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, 2008 and 2009 (unaudited)
1
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED
SEPTEMBER 30, 2008 AND 2009 (UNAUDITED)
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 - 99
***************************
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(Note 3)
Rp
Rp
US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2c,2w,4,25
6,646,684
2,237,212
231,093
Short-term investments - net of
allowance for decline in value
of Rp25,395 in 2008 and 2009
2d
-
-
-
Accounts receivable
2e
Trade
5,15
Related parties - net of
allowance for doubtful
accounts of Rp81,923
in 2008 and Rp46,701
in 2009
2w,25
93,879
116,460
12,029
Third parties - net of allowance
for doubtful accounts of
Rp406,411 in 2008 and
Rp413,699 in 2009
1,149,752
1,246,666
128,775
Others - net of allowance
for doubtful accounts of
Rp17,262 in 2008 and
Rp16,952 in 2009
24,250
25,933
2,679
Inventories
2f
179,030
181,779
18,777
Derivative assets
2r,28
121,810
281,485
29,076
Advances
66,299
49,236
5,086
Prepaid taxes
6,13
515,674
839,733
86,740
Prepaid expenses
2g,2q,2w,24,
25,28p
963,683
1,164,209
120,257
Other current assets
2c,2w,25
53,661
26,410
2,728
Total Current Assets
9,814,722
6,169,123
637,240
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
September 30, 2008 and 2009 (Unaudited) (continued)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(Note 3)
Rp
Rp
US$
NON-CURRENT ASSETS
Due from related parties - net of
allowance for doubtful
accounts of Rp2,578 in 2008
and Rp1,246 in 2009
2e,2w,25
37,474
34,600
3,574
Deferred tax assets - net
2t,13
96,740
87,906
9,080
Investments in associated
companies - net of allowance
for decline in value of Rp56,300
in 2008 and Rp56,586 in 2009
2h,7
986
700
72
Other long-term investments - net
of allowance for decline in value of
Rp99,977 in 2008 and 2009
2h,8
2,730
2,730
282
Property and equipment
2i,2j,2p,
9,15,21
Cost
58,821,869
73,677,070
7,610,482
Accumulated depreciation
(23,800,245
)
(28,662,535)
(2,960,700)
Impairment in value
(98,611
)
(98,611)
(10,186)
Net
34,923,013
44,915,924
4,639,596
Goodwill and other
intangible assets - net
2l,10
2,129,891
2,172,461
224,405
Long-term receivables
73,247
67,080
6,929
Long-term prepaid pension - net
2q,2w,24,25
of current portion
188,579
162,907
16,828
Long-term advances
2w,11,25
683,298
383,003
39,562
Others
25,28p
649,912
820,919
84,797
Total Non-current Assets
38,785,870
48,648,230
5,025,125
TOTAL ASSETS
48,600,592
54,817,353
5,662,365
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
September 30, 2008 and 2009 (Unaudited) (continued)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(Note 3)
Rp
Rp
US$
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
Related parties
2w,25
6,661
46,057
4,757
Third parties
563,169
604,431
62,435
Procurement payable
2w,12,25
6,084,204
6,019,797
621,816
Taxes payable
2t,13
396,838
132,637
13,701
Accrued expenses
2q,2w,14,
24,25
1,534,759
1,575,282
162,719
Unearned income
2o
1,064,223
969,572
100,152
Deposits from customers
45,701
24,122
2,492
Derivative liabilities
2r,28
108,198
211,792
21,877
Current maturities of:
Loans payable
2m,15
602,410
1,438,385
148,578
Bonds payable
2m,16
1,916,442
-
-
Other current liabilities
2w,25
55,489
100,564
10,388
Total Current Liabilities
12,378,094
11,122,639
1,148,915
NON-CURRENT LIABILITIES
Due to related parties
2w,25
35,851
35,400
3,656
Deferred tax liabilities - net
2t,13
1,488,702
1,512,965
156,282
Loans payable - net of current
maturities
2m,2r,15
Related party
2w,25
1,595,854
2,191,795
226,402
Third parties
5,198,710
10,875,788
1,123,416
Bonds payable - net of current
maturities
2m,16
9,770,421
9,912,581
1,023,921
Other non-current liabilities
2q,2w,7,
24,25
828,819
941,659
97,269
Total Non-current Liabilities
18,918,357
25,470,188
2,630,946
TOTAL LIABILITIES
31,296,451
36,592,827
3,779,861
MINORITY INTEREST
2b
308,230
313,560
32,389
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
September 30, 2008 and 2009 (Unaudited) (continued)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(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 2008 and 2009
18
543,393
543,393
56,130
Premium on capital stock
18
1,546,587
1,546,587
159,755
Difference in transactions of equity
changes in associated
companies/subsidiaries
2h
403,812
404,104
41,742
Difference in foreign currency
translation
2b
5,280
3,983
411
Retained earnings
Appropriated
100,678
119,463
12,340
Unappropriated
14,396,161
15,293,436
1,579,737
TOTAL STOCKHOLDERS’ EQUITY
16,995,911
17,910,966
1,850,115
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
48,600,592
54,817,353
5,662,365
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(Note 3)
Rp
Rp
US$
OPERATING REVENUES
2o,2w,19,25,
30,31,32
Cellular
10,367,914
10,055,756
1,038,711
Multimedia, Data
Communication,
Internet (“MIDI”)
1,979,378
2,009,059
207,526
Fixed telecommunication
1,301,529
1,344,711
138,902
Total Operating Revenues
13,648,821
13,409,526
1,385,139
OPERATING EXPENSES
2o
Cost of services
2w,20,25
4,422,986
4,850,661
501,050
Depreciation and amortization
2i,2l,9,10
3,385,794
3,760,596
388,451
Personnel
2n,2p,2q,2w,
21,24,25
1,236,184
1,097,674
113,384
Marketing
703,181
611,043
63,118
General and administration
2w,22,25
567,602
497,281
51,367
Total Operating Expenses
10,315,747
10,817,255
1,117,370
OPERATING INCOME
3,333,074
2,592,271
267,769
OTHER INCOME (EXPENSES)
2o
Gain (loss) on foreign
exchange - net
2r,2s,5
(45,092
)
1,394,440
144,039
Interest income
2w,25
353,541
120,899
12,488
Financing cost
2m,2w,15,
16,23,25
(1,377,706
)
(1,359,189
)
(140,398)
Loss on change in fair value of
derivatives - net
2r,28
(53,513
)
(387,552
)
(40,032
)
Amortization of goodwill
2l,10
(169,880
)
(177,173
)
(18,301
)
Others - net
13
30,292
(68,370
)
(7,062)
Other Expenses - Net
(1,262,358
)
(476,945
)
(49,266)
INCOME BEFORE INCOME TAX
2,070,716
2,115,326
218,503
INCOME TAX BENEFIT (EXPENSE)
2t,13
Current
(578,169
)
(434,546
)
(44,887)
Deferred
2,755
(191,422
)
(19,773)
Income Tax Expense - Net
(575,414
)
(625,968
)
(64,660)
The accompanying notes form an integral part of these consolidated financial statements.
6
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30, 2008 and 2009 (Unaudited)(continued)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2009
Notes
2008
2009
(Note 3)
________________
Rp
Rp
US$
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,495,302
1,489,358
153,843
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(22,187)
(39,450
)
(4,075)
NET INCOME
1,473,115
1,449,908
149,768
BASIC EARNINGS PER SHARE
2v,18,26
271.10
266.82
0.03
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2v,18,26
13,554.78
13,341.24
1.38
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, 2008 and 2009 (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
Net
Balance as of January 1, 2008
543,393
1,546,587
403,812
6,177
80,258
13,964,503
16,544,730
Decrease in difference in foreign currency translation arising from the translation of the financial
statements of Indosat Finance Company B.V. and Indosat International Finance
Company B.V. from euro, and Indosat Singapore Pte. Ltd. from U.S. dollar to rupiah - net
of 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
Balance as of January 1, 2009
543,393
1,546,587
404,104
13,291
100,678
14,801,568
17,409,621
Decrease in difference in foreign currency translation arising from the translation of the
financial statements of Indosat Finance Company B.V. and Indosat International Finance
Company B.V. from euro, and Indosat Singapore Pte. Ltd. from U.S. dollar to rupiah - net of
applicable income tax benefit of Rp850, Rp1,447 and Rp806, respectively
2b
-
-
-
(9,308)
-
-
(9,308)
Resolution during the Annual Stockholders’ General Meeting on June 11, 2009
27
Declaration of cash dividend
-
-
-
-
-
(939,255
)
(939,255)
Appropriation for reserve fund
-
-
-
-
18,785
(18,785
)
-
Net income for the period
-
-
-
-
-
1,449,908
1,449,908
Balance as of September 30, 2009
543,393
1,546,587
404,104
3,983
119,463
15,293,436
17,910,966
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2009
Notes
2008
2009
(Note 3)
______________
RpRpUS$
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
13,707,586
13,457,388
1,390,082
Interest income
311,348
131,442
13,577
Refund of taxes
6
271,321
84,650
8,744
Cash paid to/for:
Suppliers and others
(6,505,649
)
(6,583,956
)
(680,091)
Financing cost
(1,362,854
)
(1,283,907
)
(132,621)
Employees
(1,163,988
)
(908,672
)
(93,861)
Taxes
(690,455
)
(902,301
)
(93,203)
Swap cost from cross currency
swap contracts
28a, 28c - 28o
(58,925
)
(65,905
)
(6,808)
Interest rate swap contracts
28v - 28ah
(2,432
)
(25,985
)
(2,684)
Net Cash Provided by Operating
Activities
4,505,952
3,902,754
403,135
CASH FLOWS FROM INVESTING
ACTIVITIES
Dividend income received from
long-term investment
8
17,753
16,528
1,707
Proceeds from sale of property
and equipment
9
1,131
2,253
233
Acquisitions of property and
equipment
9
(6,180,259
)
(9,440,554
)
(975,163)
Acquisition of intangible assets
10
(8,508
)
(336,614
)
(34,771)
Proceeds from sale of short-term
investment
1,250
-
-
Net Cash Used in Investing Activities
(6,168,633
)
(9,758,387
)
(1,007,994)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term loans
15
1,946,570
3,879,237
400,707
Cash dividend paid by the Company
(1,021,037)
(939,255
)
(97,020)
Repayment of long-term loans
15
(448,556
)
(510,155)
(52,697)
Swap cost from cross currency
swap contract
28b
(29,244
)
(32,390)
(3,346)
Repayment of bonds payable
16
(1,947,801
)
(14,453)
(1,493)
Decrease (increase) in restricted cash
and cash equivalents
2,891
(11,694)
(1,208)
Cash dividend paid by subsidiaries
to minority interest
(5,563
)
(9,291)
(960)
Proceeds from bonds payable
16
1,650,000
-
-
Settlement from cross currency
swap contract
28b
109,099
-
-
Net Cash Provided by
Financing Activities
256,359
2,361,999
243,983
NET DECREASE IN CASH AND
CASH EQUIVALENTS
(1,406,322
)
(3,493,634)
(360,876)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
8,053,006
5,737,866
592,694
BEGINNING BALANCE OF CASH AND
CASH EQUIVALENTS OF LIQUIDATED
SUBSIDIARY
1d
-
(7,020
)
(725)
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
4
6,646,684
2,237,212
231,093
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
Nine Months Ended September 30, 2008 and 2009 (Unaudited)(continued)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2009
Notes
2008
2009
(Note 3)
______________
RpRpUS$
DETAILS OF CASH AND CASH EQUIVALENTS:
Time deposits with original maturities of
three months or less
6,368,291
1,875,785
193,759
Cash on hand and in banks
278,393
361,427
37,334
Cash and cash equivalents as stated in the
consolidatedbalance sheets
4
6,646,684
2,237,212
231,093
SUPPLEMENTAL CASH FLOW INFORMATION:
Transactions not affecting cash flows:
Unpaid dividend
Acquisitions of property and
equipment credited to:
Loans payable
1,326,598
706,747
73,004
Long-term advances
36,301
73,090
7,550
Other non-current liabilities
36,613
16,712
1,726
Procurement payable
97,912
-
-
Unpaid dividend
4,435
-
-
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, 2008 and 2009 (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 (“the Government”) 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 in 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. 118 dated June 11, 2009 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) as approved in the Stockholders’ General Meeting held on June 11, 2009, in order to comply with the Indonesian Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) Rule No. IX.J.1 dated May 14, 2008 on the Principles of Articles of Association of Limited Liability Companies that Conduct of Public Offering of Equity Securities and Public Companies. The latest amendment of the Company’s Articles of Association has been approved by and reported to the Ministry of Law and Human Rights of the Republic of Indonesia based on its letters No. AHU-31103.AH.01.02 Year 2009 dated July 7, 2009 and
AHU-AH.01.10-09907 dated July 10, 2009. The amendments, among others, relate to the Company’s additional business activities and additional veto rights of “A” share with respect to demerger of the Company and carrying out the submission of application for bankruptcy.
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
·
Engaging in payment transactions and money transfer service through telecommunications and information technology networks
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.
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, 2008 and 2009 (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)
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.
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, 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, 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, PT Telekomunikasi Indonesia Tbk (“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.
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, 2008 and 2009 (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.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 | Amended operating license for nationwide GSM cellular mobile network (including its basic telephony services and 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 Voice over Internet Protocol Service with national coverage that expired in 2007 |
268/KEP/M.KOMINFO/9/2009 | September 1, 2009 | MOCIT | 10 years | Operating license for one additional block (2 x 5 Mhz) of 3G frequency (a third generation mobile communications technology) (***) |
(*)
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 2l) 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.
(***)
In connection with license for one additional block of 3G frequency, the Company was obliged, among others, to pay upfront fee of Rp320,000 (Notes 2l
and 10) and radio frequency fee.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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.
On March 30, 2009, the Ministry of Domestic Affairs, Ministry of Public Works, MOCIT and the Head of BKPM jointly issued Decrees No. 18 Year 2009, No. 07/PRT/M/2009, No. 19/PER/M.KOMINFO/03/09 and No. 3/P/2009 on the Detailed Guidelines of Construction and Utilization of Sharing Telecommunication Towers. The Decrees define the requirements and procedures for tower construction. Tower provider can be either a telecommunications operator or a non-telecommunications operator. If a tower provider is a non-telecommunications operator, it is required to be a 100% locally-owned company.
