These Consolidated Financial Statements are Originally Issued in Indonesian Language.
PT Indosat Tbk and subsidiaries
Consolidated financial statements
with independent auditors’ report
years ended December 31, 2009 and 2010 ![[indosateng31des2010releas002.gif]](https://capedge.com/proxy/6-K/0000929700-11-000016/indosateng31des2010releas002.gif)
0
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH INDEPENDENT AUDITORS’ REPORT
YEARS ENDED DECEMBER 31, 2009 AND 2010
Table of Contents
Page
Independent Auditors’ Report
Consolidated Balance Sheets
…………………………………………………………………………...
1 - 4
Consolidated Statements of Income
……………………………………………………………………
5 - 6
Consolidated Statements of Changes in Stockholders’ Equity
………………………………………
7
Consolidated Statements of Cash Flows
………………………………………………………………
8 - 9
Notes to Consolidated Financial Statements
………………………………………………………….
10 - 119
***************************
This report is originally issued in Indonesian language.
Independent Auditors’ Report
Report No. RPC-719/PSS/2011
The Stockholders and Boards of Commissioners and Directors
PT Indosat Tbk
We have audited the accompanying consolidated balance sheets of PT Indosat Tbk (“the Company”) and subsidiaries as of December 31, 2009 and 2010, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards established by the Indonesian Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PT Indosat Tbk and subsidiaries as of December 31, 2009 and 2010, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles in Indonesia.
Purwantono, Suherman & Surja
Drs. Hari Purwantono
Public Accountant License No. 98.1.0065
February 10, 2011
The accompanying financial statements are not intended to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Indonesia. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in Indonesia.
The accompanying notes form an integral part of these consolidated financial statements.
1
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2c,2q,2v,
3,17,26,34
2,835,999
2,075,270
Short-term investments - net of
allowance for impairment of
Rp25,395 in 2009 and 2010
2d,2q,17
-
-
Accounts receivable
2e,2q,17,34
Trade
4
Related parties - net of
allowance for impairment
of Rp57,538 in 2009
and Rp47,640 in 2010
2v,26
125,912
222,506
Third parties - net of
allowance for impairment
of Rp404,272 in 2009
and Rp448,470 in 2010
37
1,259,213
1,325,920
Others - net of allowance
for impairment of
Rp16,544 in 2009 and
Rp15,281 in 2010
37
564,859
10,031
Inventories - net of allowance for
obsolescence of Rp10,769 in
2009 and Rp13,961 in 2010
2f
112,260
105,885
Derivative assets
2q,17,28,34
224,743
69,334
Advances
29e
35,173
67,273
Prepaid taxes
2s,5,13
818,326
701,560
Prepaid expenses
2g,2k,2p,2v,
25,26,28l
1,125,091
1,527,254
Other current financial assets
2c,2q,2v,17,
26,34,37
35,173
53,119
Other current assets
2v,26,37
2,878
702
Total Current Assets
7,139,627
6,158,854
The accompanying notes form an integral part of these consolidated financial statements.
2
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
NON-CURRENT ASSETS
Due from related parties - net of
allowance for impairment
of Rp1,182 in 2009
and Rp646 in 2010
2e,2q,2v,
17,26,34
7,215
8,421
Deferred tax assets - net
2s,13
85,812
95,018
Investments in associated
companies - net of allowance
for impairment of
Rp56,586 in 2009 and
Rp56,300 in 2010
2h,6
422
-
Other long-term investments - net
of allowance for impairment
of Rp99,977 in 2009 and 2010
2h,2q,7,17,
34
2,730
2,730
Property and equipment
2i,2j,2o,8,
15,29b
Cost
74,818,452
78,101,166
Accumulated depreciation
(30,291,034
)
(34,431,545
)
Impairment in value
(98,611
)
(98,611
)
Net
44,428,807
43,571,010
Goodwill and other
intangible assets - net
2l,9
1,580,080
1,374,060
Long-term prepaid rentals -
net of current portion
2g,2v,10,26,37
735,185
750,472
Long-term prepaid licenses -
net of current portion
2g,2k
463,549
397,708
Long-term advances
2v,11,26,29e
294,391
216,643
Long-term prepaid pension - net
of current portion
2p,2v,25,26
147,380
111,344
Long-term receivables
37
50,767
45,911
Other non-current financial assets
2c,2q,2v,17,26,
29e,29f,34,37
100,004
77,675
Other non-current assets
5,518
8,341
Total Non-current Assets
47,901,860
46,659,333
TOTAL ASSETS
52,818,187
The accompanying notes form an integral part of these consolidated financial statements.
