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PT Indosat Tbk and subsidiaries
Consolidated financial statements
Nine months ended September 30, 2009 and 2010
(unaudited)
0
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010 (UNAUDITED)
Table of Contents
Page
Consolidated Balance Sheet
…………………………………………………………………………...
1 - 4
Consolidated Statement of Income
……………………………………………………………………
5 - 6
Consolidated Statement of Changes in Stockholders’ Equity
………………………………………
7
Consolidated Statement of Cash Flows
………………………………………………………………
8 - 9
Notes to Consolidated Financial Statements
………………………………………………………….
10 - 118
***************************
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 SHEET
September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(Note 3)
Rp
Rp
US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2c,2q, 2v,
4,18,27,35
2,237,212
6,185,065
693,082
Short-term investments - net of
allowance for decline in value
of Rp25,395 in 2009 and 2010
2d,18
-
-
Accounts receivable
2e,2q,5,18,35
Trade
Related parties - net of
allowance for doubtful
accounts of Rp46,701 in
2009 and Rp59,913
in 2010
2v,27
116,460
144,186
16,157
Third parties - net of
allowance for doubtful
accounts of Rp413,699
in 2009 and Rp423,893
in 2010
1,246,666
1,414,785
158,537
Others - net of allowance
for doubtful accounts of
Rp16,952 in 2009 and
Rp15,140 in 2010
25,933
26,055
2,920
Inventories - net of allowance for
obsolescence of Rp2,965 in
2009 and Rp8,305 in 2010
2f
181,779
113,021
12,665
Derivative assets
2q,18,29,35
281,485
119,462
13,387
Advances
30d
49,236
98,452
11,032
Prepaid taxes
2s,6,14
839,733
616,381
69,070
Prepaid expenses
2g,2k,2p,2v,
26,27,29l,38
1,228,209
1,146,835
128,511
Other current financial assets
2c,2q,2v,
18,27,35,38
25,988
43,191
4,840
Other current assets
2v,38
422
1,082
121
Total Current Assets
6,233,123
9,908,515
1,110,322
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 SHEET (continued)
September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(Note 3)
Rp
Rp
US$
NON-CURRENT ASSETS
Due from related parties - net of
allowance for doubtful
accounts of Rp1,246 in 2009
and Rp646 in 2010
2e,2q,2v,
18,27,35,38
8,275
7,960
892
Deferred tax assets - net
2s,14
87,906
89,270
10,003
Investments in associated
companies - net of allowance
for decline in value of
Rp56,586 in 2009 and 2010
2h,7
700
422
47
Other long-term investments - net
of allowance for decline in value
of Rp99,977 in 2009 and 2010
2h,2q,8,18,35
2,730
2,730
306
Property and equipment
2i,2j,2o,9,16
Cost
73,677,070
78,115,262
8,753,391
Accumulated depreciation
(28,662,535
)
(34,792,378)
(3,898,743)
Impairment in value
(98,611
)
(98,611)
(11,050)
Net
44,915,924
43,224,273
4,843,598
Goodwill and other
intangible assets - net
2l,10,38
1,646,594
1,416,447
158,724
Long-term prepaid rentals -
net of current portion
2g,11,38
693,345
756,005
84,716
Long-term prepaid licenses -
net of current portion
2g,2k,38
461,867
414,169
46,411
Long-term advances
2v,12,27,30d
383,003
241,336
27,043
Long-term prepaid pension - net
of current portion
2p,2v,26,27
162,907
120,149
13,464
Long-term receivables
38
52,221
46,169
5,174
Other non-current financial assets
2c,2q,2v,18,
27,30d,30e,
35,38
85,422
85,842
9,619
Other non-current assets
83,336
8,469
949
Total Non-current Assets
48,584,230
46,413,241
5,200,946
TOTAL ASSETS
56,321,756
6,311,268
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 SHEET (continued)
September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(Note 3)
Rp
Rp
US$
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
2q,18,35
Related parties
2v,27
46,057
28,182
3,158
Third parties
604,431
591,159
66,244
Procurement payable
2q,2v,13,18,27,35
6,019,797
4,000,682
448,306
Taxes payable
2s,14
132,637
93,864
10,518
Accrued expenses
2q,2v,15,18,
26,27,35,38
1,515,372
1,767,281
198,037
Unearned income
2n,30c
969,572
1,111,349
124,535
Deposits from customers
2q,18,35
24,122
87,115
9,762
Derivative liabilities
2q,18,29,35
211,792
284,631
31,895
Current maturities of:
Loans payable
2m,2q,2v,
16,18,27,35
1,438,385
2,665,040
298,637
Bonds payable
2m,2q,17,18,35
-
1,737,025
194,646
Other current financial
liabilities
2q,2v,18,
27,28,35,38
94,128
46,329
5,192
Other current liabilities
2v,27,38
73,405
93,930
10,526
Total Current Liabilities
11,129,698
12,506,587
1,401,456
NON-CURRENT LIABILITIES
Due to related parties
2q,2v,18,27,35,38
23,624
20,998
2,353
Deferred tax liabilities - net
2s,14
1,512,965
1,730,101
193,871
Loans payable - net of current
maturities
2m,2q,16,18,35
Related party
2v,27
2,191,795
1,794,597
201,098
Third parties
10,875,788
9,040,576
1,013,063
Bonds payable - net of current
maturities
2m,2q,17,18,35
9,912,581
12,071,104
1,352,656
Employee benefit obligations -
net of current portion
2p,19,26,38
798,005
951,245
106,594
Other non-current financial
liabilities
2q,38
16,712
-
-
Other non-current liabilities
2v,27,30d,35,38
131,659
113,089
12,672
Total Non-current Liabilities
25,463,129
25,721,710
2,882,307
TOTAL LIABILITIES
36,592,827
38,228,297
4,283,763
MINORITY INTEREST
2b
313,560
358,605
40,184
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 SHEET (continued)
September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(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
20
543,393
543,393
60,891
Premium on capital stock
20
1,546,587
1,546,587
173,306
Difference in transactions of equity
changes in associated
companies/subsidiaries
2h
404,104
404,104
45,283
Difference in foreign currency
translation
2b
3,983
(2,259)
(253)
Retained earnings
Appropriated
119,463
134,446
15,066
Unappropriated
15,293,436
15,108,583
1,693,028
STOCKHOLDERS’ EQUITY - NET
17,910,966
17,734,854
1,987,321
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
54,817,353
56,321,756
6,311,268
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 STATEMENT OF INCOME
Nine Months Ended September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(Note 3)
________________
Rp
Rp
US$
OPERATING REVENUES
2n,2v,21,27,
31,32,33,38
Cellular
10,217,260
11,914,352
1,335,091
Multimedia, Data
Communication,
Internet (“MIDI”)
2,009,059
1,810,876
202,922
Fixed telecommunications
1,506,547
1,117,851
125,263
Total Operating Revenues
13,732,866
14,843,079
1,663,276
OPERATING EXPENSES
2n
Cost of services
2k,2v,2
2,27,30i,
32,33,38
5,199,423
5,291,105
592,907
Depreciation and amortization
2i,2l,9,10,38
3,735,174
4,565,620
511,611
Personnel
2o,2p,2v
1,097,674
1,138,464
127,573
23,26,27
Marketing
611,043
821,914
92,102
General and administration
2v,24,27
497,281
463,923
51,986
Total Operating Expenses
11,140,595
12,281,026
1,376,179
OPERATING INCOME
2,592,271
2,562,053
287,097
OTHER INCOME (EXPENSES)
2n
Gain on foreign exchange - net
2q,2r,5
1,394,440
589,156
66,019
Interest income
2v,27
120,899
113,166
12,681
Financing cost
2m,2v,16,17,25,27
(1,359,189
)
(1,745,054)
(195,546
)
Loss on change in fair value
of derivatives - net
2q,29
(387,552
)
(378,431)
(42,406
)
Amortization of goodwill
2l,10
(177,173
)
(169,880
)
(19,036
)
Others - net
8,9,14
(68,370
)
(97,468
)
(10,922
)
Other Expenses - Net
(476,945
)
(1,688,511
)
(189,210
)
INCOME BEFORE INCOME TAX
2,115,326
873,542
97,887
INCOME TAX EXPENSE
2s,14
Current
(434,546
)
(99,859
)
(11,190
)
Deferred
(191,422
)
(193,320
)
(21,663
)
Total Income Tax Expense
(625,968
)
(293,179
)
(32,853
)
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 STATEMENT OF INCOME (continued)
Nine Months Ended September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share data)
2010
Notes
2009
2010
(Note 3)
________________
Rp
Rp
US$
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,489,358
580,363
65,034
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(39,450
)
(49,449)
(5,541)
NET INCOME
1,449,908
530,914
59,493
BASIC EARNINGS PER SHARE
2u
266.82
97,70
0.01
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2u
13,341.24
4,885.17
0.55
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 STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine Months Ended September 30, 2009 and 2010 (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, 2009
543,393
1,546,587
404,104
13,291
100,678
14,801,568
17,409,621
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
28
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
Balance as of January 1, 2010
543,393
1,546,587
404,104
2,369
119,464
15,341,773
17,957,690
Difference in foreign currency translation arising from the translation of the
financial statements of Indosat Finance Company B.V. and Indosat International
Finance Company B.V. from euro, and Indosat Singapore Pte. Ltd.
and Indosat Palapa B.V. from U.S.dollar to rupiah - net of applicable income
tax benefit of Rp726, Rp336, Rp371 and Rp110, respectively
2b
-
-
-
(4,628)
-
-
(4,628)
Resolution during the Annual Stockholders’ General Meeting on June 22, 2010
28
Declaration of cash dividend
-
-
-
-
-
(749,122
)
(749,122)
Appropriation for reserve fund
-
-
-
-
14,982
(14,982
)
-
Net income for the period
-
-
-
-
-
530,914
530,914
Balance as of September 30, 2010
543,393
1,546,587
404,104
(2,259)
134,446
15,108,583
17,734,854
8
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2010
Notes
2009
2010
(Note 3)
______________
RpRpUS$
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
13,457,388
14,697,282
1,646,939
Interest income
131,442
111,700
12,517
Refund of taxes
6
84,650
41,753
4,679
Cash paid to/for:
Suppliers and others
(6,583,956)
(6,167,112)
(691,070
)
Financing cost
(1,283,907
)
(1,829,875)
(205,051
)
Employees
(908,672
)
(1,096,052
)
(122,821
)
Income taxes
(902,301
)
(187,991)
(21,066
)
Interest margin paid
29n-aa
(25,985
)
(95,165
)
(10,664
)
Swap cost from cross currency
swap contracts
29b-k
(65,905
)
(65,231
)
(7,310
)
Long-term prepaid licence
1a,2k
(320,000
)
-
-
Net Cash Provided by Operating Activities
3,582,754
5,409,309
606,153
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds of Palapa D-Satellite insurance
claim
9
-
537,657
60,248
Cash dividend received from other
long-term investment
8
16,528
19,281
2,161
Proceeds from sale of property
and equipment
9
2,253
1,940
217
Acquisitions of property and
equipment
9
(9,440,554)
(4,316,850)
(483,735)
Acquisition of intangible assets
10
(16,614
)
(22,798)
(2,554)
Net Cash Used in Investing Activities
(9,438,387
)
(3,780,770)
(423,663)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from bonds payable
17
-
5,851,300
655,681
Proceeds from long-term loans
16
3,879,237
1,092,059
122,373
Decrease (increase) in restricted cash and
cash equivalents
(11,694
)
19,645
2,202
Repayment of bonds payable
17
(14,453
)
(3,080,816
)
(345,228
)
Repayment of long-term loans
16
(510,155
)
(1,375,404
)
(154,124
)
Cash dividend paid by the Company
(939,255
)
(749,122
)
(83,945
)
Swap cost from cross currency swap contracts
29a
(32,390
)
(28,850
)
(3,233
)
Cash dividend paid by subsidiaries
to minority interest
(9,291
)
(8,285
)
(928
)
Net Cash Provided by Financing Activities
2,361,999
1,720,527
192,798
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
(3,493,634
)
3,349,066
375,288
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
5,737,866
2,835,999
317,794
CASH AND CASH EQUIVALENTS
OF LIQUIDATED SUBSIDIARY*
(7,020
)
-
-
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
4
2,237,212
6,185,065
693,082
* PT Satelindo Multi Media (“SMM”) was liquidated on June 23, 2009.
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 STATEMENT OF CASH FLOWS (continued)
NIne Months Ended September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar)
2010
Notes
2009
2010
(Note 3)
______________
RpRpUS$
DETAILS OF CASH AND CASH EQUIVALENTS:
Time deposits with original maturities of
three months or less and deposits on call
1,875,785
5,684,390
636,978
Cash on hand and in banks
361,427
500,675
56,104
Cash and cash equivalents as stated in the
consolidatedbalance sheets
2,237,212
6,185,065
693,082
SUPPLEMENTAL CASH FLOW INFORMATION:
Transactions not affecting cash flows:
Acquisitions of property and
equipment credited to:
Long-term advances
73,090
53,055
5,945
Loans payable
706,747
-
-
Other non-current liabilities
16,712
-
-
The accompanying notes form an integral part of these consolidated financial statements.
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2009 and 2010 (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. 123 dated January 28, 2010 of Aulia Taufani, S.H., (as a substitute notary of Sutjipto, S.H.) as approved in the Stockholders’ Extraordinary General Meeting held on January 28, 2010, 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 Public Offering of Equity Securities and Public Companies and Rule No. IX.E.1 on Affiliate Transactions and Certain Conflict of Interests Transactions. 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-09555.AH.01.02 Year 2010 dated F ebruary 22, 2010 and No. AHU-AH.01.10-04964 dated February 25, 2010. The amendments relate to, among others, the changes in the Company’s purposes, objectives and business activities, appointment of acting President Director if the incumbent President Director is unavailable and definition of conflict of interests.
According to article 3 of its Articles of Association, the Company’s purposes and objectives are
to provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by carrying out the following main business activities:
a.
To provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services, including but not limited to providing basic telephony services, multimedia services, internet telephony services for public use, interconnection internet services, internet access services, mobile telecommunications networks and fixed telecommunications networks; and
b.
To engage in payment transactions and money transfer services through telecommunications networks as well as information technology and/or convergence technology.
The Company can provide supporting business activities in order to achieve the purposes and objectives, and to support its main businesses, as follows:
a.
To plan, to procure, to modify, to build, to provide, to develop, to operate, to lease, to rent, and to maintain infrastructures/facilities including resources to support the Company’s business in providing telecommunications networks, telecommunications services as well as information technology and/or convergence technology services;
11
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2009 and 2010 (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)
b.
To conduct business and operating activities (including development, marketing and sales of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by the Company), including research, customer services, education and courses both domestic and overseas; and
c.
To conduct other activities necessary to support and/or related to the provision of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services including but not limited to electronic transactions and provision of hardware, software, content as well as telecommunications-managed services.
The Company started its commercial operations in 1969.
Based on Law No. 3 of 1989 on Telecommunications and pursuant to Government Regulation No. 77 of 1991, the Company had been re-confirmed as an Operating Body (“Badan Penyelenggara”) that provided international telecommunications service under the authority of the Government.
In 1999, the Government issued Law No. 36 on Telecommunications (“Telecommunications Law”) which took effect on September 8, 2000. Under the Telecommunications Law, telecommunications activities cover:
·
Telecommunications networks
·
Telecommunications services
·
Special telecommunications services
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.
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, 2009 and 2010 (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)
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.
The following are operating licenses obtained by the Company and PT Indosat Mega Media,
a subsidiary:
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.), which was amended by license No.198/KEP/M.KOMINFO/ 05/2010 |
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, which was amended by licenses No.311/KEP/M.KOMINFO/8/2010, No.312/KEP/M.KOMINFO/8/2010 and No.313/KEP/M.KOMINFO/8/2010 |
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 |
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 |
(*)
As one of the winners in the selection of IMT-2000 cellular providers, the Company was obliged to, among others, pay upfront fee of Rp320,000 (Notes 2k and 38) and radio frequency fee (Note 30f).
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, 2009 and 2010 (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)
License No. | Date Issued | Issuing Body | Period of License | Description |
237/KEP/M.KOMINFO/7/2009 | July 27, 2009 | MOCIT | 10 years | Operating license for “Packet Switched” local fixed telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (BWA) (**) |
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 (***) |
198/KEP/M.KOMINFO/05/2010 | May 27, 2010 | MOCIT | Evaluated every 5 years | Amended operating license for nationwide closed fixed communications network (e.g.,VSAT, frame relay, etc.), which replaces the previous license (No.KP.69/Thn 2004) given to the Company |
311/KEP/M.KOMINFO/8/2010 312/KEP/M.KOMINFO/8/2010 and 313/KEP/M.KOMINFO/8/2010 | August 24, 2010 | MOCIT | Evaluated every 5 years | Amended operating license for fixed network and basic telephony service which covers the provision of local, national long-distance, and international long-distance telephony services, which replaces the previous license (No. KP.203/Thn 2004) given to the Company |
(**)
PT Indosat Mega Media was obliged to, among others, pay upfront fee of Rp18,408 (Note 2k) and radio frequency fee (Note 30f).
(***)
The Company was obliged, among others, to pay upfront fee of Rp320,000 (Note 2k) and radio frequency fee (Note 30f).
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 making payments to certain merchants. The Company was also appointed as a special principal and technical acquirer for such prepaid cards. On November 19, 2009, the Company launched“Indosat m-wallet”to the public.
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 telecommunications 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 telecommunications provider or tower provider which owns telecommunications towers is obliged to allow other telecommunications operators to utilize its telecommunications 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. A 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.
On September 3, 2010, based on letter No.12/67/DASP/25 from Bank Indonesia (Central Bank), the Company obtained approval to become“money remitter” for making payment in local and international coverage.
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.
1.
GENERAL (continued)
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, 2010, the Companies’ outstanding bonds issued to the public are as follows:
Bond (Note 17) | 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 22, 2003 | Indonesia Stock Exchange |
3. Fourth Indosat Bonds in Year 2005 with Fixed Rate | June 21, 2005 | Indonesia Stock Exchange |
4. Indosat Syari’ah Ijarah Bonds in Year 2005 | June 21, 2005 | Indonesia Stock Exchange |
5. Fifth Indosat Bonds in Year 2007 with Fixed Rates | May 29, 2007 | Indonesia Stock Exchange |
6. Indosat Sukuk Ijarah II in Year 2007 | May 29, 2007 | Indonesia Stock Exchange |
7. Sixth Indosat Bonds in Year 2008 with Fixed Rates | April 9, 2008 | Indonesia Stock Exchange |
8. Indosat Sukuk Ijarah III in Year 2008 | April 9, 2008 | Indonesia Stock Exchange |
9. Seventh Indosat Bonds in Year 2009 with Fixed Rates | December 8, 2009 | Indonesia Stock Exchange |
10. Indosat Sukuk Ijarah IV in Year 2009 | December 8, 2009 | Indonesia Stock Exchange |
11. Guaranteed Notes Due 2020 | July 29, 2010 | Singapore Exchange Securities Trading Limited |
c.