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, 2009, 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 series B in Year 2003 with Fixed Rate | 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, 2008 and 2009 (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 of the (i) Annual Stockholders’ General Meeting held on June 5, 2008 which is notarized under Deed No. 30 of Aulia Taufani, S.H. (as a substitute notary of Sutjipto, S.H.) on the same date and Extraordinary Stockholders’ Meeting held on August 25, 2008 which is notarized under Deed No. 344 of Aulia Taufani, S.H. (as substitute notary of Sutjipto, S.H.) on the same date, and (ii) Annual Stockholders’ General Meeting held on June 11, 2009 which is notarized under Deed No. 118 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, 2008 and 2009, respectively, is as follows:
Board of Commissioners:
2008
2009
President Commissioner
Abdulla Mohammed S.A. Al Thani Abdulla Mohammed S.A. Al Thani
Commissioner
Dr. Nasser Mohd. A. Marafih
Dr. Nasser Mohd. A. Marafih
Commissioner
Rachmad Gobel
Rachmad Gobel
Commissioner
Sheikh Mohammed Bin Suhaim
Richard Farnsworth Seney
Hamad Al Thani
Commissioner
Jarman
Jarman
Commissioner
Rionald Silaban
Rionald Silaban
Commissioner
Setyanto Prawira Santosa*
Setyanto Prawira Santosa*
Commissioner
Michael Francis Latimer*
Michael Francis Latimer*
Commissioner
Thia Peng Heok George*
Thia Peng Heok George*
Commissioner
Soeprapto *
Soeprapto *
*
Independent commissioner
Board of Directors:
2008
2009
President Director and
Chief Executive Officer
Johnny Swandi Sjam
Harry Sasongko Tirtotjondro
Deputy President Director**
Kaizad Bomi Heerjee
-
Director and Chief Finance
Officer
Wong Heang Tuck
Peter Wladyslaw Kuncewicz
Corporate Services Director**
Wahyu Wijayadi
-
Information Technology
Director**
Roy Kannan
-
Jabotabek and Corporate
Sales Director**
Fadzri Sentosa
-
Regional Sales Director**
Syakieb Ahmad Sungkar
-
Marketing Director**
Guntur Soaloon Siboro
-
Network Director**
Raymond Tan Kim Meng
-
Director and Chief Commercial
Officer
-
Kaizad Bomi Heerjee
Director and Chief Technology
Officer
-
Stephen Edward Hobbs
Directorand Chief Wholesale
and Infrastructure Officer
-
Fadzri Sentosa
**
This position no longer exists starting June 11, 2009 due to the new organizational structure
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
c.
Employees, Directors, Commissioners and Audit Committee (continued)
The composition of the Company’s Audit Committee as of September 30, 2008 and 2009 is as follows:
2008
2009
Chairman
Thia Peng Heok George
Thia Peng Heok George
Member
Michael Francis Latimer
Michael Francis Latimer
Member
Soeprapto
Soeprapto
Member
Unggul Saut Marupa
Unggul Saut Marupa
Tampubolon
Tampubolon
Member
Rusdy Daryono
Kanaka Puradiredja
The Company and subsidiaries (collectively referred to hereafter as “the Companies”)
have approximately 7,677 and 7,145 employees (unaudited), including non-permanent employees, as of September 30, 2008 and 2009, respectively.
d.
Structure of the Company’s Subsidiaries
As of September 30, 2008 and 2009, the Company has direct and indirect ownership in the following subsidiaries:
Name of Subsidiary | Location | Principal Activity | Start of Commercial Operations | Percentage of Ownership (%) | ||||||
2008 | 2009 | |||||||||
Indosat Finance Company B.V. (“IFB”) | Amsterdam | Finance | 2003 | 100.00 | 100.00 | |||||
Indosat International Finance Company B.V. (“IIFB”) | Amsterdam | Finance | 2005 | 100.00 | 100.00 | |||||
Indosat Singapore Pte. Ltd. (“ISP”) | Singapore | Telecommunication | 2005 | 100.00 | 100.00 | |||||
PT Indosat Mega Media (“IMM”) | Jakarta | Multimedia | 2001 | 99.85 | 99.85 | |||||
PT Starone Mitra Telekomunikasi (“SMT”) | Semarang | Telecommunication | 2006 | 55.36 | 72.54 | |||||
PT Aplikanusa Lintasarta (“Lintasarta”) | Jakarta | Data Communication | 1989 | 72.36 | 72.36 | |||||
PT Artajasa Pembayaran Elektronis (“APE”) | Jakarta | Telecommunication | 2000 | 39.80 | 39.80 | |||||
PT Satelindo Multi Media (“SMM”)* | Jakarta | Multimedia | 1999 | 99.60 | - | |||||
Total Assets (Before Eliminations) | ||||
Name of Subsidiary | 2008 | 2009 | ||
IFB | 2,314,827 | 2,373,137 | ||
IIFB | 1,083,226 | 1,094,340 | ||
ISP | 15,290 | 33,667 | ||
IMM | 778,117 | 773,302 | ||
SMT | 164,203 | 136,360 | ||
Lintasarta | 1,251,416 | 1,383,237 | ||
APE | 138,672 | 164,443 | ||
SMM * | 10,690 | - | ||
*
liquidated on June 30, 2009.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
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.
On November 27, 2008, the Company entered into a Sale and Purchase Agreement with PT Sarana Pembangunan Jawa Tengah (“SPJT”) to purchase the 17.18% ownership of SPJT in SMT for Rp33,680. Such purchase, which resulted in the recognition of goodwill amounting to Rp9,724 (Note 10), increased the Company’s ownership in SMT from 55.36% to 72.54%. On December 3, 2008, the Company fully paid SPJT for the purchase.
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, 2008 and 2009 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a.
Basis of Consolidated Financial Statements (continued)
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).
The consolidated financial statements also include the accounts of APE (Lintasarta’s 55%-owned subsidiary). The accounts of APE in 2008 and 2009 were consolidated because its financial and operating policies were controlled by Lintasarta.
The accounts of IFB, IIFB, and ISP were translated into rupiah amounts at the middle rates of exchange prevailing at balance sheet date for balance sheet accounts and the average rates 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 “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 change in net assets value at balance sheet date is credited or charged to current operations.
·
Time deposits with original maturities of more than three months at the time of placement are recorded at historical value.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, pulse reload vouchers, broadband modems and cellular handsets, are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method.
Effective January 1, 2009, the Companies have applied SAK 14 (Revised 2008), “Inventories”, which supersedes SAK 14 (1994). This revised SAK provides guidance on the determination of inventory cost and its subsequent recognition as an expense, including any write-down to net realizable value, as well as guidance on the cost formula used to assign costs to inventories. The adoption of this revised SAK did not have significant effect to the Companies’ consolidated financial statements.
g.
Prepaid Expenses
Prepaid expenses, which mainly consist of frequency fee, rentals, upfront premium for cross currency swap (Note 28p), and salaries, 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
Investment in shares of stock wherein the Companies have equity interests 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 the former’s 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.
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, 2008 and 2009 (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
Property and equipment are stated at cost (which includes certain capitalized borrowing costs 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 Companies have chosen the cost model for the measurement of their property and equipment. 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. Below are the estimated useful lives (in years) prior to and starting January 1, 2008.
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 leasehold 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 an asset’s 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.
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, 2008 and 2009 (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)
Properties under construction and installation are stated at cost. All borrowing costs, which include interest, amortization of ancillary costs (Notes 15d and 15h) and foreign exchange differentials (to the extent that they are regarded as an adjustment to interest costs) 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.
The residual values, useful lives and methods of depreciation of property and equipment are reviewed, and adjusted prospectively, if appropriate, at each financial year end.
j.
Impairment of Assets Value
In accordance with SAK 48, “Impairment of Assets Value”, the Companies review whether there is an indication of assets impairment at balance sheet date. If there is an indication of assets impairment, the Companies estimate the recoverable amount of the assets. Impairment loss is recognized as a charge to current operations.
k.
Leases
Effective January 1, 2008, the Companies have applied SAK 30 (Revised 2007), “Leases”, which supersedes SAK 30 (1990), “Accounting for Leases”. Under this revised SAK, a lease that transfers substantially all the risks and rewards incidental to ownership is classified as finance lease. At the commencement of the lease term, a lessee recognizes finance lease as asset and liability in its balance sheet at an amount equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are allocated to each period during the lease term. Leased asset held by the lessee under a finance lease is depreciated consistently using the same method used for depreciable assets that are directly owned or is fully depreciated over the shorter of the lease term and its useful life, if there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term.
Leases which do not transfer substantially all the risks and rewards incidental to ownership are classified as operating leases. Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
The adoption of this revised SAK did not have significant effect to the Companies’ financial statements.
l.
Goodwill and Other Intangible Assets
At the time the Company acquires a subsidiary which is not an entity under common control, any excess of the acquisition cost over the Company’s interest in the fair value of the subsidiary’s identifiable assets, net of liabilities, as of acquisition date is recognized as goodwill.
Acquisitions of minority interest in a subsidiary by the Company are accounted for using the parent entity extension method. Under this method, the assets and liabilities of the subsidiary are not restated to reflect their fair values at the date of the acquisition. The difference between the purchase price and the minority interest’s share of the assets and liabilities reflected within the consolidated balance sheet at the date of the acquisition is considered as goodwill.
Goodwill is amortized using the straight-line method over 15 years.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l.
Goodwill and Other Intangible Assets (continued)
At the time of acquisition of a subsidiary, any intangible assets recognized are amortized using the straight-line method based on the estimated useful lives of the assets as follows:
Years
Customer base
- Prepaid
6
- Post-paid
5
Spectrum license
5
Brand
8
Upfront fee in connection with the license to use 2.1 GHz radio frequency spectrum (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.
m.
Debt and Bonds Issuance Costs and Consent Solicitation Fees
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. Consent solicitation fees resulting from the amendments of certain terms under debt facility agreement and trustee agreement, which are not accounted for as an extinguishment, are recognized as adjustment to the carrying amount of the debt or bonds that will be amortized over the remaining term of the debt or bonds.
n.
Stock-based Compensation
In accordance with SAK 53, “Accounting for Stock-based Compensation”, compensation expenses are accrued during the vesting period based on the fair values of all stock options as of the grant date.
o.
Revenue and Expense Recognition
Cellular
Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network.
For post-paid subscribers, monthly service fees are recognized as the service is provided.
For prepaid subscribers, the activation component of starter package sales is recognized upon activation by 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.
Sales of wireless broadband modems and cellular handsets are recognized upon delivery to the customers. Revenues from wireless broadband data communications are recognized based on the duration of usage or fixed monthly charges depending on the arrangement with the customers.
Cellular revenues are presented on a net basis, after compensation to value added service providers.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Revenue and Expense Recognition (continued)
Cellular (continued)
Customer Loyalty Program
The Company operates a customer loyalty program called “Poin Plus Plus”, which allows customers to accumulate points for every reload and usage made by the Company’s prepaid and post-paid subscribers, respectively. The points can then be redeemed for free telecommunication and non-telecommunication products, subject to a minimum number of points being obtained.
The consideration received is allocated between the cellular products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or when the redemption period expires.
MIDI
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.
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.
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 activation by 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Revenue and Expense Recognition (continued)
Fixed 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.
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 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 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.
p.
Personnel Costs
Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.
q.
Pension Plan and Employee Benefits
Pension costs under the Companies’ defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation. 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).
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
r.
Derivatives
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, termination cost or income, and settlement of derivative instruments 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.
s.
Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded at the rates of exchange prevailing at
the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the 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, 2008 and 2009, the foreign exchange rates used (in full amounts) were Rp9,430 and Rp9,681, respectively, per US$1 computed by taking the average of the buying and selling rates of bank notes last published by Bank Indonesia for the period.
t.
Income Tax
Current tax expense is provided based on the estimated taxable income for the period. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that realization of such benefits is probable. The tax effects for the period are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to stockholders’ equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are credited or charged to current period operations, except to the extent that they relate to items previously charged or credited to stockholders’ equity.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
t.
Income Tax (continued)
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.
u.
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.
v.
Basic Earnings per Share/ADS
In accordance with SAK 56, “Earnings per Share”, basic earnings per share are computed by dividing net income by the weighted-average number of shares outstanding during the period (Note 26).
Basic earnings per ADS are computed by multiplying basic earnings per share by 50, which is equal to the number of shares per ADS.
w.
Transactions with Related Parties
The Companies account for transactions with related parties as described in SAK 7, “Transactions with Related Parties”.
The details of the accounts and the significant transactions entered into with related parties are presented in Note 25.
x.
Use of Estimates
The preparation of consolidated 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 average buying and selling rate published by Bank Indonesia (Central Bank) on September 30, 2009 of Rp9,681 to US$1 (in full amounts). The convenience translations should not be construed as representations that the rupiah amounts have been, could have been, or could in the future be, converted into U.S. dollar at this or any other rate of exchange.
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, 2008 and 2009 (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:
2008
2009
Cash on hand
Rupiah
1,564
1,685
Cash in banks
Related parties (Note 25)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
35,993
23,598
PT Bank Syariah Mandiri (“Mandiri Syariah”)
1,361
2,781
PT Bank Pembangunan Daerah DKI Jakarta
3,077
2,768
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
13,103
1,555
PT Bank Pembangunan Daerah Yogyakarta
(“BPD - Yogyakarta”)
253
1,257
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
-
1,119
BRI Syariah
-
1,000
Others (each below Rp1,000)
2,247
3,546
U.S. dollar
Mandiri (US$305 in 2008 and US$17,748 in 2009)
2,876
171,822
BNI (US$68 in 2008 and 2009)
647
658
Niaga (US$25)
232
-
Third parties
Rupiah
PT Bank CIMB Niaga Tbk, Jakarta Branch
(formerly PT Bank Niaga Tbk) (“CIMB Niaga”)
7,583
11,998
PT Bank Central Asia Tbk (“BCA”)
72,072
10,633
Deutsche Bank AG, Jakarta Branch (“DB”)
14,549
6,907
The Hongkong and Shanghai Banking
Corporation Limited, Jakarta Branch (“HSBC”)
8,550
3,908
Others (each below Rp5,000)
14,945
14,160
U.S. dollar
Fortis Bank N.V., The Netherlands (US$6,707 in 2008
and US$4,480 in 2009)
63,247
43,369
DB (US$2,196 in 2008 and US$1,762 in 2009)
20,708
17,058
Citibank N.A., Jakarta Branch (US$563 in 2008 and
US$1,725 in 2009)
5,306
16,697
CIMB Niaga (US$1,446)
-
13,996
Citibank N.A., Singapore Branch (US$972 in 2008 and
US$1,125 in 2009)
9,170
10,893
Others (US$96 in 2008 and US$2 in 2009)
910
19
276,829
359,742
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2008
2009
Time deposits
Related parties (Note 25)
Rupiah
Mandiri
229,400
404,175
BNI
59,060
74,170
BRI
705,000
33,500
PT Bank Tabungan Negara (Persero) (“BTN”)
467,400
12,500
Mandiri Syariah
501,000
5,000
PT Bank Pembangunan Daerah Jawa Tengah
5,000
1,500
BPD-Yogyakarta
1,000
1,000
U.S. dollar
BNI (US$40,000 in 2008 and US$20,000 in 2009)
377,200
193,620
BRI (US$20,000 in 2008 and 2009)
188,600
193,620
Mandiri (US$32,117 in 2008 and US$6,694 in 2009)
302,859
64,809
Third parties
Rupiah
CIMB Niaga
557,000
49,000
Bukopin
716,800
25,200
Danamon*
327,800
22,800
DB
254,194
20,206
PT Bank Tabungan Pensiunan Nasional Tbk
16,000
18,500
Citibank N.A., Jakarta Branch
3,190
14,818
PT Bank Mega Syariah
2,000
8,000
PT Bank Permata Syariah
5,000
6,300
PT Bank Mega
11,500
4,000
PT Bank Syariah Muamalat Indonesia Tbk (“Muamalat”)
250,000
3,000
PT Bank DBS Indonesia (“DBS”)*
300,000
-
Others (each below Rp5,000)
10,206
1,500
U.S. dollar
DB (US$32,325 in 2008 and US$69,225 in 2009)
304,822
670,162
Muamalat (US$35,000 in 2008 and US$5,000 in 2009)
330,050
48,405
CIMB Niaga (US$47,000)
443,210
-
6,368,291
1,875,785
Total
6,646,684
2,237,212
* no longer a related party since June 6, 2008 (Note 18)
Time deposits and deposits on call denominated in rupiah earned interest at annual rates ranging from 2.25% to 13% in 2008 and from 2.5% to 14.5% in 2009, while those denominated in U.S. dollar earned interest at annual rates ranging from 1.25% to 5.5% in 2008 and from 0.001% to 6% in 2009.