3
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable - trade
2q,17,34
Related parties
2v,26
38,670
22,260
Third parties
498,806
623,245
Procurement payable
2q,2v,12,17,26,34
5,289,782
3,644,467
Taxes payable
2s,13
161,820
169,445
Accrued expenses
2q,2v,14,17,
25,26,34,37
1,525,561
1,710,885
Unearned income
2n,29d,29e
941,223
1,143,852
Deposits from customers
2q,17,34
22,463
50,279
Derivative liabilities
2q,17,28,34
200,202
215,403
Current maturities of:
Loans payable
2m,2q,2v,
15,17,26,34
1,440,259
3,184,147
Bonds payable
2m,2q,16,17,34
2,840,662
1,098,131
Other current financial
liabilities
2q,17,34,37
43,721
23,127
Other current liabilities
2v,26,34,37
68,065
61,612
Total Current Liabilities
13,071,234
11,946,853
NON-CURRENT LIABILITIES
Due to related parties
2q,2v,17,26,34
13,764
22,099
Deferred tax liabilities - net
2s,13
1,535,202
1,772,337
Loans payable - net of current
maturities
2m,2q,15,17,34
Related party
2v,26
2,192,489
997,045
Third parties
10,528,819
6,669,759
Bonds payable - net of current
maturities
2m,2q,16,17,34
8,472,175
12,114,104
Employee benefit obligations -
net of current portion
2p,18,25,37
825,714
872,407
Other non-current liabilities
2v,26,29e,34,37
113,807
187,097
Total Non-current Liabilities
23,681,970
22,634,848
TOTAL LIABILITIES
36,753,204
34,581,701
MINORITY INTEREST
2b
330,593
385,840
The accompanying notes form an integral part of these consolidated financial statements.
4
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
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
19
543,393
543,393
Premium on capital stock
1,546,587
1,546,587
Difference in transactions of equity
changes in associated
companies/subsidiaries
2h
404,104
404,104
Difference in foreign currency
translation
2b
2,369
(2,727)
Retained earnings
Appropriated
119,464
134,446
Unappropriated
15,341,773
15,224,843
STOCKHOLDERS’ EQUITY - NET
17,957,690
17,850,646
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
55,041,487
52,818,187
The accompanying notes form an integral part of these consolidated financial statements.
5
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
OPERATING REVENUES
2n,2v,20,26,
30,31,32,37
Cellular
14,300,163
16,027,062
Multimedia, Data
Communication,
Internet (“MIDI”)
2,720,984
2,476,276
Fixed telecommunications
1,803,039
1,293,177
Total Operating Revenues
18,824,186
19,796,515
OPERATING EXPENSES
2n
Cost of services
2k,2v,21,26,
29j,31,32,37
7,087,850
7,113,410
Depreciation and amortization
2i,2l,8,9
5,561,390
6,151,911
Personnel
2o,2p,2v,
22,25,26
1,451,560
1,411,244
Marketing
2n
816,934
986,019
General and administration
2v,23,26
693,437
659,987
Total Operating Expenses
15,611,171
16,322,571
OPERATING INCOME
3,213,015
3,473,944
OTHER INCOME (EXPENSES)
2n
Gain on foreign exchange - net
2q,2r,4
1,656,407
492,401
Interest income
2v,26
138,951
143,402
Financing cost
2m,2v,15,16,24,26
(1,872,967
)
(2,271,628
)
Loss on change in fair value
of derivatives - net
2q,28
(517,655
)
(418,092
)
Amortization of goodwill
2l,9
(235,420
)
(226,380
)
Others - net
7,8,13
(150,338
)
(111,830
)
Other Expenses - Net
(981,022
)
(2,392,127)
INCOME BEFORE INCOME TAX
2,231,993
1,081,817
INCOME TAX EXPENSE
2s,13
Current
(460,973
)
(128,171
)
Deferred
(216,292
)
(229,627
)
Total Income Tax Expense
(677,265
)
(357,798
)
The accompanying notes form an integral part of these consolidated financial statements.
