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)
PT Indosat Tbk and subsidiaries
Consolidated financial statements
nine months ended September 30, 2007 and 2008
1
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2008
Table of Contents
Page
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 - 100
***************************
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
September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(Note 3)
Rp
Rp
US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2c,4,25
6,303,937
6,646,684
704,845
Short-term investments - net of
allowance for decline in value
of Rp25,395 in 2007 and 2008
2d
-
-
-
Accounts receivable
2e
Trade
5,15
Related parties - net of allowance
for doubtful accounts of
Rp83,898 in 2007 and
Rp81,923 in 2008
25
197,013
93,879
9,955
Third parties - net of allowance
for doubtful accounts of
Rp295,199 in 2007 and
Rp406,411 in 2008
1,038,270
1,149,752
121,925
Others - net of allowance
for doubtful accounts of
Rp16,848 in 2007 and
Rp17,262 in 2008
12,370
24,250
2,572
Inventories
2f
114,171
179,030
18,985
Derivative assets
2q,28
20,863
121,810
12,917
Advances
34,408
66,299
7,031
Prepaid taxes
6,13
804,062
515,674
54,684
Prepaid expenses
2g,2p,24,25
639,300
963,683
102,193
Other current assets
2c,25
41,253
53,661
5,691
Total Current Assets
9,205,647
9,814,722
1,040,798
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)
September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(Note 3)
Rp
Rp
US$
NON-CURRENT ASSETS
Due from related parties - net of
allowance for doubtful
accounts of Rp2,219 in 2007
and Rp2,578 in 2008
2e,25
47,154
37,474
3,974
Deferred tax assets - net
2s,13
76,000
96,740
10,259
Investments in associated
companies - net of allowance
for decline in value of Rp56,300
in 2007 and 2008
2h,7
286
986
104
Other long-term investments - net of
allowance for decline in value of
Rp99,977 in 2007 and 2008
2h,8
2,730
2,730
289
Property and equipment
2i,2j,2o,
9,15,21
Carrying value
47,202,590
58,821,869
6,237,738
Accumulated depreciation
(19,370,077
)
(23,800,245
)
(2,523,886)
Impairment in value
(98,611
)
(98,611)
(10,457)
Net
27,733,902
34,923,013
3,703,395
Goodwill and other
intangible assets - net
2k,10
2,413,900
2,129,891
225,863
Long-term receivables
100,990
73,247
7,767
Long-term prepaid pension - net
of current portion
2p,24,25
213,345
188,579
19,998
Long-term advances
11,25
1,007,777
683,298
72,460
Others
460,711
649,912
68,920
Total Non-current Assets
32,056,795
38,785,870
4,113,029
TOTAL ASSETS
41,262,442
48,600,592
5,153,827
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)
September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(Note 3)
Rp
Rp
US$
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
Related parties
25
8,932
6,661
706
Third parties
348,052
563,169
59,721
Procurement payable
12,25
4,580,142
6,084,204
645,196
Taxes payable
2s,13
302,576
396,838
42,083
Accrued expenses
14,24,25
1,392,522
1,534,759
162,753
Unearned income
2n
785,999
1,064,223
112,855
Deposits from customers
91,145
45,701
4,846
Derivative liabilities
2q,28
132,847
108,198
11,474
Current maturities of:
Loans payable
2l,15
257,180
602,410
63,882
Bonds payable
2l,16
1,050,000
1,916,442
203,228
Other current liabilities
25
79,325
55,489
5,885
Total Current Liabilities
9,028,720
12,378,094
1,312,629
NON-CURRENT LIABILITIES
Due to related parties
25
23,613
35,851
3,802
Deferred tax liabilities - net
2s,13
1,412,124
1,488,702
157,869
Loans payable - net of current
maturities
2l,15
Related parties
25
715,000
1,595,854
169,231
Third parties
1,401,231
5,198,710
551,295
Bonds payable - net of current
maturities
2l,16
11,802,993
9,770,421
1,036,100
Other non-current liabilities
17,24,25
636,667
828,819
87,891
Total Non-current Liabilities
15,991,628
18,918,357
2,006,188
TOTAL LIABILITIES
25,020,348
31,296,451
3,318,817
MINORITY INTEREST
2b
297,116
308,230
32,686
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)
September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(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 2007 and 2008
18
543,393
543,393
57,624
Premium on capital stock
18
1,546,587
1,546,587
164,007
Difference in transactions of equity
changes in associated
companies/subsidiaries
2h
403,812
403,812
42,822
Difference in foreign currency
translation
2b
3,338
5,280
560
Retained earnings
Appropriated
80,258
100,678
10,676
Unappropriated
13,367,590
14,396,161
1,526,635
TOTAL STOCKHOLDERS’ EQUITY
15,944,978
16,995,911
1,802,324
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
41,262,442
48,600,592
5,153,827
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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(Note 3)
Rp
Rp
US$
OPERATING REVENUES
2n,19,25,
30,31,32
Cellular
9,146,449
10,226,044
1,084,416
Multimedia, Data
Communication,
Internet (“MIDI”)
1,568,223
2,121,248
224,947
Fixed telecommunication
1,165,308
1,301,529
138,020
Total Operating Revenues
11,879,980
13,648,821
1,447,383
OPERATING EXPENSES
2n
Cost of services
20,25
3,388,955
4,422,986
469,033
Depreciation and amortization
2i,2k,9,10
3,053,861
3,385,794
359,045
Personnel
2m,2o,2p,
21,24,25
1,205,045
1,236,184
131,091
Marketing
510,137
703,181
74,569
Administration and general
22,25
517,571
567,602
60,191
Total Operating Expenses
8,675,569
10,315,747
1,093,929
OPERATING INCOME
3,204,411
3,333,074
353,454
OTHER INCOME (EXPENSES)
2n
Interest income
25
151,155
353,541
37,491
Financing cost
2l,15,16,
23,25
(1,028,623
)
(1,377,706)
(146,098)
Amortization of goodwill
2k,10
(169,880
)
(169,880)
(18,015)
Loss on change in fair value
of derivatives - net
2q,28
(5,742)
(53,513
)
(5,675)
Loss on foreign
exchange - net
2q,2r,5
(26,170
)
(45,092
)
(4,782)
Others - net
13
(55,250
)
30,292
3,213
Other Expenses - Net
(1,134,510
)
(1,262,358
)
(133,866)
INCOME BEFORE INCOME TAX
2,069,901
2,070,716
219,588
INCOME TAX BENEFIT (EXPENSE)
2s,13
Current
(455,889
)
(578,169
)
(61,311)
Deferred
(141,079
)
2,755
292
Income Tax Expense - Net
(596,968
)
(575,414
)
(61,019)
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2008
Notes
2007
2008
(Note 3)
________________
Rp
Rp
US$
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,472,933
1,495,302
158,569
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(27,803
)
(22,187)
(2,353
)
NET INCOME
1,445,130
1,473,115
156,216
BASIC EARNINGS PER SHARE
2u,18,26
265.95
271.10
0.03
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2u,18,26
13,297.27
13,554.78
1.44
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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah)
Difference in
Transactions
Difference
Capital Stock -
of Equity Changes
in Foreign
Retained Earnings
Issued and
Premium on
in Associated
Currency
Description
Notes
Fully Paid
Capital Stock
Companies/Subsidiaries
Translation
Appropriated
Unappropriated
Total
Balance as of January 1, 2007
543,393
1,546,587
403,812
182
66,157
12,641,614
15,201,745
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 Rp677, Rp665 and Rp11, respectively
2b
-
-
-
3,156
-
-
3,156
Resolution during the Annual Stockholders’ General Meeting on
June 5, 2007
27
Declaration of cash dividend
-
-
-
-
-
(705,053
)
(705,053
)
Appropriation for reserve fund
-
-
-
-
14,101
(14,101
)
-
Net income for the period
-
-
-
-
-
1,445,130
1,445,130
Balance as of September 30, 2007
543,393
1,546,587
403,812
3,338
80,258
13,367,590
15,944,978
Balance as of January 1, 2008
543,393
1,546,587
403,812
6,177
80,258
13,964,503
16,544,730
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 (plus) applicable income
tax expense (benefit) of (Rp225), (Rp217) and Rp57, respectively
2b
-
-
-
(897)
-
-
(897)
Resolution during the Annual Stockholders’ General Meeting on
June 5, 2008
27
Declaration of cash dividend
-
-
-
-
-
(1,021,037
)
(1,021,037
)
Appropriation for reserve fund
-
-
-
-
20,420
(20,420
)
-
Net income for the period
-
-
-
-
-
1,473,115
1,473,115
Balance as of September 30, 2008
543,393
1,546,587
403,812
5,280
100,678
14,396,161
16,995,911
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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2008
Notes
2007
2008
(Note 3)
______________
RpRpUS$
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
12,036,908
13,707,586
1,453,615
Interest income
147,539
311,348
33,017
Refund of taxes
6
194,656
271,321
28,772
Income from early termination of
currency forward contract
3,702
-
-
Cash paid to/for:
Employees, suppliers and others
(5,351,393
)
(7,669,637)
(813,323)
Financing cost
(912,613
)
(1,362,854)
(144,523)
Taxes
(312,935
)
(690,455)
(73,219)
Swap cost from cross currency
swap contracts
28a, 28c-k
(57,600
)
(58,925
)(6,249)
Swap income (expense) from interest
rate swap contracts
28w, 28x-y
1,386
(2,432)
(258)
Net Cash Provided by Operating
Activities
5,749,650
4,505,952
477,832
CASH FLOWS FROM INVESTING
ACTIVITIES
Dividend income received from
long-term investment
8
40,105
17,753
1,883
Proceeds from sale of short-term
investment
-
1,250
133
Proceeds from sale of property
and equipment
9
346
1,131
120
Acquisitions of property and
equipment
9
(4,541,708)
(6,180,259)
(655,383)
Acquisition of intangible assets
10
-
(8,508)
(902)
Capital contribution by minority interest
in a subsidiary
1d
47,684
-
-
Increase in long-term advances for purchase
of property and equipment
(794,006)
-
-
Net Cash Used in Investing Activities
(5,247,579
)
(6,168,633)
(654,149)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term loans
15
2,050,863
1,946,570
206,423
Proceeds from bonds payable
16
3,000,000
1,650,000
174,974
Settlement from derivative contracts
28b
-
109,099
11,569
Decrease (increase) in restricted cash
and cash equivalents
(6,385
)
2,891
306
Repayment of bonds payable
16
-
(1,947,801
)
(206,554)
Cash dividend paid by the Company
(705,053)
(1,021,037)
(108,275)
Repayment of long-term loans
15
(1,328,946)
(448,556
)
(47,567)
Swap cost from cross currency swap
contract
28b
(31,331)
(29,244)
(3,101)
Cash dividend paid by subsidiaries to
minority interest
(9,795)
(5,563)
(590)
Net Cash Provided by
Financing Activities
2,969,353
256,359
27,185
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)
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2008
Notes
2007
2008
(Note 3)
______________
RpRpUS$
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
3,471,424
(1,406,322
)
(149,132)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
2,807,260
8,053,006
853,977
BEGINNING BALANCE OF CASH AND
CASH EQUIVALENTS OF ACQUIRED
SUBSIDIARY
25,253
-
-
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
4
6,303,937
6,646,684
704,845
DETAILS OF CASH AND CASH EQUIVALENTS:
Time deposits with original maturities of
three months or less
6,071,521
6,368,291
675,323
Cash on hand and in banks
232,416
278,393
29,522
Cash and cash equivalents as stated in the
consolidatedbalance sheets
6,303,937
6,646,684
704,845
SUPPLEMENTAL CASH FLOW INFORMATION:
Transactions not affecting cash flows:
Acquisitions of property and
equipment credited to:
Loans payable
-
1,326,599
140,679
Procurement payables
1,211,271
97,912
10,383
Other non-current liabilities
-
36,613
3,883
Long-term advance
-
36,301
3,850
Unpaid dividend
4,412
4,435
470
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL
a.
Company’s Establishment
PT Indosat Tbk (“the Company”) was established in the Republic of Indonesia on November 10, 1967 within the framework of the Indonesian Foreign Investment Law No. 1 of 1967 based on the notarial deed No. 55 of Mohamad Said Tadjoedin, S.H. The deed of establishment was published in Supplement No. 24 of State Gazette No. 26 dated March 29, 1968 of the Republic of Indonesia. In 1980, the Company was sold 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. 109 dated July 14, 2008 of Sutjipto, S.H. in order to comply with the Indonesian Corporate Law No. 40 of 2007, to strengthen the implementation of good corporate governance in the Company and to accommodate the Company’s business. The latest amendment of the Company’s Articles of Association has been reported to and approved by the Ministry of Law and Human Rights of the Republic of Indonesia based on its letter No. AHU-48398.AH.01.02 dated August 6, 2008.
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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Individuals, government institutions and legal entities, other than telecommunications networks and service providers, are allowed to render special telecommunications services.
The Telecommunications Law prohibits activities that result in monopolistic practices and unhealthy competition, and expects to pave the way for market liberalization.
Based on the Telecommunications Law, the Company ceased as an Operating Body and has to obtain licenses from the government for the Company to engage in the provision of specific telecommunications networks and services.
On August 14, 2000, the Government of the Republic of Indonesia, through the Ministry of Communications (“MOC”), 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 MOC. Subsequently, based on Decree No. KP.247 dated November 6, 2001 issued by the MOC, 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 MOC, 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 MOC, the Company was granted an operating license for fixed local telecommunications 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 MOC. 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 MOC 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”), 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 the above exclusivity rights.
12
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
The following are operating licenses obtained by the Company:
License No. | Date Issued | Issuing Body | Period of License | Description |
KP.68/Thn 2004 | March 15, 2004 | MOC | Evaluated every 5 years | Operating license for nationwide GSM cellular mobile network (including its basic telephony services), which was amended by License No. 102/KEP/ |
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 |
19/KEP/M.KOMINFO/02/2006 and 29/KEP/M.KOMINFO/03/2006 | February 14, 2006 and March 27, 2006 | Ministry of Communications and Information and Technology (“MOCIT”) | 10 years | Determination of the winner and operating license for IMT-2000 cellular network provider using 2.1 GHz radio frequency spectrum (a third generation [“3G”] mobile communications technology) 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 (**) |
01/DIRJEN/2008 | January 7, 2008 | Directorate General of Post and Telecommunications (“DGPT”) | Evaluated every 5 years | Operating license as internet service provider |
51/DIRJEN/2008 | January 9, 2008 | DGPT | Evaluated every 5 years | Operating license for internet interconnection services (Network Access Point/NAP), which replaces the previous license given to Satelindo |
52/DIRJEN/2008 | January 9, 2008 | DGPT | Evaluated every 5 years | Operating license for telephony internet services which replaces the previous License No. 823/DIRJEN/2002 for VoIP with national coverage that expired in 2007 |
(*)
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 2k) 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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
On January 9, 2008, based on letter No.10/14/DASP from Bank Indonesia (Central Bank), 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.