The interest rates on time deposits in related parties are comparable to those offered by third parties.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
5.
ACCOUNTS RECEIVABLE - TRADE
This account consists of the following:
2008
2009
Related parties (Note 25)
Telkom (including US$274 in 2008 and US$74 in 2009)
23,123
24,654
Others (including US$7,217 in 2008 and US$4,775 in 2009)
152,679
138,507
Sub-total
175,802
163,161
Less allowance for doubtful accounts
81,923
46,701
Net
93,879
116,460
Third parties:
Overseas international carriers (including US$78,639 in 2008 and
US$97,809 in 2009)
743,682
923,588
Local companies (including US$24,740 in 2008 and US$17,604
in 2009)
536,714
465,479
Post-paid subscribers from:
Cellular
234,254
244,951
Fixed wireless
17,284
13,430
Fixed lines
24,229
12,917
Sub-total
1,556,163
1,660,365
Less allowance for doubtful accounts
406,411
413,699
Net
1,149,752
1,246,666
Total
1,243,631
1,363,126
The aging schedule of the accounts receivable - trade is as follows:
2008
2009
Number of Percentage Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Related parties
0 - 6 months
95,112
54.10
105,524
64.67
7 - 12 months
16,509
9.39
23,421
14.35
13 - 24 months
7,389
4.20
1,132
0.69
Over 24 months
56,792
32.31
33,084
20.29
Total
175,802
100.00
163,161
100.00
Third parties
0 - 6 months
879,710
56.53
827,478
49.84
7 - 12 months
185,598
11.93
303,145
18.26
13 - 24 months
253,995
16.32
241,781
14.56
Over 24 months
236,860
15.22
287,961
17.34
Total
1,556,163
100.00
1,660,365
100.00
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
5.
ACCOUNTS RECEIVABLE - TRADE (continued)
The changes in the allowance for doubtful accounts provided on the accounts receivable - trade are as follows:
2008
2009
Related parties
Balance at beginning of period
88,342
69,444
Reversal - net of provision
(4,573
)
(4,921)
Net effect of foreign exchange adjustment
(1,825
)
(8,423)
Write-off
(21
)
(9,399
)
Balance at end of period
81,923
46,701
Third parties
Balance at beginning of period
326,142
426,719
Provision
92,501
93,342
Net effect of foreign exchange adjustment
600
(12,925)
Write-off
(12,832
)
(92,188)
Deduction due to liquidation of SMM (Note 1d)
-
(1,249)
Balance at end of period
406,411
413,699
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.
6.
PREPAID TAXES
This account consists of the following:
2008
2009
Claims for tax refund
329,491
462,958
Value Added Tax (“VAT”)
171,043
366,372
Others
15,140
10,403
Total
515,674
839,733
Claims for tax refund as of September 30, 2008 and 2009 mainly consist of the Company’s corporate income tax for fiscal years 2004, 2005 and 2006 and Satelindo’s corporate income tax for fiscal year 2002 and income tax article 26 for fiscal years 2002 and 2003.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
PREPAID TAXES (continued)
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 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 corrections on the 2005 corporate income tax amounting to Rp2,725. On July 17, 2008, the Company received the tax refund amounting to Rp1,785 after offsetting the additional tax underpayment for 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 objection on the 2005 corporate income tax. As of September 30, 2009, the Company has not yet received any decision from the Tax Court on such appeal.
On June 20, 2008, the Company received SKPLBs from the DGT advising the Company of its approval to refund the overpayment of the 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 corrections on the Company’s 2006 corporate income tax. On September 7, 2009, the Company received the Decision Letter No.KEP-335/ WPJ.19/BD.05/2009 from the DGT declining this objection. As of Sept ember 30, 2009, the Company is planning to submit an appeal to Tax Court.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
PREPAID TAXES (continued)
On February 2, 2009, the Company received the tax refund from the Tax Office amounting to Rp84,650 for the additional tax overpayment of corporate income tax for fiscal year 2004 (Note 13).
On June 8, 2009, the Company received SKPKB from the DGT for Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp105,809 (including penalties and interest). The Company accepted a part of the correction of the 2002 corporate income tax amounting to Rp2,646 which was charged to current operations in 2009. On August 28, 2009, the Company submitted an objection letter to the Tax Office regarding the remaining correction on Satelindo’s 2002 corporate income tax. As of September 30, 2009, the Company has not yet received any decision from the Tax Office on such objection.
On June 8, 2009, the Company also received SKPKBs from the DGT for Satelindo’s 2002 and 2003 income tax article 26 amounting to Rp51,546 and Rp40,307 (including penalties and interest), respectively. On August 27, 2009, the Company submitted an objection letter to the Tax Office for the correction on the Company’s 2002 and 2003 income tax article 26. As of September 30, 2009, the Company has not yet received any decision from the Tax Office on such objection.
7.
INVESTMENTS IN ASSOCIATED COMPANIES
As of September 30, 2008 and 2009, 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 (%)
Cost
Companies
Value
2008
PT Multi Media Asia Indonesia
Indonesia
Satellite-based
telecommunication
26.67
56,512
(212
)
56,300
PT Lintas Media Danawa *
Indonesia
Information and
communication services
35.00
700
-
700
PT Swadharma Marga Inforindo
Indonesia
Telecommunication
and information services
20.00
100
186
286
Total
57,312
(26
)
57,286
Less allowance for decline in value
56,300
Net
986
2009
PT Multi Media Asia Indonesia
Indonesia
Satellite-based
telecommunication
26.67
56,512
(212
)
56,300
PT Lintas Media Danawa *
Indonesia
Information and
communication services
35.00
700
-
700
PT Swadharma Marga Inforindo
Indonesia
Telecommunication
and information services
20.00
100
186
286
Total
57,312
(26
)
57,286
Less allowance for decline in value
56,586
Net
700
*
PT Lintas Media Danawa (“LMD”) is an associated company of Lintasarta. 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, and content services based on Internet Protocol (e.g., IPTV, internet game and internet payment gateway).
7.
INVESTMENTS IN ASSOCIATED COMPANIES (continued)
The Company believes that the allowance for decline in value amounting to Rp56,300 and Rp56,586 as of September 30, 2008 and 2009, respectively, is adequate to cover probable losses on the above investments.
8.
OTHER LONG-TERM INVESTMENTS
As of September 30, 2008 and 2009, 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 April 1, 2008, the Company received dividend income from its investment in ACPL totaling US$1,930 (equivalent to Rp17,753), while on May 19 and September 28, 2009, the Company received dividend income from its investment in ACPL totaling US$1,655 (equivalent to Rp16,528), respectively.
The Company provided allowance for decline in value of its investments in shares of stock accounted for under the cost method amounting to Rp99,977 as of September 30, 2008 and 2009, which the Company believes 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, 2008 and 2009 (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:
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
484,9923,312-31,248519,552
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).
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
2009
Transactions during the Period
Balance
at Beginning
Liquidated
Balance at
of Period
Additions
Deductions
Reclassifications
SubsidiaryEnd of Period
Landrights
473,109
-
-
23,739
-
496,848
Buildings
551,700
15,647
-
71,229
-
638,576
Submarine cables*
-
-
-
-
-
-
Earth stations*
-
-
-
-
-
-
Inland link
*
-
-
-
-
-
-
Switching equipment*
-
-
-
-
-
-
Fixed access network
equipment
986,961
-
-
69,861
-1,056,822
Telecommunications
peripherals*
-
-
-
-
-
-
Operation and maintenance
center and measurement
unit
1,098,407
849
-
142,189
-1,241,445
Information technology
equipment
1,856,437
142
-
159,451
(6,047)2,009,983
Office equipment
1,605,201
14,895
(15,179)
49,109
(570)
1,653,456
Building and leasehold
improvements
8,651,137
-
(14,604)
1,563,688
(70)
10,200,151
Vehicles
24,171
-
(1,157)
650
-
23,664
Cellular technical
equipment
22,649,669
-
(817)
6,563,005
-29,211,857
Satellite technical
equipment*
-
-
-
-
-
Transmission and cross-
connection equipment
10,750,328
132,508
-
1,582,125
-12,464,961
FWA technical equipment
904,347
-
-
344,358
-
1,248,705
Properties under
construction and
installation
13,926,944
10,073,062
-
(10,569,404)-
13,430,602
Total
63,478,411
10,237,103
(31,757)
-
(6,687)73,677,070
Accumulated Depreciation
Buildings
258,796
18,943
-
-
-
277,739
Submarine cables*
-
-
-
-
-
-
Earth stations*
-
-
-
-
-
-
Inland link
*
-
-
-
-
-
-
Switching equipment*
-
-
-
-
-
-
Fixed access network
equipment
707,021
54,324
-
-
-761,345
Telecommunications
peripherals*
-
-
-
-
-
-
Operation and maintenance
center and measurement
unit
791,781
129,694
-
-
-921,475
Information technology
equipment
1,406,186
209,673
-
-
(5,014)
1,610,845
Office equipment
1,100,225
102,527
(15,175)
-
(401)1,187,176
Building and leasehold
Improvements
3,130,120
591,298
(9,637)
-
(70)3,711,711
Vehicles
13,930
2,929
(1,013)
-
-15,846
Cellular technical
equipment
11,359,453
1,782,421
(817)
-
-13,141,057
Satellite technical
equipment*
-
-
-
-
-
-
Transmission and cross -
connection equipment
5,905,416
735,687
-
-
-
6,641,103
FWA technical equipment
312,799
81,439
-
-
-394,238
Total
24,985,727
3,708,935
(26,642)
-
(5,485)28,662,535
Impairment in Value
98,611
-
-
-
-98,611
Net Book Value
38,394,073
44,915,924
* This account has been regrouped or renamed by the Company (Note 2i).
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
Submarine cables represent the Company’s proportionate investment in submarine cable circuits jointly constructed, operated, maintained and owned with other countries, based on the respective contracts and/or the construction and maintenance agreements.
For the nine months ended September 30, 2008 and 2009, sales of certain property and equipment were made as follows:
2008
2009
Proceeds from sales
1,131
2,253
Net book value
(853
)
(5,115)
Gain (loss)
278
(2,862)
Depreciation expense charged to the consolidated statements of income amounted to Rp3,326,590 and Rp3,708,935 for the nine months ended September 30, 2008 and 2009, 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, 2009, approximately 0.09% of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 15).
As of September 30, 2009, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$89,985 and Rp36,873,835 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, 2008 and 2009 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
Percentage of
Estimated Date
Completion
Cost
of Completion
2009
Cellular technical equipment
5 - 99
7,021,011
October 2009 - January 2010
Transmission and cross-connection equipment
5 - 95
4,625,679
October 2009 - January 2010
Building and leasehold improvements
40 - 60
1,127,134
October 2009 - January 2010
FWA technical equipment
5 - 95
114,651
October - December 2009
Operation and maintenance center and
measurement unit
20 - 90
219,604
October - December 2009
Information technology equipment
90 - 95
189,220
October - December 2009
Building
65 - 75
80,542
October - December 2009
Others (each below Rp50,000)
8 - 95
52,761
October 2009 - January 2010
Total
13,430,602
Borrowing costs capitalized to properties under construction and installation for the nine months ended September 30, 2008 and 2009 amounted to Rp86,463 and Rp163,377, respectively.
10.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arose from the acquisition of ownership in Bimagraha and Satelindo in 2001 and 2002, respectively, and from the acquisition of additional ownership in Lintasarta in 2005 and in SMT in 2008 (Note 1d).
The details of the other intangible assets arising from the acquisition of Satelindo in 2002 are as follows:
Amount
Spectrum license
222,922
Customer base
- Post-paid
154,220
- Prepaid
73,128
Brand
147,178
Total
597,448
The changes in the goodwill and other intangible assets account are as follows:
2008
2009
Balance at beginning of period
2,350,467
2,064,681
Addition:
3G licence (Note 1a)
-
320,000
Non-integrated software
8,508
16,614
Amortization of goodwill
(169,880)
(177,173)
Amortization of other intangible assets
(59,204)
(51,661)
Balance at end of period
2,129,891
2,172,461
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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
12.
PROCUREMENT PAYABLE
This account consists of payables for capital and operating expenditures procured from the following:
2008
2009
Related parties (Note 25) (including US$977 in 2008 and
US$753 in 2009)
83,409
81,087
Third parties (including US$409,027 in 2008 and US$369,503
in 2009)
6,000,795
5,938,710
Total
6,084,204
6,019,797
The billed amount of procurement payable amounted to Rp1,500,345 and Rp1,375,062 as of September 30, 2008 and 2009, respectively. The unbilled amount of procurement payable amounted to Rp4,583,859 and Rp4,644,735 as of September 30, 2008 and 2009, respectively.
13.
TAXES PAYABLE
This account consists of the following:
2008
2009
Estimated corporate income tax payable,
less tax prepayments of Rp351,396 in 2008
and Rp404,125 in 2009
226,773
30,421
Income tax:
Article 4(2)
5,415
16,524
Article 21
46,697
10,337
Article 22
4,261
4,110
Article 23
44,287
7,858
Article 25
32,270
34,363
Article 26
26,761
11,176
VAT
9,027
11,859
Others
1,347
5,989
Total
396,838
132,637
The reconciliation between income before income tax and estimated taxable income of the Company for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Income before income tax per consolidated statements of income
2,070,716
2,115,326
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations
(97,776
)
(134,249)
Income before income tax of the Company
1,972,940
1,981,077
Positive adjustments
Accrual of employee benefits - net
133,076
132,960
Assessments for income taxes and VAT and related penalties
-
55,342
Provision for doubtful accounts
74,076
54,867
Provision for termination, gratuity and compensation benefits
of employees
15,542
23,052
Amortization of goodwill and other intangible assets
5,279
19,889
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
2008
2009
Positive adjustments (continued)
Donation
42,717
10,421
Representation and entertainment
14,498
5,725
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
1,641
3,832
Net periodic pension cost
9,186
-
Others
37,750
39,651
Negative adjustments
Depreciation - net
(191,290
)
(793,364)
Equity in net income of investees
(130,071
)
(177,996)
Interest income already subjected to final tax
(342,546
)
(106,259)
Write-off of accounts receivable
-
(98,905)
Net periodic pension cost
-
(6,163)
Estimated taxable income of
the Company
1,642,798
1,144,129
The computation of income tax expense for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Estimated taxable income of the Company
1,642,798
1,144,129
Income tax expense - current (at statutory tax rates)
Company
492,822
320,356
Subsidiaries
85,347
114,190
Total income tax expense - current
578,169
434,546
Income tax expense (benefit) - deferred - effect
of temporary differences at enacted maximum tax rates
Company
Depreciation - net
57,387
205,154
Equity in net income of investees
39,021
52,456
Write-off of accounts receivable (provision for doubtful
accounts) - net
(22,223
)
13,960
Net periodic pension cost
(2,756
)
1,726
Accrual of employee benefits - net
(10,048
)
(20,590)
Provision for termination, gratuity
and compensation benefits of employees
(4,662
)
(5,700)
Amortization of goodwill and other intangible assets
(1,584
)
(5,569)
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
(492
)
(1,052)
Others
(47,640
)
(29,573)
Net
7,003
210,812
Subsidiaries
(9,758
)
(19,390)
Net income tax expense (benefit) - deferred
(2,755
)
191,422
Income tax expense - net
575,414
625,968
13.