Employees, Directors, Commissioners and Audit Committee
Based on a resolution at each of the Stockholders’ Annual 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 and the Stockholders’ Annual General Meeting held on June 22, 2010 which is notarized under Deed No. 164 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, 2009 and 2010, respectively, is as follows:
Board of Commissioners:
2009
2010
President Commissioner
Abdulla Mohammed S.A
Abdulla Mohammed S.A
Al Thani
Al Thani
Commissioner
Dr. Nasser Mohd. A. Marafih
Dr. Nasser Mohd. A. Marafih
Commissioner
Rachmad Gobel
Rachmad Gobel
Commissioner
Richard Farnswoth Seney
Richard Farnsworth Seney
Commissioner
Jarman
Jarman
Commissioner
Rionald Silaban
Rionald Silaban
Commissioner
Setyanto Prawira Santosa*
Alexander Rusli*
Commissioner
Michael Francis Latimer*
Chris Kanter*
Commissioner
Thia Peng Heok George*
Thia Peng Heok George*
Commissioner
Soeprapto*
Soeprapto*
*
Independent commissioner
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, 2009 and 2010 (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)
Board of Directors:
2009
2010
President Director and
Chief Executive Officer
Harry Sasongko Tirtotjondro
Harry Sasongko Tirtotjondro
Director and Chief Financial
Officer
Peter Wladyslaw Kuncewicz
Peter Wladyslaw Kuncewicz
Directorand Chief
Commercial Officer
Kaizad Bomi Heerjee
Laszlo Imre Barta
Directorand Chief
Technology Officer
Stephen Edward Hobbs
Stephen Edward Hobbs
Directorand Chief Wholesale
and Infrastructure Officer
Fadzri Sentosa
Fadzri Sentosa
The composition of the Company’s Audit Committee as of September 30, 2009 and 2010 is as follows:
2009
2010
Chairman
Thia Peng Heok George
Thia Peng Heok George
Member
Michael Francis Latimer
Chris Kanter
Member
Soeprapto
Soeprapto
Member
Unggul Saut Marupa
Unggul Saut Marupa
Tampubolon
Tampubolon
Member
Kanaka Puradiredja
Kanaka Puradiredja
The Company and subsidiaries (collectively referred to hereafter as “the Companies”)
have approximately 7,145 and 6,712 employees, including non-permanent employees, as of September 30, 2009 and 2010, respectively.
d.
Structure of the Company’s Subsidiaries
As of September 30, 2009 and 2010, the Company has direct and indirect ownership in the following subsidiaries:
Start of
Percentage of Ownership (%)
Commercial
Name of Subsidiary
Location
Principal Activity
Operations
2009
2010
Indosat Palapa Company B.V.
(“IPBV”)(1)
Amsterdam
Finance
2010
-
100.00
Indosat Mentari Company B.V.
(“IMBV”)(1)
Amsterdam
Finance
2010
-
100.00
Indosat Finance Company B.V.
(“IFB”)(2)
Amsterdam
Finance
2003
100.00
100.00
Indosat International Finance
Company B.V. (“IIFB”)(3)
Amsterdam
Finance
2005
100.00
100.00
Indosat Singapore Pte. Ltd. (“ISPL”)
Singapore
Telecommunications
2005
100.00
100.00
PT Indosat Mega Media (“IMM”)
Jakarta
Multimedia
2001
99.85
99.85
PT Starone Mitra Telekomunikasi
(“SMT”)
Semarang
Telecommunications
2006
72.54
72.54
PT Aplikanusa Lintasarta
(“Lintasarta”)
Jakarta
Data Communication
1989
72.36
72.36
PT Artajasa Pembayaran Elektronis
(“APE”) (Note 2b)
Jakarta
Telecommunications
2000
39.80
39.80
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
Total Assets (Before Eliminations)
Name of Subsidiary
2009
2010
IPBV(1)
-
5,811,549
IMBV(1)
-
5,794,054
IFB(2)
2,373,137
25,021
IIFB(3)
1,094,340
11,824
ISPL
33,667
46,185
IMM
773,302
875,444
SMT
136,360
146,203
Lintasarta
1,383,237
1,740,519
APE
164,443
215,021
(1)
IPBV and IMBV were incorporated in Amsterdam on April 28, 2010 to engage in treasury activities, to lend and borrow money, whether in the form of securities or otherwise, to finance enterprises and companies, to grant security in respect of its obligation or those of its group companies and third parties.
(2)
Based on an IFB shareholder’s resolution dated November 6, 2008, IFB decided to refund capital injection amounting to EUR99,996. The Company received such refund in February 2009.
(3)
Based on an IIFB shareholder’s resolution dated November 6, 2008, IIFB decided to refund capital injection amounting to EUR1,124,064. The Company received such refund in February 2009.
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, 2009 and 2010 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, and financial instruments which are stated at fair value.
The consolidated statements of cash flows classify cash receipts and payments into operating, investing and financing activities. The cash flows from operating activities are presented using
the direct method.
The reporting currency used in the consolidated financial statements is the Indonesian rupiah.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation
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 2009 and 2010 were consolidated because its financial and operating policies were controlled by Lintasarta.
The accounts of IPBV, IMBV, IFB, IIFB and ISPL 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 IPBV, IMBV, IFB, IIFB and ISPL 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 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 and deposits on call are considered as “Cash Equivalents”.
Cash in banks and time deposits which are pledged as collateral for bank guarantees are not classified as part of “Cash and Cash Equivalents”. These are presented as part of either “Other Current Financial Assets” or “Other Non-current Financial Assets”.
d.
Short-term Investments
Time deposits with original maturities of more than three months at the time of placement are recorded at historical value.
e.
Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on management's evaluation of the collectibility of the accounts at the end of the period.
f.
Inventories
Inventories, which mainly consist of SIM cards, broadband modems, starter packs, cellular handsets and pulse reload vouchers, are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method.
In accordance with SAK 14 (Revised 2008), the Companies apply the 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.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g.
Prepaid Expenses
Prepaid expenses, which mainly consist of rentals, frequency fee, upfront fee of 3G and BWA licenses and upfront premium for cross currency swap (Note 29l), are expensed as the related asset is utilized. The non-current portions of prepaid rentals and upfront fee of 3G and BWA licenses are shown as part of “Long-term Prepaid Rentals - Net of Current Portion” and “Long-term Prepaid Licenses - Net of Current Portion”, respectively.
h.
Investments in Associated Companies
Investments 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 their share in the equity of the investee prior to such transactions, the difference is recognized by a credit or charge to “Difference in Transactions of Equity Changes in Associated Companies/Subsidiaries”, net of applicable income tax, after adjusting their equity in the investee to conform with their accounting policies.
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 Companies perform periodic review and assessment of the economic useful lives of the assets. Below are the estimated useful lives (in years).
Years
Buildings
20
Information technology equipment
3 to 5
Office equipment
3 to 5
Building and leasehold improvements
3 to 15
Vehicles
5
Cellular technical equipment
10
Transmission and cross-connection equipment
10 to 15
Fixed Wireless Access (“FWA”) technical equipment
10
Operation and maintenance center and
measurement unit
3 to 5
Fixed access network equipment
10
Landrights are stated at cost.
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, 2009 and 2010 (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)
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 derecognized from the accounts, and any resulting gains or losses are recognized in the consolidated statement of income for the period.
Properties under construction and installation are stated at cost. All borrowing costs, which include interest, amortization of ancillary costs (Notes 16d and 16g) and foreign exchange differentials (estimated quarterly to the extent that they are regarded as an adjustment to interest costs by capping the exchange differences taken as borrowing costs at the amount of borrowing costs on the functional currency equivalent borrowings) 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
In accordance with SAK 30 (Revised 2007), 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.
In 2006, the Company was granted a license to use 2.1 GHz radio frequency spectrum (a 3G mobile communications technology - Note 1a) by the MOCIT. The upfront fee is recorded as Long-term Prepaid Licenses (Note 38) for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.
In 2009, the Company received additional 3G license (Note 1a), and IMM was granted an operating license for “Packet Switched” local telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (“BWA”). The Company and IMM were obliged to, among others, pay upfront fee and annual radio frequency fee for 10 years (Note 30f).
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k.
Leases (continued)
Management believes, as supported by written confirmation from the DGPT, that the 3G and BWA licenses may be returned at any time without any financial obligation to pay the remaining outstanding annual radio frequency fees (i.e., the license arrangement does not transfer substantially all the risks and rewards incidental to ownership).
Accordingly, the Company and IMM recognize the annual radio frequency fee as operating lease expense, amortized using the straight-line method over the term of the rights to operate the 3G and BWA licenses. Management evaluates its plan to continue to use the licenses on an annual basis.
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.
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
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 the 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 and are amortized over the remaining term of the debt or bonds.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition
Up to December 31, 2009, the Companies had applied SAK 35, “Accounting for Revenues from Telecommunication Services”, in recognizing revenue for interconnected telecommunications services and self-conducted telecommunications services. In June 2009, Financial Accounting Standards Revocation Statement (Pernyataan Pencabutan Standar Akuntansi Keuangan) 1, “Revocation of SAK 32, “Accounting for Forestry Enterprises”, SAK 35, “Accounting for Revenues from Telecommunication Services”, and SAK 37, “Accounting for Toll Road Operations” was issued, which refers to the determination of other events and transactions that were provided in such SAKs to other relevant SAKs. Starting January 1, 2010, the Companies have referred to SAK 23, “Revenue”, in recognizing their revenues.
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, which up to December 31, 2009, had been presented on a net basis. To improve the comparability of the consolidated financial statements, the Company made accounts reclassification in the consolidated financial statements for the nine months ended September 30, 2009 (Note 38). Starting January 1, 2010, roaming calls have been presented on a gross basis. The change in accounting policy resulted from the revocation of SAK 35.
For post-paid subscribers, monthly service fees are recognized as the service is provided.
Up to December 31, 2009, for prepaid subscribers, the activation component of starter package sales had been recognized upon activation by end-customers. Starting January 1, 2010, the activation component of starter package sales has been deferred and recognized as revenue over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of SAK 35. 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.
Customer Loyalty Program
The Company operates a customer loyalty program called “Poin Plus Plus”, which allows customers to accumulate points for every reload and payment by the Company’s prepaid and post-paid subscribers, respectively. The points can then be redeemed for free telecommunications and non-telecommunications products, subject to a minimum number of points being obtained.
Customer loyalty credits are accounted for as a separate component of the sales transaction in which they are granted. The Company records a liability at the time of reload and payment by its prepaid and post-paid subscribers, respectively, based on the fair value expected to be incurred to supply products in the future. 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.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition (continued)
Multimedia, Data Communication, Internet (“MIDI”)
Internet
Up to December 31, 2009, revenues arising from installation service had been recognized at the time the installations were placed in service. Starting January 1, 2010, revenues from installation services have been deferred and recognized over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of SAK 35. 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
Up to December 31, 2009, revenues arising from installation service had been recognized upon the completion of the installation of equipment used for network connection purposes in the customers’ premises. Starting January 1, 2010, revenues from installation services have been deferred and recognized over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of SAK 35. 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 Telecommunications
International Calls
Revenues from outgoing international call traffic are recognized on the basis of the actual recorded traffic for the period and had been reported on a net basis up to December 31, 2009, after allocations to overseas international carriers. Starting January 1, 2010, outgoing international call traffic has been reported on a gross basis. The change in accounting policy resulted from the revocation of
SAK 35. To improve the comparability of the consolidated financial statements, the Company made accounts reclassification in the consolidated financial statements for the nine months ended September 30, 2009 (Note 38).
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, monthly service fees are recognized as the service is provided.
Up to December 31, 2009, for prepaid subscribers, the activation component of starter package sales had been recognized upon activation by end-customers. Starting January 1, 2010, the activation component of starter package sales has been deferred and recognized as revenue over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of SAK 35. 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.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition (continued)
Fixed Telecommunications (continued)
Fixed Line
Up to December 31, 2009, revenues arising from fixed line installations had been recognized at the time the installations were placed in service. Starting January 1, 2010, revenues from fixed line installations have been deferred and recognized over the expected average period of the customer relationship. The change in accounting policy resulted from the revocation of SAK 35. 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.
Expenses
Interconnection Expenses
Expenses from network interconnection with other domestic and international telecommunications carriers are accounted for as operating expenses in the period these are incurred.
Other Expenses
Expenses are recognized when incurred.
o.
Personnel Costs
Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.
p.
Pension Plan and Employee Benefits
Pension costs under the Companies’ defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation. Actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10% of the present value of the defined benefit obligation or fair value of plan assets, whichever is greater, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees. The past service costs are recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, followin g the introduction of changes to a pension plan, past service costs are recognized immediately.
The Companies follow SAK 24 (Revised 2004), “Employee Benefits”, which regulates the accounting and disclosure for employee benefits, both short-term (e.g., paid annual leave, paid sick leave) and long-term (e.g., long-service leave, post-employment medical benefits).
23
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments
Effective January 1, 2010, the Companies have applied SAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”, and SAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”, which supersede SAK 50, “Accounting for Certain Investments in Securities” and SAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”.
SAK 50 (Revised 2006) 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 interest, 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 55 (Revised 2006) 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.
q1.
Financial assets
Initial recognition
Financial assets within the scope of SAK 55 (Revised 2006) are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. The Companies determine the classification of their financial assets at initial recognition and, where allowed and appropriate, re-evaluate the designation of such assets at each financial year-end.
Financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Companies commit to purchase or sell the assets.
The Companies’ financial assets include cash and cash equivalents, trade and other receivables, quoted and unquoted financial instruments, derivative financial instruments and other current and non-current financial assets.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q1.
Financial assets (continued)
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
•
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivative assets are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the consolidated balance sheet at fair value with gains or losses recognized in the consolidated statement of income.
Derivatives embedded in host contracts are accounted for as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair value. These embedded derivatives are measured at fair value with gains or losses arising from changes in fair value recognized in the consolidated statement of income. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
•
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are carried at amortized cost using the effective interest rate method. Gains and losses are recognized in the consolidated statement of income when the loans and receivables are derecognized or impaired, as well as through the amortization process.
The Companies’ cash and cash equivalents, trade and other receivables, due from related parties, other current financial assets, long-term receivables and other non-current financial assets are included in this category.
•
Held-to-maturity (HTM) investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Companies have the positive intention and ability to hold them to maturity. After initial measurement, HTM investments are measured at amortized cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognized in the consolidated statement of income when the investments are derecognized or impaired, as well as through the amortization process.
The Companies did not have any HTM investments during the nine months ended September 30, 2009 and 2010.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q1.
Financial assets (continued)
Subsequent measurement (continued)
•
Available-for-sale (AFS) financial assets
AFS financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in stockholders’ equity until the investment is derecognized. At that time, the cumulative gain or loss previously recognized in stockholders’ equity shall be reclassified to profit or loss as a reclassification adjustment.
The Companies have the following investments classified as AFS:
-
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. These 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 AFS. These are recorded at fair value.
q2.
Financial liabilities
Initial recognition
Financial liabilities within the scope of SAK 55 (Revised 2006) are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Companies determine the classification of their financial liabilities at initial recognition.
Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, inclusive of directly attributable transaction costs.
The Companies’ financial liabilities include trade accounts payable, procurement payable, accrued expenses, deposits from customers, loans and bonds payable, due to related parties, derivative financial instruments and other current and non-current financial liabilities.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
•
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivative liabilities are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the consolidated statement of income.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q2.
Financial liabilities (continued)
Subsequent measurement (continued)
•
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method.
Gains and losses are recognized in the consolidated statement of income when the liabilities are derecognized as well as through the amortization process.
q3.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
q4.
Fair value of financial instruments
The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market bid or ask prices at the close of business at the end of the reporting period. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis; or other valuation models.
Credit risk adjustment
The Company adjusts the price in the more advantageous market to reflect any differences in counterparty credit risk between instruments traded in that market and the ones being valued for financial asset positions. In determining the fair value of financial liability positions, the Company's own credit risk associated with the instrument is taken into account.
q5.
Amortized cost of financial instruments
Amortized cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q6.
Impairment of financial assets
The Companies assess at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
•
Financial assets carried at amortized cost
For loans and receivables carried at amortized cost, the Companies first assess whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Companies determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, they include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan or receivable has a variable interest rate, the discount rate for measuring impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statement of income. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Companies. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is recognized in profit or loss.
•
AFS financial assets
In the case of equity investments classified as an AFS financial asset, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.
Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss - is reclassified from stockholders’ equity to profit or loss. Impairment losses on equity investments are not reversed through the profit or loss; increases in their fair value after impairment are recognized in stockholders’ equity.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q6.
Impairment of financial assets (continued)
•
AFS financial assets (continued)
In the case of debt instruments classified as an AFS financial asset, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of the “Interest income” account in the consolidated statement of income. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.
q7.
Derecognition of financial assets and liabilities
Financial assets
A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: (1) the rights to receive cash flows from the asset have expired; or (2) the Companies have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Companies have transferred substantially all the risks and rewards of the asset, or (b) the Companies have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.
q8.
Derivative financial instruments
The Company enters into and engages in cross currency swaps, interest rate swaps, currency forwards and other permitted instruments, if considered necessary, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies. These derivative financial instruments do not meet the criteria for hedge accounting as provided in SAK 55 (Revised 2006) and are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q.
Financial Instruments (continued)
q8.
Derivative financial instruments (continued)
Any gains or losses arising from changes in fair value of derivatives during the period that do not qualify for hedge accounting are taken directly to profit or loss.
Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivative is presented with the host contract on the consolidated 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 credited (charged) to “Gain (loss) on Change in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statement of income.
r.
Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded at the rates of exchange prevailing at
the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the prevailing exchange rates at such date and the resulting gains or losses are credited or charged to current operations, except for foreign exchange differentials that can be attributed to qualifying assets which are capitalized to assets under construction and installation.
For September 30, 2009 and 2010, the foreign exchange rates used (in full amounts) were Rp9,681 and Rp8,924, 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.
s.
Income Tax
Current tax expense is provided based on the estimated taxable income for the period. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that 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.
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.
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, 2009 and 2010 (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.
Segment Reporting
The Companies follow SAK 5 (Revised 2000), “Segment Reporting”, in the presentation of segment reporting in their financial statements. SAK 5 (Revised 2000) provides more detailed guidance for identifying reportable business segments and geographical segments. The financial information which is used by management for evaluating the segment performance is presented in Note 34.
u.
Basic Earnings per Share/ADS
In accordance with SAK 56, “Earnings per Share”, the amount of basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period.
The amount of basic earnings per ADS is computed by multiplying basic earnings per share by 50, which is equal to the number of shares per ADS.
v.
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 27.
w.
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, 2010 of Rp8,924 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.
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, 2009 and 2010 (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:
2009
2010
Cash on hand
Rupiah
1,685
1,552
U.S. dollar (US$6)
-
51
1,685
1,603
Cash in banks
Related parties (Note 27)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
23,598
67,868
PT Bank Pembangunan Daerah Nusa Tenggara Timur
(”Bank - NTT”)
-
2,683
PT Bank Pembangunan Daerah DKI Jakarta
(”BPD - DKI”)
2,768
1,984
PT Bank Pembangunan Daerah Yogyakarta
(“BPD - Yogyakarta”)
1,257
1,759
PT Bank Syariah Mandiri (“Mandiri Syariah”)
2,781
1,731
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
1,555
1,667
PT Bank Pembangunan Daerah Papua
(”Bank - Papua”)
-
1,093
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
1,119
591
BRI Syariah
1,000
-
Others (each below Rp1,000)
3,546
2,581
U.S. dollar
Mandiri (US$17,748 in 2009 and US$10,788 in 2010)
171,822
96,268
BNI (US$68 in 2009 and US$419 in 2010)
658
3,738
Others (US$70)
-
629
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)
10,633
126,638
PT Bank CIMB Niaga Tbk (“CIMB Niaga”)
11,998
23,181
The Hongkong and Shanghai Banking
Corporation Limited, Jakarta Branch (“HSBC”)
3,908
12,679
PT Bank Tabungan Pensiunan Nasional Tbk (“BTPN”)
61
5,052
Deutsche Bank AG, Jakarta Branch (“DB”)
6,907
3,391
Others (each below Rp5,000)
14,099
10,975
U.S. dollar
Fortis Bank N.V., The Netherlands (US$4,480 in 2009 and
US$7,401 in 2010)
43,369
66,042
Citibank N.A., Singapore Branch (US$1,125 in 2009 and
US$3,089 in 2010)
10,893
27,564
Citibank N.A., Jakarta Branch (US$1,725 in 2009 and
US$2,210 in 2010)
16,697
19,724
CIMB Niaga (US$1,446 in 2009 and US$1,193 in 2010)
13,996
10,651
Bukopin (US$717)
-
6,400
DB (US$1,762 in 2009 and US$467 in 2010)
17,058
4,166
Others (US$2 in 2009 and 2010)
19
17
359,742
499,072
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
4.