On March 17, 2008, MOCIT issued Ministerial Decree No. 02/PER/M.KOMINFO/2008 on the Guidelines of Construction and Utilization of Sharing Telecommunication Towers. Based on this Decree, the construction of telecommunication towers requires permits from the relevant governmental institution and the local government determines the placement of the towers and the location in which the towers can be constructed. Furthermore, a telecommunication provider or tower provider which owns telecommunication towers is obligated to allow other telecommunication operators to utilize its telecommunication towers without any discrimination. The Decree also mandated that each of the tower contractor, provider and owner be 100% locally-owned companies.
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 September 30, 2008, the Companies’ outstanding bonds issued to the public are as follows:
Bond | Effective Date | Registered with and Traded on |
1. Second Indosat Bonds series B in Year 2002 with Fixed Rate | 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 | November 5, 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 | 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 |
9. Sixth Indosat Bonds in Year 2008 with Fixed Rates | April 9, 2008 | Indonesia Stock Exchange |
10. Indosat Sukuk Ijarah III in Year 2008 | April 9, 2008 | Indonesia Stock Exchange |
14
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
2.
c.
Employees, Directors, Commissioners and Audit Committee
Based on a resolution at each of the (i) Annual Stockholders’ General Meeting held on June 5, 2007 which is notarized under Deed No. 11 of Aulia Taufani, S.H (as a substitute notary of Sutjipto, S.H) on the same date, (ii) Annual Stockholders’ General Meeting held on June 5, 2008 which is notarized under Deed No. 29 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H) on the same date and (iii) Extraordinary Stockholders’ Meeting held on August 25, 2008 which is notarized under Deed No. 343 of Aulia Taufani, S.H (as a substitute notary of Sutjipto, S.H) on the same date, the composition of the Company’s Board of Commissioners and Board of Directors as of September 30, 2007 and 2008, respectively, is as follows:
2007
2008
President Commissioner
Peter Seah Lim Huat
Sheikh Abdulla Mohammed
S.A Al-Thani
Commissioner
Sio Tat Hiang
Dr. Nasser Mohd. A. Marafih
Commissioner
Sum Soon Lim
Rachmad Gobel
Commissioner
Sheikh Mohammed Bin
Sheikh Mohammed Bin
Suhaim Hamad Al-Thani
Suhaim Hamad Al-Thani
Commissioner
Lee Theng Kiat
Jarman
Commissioner
Roes Aryawijaya
Rionald Silaban
Commissioner
Setyanto P. Santosa
Setyanto P. Santosa*
Commissioner
Lim Ah Doo*
Michael Francis Latimer*
Commissioner
Setio Anggoro Dewo*
Thia Peng Heok George*
Commissioner
Soeprapto S. IP*
Soeprapto S. IP*
*
Independent commissioner
2007 and 2008
President Director
Johnny Swandi Sjam
Deputy President Director
Kaizad Bomi Heerjee
Finance DirectorWong Heang Tuck
Corporate Services Director
Wahyu Wijayadi
Information Technology Director
Roy Kannan
Jabotabek and Corporate Sales Director
Fadzri Sentosa
Regional Sales Director
Syakieb A. Sungkar
Marketing Director
Guntur S. Siboro
Network Director
Raymond Tan Kim Meng
`
The composition of the Company’s Audit Committee as of September 30, 2007 and 2008 is as follows:
2007
2008
Chairman
Lim Ah Doo
Thia Peng Heok George
Member
Setio Anggoro Dewo
Michael Francis Latimer
Member
Soeprapto S. IP
Soeprapto S. IP
Member
Achmad Rivai
Rusdy Daryono
Member
Achmad Fuad Lubis
Unggul Saut Marupa
Tampubolon
The Company and subsidiaries (collectively referred to hereafter as “the Companies”) have approximately 7,689 and 7,677 employees, including non-permanent employees, as of September 30, 2007 and 2008, respectively.
15
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries
As of September 30, 2007 and 2008, the Company has direct and indirect ownership in the following subsidiaries:
Name of Subsidiary | Location | Principal Activity | Start of Commercial Operations | Percentage of Ownership (%) | ||||
2007 and 2008 | ||||||||
Indosat Finance Company B.V. (“IFB”) | Amsterdam | Finance | 2003 | 100.00 | ||||
Indosat International Finance Company B.V. (“IIFB”) | Amsterdam | Finance | 2005 | 100.00 | ||||
Indosat Singapore Pte. Ltd. (“ISP”) | Singapore | Telecommunication | 2005 | 100.00 | ||||
PT Indosat Mega Media (“IMM”) | Jakarta | Multimedia | 2001 | 99.85 | ||||
PT Satelindo Multi Media (“SMM”)(1) | Jakarta | Multimedia | 1999 | 99.60 | ||||
PT Aplikanusa Lintasarta (“Lintasarta”) (2) | Jakarta | Data Communication | 1989 | 72.36 | ||||
PT Starone Mitra Telekomunikasi (“SMT”) | Semarang | Telecommunication | 2006 | 55.36 | ||||
PT Artajasa Pembayaran Elektronis (“APE”) | Jakarta | Telecommunication | 2000 | 39.80 |
Total Assets (Before Eliminations) | ||||
Name of Subsidiary | 2007 | 2008 | ||
IFB | 2,854,424 | 2,314,827 | ||
IIFB | 2,356,137 | 1,083,226 | ||
ISP |
8,332 | 15,290 | ||
IMM |
641,845 | 778,117 | ||
SMM(1) | 10,690 | 10,690 | ||
Lintasarta(2) | 1,010,725 | 1,251,416 | ||
SMT |
170,297 | 164,203 | ||
APE |
92,167 | 138,672 | ||
(1)
Based on a circular shareholders’ resolution of SMM, SMM would be subject to liquidation effective May 5, 2006. As of September 30, 2008, such liquidation has not yet been finalized.
(2)
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.
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 the 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%. This increase was approved by SMT’s stockholders based on the minutes of a stockholders’ meeting held on July 30, 2007.
16
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
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 policies applied consistently in the preparation of the consolidated financial statements for the nine months ended September 30, 2007 and 2008 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.
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.
The consolidated financial statements also include the accounts of APE (Lintasarta’s 55%-owned subsidiary). The accounts of APE in 2007 and 2008 were consolidated because its financial and operating policies were controlled by Lintasarta.
17
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation (continued)
The accounts of IFB, IIFB and ISP were translated into rupiah amounts at the middle rate of exchange prevailing at balance sheet date for balance sheet accounts and the average rate during the period for profit and loss accounts. The resulting differences arising from the translations of the financial statements of IFB, IIFB and ISP are presented as part of “Difference in Foreign Currency Translation” under the Stockholders’ Equity section of the consolidated balance sheets.
Minority interest in subsidiaries represents the minority stockholders’ proportionate share in
the equity (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, 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 period.
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.
18
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
In accordance with SAK 16 (Revised 2007), the Company regrouped certain property and equipment starting January 1, 2008 based on its periodic review and assessment of the economic useful lives of the assets. The remaining useful lives under the new groupings were adjusted accordingly. The effect of the change in the groupings on depreciation expense is not material. Below are the estimated useful lives (in years) prior to and starting January 1, 2008.
19
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i.
Property and Equipment (continued)
Prior to
Starting
January 1, 2008
January 1, 2008
Buildings
15 to 20
20
Submarine cables(*)
12
-
Earth stations(*)
10
-
Inland link(*)
15
-
Switching equipment(**)
10
-
Telecommunications peripherals(***)
5
-
Information technology equipment
3 to 5
3 to 5
Office equipment
5
3 to 5
Building and leasehold improvements
5
3 to 15
Vehicles
5
5
Cellular technical equipment
10 to 15
10
Satellite technical equipment(*)
12
-
Transmission and cross-connection equipment
12
10 to 15
Fixed Wireless Access (“FWA”) technical equipment
10
10
Operation and maintenance center and
measurement unit
-
3 to 5
Fixed access network equipment
-
10
(*)
This classification has been regrouped into transmission and cross-connection equipment. There is no change in estimated useful lives.
(**)
This account has been renamed as fixed access network equipment and some items in this group were reclassified into cellular technical equipment, and operation and maintenance center and measurement unit. The remaining useful lives were adjusted accordingly.
(***)
This account has been renamed as operation and maintenance center and measurement unit. Some items in this group were reclassified into information technology equipment, office equipment, building and improvements, cellular technical equipment, transmission and cross-connection equipment, and fixed access network equipment. The remaining useful lives were adjusted accordingly.
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 period.
Properties under construction and installation are stated at cost. All borrowing costs, which include interest, amortization of ancillary costs (Notes 15e and 15h) 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.
20
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 period 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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 31) 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 30), are reported on a gross basis, before interconnection expenses/charges (Note 20). These interconnection expenses/charges are accounted for as operating expenses in the period 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 31). Under the new scheme, operating revenues for interconnection services are reported on a gross basis starting 2007. The interconnection expenses/charges (Note 20) are accounted for as operating expenses in the period 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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 loans and 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 assumptions 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 September 30, 2007 and 2008, the foreign exchange rates used (in full amounts) were Rp9,137 and Rp9,430, 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 period. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the 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 period 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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 34.
u.
Basic Earnings per Share/ADS
In accordance with SAK 56, “Earnings Per Share”, basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period (Note 26).
Basic earnings per ADS is computed by multiplying basic 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.
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 Rp9,430 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.
25
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS
This account consists of the following:
2007
2008
Cash on hand
Rupiah
1,558
1,564
Cash in banks
Related parties (Note 25)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
14,549
35,993
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
1,278
13,103
PT Bank Pembangunan Daerah DKI Jakarta
2,058
3,077
PT Bank Syariah Mandiri (“Mandiri Syariah”)
2,319
1,361
PT Bank Pembangunan Daerah Yogyakarta (“BPD -DIY”)
1,033
253
PT Bank Danamon Indonesia Tbk (“Danamon”)*
3,288
-
Others (each below Rp1,000)
1,867
2,247
U.S. dollar
Mandiri (US$1,199 in 2007 and US$305 in 2008)
10,951
2,876
BNI (US$12 in 2007 and US$68 in 2008)
112
647
Niaga (US$25)
-
232
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)
35,740
72,072
Deutsche Bank AG, Jakarta Branch (“DB”)
11,396
14,549
The Hongkong and Shanghai Banking Corp. Ltd., (“HSBC”)
Jakarta Branch
1,334
8,550
PT Bank Niaga Tbk (“Niaga”)
2,213
7,583
PT Bank Internasional Indonesia Tbk (“BII”)*
-
4,457
PT Bank Mega Tbk (“Mega”)
3,307
2,524
PT Bank Bukopin Tbk (“Bukopin”)
3,757
2,460
PT Bank Permata Tbk (”Bank Permata”)
1,499
1,344
Danamon*
-
1,219
PT Bank Lippo
-
1,177
Citibank N.A., Jakarta Branch
27,180
1,120
Others (each below Rp1,000)
1,553
644
U.S. dollar
Fortis Bank, The Netherlands (US$5,960 in 2007 and
US$6,707 in 2008)
54,455
63,247
DB (US$2,835 in 2007 and US$2,196 in 2008)
25,903
20,708
Citibank N.A., Singapore Branch (US$478 in 2007 and
US$972 in 2008)
4,371
9,170
Citibank N.A., Jakarta Branch (US$1,835 in 2007 and
US$563 in 2008)
16,770
5,306
* no longer related parties since June 6, 2008 (Note 18)
26
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2007
2008
Cash in banks (continued)
Third parties (continued)
U.S. dollar
Bukopin (US$216 in 2007 and US$83 in 2008)
1,973
786
Others (US$214 in 2007 and US$13 in 2008)
1,952
124
230,858
276,829
Time deposits
Related parties (Note 25)
Rupiah
PT Bank Rakyat Indonesia (Persero) Tbk
735,000
705,000
Mandiri Syariah
354,000
501,000
PT Bank Tabungan Negara (Persero) (“BTN”)
264,000
467,400
Mandiri
1,167,985
229,400
BNI
54,515
59,060
PT Bank Pembangunan Daerah Jawa Tengah
20,000
5,000
BPD-DIY
1,000
1,000
Danamon*
157,900
-
PT Bank DBS Indonesia (“DBS”)*
50,000
-
PT Bank Pembangunan Daerah Sulawesi Utara
1,000
-
U.S. dollar
BNI (US$15,000 in 2007 and US$40,000
in 2008)
137,055
377,200
Mandiri (US$1,664 in 2007 and US$32,117 in 2008)
15,202
302,859
BRI (US$20,000)
-
188,600
DBS* (US$45,000)
411,165
-
BTN (US$10,000)
91,370
-
Danamon* (US$5,000)
45,685
-
Third parties
Rupiah
Bukopin
266,750
716,800
Niaga
300,000
557,000
Danamon*
-
327,800
DBS*
-
300,000
DB
436,183
254,194
PT Bank Muamalat Indonesia Tbk (“Muamalat”)
50,000
250,000
Bank Tabungan Pensiunan Nasional
-
16,000
Mega
2,801
11,500
Bank Permata Syariah
-
5,000
Citibank
-
3,190
PT Bank Syariah Mega Indonesia
2,000
2,000
BCA
202,250
-
Others
1,006
10,206
* no longer related parties since June 6, 2008 (Note 18)
27
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2007
2008
Time deposits (continued)
Third parties (continued)
U.S. dollar
Niaga (US$29,300 in 2007 and US$47,000 in 2008)
267,714
443,210
Muamalat (US$35,000 in 2007 and US$35,000 in 2008)
319,795
330,050
DB (US$33,488 in 2007 and US$32,325 in 2008)
305,980
304,822
Standard Chartered Bank (US$25,000)
228,425
-
Citibank N.A., Jakarta Branch (US$15,000)
137,055
-
Bukopin (US$5,000)
45,685
-
6,071,521
6,368,291
Total
6,303,937
6,646,684
Time deposits denominated in rupiah earned interest at annual rates ranging from 2.50% to 11.40% in 2007 and from 2.25% to 13.00% in 2008, while those denominated in U.S. dollar earned interest at annual rates ranging from 1.50% to 5.38% in 2007 and from 1.25% to 5.50% in 2008.
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:
2007
2008
Related parties (Note 25)
Telkom (including US$511 in 2007 and US$274 in 2008)
32,312
23,123
Others (including US$19,232 in 2007 and US$7,217 in 2008)
248,599
152,679
Total
280,911
175,802
Less allowance for doubtful accounts
83,898
81,923
Net
197,013
93,879
Third parties:
Overseas international carriers (including US$79,882 in 2007
and US$78,639 in 2008)
740,533
743,682
Local companies (including US$20,130 in 2007 and US$24,740
in 2008)
330,566
536,714
Post-paid subscribers from:
Cellular
215,061
234,254
Fixed lines
29,687
24,229
Fixed wireless
17,622
17,284
Total
1,333,469
1,556,163
Less allowance for doubtful accounts
295,199
406,411
Net
1,038,270
1,149,752
Total
1,235,283
1,243,631
28
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
5.