TAXES PAYABLE (continued)
The computation of the estimated income tax payable for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Income tax expense - current
Company
492,822
320,356
Subsidiaries
85,347
114,190
Total income tax expense - current
578,169
434,546
Less prepayments of income tax of the Company
Article 22
55,113
91,131
Article 23
4,565
2,749
Article 25
238,358
224,467
Total prepayments of income tax of the Company
298,036
318,347
Less prepayments of income tax of Subsidiaries
Article 22
374
2,186
Article 23
941
732
Article 25
52,045
106,391
Total prepayments of income tax of Subsidiaries
53,360
109,309
Total prepayments of income tax
351,396
427,656
Estimated income tax payable
Company
194,786
2,009
Subsidiaries
31,987
28,412
Total estimated income tax payable
226,773
30,421
Claims for tax refund (presented as part of “Prepaid Taxes”)
Subsidiaries
-
23,531
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 30% in 2008 and 28% in 2009 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, 2008 and 2009 is as follows:
2008
2009
Income before income tax per consolidated statements
of income
2,070,716
2,115,326
Income tax expense at the applicable tax rate
621,215
592,291
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
38,917
53,750
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
2008
2009
Tax effect on permanent differences
Assessment for income taxes and related penalties
3,132
15,496
Employee benefits
1,927
14,163
Donation
12,815
2,918
Representation and entertainment
4,682
1,904
Interest income already subjected to final tax
(107,839)
(39,862)
Others
(5,026)
(11,820)
Adjustment due to tax audit and others (70) (2,872)
Valuation allowance adjustment
5,661
-
Income tax expense - net per consolidated statements of income
575,414
625,968
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of September 30, 2008 and 2009 are as follows:
2008
2009
Deferred tax assets
Accrual of employee benefits - net
223,332
213,877
Allowance for doubtful accounts
144,659
111,067
Allowance for decline in value of investment in associated
company and
other long-term investments
46,883
39,069
Pension cost
29,273
16,049
Allowance for decline in value of short-term investment
7,619
6,349
Total
451,766
386,411
Deferred tax liabilities
Property and equipment
1,699,122
1,696,102
Investments in subsidiaries/associated company - net of
amortization of goodwill and other intangible assets
231,806
196,921
Deferred debt and bonds issuance costs, consent solicitation fees
and discount
4,736
1,753
Difference in transactions of equity changes in associated
company
1,752
1,460
Others
3,052
1,985
Total
1,940,468
1,898,221
Deferred tax liabilities - net
1,488,702
1,511,810
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
13.
TAXES PAYABLE (continued)
The breakdown by entity of the deferred tax assets and liabilities outstanding as of September 30, 2008 and 2009 is as follows:
2008
2009
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
1,488,702
-
1,511,810
Subsidiaries
Lintasarta
75,806
-
75,952
-
IMM
7,223
-
11,792
-
APE
723
-
162
-
SMT
12,988
-
-
825
ISP
-
-
-
330
SMM*
-
-
-
-
Total
96,740
1,488,702
87,906
1,512,965
* liquidated on June 30, 2009
The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation of property and equipment.
The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the doubtful accounts are written off, the allowance for decline in value of 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, consent solicitation fees and discount.
A valuation allowance has been established for certain deferred tax assets of a subsidiary. This valuation allowance reduced tax assets to an amount which is probable 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 (KEP-00080) from the Tax Court accepting the Company’s objection on the correction of
2003 corporate income tax. On December 24, 2008, the Company received Decision Letter
No.KEP-539/WPJ.19/BD.05/2008 from the DGT regarding the increase of SKPLB for fiscal year 2004 amounting to Rp84,650, which amount is lower than the amount stated in KEP-00080 (Note 6). On January 21, 2009, the Company filed a lawsuit letter to the Tax Court regarding the additional request to increase the SKPLB for fiscal year 2004 as stated in KEP-00080. As of September 30, 2009, the Company has not yet received any response from the Tax Court on the lawsuit letter.
13.
TAXES PAYABLE (continued)
On December 4, 2006, the Company received SKPKB/STP from the DGT for the Company’s VAT for the periods January - March 2004 and August - October 2004 totalling Rp8,238 (including penalties and interest) and income tax articles 23 and 26 amounting to Rp8 and Rp60,493 (including penalties and interest), respectively, for fiscal year 2004 (Note 6). The Company accepted the SKPKB for income tax article 23 and VAT. On February 28, 2007, the Company submitted an objection letter to the Tax Office regarding the 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 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. As of September 30, 2009, the Company has not yet re ceived any decision from the Tax Court on such appeal.
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 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 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 correction on the 2005 income tax article 26. In addition, based on such Decision Letter, the Company was also charged for additional correction on income tax article 26 amounting to Rp940 (Note 6), which was accepted by the Company. On September 2, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on the 2005 income tax article 26. As of September 30, 2009, the Company has not yet received any decision from the Tax Court for such appeal.
In September 2008, Law No. 7 Year 1983 regarding “Income Tax” was revised for the fourth time with the issuance of Law No. 36 Year 2008. The revised Law stipulates change in the corporate tax rates from progressive tax rates to a single rate of 28% for fiscal year 2009 and 25% for fiscal years 2010 onwards. The revised Law is effective starting January 1, 2009. The Companies recorded the effects resulting from the reduction in tax rates as a reduction of income tax expense amounting to Rp257,819 for the year ended December 31, 2008 and credits amounting to Rp292 to “Difference in transactions of equity changes in associated companies/subsidiaries” and Rp886 to “Difference in foreign currency translation”, which are presented under the Stockholders’ Equity section of the consolidated balance sheets.
On June 8, 2009, the Company received SKPKBs from the DGT for Satelindo’s 2002 and 2003 income tax articles 21, 23 and 4(2), and VAT totalling Rp28,960 (including penalties and interest), which were charged to current operations in 2009.
On June 8, 2009, the Company received SKPKB from the DGT for Satelindo’s 2003 corporate income tax amounting to Rp30,871 (including interest), which was charged to current operations in 2009.
On July 7, 2009, the Company paid all tax underpayments that resulted from the tax audit of Satelindo’s corporate income tax, income tax articles 4(2), 21, 23 and 26, and VAT for fiscal years 2002 and 2003 totalling Rp257,492.
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, 2008 and 2009 (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 SMT as of September 30, 2009 can be carried forward through 2014 based on the following schedule:
Year of Expiration
Amount
2011
14,190
2012
30,205
2013
26,660
2014
18,905
Total
89,960
14.
ACCRUED EXPENSES
This account consists of the following:
2008
2009
Interest
309,780
301,008
Network repairs and maintenance
331,909
239,836
Marketing
180,279
188,954
Radio frequency fee
255,592
175,116
Employee benefits
149,864
154,894
Dealer incentives
43,688
109,826
Utilities
10,395
108,154
Universal Service Obligation (“USO”)
37,968
55,842
Consultancy fees
38,157
46,639
General and administration
22,552
26,276
Concession fee
45,757
25,170
Outsourcing
29,858
15,666
Rental
34,225
11,676
Others (each below Rp20,000)
44,735
116,225
Total
1,534,759
1,575,282
15.
LOANS PAYABLE
This account consists of the following:
2008
2009
Related party (Note 25)
Mandiri - net of unamortized debt issuance cost and consent
solicitation fees of Rp4,146 in 2008 and Rp8,205 in 2009
1,795,854
2,591,795
Third parties - net of unamortized debt issuance cost and consent
solicitation fees of Rp240,245 in 2008 and Rp260,900 in 2009;
unamortized debt discount of Rp33,235 in 2008 and
Rp27,440 in 2009
5,601,120
11,914,173
Total loans payable
7,396,974
14,505,968
Less current maturities:
Related party
200,000
400,000
Third parties
402,410
1,038,385
Total current maturities
602,410
1,438,385
Long-term portion
6,794,564
13,067,583
15.
LOANS PAYABLE (continued)
The details of the loan from Mandiri are as follows:
a.
Mandiri
·
Five-Year Unsecured Credit Facility
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 average 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.
Voluntary early repayment (whole or any part of the loan) is permitted without penalty if the repayment is made after the 24th month from the date of the agreement subject to 7 days’ prior written notice. Repayment prior to the 24th month after the agreement date is allowed with penalty of 2% of the prepaid amount.
On September 27, 2008, the Company paid the first annual installment amounting to Rp200,000.
On March 23, 2009, the five-year unsecured credit facility agreement with Mandiri was amended on the basis of the consent letter received on the same date, which represents the outstanding principal amount of Rp1,800,000. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
On September 25, 2009, the Company paid the second annual installment amounting to Rp200,000.
·
Five-Year Unsecured Credit Facility
On July 28, 2009, the Company entered into a five-year unsecured credit facility agreement with Mandiri amounting to Rp1,000,000 for general corporate purposes. The loan bears interest at annual rate of average 3-month JIBOR plus 4.00% per annum. The interest is payable quarterly. The repayment of the loan will be made annually, as follows: (a) 10% of the loan in the 1st and 2nd years after the loan drawdown, (b) 15% of the loan in the 3rd and 4th years after the loan drawdown and (c) 50% of the loan in the 5th year after the signing date of the agreement.
On July 31, 2009, the Company drew down the full amount of the facility.
Voluntary early repayment (whole or any part of the loan) is permitted subject to 2% penalty of the prepaid amount.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
The loans from third parties consist of the following:
2008
2009
Syndicated U.S. Dollar Loan Facility - net of unamortized debt
issuance cost and consent solicitation fees of Rp47,313
in 2008 and Rp48,752 in 2009 1,367,187 4,307,698
BCA - net of unamortized debt issuance cost and consent
solicitation fees of Rp4,146 in 2008 and Rp7,775 in 2009
1,795,854
3,092,225
HSBC France - net of unamortized debt issuance cost
and consent solicitation fees of Rp182,208 in 2008 and
Rp163,602 in 2009
915,767
1,769,311
Export Kredit Namnden, Sweden - net of unamortized debt
issuance cost of Rp34,259
-
1,309,343
Goldman Sachs International
Principal, net of unamortized debt discount of Rp33,235
in 2008 and Rp27,440 in 2009
401,065
406,860
Foreign Exchange (FX) Conversion Option
98,983
136,197
DBS* - net of unamortized debt issuance cost and consent
solicitation fees of Rp827 in 2008 and Rp1,303 in 2009
499,173
448,697
9-Year Commercial Loan - net of unamortized debt issuance
cost and consent solicitation fees of Rp4,142 in 2008 and
Rp3,976 in 2009
250,817
257,769
Finnish Export Credit Ltd. - net of unamortized debt issuance
cost and consent solicitation fees of Rp1,609 in 2008 and
Rp1,233 in 2009
213,395
145,918
Investment Credit Facility 5 from CIMB Niaga
49,933
29,933
Investment Credit Facility 6 from CIMB Niaga
-
10,222
Investment Credit Facility 4 from CIMB Niaga
8,946
-
Total
5,601,120
11,914,173
Less current maturities
402,410
1,038,385
Long-term portion
5,198,710
10,875,788
* no longer a related party since June 6, 2008 (Note 18)
b.
Syndicated U.S. Dollar Loan Facility - 13 Financial Institutions
On June 12, 2008, the Company entered into a five-year unsecured credit facility agreement with 13 financial institutions (including ING Bank N.V. and DBS Bank Ltd. as the trustees) 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 U.S. dollar LIBOR plus margin (1.9% per annum for onshore lenders and 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
b.
Syndicated U.S. Dollar Loan Facility - 13 Financial Institutions (continued)
Voluntary early repayment is permitted only after the 6thmonth from the date of loan agreement subject to 15 days’ prior written notice. The Company may repay the whole or any part of the loan before the due dates (in the minimum amount of US$10,000 and divisible by US$1,000).
On September 26 and October 30, 2008, the Company received the first and second drawdowns fromthis credit facility totalling US$450,000 (equivalent to Rp4,704,650).
On February 24, 2009, the Company amended the Syndicated U.S. Dollar Loan Facility based on the consent letter received on February 19, 2009 from DBS Bank Ltd., which covers the consent provided by a majority of the 13 financial institutions to which is owed the aggregate principal amount of US$405,000 or 90% of the outstanding loan. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
c.
BCA
·
Five-Year Unsecured Credit Facility
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% each of the total loan drawdowns in the 1st and 2nd years after the first drawdown, (b) 15% each of the total loan drawdowns in the 3rd and 4th years after the first drawdown, and (c) 50% of the total loan drawdowns in the 5th year after the first drawdown.
On September 27, October 26 and December 27, 2007, the Company made the first, second and third loan drawdowns totalling Rp2,000,000.
Voluntary early repayment (whole or any part of the loan) is permitted without penalty if the repayment is made after the 24th month from the date of the agreement subject to 7 days’ prior written notice. Repayment prior to the 24th month after the agreement is allowed with penalty of 2% of the prepaid amount.
On September 27, 2008, the Company paid the first annual installment amounting to Rp200,000.
On September 25, 2009, the Company paid the second annual installment amounting to Rp200,000.
·
Three-Year Unsecured Credit Facility
On September 17, 2008, the Company entered into a three-year unsecured credit facility agreement with BCA amounting to Rp500,000 for the refinancing and/or purchase of telecommunications 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.
On March 16, 2009, the Company made the loan drawdown amounting to Rp500,000.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
c.
BCA (continued)
·
Three-Year Unsecured Credit Facility (continued)
Voluntary early repayment (whole or any part of the loan) is permitted with penalty of 1% of the prepaid amount.
On February 12, 2009, the Company amended its five-year and three-year BCA credit facility agreements based on the consent letter received on February 6, 2009, which represents the outstanding principal amounts of Rp1,800,000 and Rp500,000, respectively. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
·
Five-Year Unsecured Credit Facility
On June 8, 2009, the Company entered into a five-year unsecured credit facility agreement with BCA amounting to Rp1,000,000 for the refinancing and/or procurement of telecommunications equipment. The loan bears interest at 3-month JIBOR plus 4.00% per annum. The repayment of the loan drawdowns will be made annually, as follows: (a) 10% of the total loan drawdowns in the first and second years, (b) 15% of the total loan drawdowns in the third and fourth years, and (c) 50% of the total loan drawdowns in the fifth year.
On June 25, 2009, the Company made the loan drawdown amounting to Rp1,000,000.
Voluntary early repayment (whole or any part of the loan) is permitted subject to 1% penalty of the prepaid amount, except for prepayment to refinance this credit facility.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
d. HSBC France
On November 27, 2007, the Company entered into an unsecured facility agreement with HSBC France relating 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, 2009, the Company has already drawn from this credit facility the amount of US$155,460.44 (equivalent to Rp1,505,013).
·
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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
d. HSBC France (continued)
·
12-year SINOSURE Term Facility Agreement (”SINOSURE Facility”) (continued)
As of September 30, 2009, the Company has already drawn from this credit facility the amount of US$44,200.00 (equivalent to Rp427,900).
Based on the credit facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
On March 18, 2009, the Company amended the COFACE Facility and SINOSURE Facility agreements with HSBC France based on two consent letters received on March 11, 2009, which represent the outstanding principal amounts of US$157,243 and US$44,200, respectively. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
e. Export Kredit Namnden (“EKN”), Sweden
On August 18, 2009, the Company obtained an export credit facility from EKN, Sweden totaling US$315,000 at maximum for the purchase of Ericsson telecommunication equipment, with HSBC, Hong Kong Branch and ABN-AMRO Bank N.V., Hong Kong Branch as the arrangers and HSBC Bank PLC, London, United Kingdom as the facility agent.
This credit facility consists of Facility A, B and C amounting to US$100,000, US$155,000 and US$60,000, respectively. Each facility bears interest at certain rate per annum as determined in the agreement and the related interest is payable semi-annually until respective maturity date. Each facility will mature on May 31, 2016, February 28, 2017 and November 30, 2017, respectively.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
As of September 30, 2009, the Company has already drawn from this credit facility the amount of US$138,787.50 (equivalent to Rp1,343,602).