6
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah, except share data)
Notes
2009
2010
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
SUBSIDIARIES
1,554,728
724,019
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES
2b
(56,483
)
(76,845
)
NET INCOME
1,498,245
647,174
BASIC EARNINGS PER SHARE
2u
275.72
119.10
BASIC EARNINGS PER ADS
(50 B shares per ADS)
2u
13,786.01
5,954.93
The accompanying notes form an integral part of these consolidated financial statements.
7
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Years Ended December 31, 2009 and 2010
(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 Rp1,172, Rp1,604 and
Rp3,641, respectively
2b
-
-
-
(10,922)
-
-
(10,922)
Resolution during the Annual Stockholders’ General Meeting on June 11, 2009
27
Declaration of cash dividend
-
-
-
-
-
(939,254
)
(939,254)
Appropriation for reserve fund
-
-
-
-
18,786
(18,786
)
-
Net income for the year
-
-
-
-
-
1,498,245
1,498,245
Balance as of December 31, 2009
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 Rp798, Rp368, Rp301 and Rp231, respectively
2b
-
-
-
(5,096)
-
-
(5,096)
Resolution during the Annual Stockholders’ General Meeting on June 22, 2010
27
Declaration of cash dividend
-
-
-
-
-
(749,122
)
(749,122)
Appropriation for reserve fund
-
-
-
-
14,982
(14,982
)
-
Net income for the year
-
-
-
-
-
647,174
647,174
Balance as of December 31, 2010
543,393
1,546,587
404,104
(2,727)
134,446
15,224,843
17,850,646
The accompanying notes form an integral part of these consolidated financial statements.
8
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah)
Notes
2009
2010
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers
18,415,890
19,678,609
Interest income
146,826
145,067
Refund of taxes
5
84,650
41,753
Cash paid to/for:
Suppliers and others
(10,116,183
)
(9,061,007)
Financing cost
(1,730,149
)
(2,175,997)
Employees
(1,359,817
)
(1,310,556)
Income taxes
(878,137
)
(215,874)
Interest rate swap contracts
28m-z
(47,715
)
(117,231)
Swap cost from cross currency
swap contracts
28b-k
(125,748
)
(121,449
)
Settlement from derivative contracts
28b,28g
-
(24,431
)
Long-term prepaid licenses
1a,2k
(338,408
)
-
Net Cash Provided by Operating Activities
4,051,209
6,838,884
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds of Palapa D-Satellite insurance
claim
8
-
537,657
Cash dividend received from other
long-term investment
7
26,774
19,281
Proceeds from sale of property
and equipment
8
2,253
7,741
Acquisitions of property and
equipment
8
(10,684,690
)
(6,495,146
)
Acquisition of intangible assets
9
(15,044
)
(40,052
)
Purchase of investment in an
associated company
6
-
(194
)
Net Cash Used in Investing Activities
(10,670,707
)
(5,970,713
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from bonds payable
16
1,500,000
5,851,301
Proceeds from long-term loans
15
3,892,786
1,092,059
Settlement from derivative contract
28a
-
59,925
Decrease (increase) in restricted cash and
cash equivalents
(18,206
)
2,846
Repayment of long-term loans
15
(632,814
)
(4,098,277
)
Repayment of bonds payable
16
(14,453
)
(3,720,815
)
Cash dividend paid by the Company
27
(939,254
)
(749,122
)
Swap cost from cross currency swap contract
28a
(54,116
)
(46,136
)
Cash dividend paid by subsidiaries
to minority interest
(9,292
)
(21,436
)
Net Cash Provided by (Used in) Financing Activities
3,724,651
(1,629,655
)
NET DECREASE IN
CASH AND CASH EQUIVALENTS
(2,894,847
)
(761,484
)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
5,737,866
2,835,999
CASH AND CASH EQUIVALENTS
OF LIQUIDATED SUBSIDIARY*
(7,020
)
-
CASH AND CASH EQUIVALENTS
OF ACQUIRED SUBSIDIARY
6
-
755
CASH AND CASH EQUIVALENTS
AT END OF YEAR
3
2,835,999
2,075,270
* 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 STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah)
Notes
2009
2010
DETAILS OF CASH AND
CASH EQUIVALENTS:
3
Time deposits with original maturities of
three months or less and deposits on call
2,611,529
1,791,783
Cash on hand and in banks
224,470
283,487
Cash and cash equivalents as stated in the
consolidatedbalance sheets
2,835,999
2,075,270
SUPPLEMENTAL CASH FLOW INFORMATION:
Transactions not affecting cash flows:
Acquisitions of property and
equipment credited to:
Long-term advances
161,702
77,748
Loans payable
723,112
-
10
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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 February 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
Years Ended December 31, 2009 and 2010
(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
Years Ended December 31, 2009 and 2010
(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 |
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 (Note 2k) and radio frequency fee (Note 29g).