ACCOUNTS RECEIVABLE - TRADE (continued)
The aging schedule of the accounts receivable - trade is as follows:
2007
2008
Number of
Percentage
Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Related parties
0 - 6 months
148,123
52.73
95,112
54.10
7 - 12 months
64,030
22.79
16,509
9.39
13 - 24 months
13,075
4.66
7,389
4.20
Over 24 months
55,683
19.82
56,792
32.31
Total
280,911
100.00
175,802
100.00
Third parties
688,710
51.65
879,710
56.53
7 - 12 months
343,030
25.72
185,598
11.93
13 - 24 months
129,955
9.75
253,995
16.32
Over 24 months
171,774
12.88
236,860
15.22
Total
1,333,469
100.00
1,556,163
100.00
The changes in the allowance for doubtful accounts provided on the accounts receivable - trade are as follows:
2007
2008
Related parties
Balance at beginning of period
141,263
88,342
Provision (reversal)
255
(4,573)
Net effect of foreign exchange adjustment
652
(1,825)
Write-off
(58,272
)
(21)
Balance at end of period
83,898
81,923
Third parties
Balance at beginning of period
423,730
326,142
Provision
81,364
92,501
Net effect of foreign exchange adjustment
2,935
600
Write-off
(212,830)
(12,832)
Balance at end of period
295,199
406,411
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 September 30, 2008, approximately 6.07% 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
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
PREPAID TAXES
This account consists of the following:
2007
2008
Claims for tax refund
673,165
329,491
Value Added Tax (“VAT”)
109,278
171,043
Others
21,619
15,140
Total
804,062
515,674
Claims for tax refund as of September 30, 2007 and 2008 mainly consist of the Company’s corporate income tax for fiscal years 2004, 2005 and 2006.
On December 4, 2006, the Company received assessment letter on tax overpayment (“SKPLB”) from the Directorate General of Taxation (“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 the 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 (Note 13).
On March 17, 2008, the Company received the tax refund from the Tax Office amounting to Rp25,440 as the Company’s objection on income tax article 23 for fiscal year 2005 was accepted by the Tax Office (Note 13).
On May 27, 2008, the Company received the Decision Letter No. KEP-230/WPJ.19/BD.05/2008 from the DGT which partially accepted the Company’s objection on the remaining tax corrections on 2005 corporate income amounting to Rp2,725. On July 17, 2008, the Company received the tax refund amounting to Rp1,785 after offsetting the additional tax correction on income tax article 26 for fiscal year 2005 (Note 13). On August 21, 2008 the Company submitted an appeal letter to the Tax Court concerning the Company’s remaining tax objection on the 2005 corporate income tax. As of September 30, 2008, the Company has not yet received any decision from the Tax Court for such appeal.
30
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
PREPAID TAXES (continued)
On June 20, 2008, the Company received SKPLBs from the DGT advising the Company of its approval to refund the overpayment of 2006 corporate income tax and VAT amounting to Rp232,439 and Rp11,657, respectively, which amounts are lower than those recognized by the Company in its financial statements. The Company accepted partially the corrections on the 2006 corporate income tax and all of the corrections on the VAT, totalling Rp9,168, and charged them to current operations in 2008. On July 21, 2008, the Company received the refund of the 2006 tax overpayment for corporate income tax and VAT amounting to Rp232,439 and Rp11,657, respectively. On September 15, 2008, the Company submitted an objection letter to the DGT for the remaining tax corrections on the Company’s 2006 corporate income tax. As of September 30, 2008, the Company has not yet received any decision from DGT for such objection.
7.
INVESTMENTS IN ASSOCIATED COMPANIES
As of September 30, 2007 and 2008, 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 Value
2007
PT Multi Media Asia Indonesia
Indonesia
Satellite-based
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
2008
PT Multi Media Asia Indonesia
Indonesia
Satellite-based
telecommunication
26.67
56,512
(212
)
56,300
PT Swadharma Marga Inforindo
Indonesia
Property rental
20.00
100
186
286
PT Lintas Media Danawa *
Indonesia
Information and
communication services
35.00
700
-
700
Total
57,312
(26
)
57,286
Less allowance for decline in value
56,300
Net
986
*
PT Lintas Media Danawa (“LMD”) is an associated company of Lintasarta, where LIntasarta has 35% ownership. LMD was established on July 28, 2008 to engage in information and communication services, such as data center services, e-learning and distant learning for public education services, content services based on Internet Protocol (e.g IPTV, internet game and internet payment gateway).
The Company believes that the allowance for decline in value amounting to Rp56,300 as of September 30, 2007 and 2008 is adequate to cover probable losses on the above investments.
31
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
8.
OTHER LONG-TERM INVESTMENTS
As of September 30, 2007 and 2008, this account consists of the following:
Investments in shares of stock accounted for under
the cost method - net
2,631
Equity securities which are available-for-sale*
99
Total
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:
Location | Principal Activity | Ownership (%) | Cost/Carrying Value | ||||||||
PT First Media Tbk (formerly PT Broadband Multimedia Tbk or “BM”)* | Indonesia | Cable television and internet network service provider | 2.29 | 50,000 | |||||||
ICO Global Communication (Holdings) Limited | Bahamas | Satellite service | 0.0087 | 49,977 | |||||||
Asean Cableship Pte. Ltd. (“ACPL”)** | Singapore | Repair and maintenance of submarine cables | 16.67 | 1,265 | |||||||
Others | 12.80 -14.29 | 1,366 | |||||||||
Total | 102,608 | ||||||||||
Less allowance for decline in value |
99,977 | ||||||||||
Net | 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 and April 30, 2007, the Company received dividend income from its investment in ACPL totalling US$3,283 (equivalent to Rp29,996), while on April 1, 2008, the Company received dividend income from its investment in ACPL amounting to US$1,930 (equivalent to Rp17,753).
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 September 30, 2007 and 2008, which the Companies believe is adequate to cover probable losses on the investments.
32
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
2007
Transactions during the Period
Balance
Balance
at Beginning
Acquired
at End
of Period
Additions
Deductions
Reclassifications
Subsidiaryof Period
Carrying Value
Landrights
400,597
-
-
24,062
1,000
425,659
Buildings
456,091
641
-
18,466
1,213476,411
Submarine cables
885,344
-
65,397
70,616
-
890,563
Earth stations
125,347
-
-
448
-125,795
Inland link
857,946
-
-
596,017
-1,453,963
Switching equipment
375,231
-
-
6,863
-382,094
Telecommunications
peripherals
2,130,835
110,659
1,570
40,718
-2,280,642
Information technology
equipment
1,080,576
3,210
6,301
269,319
7611,347,565
Office equipment
1,544,897
68,017
948
83,699
-1,695,665
Building and leasehold
improvements
1,432,521
1,724
1,502
43,004
6,5641,482,311
Vehicles
17,498
2,695
-
-
-20,193
Cellular technical
equipment
25,797,738
-
190,527
2,395,221
-28,002,432
Satellite technical
equipment
1,290,575
-
-
9,313
-1,299,888
Transmission and cross-
connection equipment
479,020
-
-
3,294
-
482,314
FWA technical equipment
539,633
37,200
-
100,500
-677,333
Properties under
construction and
installation
4,291,429
5,528,835
-
(3,661,540
)1,0386,159,762
Total
41,705,278
5,752,981
266,245
-
10,57647,202,590
Accumulated Depreciation
Buildings
222,353
19,544
-
-
20241,917
Submarine cables
525,191
68,041
65,361
-
-527,871
Earth stations
118,237
3,393
-
-
-121,630
Inland link
148,869
69,250
-
-
-218,119
Switching equipment
258,697
26,608
-
-
-285,305
Telecommunications
peripherals
1,364,343
197,594
1,570
-
-1,560,367
Information technology
equipment
793,366
121,337
6,301
-
23908,425
Office equipment
830,332
148,829
947
-
-978,214
Building and leasehold
improvements
697,636
191,385
1,502
-
331887,850
Vehicles
9,987
2,155
-
-
-12,142
Cellular technical
equipment
10,382,388
1,922,523
190,525
-
-12,114,386
Satellite technical
equipment
985,512
110,167
-
-
-1,095,679
Transmission and cross -
connection equipment
212,424
14,112
-
-
-226,536
FWA technical equipment
138,684
52,952
-
-
-191,636
Total
16,688,019
2,947,890
266,206
-
37419,370,077
Less impairment in value
98,611
-
-
-
-
98,611
Net Book Value
24,918,648
27,733,902
33
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
2008
Balance
Transactions during the Period
Balance
at Beginning
at End
of Period
Additions
Deductions
Reclassifications
of Period
Carrying Value
Landrights
429,101
-
-
27,840
456,941 Buildings
484,992
3,312
-31,248519,552
Submarine cables *
891,118
-
-
(891,118
)
-
Earth stations *
125,795
-
-
(125,795
)
-
Inland link
*
1,693,228
-
-
(1,693,228
)
-
Switching equipment *
388,802
-
-
(388,802
)
-
Fixed access network equipment
-
-
-
961,433
961,433
Telecommunications peripherals *
2,397,583
-
-
(2,397,583
)
-
Operation and maintenance center
and measurement unit
-
214,169
18,439
2,570,235
2,765,965
Information technology equipment
1,389,479
248
-
446,970
1,836,697
Office equipment
1,803,259
85,104
8
(338,216
)
1,550,139
Building and leasehold
improvements
1,584,215
3,919
-
6,711,298
8,299,432
Vehicles
20,064
3,863
2,234
69
21,762
Cellular technical equipment
29,435,912
-
-
(8,007,852)
21,428,060
Satellite technical equipment *
1,305,388
-
-
(1,305,388)
-
Transmission and cross-
connection equipment
482,314
-
-
8,331,521
8,813,835
FWA technical equipment
722,714
520
-
163,041
886,275
Properties under construction
and installation
8,010,903
7,366,548
-
(4,095,673
)
11,281,778
Total
51,164,867
7,677,683
20,681
-
58,821,869
Accumulated Depreciation
Buildings
248,580
18,712
-
-
267,292
Submarine cables *
550,753
7,623
-
(558,376
)
-
Earth stations *
122,460
223
-
(122,683
)
-
Inland link
*
248,744
9,472
-
(258,216
)
-
Switching equipment *
294,306
-
-
(294,306
)
-
Fixed access network equipment
-
57,028
-
294,306
351,334
Telecommunications peripherals *
1,628,837
-
-
(1,628,837
)
-
Operation and maintenance center
and measurement unit
-
388,079
18,415
1,628,837
1,998,501
Information technology equipment
959,706
262,351
-
-
1,222,057
Office equipment
1,034,283
124,470
3
-
1,158,750
Building and leasehold
improvements
959,729
481,587
-
-
1,441,316
Vehicles
12,269
2,385
1,410
-
13,244
Cellular technical equipment
12,850,592
1,460,812
-
-
14,311,404
Satellite technical equipment *
1,132,572
11,407
-
(1,143,979)
-
Transmission and cross-
connection equipment
231,254
439,793
-
2,083,254
2,754,301
FWA technical equipment
219,398
62,648
-
-
282,046
Total
20,493,483
3,326,590
19,828
-
23,800,245
Impairment in value
98,611
-
-
-
98,611
Net Book Value
30,572,773
34,923,013
* This account has been regrouped or renamed by the Company (Note 2i).
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.
34
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
During the nine months ended September 30, 2007 and 2008, sales of certain property and equipment were made as follows:
2007
2008
Proceeds from sales
346
1.131
Net book value
(39
)
(853
)
Gain
307
278
Depreciation expense charged to the consolidated statements of income amounted to Rp2,947,890 and Rp3,326,590 in 2007 and 2008, respectively.
Management believes that there is no impairment in assets value or recovery of the impairment reserve as contemplated in SAK 48 for the current period.
As of September 30, 2008, approximately 0.10% of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 15).
As of September, 2008, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$82,371 and Rp36,715,285 including insurance on the Company‘s satellite amounting to US$10,200. 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 September 30, 2007 and 2008 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
2007
Cellular technical equipment
20 - 99
3,590,576
October - December 2007
Building and leasehold improvements
45 - 99
1,247,087
October - December 2007
Transmission and cross-connection equipment
13 - 99
1,121,827
October - December 2007
FWA technical equipment
13 - 40
100,773
October - December 2007
Others (each below Rp50,000)
33 - 94
99,499
October 2007 - January 2008
Total
6,159,762
2008
Cellular technical equipment
3 - 98
6,471,229
October 2008 - June 2009
Transmission and cross-connection equipment
19 - 99
3,014,562
October 2008 - September
2009
Building and leasehold improvements
5 - 99
1,224,753
October 2008 - January
2009
FWA technical equipment
14 - 99
284,110
October 2008 - June 2009
Operation and maintenance center and
measurement unit
40 - 95
96,265
October 2008 - March 2009
Building
50 - 80
69,616
October 2008 - March 2009
Information technology equipment
25 - 98
53,135
October 2008 - March 2009
Others (each below Rp50,000)
12 - 96
68,108
October 2008- February 2009
Total
11,281,778
35
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
Borrowing costs capitalized to properties under construction and installation for the nine months ended September 30, 2007 and 2008 amounted to Rp17,539 and Rp86,463 , respectively.
