided to release the Company from its obligation to pay penalty for late payment of dividend declared from its 2000 net income and required the Company to pay immediately the penalty for late payment of dividend declared from its 1999 net income amounting to Rp20,633.
On September 24, 2007, the Company paid the penalty amounting to Rp20,633.
b.
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 Indefeasible Right of Use (“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.
83
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
30.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
The funds received from the sale of IRU and DUC, OCU services and 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, 2007, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$6,249. 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.
c.
Other agreements made with Telkom are as follows:
·
Under a cooperation agreement, the compensation to 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.
·
In 1994, Satelindo entered into a land transfer agreement for the transfer of Telkom’s rights to use a 134,925-square meter land property 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 a land rental agreement dated December 6, 2001, generally under the same terms as those of the Land Transfer Agreement.
·
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 seventh amendment agreement dated November 8, 2007. Transponder lease expense charged to operations amounting to Rp8,025, Rp7,083 and Rp16,399 in 2005, 2006 and 2007, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of income.
31.
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.
84
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
31.
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.
Based on Decision Letter No. 09/PER/M.KOMINFO/02/06 dated February 28, 2006 of the Ministry of Communications and Information Technology, the collection rates are set by tariff formula known as price cap formula which already considers customer price index starting January 1, 2007.
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 per new connection number. The maximum tariff for monthly charges is Rp65,000. Usage charges consist of the following:
1.
Airtime
The maximum airtime tariff charged to the originating cellular subscriber is Rp325 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 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.
85
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
31.
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 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.
Under the new regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges
·
Additional facilities fee
The cellular providers should implement the new tariffs referred to as “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee), while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.
The implementation of the new tariffs for a dominant operator has to be approved by the Government. A dominant operator is an operator that has a revenue of more than 25% of total industry revenue for a certain segment.
As of December 31, 2007, the Company has fully adopted the new cellular tariff system.
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, 2007, the Company has fully adopted the new fixed telecommunication tariff system.
32.
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.
86
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
32.
INTERCONNECTION TARIFFS (continued)
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
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 telecommunications 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.
87
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
32.
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 discussed in “a” above. However, 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 until December 31, 2006 (Note33).
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.
Universal Service Obligation (“USO”)
On September 30, 2005, the Ministry of Communications and Information Technology issued Regulation No. 15/PER/M.KOMINFO/9/2005, which sets forth the basic policy underlying the USO program and requiring telecommunication operators in Indonesia to contribute 0.75% of annual gross revenue (after deducting bad debt and interconnection charges) for USO development.
The Ministry of Communications and Information Technology also issued Regulation No. 11/PER/M.KOMINFO/04/2007 dated April 13, 2007, which gives guidance on USO provisioning, such as on auction mechanism, tariff, USO area and technical requirements.
Currently, all operators and the Government are working together to amend the USO tariff. However, as of December 31, 2007, such amendment has not yet been finalized.
88
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
32.
INTERCONNECTION TARIFFS (continued)
3.
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 new decree, the operator of the network on which calls terminate will determine the interconnection charge to be received by it based on a formula to be mandated by the Government, which will be intended to have the effect of requiring that operators charge for calls based on the cost of carrying such calls.
The effective date of this decree, which was originally set to start on January 1, 2005, was subsequently postponed until January 1, 2007 based on Regulation No. 08/PER/M.KOMINFO/02/2006 dated February 8, 2006 of the Ministry of Communications and Information Technology (Note 33).
The implementation of interconnection billing between operators starts from the time they sign their interconnection agreements.All interconnection agreements will be based on Reference Interconnection Offer (“RIO”). All operators have to publish their RIO and a dominant operator is required to obtain an approval of its RIO from the Government. The Directorate General of Posts and Telecommunications issued Decree No. 278/DIRJEN/2006 on August 4, 2006, which approved the RIO of the Company and two other dominant telecommunications operators (Telkom and Telkomsel).
The decree has been implemented since January 1, 2007 as agreed by all operators and approved by the Government.
33.
INTERCONNECTION AGREEMENTS
The Company, Satelindo and IM3 have interconnection arrangements with domestic and overseas operators. Some significant interconnection agreements are as follows:
1.
Telkom
The following are significant interconnection agreements/transactions with Telkom:
a.