13
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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 |
(**)
PT Indosat Mega Media was obliged to, among others, pay upfront fee of Rp18,408 (Note 2k) and radio frequency fee (Note 29g).
(***)
The Company was obliged, among others, to pay upfront fee of Rp320,000 (Note 2k) and radio frequency fee (Note 29g).
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 a “money remittance provider” to customers in the local and international markets.
On December 13, 2010, based in letter No.2619/BSN/D3-d3//12/2010 from the Badan Standardisasi Nasional (National Standardization Bureau), the Company obtained Issuer Identification Number (IIN) on its applications for“Indosat m-wallet” and“money remittance provider”.
14
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
On December 13, 2010, the President of the Republic of Indonesia issued Government Regulation orPeraturan Pemerintah (“PP”) No.76/2010 regarding the amendment of PP No.7/2009 on types and tariffs of non-tax state income applicable at MOCIT. This regulation affects the computation method and payment of the spectrum fee allocated to the Company (800 Mhz, 900 Mhz and 1,800 Mhz frequency bands).
The Company is domiciled at Jalan Medan Merdeka Barat No. 21, Jakarta and has 8 regional offices located in Jakarta, Bandung, Semarang, Surabaya, Medan, Palembang, Balikpapan and Makassar.
b.
Company’s Public Offerings
All of the Company’s B shares have been registered with and traded on the Indonesia Stock Exchange (new entity after the merger of Jakarta Stock Exchange and Surabaya Stock Exchange in November 2007) since 1994. The Company’s American Depositary Shares (ADS, each representing 50 B shares), have also been traded on the New York Stock Exchange since 1994.
As of December 31, 2010, the Companies’ outstanding bonds issued to the public are as follows:
Bond (Note 16) | 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. Fourth Indosat Bonds in Year 2005 with Fixed Rate | June 21, 2005 | Indonesia Stock Exchange |
3. Indosat Syari’ah Ijarah Bonds in Year 2005 | June 21, 2005 | Indonesia Stock Exchange |
4. Fifth Indosat Bonds in Year 2007 with Fixed Rates | May 29, 2007 | Indonesia Stock Exchange |
5. Indosat Sukuk Ijarah II in Year 2007 | May 29, 2007 | Indonesia Stock Exchange |
6. Sixth Indosat Bonds in Year 2008 with Fixed Rates | April 9, 2008 | Indonesia Stock Exchange |
7. Indosat Sukuk Ijarah III in Year 2008 | April 9, 2008 | Indonesia Stock Exchange |
8. Seventh Indosat Bonds in Year 2009 with Fixed Rates | December 8, 2009 | Indonesia Stock Exchange |
9. Indosat Sukuk Ijarah IV in Year 2009 | December 8, 2009 | Indonesia Stock Exchange |
10. 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 December 31, 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
15
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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 December 31, 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 7,126 and 6,694 employees, including non-permanent employees, as of December 31, 2009 and 2010, respectively.
d.
Structure of the Company’s Subsidiaries
As of December 31, 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 Lintas Media Danawa (“LMD”)
Information and
(Note 6)
Jakarta
Communication Services
2008
-
50.65
PT Artajasa Pembayaran Elektronis
(“APE”) (Note 2b)
Jakarta
Telecommunications
2000
39.80
39.80
16
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
-
5,966,764
IMBV(1)
-
5,946,885
IFB(2)
2,261,226
21,876
IIFB(3)
1,044,174
9,635
ISPL
28,779
54,353
IMM
745,204
815,130
SMT
139,903
155,297
Lintasarta
1,419,595
1,739,896
LMD (Note 6)
-
2,671
APE
179,681
221,297
(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, 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 years ended December 31, 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.