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:
2007
2008
Balance at beginning of period
2,689,751
2,350,467
Additional non-integrated software
-
8,508
Amortization of goodwill
(169,880)
(169,880)
Amortization of other intangible assets
(105,971)
(59,204)
Balance at end of period
2,413,900
2,129,891
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:
2007
2008
Related parties (Note 25) (including US$7,733 in 2007 and
US$977 in 2008)
171,215
83,409
Third parties (including US$302,615 in 2007 and US$409,027
in 2008)
4,408,927
6,000,795
Total
4,580,142
6,084,204
36
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE
This account consists of the following:
2007
2008
Estimated corporate income tax payable, less tax prepayments
of Rp253,273 in 2007 and Rp351,396 in 2008
202,616
226,773
Income tax:
Article 21
22,248
46,697
Article 22
3,353
4,261
Article 23
26,080
44,287
Article 25
29,091
32,270
Article 26
8,036
26,761
VAT
2,887
9,027
Others
8,265
6,762
Total
302,576
396,838
The reconciliation between income before income tax and estimated taxable income of the Company for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Income before income tax per consolidated statements of income
2,069,901
2,070,716
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations
(73,259
)
(97,776)
Income before income tax of the Company
1,996,642
1,972,940
Positive adjustments
Accrual of employee benefits - net
90,189
133,076
Provision for doubtful accounts
79,368
74,076
Donation
21,700
42,717
Provision for termination, gratuity and compensation benefits
of employees
10,286
15,542
Representation and entertainment
8,221
14,498
Net periodic pension cost
4,062
9,186
Amortization of goodwill and other intangible assets
10,173
5,279
Amortization of debt and bonds issuance costs and discount
(Notes 15 and 16)
3,204
1,641
Others
49,697
37,750
Negative adjustments
Interest income already subjected to final tax
(131,745)
(342,546)
Equity in net income of investees
from subsidiaries
(121,376)
(130,071)
Depreciation - net
(471,704)
(191,290)
Write-off receivable
(271,102)
-
Others
(454)
-
Estimated taxable income of
the Company
1,277,161
1,642,798
37
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
The computation of the income tax expense for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Estimated taxable income of the Company
1,277,161
1,642,798
Income tax expense - current (at statutory tax rates)
Company
383,130
492,822
Subsidiaries
72,759
85,347
Total income tax expense - current
455,889
578,169
Income tax expense (benefit) - deferred
Company- effect of temporary
differences at enacted
maximum tax rate (30%)
Depreciation - net
141,511
57,387
Equity in net income of investees from subsidiaries
36,413
39,021
Provision for doubtful accounts
(23,810)
(22,223
)
Accrual of employee benefits - net
(27,057)
(10,048
)
Provision for termination, gratuity and compensation
benefits of employees
(3,086)
(4,662)
Net periodic pension cost
(1,219)
(2,756)
Amortization of goodwill and other intangible assets
(3,052
)
(1,584)
Amortization of debt and bonds issuance costs and
discount (Notes 15 and 16)
(961
)
(492)
Write-off receivable
81,331
-
Others
(31,689
)
(47,640)
Net
168,381
7,003
Subsidiaries
(27,302
)
(9,758)
Net income tax expense (benefit) - deferred
141,079
(2,755
)
Net income tax expense - net
596,968
575,414
The computation of the estimated income tax payable for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Income tax expense - current
Company
383,130
492,822
Subsidiaries
72,759
85,347
Total income tax expense - current
455,889
578,169
Less prepayments of income tax of the Company
Article 22
80,772
55,113
Article 23
33,918
4,565
Article 25
85,480
238,358
Total prepayments of income tax of the Company
200,170
298,036
38
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
2007
2008
Less prepayments of income tax of Subsidiaries
Article 22
499
374
Article 23
18,763
941
Article 25
33,841
52,045
Total prepayments of income tax of Subsidiaries
53,103
53,360
Total prepayments of income tax
253,273
351,396
Estimated income tax payable
Company
182,960
194,786
Subsidiaries
19,656
31,987
Total estimated income tax payable
202,616
226,773
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 30% to the income before income tax and the net income tax expense as shown in the consolidated statements of income for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Income before income tax per consolidated statements
of income
2,069,901
2,070,716
Income tax expense at the applicable tax rate of 30%
620,970
621,215
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
38,603
38,917
Tax effect on permanent differences
Donation
6,525
12,815
Representation and entertainment
2,911
4,682
Assessment for income taxes and related penalties
-
3,132
Employee benefits
1,031
1,927
Interest income already subjected to final tax
(45,602)
(107,839)
Others
(12,422)
(5,026)
Valuation allowance adjustment
-
5,661
Adjustment due to tax audit and others
(15,048)
(70)
Income tax expense - net per consolidated
statements of income
596,968
575,414
39
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of September 30, 2007 and 2008 are as follows:
2007
2008
Deferred tax assets
Accrual of employee benefits - net
158,763
223,332
Allowance for doubtful accounts
113,675
144,659
Allowance for decline in value of investment in associated
company and
other long-term investments
46,883
46,883
Pension cost
25,705
29,273
Allowance for decline in value of short-term investments
7,619
7,619
Total
352,645
451,766
Deferred tax liabilities
Property and equipment
1,547,718
1,699,122
Investments in subsidiaries/associated companies - net of
amortization of goodwill and other intangible assets
207,377
231,806
Deferred debt and bonds issuance costs and discount
4,770
4,736
Difference in transactions of equity changes in associated
companies/subsidiaries
1,752
1,752
Others
2,221
3,052
Total
1,763,838
1,940,468
Deferred tax liabilities - net
1,411,193
1,488,702
The breakdown by entity of the deferred tax assets and liabilities outstanding as of September 30, 2007 and 2008 is as follows:
2007
2008
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
1,411,193
-
1,488,702
Subsidiaries
Lintasarta
66,765
-
75,806
-
SMT
9,228
-
12,988
-
IMM
7
-
7,223
-
APE
-
931
723
-
Total
76,000
1,412,124
96,740
1,488,702
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.
13.
TAXES PAYABLE (continued)
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 investment in associated company and other long-term investments is realized upon sale of the investments, and the pension cost is paid. The significant 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.
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 DGT 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 and thereafter received the decision in its favor. On July 4, 2008, the Company received Decision Letter No. KEP-00080/WPJ.19/KP.0303/2008 from the Tax Court accepting the Company’s objection on the tax correction of 2003 corporate income tax.
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 and VAT. On February 28, 2007, the Company submitted an objection letter to the Tax Office regarding the tax correction on income tax article 26. On February 18, 2008, the Company received Decision Letter No. KEP-0067/WPJ.19/BD.05/2008 from the DGT declining the Company’s appeal on the tax correction on income tax article 26 for fiscal year 2004. On May 14, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the tax correction.
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 operations in 2007. On June 22, 2007 and June 11, 2007, the Company submitted its objection letters to the Tax Office regarding the SKPKBs for income tax article 23 for the remaining tax corrections and article 26, respectively. On February 28, 2008, the Company received Decision Letter No. KEP-076/WPJ.19/BD.05/2008 from the DGT accepting the Company’s objection to the tax correction on income tax article 23 for fiscal year 2005 (Note 6). On June 4, 2008, the Company received Decision Letter No. 261/WPJ.19/BD.05/2008 from the DGT declining the Company’s objection to the tax correct ion on the 2005 income tax article 26. In addition, based on such Decision Letter, the Company was also charged for additional tax correction on income tax article 26 amounting to Rp940 (Note 6). On September 2, 2008, the Company submitted an an appeal letter to the Tax Court concerning the Company’s objection to the tax correction on the 2005 income tax article 26.
The Company provides for deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in its investments in domestic subsidiaries as the Company believes that for certain subsidiaries the investments will be recovered through, among others, 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.
40
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
The tax losses carryover of SMM and SMT as of September 30, 2008 can be carried forward through 2013 based on the following schedule:
Year of Expiration
Amount
2009
2,035
2010
1,885
2011
14,191
2012
30,204
2013
18,869
Total
67,184
14.
ACCRUED EXPENSES
This account consists of the following:
2007
2008
Network repairs and maintenance
254,234
331,909
Interest
333,295
309,780
Radio frequency fee
212,251
255,592
Marketing
134,041
180,279
Employee benefits
235,259
149,864
Concession fee
39,353
45,757
Consultancy fees
51,404
38,157
Universal Service Obligation (“USO”)
30,935
37,968
Rental
12,330
34,225
Outsourcing
12,452
29,858
Utilities
5,535
10,395
Others
71,433
110,975
Total
1,392,522
1,534,759
15.
LOANS PAYABLE
This account consists of the following:
2007
2008
Related parties
Mandiri - net of unamortized debt issuance cost of Rp4,146
795,000
1,795,854
Third parties - net of unamortized debt issuance cost of Rp6,178
in 2007 and Rp240,245 in 2008; and unamortized debt discount of
Rp38,441 in 2007 and Rp33,235 in 2008
1,578,411
5,601,120
Total loans payable
2,373,411
7,396,974
41
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
2007
2008
Less current maturities:
Related parties
80,000
200,000
Third parties
177,180
402,410
Total current maturities
257,180
602,410
Long-term portion
2,116,231
6,794,564
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.
On September 27, 2008 , the Company paid the first semi-annual installment amounting to Rp200,000.
a.
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 party
**
no longer a related party since June 6, 2008 (Note 18)
42
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
b.
Syndicated Loan Facility 2 (continued)
On December 8, 2003, the Company drew down 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 were repaid using other facility.
The interest rate was fixed at 9.3% per annum for the three months ended March 31, 2007. During April - June 2007 and July - September 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:
2007
2008
BCA - net of unamortized debt issuance cost of
Rp
4,000 in 2007 and Rp4,146 in 2008
796,000
1,795,854
Syndicated US$ Loan Facility - net of unamortized debt
issuance cost of Rp47,313
-
1,367,187
HSBC France - net of unamortized debt issuance
cost of Rp182,208
-
915,767
Goldman Sachs International
Principal, net of unamortized debt discount of Rp38,441
395,859
401,065
in 2007 and Rp33,235 in 2008
Foreign Exchange (FX) Conversion Option
64,817
98,983
DBS * - net of unamortized debt issuance cost of Rp827
-
499,173
9-Year Commercial Loan - net of unamortized debt issuance
cost of Rp4,142
-
250,817
Finnish Export Credit Ltd. - net of unamortized debt
issuance cost of Rp2,178 in 2007 and Rp1,609 in 2008
275,587
213,395
* no longer a related party since June 6, 2008 (Note 18)
43
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
2007
2008
Investment Credit Facility 5 from Niaga
9,463
49,933
Investment Credit Facility 4 from Niaga
26,946
8,946
Investment Credit Facility 3 from Niaga
9,739
-
Total
1,578,411
5,601,120
Less current maturities
177,180
402,410
Long-term portion
1,401,231
5,198,710
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 totaling Rp2,000,000.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
On September 27, 2008 , the Company paid the first semi-annual installment amounting to Rp200,000.
b.
Syndicated US$ Loan Facility - 13 Banks and Financial Institutions
On June 12, 2008, the Company entered into a five-year unsecured credit facility agreement with 13 banks and financial institutions (including ING Bank N.V. and DBS Bank Ltd.) in the total amount of US$450,000. The loan proceeds shall be used to finance the Company’s (i) capital expenditure, (ii) purchase of a portion of its Guaranteed Notes Due 2010 and/or Guaranteed Notes 2012, and/or (iii) general working capital requirements. The loan bears interest at floating rates based on LIBOR plus margin (1.9% per annum for onshore lenders or 1.85% per annum for offshore lenders), which is payable semi-annually.
The repayment of the loan drawdowns will be made semi-annually, as follows: (a) 25% of the total loan drawdowns in 3rd year after the signing date of the agreement (first repayment date), (b) 24% of the total loan drawdowns in 6th month after the first repayment date, (c) 8% each of the total loan drawdowns in 12th and 18th months after the first repayment date, and (d) 35% of the total loan drawdowns in 24th month after the first repayment date.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
On September 26, 2008, the Company received the first drawdown fromthis credit facility amounting to US$150,000 (equivalent to Rp1,406,100).
44
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
e.
HSBC France
On November 27, 2007, the Company signed an unsecured facility agreement with HSBC France related to:
·
12-year COFACE Term Facility Agreement (”COFACE Facility”)
This facility amounts to US$157,243 to be used to finance the payment of 85% of the French Content under the Palapa D Satellite Contract plus 100% of the COFACE Premium. The loan bears interest at the fixed annual rate of 5.69% which is payable semi-annually. The total loan outstanding after the availability period shall be repaid in twenty semi-annual installments. The semi-annual repayment of the principal will start six months after the earlier of (a) date of successful completion of the Satellite In-Orbit Acceptance Review under the Palapa D Satellite Contract and (b) September 29, 2009.
As of September 30, 2008, the Company has drawn down from this credit facility the amount of US$93,034 (equivalent to Rp877,313).
·
12-year SINOSURE Term Facility Agreement (”SINOSURE Facility”)
This facility amounts to US$44,200 to be used 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. The total loan outstanding after the availability period shall be repaid in twenty semi-annual installments. The semi-annual repayment of the principal will start six months after the earlier of (a) date of successful completion of the Satellite In-Orbit Acceptance Review under the Palapa D Satellite Contract and (b) September 29, 2009.
As of September 30, 2008, the Company has drawn down from this credit facility the amount of US$23,400 (equivalent to Rp220,662).
Based on the credit facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
f. 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 September 30, 2007 and 2008 amounted to US$7,093.93 and US$10,496.63 (equivalent to Rp64,817 and Rp98,983), respectively. 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.
45
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
f. Goldman Sachs International (“GSI”) (continued)
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.
On June 24, 2008, the Company received a waiver letter from GSI affirming that it will not terminate the loan due to the change of control in the Company (Note 18).
g. DBS
On November 1, 2007, the Company obtained a five-year unsecured credit facility from DBS with a maximum amount of Rp500,000 for capital expenditure and general corporate purposes. 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 3-month Certificates of Bank Indonesia 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 January 31, 2008, the Company drew down the full amount of the facility.
Based on the credit facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
Voluntary prepayment is permitted on each interest payment date without penalty if the prepayment is made on or after the 24th month from the date of first drawdown subject to 15 days’ prior written notice. Prepayment prior to the 24th month after the agreement date is allowed with penalty of 1% of the prepaid amount.
h.
9-Year Commercial Facility with HSBC Jakarta Branch, PT Bank Lippo Tbk and Bank of China Limited, Jakarta Branch
On November 27, 2007, the Company signed an unsecured facility agreement with HSBC Jakarta Branch related to 9-year Commercial Facility Agreement amounting to US$27,037 from HSBC Jakarta Branch to finance the construction and launch of the satellite and the payment of the Sinosure Premium in connection with the Sinosure Facility (Note 15e). The loan bears interest at floating rates based on U.S. dollar LIBOR plus 1.45% per annum, which is payable semi-annually.
The agreement also stipulates that HSBC Jakarta Branch may assign any of its rights or transfer any of its rights and obligations as provided in the agreement to another bank or financial institution. On March 10, 2008, HSBC Jakarta Branch transferred such rights and obligations to PT Bank Lippo Tbk and Bank of China Limited, Jakarta Branch.
46
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
h.
9-Year Commercial Facility with HSBC Jakarta Branch, PT Bank Lippo Tbk and Bank of China Limited, Jakarta Branch (continued)
On April 1, 2008, the Company received the full drawdown from its 9-year Commercial Facility. The drawdown consisted of US$13,537 (equivalent to Rp124,527) from HSBC Jakarta Branch, US$10,000 (equivalent to Rp91,990) from PT Bank Lippo Tbk and US$3,500 (equivalent to Rp32,197) from Bank of China Limited, Jakarta Branch.
Based on the facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
i.
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 May 12, 2011.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
j.
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 September 30, 2008, Lintasarta has already drawn from this credit facility the amount of Rp49,933.
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 3 and 4 from Niaga.
k.
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 3 and 5 from Niaga.
15.
LOANS PAYABLE (continued)
l.
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 bore 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 was 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 had the same restrictive covenants as the Investment Credit Facilities 4 and 5 from Niaga.