CASH AND CASH EQUIVALENTS (continued)
2009
2010
Time deposits and deposits on call
Related parties (Note 27)
Rupiah
Mandiri
404,175
1,205,675
BNI
74,170
344,814
BRI
33,500
298,000
Mandiri Syariah
5,000
117,000
PT Bank Tabungan Negara (Persero) (“BTN”)
12,500
116,500
PT Bank Pembangunan Daerah Jawa Tengah
1,500
7,050
BPD-Yogyakarta
1,000
1,000
U.S. dollar
BRI (US$20,000 in 2009 and US$145,000 in 2010)
193,620
1,293,980
BNI (US$20,000 in 2009 and US$125,000 in 2010)
193,620
1,115,500
Mandiri (US$6,694 in 2009 and US$1,540 in 2010)
64,809
13,742
Others (US$390)
-
3,480
Third parties
Rupiah
PT Bank DBS Indonesia (“DBS”)
-
200,000
PT Bank Syariah Muamalat Indonesia Tbk (“Muamalat”)
3,000
55,000
CIMB Niaga
49,000
46,000
DB
20,206
27,030
Bukopin
25,200
18,400
Danamon
22,800
15,900
PT Bank International Indonesia (“BII”)
500
13,000
BTPN
18,500
12,000
PT Bank Himpunan Saudara 1906, Tbk (“HS 1906”)
-
11,400
Citibank N.A., Jakarta Branch
14,818
6,750
PT Bank Mega Syariah
8,000
3,250
PT Bank Mega
4,000
2,000
PT Bank Permata Syariah
6,300
-
Others (each below Rp5,000)
1,000
-
U.S. dollar
DB (US$69,225 in 2009 and US$58,754 in 2010)
670,162
524,319
DBS (US$23,000)
-
205,252
CIMB Niaga (US$2,000)
-
17,848
Muamalat (US$5,000 in 2009 and US$1,064 in 2010)
48,405
9,500
1,875,785
5,684,390
Total
2,237,212
6,185,065
Time deposits and deposits on call denominated in rupiah earned interest at annual rates ranging from 2.50% to 14.50% in 2009 and from 2.50% to 9.50% in 2010, while those denominated in U.S. dollar earned interest at annual rates ranging from 0.001% to 6.00% in 2009 and from 0.05% to 4.75% in 2010.
The interest rates on time deposits and deposits on call in related parties are comparable to those offered by third parties.
5.
ACCOUNTS RECEIVABLE - TRADE
This account consists of the following:
2009
2010
Related parties (Note 27)
Telkom (including US$74 in 2009 and US$71 in 2010)
24,654
24,656
Others (including US$4,775 in 2009 and US$6,463 in 2010)138,507179,443
Sub-total
163,161
204,099
Less allowance for doubtful accounts
46,701
59,913
Net
116,460
144,186
Third parties
Overseas international carriers (including US$97,809 in 2009 and
US$103,012 in 2010)
923,588
896,160
Local companies (including US$17,604 in 2009 and US$15,718
in 2010)
465,479
611,328
Post-paid subscribers from:
Cellular
244,951
328,842
Fixed telecommunication
26,347
2,348
Sub-total
1,660,365
1,838,678
Less allowance for doubtful accounts
413,699
423,893
Net
1,246,666
1,414,785
Total
1,363,126
1,558,971
The aging schedule of the accounts receivable - trade is as follows:
2009
2010
Number of
Percentage Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Related parties
0 - 6 months
105,524
64.67
129,785
63.59
7 - 12 months
23,421
14.35
18,697
9.16
13 - 24 months
1,132
0.69
13,551
6.64
Over 24 months
33,084
20.29
42,066
20.61
Total
163,161
100.00
204,099
100.00
Third parties
0 - 6 months
827,478
49.84
971,714
52.85
7 - 12 months
303,145
18.26
189,102
10.28
13 - 24 months
241,781
14.56
355,346
19.33
Over 24 months
287,961
17.34
322,516
17.54
Total
1,660,365
100.00
1,838,678
100.00
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, 2009 and 2010 (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:
Related
Third
Total
Parties
Parties
September 30, 2009
Balance at beginning of period
496,163
69,444
426,719
Provision (reversal) (Note 24)
88,421
(4,921
)
93,342
Write-offs
(101,587)
(9,399
)
(92,188
)
Net effect of foreign exchange adjustment
(21,348
)
(8,423
)
(12,925)
Deduction due to liquidation of SMM*
(1,249
)
-
(1,249
)
Balance at end of period
460,400
46,701
413,699
September 30, 2010
Balance at beginning of period
461,810
57,538
404,272
Provision (Note 24)
54,344
3,186
51,158
Write-offs
(23,587)
-
(23,587)
Net effect of foreign exchange adjustment
(8,761)
(811)
(7,950)
Balance at end of period
483,806
59,913
423,893
Individual impairment
133,906
44,948
88,958
Collective impairment
349,900
14,965
334,935
Total
483,806
59,913
423,893
Gross amount of receivables, individually impaired,
before deducting any individually assessed
impairment allowance
387,433
54,123
333,310
* a subsidiary liquidated on June 23, 2009.
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 on Foreign Exchange - Net”.
There are no significant concentrations of credit risk.
Management believes the established allowance is sufficient to cover probable losses from uncollectible accounts receivable.
6.
PREPAID TAXES
This account consists of the following:
2009
2010
Claims for tax refund
462,958
563,650
Value Added Tax (“VAT”)
366,372
48,135
Others
10,403
4,596
Total
839,733
616,381
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
6.
PREPAID TAXES (continued)
Claims for tax refund as of September 30, 2009 and 2010 mainly consist of the Company’s corporate income tax for fiscal years 2004, 2005, 2006, 2009 and 2010 and Satelindo’s corporate income tax for fiscal year 2002 and income tax article 26 for fiscal years 2002 and 2003.
On February 18, 2008, the Company received Decision Letter No. KEP-0067/WPJ.19/BD.05/2008 from the Directorate General of Taxation (“DGT”) which declined the Company’s objection to the correction on income tax article 26 for fiscal year 2004 amounting to Rp60,493 (including penalties and interest). On May 14, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the tax correction. On May 25, 2010, the Company received the Decision Letter from the Tax Court which declined the Company’s objection to the tax correction of the 2004 income tax article 26. The Company charged the tax correction to current operations, which was presented as part of “Other Income (Expenses) - Others - Net”.
On May 27, 2008, the Company received 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 the fiscal year 2005 amounting to Rp940 (see below). 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 (Note 36f).
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 for fiscal year 2005, 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 amounting to Rp82,126 (including penalties and interest). On May 25, 2010, the Company received the Decision Letter from the Tax Court which declined the Company’s objection to the tax correction of the 2005 income tax article 26. The Company charged the tax correction to current operations, which was presented as part of “Other Income (Expens es) - Others - Net”.
On July 4, 2008, the Company received Decision Letter No. KEP-00080/WPJ.19/KP.0303/2008 (KEP-00080) from the Tax Court which accepted the Company’s objection to the correction of
2003 corporate income tax amounting to Rp126,403. On December 24, 2008, the Company received Decision Letter No. KEP-539/WPJ.19/BD.05/2008 from the DGT which increased the overpayment amount by Rp84,650 in the assessment letter on tax overpayment (“SKPLB”) for fiscal year 2004, which amount is lower than the amount stated in KEP-00080. On January 21, 2009, the Company filed an appeal letter to the Tax Court to increase the SKPLB for fiscal year 2004 as stated in KEP-00080. 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. On December 4, 2009, the Company received from the Tax Court its Decision
No. Put.20644/PP/M.II/2009 which granted the request to increase the SKPLB for fiscal year 2004. Furthermore, on December 15, 2009, the DGT issued Decision Letter No. KEP-00101/WPJ.19/KP.0303/2009 to implement such Tax Court Decision. On April 13, 2010, the Company received the tax refund from the Tax Office amounting to Rp41,753 for the remaining tax overpayment of corporate income tax for the fiscal year 2004.
6.
PREPAID TAXES (continued)
On June 8, 2009, the Company received the assessment letter on tax underpayment (“SKPKB”) from the DGT for Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp105,809 (including penalties and interest) (Note 14). 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. Under Indonesian Tax Law, a taxpayer is required to pay the tax underpayment amount as stated in the SKPKB within one month from the date of the SKPKB. The taxpayer can reclaim the tax paid through an objection or appeal process. 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. On July 15, 2010, the Company received Decision Letter No.KEP-357/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Sateli ndo’s corporate income tax for fiscal year 2002 (Note 36e).
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 interests), respectively (Note 14). On August 27, 2009, the Company submitted an objection letter to the Tax Office for the correction on Satelindo’s 2002 and 2003 income tax article 26. On July 16, 2010, the Company received Decision Letters No.KEP-367/WPJ.19/BD.05/2010 and KEP-368/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Satelindo’s 2002 and 2003 income tax article 26 (Note 36c).
On September 7, 2009, the Company received Decision Letter No.KEP-335/WPJ.19/BD.05/2009 from the DGT which declined the Company’s objection to the remaining corrections on the 2006 corporate income tax. On December 2, 2009, the Company submitted an appeal letter to the Tax Court regarding the remaining corrections on the Company’s 2006 corporate income tax. As of October 25, 2010, the Company has not yet received any decision from the Tax Court on such appeal.
7.
INVESTMENTS IN ASSOCIATED COMPANIES
As of September 30, 2009 and 2010, 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
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
Telecommunications
and information services
20.00
100
186
286
Total
57,312
(26
)
57,286
Less allowance for decline in value
56,586
Net
700
7.
INVESTMENTS IN ASSOCIATED COMPANIES (continued)
Company’s
Portion of
Accumulated
Equity in
Undistributed
Net Income
(Loss) of
Associated
Carrying
Location Principal Activity Ownership (%) Cost Companies Value
2010
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
(278)
422
PT Swadharma Marga
Inforindo
Indonesia
Telecommunications
and information services
26.67
400
(114)
286
Total
57,612
(604
)
57,008
Less allowance for decline in value
56,586
Net
422
*
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).
The Companies believe that the allowance for decline in value amounting to Rp56,586 as of September 30, 2009 and 2010 is adequate to cover probable losses on the above investments.
8.
OTHER LONG-TERM INVESTMENTS
As of September 30, 2009 and 2010, 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
The details of the investments in shares of stock as of September 30, 2009 and 2010 which are accounted for under the cost method are as follows:
Location | Principal Activity | Ownership (%) | Cost/Carrying Value | ||||||
PT First Media Tbk | Indonesia | Cable television and internet network service provider | 2.29/1.07* | 50,000 | |||||
ICO Global Communication (Holdings) Limited | Bahamas | Satellite service | 0.0087 | 49,977 | |||||
Asean Cableship Pte. Ltd. (“ACPL”)** | Singapore | Repairs 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 May 20, 2010, the Company’s ownership in PT First Media Tbk was diluted to 1.07% since the Company did not exercise its pre-emptive right in relation to a rights issue conducted by PT First Media Tbk.
**
The Company received dividend income from its investment in ACPL totalling US$1,655 (equivalent to Rp16,528) and US$2,140 (equivalent to Rp19,281) for the nine months ended September 30, 2009 and 2010, respectively.
8.
OTHER LONG-TERM INVESTMENTS (continued)
The Company has provided allowance for the decline in value in its investments in shares of stock accounted for under the cost method amounting to Rp99,977 as of September 30,2009 and 2010, which the Company believes is adequate to cover probable losses on the investments.
9.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
2009
Transactions during the Period
Balance
at Beginning
Liquidated
Balance at
of Period
Additions
Derecognitions
Reclassifications
Subsidiary *
End of Period
Cost
Landrights
473,109
-
-
23,739
-496,848
Buildings
551,700
15,647
-
71,229
-638,576
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
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
Operation and maintenance
center and measurement
unit
1,098,407
849
-
142,189
-1,241,445
Fixed access network
equipment
986,961
-
-
69,861
-1,056,822
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
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
Transmission and cross -
connection equipment
5,905,416
735,687
-
-
-6,641,103
FWA technical equipment
312,799
81,439
-
-
-
394,238
Operation and maintenance
center and measurement
unit
791,781
129,694
-
-
-921,475
Fixed access network
equipment
707,021
54,324
-
-
-761,345
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
* SMM - subsidiary of the Company liquidated on June 23, 2009.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
9.
PROPERTY AND EQUIPMENT (continued)
2010
Balance
Transactions during the Period
Balance
at Beginning
at End
of Period
Additions
Derecognitions
Reclassifications
of Period
Cost
Landrights
504,620
15,977
-
17,186
537,783
Buildings
652,677
89
-
92,210
744,976
Information technology
equipment
2,162,426
114
(13,052
)
314,890
2,464,378
Office equipment
1,682,984
12,626
(14,764)
20,594
1,701,440
1,701,440
Building and leasehold
improvements
10,924,318
23
(14,341
)
893,134
11,803,134
Vehicles
24,389
-
(750
)
1,176
24,815
Cellular technical
equipment
31,170,449
-
(5,193
)
4,478,651
35,643,907
Transmission and cross-
connection equipment
16,349,982
181,566
-
1,732,961
18,264,509
FWA technical equipment
1,284,431
-
-
83,675
1,368,106
Operation and maintenance
center and measurement unit
1,286,658
-
(91
)
49,621
1,336,188
Fixed access network
equipment
1,069,005
-
-
51,160
1,120,165
Properties under
construction and
installation
7,706,513
3,134,606
-
(7,735,258)
3,105,861
Total
74,818,452
3,345,001
(48,191
)
-
78,115,262
Accumulated Depreciation
Buildings
283,781
21,724
-
-
305,505
Information technology
equipment
1,686,303
218,116
(13,052)
-
1,891,367
Office equipment
1,209,518
94,131
(14,742)
-
1,288,907
Building and leasehold
improvements
3,952,460
681,866
(14,319)
-
4,620,007
Vehicles
15,761
2,665
(328
)
-
18,098
Cellular technical
equipment
14,044,917
2,221,652
(5,193
)
-
16,261,376
Transmission and cross-
connection equipment
6,925,779
1,064,785
-
-
7,990,564
FWA technical equipment
434,990
91,939
-
-
526,929
Operation and maintenance
center and measurement unit
959,924
102.652
(91
)
-
1,062,485
Fixed access network
equipment
777,601
49,539
-
-
827,140
Total
30,291,034
4,549,069
(47,725)
-
34,792,378
Less Impairment in Value
98,611
-
-
-
98,611
Net Book Value
44,428,807
43,224,273
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, 2009 and 2010, sales of certain property and equipment were made as follows:
2009
2010
Proceeds from sales
2,253
1,940
Net book value
(5,115
)
(466)
Gain (loss)
(2,862
)
1,474
9.
PROPERTY AND EQUIPMENT (continued)
Depreciation expense charged to the consolidated statements of income amounted to Rp3,708,935 and Rp4,549,069 for the nine months ended September 30, 2009 and 2010, 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.
On August 31, 2009, the Company launched its Palapa D Satellite. The Satellite experienced an under-performance of the launch vehicle during the Satellites’ placement to its intended orbital position. Consequently, its orbital lifetime has been reduced. The insurance claim for the partial loss of the Satellite has been made and is recorded as a reduction of the cost of the Satellite. The Satellite has been in operation since November 2009 after going through the process of testing and arranging its orbital position in September and October 2009. On January 4 and 19, 2010, the Company collected the Palapa D Satellite insurance claim amounting to US$58,008 (equivalent to Rp537,657) as a loss compensation for the decrease in the Satellite’s useful life from 15 years to 10.77 years due to the under-performance of the launch vehicle in the Satellite’s orbital process.
As of September 30, 2010, approximately Rp35,984 of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 16).
As of September 30, 2010, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$232,785 and Rp47,007,583 including insurance amounting to US$153,000 on the Company‘s satellite. 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, 2009 and 2010 are as follows:
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
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, 2009 and 2010 (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
2010
Cellular technical equipment
5 - 95
1,759,571
October 2010 - November 2011
Transmission and cross-connection equipment
5 - 95
775,604
October 2010 - March 2011
Building and leasehold improvements
20 - 80
343,457
October 2010 - March 2011
Building
20 - 90
89,942
October 2010 - November 2011
Others (each below Rp50,000)
30 - 99
137,287
October 2010 - February 2011
Total
3,105,861
Borrowing costs capitalized to properties under construction and installation for the nine months ended September 30, 2009 and 2010 amounted to Rp163,377 and Rp15,554 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.
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:
2009
2010
Balance at beginning of period (Note 38)
1,833,392
1,580,080
Additional non-integrated software
16,614
22,798
Amortization of goodwill
(177,173
)
(169,880
)
Amortization of other intangible assets
(26,239
)
(16,551)
Balance at end of period
1,646,594
1,416,447
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
11. LONG-TERM PREPAID RENTALS - NET OF CURRENT PORTION
This account represents mainly the long-term portion of prepaid rentals on sites and towers.
12. LONG-TERM ADVANCES
This account represents advances to suppliers and contractors for the purchase and construction/ installation 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/ installation of the property and equipment has reached a certain percentage of completion.
13.
PROCUREMENT PAYABLE
This account consists of payables for capital and operating expenditures procured from the following:
2009
2010
Related parties (Note 27) (including US$753 in 2009 and
US$398 in 2010)
81,087
68,065
Third parties (including US$369,503 in 2009 and US251,874
in 2010)
5,938,710
3,932,617
Total
6,019,797
4,000,682
The billed amount of procurement payable amounted to Rp1,375,062 and Rp620,594 as of September 30, 2009 and 2010, respectively. The unbilled amount of procurement payable amounted to Rp4,644,735 and Rp3,380,088 as of September 30, 2009 and 2010, respectively.
14.
TAXES PAYABLE
This account consists of the following:
2009
2010
Estimated corporate income tax payable,
less tax prepayments of Rp404,125 in 2009
and Rp86,412 in 2010
30,421
13,447
Income tax:
Article 4(2)
16,524
9,389
Article 21
10,337
10,886
Article 22
4,110
608
Article 23
7,858
5,996
Article 25
34,363
13,454
Article 26
11,176
31,546
VAT
11,859
7,568
Others
5,989
970
Total
132,637
93,864
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
The reconciliation between income before income tax and estimated taxable income (tax loss) of the Company for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Income before income tax per consolidated statements of income
2,115,326
873,542
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations (134,249) (147,168)
Income before income tax of the Company
1,981,077
726,374
Positive adjustments
Accrual of employee benefits - net
132,960
97,674
Assessments for income taxes and VAT and related penalties
55,342
82,694
Amortization of goodwill and other intangible assets
16,465
28,632
Provision for doubtful accounts
54,867
27,305
Provision for termination, gratuity and compensation benefits
of employees
23,052
24,970
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 16 and 17)
3,832
19,948
Net periodic pension cost
-
13,568
Donations
10,421
7,272
Representation and entertainment
5,725
4,000
Others
39,651
94,998
Negative adjustments
Depreciation - net
(793,364
)
(1,237,859)
Equity in net income of investees
(177,996
)
(182,609)
Interest income already subjected to final tax
(106,259
)
(91,044)
Amortization of long-term prepaid licenses
3,424
(26,254)
Loss on sale of property and equipment
-
(10,634)
Write-off of accounts receivable
(98,905
)
-
Net periodic pension cost
(6,163
)
-
Others
-
(3,466)
Estimated taxable income (tax loss) of
the Company
1,144,129
(424,431)
The computation of income tax expense for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Estimated taxable income of the Company
1,144,129
-
Income tax expense - current (at statutory tax rates)
Company
320,356
-
Subsidiaries
114,190
99,859
Total income tax expense - current
434,546
99,859
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
14.
TAXES PAYABLE (continued)
2009
2010
Income tax expense (benefit) - deferred - effect
of temporary differences at enacted maximum tax rates
Company
Depreciation - net
205,154
309,465
Equity in net income of investees
52,456
35,039
Amortization of long-term prepaid licenses
-
6,564
Tax loss
-
(106,108)
Accrual of employee benefits - net
(20,590
)
(24,419)
Amortization of goodwill and other intangible assets
(5,569
)
(7,158)
Write-off of accounts receivable (provision for doubtful
accounts) - net
13,960
(6,826)
Provision for termination, gratuity and compensation
benefits of employees
(5,700
)
(6,243)
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 16 and 17)
(1,052)
(4,987)
Net periodic pension cost
1,726
(3,392)
Others
(29,573
)
3,526
Net
210,812
195,461
Subsidiaries
(19,390)
(2,141)
____________________________
Net income tax expense - deferred
191,422
193,320
Total income tax expense
625,968
293,179
The computation of the estimated income tax payable for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Income tax expense - current
Company
320,356
-
Subsidiaries
114,190
99,859
Total income tax expense - current
434,546
99,859
Less prepayments of income tax of the Company
Article 22
91,131
39,773
Article 23
2,749
2,754
Article 25
224,467
21,596
Total prepayments of income tax of the Company
318,347
64,123
Less prepayments of income tax of Subsidiaries
Article 22
2,186
1,006
Article 23
732
2,383
Article 25
106,391
136,173
Total prepayments of income tax of Subsidiaries
109,309
139,562
Total prepayments of income tax
427,656
203,685
14.