17
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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
In accordance with SAK 4 (Revised 2009), the Company prepares and presents the consolidated financial statements for a group of entities under its control.
Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. Control also exists when the parent owns half or less of the voting power of an entity when there is:
(a)
power over more than half of the voting rights by virtue of an agreement with other investors;
(b)
power to govern the financial and operating policies of the entity under a statute or an agreement;
(c)
power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or
(d)
power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
The consolidated financial statements also include the accounts of APE (Lintasarta’s 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 year 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 Impairment of Receivables
Prior to 2010, allowance for impairment was provided based on management's evaluation of the collectibility of the accounts at the end of the year. Effective January 1, 2010, the Companies provide allowance for impairment of accounts receivable in accordance with SAK 55 (Revised 2006) (Note 2q6).
f.
Inventories
Inventories, which mainly consist of SIM cards, broadband modems, starter packs, pulse reload vouchers and cellular handsets 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.
18
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g.
Prepaid Expenses
Prepaid expenses, which mainly consist of frequency fee, rentals, upfront fee of 3G and BWA licenses and insurance 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.
Property and equipment acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets are measured at fair values unless:
(i)
the exchange transaction lacks commercial substance, or
(ii)
the fair value of neither the assets received nor the assets given up can be measured reliably.
The acquired assets are measured this way even if the Companies cannot immediately derecognize the assets given up. If the acquired assets cannot be reliably measured at fair value, their value is measured at the carrying amount of the assets given up.
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
19
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
Years
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.
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 statements of income for the year.
Properties under construction and installation are stated at cost. All borrowing costs, which include interest, amortization of ancillary costs (Notes 15c and 15f) 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 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.
20
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
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 29h).
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 sheets 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.
21
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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 Telecommunications Services”, in recognizing revenue for interconnection 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 year ended December 31, 2009 (Note 37). 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.
22
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
Dealer Commissions
Consideration in the form of sales discount given by the Company to a dealer is recognized as a reduction of revenue.
If the Company receives, or will receive, an identifiable benefit in exchange for a consideration given by the Company to a dealer, and the fair value of such benefit can be reasonably estimated, the consideration will be recorded as a marketing expense.
Tower Leasing
Revenue from tower leasing is recognized on the straight-line basis over the lease term based on the amount stated in the agreement between the Company and the lessee. Based on the Company’s assessment on the current tower leasing arrangements, the leasing transactions are classified as operating leases (Note 2k).
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 year and had been reported on a net basis up to December 31, 2009, after allocations to overseas international carriers. Starting January 1, 2010, revenue from outgoing international call traffic has been reported on a gross basis. The change in accounting policy resulted from the revocation of SAK 35.
In addition, starting January 1, 2010, the Company has decided to reclassify the portion of incoming calls revenue that belongs to the Company’s cellular segment. The Company believes that this change will bring the Company’s revenue presentation to be aligned more closely with the Company’s profit and loss performance and to provide reliable and more relevant information to shareholders and users of the accounts.
To improve the comparability of the consolidated financial statements, the Company made accounts reclassification in the consolidated financial statements for the year ended December 31, 2009
(Note 37).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Revenue and Expense Recognition (continued)
Fixed Telecommunications (continued)
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.
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 year 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.
23
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 from post-employment benefits 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 the greater of 10% of the present value of the defined benefit obligation or 10% of the fair value of plan assets, 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 from post-employment benefits 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, following the introduction of changes to a pension plan, past service costs are recognized immediately.
Actuarial gains or losses and past service costs from other long-term employee benefits are recognized immediately in the current year’s consolidated statement of income.
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).
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 superseded 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, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Companies determine the classification of their financial assets at initial recognition.
24
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
Initial recognition (continued)
All 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 accounts receivable, due from related parties, quoted and unquoted financial instruments, derivative financial instruments and other current and non-current financial assets.
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. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by SAK 55 (Revised 2006). Derivatives, including separated embedded derivatives, 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 sheets at fair value with changes in fair value recognized in the consolidated statements of income.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in the consolidated statements 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.
The Companies’ financial asset classified as fair value through profit or loss consist of Derivative Assets.
•
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in the consolidated statements of income. The losses arising from impairment are recognized in the consolidated statements of income.