The scheduled principal payments from 2009 to 2013 and thereafter of all the loans payable as of September 30, 2008 are as follows:
Twelve months ending September 30,
2013 and
2009
2010
2011
2012
thereafter Total
In rupiah
Mandiri
200,000
300,000
300,000
1,000,000-1,800,000
BCA
200,000
300,000
300,000
1,000,000-1,800,000
DBS
50,000
50,000
75,000
75,000
250,000500,000
GSI
-
-
-
-
434,300
434,300
Niaga
28,946
20,000
9,933
--58,879
Sub-total
478,946
670,000
684,933
2,075,000
684,300
4,593,179
In U.S. dollar
Syndicated US$ Loan
Facility (US$150,000)
-
-
353,625
452,640
608,2351,414,500
HSBC France
(US$116,434)
51,796
109,797
109,797
109,797
716,788
1,097,975
9-Year Commercial
Facility (US$27,034)
-
25,496
25,496
31,870
172,097254,959
FEC (US$22,800)
71,668
71,668
71,668
-
-215,004
GSI (US$10,496.63)
-
-
-
-
98,983
98,983
Sub-total
123,464
206,961
560,586
594,307
1,596,103
3,081,421
Total
602,410
876,961
1,245,519
2,669,307
2,280,403
7,674,600
Less:
- unamortized debt issuance costs
(244,391)
- unamortized debt discount
(33,235)
Net
7,396,974
The amortization of debt issuance costs and debt discount on the loans amounted to Rp7,125 in 2007 and Rp9,867 in 2008 (Note 23).
47
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE
This account consists of the following:
2007
2008
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost of Rp7,789 in 2007 and
2,592,211
2,592,875
Rp7,125 in 2008
Third Indosat Bonds in Year 2003 with Fixed Rates - net of unamortized
bonds issuance cost of Rp10,255 in 2007 and Rp3,400 in 2008
2,489,745
2,496,600
Guaranteed Notes Due 2010 - net of unamortized notes issuance
cost of Rp14,432 in 2007
and Rp10,145 in 2008
2,726,668
2,203,519
Sixth Indosat Bonds in Year 2008 with Fixed Rates - net of
unamortized bonds issuance cost of Rp4,428
-
1,075,572
Guaranteed Notes Due 2012 - net of unamortized notes discounts
of Rp11,863 in 2007 and Rp9,685 in 2008; and unamortized
notes issuance cost of Rp24,884 in 2007 and Rp20,313 in 2008
2,247,503
1,001,738
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of unamortized
bonds issuance cost of Rp6,176 in 2007 and Rp4,780 in 2008
808,824
810,220
Indosat Sukuk Ijarah III in Year 2008 - net of unamortized bonds
issuance cost of Rp2,332
-
567,668
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized bonds
issuance cost of Rp1,211 in 2007 and Rp1,077 in 2008
398,789
398,923
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost of Rp2,189 in 2007 and Rp1,694 in 2008
282,811
283,306
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
-
Total bonds payable
12,852,993
11,686,863
Less current maturities
1,050,000
1,916,442
Long-term portion
11,802,993
9,770,421
*
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
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.
48
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Fifth Indosat Bonds in Year 2007 with Fixed Rates (continued)
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.
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 June 2008, 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.
49
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Third Indosat Bonds in Year 2003 with Fixed Rates (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 June 2008, the bonds haveidAA+ (stable outlook) rating from Pefindo.
Guaranteed Notes Due 2010
In October 2003, the Company, through IFB, issued Guaranteed Notes Due 2010 with fixed rate
and with 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 on 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.
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.
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.
50
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010 (continued)
On July 22, 2008, IFB announced the Change of Control Offer to all bondholders of GN 2010 (Note 18). This offer was to purchase the GN 2010 at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest up to the date of settlement and any additional amounts. Such offer expired on September 17, 2008. The bondholders that validly tendered their Notes prior to the expiration date and whose tendered Notes were accepted for purchase would receive the Purchase Price.
On September 19, 2008, IFB made payment for the purchased portion of GN 2010 with total principal amount of US$65,253 at a price which was equal to 101% of the principal amount purchased, plus the accrued and unpaid interest up to the date of settlement, and also other additional expense (totalling US$67,805).
As of September 30, 2008, the outstanding balance of GN 2010 amounted to US$234,747.
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 (Note 36a).
Sixth Indosat Bonds in Year 2008 with Fixed Rates
On April 9, 2008, the Company issued its Sixth Indosat Bonds in Year 2008 with Fixed Rates (“Sixth Indosat Bonds”), with BRI as the trustee. The bonds have a total face value of Rp1,080,000. The bonds consist of two series:
·
Series A bonds amounting to Rp760,000 which bear interest at the fixed rate of 10.25% per annum starting April 9, 2008. These bonds will mature on April 9, 2013.
·
Series B bonds amounting to Rp320,000 which bear interest at the fixed rate of 10.80% per annum starting April 9, 2008. These bonds will mature on April 9, 2015.
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.
KSEI, acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
Starting July 9, 2008 and every quarter thereafter up to April 9, 2013.
Series B
:
Starting July 9, 2008 and every quarter thereafter up to April 9, 2015.
The Company received the proceeds of the bonds on April 9, 2008.
The net proceeds, after deducting the underwriting fee and offering expenses, were used for capital expenditure to expand the Company’s cellular network.
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 June 2008, the bonds haveidAA+ (stable outlook) rating from Pefindo.
51
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2012
On June 22, 2005, the Company, through IIFB, issued Guaranteed Notes Due 2012 with fixed rate and with a total face value of US$250,000. The notes 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.
On July 22, 2008, IIFB announced the Change of Control Offer to all bondholders of GN 2012 (Note 18). This offer was to purchase the GN 2012 at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest up to the date of settlement and any additional amounts. Such offer expired on September 17, 2008. The bondholders that validly tendered their Notes prior to the expiration date and whose tendered Notes were accepted for purchase would receive the Purchase Price.
On September 19, 2008, IIFB made payment for the purchased portion of GN 2012 with total principal amount of US$140,590 at a price which was equal to 101% of the principal amount purchased, plus the accrued and unpaid interest up to the date of settlement, and also other additional expense (totalling US$144,441).
As of September 30, 2008, the outstanding balance of GN 2012 amounted to US$109,410.
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 (Note 36a).
52
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Fourth Indosat Bonds in Year 2005 with Fixed Rate
On June 21, 2005, the Company issued its Fourth Indosat Bonds in Year 2005 with Fixed Rate (“Fourth Indosat 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.
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 June 2008, the bonds haveidAA+ (stable outlook) rating from Pefindo.
Indosat Sukuk Ijarah III in Year 2008 (“Sukuk Ijarah III”)
On April 9, 2008, the Company issued its Sukuk Ijarah III, with BRI as the trustee. The bonds have a total face value of Rp570,000. The bonds will mature on April 9, 2013.
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 Rp58,425, payable on a quarterly basis starting July 9, 2008 up to April 9, 2013.
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 April 9, 2008.
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 June 2008, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
53
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
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 June 2008, 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.
·
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 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 June 2008, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
54
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
On November 6, 2002, the Company issued its Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (“Second Indosat 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.
-
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 to 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 June 2008, the bonds haveidAA+ (stable outlook) rating from Pefindo.
55
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
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 are unsecured. These were originally set to mature 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.
On the maturity date, Lintasarta paid a certain portion of the limited bonds 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. The floating interest rates of the bonds are 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
56
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Indosat Syari’ah Mudharabah Bonds in Year 2002 (“Syari’ah Mudharabah Bonds”) (continued)
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.
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 to 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.
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%. Interest was paid on a quarterly basis.
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.
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 (Note 1d).
57
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
The scheduled principal payments of all the bonds payable outstanding as of September 30, 2008 are as follows:
Twelve months ending September 30,
2013 and
2009
2010
2011
2012
thereafter*
Total
In U.S. dollar
Guaranteed Notes *
Due 2010
(US$234,747)
-
-
2,213,664
-
-
2,213,664
Due 2012
(US$109,410)
-
-
-
1,031,736
-1,031,736
Sub-total
-
-
2,213,664
1,031,736
-3,245,400
In Rupiah
Fifth Indosat Bonds *
-
-
-
-
2,600,000
2,600,000
Third Indosat Bonds *
1,860,000
-
640,000
-
-
2,500,000
Sixth Indosat Bonds*
-
-
-
-
1,080,000
1,080,000
Fourth Indosat Bonds
*
-
-
815,000
-
-
815,000
Sukuk Ijarah III *
-
-
-
-
570,000
570,000
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
1,916,442
-
1,740,000
-
4,850,000
8,506,442
Total
1,916,442
-
3,953,664
1,031,736
4,850,00011,751,842
Less:
-
unamortized notes issuance cost
(30,458)
-
unamortized bonds issuance cost
(24,836)
-
unamortized notes discount
(9,685)
Net
11,686,863
* 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 Rp13,883. in 2007 and Rp16,133 in 2008 (Note 23).
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 24), other employee benefits and deposits from customers.
58
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
18.
CAPITAL STOCK
The Company’s capital stock ownership as of September 30, 2007 and 2008 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
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 39)
424,887,770
42,489
7.82
Indonesia Communications Pte.
Ltd., Singapore
46,340,000
4,634
0.85
Commissioners:
Lee Theng Kiat
135,000
14
0.00
Directors:
Wahyu Wijayadi
252,500
25
0.01
Raymond Tan Kim Meng
222,500
22
0.01
Wong Heang Tuck
100,000
10
0.00
Johnny Swandi Sjam
30,000
3
0.00
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
2,014,080,730
201,408
37.06
Total
5,433,933,500
543,393
100.00
2008
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
Stockholders holding above 5% (Note39):
Fidelity Entities
638,561,050
63,856
11.75
Goldman Sachs & Co
469,653,300
46,965
8.64
Noonday (Farallon Entities)
432,226,800
43,223
7.95
SKAGEN Funds (SKAGEN AS)
327,666,190
32,767
6.03
Indonesia Communications Pte.
Ltd., Singapore
46,340,000
4,634
0.85
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%)
571,121,160
57,112
10.52
Total
5,433,933,500
543,393
100.00
59
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 (“STTC”), the sole shareholder of ICL, from third parties.
On May 5, 2006, Indonesia Communications Pte. Ltd., Singapore (“ICLS”), a wholly-owned subsidiary of 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.
On June 6, 2008, STTC entered into a Share Purchase Agreement to sell its 75% ownership in ICL and ICLS to Qtel. The closing process of such sale was made on June 22, 2008 and resulted in Qtel’s direct ownership in ICL and ICLS. As a result, Qtel becomes the ultimate shareholder in the Company (Notes 15f and 16).
As of September 30, 2007 and 2008, 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 stock option under the Company’s Employee Stock Option Program from August 1, 2004 and July 31, 2006, a total of 256,433,500 “B” shares had been issued at a total premium of Rp873,512.
19.
OPERATING REVENUES
This account consists of the following:
2007
2008
Cellular
Usage charges
4,727,131
5,285,982
Features
2,947,202
3,417,828
Interconnection revenues (Note 32)
1,333,298
1,374,457
Connection fee
61,060
62,433
Monthly subscription charges
12,763
39,055
Others
64,995
46,289
Sub-total
9,146,449
10,226,044
60
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
OPERATING REVENUES (continued)
2007
2008
MIDI
Internet
387,913
646,388
IP VPN
272,076
436,080
World link and direct link
274,460
328,143
Frame net
250,922
244,007
Leased line
122,160
176,147
Application services
69,425
103,646
Digital data network
96,893
94,037
Satellite lease
70,272
66,846
Packet net
8,707
7,766
Others
15,395
18,188
Sub-total
1,568,223
2,121,248
Fixed Telecommunication
International Calls
Incoming calls
696,709
921,075
Outgoing calls
222,056
94,152
Fixed Wireless
159,182
193,708
Fixed Line
86,319
92,082
Others
1,042
512
Sub-total
1,165,308
1,301,529
Total
11,879,980
13,648,821
Operating revenues from related parties amounted to Rp1,538,259 and Rp1,349,993 for the nine months ended September 30, 2007 and 2008, respectively. These amounts represent 12.95% and 9,89% of total operating revenues in 2007 and 2008, respectively (Note 25).
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 MOCIT (Note 32).
61
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
20.
OPERATING EXPENSES - COST OF SERVICES
This account consists of the following:
2007
2008
Interconnection (Note 32)
1,099,872
1,268,348
Radio frequency fee
503,802
759,077
Maintenance
548,436
651,904
Utilities
202,284
363,887
Cost of SIM cards and pulse reload vouchers
236,751
342,780
Leased circuits
247,491
309,434
Rent
190,470
256,665
Concession fee
104,760
121,543
USO (Note 31)
78,570
91,850
Installation
22,028
62,008
Delivery and transportation
54,206
48,795
Billing and collection
38,776
34,959
License
12,346
16,488
Communication network
9,851
9,775
Others
39,312
85,473
Total
3,388,955
4,422,986
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).
21.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2007
2008
Salaries
261,499
313,460
Incentives and other employee benefits
194,121 211,909
Bonuses
239,028 181,656
Employee income tax
169,920 194,203
Post-retirement healthcare benefits (Note 24)
76,826 105,474
Outsourcing
97,822 104,814
Medical expense
38,349 44,392
Pension (Note 24)
34,795 36,245
Early retirement*
67,669 16,163
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 24)
17,371 19,051
Others
7,645 8,817
Total
1,205,045 1,236,184
*
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. During the nine months ended September 30, 2007 and 2008, there were additional 108 and 35 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation during the nine months ended September 30, 2007 and 2008 amounted to Rp31,660 and Rp25,303 respectively.
62
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
22.
OPERATING EXPENSES - ADMINISTRATION AND GENERAL
This account consists of:
2007
2008
Rent
89,458
111,073
Provision for doubtful accounts
81,619
87,928
Travel
65,933
70,025
Professional fees
75,373
68,135
Utilities
39,492
45,073
Training, education and research
24,841
27,248
Catering
24,535
23,061
Insurance
20,769
18,044
Communications
3,913
14,165
Office supplies and stationery
10,815
13,255
Public relations
9,598
8,791
Others
71,225
80,804
Total
517,571
567,602
23.
OTHER EXPENSES - FINANCING COST
This account consists of:
2007
2008
Interest on debt and bonds
1,004,181
1,346,489
Amortization of debt and bonds issuance
costs and discount (Notes 15 and 16)
21,008
26,000
Bank charges
3,434
5,217
Total
1,028,623
1,377,706
24.
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.
63
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
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, and were 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:
·
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 and March - September 2008, the Company made payments for additional premium of Rp275 for additional 55 employees and Rp440 for additional 88 employees, respectively.
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.