TAXES PAYABLE (continued)
2009
2010
Estimated income tax payable
Company
2,009
-
Subsidiaries
28,412
13,447
Total estimated income tax payable
30,421
13,447
Claims for tax refund (presented as part of “Prepaid Taxes”)
Company
-
64,123
Subsidiaries
23,531
53,150
Total
23,531
117,273
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 28% in 2009 and 25% in 2010 to the income before income tax and the income tax expense as shown in the consolidated statements of income for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Income before income tax per consolidated statements
of income
2,115,326
873,542
Income tax expense at the applicable tax rate
592,291
218,385
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
53,750
51,160
Tax effect on permanent differences
Assessment for income taxes and related penalties
15,496
20,706
Employee benefits
14,163
11,703
Donation
s
2,918
1,819
Representation and entertainment
1,904
1,512
Interest income already subjected to final tax
(39,862
)
(28,833)
Others
(11,820
)
(536)
Adjustment due to tax audit and others
(2,872
)
17,263
Income tax expense per consolidated statements of income
625,968
293,179
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of September 30, 2009 and 2010 are as follows:
2009
2010
Deferred tax assets
Accrual of employee benefits - net
213,877
253,728
Allowance for doubtful accounts
111,067
116,337
Tax loss
-
106,108
Allowance for decline in value of investment in associated
company and
other long-term investments
39,069
39,069
Pension cost
16,049
21,282
Allowance for decline in value of short-term investment
6,349
6,349
Others
-
1,877
Total
386,411
544,750
14.
TAXES PAYABLE (continued)
2009
2010
Deferred tax liabilities
Property and equipment
1,696,102
2,023,200
Investments in subsidiaries/associated company - net of
amortization of goodwill and other intangible assets
194,791
224,379
Long-term prepaid licenses
2,130
11,375
Deferred debt and bonds issuance costs, consent solicitation fees
and discount
1,753
8,119
Difference in transactions of equity changes in associated
company
1,460
1,460
Others
1,985
657
Total
1,898,221
2,269,190
Deferred tax liabilities - net
1,511,810
1,724,440
The breakdown by entity of the deferred tax assets and liabilities outstanding as of September 30, 2009 and 2010 is as follows:
2009
2010
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
1,511,810
-
1,724,440
Subsidiaries
Lintasarta
75,952
-
75,602
-
IMM
11,792
-
13,668
-
APE
162
-
-
3,404
SMT
-
825
-
1,638
ISPL
-
330
-
619
Total
87,906
1,512,965
89,270
1,730,101
The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation of property and equipment.
The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the doubtful accounts are written off, the allowance for decline in value of investments in associated 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 company, debt and bonds issuance costs, consent solicitation fees and discount, and long-term prepaid licenses.
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 as part of “Other Income (Expenses) - Others - Net”.
On June 8, 2009, the Company received SKPKB from the DGT for Satelindo’s 2003 corporate income tax amounting to Rp30,870 (including interests), which was charged to current operations in 2009 as part of “Other Income (Expenses) - Others - Net”.
14.
TAXES PAYABLE (continued)
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 (Note 6).
The tax losses carryover of SMT and the Company as of September 30, 2010 can be carried forward through 2015 based on the following schedule:
Year of Expiration
Amount
2011
14,190
2012
30,205
2013
26,660
2014
31,901
2015
464,092
Total
567,048
15.
ACCRUED EXPENSES
This account consists of the following:
2009
2010
Network repairs and maintenance
239,836
324,523
Dealer incentives
109,826
226,171
Interest
241,098
221,028
Marketing
188,954
193,066
Employee benefits (Note 26)
154,894
165,445
Utilities
108,154
155,642
Radio frequency fee
175,116
112,996
Link
4,659
72,002
Universal Service Obligation (“USO”) (Note 32)
55,842
62,005
Consultancy fees
48,733
47,257
Rental
11,676
41,102
General and administration
26,276
25,948
Concession fee (Note 32)
25,170
16,725
Others (each below Rp20,000)
125,138
103,371
Total
1,515,372
1,767,281
16.
LOANS PAYABLE
This account consists of the following:
2009
2010
Related party (Note 27)
Mandiri - net of unamortized debt issuance cost and consent
solicitation fees of Rp8,205 in 2009 and Rp5,403 in 2010
2,591,795
2,194,597
Third parties - net of unamortized debt issuance cost and consent
solicitation fees of Rp260,900 in 2009 and Rp206,599 in 2010;
unamortized debt discount of Rp27,440 in 2009 and Rp20,990
in 2010
11,914,173
11,305,616
Total loans payable
14,505,968
13,500,213
16.
LOANS PAYABLE (continued)
2009
2010
Less current maturities (net of unamortized debt issuance cost
and consent solicitation fees amounting to Rp599 in 2010)
Related party
400,000
400,000
Third parties
1,038,385
2,265,040
Total current maturities
1,438,385
2,665,040
Long term portion
Related party
2,191,795
1,794,597
Third parties
10,875,788
9,040,576
Total long-term portion
13,067,583
10,835,173
The details of the loans from Mandiri are as follows:
·
Credit Facility 1
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 Jakarta Interbank Offered Rate (“JIBOR”) plus 1.5% per annum. The loan has an effective interest rate of 9.19% 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 th e agreement.
On September 27 and December 27, 2007, the Company made the first and second loan drawdowns representing the full amount of the facility.
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 and September 25, 2009, the Company paid the first and second annual installments, respectively, amounting to Rp200,000 each.
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 27, 2010, the Company paid the third annual installment amounting to Rp300,000.
16.
LOANS PAYABLE (continued)
·
Credit Facility 2
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 the annual rate of average 3-month JIBOR plus 4.00% per annum. The loan has an effective interest rate of 11.31% 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 (Note 36b).
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
On May 20, 2010, the Company received a letter from Mandiri regarding the change of interest rate from an average 3-month JIBOR plus 4.00% per annum to an average 3-month JIBOR plus 2.25% per annum, effective on May 31, 2010.
On July 30, 2010, the Company paid the first annual installment amounting to Rp100,000.
The loans from third parties consist of the following:
2009
2010
Syndicated U.S. Dollar Loan Facility - net of unamortized debt
issuance cost and consent solicitation fees of Rp48,752
in 2009 and Rp31,557 in 2010
4,307,698
3,984,243
BCA - net of unamortized debt issuance cost and consent
solicitation fees of Rp7,775 in 2009 and Rp4,917 in 2010
3,092,225
2,595,083
AB Svensk Exportkredit, Sweden with Guarantee from Export
Kredit Namnden - net of unamortized debt issuance
cost of Rp34,259 in 2009 and Rp29,818 in 2010
1,309,343
2,019,515
HSBC France - net of unamortized debt issuance cost
and consent solicitation fees of Rp163,602 in 2009 and
Rp135,816 in 2010
1,769,311
1,481,641
Goldman Sachs International
Principal, net of unamortized debt discount of Rp27,440
in 2009 and Rp20,990
in 2010
406,860
413,310
Foreign Exchange (FX) Conversion Option
136,197
61,426
DBS - net of unamortized debt issuance cost and consent
solicitation fees of Rp1,303 in 2009 and Rp855 in 2010
448,697
399,145
9-Year Commercial Loan - net of unamortized debt issuance
cost and consent solicitation fees of Rp3,976 in 2009 and
Rp3,037 in 2010
257,769
214,114
Finnish Export Credit Ltd. - net of unamortized debt issuance
cost and consent solicitation fees of Rp1,233 in 2009 and
Rp599 in 2010
145,918
67,223
16.
LOANS PAYABLE (continued)
2009
2010
Investment Credit Facility 6 from CIMB Niaga
10,222
59,983
Investment Credit Facility 5 from CIMB Niaga
29,933
9,933
Total
11,914,173
11,305,616
Less current maturities (net of unamortized debt issuance
costs and consent solicitation fees totaling Rp599 in 2010)
1,038,385
2,265,040
Long-term portion
10,875,788
9,040,576
a.
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 with ING Bank N.V. and DBS Bank Ltd. as arrangers and DBS as the facility agent, in the total amount of US$450,000. The loan proceeds are 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 London Interbank Offered Rate (“LIBOR”) plus margin (1.9% per annum for onshore lenders and 1.85% per annum for offshore lenders), which is payable semi-annually. The loan has an effective interest rate of 5.78% per annum.
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.
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 in an amount divisible by US$1,000).
On September 26 and October 30, 2008, the Company received the first and second drawdowns representing the full amount of the facility totaling 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 the aggregate principal amount of US$405,000 or 90% of the outstanding loan is payable. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
16.
LOANS PAYABLE (continued)
b.
BCA
·
Credit Facility 1
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. The loan has an effective interest rate of 9.21% per annum. On September 20, 2007, the Company obtained an increase in the credit facility by 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 a nd 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 representing the full amount of the facility.
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 and September 25, 2009, the Company paid the first and second annual installments, respectively, amounting to Rp200,000 each.
On September 27, 2010, Company paid the third annual installment amounting to Rp300,000.
·
Credit Facility 2
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 loan has an effective interest rate of 11.69% 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 drawdown of the full amount of the facility.
On March 16, 2010, the Company paid the first annual installment amounting to Rp100,000.
Voluntary early repayment (whole or any part of the loan) is permitted with penalty of 1% of the prepaid amount (Notes 36b and 36g).
On February 12, 2009, the Company amended its five-year and three-year credit facility agreements with BCA 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.
16.
LOANS PAYABLE (continued)
b.BCA (continued)
·
Credit Facility 3
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, which is subject to change by BCA depending on the market condition. 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. The loan has an effective interest rate of 11.65% per annum.
On June 25, 2009, the Company drew down the full amount of the facility.
On April 28, 2010, the Company received a letter from BCA regarding the change of interest rate from 3-month JIBOR plus 4.00% per annum to 3-month JIBOR plus 2.25% per annum, effective on June 25, 2010.
On June 25, 2010, the Company paid the first annual installment amounting to Rp100,000.
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 (Notes 36b and 36g).
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
c.
AB Svensk Exportkredit (“SEK”), Sweden with Guarantee from Export Kredit Namnden (“EKN”)
On August 18, 2009, the Company obtained credit facilities guaranteed by EKN, Sweden with maximum amounts totalling US$315,000 for the purchase of Ericsson telecommunications equipment, with The Hongkong and Shanghai Banking Corporation Limited (“HSBC”), Hong Kong and ABN Amro N.V. (“ABN-Amro”), Hong Kong Branch as the original lenders and arrangers, while HSBC Bank PLC, London, United Kingdom acted as the facility agent and EKN agent.
The agreement stipulates that the original lenders may assign any of their rights or transfer any of their rights and obligations as provided in the agreement to another bank or financial institution or SEK or EKN. On September 2, 2009, the original lenders transferred such rights and obligations to SEK.
The credit facilities consist of facilities A, B and C with maximum amounts of US$100,000, US$155,000 and US$60,000, respectively. The loans from the facilities bear interest at certain rates per annum as determined in the agreement and the related interest is payable semi-annually until the respective maturity dates. Facilities A and B have effective interest rates of 3.23% and 4.21% per annum, respectively. The repayment of each of facilities A, B and C shall be made in 14 installments starting six months after May 31, 2009, February 28, 2010 and November 30, 2010, respectively.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
Voluntary early repayment for each facility is permitted only if the repayment for facilities A, B and C is made at the same time and in proportionate amount for each of facilities A, B and C after the last day of the availability period and on a repayment date subject to 20 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$5,000 and in an amount divisible by US$500). Any repayment shall satisfy the obligations of loan repayment in inverse chronological order for the relevant facility.
16.
LOANS PAYABLE (continued)
c.
AB Svensk Exportkredit (“SEK”), Sweden with Guarantee from Export Kredit Namnden (“EKN”) (continued)
As of September 30, 2010, the Company has already drawn US$100,000 and US$155,000 from facilities A and B, respectively.
On November 30, 2009 and May 27, 2010, the Company paid the first and second semi-annual installments, respectively, for facility A amounting to US$7,142.86 each.
On August 28, 2010, the Company paid the first semi-annual installment for facility B amounting to US$11,071.43.
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 loan has an effective interest rate of 7.86% per annum. 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.
The Company has already drawn from this credit facility the amount of US$157,186.69.
Voluntary early repayment is permitted only with a corresponding proportionate voluntary prepayment under SINOSURE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice. The Company may repay the whole or any part of the loan before the due date (in the minimum amount of US$10,000 and in an amount divisible by US$1,000). Any repayment shall satisfy the obligations of loan repayment in inverse chronological order.
On March 29 and September 29, 2010, the Company paid the first and second semi-annual installments amounting to US$7,859.34 each.
·
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 loan has an effective interest rate of 2.90% per annum. 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.
The Company has already drawn the full amount of US$44,200 from this credit facility.
16.
LOANS PAYABLE (continued)
d. HSBC France (continued)
·
12-year SINOSURE Term Facility Agreement (“SINOSURE Facility”) (continued)
Voluntary early repayment is permitted only with a corresponding proportionate voluntary prepayment under COFACE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice. The Company may repay the whole or any part of the loan before the due date (in the minimum amount of US$10,000 and in an amount divisible by US$1,000). Any repayment shall satisfy the obligations of loan repayment in inverse chronological order.
On March 29 and September 29, 2010, the Company paid the first and second semi-annual installments amounting to US$2,210 each.
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.
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 has an effective interest rate of 10.86% per annum.
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, 2009 and 2010 amounted to US$14,068.44 (equivalent to Rp136,197) and US$6,883.27 (equivalent to Rp61,426), 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 17), (iii) default under the Company’s USD Notes and IDR Bonds (Note 17), (iv) redemption, purchase or
cancellation of the Guaranteed Notes Due 2012 (Note 17) and there are no USD Indosat Notes outstanding upon such redemption, purchase or cancellation, and (v) change of control in the Company.
On June 24, 2008, the Company received a waiver letter from GSI affirming that it will not terminate the loan due to the change of control in the Company (Note 20).
16.
LOANS PAYABLE (continued)
f.
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 loan has an effective interest rate of 10.54% 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 (Note 36b).
On January 30, 2009 and February 1, 2010, the Company paid the first and second annual installments, respectively, amounting to Rp50,000 each.
On March 25, 2009, the Company amended the credit facility agreement 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.
g.
9-Year Commercial Facility with HSBC Jakarta Branch, CIMB Niaga (formerly 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 16d). The loan bears interest at floating rates based on U.S. dollar LIBOR plus 1.45% per annum, which is payable semi-annually. The loan has an effective interest rate of 2.36% per annum.
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.
16.
LOANS PAYABLE (continued)
g.
9-Year Commercial Facility with HSBC Jakarta Branch, CIMB Niaga (formerly 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.
Voluntary early repayment is permitted only on each repayment date after the first repayment date subject to 30 days’ prior written notice. The Company may repay the whole or any part of the loan before the due date (in the minimum amount of US$5,000 and in an amountdivisible by US$1,000). Any repayment shall satisfy the obligations of loan repayment proportionately.
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.
On November 27, 2009 and May 27, 2010, the Company paid the first and second semi-annual installments, respectively, amounting to US$1,351.85 each.
h.
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 has an effective interest rate of 3.56% per annum. 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 in an amount 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.
i.
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 annual rate of 14.5%, which is subject to change by CIMB Niaga depending on the market condition. The quarterly repayment of the principal amount at Rp7,500 each started on May 24, 2010 and will continue up to August 24, 2012. Lintasarta has already drawn the full amount of this facility.
Voluntary early repayment is permitted only on interest payment date subject to 15 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties is allowed with penalty determined by CIMB Niaga.
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 Facility 5.
16.
LOANS PAYABLE (continued)
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 rate of 1-month Certificate of Bank Indonesia plus 2.25% per annum. The quarterly repayment of the principal amount at Rp5,000 each started on October 10, 2008 and will continue up to January 10, 2011. Lintasarta has already drawn the full amount of this credit facility.
Voluntary early repayment is permitted only on interest payment date subject to 3 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties is allowed with penalty of 1% of the early repaid amount.
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 Facility 6 from CIMB Niaga.
The scheduled principal payments from 2011 to 2015 and thereafter of all the loans payable as of September 30, 2010 are as follows:
Twelve months ending September 30,
2015 and
2011
2012
2013
2014
thereafter Total
In rupiah
BCA
550,000
1,400,000
150,000
500,000-2,600,000
Mandiri
400,000
1,150,000
150,000
500,000-2,200,000
DBS
75,000
75,000
250,000
-
-400,000
GSI
-
-
434,300
-
-
434,300
CIMB Niaga
39,933
29,983
-
-
-
69,916
Sub-total
1,064,933
2,654,983
984,300
1,000,000-5,704,216
In U.S. dollar
Syndicated U.S. Dollar
Loan facility
(US$450,000)
1,003,950
1,285,056
1,726,794
-
-4,015,800
SEK, Sweden
(US$229,642.86)
325,089
325,089
325,089
325,089748,977
2,049,333
HSBC France
(US$181,248.02)
179,718
179,718
179,718
179,718
898,585
1,617,457
9-Year Commercial
Facility (US$24,333.30)
24,128
30,160
36,192
36,19290,479217,151
FEC (US$7,600)
67,822
-
-
-
-
67,822
GSI (US$6,883.27)
-
-
61,426
-
-
61,426
Sub-total
1,600,707
1,820,023
2,329,219
540,999
1,738,041
8,028,989
Total
2,665,640
4,475,006
3,313,519
1,540,9991,738,041
Less:
- unamortized debt issuance costs and consent solicitation fees
(212,002)
- unamortized debt discount
(20,990)
Net
13,500,213
16.
LOANS PAYABLE (continued)
The amortization of debt issuance, discount and consent solicitation fees on the loans for the nine months ended September 30, 2009 and 2010 amounted to Rp21,819 and Rp51,299, respectively
(Note 25).
As of September 30, 2009 and 2010, the Companies have complied with all financial ratios required to be maintained under the loan agreements.
17.
BONDS PAYABLE
This account consists of the following:
2009
2010
Guaranteed Notes Due 2020 - net of unamortized notes discount
of Rp30,189 and unamortized notes issuance cost of Rp62,344
-
5,708,067
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation fees of
Rp13,204 in 2009 and
Rp11,496 in 2010
2,586,796
2,588,504
Seventh Indosat Bonds in Year 2009 with Fixed Rates - net of
unamortized bonds issuance cost of Rp5,576
-
1,294,424
Sixth Indosat Bonds in Year 2008 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp7,434 in 2009 and Rp5,839 in 2010
1,072,566
1,074,161
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp4,669 in 2009
and Rp2,079 in 2010
810,331
812,921
Third Indosat Bonds in Year 2003 with Fixed Rates - net of
unamortized
bonds issuance cost and consent
solicitation fees of Rp2,679 in 2009
and Rp163 in 2010
637,321
639,837
Indosat Sukuk Ijarah III in Year 2008 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp3,830 in 2009
and Rp2,878 in 2010
566,170
567,122
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp1,955 in 2009
and Rp1,609 in 2010
398,045
398,391
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost and consent solicitation fees of
Rp1,648 in 2009 and Rp733 in 2010
283,352
284,267
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
- net of unamortized consent solicitation fees of Rp656 in 2009
and Rp653 in 2010
199,344
199,347
Indosat Sukuk Ijarah IV in Year 2009 - net of unamortized
bonds issuance cost of Rp901
-
199,099
Limited Bonds II issued by Lintasarta*
25,000
25,000
Limited Bonds I issued by Lintasarta**
16,989
16,989
Guaranteed Notes Due 2010 - net of unamortized notes issuance
cost of Rp4,678
2,267,908
-
Guaranteed Notes Due 2012 - net of unamortized notes discount
of Rp3,375 and unamortized notes issuance cost of Rp7,064
1,048,759
-
Total bonds payable
9,912,581
13,808,129
17.