Fixed telecommunication services
On September 23, 2005, the Company and Telkom signed an agreement regarding the interconnection of local, long-distance and international fixed networks.
The principal matters covered by the agreement are as follows:
·
Interconnection between the Company’s and Telkom’s local, long-distance and international fixed networks enables the Company’s fixed 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.
89
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
33.
INTERCONNECTION AGREEMENTS (continued)
1.
Telkom (continued)
a.
Fixed telecommunication services (continued)
·
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 per record of outgoing call as compensation for billing processing.
On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that are effective starting January 1, 2007.
b.
Cellular Services
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.
On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that are effective starting January 1, 2007.
1.
PT Excelkomindo Pratama or “Excelcom”, Komselindo and Telkomsel
The principal matters covered by the agreements are as follows:
·
The Company’s and Satelindo’s international gateway exchanges are interconnected with the 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.
90
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
33.
INTERCONNECTION AGREEMENTS (continued)
2.
PT Excelkomindo Pratama or “Excelcom”, Komselindo and Telkomsel (continued)
The latest agreement with Komselindo was signed on July 6, 2004, while the latest agreement with Excelcom was signed on July 1, 2004. 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, except for interconnection fee.
On December 8, 27 and 28, 2006, the Company entered into a memorandum of understanding with each of Telkomsel, Komselindo and Excelcom, respectively, applying the new interconnection rates under cost-based regime effective January 1, 2007 to comply with Regulation No. 08/PER/M.KOMINFO/02/2006 of the Ministry of Communications and Information Technology (Note 32).
Net interconnection revenues (charges) from (to) the operators are as follows:
2005
2006
2007
Telkom
594,523
399,122
449,730
Excelcom
(30,239
)
(34,675
)
25,341
Komselindo
3,432
2,028
11,728
Telkomsel
29,932
(50,782
)
5,405
Net
revenues
597,648
315,693
492,204
34.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
The Companies’ monetary assets and liabilities denominated in various foreign currencies as of December 31, 2007 (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
207,702
1,950,942
Accounts receivable Trade
98,651
926,629
Others
1,250
11,741
Derivative assets
13,597
127,717
Other current assets
332
3,116
Due from related parties
2,351
22,083
Non-current assets - others
1,230
11,553
Total assets
325,113
3,053,781
91
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
34.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)
Amount in
Equivalent
U.S. Dollar
Rupiah *
Liabilities:
Accounts payable - trade
21,649
203,347
Procurement payable
423,215
3,975,258
Accrued expenses
22,164
208,186
Deposits from customers
1,941
18,232
Derivative liabilities
6,847
64,310
Other current liabilities
34
319
Due to related parties
2
17
Loans payable (including current maturities)
34,773
326,621
Bonds payable (including current maturities)
550,000
5,166,150
Other non-current liabilities
36,401
341,916
Total liabilities
1,097,026
10,304,356
Net liabilities position
771,913
7,250,575
*
translated using the prevailing exchange rate at balance sheet date
35.
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 year to acquire segment assets that are expected to be used for more than one year.
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
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
92
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
35.
SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunication
MIDI
Total
2005 (continued)
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 company
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
960,83221,722,897
Unallocated liabilities
2,142,746
Inter-segment liabilities elimination
(5,393,838)
Liabilities – net
18,471,805
Capital expenditure
6,330,401
306,349
661,1977,297,947
Depreciation and amortization
2,431,356
214,206
434,6433,080,205
2006
Operating revenues
Revenues from external customers
9,227,537
1,109,281
1,902,58912,239,407
Inter-segment revenues
(222,650
)
222,650
318,119318,119
Total operating revenues
9,004,887
1,331,931
2,220,70812,557,526
Inter-segment revenues elimination
(318,119)
Operating revenues - net
12,239,407
Income
Operating income
2,291,923
627,611
479,1253,398,659
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 company
(238)
Others - net
21,202
Income before minority interest in net income
of subsidiaries
1,446,560
93
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
35.
SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunication
MIDI
Total
2006 (continued)
Other Information
Segment assets
30,550,224
1,552,003
3,738,04435,840,271
Unallocated assets
4,520,191
Inter-segment assets elimination
(6,131,804)
Assets - net
34,228,658
Segment liabilities
19,665,806
760,291
931,64621,357,743
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
503,3793,653,266
2007
Operating revenues
Revenues from external customers
12,752,496
1,567,415
2,168,58416,488,495
Inter-segment revenues
(205,765
)
205,765
364,192364,192
Total operating revenues
12,546,731
1,773,180
2,532,776
16,852,687
Inter-segment revenues elimination
(364,192
)
Operating revenues - net
16,488,495
Income
Operating income
3,438,770
661,039
419,795
4,519,604
Interest income
232,411
Gain on change in fair value of derivatives - net
68,023
Financing cost
(1,428,604
)
Income tax expense
(859,517
)
Amortization of goodwill
(226,507
)
Loss on foreign exchange - net
(155,315
)
Others - net
(79,996
)
Income before minority interest in net income
of subsidiaries
2,070,099
Other Information
Segment assets
35,594,557
1,667,532
4,923,560
42,185,649
Unallocated assets
9,715,950
Inter-segment assets elimination
(6,596,513
)
Assets - net
45,305,086
Segment liabilities
27,859,412
989,627
1,278,61430,127,653
Unallocated liabilities
3,821,202
Inter-segment liabilities elimination
(5,188,499
)
Liabilities – net
28,760,356
Capital expenditure
8,382,846
428,278
915,273
9,726,397
Depreciation and amortization
3,477,044
198,378
519,780
4,195,202
94
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
36.
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.
37.
SUBSEQUENT EVENTS
a.
On January 7, 2008, based on Decree No. 01/DIRJEN/2008 of the DGPT, the Company was granted an operating license as Internet Service Provider (Note 1a).
b.
On January 9, 2008, the Company was also granted operating licenses as follows:
·
Based on Decree No. 51/DIRJEN/2008 of the DGPT, the Company obtained an operating license for Internet Interconnection Services (Network Access Point/NAP). This replaces the previous license given to Satelindo.
·
Based on Decree No. 52/DIRJEN/2008 of DGPT, the Company obtained an operating license for Telephony Internet Services. This replaces the previous license for VoIP with national coverage that expired in 2007 (Note 1a).
a.
On January 9, 2008, based on letter No. 10/14/DASP from Bank Indonesia, the Company obtained approval for“Indosat m-wallet” prepaid cards as a new means of payment. The Company was also appointed as a special principal and technical acquirer for such prepaid cards.
b.
On January 17, 2008, the Company entered into an agreement for a Joint Shore End Cable Operations in Singapore with Telkom and AAG parties. Based on the agreement, the Company has committed to invest US$4,535 for this project.
c.
On January 28, 2008, the Company made the first loan drawdown amounting to US$44,863 from its COFACE Facility from HSBC (Note 30b).
d.
On January 31, 2008, the Company drew down in full the five-year credit facility from DBS (Note 30c).
e.
On February 6, 2008, the Company informed the Capital Market and Financial Institutions Supervisory Agency (Bapepam - LK) about its intention to purchase a portion of its Guaranteed Notes Due 2010 and Guaranteed Notes Due 2012 up to US$100,000 through a combination of the two notes but should not exceed more than 25% of the principal amount of either series of the notes.
f.
On February 11, 2008, the Company terminated its credit facility from StandChart (Note 30f).
g.
As of February 15, 2008, the prevailing exchange rate of the rupiah to U.S. dollar is Rp9,186 to US$1 (in full amounts), while as of December 31, 2007, the prevailing exchange rate was Rp9,393 to US$1 (in full amounts). Using the exchange rate as of February 15, 2008, the Companies earned foreign exchange gain amounting to approximately Rp159,786 on the foreign currency liabilities, net of foreign currency assets, as of December 31, 2007 (Note 34).
95
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
37.
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 prevailing exchange rate of the rupiah to U.S. dollar as of December 31, 2007 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of December 31, 2007 as disclosed in Note 30a are approximately Rp4,210,274 if translated at the prevailing exchange rate as of February 15, 2008.
38.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the 2006 consolidated balance sheet which have been reclassified to Goodwill and Other Intangible Assets to conform with the presentation of accounts in the 2007 consolidated balance sheet:
As Previously Reported | Amounts | |
Property and Equipment - carrying value | (203,049) | |
Property and Equipment - accumulated depreciation | 158,667 |
Following are the accounts in the 2005 and 2006 consolidated statements of income which have been reclassified to Operating Expenses - Cost of Services to conform with the presentation of accounts in the 2007 consolidated statement of income:
Amounts | ||||
As Previously Reported | 2005 | 2006 | ||
Operating expenses - compensation to telecommunication carriers and service providers | 408,411 | 369,704 | ||
Operating expenses - maintenance | 614,595 | 585,158 | ||
Operating expenses - leased circuits | 142,210 | 180,168 | ||
Operating expenses - other cost of services | 1,461,729 | 1,569,143 | ||
39.