64
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
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 contributions made by Lintasarta to Jiwasraya amounted to Rp9,968 and Rp9,653 for the nine months ended September 30, 2007 and 2008, respectively.
The net periodic pension cost for the pension plans for the nine months ended September 30, 2007 and 2008 was calculated based on the actuarial valuations as of December 31, 2006 and 2007, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2007
2008
Annual discount rate
9.5 - 10.5%
10.0%
Expected annual rate of return on plan assets
4.5 - 10.0%
4.5 - 9.0%
Annual rate of increase in compensation
3.0 - 9.0%
3.0 - 9.0%
Mortality rate
CSO 1980
TMI 1999
a.
The composition of the net periodic pension cost for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Interest cost
49,827
49,576
Service cost
31,002
31,144
Net amortization
4,182
3,817
Immediate recognition of past service cost - vested benefit
3,335
-
Return on plan assets
(53,551)
(48,292)
Net periodic pension cost (Note 21)
34,795
36,245
65
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
b.
The funded status of the plans as of September 30, 2007 and 2008 is as follows:
2007
2008
Plan assets at fair value
753,356
759,588
Projected benefit obligation
(728,365
)
(752,865)
Excess of plan assets over projected benefit obligation
24,991
6,723
Unrecognized actuarial loss
191,896
184,487
Net prepaid pension cost
216,887
191,210
c.
Movements in the prepaid pension cost during the nine months ended September 30, 2007 and 2008 are as follows:
2007
2008
Beginning balance
Company
225,296
187,801
Lintasarta
8,278
13,190
Net periodic pension cost
Company
(31,691
)
(33,264)
Lintasarta
(3,104
)
(2,981)
Benefit payment
Company
540
16,371
Contribution to Jiwasraya
Company
7,600
440
Lintasarta
9,968
9,653
Ending balance
Company
201,745
171,348
Lintasarta
15,142
19,862
d.
Prepaid pension cost consists of:
2007
2008
Current portion (presented as part of “Prepaid Expenses”)
Company
3,424
2,128
Lintasarta
118
503
3,542
2,631
Long-term portion
Company
198,321
169,220
Lintasarta
15,024
19,359
213,345
188,579
216,887
191,210
66
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
Plan assets as of September 30, 2007 and 2008 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 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 nine months ended September 30, 2007 and 2008 amounted to Rp11,901 and Rp12,441, 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.
The net periodic pension cost under the Labor Law for the nine months ended September 30, 2007 and 2008 was calculated based on the actuarial valuations as of December 31, 2006 and 2007, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2007
2008
Annual discount rate
10.5%
10.0%
Annual rate of increase in compensation
10.0%
10.0%
a.
The composition of the periodic pension cost under the Labor Law for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Service cost
10,015
10,949
Interest cost
6,880
7,768
Net amortization
476
334
Periodic pension cost (Note 21)
17,371
19,051
67
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
b.
The composition of the accrued pension cost under the Labor Law as of September 30, 2007 and 2008 is as follows:
2007
2008
Projected benefit obligation
100,537
121,726
Unrecognized actuarial loss
(18,343)
(15,857)
Accrued pension cost
82,194
105,869
c.
Movements in the accrued pension cost under the Labor Law during the nine months ended September 30, 2007 and 2008 are as follows:
2007
2008
Beginning balance
Company
62,972
78,604
Lintasarta
5,450
7,013
IMM
978
2,719
Periodic Labor Law cost
Company
14,863
16,786
Lintasarta
1,965
1,087
IMM
543
1,178
Benefit payment
Company
(4,577
)
(1,244)
Lintasarta
-
(274)
Ending balance
Company
73,258
94,146
Lintasarta
7,415
7,826
IMM
1,521
3,897
As of September 30, 2007 and 2008, 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 Rp80,505 and Rp104,041, 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 officially registered in the administration records 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.
68
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
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 nine months ended September 30, 2007 and 2008 was calculated based on the actuarial valuations as of December 31, 2006 and 2007. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2007
2008
Annual discount rate
10.5%
10.0%
Ultimate cost trend rate
8.0%
6.0%
Next year trend rate
16.0%
18.0%
Period to reach ultimate cost trend rate
4 years
6 years
a.
The composition of the periodic post-retirement healthcare cost for the nine months ended September 30, 2007 and 2008 is as follows:
2007
2008
Interest cost
41,196
57,225
Service cost
22,310
28,111
Net amortization
13,320
20,138
Periodic post-retirement
healthcare cost (Note 21)
76,826
105,474
b.
The composition of the accrued post-retirement healthcare cost as of September 30, 2007 and 2008 is as follows:
2007
2008
Projected benefit obligation
583,895
847,275
Unrecognized actuarial loss
(239,953)
(375,885)
Accrued post-retirement healthcare cost
343,942
471,390
69
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
c.
Movements in the accrued post-retirement healthcare cost during the nine months ended September 30, 2007 and 2008 are as follows:
2007
2008
Beginning balance
272,958
371,806
Net periodic post-retirement healthcare cost
76,826
105,474
Benefit payment
(5,842)
(5,890)
Ending balance
343,942
471,390
d.
The effect of 1% increase in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs for the nine months ended September 30, 2007 and 2008 and accumulated post-retirement healthcare benefit obligation as of September 30, 2007 and 2008 as follows:
2007
2008
Service and interest costs
78,220
110,800
Accumulated post-retirement healthcare
benefit obligation
652,351
1,048,684
As of September 30, 2007 and 2008, 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 Rp337,733 and Rp461,729, respectively.
25.
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 (%)
2007
2008
2007
2008
Cash and cash equivalents (Note 4)
State-owned banks
2,874,854
2,896,308
6.975.96
Private banks*
668,478
-
1.62
-
Total
3,543,332
2,896,308
8.595.96
Accounts receivable - trade (Note 5)
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
44,362
45,967
0.110.09
State-owned banks
38,816
30,782
0.090.06
Telkom
32.312
23,123
0.08
0.05
PT Telekomunikasi Selular (“Telkomsel”)
4,461
18,260
0.01
0.04
PT Pos Indonesia (Persero)
9,063
9,858
0.02
0.02
PT Citra Sari Makmur (“CSM”)
4,517
7,275
0.010.01
PT Pasifik Satelit Nusantara (“PSN”)
5,539
5,025
0.01
0.01
MOCIT
3,795
-
0.01
-
* no longer related parties since June 6, 2008 (Note 18)
70
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2007
2008
2007
2008
Accounts receivable - trade (Note 5)
(continued)
StarHub Pte. Ltd. (“StarHub”),
Singapore*
56,581
-
0.14
-
Singapore Telecommunications Ltd.
(“SingTel”), Singapore*
44,627
-
0.11
-
Private banks *
8,860
-
0.02
-
Others
27,978
35,512
0.07
0.08
Total
280,911
175,802
0.680.36
Less allowance for doubtful accounts
83,898
81,923
0.20
0.17
Net
197,013
93,879
0.480.19
Prepaid expenses
MOCIT
425,153
685,007
1.03
1.41
Kopindosat
2,901
2,710
0.010.01
Jiwasraya
3,542
2,631
0.010.01
PT Industri Telekomunikasi
Indonesia (Persero)
-
1,591
-
0.00
Telkom
-
1,434
-
0.00
Others
2,242
1,305
0.00
0.00
Total
433,838
694,678
1.051.43
Other current assets
State-owned banks
30,375
14,823
0.070.03
Others
7
7
0.00
0.00
Total
30,382
14,830
0.070.03
Due from related parties
Directorate General of Customs
and Excise
24,668
23,629
0.060.05
Kopindosat
5,949
5,949
0.010.01
Telkomsel
6,372
4,884
0.020.01
Pertamina
-
4,381
-
0.01
Key management personnel
9,409
851
0.020.00
State-owned banks
2,274
-
0.01
-
Others
701
358
0.00
0.00
Total
49,373
40,052
0.120.08
Less allowance for doubtful accounts
2,219
2,578
0.01
0.01
Net
47,154
37,474
0.110.07
Long-term prepaid pension (Note 24)
Jiwasraya
213,345
188,579
0.520.39
Long-term advances
Kopindosat
1,648
12,857
0.000.03
PT Industri Telekomunikasi
Indonesia (Persero)
5,169
4,031
0.010.01
Others
2,674
-
0.01
-
Total
9,491
16,888
0.020.04
* no longer related parties since June 6, 2008 (Note 18)
71
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2007
2008
2007
2008
Non-current assets - others
State-owned banks
37,351
34,250
0.090.07
Telkom
24,164
21,391
0.06
0.05
Kopindosat
11,159
10,660
0.030.02
PT Industri Telekomunikasi
Indonesia (Persero)
-
4,863
-
0.01
Others
3,865
1,848
0.010.00
Total
76,539
73,012
0.19
0.15
Accounts payable - trade
Qtel**
-
3,379
-
0.01
Optus*
2,681
-
0.01
-
Telkom
2,390
-
0.01
-
Telkomsel
1,943
-
0.01
-
Others
1,918
3,282
0.010.01
Total
8,932
6,661
0.040.02
Procurement payable
(Note 12)
PT Industri Telekomunikasi
Indonesia (Persero)
103,168
49,181
0.410.15
Kopindosat
39,817
20,746
0.160.07
PT Personel Alih Daya
-
13,183
-
0.04
PT NexWave*
20,655
-
0.08
-
PT SCS Astra Graphia Technologies*
7,575
-
0.03
-
Others
-
299
-
0.00
Total
171,215
83,409
0.680.26
Accrued expenses
MOCIT
282,539
339,317
1.131.07
Kopindosat
12,452
29,858
0.050.10
Key management personnel
6,160
23,934
0.020.08
PLN
3,000
9,400
0.01
0.03
Telkom
7,028
2,780
0.03
0.01
Others
2,510
995
0.010.00
Total
313,689
406,284
1.251.29
Other current liabilities
Telkomsel
1,664
1,664
0.010.01
Directorate General of Customs
and Excise
42,096
-
0.17
-
Starhub*
135
-
0.00
-
Total
43,895
1,664
0.180.01
*
no longer a related party since June 6, 2008 (Note 18)
**
became a related party starting June 6, 2008 (Note 18)
72
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2007
2008
2007
2008
Due to related parties
TVRI
2,262
26,892
0.010.08
State-owned banks
1,875
1,931
0.010.01
Kopindosat
1,490
1,490
0.010.00
Indonesia Comnet Plus (“Comnet”)
13,576
-
0.05
-
PT Pos Indonesia (Persero)
677
-
0.00
-
Others
3,733
5,538
0.010.02
Total
23,613
35,851
0.090.11
Loans payable (Note 15)
State-owned banks
795,000
1,795,854
3.185.68
Other non-current liabilities
Telkomsel
11,861
10,198
0.050.03StarHub*889-0.00-
Total
12,750
10,198
0.050.03
Percentage to Respective Income or
Amount
Expenses (%)
2007
2008
2007
2008
Operating revenues
Telkom
900,390
696,328
7.58
5.10
Telkomsel
308,673
261,620
2.60
1.92
State-owned banks
143,436
134,022
1.21
0.98
StarHub*
36,130
36,748
0.300.27
Private banks*
38,735
28,161
0.330.21
SingTel*
37,594
17,304
0.32
0.13
CSM
6,184
8,106
0.05
0.06
PSN
5,555
6,819
0.05
0.05
PT Pos Indonesia (Persero)
2,183
3,702
0.02
0.03
PT Angkasa Pura (Persero)
4,148
3,567
0.03
0.03
TVRI
3,096
2,997
0.03
0.02
Qtel**
-
1,801
-
0.01
MOCIT
6,724
1,182
0.060.01
LKBN Antara
3,311
693
0.03
0.01
Others
42,100
146,943
0.34
1.06
Total
1,538,259
1,349,993
12.95
9.89
Operating expenses
Cost of services
MOCIT
687,132
972,470
7.92
9.43
Telkom
711,862
704,832
8.21
6.83
Telkomsel
343,722
445,434
3.96
4.32
PT Personel Alih Daya
-
41,730
-
0.40
Comnet
23,241
27,790
0.27
0.27
SingTel*
17,183
12,637
0.20
0.12
Perusahaan Gas Negara (“PGN”)
1,575
11,170
0.010.11
PT Industri Telekomunikasi Indonesia
(Persero)
-
5,200
-
0.06
Starhub*
7,065
3,321
0.080.03
Kopindosat
6,881
2,177
0.080.02
PSN
1,966
1,734
0.02
0.02
Others
1,671
-
0.02
-
Total
1,802,298
2,228,495
20.7721.61
*
no longer a related party since June 6, 2008 (Note 18)
** became a related party starting June 6, 2008 (Note 18)
73
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income or
Amount
Expenses (%)
2007
2008
2007
2008
Personnel
Key management personnel
97,287
111,538
1.121.08
Kopindosat
97,852
105,011
1.131.02
Jiwasraya
34,795
36,245
0.400.35
Total
229,934
252,794
2.652.45
Administration and general
Kopindosat
34,759
42,621
0.400.41
PLN
32,255
30,888
0.37
0.30
Usaha Gedung Bank Dagang Negara
(“UGBDN”)
3,803
4,086
0.050.05
Others
2,591
5,794
0.030.05
Total
73,408
83,389
0.850.81
Other income (expenses)
Interest income
State-owned banks
66,253
147,579
5.84
11.69
Private banks*
21,554
36,458
1.90
2.89
Others
1,216
551
0.110.04
89,023
184,588
7.8514.62
Financing cost
State-owned banks
(45,249
)
(148,366
)
(3.99
)
(11.75)
Private banks*
-
(16,302
)
-
(1.29)
Others
(5,001
)
(4,659
)
(0.44
)
(0.37)
(50,250
)
(169,327
)
(4.43
)
(13.41)
Net
38,773
15,261
3.421.21
* no longer related parties since June 6, 2008 (Note 18)
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
Affiliates
Cash and cash equivalents,
loans payable and operating
revenues - MIDI
2.
Private banks*
Affiliates
Cash and cash equivalents,
loans payable and operating
revenues - MIDI
3.
TVRI
Affiliate
Operating revenues - MIDI
4.
PT Pos Indonesia (Persero)
Affiliate
Operating revenues - MIDI
5.
CSM
Affiliate
Operating revenues - MIDI
6.
Telkomsel (Note 32)
Affiliate
Operating revenues - cellular and
fixed telecommunication
74
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
7.
PSN
Affiliate
Operating revenues - MIDI
8.
Telkom (Notes 29k and 32)
Affiliate
Operating revenues - cellular,
fixed telecommunication and
MIDI; operating expenses -
cost of services
9.
StarHub*
Affiliate
Operating revenues -
international calls
10.
SingTel*
Affiliate
Operating revenues -
international calls
11.
Optus*
Affiliate
Operating revenues -
international calls
12.
Kopindosat
Affiliate
Operating expenses - personnel
expenses, administration and
general expenses
13.
Jiwasraya
Affiliate
Long-term prepaid pension
14.