BONDS PAYABLE (continued)
2009
2010
Less current maturities (net of unamortized bonds
issuance
cost and consent solicitation fees
totalling Rp2,975)
-
1,737,025
Long-term portion
9,912,581
12,071,104
*
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.
Guaranteed Notes Due 2020
On July 29, 2010 the Company, through IPBV, issued Guaranteed Notes (“GN”) 2020 with fixed rate and with a total face value of US$650,000. The notes were issued at 99.478% of their principal amount. The notes bear interest at the fixed rate of 7.375% per annum payable in semi-annual installment due on January 29 and July 29 of each year, commencing January 29, 2011. The notes have an effective interest rate of 7.61% per annum. The notes will mature on July 29, 2020.
The notes will be redeemable at the option of IPBV, in whole or in part, at any time on or after July 29, 2015 at prices equal to 103.6875%, 102.4583%, 101.2292% and 100% of the principal amount during the 12-month period commencing July 29, 2015, 2016, 2017 and 2018 and thereafter, respectively, plus accrued and unpaid interest and additional amounts, if any. In addition, prior to July 29, 2013, IPBV 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 107.375% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. The notes are also redeemable at option of IPBV or the Company, in whole but not in part, at any time, at a price equal to 100% of principal amount thereof, plus any accrued and unpaid interest to (but not including) the redemption date and any additiona l amounts, in the event of certain changes effecting withholding taxes in Indonesia and the Netherlands. Upon a change in control of the Company (including sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company’s assets), the holder of the notes has the right to require IPBV to repurchase all or any part of such holder’s notes at a purchase price equal to 101% of principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
The net proceeds, after deducting the underwriting fees and offering expenses, were received on July 29, 2010 and used (i) to fund the offers to purchase the outstanding Guaranteed Notes Due 2010 and Guaranteed Notes Due 2012 and any consent solicitation relating to, or redemption of, such notes and
(ii) to refinance part of the Company’s other existing indebtedness.
The notes are unconditionally and irrevocably guaranteed by the Company.
Based in the notes indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
Based on the latest rating reports (released in July and August 2010), the notes have BB (stable outlook), B1 (negative outlook) and BBB- (stable outlook) ratings from Standard & Poor’s (“S&P”), Moody’s Investors Service (“Moody’s”) and Fitch ratings (“Fitch”), respectively.
17.
BONDS PAYABLE (continued)
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. The bonds have an effective interest rate of 10.33% per annum. 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. The bonds have an effective interest rate of 10.75% per annum. These bonds will mature on May 29, 2017.
The bonds will mature before the maturity dates if, after the 1stanniversary of the bonds, the Company exercises its option to buy back part or all of the bonds at market price temporarily or as an early settlement.
PT Kustodian Sentral Efek Indonesia (“KSEI”), acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
on August 29, 2007 and every quarter thereafter up to May 29, 2014.
Series B
:
on 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 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA+ (negative outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”) (Note 36a).
Seventh Indosat Bonds in Year 2009 with Fixed Rates
On December 8, 2009, the Company issued its Seventh Indosat Bonds in Year 2009 with Fixed Rates (“Seventh Indosat Bonds”), with BRI as the trustee as covered under a Trustee Agreement. The bonds have a total face value of Rp1,300,000. The bonds consist of two series:
·
Series A bonds amounting to Rp700,000 which bear interest at the fixed rate of 11.25% per annum starting December 8, 2009. The bonds have an effective interest rate of 11.38% per annum. These bonds will mature on December 8, 2014.
·
Series B bonds amounting to Rp600,000 which bear interest at the fixed rate of 11.75% per annum starting December 8, 2009. The bonds have an effective interest rate of 11.85% per annum. These bonds will mature on December 8, 2016.
17. BONDS PAYABLE (continued)
Seventh Indosat Bonds in Year 2009 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.
KSEI, acting as payment agent, shall pay interest on the bonds, as follows:
Series A
:
on March 8, 2010 and every quarter thereafter up to December 8, 2014.
Series B
:
on March 8, 2010 and every quarter thereafter up to December 8, 2016.
The Company received the proceeds of the bonds on December 8, 2009. The net proceeds, after deducting the underwriting fee and offering expenses, were used for the purchase ofBase Station Subsystem 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 November 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo (Note 36a).
Sixth Indosat Bonds in Year 2008 with Fixed Rates
On April 9, 2008, the Company issued its Sixth Indosat Bonds in Year 2008 with Fixed Rates (“Sixth Indosat Bonds”), with BRI as the trustee 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. The bonds have an effective interest rate of 10.5% per annum. 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. The bonds have an effective interest rate of 11.0% per annum. 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
:
on July 9, 2008 and every quarter thereafter up to April 9, 2013.
Series B
:
on July 9, 2008 and every quarter thereafter up to April 9, 2015.
The Company received the proceeds of the bonds on April 9, 2008. The net proceeds, after deducting the underwriting fee and offering expenses, were used for capital expenditure to expand the Company’s cellular network.
Based on the Trustee Agreement, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
16.
BONDS PAYABLE (continued)
Sixth Indosat Bonds in Year 2008 with Fixed Rates (continued)
The bonds are neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that have been specifically used as security to its other creditors, are used aspari-passu security to all of the Company’s other liabilities including the bonds.
Based on the 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo (Note 36a).
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 have an effective interest rate of 12.38% per annum. The bonds will mature on June 21, 2011.
The bonds will mature before maturity date if after the 1st anniversary 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. The Company did not exercise its early settlement option to make early payment for all the bonds on the 4th anniversary of the bonds at 100% of the bonds’ nominal value.
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 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo (see Note 36a).
Third Indosat Bonds in Year 2003 with Fixed Rates
On October 22, 2003, the Company issued 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 were issued in two series. The Series A matured on October 21, 2008.
The Series B bonds which amount to Rp640,000 bear interest at the fixed rate of 12.875% per annum for 7 years starting October 22, 2003 (Note 36h). The bonds have an effective interest rate of 13.31% per annum.
The bonds will mature before maturity date if after the 1st anniversary 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. The Company did not exercise its early settlement option to make early payment for all the bonds on the 6th anniversary of the bonds at 100% of the bonds’ nominal value.
17. BONDS PAYABLE (continued)
Third Indosat Bonds in Year 2003 with Fixed Rates (continued)
KSEI, acting as payment agent, pays interest on the Series B bonds, on 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.
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.
Based on the latest rating report (released in November 2009), the series B bonds haveidAA+ (negative outlook) rating from Pefindo (Note 36a).
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.
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 July 9, 2008 and every quarter thereafter up to April 9, 2013. The bonds have an effective Ijarah return rate of 10.49% per annum.
The Company received the proceeds of the bonds on April 9, 2008. 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 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo (Note 36a).
17. BONDS PAYABLE (continued)
Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”)
On May 29, 2007, the Company issued its Sukuk Ijarah II, with BRI as the trustee 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 August 29, 2007 and every quarter thereafter up to May 29, 2014. The bonds have an effective Ijarah return rate of 10.34% per annum.
The Company received the proceeds of the bonds on May 31, 2007. 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 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo (Note 36a).
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 June 21, 2005 and every quarter thereafter up to September 21, 2011. The bonds have an effective Ijarah return rate of 12.39% per annum.
The bonds will mature before maturity date if after the 1st anniversary 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. The Company did not exercise its early settlement option to make early payment for all the bonds on the 4th anniversary of the bonds at 100% of the bonds’ nominal value.
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.
17.
BONDS PAYABLE (continued)
Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”) (continued)
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.
Based on the latest rating report (released in November 2009), the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo (Note 36a).
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 have an effective interest rate of 16.05% per annum. The bonds will mature before maturity date if the Company or the bondholder exercises the following options:
-
Buy Option
:
the Company has the right to make early payment for all the Series B bonds on the 5th, 10th, 15th, 20th and 25th anniversaries of the bonds at 101% of the bonds’ nominal value.
-
Sell Option
:
the bondholder has the right to ask for early settlement from the Company at 100% of the bonds’ nominal value: 1) at any time, if the rating of the bonds decreases toidAA- or lower (Special Sell Option) or 2) on the 15th, 20th and 25th anniversaries of the bonds (Regular Sell Option).
KSEI, acting as payment agent, pays interest on the Series B bonds on 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 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.
Based on the latest rating report (released in November 2009), the bonds haveidAA+ (negative outlook) rating from Pefindo (Note 36a).
17.
BONDS PAYABLE (continued)
Indosat Sukuk Ijarah IV in Year 2009 (“Sukuk Ijarah IV”)
On December 8, 2009, the Company issued its Sukuk Ijarah IV, with BRI as the trustee as covered under a Trustee Agreement. The bonds have a total face value of Rp200,000. The bonds consist of two series:
·
Series A bonds amounting to Rp28,000 with annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp3,150, payable on March 8, 2010 and every quarter thereafter up to December 8, 2014. The bonds have an effective Ijarah return rate of 11.38% per annum.
·
Series B bonds amounting to Rp172,000 with annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp20,210, payable on March 8, 2010 and every quarter thereafter up to December 8, 2016. The bonds have an effective Ijarah return rate of 11.86% per annum.
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.
The Company received the proceeds of the bonds on December 8, 2009. The net proceeds, after deducting the underwriting fee and offering expenses, were used for the purchase ofBase Station Subsystem 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 November 2009), the bonds haveidAA(sy)+ (negative outlook) rating from Pefindo (Note 36a).
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 bonds were used for capital expenditure to expand Lintasarta’s telecommunications peripherals.
On July 17, 2006, Lintasarta obtained approval from CIMB Niaga on the issuance of the limited bonds (Note 16).
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 Lintasarta’s 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 Limited Bonds II agreement, after being amended to accommodate the changes in maturity date and minimum limit of floating interest rates, was finalized.
17.
BONDS PAYABLE (continued)
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.
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 Lintasarta’s 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 Limited Bonds I agreement, after being amended to accommodate the changes in maturity date and minimum limit of floating interest rates, was finalized.
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 have an effective interest rate of 7.93% per annum. 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 2008, 2009 and 2010, respectively. 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 the Company (including sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company’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, pl us accrued and unpaid interest and additional amounts, if any, to the purchase date.
The net proceeds, after deducting the underwriting fee and offering expenses, were received on November 5, 2003 and used primarily to repay a portion of Indosat’s (including Satelindo’s and IM3’s) outstanding indebtedness amounting to Rp1,500,000 and US$447,500.
Based on the notes indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The notes are unconditionally and irrevocably guaranteed by the Company.
17.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010 (continued)
On January 11, 2006, IFB released a 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 20). 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.
On May 12, 2010, the Company, together with IFB and IIFB, announced the commencement by IFB and IIFB of cash tender offers to purchase for cash any or all of IFB's outstanding Guaranteed Notes Due 2010 (the "2010 Notes") and IIFB's outstanding Guaranteed Notes Due 2012 (the “2012 Notes”). In addition to its offer to purchase the 2010 Notes, IFB is also soliciting, as one proposal, consents to certain proposed amendments to the amended and restated indenture, dated as of January 25, 2006 (the "2010 Indenture"), which would shorten the notice period for optional redemption of the 2010 Notes and to the release of IIFB as a guarantor under the 2010 Indenture.
On August 2, 2010, IFB paid a total of US$174,699 (equivalent to Rp1,561,460) for the purchased portion of the 2010 Notes under tender offer with a total principal amount of US$167,744 (equivalent to Rp1,499,564) and US$100 (equivalent to Rp894) at price equal to 102.1875% and 101.9375%, respectively, of the principal amount purchased, plus the accrued and unpaid interest up to settlement date and other additional expense.
On August 10, 2010, IFB paid a total of US$69,536 (equivalent to Rp622,556) for the remaining purchased portion of the 2010 Notes which was called with a total principal amount of US$66,873 (equivalent to Rp598,715) at a price equal to 101.9375% of principal amount called, plus the accrued and unpaid interest up to settlement date and other additional expense.
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 have an effective interest rate of 8.13% per annum. The notes will mature on June 22, 2012.
17.BONDS PAYABLE (continued)
Guaranteed Notes Due 2012 (continued)
The notes will be redeemable at the option of IIFB, in whole or in part, at any time on or after
June 22, 2010 at prices equal to 103.5625%, 101.7813% and 100.0000% of the principal amount during the 12-month period commencing June 22, 2010, 2011 and 2012, respectively, plus accrued and unpaid interest and additional amounts, if any. In addition, prior to June 22, 2008, IIFB may redeem up to a maximum of 35% of the original aggregate principal amount, with the proceeds of one or more public equity offerings of the Company, at a price equal to 107.125% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. The notes are also redeemable at the option of IIFB, in whole but not in part, at any time, at a price equal to 103.5625% of the principal amount thereof, plus any accrued and unpaid interest and additional amounts to the date of redemption, in the event of certain changes affecting withholding taxes in Indonesia and the Netherlands that would require IIFB or the Company to pay an additional amount in respect of any note in excess of certain amounts. Upon a change in control of the Company (including sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company’s assets), the holder of the notes has the right to require IIFB to repurchase all or any part of such holder’s notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
The net proceeds, after deducting the underwriting fee and offering expenses, were received on June 23, 2005 and used for general corporate purposes, including capital expenditures.
Based on the notes indenture, the Company is required to comply with certain conditions, such as maintaining certain financial ratios.
The notes are unconditionally and irrevocably guaranteed by the Company.
On July 22, 2008, IIFB announced the Change of Control Offer to all holders of the notes
(Note 20). This offer was intended 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.
On May 12, 2010, the Company, together with IFB and IIFB, announced the commencement by IFB and IIFB of cash tender offers to purchase for cash any or all of IFB’s outstanding Guaranteed Notes Due 2010 (the”2010 Notes”) and IIFB’s outstanding Guaranteed Notes Due 2012 (the “2012 Notes”).
On August 2, 2010, IIFB paid a total of US$58,614 (equivalent to Rp523,892) for the purchased portion of the 2012 Notes under tender offer with a total principal amount of US$55,835 (equivalent to Rp499,053) and US$200 (equivalent to Rp1,788) at a price equal to 103.8125% and 103.5625%, respectively, of the principal amount purchased, plus the accrued and unpaid interest up to settlement date and other additional expenses.
On September 2, 2010, IIFB paid a total US$56,016 (equivalent to Rp504,592) for the remaining purchased portion of the 2012 Notes which was called with a total principal amount of US$53,375 (equivalent to Rp480,802) at a price equal to 103.5625% of principal amount called, plus the accrued and unpaid interest up to settlement date and other additional expenses.
17.
BONDS PAYABLE (continued)
The scheduled principal payments of all the bonds payable outstanding as of September 30, 2010 are as follows:
Twelve months ending September 30,
2015 and
2011
2012
2013
2014
thereafter*
Total
In U.S. dollar
Guaranteed Notes *
Due 2020
(US$650,000)
-
-
-
-
5,800,600
5,800,600
In Rupiah
Fifth Indosat Bonds *
-
-
-
1,230,000
1,370,0002,600,000
Seventh Indosat Bonds*
-
-
-
-
1,300,000
1,300,000
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
Sukuk Ijarah IV *
-
-
-
-
200,000
200,000
Limited Bonds II
-
25,000
-
-
-
25,000
Limited Bonds I
-
16,989
-
-
-
16,989
Sub-total
1,740,000
41,989
1,330,000
1,630,0003,390,0008,131,989
Total
1,740,000
41,989
1,330,000
1,630,000
9,190,600
Less:
-
unamortized notes issuance cost
s
(62,344)
-
unamortized bonds issuance costs and consent solicitation fees
(31,927)
-
unamortized notes discount
(30,189)
Net
13,808,129
*
Refer to previous discussion on early repayment options for each bond/note.
The amortization of bonds issuance cost, consent solicitation fees, notes issuance cost and notes discount for the nine months ended September 30, 2009 and 2010 amounted to Rp11,277 and Rp23,388, respectively (Note 25).
As of September 30, 2009 and 2010, the Companies have complied with all financial ratios required to be maintained under the Notes Indenture and Trustee Agreements.
18. FINANCIAL ASSETS AND LIABILITIES
The Companies have various financial assets such as trade and other accounts receivable, cash and cash equivalents and short-term investments, which arise directly from the Companies’ operations. The Companies’ principal financial liabilities, other than derivatives, consist of loans and bonds payable, procurement payable, trade and other accounts payable. The main purpose of these financial liabilities is to finance the Companies’ operations. The Company also enters into derivative transactions, primarily cross currency swaps and interest rate swaps, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies.
16.
FINANCIAL ASSETS AND LIABILITIES (continued)
The following table sets forth the Companies’ financial assets and financial liabilities as of
September 30, 2010:
Amount
Financial Assets
Held for trading
Derivative assets
119,462
Loans and receivable
Cash and cash equivalents
6,185,065
Accounts receivable - trade and others - net
1,585,026
Other current financial assets
43,191
Due from related parties - net
7,960
Other non-current financial assets
85,842
Available for sale
Short-term investments - net
-
Other long-term investments - net
2,730
Total Financial Assets
8,029,276
Financial Liabilities
Held for trading
Derivative liabilities
284,631
Liabilities at amortized cost
Accounts payable - trade
619,341
Procurement payable
4,000,682
Accrued expenses
1,767,281
Deposits from customers
87,115
Loans payable - current maturities
2,665,040
Bonds payable - current maturities
1,737,025
Other current financial liabilities
46,329
Due to related parties
20,998
Loans payable - net of current maturities
10,835,173
Bonds payable - net of current maturities
12,071,104
Total Financial Liabilities
34,134,719
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
18.
FINANCIAL ASSETS AND LIABILITIES (continued)
The following table sets forth the carrying values and estimated fair values of the Companies financial instruments that are carried in the consolidated balance sheet as of September 30, 2010:
Carrying Amount | Fair Value Amount | |
Current Financial Assets | ||
Cash and cash equivalents | 6,185,065 | 6,185,065 |
Short-term investments - net | - | - |
Accounts receivable - trade and others - net |
1,585,026 |
1,585,026 |
Derivative assets | 119,462 | 119,462 |
Other current financial assets | 43,191 | 43,191 |
Total current financial assets | 7,932,744 | 7,932,744 |
Non-Current Financial Assets | ||
Due from related parties - net | 7,960 | 6,997 |
Other long-term investments - net | 2,730 | 2,730 |
Other non-current financial assets | 85,842 | 85,278 |
Total non-current financial assets | 96,532 | 95,005 |
Total Financial Assets | 8,029,276 | 8,027,749 |
Current Financial Liabilities | ||
Accounts payable - trade | 619,341 | 619,341 |
Procurement payable | 4,000,682 | 4,000,682 |
Accrued expenses | 1,767,281 | 1,767,281 |
Deposits from customers | 87,115 | 87,115 |
Derivative liabilities | 284,631 | 284,631 |
Loans payable - current maturities | 2,665,040 | 2,633,541 |
Bonds payable - current maturities | 1,737,025 | 1,759,964 |
Other current financial liabilities | 46,329 | 46,329 |
Total current financial liabilities | 11,207,444 | 11,198,884 |
Non-Current Financial Liabilities | ||
Due to related parties | 20,998 | 18,457 |
Loans payable - net of current maturities | 10,835,173 | 9,893,118 |
Bonds payable - net of current maturities | 12,071,104 | 13,090,896 |
Total non-current financial liabilities | 22,927,275 | 23,002,471 |
Total Financial Liabilities | 34,134,719 | 34,201,355 |
The fair values of the financial assets and liabilities are presented at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:
18.
FINANCIAL ASSETS AND LIABILITIES (continued)
Short-term financial assets and liabilities:
·
Short-term financial instruments with remaining maturities of one year or less (cash and cash equivalents, trade and other receivables, other current financial assets, trade payables, procurement payable, accrued expenses, deposits from customers and other current financial liabilities)
These financial instruments approximate their carrying amounts largely due to their short-term maturities.