The Companies’ cash and cash equivalents (Note 2c), trade and other accounts receivable, due from related parties, other current financial assets, and other non-current financial assets are included in this category.
25
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
•
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, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in the consolidated statements of income. The losses arising from impairment are recognized in the consolidated statements of income.
The Companies did not have any HTM investments during the years ended December 31, 2009 and 2010.
•
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 which time the cumulative gain or loss is recognized, or determined to be impaired, at which time the cumulative loss is reclassified from equity to profit or loss.
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.
26
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
Initial recognition (continued)
All 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 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. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by SAK 55 (Revised 2006). Separated embedded derivatives 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 statements of income.
•
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 statements of income when the liabilities are derecognized as well as through the EIR amortization process.
q3.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheets 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.
27
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
q4.
Fair value of financial instruments
The fair value of financial instruments that are traded in active market at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long position and ask price for short position), without any deduction for transaction costs. 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 rate 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.
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.
28
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
•
Financial assets carried at amortized cost (continued)
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 statements of income. Interest income continues to be accrued on the reduced carrying amount based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. 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 the consolidated statements of income.
•
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 objective 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 the consolidated statements of income - is reclassified from stockholders’ equity to profit or loss. Impairment losses on equity investments are not reversed through the consolidated statements of income; increases in their fair value after impairment are recognized in stockholders’ equity.
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 statements 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 the consolidated statements of income, the impairment loss is reversed through the consolidated statements of income.
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.
29
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(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)
q7.
Derecognition of financial assets and liabilities (continued)
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 the consolidated statements of income.
q8.
Derivative financial instruments
The Company enters into and engages in cross currency swaps, interest rate swaps 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.
Any gains or losses arising from changes in fair value of derivatives during the year that do not qualify for hedge accounting are taken directly to the consolidated statements of income.
Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivative is presented with the host contract on the consolidated balance sheets 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 “Loss on Change in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statements of income.
r.
Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded at the rates of exchange prevailing at
the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the prevailing exchange rates at such date and the resulting gains or losses are credited or charged to current operations, except for foreign exchange differentials that can be attributed to qualifying assets which are capitalized to properties under construction and installation.
For December 31, 2009 and 2010, the foreign exchange rates used (in full amounts) were Rp9,400 and Rp8,991, 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 year.
30
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s.
Income Tax
Current tax expense is provided based on the estimated taxable income for the year. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that realization of such benefits is probable. The tax effects for the year are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to stockholders’ equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are credited or charged to current year 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.
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 33.
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 year.
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 26.
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.
31
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
3.
CASH AND CASH EQUIVALENTS
This account consists of the following:
2009
2010
Cash on hand
Rupiah
1,581
1,682
U.S. dollar (US$12)
-
110
1,581
1,792
Cash in banks
Related parties (Note 26)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
28,750
45,792
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
752
11,345
PT Bank Pembangunan Daerah NTT
(“BPD - NTT”)
-
4,476
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
10,877
4,461
PT Bank Pembangunan Daerah Papua
(“BPD - Papua”)
-
2,473
PT Bank Tabungan Negara (Persero) Tbk (“BTN”)
-
1,270
PT Bank Syariah Mandiri (“Mandiri Syariah”)
2,310
1,215
PT Bank Pembangunan Daerah DKI Jakarta
(“BPD - DKI”)
4,652
935
Others (each below Rp1,000)
3,408
1,638
U.S. dollar
Mandiri (US$4,228 in 2009 and US$4,606 in 2010)
39,748
41,412
BNI (US$137 in 2009 and US$60 in 2010)
1,286
542
Others (US$60)
-
548
Third parties
Rupiah
PT Bank CIMB Niaga Tbk (“CIMB Niaga”)
10,715
21,845
PT Bank Bukopin Tbk (“Bukopin”)
-
9,308
PT Bank Central Asia Tbk (“BCA”)
11,966
2,284
Others (each below Rp5,000)
16,684
16,307
U.S. dollar
Fortis Bank N.V., The Netherlands (US$4,497 in 2009 and
US$6,960 in 2010)
42,272
62,577
Citibank N.A., Singapore Branch (US$2,343 in 2009 and
US$4,945 in 2010)
22,024
44,464
Citibank N.A., Jakarta Branch (“Citibank”)
(US$948 in 2009 and US$677 in 2010)
8,913
6,087
CIMB Niaga (US$838 in 2009 and US$160 in 2010)
7,875
1,435
Deutsche Bank AG, Jakarta Branch (“DB”)
(US$1,121 in 2009 and US$91 in 2010)
10,540
817
Others (US$12 in 2009 and US$52 in 2010)
117
464
222,889
281,695
32
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
3.