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, 2008 and 2009 amounted to US$10,496.63 and US$14,068.44 (equivalent to Rp98,983 and Rp136,197), 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.
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.
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, 2008 and 2009 (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)
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% each of the total loan drawdowns in the 1st and 2nd years after the first drawdown, (b) 15% each 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 early repayment is permitted on each interest payment date without penalty if the repayment is made after the 24th month from the date of the first drawdown subject to 15 days’ prior written notice. Repayment prior to the 24th month after the agreement date is allowed with penalty of 1% of the prepaid amount.
On January 30, 2009, the Company paid the first annual installment amounting to Rp50,000.
On March 25, 2009, the Company amended its five-year unsecured credit facility agreement with DBS based on the consent letter received on February 27, 2009, which represents the outstanding principal amount of Rp500,000. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
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 entered into an unsecured facility agreement with HSBC Jakarta Branch as the arranger and HSBC Limited, Hong Kong as the facility agent, relating to a
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 theSINOSURE Premium in connection with the SINOSURE Facility (Note 15d). The loan bears interest at floating rates based on U.S. dollar LIBOR plus 1.45% per annum, which is payable semi-annually.
The repayment of the loan shall be made in fifteen semi-annual installments starting 24 months from the date of the loan agreement. For the 1st five installments, the Company will repay US$1,351.85 each and US$2,027.78 for the remaining installments thereafter.
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 CIMB Niaga and Bank of China Limited, Jakarta Branch.
On April 1, 2008, the Company received the full drawdown from the 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 CIMB Niaga and US$3,500 (equivalent to Rp32,197) from 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, 2008 and 2009 (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)
Based on the facility agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
On March 18, 2009, the Company amended its 9-Year Commercial Facility based on the consent letter received on March 5, 2009 from HSBC Limited, Hong Kong which represents the aggregate principal amount of US$17,057 or 63% of the outstanding loan. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
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.
Voluntary early repayment is permitted only after 60 days from the date of the loan agreement subject to 15 days’ prior written notice. The Company may repay the whole or any part of the loan before the due dates (in the minimum amount of US$10,000 and divisible by US$1,000).
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
On March 20, 2009, the Company amended its credit facility agreement with FEC based on the consent letter received on February 27, 2009 from ABN-AMRO N.V., Stockholm Branch, which represents the outstanding principal amount of US$19,000. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
j.
Investment Credit Facility 5 from CIMB Niaga
On July 10, 2007, Lintasarta obtained a credit facility from CIMB 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 started on October 10, 2008, at Rp5,000 each quarter up to January 10, 2011. Lintasarta has already drawn the full amount of this credit facility.
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 4 and 6 from CIMB Niaga.
k.
Investment Credit Facility 6 from CIMB Niaga
On February 24, 2009, Lintasarta obtained a loan from a credit facility from CIMB Niaga for the purchase of telecommunications equipment, computers and other supporting facilities amounting to Rp75,000. The loan bears interest at the fixed annual rate of 14.5%. The quarterly repayment of the principal amount of Rp7,500 will start on March 24, 2010 up to June 24, 2012. As of September 30, 2009, Lintasarta has already drawn from this credit facility the amount of Rp10,222.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
15.
LOANS PAYABLE (continued)
k.
Investment Credit Facility 6 from CIMB Niaga (continued)
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 4 and 5 from CIMB Niaga.
l.
Investment Credit Facility 4 from CIMB Niaga
On August 29, 2005, Lintasarta obtained a credit facility from CIMB Niaga amounting to Rp45,000 for the purchase of telecommunications equipment, computers and other supporting facilities. The loan bore 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 and in February 2009, the final installment was paid.
The loan was 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 had the same restrictive covenants as the Investment Credit Facilities 5 and 6 from CIMB Niaga, which include prior written approval from CIMB Niaga for new debts obtained by Lintasarta.
The scheduled principal payments from 2010 to 2014 and thereafter of all the loans payable as of September 30, 2009 are as follows:
Twelve months ending September 30,
2014 and
2010
2011
2012
2013
thereafter Total
BCA
500,000
550,000
1,400,000
150,000500,0003,100,000
Mandiri
400,000
400,000
1,150,000
150,000500,0002,600,000
DBS
50,000
75,000
75,000
250,000
-450,000
GSI
-
-
-
434,300
-434,300
CIMB Niaga
30,222
9,933
-
-
-
40,155
Sub-total
980,222
1,034,933
2,625,000
984,300
1,000,0006,624,455
In U.S. dollar
Syndicated U.S. Dollar
Loan facility
(US$450,000)
-
1,089,112
1,394,064
1,873,274
-
4,356,450
HSBC France
(US$199,660.44)
193,291
193,291
193,291
193,2911,159,7491,932,913
EKN, Sweden
(US$138,787.50)
165,122
191,943
191,943
191,943602,651
1,343,602
9-Year Commercial
Facility (US$27,037)
26,175
26,175
32,718
39,262
137,415
261,745
FEC (US$15,200)
73,575
73,576
-
-
-147,151
GSI (US$14,068.44)
-
-
-
136,197
-136,197
Sub-total
458,163
1,574,097
1,812,016
2,433,967
1,899,815
8,178,058
Total
1,438,385
2,609,030
4,437,016
3,418,267
2,899,815
14,802,513
Less:
- unamortized debt issuance costs and consent solicitation fees
(269,105)
- unamortized debt discount
(27,440)
Net
14,505,968
The amortization of debt issuance, discount and consent solicitation fees on the loans for the nine months ended September 30, 2008 and 2009 amounted to Rp9,867 and Rp21,819, respectively (Note 23).
As of September 30, 2008 and 2009, the Companies have fulfilled all financial ratios as required in loan agreements.
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, 2008 and 2009 (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:
2008
2009
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation fees of
Rp7,125 in 2008 and
Rp13,204 in 2009
2,592,875
2,586,796
Guaranteed Notes Due 2010 - net of unamortized notes issuance
cost of Rp10,145 in 2008
and Rp4,678 in 2009
2,203,519
2,267,908
Sixth Indosat Bonds in Year 2008 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp4,428 in 2008 and Rp7,434 in 2009
1,075,572
1,072,566
Guaranteed Notes Due 2012 - net of unamortized notes discount
of Rp9,685 in 2008 and Rp3,375 in 2009; and unamortized
notes issuance cost of Rp20,313 in 2008 and Rp7,064 in 2009
1,001,738
1,048,759
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp4,780 in 2008
and Rp4,669 in 2009
810,220
810,331
Third Indosat Bonds in Year 2003 with Fixed Rates - net of
unamortized
bonds issuance cost and consent
solicitation fees of Rp3,400 in 2008
and Rp2,679 in 2009
2,496,600
637,321
Indosat Sukuk Ijarah III in Year 2008 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp2,332 in 2008
and Rp3,830 in 2009
567,668
566,170
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp1,077 in 2008
and Rp1,955 in 2009
398,923
398,045
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost and consent solicitation fees of
Rp1,694 in 2008 and Rp1,648 in 2009
283,306
283,352
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
- net of unamortized consent solicitation fees of Rp656 in 2009
200,000
199,344
Limited Bonds II issued by Lintasarta*
31,150
25,000
Limited Bonds I issued by Lintasarta**
25,292
16,989
Total bonds payable
11,686,863
9,912,581
Less current maturities
1,916,442
-
Long-term portion
9,770,421
9,912,581
*
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 as covered under a Trustee Agreement. 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.
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, 2008 and 2009 (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)
The bonds will mature before the maturity dates if, after the 1stanniversary of the bonds, the Company exercises its option to buy back part or all of the bonds at market price temporarily or as an early settlement.
PT Kustodian Sentral Efek Indonesia (“KSEI”), acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
starting August 29, 2007 and every quarter thereafter up to May 29, 2014
Series B
:
starting August 29, 2007 and every quarter thereafter up to May 29, 2017.
The Company received the proceeds of the bonds on May 31, 2007.
The net proceeds, after deducting the underwriting fee and offering expenses, were used for capital expenditure to expand the Company’s cellular network.
Based on the Trustee Agreement, 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 September 2009, the bonds haveidAA+ (negative outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”).
Based on the minutes of the General Meeting of Bondholders (“RUPO”) dated March 24, 2009, the bondholders of the Fifth Indosat Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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.
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, 2008 and 2009 (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)
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 the solicitation relating to the outstanding notes. The primary purpose of the solicitation was to modify certain covenants under the indenture of the notes 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 notes representing an aggregate principal amount of US$239,526 or 79.842% of the outstanding notes.
On July 22, 2008, IFB announced the Change of Control Offer to all holders of the notes (Note 18). This offer was to purchase the notes 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 exercised their rights that required IFB to repurchase all or any part of such holders’ notes.
On September 19, 2008, IFB paid a total of US$67,805 (equivalent to Rp642,109) for the purchased portion of the notes with a total principal amount of US$65,253 (equivalent to Rp617,946) at a price equal to 101% of the principal amount purchased, plus the accrued and unpaid interest up to settlement date and other additional expenses.
Based on the latest rating report (released in March and September 2009), the notes currently have BB and Ba1 ratings from Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”), respectively.
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 as covered under a Trustee Agreement. 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Sixth Indosat Bonds in Year 2008 with Fixed Rates (continued)
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 Trustee Agreement, 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 September 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of the Sixth Indosat Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 of 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.
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, 2008 and 2009 (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 (continued)
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 holders of the notes
(Note 18). This offer was to purchase the notes 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 exercised their rights that required IIFB to repurchase all or any part of such holders’ notes.
On September 19, 2008, IIFB paid a total of US$144,441 (equivalent to Rp1,367,858) for the purchased portion of the notes with a total principal amount of US$140,590 (equivalent to Rp1,331,387) at a price equal to 101% of the principal amount purchased, plus the accrued and unpaid interest up to settlement date and other additional expenses.
Based on the latest rating report (released in March and September 2009), the notes have BB and Ba1 ratings from S&P and Moody’s, respectively.
Fourth Indosat Bonds in Year 2005 with Fixed Rate
On June 21, 2005, the Company issued its Fourth Indosat Bonds in Year 2005 with Fixed Rate (“Fourth Indosat Bonds”), with BRI as the trustee as covered under a Trustee Agreement. 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 temporarily or as an early settlement.
The proceeds of the bonds were used for capital expenditure to expand the Company’s cellular network.
Based on the Trustee Agreement, 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 September 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of the Fourth Indosat Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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, 2008 and 2009 (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
On October 15, 2003, the Company issued at face value its Third Indosat Bonds in the Year 2003 with Fixed Rates (“Third Indosat Bonds”), with BRI as the trustee as covered under a Trustee Agreement. 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.
Based on the Trustee Agreement, 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.
On October 21, 2008, the Company paid in full the series A bonds amounting to Rp1,860,000.
Based on the latest rating report released in September 2009, the series B bonds haveidAA+ (stable outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of the Third Indosat Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 as covered under a Trustee Agreement. The bonds have a total face value of Rp570,000. The bonds will mature on
April 9, 2013.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Indosat Sukuk Ijarah III in Year 2008 (“Sukuk Ijarah III”) (continued)
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.
Based on the Trustee Agreement, 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 September 2009, the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of Indosat Sukuk Ijarah III agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 as covered under a Trustee Agreement. 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.
Based on the Trustee Agreement, 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 September 2009, the bonds haveidAA(sy)+ (negative 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, 2008 and 2009 (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”) (continued)
Based on the minutes of the RUPO dated March 24, 2009, the holders of Indosat Sukuk Ijarah II agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 as covered under a Trustee Agreement. 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 temporarily or as an early settlement.
The proceeds of the bonds were used for capital expenditure to expand the Company’s cellular network.Based on the Trustee Agreement, 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 September 2009, the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of Indosat Syariah Ijarah Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 as covered under a Trustee Agreement. The bonds were issued in three series. The Series A and Series C bonds matured on November 6, 2007.
The Series B bonds which amount to Rp200,000 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.
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, 2008 and 2009 (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 (continued)
-
Sell Option
:
the bondholder has the right to ask for early settlement from the Companyat 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).
KSEI, acting as payment agent, pays interest on the Series B bonds starting February 6, 2003 and every quarter thereafter up to November 6, 2032.
The proceeds of the bonds were used to repay working capital loan from Mandiri and time loan facility from BCA.
Based on the Trustee Agreement, 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 September 2009, the bonds haveidAA+ (negative outlook) rating from Pefindo.
Based on the minutes of the RUPO dated March 24, 2009, the holders of the Second Indosat Bonds agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
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 were originally set to mature on June 14, 2009 and bore 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 rates was 19% and the minimum limit was 11% per annum. The interest is payable on a quarterly basis starting September 14, 2006. The proceeds of the limited bond were used for capital expenditure to expand Lintasarta’s telecommunication peripherals.
On July 17, 2006, Lintasarta obtained approval from CIMB Niaga on the issuance of the limited bonds (Note 15).
On June 14, 2009, Lintasarta paid a portion of the limited bonds amounting to Rp6,150. Based on the Minutes of the Joint Meeting of Lintasarta’s Boards of Commissioners and Directors held on May 20, 2009, the representatives of the Stockholders agreed to extend the maturity date of the remaining Limited Bonds II of Rp60,000 to June 14, 2012 and to increase the minimum limit of the floating interest rates to 12.75%. On August 25, 2009, the amended agreement of Limited Bonds II to accommodate the changes in maturity date and minimum limit of floating interest rates was finalized.
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 represent unsecured bonds which 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
Limited Bonds I issued by Lintasarta (continued)
On June 2, 2006 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 based on the first amendment dated June 14, 2006 of the Limited Bonds I agreement. The floating interest rates of the bonds were determined using the average
3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3%. The maximum limit of the floating rates was 19% and the minimum limit was 11% per annum.
On July 17, 2006, Lintasarta obtained approval from CIMB Niaga on the changes in maturity date and nominal value of the limited bonds.
On June 2, 2009, Lintasarta paid a portion of the limited bonds amounting to Rp8,303. Based on the Minutes of the Joint Meeting of Lintasarta’s Boards of Commissioners and Directors held on May 20, 2009, the representatives of the Stockholders agreed to extend the maturity date of the remaining Limited Bonds I of Rp26,553 to June 2, 2012 and to increase the minimum limit of the floating interest rates to 12.75%. On August 25, 2009, the amended agreement of Limited Bonds I to accommodate the changes in maturity date and minimum limit of floating interest rates was finalized.
The scheduled principal payments of all the bonds payable outstanding as of September 30, 2009 are as follows:
Twelve months ending September 30,
2014 and
2010
2011
2012
2013
thereafter*
Total
In U.S. dollar
Guaranteed Notes*
Due 2010
(US$234,747)
-
2,272,586
-
-
-2,272,586
Due 2012
(US$109,410)
-
-
1,059,198
-
-
1,059,198
Sub-total
-
2,272,586
1,059,198
-
-3,331,784
In Rupiah
Fifth Indosat Bonds*
-
-
-
-
2,600,000
2,600,000
Sixth Indosat Bonds*
-
-
-
760,000
320,000
1,080,000
Fourth Indosat Bonds*
-
815,000
-
-
-
815,000
Third Indosat Bonds *
-
640,000
-
-
-
640,000
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 Bond II
-
-
25,000
-
-
25,000
Limited Bond I
-
-
16,989
-
-
16,989
Sub-total
-
1,740,000
41,989
1,330,000
3,520,0006,631,989
Total
-
4,012,586
1,101,187
1,330,000
3,520,000
9,963,773
Less:
-
unamortized bonds issuance costs and consent solicitation fees
(36,075)
-
unamortized notes issuance costs
(11,742)
-
unamortized notes discount
(3,375)
Net
9,912,581
* Refer to previous discussion on early repayment options for each bond/note.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
16.