·
Derivative Financial Instruments
Cross currency swap contracts and currency forward contracts (including bifurcated embedded derivative)
These derivatives are measured at their fair values using internal valuation techniques as no quoted market prices exist for such instruments. The principal technique used to value these instruments is the use of discounted cash flows. The key inputs include interest rate yield curves, foreign exchange rates, Credit Default Spread (“CDS”), and the spot price of the underlying instruments.
Interest rate swap contracts
These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include interest rate yield curves and payment dates.
Long-term financial assets and liabilities:
·
Long-term fixed-rate and variable-rate financial liabilities (unquoted loans and bonds payable)
The fair value of these financial liabilities is determined by discounting future cash flows using applicable rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities.
·
Other long-term financial assets and liabilities (due from/to related parties, other non-current financial assets and liabilities)
Estimated fair value is based on discounted value of future cash flows adjusted to reflect counterparty risk (for financial assets) and the Companies’ own credit risk (for financial liabilities) and using risk-free rates for similar instruments.
·
Financial instruments quoted in an active market
The fair value of the bonds issued by the Company which are traded in an active market is determined with reference to their quoted market prices.
For equity investments classified as available-for-sale, the fair value is determined based on the latest market quotation as published by the Indonesia Stock Exchange as of September 30, 2010.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
19.
EMPLOYEE BENEFIT OBLIGATIONS
This account consists of non-current portion of employee benefit obligations as follows:
2009
2010
Post-retirement healthcare (Note 26)
532,568
618,653
Labor Law 13 (Note 26)
137,448
178,377
Post-retirement benefit of salary continuation
before retirement
94,169
114,770
Service award
32,816
37,601
Accumulated leave benefits
1,004
1,844
Total
798,005
951,245
20.
CAPITAL STOCK
The Company’s capital stock ownership as of September 30, 2009 and 2010 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
2009
A Share
The Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
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
2010
A Share
The Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
3,532,056,600
353,206
65.00
The Government
776,624,999
77,662
14.29
SKAGEN Funds (SKAGEN AS)
277,076,269
27,708
5.10
Directors:
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
848,165,631
84,816
15.61
Total
5,433,933,500
543,393
100.00
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.
20.
CAPITAL STOCK (continued)
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 16e and 17) and all of STTC’s affiliations ceased to be related parties of the Companies (Note 27).
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 May 29, 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.
21.
OPERATING REVENUES
This account consists of the following:
2009
2010
Cellular
Value-added services
4,346,195
5,408,231
Usage charges
4,238,100
5,368,861
Interconnection revenues (Note 33)
1,307,199
820,017
Tower leasing (Note 30)
17,480
166,944
Sale of Blackberry handsets
76,713
32,836
Monthly subscription charges
132,673
2,477
Connection fee
9,263
958
Others
89,637
114,028
Sub-total
10,217,260
11,914,352
MIDI
IP VPN
365,766
449,565
Internet
542,710
404,245
World link and direct link
284,142
207,052
Frame net
202,209
178,616
Application services
159,441
167,252
Leased line
146,881
134,912
Satellite lease
95,455
94,399
Digital data network
119,070
67,239
MPLS
42,914
44,216
Others
50,471
63,380
Sub-total
2,009,059
1,810,876
21.
OPERATING REVENUES (continued)
2009
2010
Fixed Telecommunication
International Calls
1,215,539
888,161
Fixed Wireless
192,045
134,518
Fixed Line
98,295
95,172
Others
668
-
Sub-total
1,506,547
1,117,851
Total
13,732,866
14,843,079
Operating revenues from related parties amounted to Rp1,123,404 and Rp1,176,404 for the nine months ended September 30, 2009 and 2010, respectively. These amounts represent 8.18% and 7.93% of the total operating revenues for the nine months ended September 30, 2009 and 2010, respectively (Note 27).
The operating revenues from interconnection services are presented on a gross basis (Note 2o).
22.
OPERATING EXPENSES - COST OF SERVICES
This account consists of the following:
2009
2010
Interconnection (Note 33)
1,424,994
1,333,249
Radio frequency fee
946,282
1,183,784
Maintenance
615,374
689,222
Utilities
581,224
533,125
Rent
340,592
369,264
Leased circuits
383,807
280,089
Cost of SIM cards and pulse reload vouchers
251,522
188,296
USO (Note 32)
156,428
161,338
Blackberry access fee
45,544
135,073
Concession fee (Note 32)
64,704
85,023
Installation
31,456
66,617
Cost of handsets and modems
157,990
64,714
Delivery and transportation
60,785
64,682
Billing and collection
31,912
47,348
License
22,849
21,374
Others
83,960
67,907
Total
5,199,423
5,291,105
Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers
(Note 2n).
23.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2009
2010
Salaries
323,928
362,929
Incentives and other employee benefits
208,534
235,760
Bonuses
170,559
156,188
Employee income tax
117,442
107,101
Post-retirement healthcare benefits (Note 26)
66,197
79,291
Medical expense
51,216
51,969
Outsourcing
65,710
48,553
Pension (Note 26)
16,609
34,874
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 26)
29,459
31,816
Early retirement*
33,945
11,761
Others
14,075
18,222
Total
1,097,674
1,138,464
*
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. For the nine months ended September 30, 2009 and 2010, there were 71 and 5 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation for the nine months ended September 30, 2009 and 2010 amounted to Rp24,754 and Rp29,233, respectively.
24.
OPERATING EXPENSES- GENERAL AND ADMINISTRATION
This account consists of:
2009
2010
Rent
98,895
83,662
Professional fees
81,417
72,737
Utilities
49,168
71,243
Provision for doubtful accounts (Note 5)
88,421
54,344
Transportation
42,581
44,797
Office
32,475
35,537
Insurance
20,881
27,355
Catering
18,048
18,222
Training, education and research
11,764
12,346
Communication
14,031
6,555
Others (each below Rp10,000)
39,600
37,125
Total
497,281
463,923
25.
OTHER EXPENSES - FINANCING COST
This account consists of:
2009
2010
Interest on loans
1,317,466
1,585,365
Excess of purchase price over nominal value
due to redemption of GN 2010 and GN 2012
-
81,142
Amortization of debt and bonds issuance
costs, consent solicitation fees and discount (Notes 16 and 17)
33,096
74,687
Bank charges
8,627
3,777
Consent solicitation
-
83
Total
1,359,189
1,745,054
26.
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 the premium payment pattern were changed.
Before the amendment, the premium was regularly paid annually until the plan would be fully funded and the benefits consisted of retirement benefit (regular monthly or lump-sum pension) and death insurance. In conjunction with the amendment, the plan would be fully funded after making installment payments up to January 2002 of the required amount to fully fund the plan determined as of September 1, 2000. The amendment also includes an additional benefit in the form of thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri (“Moslem Holiday”).
The amendment covers employees registered as participants of the pension plan as of
September 1, 2000 and includes an increase in basic salary pension by 9% compounded annually starting from September 1, 2001. The amendment also stipulates that there will be no increase in the premium even in cases of mass employee terminations or changes in marital status.
The total premium installments based on the amendment amounted to Rp355,000 and were paid on due dates.
On March 1, 2007, the Company entered into an agreement with Jiwasraya to provide defined death insurance plan to 1,276 employees as of January 1, 2007, who are not covered by the defined benefit pension plan as stated above. Based on the agreement, a participating employee will receive:
·
Expiration benefit equivalent to the cash value at the normal retirement age, or
·
Death benefit not due to accident equivalent to 100% of insurance money plus cash value when the employee dies not due to accident, or
·
Death benefit due to accident equivalent to 200% of insurance money plus cash value when the employee dies due to accident.
The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, February to December 2008, January to September 2009 and January to September 2010, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees, Rp407 for additional 80 employees, and Rp20 for additional 4 employees, respectively.
26.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
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 the 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.
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 each for the nine months ended September 30, 2009 and 2010.
The net periodic pension cost for the pension plans for the nine months ended September 30, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2008 and 2009, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2009
2010
Annual discount rate
12.0%
8.5 - 10.5%
*
Expected annual rate of return on plan assets4.5 - 9.0% 4.5 - 9.0%
Annual rate of increase in compensation
3.0 - 9.0%
3.0 - 9.0%
Mortality rate (Indonesian Mortality Table - TMI)
TMI 1999
TMI 1999
* Revised discount rate used by the Company following the changes in market yield of Government Bonds at August 31, 2010.
26.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
a.
The composition of the net periodic pension cost for the nine months September 30, 2009 and 2010 is as follows:
2009
2010
Interest cost
47,736
55,919
Service cost
23,925
31,174
Return on plan assets
(53,981
)
(52,857
)
Amortization of unrecognized actuarial loss (gain)
(1,071)638
Net periodic pension cost (Note 23)
16,609
34,874
b.
The funded status of the plans as of September 30, 2009 and 2010 is as follows:
2009
2010
Plan assets at fair value
800,613
838,733
Projected benefit obligation
(612,901
)
(813,520
)
Excess of plan assets over projected benefit obligation
187,712
25,213
Unrecognized actuarial loss (gain)
(21,691
)
97,376
Net prepaid pension cost
166,021
122,589
c.
Movements in the prepaid pension cost for the nine months ended September 30, 2009 and 2010 are as follows:
2009
2010
Beginning balance
Company
154,441
124,720
Lintasarta
18,659
25,100
Net periodic pension cost
Company
(14,887)
(31,816)
Lintasarta
(1,722)
(3,058)
Refund from Jiwasraya
Company
(530)
(1,662)
Lintasarta
-
(368)
Contribution to Jiwasraya
Company
407
20
Lintasarta
9,653
9,653
Ending balance
Company
139,431
91,262
Lintasarta
26,590
31,327
26.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
d.
Prepaid pension cost consists of:
2009
2010
Current portion (presented as part of “Prepaid Expenses”)
Company
2,712
1,715
Lintasarta
402
725
3,114
2,440
Long-term portion
Company
136,719
89,547
Lintasarta
26,188
30,602
162,907
120,149
Total prepaid pension cost
166,021
122,589
Plan assets as of September 30, 2009 and 2010 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
Defined Contribution Pension Plan
In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3 employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10% - 20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of employees for the nine months ended September 30, 2009 and 2010 amounted to Rp13,506 and Rp34,319, 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, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2008 and 2009, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2009
2010
Annual discount rate
12.0%
9.0 - 10.5%
*
Annual rate of increase in compensation
10.0 - 11.0%
9.0 - 10.0%
* Revised discount rate used by the Company following the changes in market yield of Government Bonds at August 31, 2010.
26.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
a.
The composition of the periodic pension cost under the Labor Law for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Service cost
14,098
16,002
Interest cost
13,979
14,689
Amortization of unrecognized actuarial loss
1,382
1,125
Total periodic pension cost under the Labor Law (Note 23)
29,459
31,816
b.
The composition of the accrued pension cost under the Labor Law as of September 30, 2009 and 2010 is as follows:
2009
2010
Projected benefit obligation
181,347
217,350
Unrecognized actuarial loss
(41,744
)
(26,559)
Unrecognized past service cost
-
(9,811
)
Accrued pension cost
139,603
180,980
c.
Movements in the accrued pension cost under the Labor Law for the nine months ended September 30, 2009 and 2010 are as follows:
2009
2010
Beginning balance
Company
100,518
131,416
Lintasarta
8,609
12,771
IMM
4,202
6,206
Periodic pension cost under the Labor Law
Company
26,238
26,200
Lintasarta
1,972
3,758
IMM
1,249
1,858
Benefit payment
Company
(3,185)
(1,229)
Ending balance
Company
123,571
156,387
Lintasarta
10,581
16,529
IMM
5,451
8,064
As of September 30, 2009 and 2010, the current portion of pension cost under the Labor Law included in accrued expenses (Note 15) amounted to Rp2,155 and Rp2,603, respectively, and the non-current portion included in employee benefit obligations amounted to Rp137,488 and Rp178,377, respectively (Note 19).
26.
PENSION PLAN (continued)
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.
The net periodic post-retirement healthcare cost for the nine months ended September 30, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2008 and 2009, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
2009
2010
Annual discount rate
12.0%
9.5%*
Ultimate cost trend rate
6.0%
6.0%
Next year trend rate
18.0%
16.0%
Period to reach ultimate cost trend rate
6 years
5 years
* Revised discount rate used by the Company following the changes in market yield of Government Bonds at August 31, 2010.
a.
The composition of the periodic post-retirement healthcare cost for the nine months ended September 30, 2009 and 2010 is as follows:
2009
2010
Interest cost
44,335
49,439
Service cost
14,023
22,013
Amortization of unrecognized past service cost
7,839
7,839
Periodic post-retirement
healthcare cost (Note 23)
66,197
79,291
b.
The composition of the accrued post-retirement healthcare cost as of September 30, 2009 and 2010 is as follows:
2009
2010
Projected benefit obligation
543,226
667,467
Unrecognized past service cost
(44,319
)
(33,866
)
Unrecognized actuarial gain (loss)
43,315(2,150
)
Accrued post-retirement healthcare cost
542,222
631,451
26.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
c.
Movements in the accrued post-retirement healthcare cost for the nine months ended
September 30, 2009 and 2010 are as follows:
2009
2010
Beginning balance
483,772
561,805
Net periodic post-retirement healthcare cost
66,197
79,291
Benefit payment
(7,747)
(9,645)
Ending balance
542,222
631,451
d.
The effect of a one percentage point change in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs for the nine months ended September 30, 2009 and 2010 and accumulated post-retirement healthcare benefit obligation as of September 30, 2009 and 2010, as follows:
2009
2010
Increase
Service and interest costs
77,187
84,073
Accumulated post-retirement healthcare
benefit obligation
657,932
800,092
Decrease
Service and interest costs
52,170
56,439
Accumulated post-retirement healthcare
benefit obligation
460,783
557,316
As of September 30, 2009 and 2010, the current portion of post-retirement healthcare cost included in accrued expenses (Note 15) amounted to Rp9,654 and Rp12,798 respectively, and the non-current portion included in employee benefit obligations amounted to Rp532,568 and Rp618,653 respectively (Note 19) .
27.
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 (%)
2009
2010
2009
2010
Cash and cash equivalents (Note 4)
State-owned banks
1,193,998
4,699,333
2.188.34
Accounts receivable - trade (Note 5)
State-owned banks
26,820
76,898
0.05
0.14
Telkom
24,654
24,657
0.04
0.04
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
26,297
22,781
0.05
0.04
PT Pasifik Satelit Nusantara (“PSN”)
2,952
11,786
0.01
0.02
PT Citra Sari Makmur (“CSM”)
9,301
11,072
0.020.02
PT Pos Indonesia (Persero)
11,020
10,283
0.02
0.02
Qtel
-
4,265
-
0.01
PT Telekomunikasi Selular (“Telkomsel”)
1,394
2,908
0.00
0.01
PT Infomedia Nusantara
1,133
206
0.00
0.00
Others
59,590
39,243
0.11
0.07
Total
163,161
204,099
0.30
0.37
Less allowance for doubtful accounts
46,701
59,913
0.09
0.11
Net
116,460
144,186
0.21
0.26
Prepaid expenses
MOCIT
806,618
827,276
1.47
1.47
Kopindosat
2,453
3,012
0.01
0.01
Jiwasraya (Note 26)
3,114
2,440
0.01
0.01
PT Industri Telekomunikasi
Indonesia (Persero)
(”INTI”)
1,982
2,011
0.00
0.00
Telkom
1,434
1,434
0.00
0.00
Others
2,346
3,389
0.00
0.00
Total
817,947
839,562
1.49
1.49
Other current financial assets
State-owned banks
11,333
29,201
0.02
0.05
Due from related parties
Kopindosat
5,958
5,958
0.01
0.01
Telkomsel
1,394
657
0.00
0.00
Others
2,169
1,991
0.00
0.00
Total
9,521
8,606
0.01
0.01
Less allowance for doubtful accounts
1,246
646
0.00
0.00
Net
8,275
7,960
0.01
0.01
Long-term prepaid pension (Note 26)
Jiwasraya
162,907
120,149
0.30
0.21
Long-term advances
INTI
2,756
3,748
0.01
0.01
Kopindosat
1,217
2,021
0.00
0.00
Total
3,973
5,769
0.01
0.01
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2009
2010
2009
2010
Long-term prepaid rentals
Telkom
19,957
18,523
0.04
0.03
Kopindosat
12,560
12,851
0.020.02
INTI
5,313
4,103
0.010.01
Others
2,702
3,249
0.000.01
Total
40,532
38,726
0.07
0.07
Other non-current financial assets
State-owned banks
41,838
61,233
0.08
0.11
Other non-current assets
Directorate General of Customs
and Excise
26,325
-
0.05
-
Others
-
87
-
0.00
Total
26,325
87
0.05
0.00
Accounts payable - trade
Telkomsel
41,679
27,166
0.12
0.07
PT Indonesia Comnet Plus (“Comnet”)
3,708
-
0.01-
Others
670
1,016
0.00
0.00
Total
46,057
28,182
0.13
0.07
Procurement payable
(Note 13)
Kopindosat
29,984
19,417
0.08
0.05
INTI
40,676
17,471
0.11
0.05
PT Personel Alih Daya
10,199
13,409
0.03
0.04
PT Telkom Cisc
-
10,656
-
0.03
Comnet
-
2,170
-
0.00
Other
228
4,942
0.00
0.01
Total
81,087
68,065
0.22
0.18
Accrued expenses
MOCIT
256,128
191,726
0.70
0.50
PT Perusahaan Listrik Negara
(Persero) (“PLN”)
108,154
148,588
0.300.39
Senior Management
35,199
29,386
0.10
0.08
Kopindosat
1,218
9,126
0.000.02
PT Personel Alih Daya
26,520
7,710
0.07
0.02
Total
427,219
386,536
1.17
1.01
Other current liabilities
Telkomsel
1,664
1,664
0.01
0.01
Due to related parties
TVRI
10,147
17,809
0.03
0.05
Kopindosat
1,490
1,490
0.00
0.00
State-owned banks
962
1,001
0.00
0.00
PLN
10,547
29
0.03
0.00
Others
478
669
0.00
0.00
Total
23,624
20,998
0.06
0.05
27. ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2009
2010
2009
2010
Loans payable (including current
maturities) (Note 16)
State-owned bank
2,591,795
2,194,597
7.08
5.74
Other non-current liabilities
Telkomsel
8,534
6,871
0.02
0.02
Kas Negara
-
1,482
-
0.00
Total
8,534
8,353
0.02
0.02
Percentage to Respective Income
Amount
or Expenses (%)
2009
2010
2009
2010
Operating revenues (Note 21)
Telkom
511,026
454,307
3.72
3.06
Telkomsel
193,543
297,3451.412.00
State-owned banks
140,500
206,200
1.02
1.39
Qtel
6,376
23,568
0.05
0.16
PSN
5,576
19,608
0.04
0.13
Governmental Departments
1,207
14,481
0.00
0.10
PT Pos Indonesia (Persero)
10,491
11,518
0.08
0.08
PT Pertamina (Persero) (“Pertamina”)
7,957
7,391
0.06
0.05
Comnet
4,378
6,711
0.03
0.05
CSM
10,011
4,458
0.07
0.03
PT Angkasa Pura (Persero)
3,310
4,349
0.02
0.03
State-owned universities
2,891
3,361
0.02
0.02
TVRI
19,377
2,879
0.14
0.02
Others
206,761
120,228
1.52
0.81
Total
1,123
404
1,176,404
8.18
7.93
Operating expenses
Cost of services
MOCIT
1,167,414
1,430,145
10.48
11.64
Telkom
553,190
422,501
4.973.44
Telkomsel
424,093
405,175
3.81
3.30
PLN
471,489
358,437
4.23
2.92
PT Personel Alih Daya
48,812
58,862
0.440.48
Kopindosat
4,454
54,173
0.04
0.44
Comnet
30,238
22,758
0.27
0.19
Qtel
-
12,726
-0.10
PT Pos Indonesia (Persero)
4,677
11,331
0.04
0.09
INTI
5,898
7,155
0.05
0.06
PT Perusahaan Gas Negara (Persero) Tbk
(“PGN”)
2,252
1,333
0.020.01
PSN
1,339
748
0.01
0.01
Others
-
415
-
0.00
Total
2,713,856
2,785,759
24.36
22.68
Personnel
Senior Management
120,957
94,126
1.090.77
Jiwasraya (Note 26)
16,609
34,874
0.150.28
PT. Personel Alih Daya
45,998
31,168
0.410.25
Total
183,564
160,168
1.651.30
27. ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income
Amount
or Expenses (%)
2009
2010
2009
2010
General and administration
PLN
53,137
53,672
0.48
0.44
Kopindosat13,179
17,997
0.12
0.15
PT Personel Alih Daya
35,912
9,734
0.32
0.08
Usaha Gedung Bank
Dagang Negara
(“UGBDN”)
647
1,605
0.01
0.01
State-owned banks
-
1,582
-
0.01
Others
2,408
3,218
0.02
0.02
Total
105,283
87,808
0.95
0.71
Other income (expenses)
Interest income
State-owned banks
90,917
85,993
19.06
5.09
Others
228
443
0.05
0.03
Total
91,145
86,436
19.11
5.12
Financing cost
State-owned banks
(161,892
)
(179,488)
(33.94
) (10.63)
Others
(4,859
)
-
(1.02
)
-
Total
(166,751
)
(179,488
)
(34.96
)
(10,63
)
Net
(75,606
)
(93,052)
(15.85
)
(5.51
)
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
Under common control
Cash and cash equivalents,
(“UCC”)
loans payable and operating
revenues - MIDI
2.