PT Industri Telekomunikasi
Indonesia (Persero)
Affiliate
Procurement payable
15.
MOCIT
Government Agency
Operating revenues - MIDI;
operating expenses - cost of
services
16.
Pertamina
Affiliate
Operating revenues - MIDI
17.
Key management personnel
Affiliate
Operating expenses - personnel
expenses, and prepaid
expense - unamortized
portions of housing and
transformation advances, and
transformation incentives
18.
PT NexWave*
Affiliate
Procurement payable
19.
Qtel**
Ultimate Stockholder
Operating revenues - fixed
telecommunication
20.
ICL
Stockholder
Dividend payable
21.
ICLS
Stockholder
Dividend payable
* no longer a related party since June 6, 2008 (Note 18)
** became a related party starting June 6, 2008 (Note 18)
75
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
25.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
22.
PT Personel Alih Daya
Affiliate
Operating expenses - personnel
expenses and cost of services
23.
PT Sigma Cipta Caraka
Affiliate
Procurement payable
24.
PT SCS Astra Graphia Technologies*
Affiliate
Procurement payable
25.
Directorate General of Customs
and Excise
Government Agency
Other current liabilities
26.
PLN
Affiliate
Operating expenses - cost of
services
27.
Comnet
Affiliate
Operating expenses - cost of
services
28.
PT Angkasa Pura (Persero)
Affiliate
Operating revenues - MIDI
29.
PGN
Affiliate
Operating expenses - cost of
services
30.
UGBDN
Affiliate
Operating expenses - cost of
services
31.
LKBN Antara
Affiliate
Operating revenues - MIDI
* no longer related parties since June 6, 2008 (Note 18)
26.
BASIC EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share:
2007
2008
Numerator for basic earnings per
share - net income
1,445,130
1,473,115
Denominator for basic earnings per share -
Weighted-average number of shares outstanding
during the period
5,433,933,500
5,433,933,500
Basic earnings per share
265.95
271.10
Basic earnings per ADS (50 B shares per ADS)
13,297.27
13,554.78
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
27.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meeting held on June 5, 2007, the stockholders resolved to, among others:
a. Approve the utilization of 2006 net income as follows:
·
Rp14,101 for reserve fund
·
Rp129.75 per share for dividend distribution
·
Remaining amount for reinvestment and working capital
b.
Pay the dividend on July 13, 2007, except the dividend for the Government which will be paid in accordance with the prevailing laws and regulations.
At the Company’s Annual Stockholders’ General Meeting held on June 5, 2008, the stockholders resolved to, among others:
a. Approve the utilization of 2007 net income as follows:
·
Rp20,420 for reserve fund
·
Rp187.90 per share for dividend distribution
·
Remaining amount for reinvestment and working capital
b.
Pay the dividend on July 15, 2008, except the dividend for the Government which will be paid in accordance with the prevailing laws and regulations.
28.
DERIVATIVES
The Company entered into several swap and currency forward contracts. Listed below is information related to the contracts and their fair values as of September 30, 2007 and 2008:
Fair Value (Rp)
Notional
2007
2008
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap Contracts:
a.
Standard Chartered Bank, Jakarta
Branch (“StandChart”)
25,000
-
5,277
19,409-
b.
GSI
100,000
6,826
-
23,460-
c.
GSI
25,000
-
30,469
-11,770
d.
GSI
75,000
10,371
-
13,202-
e.
Merrill Lynch Capital Market Bank
Limited (“MLCMB”)(10)
25,000
-
7,425
--
f.
MLCMB(8)
25,000
-
37,910
--
g.
StandChart
25,000
-
23,109
3,087-
h.
MLCMB(9)
25,000
-
14,699
--
i.
StandChart
25,000
-
7,345
17,417-
j.
StandChart
25,000
3,071
-
27,499-
k.
HSBC, Jakarta
25,000
-
5,701
17,736-
l.
MLCMB
50,000
-
-
-48,647
m.
MLCMB
25,000
-
-
-1,658
n.
MLCMB
25,000
-
-
-634
o.
DBS
25,000
-
-
-438
Sub-total
20,268
131,935
121,81063,147
Currency Forward Contracts:
p.
Goldman Sachs Capital
Market,L.P, New York (“GSCM”)(2)
10,000
-
-
-
-
q.
StandChart(3)
2,000
232
-
--
r.
JPMorgan Close Bank, Singapore
Branch (“JPMorgan”)(4)
3,000 or 6,000
-
912
--
s.
StandChart(5)
1,500 or 3,000
142
-
--
t.
JPMorgan(7)
3,000 or 6,000
-
-
--
77
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
Fair Value (Rp)
Notional
2007
2008
Amount
(US$)
Receivable
Payable
ReceivablePayable
Currency Forward Contracts:
u.
StandChart(5)
1,500 or 3,000
221
-
--
v.
GSCM(6)
10,000
-
-
--
Sub-total
595
912
-
-
Interest Rate Swap Contracts:
w.
GSCM
(1)
25,000
-
-
--
x.
HSBC, Jakarta
27,037 with
decreasing amount
-
-
-103
y.
HSBC, Jakarta
44,200 with
decreasing amount
-
-
-6,153
z.
GSCM
100,000
-
-
-37,720
aa.
DBS
25,000 with
decreasing amount
-
-
-
1,075
Sub-total
-
-
-
45,051
Total
20,863
132,847
121,810108,198
(1)
contract entered into in July 2006 and terminated in June 2007
(2)
contract entered into in January 2007 and terminated in June 2007
(3)
contract entered into in February 2007 and settled in February 2008
(4)
contract entered in April 2007 and settled in April 2008
(5)
contracts entered in May 2007 and settled in December 2007
(6)
contract entered in May 2007 and terminated in July 2007
(7)
contract entered in May 2007 and terminated in August 2007
(8)
contract entered in November 2005 and restructured into a new contract entered in August 2008
(9)
contract entered in March 2006 and restructured into a new contract entered in August 2008
(10)
contract entered in September 2005 and restructured into a new contract entered in September 2008
The net changes in fair value of the swap and currency forward contracts and embedded derivative (Note 15f), totalling Rp5,742 and Rp53,513 in 2007 and 2008, respectively, were charged to “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 and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid (Rp) | |
2007 | 2008 | |||||
a. | StandChart Branch (“StandChart”) | April 23, 2004 - November 5, 2008 Swap Rp214,625 for US$25,000 | 6-month U.S. dollar LIBOR plus 2.60% | Every May 5 and November 5 | 9,188 | 8,738 |
b. | GSI | May 13, 2005 - November 5, 2010 Swap Rp832,250 for US$100,000 | (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 (a) 6-month U.S. dollar LIBOR per annum multiplied by US$11,750 during the period May 13, 2005 through May 13, 2008 and (b) the amount of US$11,750 on May 13, 2008. On May 14, 2008, the Company received from GSI the fixed amount of US$11,750 (equivalent to Rp109,099) related to the cross currency swap contract. | Every May 5 and November 5 | 31,331 | 29,244 |
78
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
The following are the details of the contracts: (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid (Rp) | |
2007 | 2008 | |||||
c. | GSI | May 13, 2005 - November 5, 2010 Swap Rp245,000 for US$25,000 | 4.30% of US$25,000 | Every May 5 and November 5 | 4,924 | 5,049 |
d. | GSI | August 22, 2005 - June 22, 2012 Swap a certain rupiah amount equivalent to US$75,000 multiplied by certain predetermined exchange rate for US$75,000 | 3.28% of US$75,000 | Every June 22 and December 22 | 11,163 | 11,611 |
e. | MLCMB(ii) | September 20, 2005 - June 22, 2012 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than Rp9,500 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (1 - Rp9,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp9,500 but is less than or equal to Rp14,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (Rp14,000 - Rp9,500) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp14,000 to US$1 (in full amounts) | 2.99% of US$25,000 | Every June 22 and December 22 | 3,327 | 3,482 |
f. | MLCMB(i) | November 16, 2005 - June 22, 2012 Swap Rp245,000 for US$25,000 | 5.50% of US$25,000 | Every June 22 and December 22 | 6,120 | 6,405 |
g. | StandChart | January 11, 2006 - June 22, 2012 Swap Rp236,250 for US$25,000 | 4.78% of US$25,000 | Every June 22 and December 22 | 5,423 | 5,609 |
h. | MLCMB(i) | March 1, 2006 - June 22, 2012 Swap Rp229,975 for US$25,000 | 4.15% of US$25,000 | Every June 22 and December 22 | 4,669 | 4,887 |
i. | StandChart | March 15, 2006 - June 22, 2012 Swap Rp228,550 for US$25,000 | 3.75% of US$25,000 | Every June 22 and December 22 | 4,255 | 4,401 |
j. | StandChart | May 12, 2006 - June 22, 2012 Swap Rp217,500 for US$25,000 | 3.45% of US$25,000 | Every June 22 and December 22 | 3,914 | 4,049 |
k. | HSBC | August 8, 2006 - November 5, 2010 Swap Rp225,000 for US$25,000 | 4.00% of US$25,000 | Every May 5 and November 5 | 4,617 | 4,694 |
(i)
On August 8, 2008, the Company restructured these contracts.
(ii) On September 8, 2008, the Company restructured this contract.
79
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid (Rp) | |
2007 | 2008 | |||||
l. | MLCMB | August 8, 2008 - June 22, 2012 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than Rp8,950 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$50,000 multiplied by (1 - Rp8,950 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,950 but is less than or equal to Rp11,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$50,000 multiplied by (Rp11,000 - Rp8,950) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts) | 4.22% of US$50,000 | Every June 22 and December 22 | - | - |
m. | MLCMB | September 2, 2008 - June 12, 2013 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp8,800 to US$1 (in full amounts) · certain U.S. dollar amount as arranged in the contract multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,800 but is less than or equal to Rp12,000 to US$1 (in full amounts) · certain U.S. dollar amount as arranged in the contract multiplied by (Rp3,200 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp12,000 to US$1 (in full amounts) | 4.10% of US$25,000 up to June 12, 2011 , and 4.10% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013 | Every June 12 and Dec 12 | - | - |
n. | MLCMB | September 8, 2008 - June 22, 2012 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than Rp9,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (1 - Rp9,000 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp9,000 but is less than or equal to Rp11,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (Rp11,000 - Rp9,000) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts) | 2.52% of US$25,000 | Every June 22 and December 22 | - | - |
80
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid (Rp) | |
2007 | 2008 | |||||
o. | DBS | September 10, 2008 - June 12, 2013 The Company will receive the following: · zero amount if the IDR/USD spot rate at the scheduled settlement date is at or less than Rp8,800 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp8,800 and is at or less than Rp12,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (Rp12,000 - Rp8,800) divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp12,000 to US$1 (in full amounts) | 3.945% of US$25,000 up to June 12, 2011 , and 3.945% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013 | Every June 12 and December 12 | - | - |
All cross currency swap contracts with GSI (contract Nos. b, c and d) 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.
Currency Forward Contracts
No. | Counter-parties | Contract Period | IDR/USD Fixing Rate (in full amounts) | Settlement Dates |
p. | GSCM(iii) | January 2, 2007 - July 5, 2007 | Rp8,955 to US$1 | May 4, 2007, June 6, 2007 and July 5, 2007 |
q. | StandChart(iv) | February 15, 2007 - February 20, 2008 | Rp8,950 to US$1 | Every month starting March 20, 2007 to February 20, 2008 |
r. | JPMorgan(iv) | April 24, 2007 - April 28, 2008 | Spot rate on the settlement date | Every month starting May 25, 2007 to April 28, 2008 |
s. | StandChart(iv) | May 1, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 4, 2007 to December 28, 2007 |
t. | JPMorgan(v) | May 3, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 27, 2007 to December 28, 2007 |
u. | StandChart(iv) | May 4, 2007 - December 28, 2007 | Spot rate on the settlement date | Every month starting June 8, 2007 to December 28, 2007 |
v. | GSCM(vi) | 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)
These contracts expired on December 28, 2007, February 20, 2008 and April 28, 2008, respectively.
(v)
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.
(vi)
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.
81
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
Interest Rate Swap Contracts
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income Receipt Date | Amount of Swap Income (Expense) Received (Paid) (Rp) | |
2007 | 2008 | |||||
w. | GSCM(vii) | 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 | 1,386 | - |
x. | HSBC | April 23, 2008 - November 27, 2016 | 5.42% of US$27,037, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.45% per annum | Every April 1 and October 1 up to October 2009, and every May 27 and November 27 up to termination date | - | (1,784) |
y. | HSBC | April 23, 2008 -September 29, 2019 | 4.82% of US$44,200, the notional amount of which will decrease based on predetermined schedule, in exchange for U.S. dollar LIBOR plus 0.35% per annum | Every April 8 and July 8 up to July 28, 2009, and every March 29 and September 29 up to termination date | - | (648) |
z. | GSCM | September 2, 2008 - June 12, 2013 | (8.10% - under layer return) of US$100,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every June 10 and Dec 10 up to June 2011, and every June 12 and Dec 12 up to termination date | - | - |
aa. | DBS | September 5, 2008 - June 12, 2013 | 5.625% of US$25,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum. | Every June 10 and Dec 10 up to Dec 10, 2010, and every June 12 and Dec 12 up to termination date | - | - |
(vii)
On June 22, 2007, GSCM took the early termination option for this contract.
82
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES
a.
As of September 30, 2008, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$631,071 and Rp3,145,838 (Note 36c).
The significant commitments on capital expenditures are as follows:
Contract Date | Contract Description | Vendor | Amount of Contract/Purchase Orders (“POs”) Already Issued | Amount of Contract/POs Not Yet Served |
February 25, 2008 | Supply and Installation of Submarine Backbone Network in Java Kalimantan Batam Singapore (JAKABARE) | NEC Corporation | US$68,310 and Rp21,705 | US$58,173 and Rp18,449 |
June 29, 2007 | Palapa D Satellite In-Orbit Delivery (“Palapa D Satellite”) | Thales Alenia Space | US$217,600 | US$124,236 |
May 16, 2007 | Supply of GSM Cellular Infrastructure | PT Nokia Networks, Nokia Siemens Networks Oy and Nokia Siemens Networks GmbH & Co.KG. | US$120,621 and Rp462,341 | US$93,023 and Rp471,825 |
May 2, 2007 | Supply and Installation Telecommunication Infrastructure | PT Huawei Tech Investment and Huawei Technologies Co.Ltd | US$29,956 and Rp205,676 | US$12,518 and Rp48,720 |
April 20, 2007 | Telecommunication Equipment Supply and Service | PT Alcatel Lucent Indonesia and Alcatel Shanghai Bell Co. Ltd. | US$20,689 and Rp399,090 | US$10,850 and Rp191,793 |
April 3, 2007 | Supply of GSM Infrastructure | PT Ericsson Indonesia and Ericsson AB | US$139,342 and Rp347,229 | US$140,321 and Rp518,331 |
September 29, 2006 | WCDMA/HSDPA Radio Access Network Development Project | PT Ericsson Indonesia and Ericsson AB | US$55,220 and Rp216,039 | US$22,725 and Rp106,865 |
September 25, 2006 | Single Intelligent Network | PT Ericsson Indonesia and Ericsson AB | US$66,176 and Rp194,558 | US$10,440 and Rp132,828 |
b.