BONDS PAYABLE (continued)
The amortization of bonds issuance cost and consent solicitation fees, notes issuance cost and notes discount for the nine months ended September 30, 2008 and 2009 amounted to Rp16,133 and Rp11,277, respectively (Note 23).
As of September 30, 2008 and 2009, the Companies have fulfilled all financial ratios as required in Notes Indenture and Trustee Agreement.
17.
OTHER NON-CURRENT LIABILITIES
This account consists mainly of non-current portions of post-retirement benefits (Note 24), benefits under Labor Law No. 13/2003 (Note 24), other employee benefits and deposits from customers.
18.
CAPITAL STOCK
The Company’s capital stock ownership as of September 30, 2008 and 2009 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
2008
A Share
Government of the Republic
of Indonesia
1
-
-
B Shares
Indonesia Communications
Limited (“ICL”), Mauritius
2,171,250,000
217,125
39.96
The Government
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 (“ICLS”)
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
2009
A Share
The Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
(previously ICLS)
3,532,056,600
353,206
65.00
The Government
776,624,999
77,662
14.29
Directors:
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
1,125,241,900
112,524
20.71
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, 2008 and 2009 (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 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, which 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, acquisition and demerger; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company. The “A” share also has the right to appoint one director and one commissioner of the Company.
On June 6, 2008, STT Communications Limited (“STTC”) entered into a Share Purchase Agreement to sell its 75% ownership in ICL and ICLS to Qatar Telecom (“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 has become the ultimate shareholder of the Company (Notes 15d and 16) and all of STTC’s affiliations ceased to be related parties of the Companies (Notes 4, 15 and 25).
On January 8, 2009, Qtel filed tender offer statements with the United States Securities and Exchange Commission (“U.S. SEC”) and BAPEPAM-LK to purchase additional Company shares which became effective on January 16, 2009. Subsequently, as required by the U.S. SEC, on January 20, 2009, the Company filed schedule 14D-9, Solicitation/Recommendation Statement, with the U.S. SEC in response to the Tender Offers made by Qtel in the United States of America and Indonesia through Qtel’s indirect wholly owned subsidiary, ICLS, to purchase Series B shares (including Series B shares held as ADS, each representing 50 Series B shares) which represent approximately 24.19% of the Company’s total issued and outstanding Series B shares. On March 4, 2009, ICLS increased its ownership interest in the Company from 0.85% to 25.04%.
On June 4, 2009, ICL entered into a Share Purchase Agreement to sell its 39.96% ownership in the Company to ICLS. The closing process of such sale was made on June 4, 2009; consequently, from this date, ICLS has become the legal owner of 3,532,056,600 “B” shares representing 65.00% ownership in the Company.
On September 11, 2009, ICLS changed its name into Qatar Telecom (Qtel Asia) Pte. Ltd.
19.
OPERATING REVENUES
This account consists of the following:
2008
2009
Cellular
Usage charges
5,285,982
4,238,100
Value Added Services
3,559,698
4,084,019
Interconnection revenues (Note 31)
1,374,457
1,407,871
Monthly subscription charges
39,055
132,673
Connection fee
62,433
9,263
Others
46,289
183,830
Sub-total
10,367,914
10,055,756
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
OPERATING REVENUES (continued)
2008
2009
MIDI
Internet
504,518
542,710
IP VPN
419,375
365,766
World link and direct link
328,143
284,142
Frame net
244,007
202,209
Application services
103,646
159,441
Leased line
176,147
146,881
Digital data network
94,037
119,070
Satellite lease
66,846
95,455
MPLS
16,705
42,914
Packet net
7,766
8,607
TV link
5,960
4,187
Others
12,228
37,677
Sub-total
1,979,378
2,009,059
Fixed Telecommunication
International Calls
1,015,227
1,053,703
Fixed Wireless
193,708
192,045
Fixed Line
92,082
98,295
Others
512
668
Sub-total
1,301,529
1,344,711
Total
13,648,821
13,409,526
Operating revenues from related parties amounted to Rp1,349,993 and Rp1,123,404 for the nine months ended September 30, 2008 and 2009, respectively. These amounts represent 9.89% and 8.38% of the total operating revenues in 2008 and 2009, 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 2o). 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, 2008 and 2009 (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:
2008
2009
Interconnection (Note 32)
1,268,348
1,101,654
Radio frequency fee
759,077
920,860
Maintenance
651,904
615,374
Utilities
363,887
581,224
Leased circuits
309,434
383,807
Rent
256,665
340,592
Cost of SIM cards and pulse reload vouchers
324,553
251,522
Cost of handsets and modems
48,416
157,990
USO (Note 31)
91,850
156,428
License
16,488
68,393
Concession fee (Note 31)
121,543
64,704
Delivery and transportation
48,795
60,785
Communication network
9,775
44,552
Billing and collection
34,959
31,912
Installation
62,008
31,456
Others
55,284
39,408
Total
4,422,986
4,850,661
Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers
(Note 2o).
21.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2008
2009
Salaries
313,460
323,928
Incentives and other employee benefits
211,909
208,534
Bonuses
181,656
170,559
Employee income tax
194,203
117,442
Post-retirement healthcare benefits (Note 24)
105,474
66,197
Outsourcing
104,814
65,710
Medical expense
44,392
51,216
Early retirement*
16,163
33,945
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 24)
19,051
29,459
Pension (Note 24)
36,245
16,609
Others
8,817
14,075
Total
1,236,184
1,097,674
*
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, 2008 and 2009, there were 35 and 71 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation during the nine months ended September 30, 2008 and 2009 amounted to Rp25,303 and Rp24,754, 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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
22.
OPERATING EXPENSES – GENERAL AND ADMINISTRATION
This account consists of:
2008
2009
Rent
111,073
98,895
Provision for doubtful accounts (Note 5)
87,928
88,421
Professional fees
70,025
81,417
Utilities
45,073
49,168
Transportation
87,554
42,581
Office
32,351
32,475
Insurance
18,044
20,881
Catering
23,061
18,048
Communication
14,165
14,031
Training, education and research
27,248
11,764
Others (each below Rp10,000)
51,080
39,600
Total
567,602
497,281
23.
OTHER EXPENSES - FINANCING COST
This account consists of:
2008
2009
Interest on loans
1,346,489
1,317,466
Amortization of debt and bonds issuance costs, consent
solicitation fee and discount (Notes 15 and 16)
26,000
33,096
Bank charges
5,217
8,627
Total
1,377,706
1,359,189
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.
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”).
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, 2008 and 2009 (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 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, February to December 2008 and January to September 2009, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees and Rp407 for additional 80 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 amounted to Rp61,623, which is payable in 10 annual installments starting 2005 until 2015.
The new agreement covers employees registered as participants of the pension plan as of
April 1, 2003. The conditions under the new agreement include the following:
·
An increase in pension basic salary 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.
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, 2008 and 2009 (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)
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 Rp9,653 and Rp9,653 for the nine months ended September 30, 2008 and 2009, respectively.
The net periodic pension cost for the pension plans for the nine months ended September 30, 2008 and 2009 was calculated based on the actuarial valuations as of December 31, 2007 and 2008, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2008
2009
Annual discount rate
10.0%
12.0%
Expected annual rate of return on plan assets
4.5 - 9.0%
4.5 - 9.0%
Annual rate of increase in compensation
3.0 - 9.0%
3.0 - 9.0%
Mortality rate
TMI 1999
TMI 1999
a.
The composition of the net periodic pension cost for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Interest cost
49,576
47,736
Service cost
31,144
23,925
Return on plan assets
(48,292
)
(53,981)
Amortization of unrecognized actuarial loss (gain)
3,817
(1,071)
Net periodic pension cost (Note 21)
36,245
16,609
b.
The funded status of the plans as of September 30, 2008 and 2009 is as follows:
2008
2009
Plan assets at fair value
759,588
800,613
Projected benefit obligation
(752,865
)
(612,901)
Excess of plan assets over projected benefit obligation
6,723
187,712
Unrecognized actuarial loss (gain)
184,487
(21,691)
Net prepaid pension cost
191,210
166,021
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, 2008 and 2009 (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)
c.
Movements in the prepaid pension cost during the nine months ended September 30, 2008 and 2009 are as follows:
2008
2009
Beginning balance
Company
187,801
154,441
Lintasarta
13,190
18,659
Net periodic pension cost
Company
(33,264
)
(14,887)
Lintasarta
(2,981
)
(1,722)
Refund from Jiwasraya
Company
-
(530)
Benefit payment
Company
16,371
-
Contribution to Jiwasraya
Company
440
407
Lintasarta
9,653
9,653
Ending balance
Company
171,348
139,431
Lintasarta
19,862
26,590
d.
Prepaid pension cost consists of:
2008
2009
Current portion (presented as part of “Prepaid Expenses”)
Company
2,128
2,712
Lintasarta
503
402
2,631
3,114
Long-term portion
Company
169,220
136,719
Lintasarta
19,359
26,188
188,579
162,907
Total prepaid pension cost
191,210
166,021
Plan assets as of September 30, 2008 and 2009 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
24.
PENSION PLAN (continued)
Defined Contribution Pension Plan
In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3 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 employees for the nine months ended September 30, 2008 and 2009 amounted to Rp12,441 and Rp13,506, 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 which are higher under either this law or the defined benefit pension plan.
The net periodic pension cost under the Labor Law for the nine months ended September 30, 2008 and 2009 was calculated based on the actuarial valuations as of December 31, 2007 and 2008, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2008
2009
Annual discount rate
10.0%
12.0%
Annual rate of increase in compensation
10.0%
11.0%
a.
The composition of the periodic pension cost under the Labor Law for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Service cost
10,949
14,098
Interest cost
7,768
13,979
Amortization of unrecognized actuarial loss
334
1,382
Periodic pension cost under the Labor Law (Note 21)
19,051
29,459
b.
The composition of the accrued pension cost under the Labor Law as of September 30, 2008 and 2009 is as follows:
2008
2009
Projected benefit obligation
121,726
181,347
Unrecognized actuarial loss
(15,857
)
(41,744)
Accrued pension cost
105,869
139,603
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, 2008 and 2009 (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)
c.
Movements in the accrued pension cost under the Labor Law during the nine months ended September 30, 2008 and 2009 are as follows:
2008
2009
Beginning balance
Company
78,604
100,518
Lintasarta
7,013
8,609
IMM
2,719
4,202
Periodic pension cost under the Labor Law
Company
16,786
26,238
Lintasarta
1,087
1,972
IMM
1,178
1,249
Benefit payment
Company
(1,244
)
(3,185)
Lintasarta
(274
)
-
Ending balance
Company
94,146
123,571
Lintasarta
7,826
10,581
IMM
3,897
5,451
As of September 30, 2008 and 2009, the current portion of pension cost under the Labor Law included in accrued expenses (Note 14) amounted to Rp1,828 and Rp2,155, respectively, and the non-current portion included in other non-current liabilities (Note 17) amounted to Rp104,041 and Rp137,448, 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.
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.
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, 2008 and 2009 (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 net periodic post-retirement healthcare cost for the nine months ended September 30, 2008 and 2009 was calculated based on the actuarial valuations as of December 31, 2007 and 2008, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2008
2009
Annual discount rate
10.0%
12.0%
Ultimate cost trend rate
6.0%
6.0%
Next year trend rate
18.0%
18.0%
Period to reach ultimate cost trend rate
6 years
6 years
a.
The composition of the periodic post-retirement healthcare cost for the nine months ended September 30, 2008 and 2009 is as follows:
2008
2009
Interest cost
57,225
44,335
Service cost
28,111
14,023
Amortization of unrecognized past service cost
7,839
7,839
Amortization of unrecognized actuarial loss
12,299
-
Periodic post-retirement
healthcare cost (Note 21)
105,474
66,197
b.
The composition of the accrued post-retirement healthcare cost as of September 30, 2008 and 2009 is as follows:
2008
2009
Projected benefit obligation
847,275
543,226
Unrecognized actuarial gain (loss)
(321,114
)
43,315
Unrecognized past service cost
(54,771
)
(44,319
)
Accrued post-retirement healthcare cost
471,390
542,222
c.