Telkom (Notes 30i and 33)
UCC
Operating revenues - cellular,
fixed telecommunications and
MIDI; operating expenses -
cost of services
3.
TVRI
UCC
Operating revenues - MIDI
4.
Qtel
Ultimate stockholder
Operating revenues - fixed
telecommunications
5.
CSM
UCC
Operating revenues - MIDI
27. ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
6.
PSN
UCC
Operating revenues - MIDI
7.
PT Pos Indonesia (Persero)
UCC
Operating revenues - MIDI
8.
Telkomsel (Note 33)
UCC
Operating revenues - cellular and
fixed telecommunications
9.
Comnet
UCC
Operating expenses - cost of
Services
10.
MOCIT
Government agency
Operating revenues - MIDI;
operating expenses - cost of
services
11.
Kopindosat
The Companies’
Operating expenses - personnel
employees cooperative
expenses, general and
administration expenses
12.
Jiwasraya
UCC
Long-term prepaid pension
13.
INTI
UCC
Procurement payable
14.
Directorate General of
Government agency
Other non-current assets
Customs and Excise
15.
PT Personel Alih Daya
Under common
Operating expenses - personnel
significant influence
expenses and cost of services
16.
Senior management
Key management
Operating expenses - personnel
personnel
expenses, prepaid
expense - unamortized
portions of housing and
transformation advances, and
transformation incentives
17.
PLN
UCC
Operating expenses - cost of
Services
18.
Qatar Telecom (Qtel Asia) Pte. Ltd.
Stockholder
Other current financial liabilities -
dividend payables
19.
The Government
Stockholder
Other current financial liabilities -
dividend payables
20.
Pertamina
UCC
Due from related party,
Operating revenues - MIDI
21.
PT Angkasa Pura (Persero)
UCC
Operating revenues - MIDI
27. ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
22.
State-owned universities
UCC
Operating revenues - MIDI
23.
PGN
UCC
Operating revenues - MIDI
24.
PT Infomedia Nusantara
UCC
Operating revenues - MIDI
25. Governmental Departments
Government agency
Operating revenues - MIDI
26.
UGBDN
UCC
Operating expenses - cost of
services
28.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meeting (“ASGM”), the stockholders approved, among others, the appropriation of annual net income for reserve fund and cash dividend distribution, as follows, and the utilization of the remaining amount for reinvestment and working capital.
ASGM Date | Reserve Fund (Rp) | Dividend per Share (Rp) | Dividend Payment Date | |||
2008 Net Income | ||||||
June 11, 2009 | 18,785 | 172.85 | July 22, 2009 | |||
2009 Net Income | ||||||
June 22, 2010 | 14,982 | 137.86 | August 2, 2010 |
Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
DERIVATIVES
The Company entered into several swap and currency forward contracts. Listed below is information related to the contracts and their fair values (net of credit risk adjustment) as of September 30, 2009 and 2010:
Fair Value (Rp)
Notional
2009
2010
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap Contracts:
a.
Goldman Sachs International (“GSI”)
100,000
105,574
-
56,641-
b.
GSI
25,000
-
3,351
-22,542
c.
GSI
75,000
67,562
-
51,806-
d.
StandChart
25,000
8,838
-
-14,025
e.
StandChart
25,000
22,399
-
-2,796
f.
StandChart
25,000
33,336
-
8,388-
g.
HSBC, Jakarta Branch
25,000
19,535
-
-5,225
h.
Merrill Lynch International Bank Limited,
London Branch (“MLIB”)
50,000
5,248
-
-8,194
i.
MLIB
25,000
-
7,780
-449
j.
MLIB
25,000
7,498
-
2,580-
k.
DBS
25,000
1,814
-
35-
l.
GSI
84,000
9,681
-
12-
Sub-total
281,485
11,131
119,46253,231
Currency Forward Contracts:
m.
DBS*
5,000
-
4,925
-
-
Interest Rate Swap Contracts:
n.
HSBC, Jakarta Branch
27,037 with
decreasing amount
-
17,098
-17,628
o.
HSBC, Jakarta Branch
44,200 with
decreasing amount
-
34,111
-31,097
p.
GSI
100,000
-
92,938
-110,486
q.
DBS
25,000 with
decreasing amount
-
14,186
-
12,617
r.
DBS
25,000 with
decreasing amount
-
10,155
-
9,658
s.
Bank of Tokyo MUFJ (“BTMUFJ”)
25,000 with
decreasing amount
-
4,799
-
6,997
t.
BTMUFJ
25,000 with
decreasing amount
-
3,424
-
6,238
u.
BTMUFJ
25,000 with
decreasing amount
-
2,376
-
5,659
v.
StandChart
40,000 with
decreasing amount
-
782
-
7,209
w.
DBS
26,000 with
decreasing amount
-
2,590
-
5,152
x.
DBS
26,000 with
decreasing amount
-
1,361
-
4,502
y.
BTMUFJ
36,500 with
decreasing amount
-
5,219
-
7,303
z.
ING Bank N.V.
25,000 with
decreasing amount
-
3,241
-
3,867
aa.
ING Bank N.V.
33,500
-
3,456
-2,987
Sub-total
-
195,736
-231,400
Total
281,485
211,792
119,462284,631
*
contract entered into in May 2009 and settled in November 2009
The net changes in fair value of the swap and currency forward contracts and embedded derivative (Note 16e), swap income or cost, termination income or cost, and settlement of derivative instruments totaling (Rp387,552) and (Rp378,431) in 2009 and 2010, 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.
29.
DERIVATIVES (continued)
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) | |
2009 | 2010 | |||||
a. | 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 cross currency swap contract. | Every May 5 and November 5 | 32,390 | 28,850 |
b. | 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 | 6,340 | 6,119 |
c. | 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 | 12,503 | 14,450 |
d. | 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 | 6,032 | 5,558 |
e. | 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 | 4,732 | 4,360 |
f. | StandChart | May 12, 2006 - September 22, 2012 Swap Rp217,500 for US$25,000 | 3.45% of US$25,000 | Every June 22 and December 22 | 4,354 | 4,012 |
g. | 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 | 5,357 | 4,527 |
h. | MLIB | 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 | 12,047 |
i. | 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 September 12, 2011, and 4.10% of decreasing U.S. dollar amount as arranged in the contract up to September 12, 2013 | Every June 12 and December 12 | 5,732 | 5,984 |
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
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) | |
2009 | 2010 | |||||
j. | MLIB | 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 | 3,597 |
k. | 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 | 4,577 |
l. | 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 (charged to prepaid expenses) is amortized over the contract period. | - | 41,809 | 41,809 |
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
All cross currency swap contracts with GSI (contracts No. a, b and c) 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 |
m. | DBS* | May 11, 2009 -November 13, 2009 | Rp10,750 to US$1 | November 13, 2009 |
(*) contract entered into in May 2009 and settled in November 2009
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) | |
2009 | 2010 | |||||
n. | 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 | (2,879) | (3,995) |
o. | 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 | (7,309) | (16,920) |
p. | 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) | (24,299) |
q. | 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) | (3,849) |
r. | 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) | (6,676) |
s. | 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) | (4,778) |
t. | 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) | (4,292) |
u. | 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) | (4,778) |
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
29.
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) | |
v. | StandChart | December 19, 2008 - September 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) | (5,384) |
w. | 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) | (3,909) |
x. | 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) | (3,451) |
y. | BTMUFJ | March 2, 2009 - September 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) | (4,901) |
z. | 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) | (3,734) |
aa. | ING Bank N.V. | April 14, 2009 - September 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 | - | (4,199) |
30.
SIGNIFICANT AGREEMENTS AND COMMITMENTS
a.
As of September 30, 2010, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$239,203 (Note 36i) and Rp1,065,672.
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 |
June 30, 2010 | The Procurement of Technology Upgrade for 2G and 3G Telecommunications Network in Kalimantan (including commitment to purchase Software Defined Radio (SDR) equipment) | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$37,773 | US$23,064 |
June 16, 2010 | The Procurement of Telco Infrastructure | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$106,736 and Rp477,607 | US$93,528 and Rp409,340 |
May 16, 2007 | Supply of GSM Cellular Infrastructure | PT Nokia Siemens Networks, Nokia Siemens Networks Oy and Nokia Siemens Networks GmbH & Co. KG. | US$328,127 and Rp1,451,235 | US$14,447 and Rp137,878 |
April 20, 2007 | Telecommunications Equipment Supply and Service | PT Alcatel Lucent Indonesia and Alcatel Shanghai Bell Co. Ltd. | US$69,482 and Rp634,390 | US$1,010 and Rp14,859 |
April 3, 2007 | Supply of GSM Infrastructure | PT Ericsson Indonesia and Ericsson AB | US$383,496 and Rp1,116,980 | US$971 and Rp28,243 |
30.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
a.
On September 17, 2010, the Company received Tax Collection Letters (“STPs”) from the DGT for the underpayment of the Company’s 2008 and 2009 income tax article 26 totalling Rp80,018 (including interest). However, the Company has objection on such tax collection (Note 36d).
b.
On January 29, April 15, May 24 and June 3, 2010, the Company agreed to lease part of its telecommunications towers and sites to PT Hutchison CP Telecommunication (“Hutchison”) for a period of 12 years, PT Natrindo Telepon Selular (“NTS”) for a period of 10 years, PT XL Axiata Tbk (“XL Axiata ”) for a period of 10 years and PT Berca Global Access (“Berca”) for a period of 10 years, respectively. Hutchison, NTS, XL Axiata and Berca are required to pay the annual lease and maintenance fees in advance which are recorded as part of unearned income .
The agreements are cancellable before termination under certain conditions, as stated in the agreements.
c.
On April 15, 2010, Lintasarta, a subsidiary, entered into agreements with MOCIT–Balai Telekomunikasi dan Informatika Pedesaan(MOCIT-BTIP), whereby Lintasarta agreed to providePusat Layanan Jasa Akses Internet Kecamatan (Center for Internet Access and Services in Rural Areas) (PLIK) for Work Packages (Paket Pekerjaan) 7, 8 and 9 that cover the provinces of Bali, Nusa Tenggara Barat, Nusa Tenggara Timur, Kalimantan Barat, Kalimantan Selatan, Kalimantan Timur, Kalimantan Tengah, Maluku and Papua. The agreement covers four years starting from October 15, 2010 with contract value amounting to Rp83,684, Rp130,781 and Rp106,275 for Work Packages 7, 8 and 9, respectively. As of September 30, 2010, Lintasarta has received advance payments from MOCIT-BTIP related with the agreements amounting to Rp51,318 and Rp12,830 which are classified as part of unearned income for the current portion and other non-current liabilities for the lo ng-term portion, respectively. In accordance with the agreements, Lintasarta placed its time deposits totalling Rp18,200 as a performance bond for the four-year contract period which is classified as part of other non-current financial assets (Note 2c).
On May 6, 2010, Lintasarta entered into an agreement with PT Wira Eka Bhakti (WEB), for the procurement of equipment and infrastructure required for the construction of PLIKs, as agreed with the MOCIT-BTIP above, with total contract value amounting to Rp189,704. As of September 30, 2010, Lintasarta has paid advances to WEB totalling Rp37,941 and Rp9,485, which are classified as part of advances for the current portion and long-term advances for the long-term portion, respectively.
d.
On May 25, 2007, the Company and six other telecommunications 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 telecommunications operators subsequently decided not to join the project.
On November 10, 2007, the Company and the other five telecommunications 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.
30.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
Furthermore, three of the telecommunications operators also no longer joined the project. Consequently, as of September 30, 2010, the remaining telecommunications operators which are 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 the number of participating telecommunications operators.
As of September 30, 2010, the Company has paid the amount of US$1,503 which is recorded as part of other non-current financial assets.
a.
The Company and IMM have committed to pay annual radio frequency fee over the 3G and BWA licenses period, provided the Company and IMM hold the 3G and BWA licenses (Note 1a). The amount of annual payment is based on the payment scheme set out in Regulations
No. 7/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 237/KEP/ M.KOMINFO/7/2009 dated February 8, 2006, September 1, 2009 and July 27, 2009, respectively, of the MOCIT.
b.
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. On December 4, 2009, these facilities were further amended to extend the expiration date to April 30, 2010. Subsequently, on June 17, 2010, these facilities were further extended up to April 30, 2011. The facilities consist of the following:
·
Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp17,000). Interest is 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$30,000 (including revolving loan denominated in rupiah amounting to Rp255,000). The loan matures within a maximum period of 180 days 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 is charged on daily balances at 3% per annum above the HSBC Cost of Fund Rate for the loans denominated either in rupiah or U.S. dollar.
As of September 30, 2010, the Company has not used these facilities
a.
In 1994, the Company was appointed as a Financial Administrator (“FA”) 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”), Defined Underwritten Capacity (“DUC”) and Occasional Commercial Use (“OCU”).
The funds received from the sale of IRU, DUC and OCU 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.
As of September 30, 2010, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$4,725. Besides receiving their share of the funds from the sale of IRU, DUC and OCU, the members of the consortium also received their share of the interest earned by the above funds.
30. SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
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 ninth amendment agreement dated May 24, 2010. Transponder lease expense charged to operations amounting to Rp21,806 and Rp21,673 in 2009 and 2010, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of income.
31.
TARIFF SYSTEM
a.
International telecommunications services
The service rates (“tariffs”) for overseas exchange carriers are set based on the international telecommunications regulations established by the International Telecommunications Union (“ITU”). These regulations require the international telecommunications administrations to establish and revise, under mutual agreement, accounting rates to be applied among them, taking into account the cost of providing specific telecommunications services and relevant recommendations from the Consultative Committee on International Telegraph and Telephone (“CCITT”). The rates are divided into terminal shares payable to the administrations of terminal countries and, where appropriate, into transit shares payable to the administrations of transit countries.
The ITU also regulates that the monetary unit to be used, in the absence of special arrangements, shall be the Special Drawing Right (“SDR”) or the Gold Franc, which is equivalent to 1/3.061SDR. Each administration shall, subject to applicable national law, establish the charges to be collected from its customers.
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.
31.
TARIFF SYSTEM (continued)
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
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
31.
TARIFF SYSTEM (continued)
b.
Cellular services (continued)
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 telecommunications 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.
c.
Fixed telecommunications 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 telecommunications tariff system.
32.
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 telecommunications 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.
(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.
32.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariffs (continued)
d.
Between cellular telecommunications network and another cellular telecommunications network
Based on Decree No. 46, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the cellular operator pays the PSTN operator 50% of the prevailing 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 in 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 (Note33).
f.
Between international gateway exchanges
Interconnection charges for international telecommunications traffic between international gateway exchanges are based on agreements between international telecommunications carriers and international telecommunications joint ventures.
2.
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.
32.
INTERCONNECTION TARIFFS (continued)
3.
RevenueSharing
Revenue from access and usage charges from international telecommunications traffic with telecommunications networks owned by more than one domestic telecommunications carrier which is not regulated by Decree No. 08/PER/M.KOMINFO/02.2006, is to be proportionally shared with each carrier, which proportion is to be bilaterally arranged between the carriers.
Decree No. 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 new 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 33).
The implementation of interconnection billing between operators starts from the time they sign their interconnection agreements.All interconnection agreements will be based on Reference Interconnection Offer (“RIO”). All operators have to publish their RIO and a dominant operator is required to obtain an approval of its RIO from the Government.
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.
33.
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 telecommunications 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 telecommunications service subscribers to make or receive calls to or from Telkom’s subscribers or international gateways.
33. INTERCONNECTION AGREEMENTS (continued)
1.
Telkom (continued)
a. Fixed telecommunications services (continued)
·
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 replaced by the agreement dated December 18, 2007. This agreement was amended several times. The latest amendment was dated December 30, 2009.
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 telecommunications network and Telkom’s fixed telecommunications network enables the Company’s cellular subscribers to make or receive calls to or from Telkom’s fixed telecommunications 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 replaced by an agreement dated December 18, 2007. This agreement was amended several times. The latest amendment was dated December 30, 2009.
2.
PT XL Axiata Tbk (formerly PT Excelcomindo Pratama Tbk or “Excelcom”), PT Mobile-8
Telecom Tbk (“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.
33. INTERCONNECTION AGREEMENTS (continued)
2. PT XL Axiata Tbk (formerly PT Excelcomindo Pratama Tbk or “Excelcom”), PT Mobile-8
Telecom Tbk (“Mobile-8”) and Telkomsel (continued)
·
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 XL Axiata, 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 2n). The memoranda of understanding with each of Mobile-8, XL Axiata and Telkomsel were replaced by agreements dated September 14, and December 17 and 19, 2007, respectively. The agreements with Mobile-8 and XL Axiata were amended on March 31, 2008, while the agreement with Telkomsel was amended on February 18, 2008.
2.
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) major operators are as follows:
2009
2010
Telkom
95,460
121,377
Mobile-8
8,999
7,952
Telkomsel
(88,055)
(124,098)
XL Axiata
(50,859)
(72,846)
Bakrie Telecom
(5,970
)
(4,051)
Net charges
(40,425
)
(71,666)
34.
SEGMENT INFORMATION
The Companies manage and evaluate their operations in three major reportable segments: cellular, fixed telecommunications and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Companies operate in one geographical area only, so no geographical information on segments is presented.
Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2009
Operating revenues
Revenues from external customers
10,217,260
1,506,547
2,009,059
13,732,866
Inter-segment revenues
(224,316)
224,316
383,944
383,944
Total operating revenues
9,992,944
1,730,863
2,393,00314,116,810
Inter-segment revenues elimination
(383,944)
Operating revenues - net
13,732,866
Income
Operating income
1,184,164
778,951
629,156
2,592,271
Gain on foreign exchange - net
1,394,440
Interest income
120,899
Financing cost
(1,359,189)
Income tax expense
(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 expenditures
8,420,514
550,919
1,282,28410,253,717
Depreciation and amortization
3,024,805
241,974
468,3953,735,174
34. SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2010
Operating revenues
Revenues from external customers
11,914,352
1,117,851
1,810,87614,843,079
Inter-segment revenues
(67,735)
67,735
448,399448,399
Total operating revenues
11,846,617
1,185,586
2,259,27515,291,478
Inter-segment revenues elimination
(448,399)
Operating revenues - net
14,843,079
Income
Operating income
2,094,326
31,202
436,525
2,562,053
Gain on foreign exchange - net
589,156
Interest income
113,166
Financing cost
(1,745,054)
Loss on change in fair value of derivatives - net
(378,431)
Income tax expense
(293,179)
Amortization of goodwill
(169,880)
Others - net
(97,468)
Income before minority interest in net income
of subsidiaries
580,363
Other Information
Segment assets
45,379,840
2,194,855
8,417,441
55,992,136
Unallocated assets
8,045,310
Inter-segment assets elimination
(7,715,690)
Assets - net
56,321,756
Segment liabilities
30,414,920
655,744
3,400,175
34,470,839
Unallocated liabilities
9,914,569
Inter-segment liabilities elimination
(6,157,111)
Liabilities - net
38,228,297
Capital expenditure
2,707,147
141,735
518,917
3,367,799
Depreciation and amortization
3,707,573
232,218
625,829
4,565,620
35.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
A.