On September 19, 2008, the Company entered into a three-year unsecured credit facility agreement with BCA amounting to Rp500,000 for the refinancing and purchase of telecommunication equipment. The loan bears interest at 3 month-JIBOR plus 2.25% per annum. The repayment of the loan drawdowns will be made annually, as follows: (a) 20% of the total loan drawdowns in the first year, (b) 30% of the total loan drawdowns in the second year, and (c) 50% of the total loan drawdowns in the third year.
As of September 30, 2008, the Company has not used the facility.
c.
On January 17, 2008, the Company entered into an agreement for a Joint Share 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. As of September 30, 2008, the Company has paid the full amount of the investment.
d.
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 subsequently decided not to join the project.
On November 10, 2007, the Company and the other five 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 September 30, 2008, the Company has paid the amount of US$1,503.
83
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
e.
On April 27, 2007, the Company joined Asia-America Gateway Consortium (“AAG”) by signing Construction & Maintenance Agreement. AAG is a sea cable consortium which consists of 19 member companies. The Company has committed to invest US$5,000 (as of September 30, 2008, the Company has paid US$2,565) 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.
f.
The Company has committed to pay annual radio frequency fee over the 3G license period, provided the Company holds the 3G license (Note 1a). The amount of annual payment is based on the payment scheme set out in Regulation No. 7/PER/M.KOMINFO/2/2006 dated February 8, 2006 of the MOCIT.
g.
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 the bank guarantee.
The facilities expired on November 30, 2005 and were extended for 12 months. The facilities shall be automatically extended for a further 12-month period upon expiration, unless early notification of non-extension is made in writing.
As of September 30, 2008, 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.
84
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
·
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.
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.
On April 22, 2008, the Company extended its facilities from HSBC until February 28, 2009.
As of September 30, 2008, the Company has not yet 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 representing its estimate of the penalty it would 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 fully paid the penalty amounting to Rp20,633.
85
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES (continued)
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.
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 September 30, 2008, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$6,389. 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. The term of the agreement may 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 Rp11,753 and Rp15,501 in 2007 and 2008, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of income.
86
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
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.
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 MOC, which rates are generally higher than the accounting rates. During the period 1996 to 1998, the MOC 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 MOCIT, 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 (“MTPT”) (subsequently renamed “Ministry of Communications” and most recently, “Ministry of Communications Information and 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
87
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
TARIFF SYSTEM (continued)
b.
Cellular services (continued)
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 MOC 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.
Regulation No. KM.27/PR.301/MPPT-98 dated February 23, 1998 and Decree No. KM.79 Year 1998 of the MTPT were subsequently superseded by Regulation No. 12/PER/M.KOMINFO/ 02/2006 dated February 28, 2006 of the MOCIT regarding basic telephony tariff for cellular mobile network service. Under this regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges
·
Additional facilities fee
On April 7, 2008, the MOCIT issued Ministerial Decree No. 09/PER/M.KOMINFO/04/2008 about guidelines on calculating basic telephony service tariffs through cellular mobile network.
Under this new regulation, the cellular providers should implement the new tariffs referred to as “price cap”. The types of tariff for telecommunication services through cellular network consist of the following:
·
Tariff for basic telephony services
·
Tariff for roaming
·
Tariff for multimedia services
The retail tariff should be calculated based on Network Element Cost, Activation Cost of Retail Services and Profit Margin.
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.
Starting May 2008, the Company has fully adopted the new cellular tariff system.
88
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
30.
TARIFF SYSTEM (continued)
c.
Fixed telecommunication services
In February 2006, the MOCIT released Regulation No. 09/PER/M.KOMINFO/02/2006 regarding basic telephony tariff for fixed network service.
On April 30, 2008, the MOCIT issued Ministerial Decree No. 15/PER/M.KOMINFO/04/2008 about the guidelines on calculating basic telephony service tariffs through fixed network. This Decree also applies to fixed wireless access (FWA) network.
Under this new regulation, the tariff for basic telephony services and SMS (short message service) must be calculated based on the formula stated in the Decree. The fixed network providers should implement the new tariffs referred to as “price cap”.
Starting May 2008, the Company has fully adopted the new fixed telecommunication tariff system.
31.
INTERCONNECTION TARIFFS
Interconnection tariffs among domestic telecommunications operators are regulated by the MOC through its Decree No. KM.108/PR.301/MPPT-94 dated December 28, 1994. The decree was updated several times with the latest update being Decree No. KM.37 Year 1999 dated June 11, 1999. This decree, along with Decree No. KM.46/PR.301/MPPT-98 dated February 27, 1998, prescribed interconnection tariff structures between mobile cellular telecommunications network and PSTN, mobile cellular telecommunications network and international telecommunications network, mobile cellular telecommunications network and other domestic mobile cellular telecommunications network, international telecommunications network and PSTN, and between two domestic PSTNs.
Based on the decree of the MOC, 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 MOC, 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.
89
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariff (continued)
c.
Between cellular telecommunications network and domestic PSTN
Based on the MTPT Decree No. KM.46/PR.301/MPPT-98 (“Decree No. 46”) dated February 27, 1998 which became effective starting April 1, 1998, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to a PSTN subscriber,
the cellular operator pays the PSTN operator 50% of the prevailing tariff for local calls.
For local calls from the PSTN to a cellular subscriber, the cellular operator receives
the airtime charged by the PSTN operator to its subscribers.
(2)
SLJJ
For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariff, which portion ranges from 15% of
the prevailing SLJJ tariff plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariff plus the airtime charges in cases where the entire long-distance portion is carried by the cellular operator.
For SLJJ which originates from a cellular telecommunications network to a PSTN subscriber, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariff, which portion ranges from 15% of the tariff in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariff in cases where the entire long-distance portion is carried by the cellular operator.
d.
Between cellular telecommunications network and another cellular telecommunications network
Based on Decree No. 46, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the cellular operator pays the PSTN operator 50% of the prevailing tariff for local calls.
(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.
90
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariff (continued)
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 (Note32).
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 MOCIT 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 MOCIT 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. As of September 30, 2008, such amendment has not yet been finalized.
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 MOC 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 MOCIT (Note 32).
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.
91
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
On August 4, 2006, the DGPT issued Decree No. 278/DIRJEN/2006, which approved the RIO of the Company and two other dominant telecommunications operators (Telkom and Telkomsel). This decree was implemented since January 1, 2007 as agreed by all operators and approved by the Government. On April 11, 2008, the DGPT approved the new RIO for dominant operators (Telkom, Telkomsel and the Company). The DGPT requires all domestic operators to amend their interconnection agreements in line with the approved new RIO starting April 1, 2008.
On April 1, 2008, the Company implemented the new interconnection tariffs based on the approved RIO.
32.
INTERCONNECTION AGREEMENTS
The Company (including Satelindo and IM3 until they were merged - Note 1e) has 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.
·
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. However, the collection and billing process expense is changed into “service charge” , which is computed at Rp1,250 per minute of outgoing call starting April 1, 2008.
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.
92
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
32.
INTERCONNECTION AGREEMENTS (continued)
1. Telkom (continued)
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 Excelcomindo Pratama or “Excelcom”, Komselindo and Telkomsel
The principal matters covered by the agreements with these operators 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.
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 scheme effective January 1, 2007 to comply with Regulation No. 08/PER/M.KOMINFO/02/2006 of the MOCIT (Note 31).
Net interconnection revenues (charges) from (to) the operators are as follows:
2007
2008
Telkom
347,994
145,142
Excelcom
9,958
42,486
Telkomsel
4,652
(3,035)
Komselindo
7,261
(645)
Net
revenues
369,865
183,948
93
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
33.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
The Companies’ monetary assets and liabilities denominated in various foreign currencies as of September 30, 2008 (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
217,374
2,049,837
Accounts receivable
Trade
110,870
1,045,500
Others
1,334
12,581
Derivative assets
12,917
121,810
Other current assets
3,233
30,487
Due from related parties
757
7,140
Non-current assets - others
1,190
11,217
Total assets
347,675
3,278,572
Liabilities:
Accounts payable - trade
26,100
246,126
Procurement payable
410,004
3,866,343
Accrued expenses
17,072
160,989
Deposits from customers
746
7,036
Derivative liabilities
11,474
108,198
Other current liabilities
14
128
Due to related parties
1
10
Loans payable (including current maturities)
326,768
3,081,421
Bonds payable (including current maturities)
344,157
3,245,400
Other non-current liabilities
13,210
124,568
Total liabilities
1,149,546
10,840,219
Net liabilities position
801,871
7,561,647
*
translated using the prevailing exchange rate at balance sheet date
34.
SEGMENT INFORMATION
The Companies manage and evaluate their operations in three major reportable segments: cellular, fixed telecommunication and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Companies operate in one geographical area only, so no geographical information on segments is presented.
Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.
94
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34. SEGMENT INFORMATION (continued)
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
Telecommunication
MIDI
Total
2007
Operating revenues
Revenues from external customers
9,146,449
1,165,308
1,568,223
11,879,980
Inter-segment revenues
(129,812
)
129,812
274,967274,967
Total operating revenues
9,016,637
1,295,120
1,843,19012,154,947
Inter-segment revenues elimination
(274,967)
Operating revenues - net
11,879,980
Income
Operating income
2,378,088
494,771
331,5523,204,411
Interest income
151,155
Financing cost
(1,028,623)
Income tax expense - net
(596,968)
Amortization of goodwill
(169,880)
Loss on change in fair value of derivatives - net
(26,170)
Loss on foreign exchange - net
(5,742)
Others - net
(55,250)
Income before Minority Interest in Net Income
of Subsidiaries
1,472,933
Other Information
Segment assets
33,897,566
1,568,419
4,130,52639,596,511
Unallocated assets
8,121,636
Inter-segment assets elimination
(6,455,705)
Assets - net
41,262,442
Segment liabilities
25,014,483
860,250
989,53226,864,265
Unallocated liabilities
3,523,367
Inter-segment liabilities elimination
(5,070,168)
Liabilities – net
25,317,464
Capital expenditure
5,055,040
256,653
441,2885,752,981
Depreciation and amortization
2,524,014
146,167
383,6803,053,861
95
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
34.
SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunication
MIDI
Total
2008
Operating revenues
Revenues from external customers
10,226,044
1,301,529
2,121,248
13,648,821
Inter-segment revenues
(254,342)
254,342
342,032342,032
Total operating revenues
9,971,702
1,555,871
2,463,28013,990,853
Inter-segment revenues elimination
(342,032)
Operating revenues - net
13,648,821
Income
Operating income
2,236,216
547,325
549,533
3,333,074
Interest income
353,541
Financing cost
(1,377,706)
Income tax expense - net
(575,414)
Amortization of goodwill
(169,880)
Loss on change in fair value of derivatives - net
(53,513)
Loss on foreign exchange - net
(45,092)
Others - net
30,292
Income before minority interest in net income of subsidiaries
1,495,302
Other Information
Segment assets
34,811,384
2,988,179
7,049,649
44,849,212
Unallocated assets
8,707,052
Inter-segment assets elimination
(4,955,672)
Assets - net
48,600,592
Segment liabilities
27,255,994
849,893
2,967,98631,073,873
Unallocated liabilities
3,999,839
Inter-segment liabilities elimination
(3,469,031)
Liabilities – net
31,604,681
Capital expenditure
6,013,074
561,562
1,111,5557,686,191
Depreciation and amortization
2,739,939
222,884
422,971
3,385,794
96
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35. 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.
36. SUBSEQUENT EVENTS
a.
On October 6, 2008, Moody’s released the rating of Ba1 for the Company's local bonds and the rating of Ba2 for GN 2010 and 2012 (Note 16).
b.
On October 6, 2008, the Company received dividend income from its investment in ACPL amounting to US$782.
c.
As of October 21, 2008, the prevailing exchange rate of the rupiah to U.S.dollar is Rp9,804 to US$1 (in full amounts), while as of September 30, 2008, the prevailing exchange rate was Rp9,430 to US$1 (in full amounts). Using the exchange rate as of October 21, 2008, the Company suffered from foreign exchange loss amounting to approximately Rp299,900 on the foreign currency liabilities, net of foreign currency assets, as of September 30, 2008 (Note 33). However, as of October 21, 2008, the gain from net change in fair value of derivatives amounted to Rp104,066 (Note 28 and 15f).
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 September 30, 2008 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of September 30, 2008 as disclosed in Note 29a are approximately Rp6,187,020 if translated at the prevailing exchange rate as of October 21, 2008.
37.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the 2007 consolidated balance sheet which have been reclassified to Goodwill and Other Intangible Assets to conform with the presentation of accounts in the 2008 consolidated balance sheet:
As Previously Reported
Amounts
Property and equipment - carrying value
203,049
Property and equipment - accumulated depreciation
(180,404)
Net
22,645
The following is the account in the 2007 consolidated balance sheet which has been reclassified to Loans Payable - Net of Current Maturities - third parties to conform with the presentation of this same account in the 2008 consolidated balance sheet:
As Previously Reported
Amount
Derivative liabilities
64,817
97
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
37.
RECLASSIFICATION OF ACCOUNTS (continued)
Following are the accounts in the 2007 consolidated statement of income which have been reclassified to Operating Expenses - Cost of Services to conform with the presentation of accounts in the 2008 consolidated statement of income:
As Previously Reported
Amounts
Operating expenses - compensation to telecommunications carriers
and service providers
1,238,542
Operating expenses - maintenance
548,436
Operating expenses - leased circuits
176,479
Operating expenses - other costs of services
1,425,498
Total
3,388,955
38.
REVISED SAK
The following summarizes the revised SAK 50 and SAK 55 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 prospectively for financial statements covering the periods beginning on or after January 1, 2009. Early application is encouraged.
·
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.
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.
98
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2008 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
39.
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 Indonesia Stock Exchange, 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 peri od of six months in one tax year. As of September 30, 2008, 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.
·
On September 23, 2008, the President of the Republic of Indonesia and the Minister of Law and Human Rights signed the Law No. 36 of 2008 on “Fourth Amendment of Law No. 7 of 1983 on Income Taxes”. This regulation amends, among others, the scheme of corporate income tax rate, tax objects, and definition of deductible expenses. All requirements under this regulation will be applied effective January 1, 2009.
The Companies have not adopted such regulation. The Companies are currently studying it and have not yet determined the related effects on the consolidated financial statements.
40.
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 October 21, 2008.
99