Movements in the accrued post-retirement healthcare cost during the nine months ended September 30, 2008 and 2009 are as follows:
2008
2009
Beginning balance
371,806
483,772
Net periodic post-retirement healthcare cost
105,474
66,197
Benefit payment
(5,890
)
(7,747)
Ending balance
471,390
542,222
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, 2008 and 2009 (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)
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, 2008 and 2009 and accumulated post-retirement healthcare benefit obligation as of September 30, 2008 and 2009 as follows:
2008
2009
Service and interest costs
110,800
77,187
Accumulated post-retirement healthcare
benefit obligation
1,048,684
665,679
As of September 30, 2008 and 2009, the current portion of post-retirement healthcare cost included in accrued expenses (Note 14) amounted to Rp9,661 and Rp9,654, respectively, and the non-current portion included in other non-current liabilities (Note 17) amounted to Rp461,729 and Rp532,568, 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 (%)
2008
2009
2008
2009
Cash and cash equivalents (Note 4)
State-owned banks
2,896,308
1,193,998
5.96
2.18
Accounts receivable - trade (Note 5)
State-owned banks
30,782
26,820
0.06
0.05
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
45,967
26,297
0.09
0.05
Telkom
23,123
24,654
0.05
0.04
PT Pos Indonesia (Persero)
9,858
11,020
0.02
0.02
PT Citra Sari Makmur (“CSM”)
7,275
9,301
0.01
0.02
PT Pasifik Satelit Nusantara (“PSN”)
5,025
2,952
0.01
0.01
PT Telekomunikasi Selular (“Telkomsel”)
18,260
1,394
0.04
0.00
PT Infomedia Nusantara
-
1,133
-
0.00
Others
35,512
59,590
0.08
0.11
Total
175,802
163,161
0.36
0.30
Less allowance for doubtful accounts
81,923
46,701
0.17
0.09
Net
93,879
116,460
0.19
0.21
Prepaid expenses
MOCIT
685,007
742,618
1.41
1.35
Jiwasraya (Note 24)
2,631
3,114
0.01
0.01
Kopindosat
2,710
2,453
0.01
0.01
PT Industri Telekomunikasi
Indonesia (Persero)
(“INTI”)
1,591
1,982
0.00
0.00
Telkom
1,434
1,434
0.00
0.00
Others
1,305
2,346
0.00
0.01
Total
694,678
753,947
1.43
1.38
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, 2008 and 2009 (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 (%)
2008
2009
2008
2009
Other current assets
State-owned banks
14,823
11,333
0.03
0.02
Others
7
-
0.00
-
Total
14,830
11,333
0.03
0.02
Due from related parties
Directorate General of
Customs and Excise
23,629
26,325
0.05
0.05
Kopindosat
5,949
5,958
0.01
0.01
Telkomsel
4,884
1,394
0.01
0.00
PT Pertamina (Persero) (“Pertamina”)
4,381
136
0.01
0.00
Others
1,209
2,033
0.00
0.00
Total
40,052
35,846
0.08
0.06
Less allowance for doubtful accounts
2,578
1,246
0.01
0.00
Net
37,474
34,600
0.07
0.06
Long-term prepaid pension (Note 24)
Jiwasraya
188,579
162,907
0.39
0.30
Long-term advances
INTI
4,031
2,756
0.010.01
Kopindosat
12,857
1,217
0.03
0.00
Total
16,888
3,973
0.04
0.01
Non-current assets - others
State-owned banks
34,250
41,838
0.07
0.08
Telkom
21,391
19,957
0.05
0.04
Kopindosat
10,660
12,560
0.02
0.02
INTI
4,863
5,313
0.01
0.01
Others
1,848
2,702
0.00
0.00
Total
73,012
82,370
0.15
0.15
Accounts payable - trade
Telkomsel
-
41,679
-
0.12
PT Indonesia Comnet Plus (“Comnet”)
-
3,708
-
0.01
Qtel**
3,379
18
0.01
0.00
Others
3,282
652
0.01
0.00
Total
6,661
46,057
0.02
0.13
** became a related party starting 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, 2008 and 2009 (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 (%)
2008
2009
2008
2009
Procurement payable
(Note 12)
INTI
49,181
40,676
0.15
0.11
Kopindosat
20,746
29,984
0.07
0.08
PT Personel Alih Daya
13,183
10,199
0.04
0.03
Others
299
228
0.00
0.00
Total
83,409
81,087
0.26
0.22
Accrued expenses
MOCIT
339,317
256,128
1.07
0.70
PT Perusahaan Listrik Negara (“PLN”)
9,400
108,154
0.03
0.30
Key management personnel
23,934
35,199
0.08
0.10
PT Personel Alih Daya
-
26,520
-
0.07
Kopindosat
29,858
1,218
0.10
0.00
Telkom
2,780
-
0.01
-
Others
995
-
0.00
-
Total
406,284
427,219
1.29
1.17
Other current liabilities
Telkomsel
1,664
1,664
0.01
0.01
Due to related parties
PLN
-
10,547
-
0.03
TVRI26,89210,147
0.08
0.03
Kopindosat
1,490
1,490
0.00
0.00
State-owned banks
1,931
962
0.01
0.00
Others
5,538
12,254
0.02
0.04
Total
35,851
35,400
0.11
0.10
Loans payable (Note 15)
State-owned bank
1,795,854
2,591,795
5.68
7.08
Other non-current liabilities
Telkomsel
10,198
8,534
0.03
0.02
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, 2008 and 2009 (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 (%)
2008
2009
2008
2009
Operating revenues
Telkom
696,328
511,026
5.10
3.81
Telkomsel
261,620
193,543
1.92
1.44
State-owned banks
134,022
140,500
0.98
1.10
TVRI
2,997
19,377
0.02
0.14
PT Pos Indonesia
3,702
10,491
0.030.08
CSM
8,106
10,011
0.06
0.07
Pertamina
1,411
7,957
0.01
0.06
Qtel**
1,801
6,376
0.01
0.05
PSN
6,819
5,576
0.05
0.04
Comnet
7,151
4,378
0.05
0.03
PT Angkasa Pura (Persero)
3,567
3,310
0.03
0.02
State-owned universities
2,543
2,891
0.02
0.02
Badan Meteorologi dan Geofisika
1,318
2,068
0.010.02
LIPI
1,358
2,059
0.010.02
PT Infomedia Nusantara
1,093
1,722
0.010.01
PT Merpati Nusantara Airlines
2,597
1,359
0.02
0.01
Starhub Pte. Ltd. (“Starhub”), Singapore*
36,748
-
0.27
-
Private banks*
28,161
-
0.21
-
SingTel*
17,304
-
0.13
-
MOCIT
1,182
-
0.01
-
Others
130,165
200,760
0.941.46
Total
1,349,993
1,123,404
9.89
8.38
Operating expenses
Cost of services
MOCIT
972,470
1,141,992
9.43
10.56
Telkom
704,832
553,190
6.83
5.11
PLN
253,182
471,489
2.45
4.36
Telkomsel
445,434
424,093
4.32
3.92
PT Personel Alih Daya
41,730
48,812
0.40
0.45
Comnet
27,790
30,238
0.27
0.28
INTI
5,200
5,898
0.060.06
Kopindosat
2,177
4,454
0.02
0.04
PT Perusahaan Gas Negara
(Persero) Tbk (“PGN”)
11,170
2,252
0.11
0.02
SingTel*
12,637
-
0.12
-
StarHub*
3,321
-
0.03
-
PSN
1,734
1,339
0.02
0.01
Total
2,481,677
2,683,757
24.06
24.81
Personnel
Key management personnel
111,538
120,957
1.08
1.12
PT Personel Alih Daya
-
45,998
-
0.43
Jiwasraya
36,245
16,609
0.35
0.15
Kopindosat
105,011
-
1.02
-
Total
252,794
183,564
2.45
1.70
General and administration
PLN
30,888
53,137
0.30
0.49
PT Personel Alih Daya
-
35,912
-
0.33
Kopindosat
42,621
13,179
0.41
0.12
Usaha Gedung Bank Dagang
Negara (“UGBDN”)
4,086
647
0.05
0.01
Others
5,794
2,408
0.05
0.02
Total
83,389
105,283
0.81
0.97
* 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, 2008 and 2009 (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 (%)
2008
2009
2008
2009
Other income (expenses)
Interest income
State-owned banks
147,579
90,917
11.69
19.06
Private banks*
36,458
-
2.89
-
Others
551
228
0.04
0.05
184,588
91,145
14.62
19.11
Financing cost
State-owned banks
(148,366)
(161,892
)
(11.75)
(33.94)
Private banks*
(16,302
)
-
(1.29)
-
Others
(4,659
)
(4,859
)
(0.37)
(1.02)
(169,327
)
(166,751
)
(13.41)
(34.96)
Net
15,261
(75,606
)
1.21
(15.85)
* no longer a related party since June 6, 2008 (Note 18)
The relationship and nature of account balances/transactions with 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.
TVRI
Affiliate
Operating revenues - MIDI
3.
Telkom (Notes 29h and 32)
Affiliate
Operating revenues - cellular,
fixed telecommunication and
MIDI; operating expenses -
cost of services
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
7.
PSN
Affiliate
Operating revenues - MIDI
8.
MOCIT
Government Agency
Operating revenues - MIDI;
operating expenses - cost of
services
9.
Jiwasraya
Affiliate
Long-term prepaid pension
10.
Kopindosat
Affiliate
Operating expenses - personnel
expenses, administration and
general expenses
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, 2008 and 2009 (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
11.
INTI
Affiliate
Procurement payable
12.
Directorate General of Customs
and Excise
Government Agency
Other current liabilities
13.
Pertamina
Affiliate
Operating revenues - MIDI
14.
Comnet
Affiliate
Operating expenses - cost of
services
15.
Qtel**
Ultimate Stockholder
Operating revenues - fixed
telecommunication
16.
Qatar Telecom (Qtel Asia) Pte. Ltd
(previously ICLS)
Stockholder
Dividend payable
17.
The Government
Stockholder
Dividend payable
18.
ICL
Stockholder
Dividend payable
19.
PT Personel Alih Daya
Affiliate
Operating expenses - personnel
expenses and cost of services
20.
PT Sigma Cipta Caraka
Affiliate
Procurement payable
21.
Senior management
Key management
Operating expenses - personnel
personnel
expenses, and prepaid
expense - unamortized
portions of housing and
transformation advances, and
transformation incentives
22.
PLN
Affiliate
Operating expenses - cost of
services
23.
PT Angkasa Pura (Persero)
Affiliate
Operating revenues - MIDI
24.
State-owned universities
Affiliates
Operating revenues - MIDI
25.
LIPI
Affiliate
Operating revenues - MIDI
26.
PT Merpati Nusantara Airlines
Affiliate
Operating revenues - MIDI
27.
PT Infomedia Nusantara
Affiliate
Operating revenues - MIDI
28.
Badan Meteorologi dan Geofisika
Affiliate
Operating revenues - MIDI
29.
StarHub*
Affiliate
Operating revenues -
international calls
30.
Private banks*
Affiliates
Cash and cash equivalents,
loans payable and operating
revenues - MIDI
*
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, 2008 and 2009 (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
31.
SingTel*
Affiliate
Operating revenues -
international calls
32.
PGN
Affiliate
Operating expenses - cost of
services
33.
UGBDN
Affiliate
Operating expenses - cost of
services
*
no longer a related party since June 6, 2008 (Note 18)
26.
EARNINGS PER SHARE
The following table sets forth the computation of basic earnings per share:
2008
2009
Numerator for basic earnings per
share - net income
1,473,115
1,449,908
Denominator - weighted-average number
of shares outstanding during the period
5,433,933,500
5,433,933,500
Basic earnings per share
271.10
266.82
Basic earnings per ADS (50 B shares per ADS)
13,554.78
13,341.24
27.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meetings (“ASGM”), the stockholders approved, among others, the appropriation of annual net income for reserve fund and cash dividend distribution, and the utilization of the remaining amount for reinvestment and working capital.
ASGM Date | Reserve Fund (Rp) | Dividend per Share (Rp) | Dividend Payment Date | |||
2007 Net Income | ||||||
June 5, 2008 | 20,420 | 187.90 | July 15, 2008 | |||
2008 Net Income | ||||||
June 11, 2009 | 18,785 | 172.85 | July 22, 2009 |
Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia.
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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, 2008 and 2009:
Fair Value (Rp)
Notional
2008
2009
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap Contracts:
a.
Standard Chartered Bank, Jakarta
Branch (“StandChart”)(6)
25,000
19,409
-
--
b.
Goldman Sachs International (“GSI”)
100,000
23,460
-
105,574-
c.
GSI
25,000
-
11,770
-3,351
d.
GSI
75,000
13,202
-
67,562-
e.
Merrill Lynch Capital Market Bank
Limited (“MLCMB”)(5)
25,000
-
-
--
f.
MLCMB(3)
25,000
-
-
--
g.
StandChart
25,000
3,087
-
8,838-
h.
MLCMB (4)
25,000
-
-
--
i.
StandChart
25,000
17,417
-
22,399-
j.
StandChart
25,000
27,499
-
33,336
-
k.
HSBC, Jakarta Branch
25,000
17,736
-
19,535-
l.
Merrill Lynch International Bank Limited,
London Branch (“MLIB”)
50,000
-
48,647
5,248-
m.
MLIB
25,000
-
1,658
-7,780
n.
MLIB
25,000
-
634
7,498-
o.
DBS
25,000
-
438
1,814-
p.
GSI
84,000
-
-
9,681-
Sub-total
121,810
63,147
281,48511,131
Currency Forward Contracts:
q.
StandChart(1)
2,000
-
-
--
r.
JPMorgan Close Bank, Singapore
Branch (“JPMorgan”)(2)
3,000 or 6,000
-
-
--
s.
DBS
5,000
-
-
--
t.
DBS
5,000
-
-
--
u.
DBS
5,000
-
-
-4,925
Sub-total
-
-
-
4,925
Interest Rate Swap Contracts:
v.
HSBC, Jakarta Branch
27,037 with
decreasing amount
-
103
-17,098
w.
HSBC, Jakarta Branch
44,200 with
decreasing amount
-
6,153
-34,111
x.
GSCM
100,000
-
37,720
-92,938
y.
DBS
25,000 with
decreasing amount
-
1,075
-
14,186
z.
DBS
25,000 with
decreasing amount
-
-
-
10,155
aa.
Bank of Tokyo MUFJ (“BTMUFJ”)
25,000 with
decreasing amount
-
-
-
4,799
ab.
BTMUFJ
25,000 with
decreasing amount
-
-
-
3,424
ac.
BTMUFJ
25,000 with
decreasing amount
-
-
-
2,376
ad.
StandChart
40,000 with
decreasing amount
-
-
-
782
ae.
DBS
26,000 with
decreasing amount
-
-
-
2,590
af.
DBS
26,000 with
decreasing amount
-
-
-
1,361
ag.
BTMUFJ
36,500 with
decreasing amount
-
-
-
5,219
ah.
ING Bank N.V.
25,000 with
decreasing amount
-
-
-
3,241
ai.
ING Bank N.V.
33,500
-
-
-3,456
Sub-total
-
45,051
-195,736
Total
121,810
108,198
281,485211,792
(1)
contract entered into in February 2007 and settled in February 2008
(2)
contract entered into in April 2007 and settled in April 2008
(3)
contract entered into in November 2005 and restructured into a new contract in August 2008
(4)
contract entered into in March 2006 and restructured into a new contract in August 2008
(5)
contract entered into in September 2005 and restructured into a new contract in September 2008
(6)
contract entered into in April 2004 and settled in November 2008
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
The net changes in fair value of the swap and currency forward contracts and embedded derivative (Note 15f), swap cost or income, termination cost or income, and settlement of derivative instruments totalling Rp53,513 and Rp387,552 in 2008 and 2009, respectively, were charged to “Loss on Change 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/ Amortized (Rp) | |
2008 | 2009 | |||||
a. | StandChart(i) 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 | 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 | 29,244 | 32,390 |
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 | 5,049 | 6,340 |
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 | 11,611 | 12,503 |
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 or equal to 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 | 3,482 | - |
f. | MLCMB(iii) | 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 | 6,405 | - |
(i)
On November 5, 2008, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp58,375.
(ii)
On September 8, 2008, the Company restructured this contract into a new contract.
(iii)
On August 8, 2008, the Company restructured these contracts into a new contract.
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, 2008 and 2009 (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/ Amortized (Rp) | |
2008 | 2009 | |||||
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 | 5,609 | 6,032 |
h. | MLCMB(iii) | 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 | 4,887 | - |
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 | 4,401 | 4,732 |
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 | 4,049 | 4,354 |
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 | 4,694 | 5,357 |
l. | MLIB(iii) | 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 or equal to 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 | - | 11,669 |
m. | MLIB | 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 December 12 | - | 5,732 |
n. | MLIB(ii) | 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 or equal to 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 | - | 3,484 |
(ii)
On September 8, 2008, the Company restructured this contract into a new contract.
(iii)
On August 8, 2008, the Company restructured these contracts into a new 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, 2008 and 2009 (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/ Amortized (Rp) | |
2008 | 2009 | |||||
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 | - | 5,702 |
p. | GSI | December 16, 2008 - November 5, 2010 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp11,500 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$84,000 multiplied by (IDR/USD spot rate - Rp11,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,500 but is less than or equal to Rp15,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$84,000 multiplied by (Rp3,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp15,000 to US$1 (in full amounts) | Upfront premium of US$9,500 (equivalent to Rp105,212) which was fully paid on December 19, 2008. The premium is amortized over the contract period. | - | - | 41,809 |
All cross currency swap contracts with GSI (contracts No. 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 |
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. | DBS | May 8, 2009 - August 12, 2009 | Rp10,610 to US$1 | August 12, 2009 |
t. | DBS | May 8, 2009 - August 12, 2009 | Rp10,610 to US$1 | August 12, 2009 |
u. | DBS | May 11, 2009 -November 13, 2009 | Rp10,750 to US$1 | November 13, 2009 |
(iv)
These contracts (q and r) expired on February 20, 2008 and April 28, 2008, respectively.