RISK MANAGEMENT
The main risks arising from the Companies’ financial instruments are interest rate risk, foreign exchange rate risk, equity risk, credit risk and liquidity risk. The importance of managing these risks has significantly increased in light of the considerable change and volatility in both Indonesian and international financial markets. The Company’s Board of Directors reviews and approves the policies for managing these risks which are summarized below.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companies’ exposure to the risk of changes in market interest rates relates primarily to their loans and bonds payable with floating interest rates.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
A.
RISK MANAGEMENT (continued)
Interest rate risk (continued)
The Company’s policies relating to interest rate risk are as follows:
(1)
Manage interest cost through a mix of fixed and variable rate debts. The Company evaluates the fixed to floating rate ratio of its loans and bonds payable in line with movements of relevant interest rates in the financial markets. Based on management’s assessment, new financing will be priced either on a fixed or floating rate basis, and
(2)
Manage interest rate exposure on its loans and bonds payables by entering into interest rate swap contracts.
As of September 30, 2010, more than 60% of the Companies’ debts are fixed-rated.
Several interest rate swap contracts are entered into to hedge floating rate U.S. dollar debts. These contracts are accounted as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the period.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Company’s consolidated net income for the nine months ended September 30, 2010 (through the impact on floating rate borrowings which is based on LIBOR for U.S. dollar borrowings and on JIBOR for rupiah borrowings).
Increase/decrease in basis points: U.S. dollar Rupiah | 31 19 |
Effect on consolidated net income for the period: | |
U.S. dollar Rupiah | US$1,081 (equivalent to Rp9,644) Rp6,304 |
Management conducted a survey among the Company’s banks to determine the outlook of the LIBOR and JIBOR interest rates until the Company’s next reporting date of December 31, 2010. The outlook is that the LIBOR and JIBOR interest rates may move 31 and 19 basis points, respectively, higher or lower than the interest rates at the end of the third quarter of 2010.
If LIBOR interest rates were 31 basis points higher or lower than the market levels as of September 30, 2010, with all other variables held constant, the Company’ consolidated net income for the nine months then ended and the consolidated stockholders’ equity would be Rp521,270 or Rp540,558 and Rp17,725,210 or Rp17,744,498, respectively, which are lower or higher than the actual results for the nine months ended September 30, 2010, mainly due to the higher or lower interest expense on floating rate borrowings.
If JIBOR interest rates were 19 basis points higher or lower than the market levels as of September 30, 2010, with all other variables held constant, the Company’ consolidated net income for the nine months then ended and the consolidated stockholders’ equity would be Rp524,610 or Rp537,218 and Rp17,728,550 or Rp17,741,158, respectively, which are lower or higher than the actual results for the nine months ended September 30, 2010, mainly due to the higher or lower interest expense on floating rate borrowings.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
A.
RISK MANAGEMENT (continued)
Foreign exchange rate risk
Foreign exchange rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Companies’ exposure to exchange rate fluctuations results primarily from U.S. dollar-denominated loans and bonds payable, accounts receivable, accounts payable and procurement payable.
To manage foreign exchange rate risks, the Company entered into several cross currency swap contracts and other permitted instruments, if considered necessary. These contracts are accounted as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the period.
The Companies’ accounts payable are primarily foreign currency net settlement payables to foreign telecommunications operators, while most of the Companies’ accounts receivable are Indonesian rupiah-denominated collectibles from domestic operators.
To the extent the Indonesian rupiah depreciated further from the exchange rates in effect at
September 30, 2010, the Companies’ obligations under such loans and bonds payable, accounts payable and procurement payable would increase in Indonesian rupiah terms. However, the increases in these obligations would be offset in part by increases in the values of foreign currency-denominated time deposits and accounts receivable. As of September 30, 2010, 32.84% of the Companies’ U.S. dollar-denominated debts were insured from exchange rate risk by entering into several cross currency swap contracts.
The following table shows the Companies’ consolidated U.S. dollar-denominated assets and liabilities as of September 30, 2010:
2010 | ||
U.S. Dollar | Rupiah* | |
Assets: | ||
Cash and cash equivalents | 383,110 | 3,418,871 |
Accounts receivable | ||
Trade | 125,264 | 1,117,859 |
Others | 493 | 4,404 |
Derivative assets | 13,387 | 119,462 |
Other current financial assets | 2,015 | 17,983 |
Due from related parties | 71 | 632 |
Other non-current financial assets | 1,401 | 12,500 |
Total assets | 525,741 | 4,691,711 |
Liabilities: | ||
Accounts payable - trade | 22,830 | 203,730 |
Procurement payable | 252,272 | 2,251,277 |
Accrued expenses | 31,552 | 281,574 |
Deposits from customers | 1,480 | 13,207 |
Derivative liabilities | 31,895 | 284,631 |
Other current financial liabilities | 225 | 2,005 |
Other current liabilities | 9,879 | 88,157 |
Loans payable (including current maturities) | 899,707 | 8,028,989 |
Bonds payable (including current maturities) | 650,000 | 5,800,600 |
Other non-current liabilities | 8,730 | 77,909 |
Total liabilities | 1,908,570 | 17,032,079 |
Net liabilities position | 1,382,829 | 12,340,368 |
*The exchange rate used to translate the U.S. dollar amounts into rupiah was Rp8,924 to US$1 (in full amounts) as quoted from the Indonesian Central Bank as at September 30, 2010.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
A.
RISK MANAGEMENT (continued)
Foreign exchange rate risk (continued)
The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rate, with all other variables held constant, of the Company’s consolidated net income for the period:
Change in U.S. dollar | 0.1% | |
Effect on consolidated net income for the period | (9,255) |
Management conducted a survey among the Company’s banks to determine the outlook of the U.S. dollar exchange rate until the Company’s next reporting date of December 31, 2010. The outlook is that the U.S. dollar exchange rate may strengthen by 0.1% as compared to the exchange rate at
September 30, 2010.
If the U.S. dollar exchange rate strengthened by 0.1% as compared to the exchange rate as of September 30, 2010, with all other variables held constant, the Company’s consolidated net income for the nine months then ended would be Rp521,659 which is lower than the actual results mainly due to the consolidated net foreign exchange loss on the translation of U.S. dollar-denominated net liabilities.
Equity price risk
The Companies’ long-term investments consist primarily of minority investment in the equity of private Indonesian companies and equity of foreign companies. With respect to the Indonesian companies in which the Companies have investments, the financial performance of such companies may be adversely affected by the economic conditions in Indonesia.
Credit risk
Credit risk is the risk that the Companies will incur a loss arising from their customers, clients or counterparties that fail to discharge their contractual obligations. There are no significant concentrations of credit risk. The Companies manage and control this credit risk by setting limits on the amount of risk they are willing to accept for individual customers and by monitoring exposures in relation to such limits.
The Companies trade only with recognized and creditworthy third parties. It is the Companies’ policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to reduce the exposure to bad debts.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
A.
RISK MANAGEMENT (continued)
Credit risk (continued)
The table below shows the maximum exposure to credit risk for the components of the consolidated balance sheet.
Gross Maximum Exposure (1) | Net Maximum Exposure (2) | |
Loans and receivables: | ||
Cash and cash equivalents | 6,185,065 | 6,185,065 |
Accounts receivable | ||
Trade - net | 1,558,971 | 1,558,971 |
Others - net | 26,055 | 26,055 |
Other current financial assets | 43,191 | 43,191 |
Due from related parties - net | 7,960 | 7,960 |
Other non-current financial assets | 85,842 | 85,842 |
Held-for-trading: | ||
Cross currency swaps | 119,462 | 119,462 |
Available-for-sale investments: | ||
Other long-term investments - net | 2,730 | 2,730 |
Total | 8,029,276 | 8,029,276 |
(1)
gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements.
(2)
gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements.
Liquidity risk
The liquidity risk is defined as a risk when the cash flow position of the Companies indicates that the short-term revenue is not enough to cover the short-term expenditure.
The Companies’ liquidity requirements have historically arisen from the need to finance investments and capital expenditures related to the expansion of their telecommunications business. The Companies’ telecommunications business requires substantial capital to construct and expand mobile and data network infrastructure and to fund operations, particularly during the network development stage. Although the Companies have substantial existing network infrastructure, the Companies expect to incur additional capital expenditures primarily in order to focus cellular network development in areas they anticipate will be high-growth areas, as well as to enhance the quality and coverage of their existing network.
In the management of liquidity risk, the Companies monitor and maintain a level of cash and cash equivalents deemed adequate to finance the Companies’ operations and to mitigate the effects of fluctuation in cash flows.The Companies also regularly evaluate the projected and actual cash flows, including their loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, debt capital and equity market issues.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
35.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
A.
RISK MANAGEMENT (continued)
Liquidity risk (continued)
The table below summarizes the maturity profile of the Companies’ financial liabilities based on contractual undiscounted payments.
Expected maturity as of September 30, 2010 | ||||||||
2011 | 2012 | 2013 | 2014 | 2015 and thereafter | Total | Discount/ debt issuance costs and consent solicitation fees | Carrying value as of September 30, 2010 | |
Accounts payable - trade | 619,341 | - | - | - | - | 619,341 | - | 619,341 |
Procurement payable | 4,000,682 | - | - | - | - | 4,000,682 | - | 4,000,682 |
Accrued expenses | 1,767,281 | - | - | - | - | 1,767,281 | - | 1,767,281 |
Deposits from customers | 87,115 | - | - | - | - | 87,115 | - | 87,115 |
Derivative liabilities | 284,631 | - | - | - | - | 284,631 | - | 284,631 |
Other current financial liabilities | 46,329 | - | - | - | - | 46,329 | - | 46,329 |
Due to related parties | - | 20,998 | - | - | - | 20,998 | - | 20,998 |
Loans payable | ||||||||
In rupiah | 1,064,933 | 2,654,983 | 984,300 | 1,000,000 | - | 5,704,216 | (32,165) | 5,672,051 |
In U.S. dollar | 1,600,707 | 1,820,023 | 2,329,219 | 540,999 | 1,738,041 | 8,028,989 | (200,827) | 7,828,162 |
Total loans payable | 2,665,640 | 4,475,006 | 3,313,519 | 1,540,999 | 1,738,041 | 13,733,205 | (232,992) | 13,500,213 |
Bonds payable | ||||||||
In rupiah | 1,740,000 | 41,989 | 1,330,000 | 1,630,000 | 3,390,000 | 8,131,989 | (31,927) | 8,100,062 |
In U.S. dollar | - | - | - | - | 5,800,600 | 5,800,600 | (92,533) | 5,708,067 |
Total bonds payable | 1,740,000 | 41,989 | 1,330,000 | 1,630,000 | 9,190,600 | 13,932,589 | (124,460) | 13,808,129 |
Total | 11,211,019 | 4,537,993 | 4,643,519 | 3,170,999 | 10,928,641 | 34,492,171 | (357,452) | 34,134,719 |
B.
COLLATERAL
The loans of Lintasarta, a subsidiary, which were obtained from CIMB Niaga, are collateralized by all equipment (Notes 9,16i and 16j) purchased from the proceeds of the credit facilities. There are no other significant terms and conditions associated with the use of collateral.
The Company itself did not hold any collateral as of September 30, 2010.
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, 2009 and 2010 (Unaudited)
(Expressed in millions of rupiah and thousands of U.S. dollar,
except share and tariff data)
36. SUBSEQUENT EVENTS
a.
On October 5, 2010, the Company received the rating ofidAA+ (stable outlook) for its local bonds andidAA(sy)+ (stable outlook) for its local sukuk from Pefindo (Note 17).
b.
On October 11, 2010, the Company made notification letters to BCA, DBS and Mandiri in relation to the Company’s plan to make early repayments for BCA credit facilities 2 and 3 (totalling Rp1,300,000), DBS (Rp400,000) and Mandiri credit facility 2 (Rp900,000), which will be paid on October 19, October 30 and November 15, 2010, respectively (Note 16).
c.
On October 12, 2010, the Company submitted appeal letters to the Tax Court regarding Decision Letter No.KEP-367/WPJ-19/BD.05/2010 and KEP-368/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Satelindo’s 2002 and 2003 income tax article 26 (Note 6).
d.
On October 13, 2010, the Company submitted the cancellation letters to the Tax Office regarding the Tax Collection Letters (“STPs”) from the DGT for the underpayment of the Company’s 2008 and 2009 income tax article 26 totalling Rp80,018 (including interest) (Note 30b).
e.
On October 14, 2010, the Company submitted an appeal letter to the Tax Court regarding Decision Letter No.KEP-357/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002 (Note 6).
f.
On October 19, 2010, the Company attended the hearing of Tax Court Decision on the acceptance of the Company’s remaining objection on the 2005 corporate income tax (Note 6).
g.
On October 19, 2010, the Company made early repayment for BCA credit facilities 2 and 3 totalling Rp1,300,000 (Note 16).
h.
On October 22, 2010, the Company paid in full the Series B of Third Indosat Bonds in Year 2003 amounting to Rp640,000 (Note 17).
i.
As of October 25, 2010, the prevailing exchange rate of the rupiah to U.S. dollar is Rp8,927 to US$1 (in full amounts), while as of September 30, 2010, the prevailing exchange rate was Rp8,924 to US$1 (in full amounts). Using the exchange rate as of October 25, 2010, the Companies suffered foreign exchange loss amounting to approximately Rp4,148 (excluding the effect of revaluing derivative contracts on October 25, 2010) on the foreign currency liabilities, net of foreign currency assets, as of September 30, 2010 (Note 35).
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, 2010 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of
September 30, 2010 as disclosed in Note 30a are approximately Rp2,135,367 if translated at the prevailing exchange rate as of October 25, 2010.
37.
RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS
The revised accounting standards and interpretations issued by the Indonesian Financial Accounting Standards Board (DSAK) up to the date of completion of the Companies’ consolidated financial statements but not yet effective as of September 30, 2010 are summarized below:
Effective on or after January 1, 2011:
·
SAK 1 (Revised 2009), “Presentation of Financial Statements”, prescribes the basis for presentation of general purpose financial statements to ensure comparability both with an entity's financial statements of previous periods and with the financial statements of other entities.
·
SAK 2 (Revised 2009), “Statement of Cash Flows”, requires the provision of information about the historical changes in cash and cash equivalents by means of a statement of cash flows which classifies cash flows during the period into operating, investing and financing activities.
·
SAK 4 (Revised 2009), “Consolidated and Separate Financial Statements”, applies to the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent and in accounting for investments in subsidiaries, jointly controlled entities and associates when separate financial statements are presented as additional information.
·
SAK 5 (Revised 2009), “Operating Segments”, requires segment information be disclosed to enable users of financial statements to evaluate the nature and financial effects of the business activities in which the entity engages and the economic environments in which it operates.
·
SAK 7 (Revised 2010), “Related Party Disclosures”, requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of a parent, and also applies to individual financial statements. Early application is allowed.
·
SAK 10 (Revised 2010), “The Effects of Changes in Foreign Exchange Rates”, prescribes how to include foreign currency transactions and foreign operations in the financial statements of an entity and translate financial statements into a presentation currency.
·
SAK 15 (Revised 2009), “Investments in Associates”, applies to the accounting for investments in associates and supersedes SAK 15 (1994), “Accounting for Investments in Associates”, and SAK 40 (1997), “Accounting for Changes in Equity of Subsidiaries/Associates”.
·
SAK 19 (Revised 2010), “Intangible Assets”, prescribe the accounting treatment for intangible assets that are not dealt with specifically in other SAKs. It requires the recognition of an intangible asset if, and only if, the specified criteria are met, and also specifies how to measure the carrying amount of intangible assets and related disclosures.
·
SAK 22 (Revised 2010), “Business Combinations”, applies to a transaction or other event that meets the definition of a business combination to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects.
·
SAK 23 (Revised 2010), “Revenue”, identifies the circumstances in which the criteria on revenue recognition will be met and, therefore, revenue will be recognized. It prescribes the accounting treatment of revenue arising from certain types of transactions and events, as well as practical guidance on the application of criteria on revenue recognition.
37.
RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS (continued)
Effective on or after January 1, 2011 (continued):
·
SAK 25 (Revised 2009), “Accounting Policies, Changes in Accounting Estimates and Errors”, prescribes the criteria for selecting and changing accounting policies, together with the treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors.
·
SAK 48 (Revised 2009), “Impairment of Assets”, prescribes the procedures to be applied to ensure that assets are carried at no more than their recoverable amount and if the assets are impaired, an impairment loss should be recognized.
·
SAK 57 (Revised 2009), “Provisions, Contingent Liabilities and Contingent Assets”, aims to provide that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and to ensure that sufficient information is disclosed in the notes to enable users to understand the nature, timing and amount related to the information.
·
SAK 58 (Revised 2009), “Non-current Assets Held for Sale and Discontinued Operations”, specifies the accounting for assets held for sale, and the presentation and disclosure of discontinued operations.
·
Interpretations of Financial Accounting Standards (ISAK) 7, “Consolidation - Special Purpose Entities”, addresses when a special purpose entity (“SPE”) should be consolidated by a reporting enterprise under the consolidation principles in SAK 4. Under ISAK 7, a company must consolidate the SPE when, in substance, the company controls the SPE.
·
ISAK 9, “Changes in Existing Decommissioning, Restoration and Similar Liabilities”, applies to changes in the measurement of any existing decommissioning, restoration or similar liability recognized as part of the cost of an item of property, plant and equipment in accordance with SAK 16 and as a liability in accordance with SAK 57.
·
ISAK 10, “Customer Loyalty Programs”, applies to customer loyalty award credits granted to customers as part of a sales transaction, and, subject to meeting any further qualifying conditions, the customers can redeem the credits in the future for free goods or services or at discounted prices.
The Companies are presently evaluating and have not yet determined the effects of these revised standards and interpretations on the consolidated financial statements.
38.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the 2009 consolidated financial statements which have been reclassified to allow their comparison with the accounts in the 2010 consolidated financial statements:
As Previously Reported | As Reclassified | Amount | Reason | |||
Other current assets | Other current financial assets | 25,988 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Due from related parties | Other non-current assets | 26,325 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) |
38.
RECLASSIFICATION OF ACCOUNTS (continued)
As Previously Reported | As Reclassified | Amount | Reason | |||
Goodwill and other intangible assets - 3G license upfront fee | Prepaid expenses | 64,000 | Reclassification to conform with the 2010 presentation | |||
Long-term prepaid licenses - net of current portion | 461,867 | Reclassification to conform with the 2010 presentation | ||||
Long-term receivables | Other non-current financial assets | 14,859 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Other non-current assets | Long-term prepaid rentals - net of current portion | 693,345 | Reclassification to conform with the 2010 presentation | |||
Other non-current financial assets | 28,285 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | ||||
Other current liabilities - dividend payable | Other current financial liabilities - dividend payable | 5,731 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Accrued expenses | Other current liabilities | 59,910 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Other current liabilities | Other current financial liabilities - others | 88,398 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Due to related parties | Other non-current liabilities | 11,776 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Other non-current liabilities | Employee benefit obligations - net of current portion | 798,005 | Reclassification to conform with the 2010 presentation | |||
Other non-current financial liabilities | 16,712 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | ||||
Other current liabilities | 7,059 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) |
38.
RECLASSIFICATION OF ACCOUNTS (continued)
As Previously Reported | As Reclassified | Amount | Reason | |||
Operating revenues - cellular | Operating expenses - cost of services | 161,504 | Reclassification resulting from the revocation of SAK 35 | |||
Operating revenues - fixed telecommunications | Operating expenses - cost of services | 161,836 | Reclassification resulting from the revocation of SAK 35 | |||
Operating expenses - depreciation and amortization | Operating expenses - cost of services | 25,422 | Reclassification to conform with the 2010 presentation |
39.
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 25, 2010.
51