REVISED SAK
The following summarizes the revised SAK which were recently issued by the Indonesian Institute of Accountants:
·
SAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”, contains the requirements for the presentation of financial instruments and identifies the information that should be disclosed. The presentation requirements apply to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interests, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. This SAK requires the disclosure of, among others, information about factors that affect the amount, timing and certainty of an entity’s future cash flows relating to financial instruments and the accounting policies applied to those instruments. SAK 50 (Revised 2006) supersedes SAK 50, “Accounting for Certain Investments in Securities”, and is applied prospect ively for financial statements covering the periods beginning on or after January 1, 2009. Early application is encouraged.
96
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
39.
REVISED SAK (continued)
·
SAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”, establishes the principles for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This SAK provides the definitions and characteristics of derivatives, the categories of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships, among others. SAK 55 (Revised 2006) supersedes SAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”, and is applied prospectively for financial statements covering the periods beginning on or after January 1, 2009. Early application is encouraged.
·
SAK 13 (Revised 2007), “Investment Property”, shall be applied in the recognition, measurement and disclosure of investment property.This SAK applies to, among others, the measurement in a lessee’s financial statements of investment property interests held under a lease accounted for as a finance lease and to the measurement in a lessor’s financial statements of investment property provided to a lessee under an operating lease. This SAK permits the entity to choose either the cost model or fair value model to be applied to all its investment property. SAK 13 (Revised 2007) supersedes SAK 13 (1994), “Accounting for Investments”, and is effective for financial statements covering the periods beginning on or after January 1, 2008.
·
SAK 16 (Revised 2007), “Fixed Assets”,prescribes the accounting treatment for property, plant and equipment to enable the financial statements users to discern information about an entity’s investment in its property, plant and equipment and the changes in such investment. This SAK provides for, among others, the recognition of the assets, determination of their carrying amounts and related depreciation and impairment losses. Under this SAK, an entity shall choose either the cost model or revaluation model to account for its property, plant and equipment. SAK 16 (Revised 2007) supersedes SAK 16 (1994), “Fixed Assets and Other Assets”, and SAK 17 (1994), “Accounting for Depreciation”, and is effective for financial statements beginning on or after January 1, 2008.
·
SAK 30 (Revised 2007), “Leases”,prescribes for lessees and lessors, the appropriate accounting policies and disclosures to apply in relation to leases.This SAK provides for the classification of leases based on (a) the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee,and (b) the substance of the transaction rather than the form of the contract. SAK 30 (Revised 2007) supersedes SAK 30 (1990), “Accounting for Leases”, and is effective for financial statements beginning on or after January 1, 2008.
The Companies have not adopted these SAKs. The Companies are currently studying them and have not yet determined the related effects on the consolidated financial statements.
40.
NEW GOVERNMENT REGULATION
On December 28, 2007, the President of the Republic of Indonesia and the Minister of Law and Human Rights signed the Government Regulation No. 81/2007 (PP No. 81/2007) on “Reduction of the Rate of Income Tax on Resident Corporate Taxpayers in the Form of Publicly-listed Companies”. This regulation provides that resident publicly-listed companies in Indonesia can obtain the reduced income tax rate which is 5% lower than the highest income tax rate under Article 17 paragraph 1 (b) of the Income Tax Law, provided they meet the prescribed criteria, i.e., companies whose shares or other equity instruments are listed in the Indonesian stock exchanges, whose shares owned by the public are 40% or more of the total paid shares and such shares are owned by at least 300 parties, each party owning less than 5% of the total paid-up shares. These requirements should be fulfilled by the publicly-listed companies for a period of six months i n one tax year. As of December 31, 2007, the Companydoes not expect to meet the required criteria to avail of the lower income tax rate (Note 18), and has therefore, not applied this reduced tax rate to its deferred tax assets and liabilities.
97
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006 and 2007
With Comparative Figures for 2005
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data and unless otherwise stated)
41.
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 February 15, 2008.
98