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, 2008 and 2009 (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 (Expense) Receipt Date | Amount of Swap Income (Expense) Received (Paid) (Rp) | |
2008 | 2009 | |||||
v. | 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) | (2,879) |
w. | 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 January 28 and July 28 up to July 2009, and every March 29 and September 29 up to termination date | (648) | (7,309) |
x. | GSI | September 2, 2008 - June 12, 2013 | (8.10% - underlyer 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 December 10 up to June 2011, and every June 12 and December 12 up to termination date | - | (6,761) |
y. | 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 December 10 up to December 2010, and every June 12 and December 12 up to termination date | - | (1,540) |
z. | DBS | October 23, 2008 - June 12, 2013 | 5.28% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (2,106) |
aa. | BTMUFJ | December 1, 2008 - June 12, 2013 | 4.46% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (1,107) |
ab. | BTMUFJ | December 4, 2008 - June 12, 2013 | 4.25% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (935) |
ac. | BTMUFJ | December 12, 2008 - June 12, 2013 | 4.09% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (835) |
ad. | StandChart | December 19, 2008 - June 12, 2013 | 3.85% of US$40,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (504) |
ae. | DBS | December 22, 2008 - December 12, 2012 | 4.02% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (558) |
af. | DBS | January 21, 2009 - December 12, 2012 | 3.83% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (302) |
ag. | BTMUFJ | March 2, 2009 - June 12, 2012 | 4.10% of US$36,500, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (627) |
ah. | ING Bank N.V. | March 3, 2009 - December 12, 2011 | 4.0094% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | - | (522) |
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
28.
DERIVATIVES (continued)
Interest Rate Swap Contracts (continued)
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income (Expense) Receipt Date | Amount of Swap Income (Expense) Received (Paid) (Rp) | |
2008 | 2009 | |||||
ai. | ING Bank N.V. | April 14, 2009 - June 12, 2011 | 3.75% of US$33,500, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and on June 12, 2011 | - | - |
29.
SIGNIFICANT AGREEMENTS AND COMMITMENTS
a.
As of September 30, 2009, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$287,720 (Note 36c) and Rp1,816,807
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 |
October 15, 2008 | The Procurement of Telecommunication Infrastructure | PT NEC Indonesia | US$16,511 and Rp73,107 | US$66 and Rp17,208 |
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$45,574 and Rp18,199 |
June 29, 2007 | Palapa D Satellite In-Orbit Delivery (“Palapa D Satellite”) | Thales Alenia Space | US$217,600 | US$20,748 |
May 16, 2007 | Supply of GSM Cellular Infrastructure | PT Nokia Siemens Networks, Nokia Siemens Networks Oy and Nokia Siemens Networks GmbH & Co.KG. | US$241,875 and Rp881,311 | US$22,730 and Rp112,558 |
May 2, 2007 | Supply and Installation of Telecommunication Infrastructure | PT Huawei Tech Investment and Huawei Technologies Co. Ltd. | US$33,280 and Rp223,321 | US$265 and Rp14,632 |
April 20, 2007 | Telecommunication Equipment Supply and Service | PT Alcatel Lucent Indonesia and Alcatel Shanghai Bell Co. Ltd. | US$43,686 and Rp561,077 | US$1,371 and Rp66,429 |
April 3, 2007 | Supply of GSM Infrastructure | PT Ericsson Indonesia and Ericsson AB | US$300,534 and Rp836,754 | US$12,279 and Rp70,004 |
September 29, 2006 | WCDMA/HSDPA Radio Access Network Development Project | PT Ericsson Indonesia and Ericsson AB | US$55,220 and Rp216,039 | US$7,903 and Rp23,349 |
September 25, 2006 | Single Intelligent Network | PT Ericsson Indonesia and Ericsson AB | US$77,559 and Rp197,333 | US$1,486 and Rp700 |
b.
On August 7, 2009, the Company entered into Landing Party Agreement with Starhub Ltd., Singapore, to use Starhub’s routed line to install JAKABARE Cable System in Singapore. Based on the agreement, the Company will pay Starhub the amount of US$3,509.
As of September 30, 2009, the Company has paid the amount of US$1,873.
c.
On May 25, 2007, the Company and six other telecommunication operators signed a memorandum of understanding on the construction of the 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
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.
Furthermore, three of the telecommunication operators also no longer joined the project. Consequently, as of September 30, 2009, the remaining telecommunication operators which still committed to this project are the Company, Telkom and Bakrie Telecom. Hence, the project’s commitment is being evaluated to accommodate the change in number of telecommunication operators participated.
As of September 30, 2009, the Company has paid the amount of US$1,503.
d.
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, 2009, the Company has paid US$3,804) 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 proportionate to their voting interests.
e.
The Company has committed to pay annual radio frequency fee over the 3G license period, provided the Company holds the 3G license (Note 1a). The amount of annual payment is based on the payment scheme set out in Regulation No. 7/PER/M.KOMINFO/2/2006 dated February 8, 2006 of the MOCIT.
f.
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 expiration date to February 28, 2008. The facilities consist of the following:
·
Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp16,000). Interest will be charged on daily balances at 3.75% per annum and 6% per annum below the HSBC Best Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.
·
Revolving loan facility amounting to US$5,000 (including revolving loan denominated in rupiah amounting to Rp40,000). The loan matures within a maximum period of six months and can be drawn in tranches with minimum amounts of US$500 and Rp500 for loans denominated in U.S. dollar and rupiah, respectively. Interest will be charged on daily balances at 3% per annum and 6% per annum below the HSBC Term Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.
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.
The currency swap limit (weighted) and exposure risk limit (weighted) were amended on May 14, 2007 to become exposure risk limit (weighted)/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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
Subsequently, on April 22, 2008, the Company extended further the expiration date of the overdraft and revolving loan facilities to February 28, 2009, increased the exposure risk limit (weighted)/FX option to US$62,500 and extended the maturity of foreign currency exposures through spot and forward transactions to a maximum of 5 years, currency swap and FX option transactions to a maximum of 7 years, and interest rate swap transactions to a maximum maturity of 12 years.
As of September 30, 2009, the Company has not yet utilized the facilities and is still in the process of extending further the expiration date of the overdraft and revolving loan facilities.
a.
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, 2009, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$6,564. 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.
b.
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 eighth amendment agreement dated November 5, 2008. Transponder lease expense charged to operations amounting to Rp15,501 and Rp21,806 in 2008 and 2009, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of income.
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, 2008 and 2009 (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 “MOC” and most recently, “MOCIT”). 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 Public Switched Telephone
Network (“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
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, 2008 and 2009 (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 tariffs for cellular mobile network service. Under this regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges
·
Additional facilities fee.
Cellular providers should implement the new tariffs referred to as “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee), while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.
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 Decree, the cellular providers should implement the new tariffs referred to as “price cap”. The types of tariffs for telecommunication services through cellular network consist of the following:
·
Tariff for basic telephony services
·
Tariff for roaming
·
Tariff for multimedia services
The retail tariffs 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 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.
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, 2008 and 2009 (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 tariffs 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 decree, the tariffs 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 Tariffs
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.
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 tariffs 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.
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, 2008 and 2009 (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 Tariffs (continued)
c.
Between cellular telecommunications network and domestic PSTN (continued)
(2)
SLJJ
For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of
the prevailing SLJJ tariffs plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs 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 tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs 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 tariffs 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 tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by
the cellular operator, to 85% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, and to 100% if the call is delivered to the same cellular operator.
e.
Between international PSTN and cellular telecommunications network
Starting from 1998, the interconnection tariffs 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 tariffs 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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
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 telecommunications operators in Indonesia to contribute 0.75% of annual gross revenue (after deducting bad debts 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.
On January 16, 2009, the Government issued Regulation No. 7 Year 2009 increasing the USO development contribution from 0.75% to 1.25% and decreasing the concession fee from 1% to 0.50% of annual gross revenue (after deducting bad debts and interconnection charges) effective January 1, 2009.
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 determines the interconnection charge to be received by it based on a formula mandated by the Government, which is intended to have the effect of requiring that operators charge for calls based on the cost of carrying such calls.
The effective date of the 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.
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.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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 was changed to “service charge”, which was computed at Rp1,250 per minute of outgoing call starting April 1, 2008. Based on the latest agreement, the service charge rate has been reduced to Rp1,200 per minute of outgoing call starting January 1, 2009.
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. This memorandum of understanding was amended on December 18, 2007.
b.
Cellular Services
On December 1, 2005, the Company and Telkom signed an agreement regarding the interconnection between the Company’s cellular telecommunications network with Telkom’s fixed telecommunications 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. This memorandum of understanding was amended on December 18, 2007.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
32.
INTERCONNECTION AGREEMENTS (continued)
1.
PT Excelcomindo Pratama Tbk or “Excelcom”, PT Mobile-8 (“Mobile-8”) (after PT Komunikasi Selular Indonesia (“Komselindo”) was merged with Mobile-8) 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 SMS to or receive calls/SMS from Satelindo’s and IM3’s customers.
·
The agreements are renewable annually.
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, Mobile-8 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). The memoranda of understanding with each of Mobile-8, Excelcom and Telkomsel were amended on September 14, and December 17 and 19, 2007, respectively.
1.
PT Bakrie Telecom Tbk (“Bakrie Telecom”)
The principal matters covered by the latest amendment of the agreement dated June 10, 2009 are related to interconnection between the Company’s mobile cellular network and international gateway exchanges to Bakrie Telecom’s network, including SLI 009 network.
Net interconnection revenues (charges) from (to) the operators are as follows:
2008
2009
`
Telkom
145,142
95,460
Mobile-8
12,803
8,999
Telkomsel
(3,035
)
(88,055)
Excelcom
42,486
(50,859)
Bakrie Telecom
13,635
(5,970)
Net
revenues (charges)
211,031
(40,425
)
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, 2008 and 2009 (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, 2009 (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
149,275
1,445,128
Accounts receivable
Trade
120,262
1,164,253
Others
221
2,136
Derivative assets
29,076
281,485
Other current assets
1,616
15,649
Due from related parties
78
758
Non-current assets - others
2,950
28,564
Total assets
303,478
2,937,973
Liabilities:
Accounts payable - trade
26,823
259,675
Procurement payable
370,256
3,584,448
Accrued expenses
32,850
318,022
Deposits from customers
807
7,813
Derivative liabilities
21,877
211,792
Other current liabilities
98
944
Loans payable (including current maturities)
844,753
8,178,058
Bonds payable (including current maturities)
344,157
3,331,784
Other non-current liabilities
10,591
102,531
Total liabilities
1,652,212
15,995,067
Net liabilities position
1,348,734
13,057,094
*
translated using the prevailing exchange rate at balance sheet date
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
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.
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
Telecommunication
MIDI
Total
2008
Operating revenues
Revenues from external customers
10,367,914
1,301,529
1,979,378
13,648,821
Inter-segment revenues
(254,342)
254,342
342,032342,032
Total operating revenues
10,113,572
1,555,871
2,321,410
13,990,853
Inter-segment revenues elimination
(342,032)
Operating revenues - net
13,648,821
Income
Operating income
2,236,216
547,325
549,5333,333,074
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
7,049,64944,849,212
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
3,691,609
Inter-segment liabilities elimination
(3,469,031)
Liabilities - net
31,296,451
Capital expenditure
6,013,074
561,562
1,111,5557,686,191
Depreciation and amortization
2,739,939
222,884
422,9713,385,794
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, 2008 and 2009 (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
2009
Operating revenues
Revenues from external customers
10,055,756
1,344,711
2,009,05913,409,526
Inter-segment revenues
(224,316)
224,316
383,944383,944
Total operating revenues
9,831,440
1,569,027
2,393,00313,793,470
Inter-segment revenues elimination
(383,944)
Operating revenues - net
13,409,526
Income
Operating income
1,184,164
778,951
629,1562,592,271
Gain on foreign exchange - net
1,394,440
Interest income
120,899
Financing cost
(1,359,189)
Income tax expense - net
(625,968)
Loss on change in fair value of derivatives - net
(387,552)
Amortization of goodwill
(177,173)
Others - net
(68,370)
Income before minority interest in net income
of subsidiaries
1,489,358
Other Information
Segment assets
44,138,337
2,722,938
8,246,96655,108,241
Unallocated assets
4,818,729
Inter-segment assets elimination
(5,109,617)
Assets - net
54,817,353
Segment liabilities
31,370,046
1,129,145
4,035,23836,534,429
Unallocated liabilities
3,799,422
Inter-segment liabilities elimination
(3,741,024)
Liabilities - net
36,592,827
Capital expenditure
8,740,514
550,919
1,282,28410,573,717
Depreciation and amortization
3,050,227
241,974
468,3953,760,596
35.
ECONOMIC CONDITIONS
The operations of the Companies have been affected and may continue to be affected for
the foreseeable future by the recent market events and economic conditions in the world and in Indonesia that are mainly characterized by volatility in currency values and interest rates, as well as decline in share prices which could negatively impact economic growth. Economic improvements and 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. The financial statements include the effects of the economic conditions to the extent they can be estimated.
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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
36. SUBSEQUENT EVENTS
a.
As of October 21, 2009, the Company is in the process of investigating the loss on property and equipment destroyed by the earthquake disaster in West Sumatra on September 30, 2009. The Company expects that the financial impact of such loss will be immaterial.
b.
As of October 21, 2009, the Company is in the process of issuing Seventh Indosat Bonds Year 2009 and Sukuk Ijarah IV Year 2009 totaling Rp1,500,000 at maximum.
c.
As of October 21, 2009, the prevailing exchange rate of the rupiah to U.S. dollar is Rp9,475 to US$1 (in full amount), while as of September 30, 2009, the prevailing exchange rate was Rp9,681 to US$1 (in full amount). Using the exchange rate as of October 21, 2009, the Company earned foreign exchange gain amounting to approximately Rp277,839 (excluding the effect of revaluing derivative contracts on October 21, 2009) on the foreign currency liabilities, net of foreign currency assets, as of September 30, 2009 (Note 33).
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, 2009 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of
September 30, 2009 as disclosed in Note 29a are approximately Rp2,726,147 if translated at the prevailing exchange rate as of October 21, 2009.
37.
REVISED SAKs
The following summarizes the revised SAKs recently issued by the Indonesian Institute of Accountants:
·
SAK 26 (Revised 2008), “Borrowing Costs”, contains the accounting treatment for borrowing costs. It requires an entity to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The Standard requires an entity to recognize other borrowing costs as an expense. SAK 26 (Revised 2008) supersedes SAK 26 (1997), “Borrowing Costs” and is applied prospectively for financial statements covering the periods beginning on or after January 1, 2010. Earlier application is permitted and should be disclosed.
·
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, 2010. Earlier application is permitted and should be disclosed.
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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, 2008 and 2009 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
37.
REVISED SAKs (continued)
·
SAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”, establishes the principles for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This SAK provides the definitions and characteristics of derivatives, the categories of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships, among others. SAK 55 (Revised 2006) supersedes SAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”, and is applied prospectively for financial statements covering the periods beginning on or after January 1, 2010. Earlier application is permitted and should be disclosed.
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.
38. REVOCATION OF SAK 35, “ACCOUNTING FOR REVENUES FROM TELECOMMUNICATION SERVICES”
The Indonesian Accounting Standards Board has issued Financial Accounting Standards Revocation Statement (PPSAK) No. 1 regarding the revocation of, among two other SAKs, SAK 35 on Accounting for Revenues from Telecommunication Services effective for accounting periods beginning on or after January 1, 2010. The determination of other events and transactions that were provided in such SAK 35 is referred to other relevant SAK. This statement is applied prospectively, earlier application is permitted.
The Companies are presently evaluating and have not yet determined the effects of this revoked
SAK 35 on the consolidated financial statements.
39.
GOVERNMENT REGULATIONS
On December 28, 2007, the President of the Republic of Indonesia and the Minister of Law and Human Rights signed 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-up shares and such shares are owned by at least 300 parties, each party owning less than 5% (Note 18) of the total paid-up shares. These requirements should be fulfilled by the publicly-listed companies for a period of six m onths in one tax year. As of September 30, 2009, the Company does not expect to meet the required criteria to avail of the lower income tax rate and has, therefore, not applied this reduced tax rate to its deferred tax assets and liabilities.
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, 2009.
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