CASH AND CASH EQUIVALENTS (continued)
2009
2010
Time deposits and deposits on call
Related parties (Note 26)
Rupiah
Mandiri
1,379,950
421,400
BNI
195,820
141,185
BTN
117,000
88,500
BRI
171,500
68,500
Mandiri Syariah
105,000
31,000
PT Bank Pembangunan Daerah Jawa Barat
(“BPD - Jawa Barat”)
-
8,350
PT Bank BRI Syariah
-
5,000
PT Bank Pembangunan Daerah Yogyakarta
(“BPD - Yogyakarta”)
1,000
1,000
PT Bank Pembangunan Daerah Jawa Tengah
(“BPD - Jawa Tengah”)
3,500
-
U.S. dollar
BRI (US$80,000)
-
719,280
Mandiri (US$265 in 2009 and US$1,540 in 2010)
2,489
13,845
BPD - Jawa Barat (US$165)
-
1,484
Third parties
Rupiah
PT Bank Syariah Muamalat Indonesia Tbk (“Muamalat”)
125,500
48,500
CIMB Niaga
81,000
22,500
Bukopin
18,900
21,400
PT Bank Danamon Indonesia Tbk (“Danamon”)
22,800
15,900
PT Bank Himpunan Saudara 1906, Tbk (“HS 1906”)
-
15,400
PT Bank Mega Syariah
5,250
13,250
PT Bank International Indonesia (“BII”)
2,000
13,000
PT Bank Tabungan Pensiunan Nasional Tbk
18,500
12,000
DB
40,209
5,232
PT Bank DBS Indonesia (“DBS”)
100,000
-
Others (each below Rp5,000)
7,500
13,080
U.S. dollar
DB (US$17,725 in 2009 and US$5,454 in 2010)
166,611
49,038
Muamalat (US$5,000 in 2009 and 2010)
47,000
44,955
CIMB Niaga (US$2,000)
-
17,984
2,611,529
1,791,783
Total
2,835,999
2,075,270
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 10.00% 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.
33
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
4.
ACCOUNTS RECEIVABLE - TRADE
This account consists of the following:
2009
2010
Related parties (Note 26)
Telkom (including US$75 in 2009 and US$55 in 2010)
31,724
56,108
Others (including US$6,322 in 2009 and US$7,764 in 2010)
151,726
214,038
Sub-total
183,450
270,146
Less allowance for impairment
57,538
47,640
Net
125,912
222,506
Third parties
Overseas international carriers (US$98,042 in 2009 and
US$93,755 in 2010)
921,595
842,954
Local companies (including US$15,291 in 2009 and US$13,956
in 2010)
463,069
628,224
Post-paid subscribers from:
Cellular
252,008
255,973
Fixed telecommunication
26,813
47,239
Sub-total
1,663,485
1,774,390
Less allowance for impairment
404,272
448,470
Net
1,259,213
1,325,920
Total
1,385,125
1,548,426
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
121,522
66.24
201,256
74.50
7 - 12 months
27,207
14.83
47,973
17.76
13 - 24 months
2,661
1.45
6,913
2.56
Over 24 months
32,060
17.48
14,004
5.18
Total
183,450
100.00
270,146
100.00
Third parties
0 - 6 months
820,082
49.30
787,871
44.40
7 - 12 months
287,533
17.28
279,806
15.77
13 - 24 months
285,407
17.16
308,808
17.40
Over 24 months
270,463
16.26
397,905
22.43
Total
1,663,485
100.00
1,774,390
100.00
34
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
4.
ACCOUNTS RECEIVABLE - TRADE (continued)
The changes in the allowance for impairment of accounts receivable - trade are as follows:
Related
Third
Total
Parties
Parties
December 31, 2009
Balance at beginning of year
496,163
69,444
426,719
Provision (Note 23)
98,042
6,635
91,407
Write-offs
(101,586
)
(9,398)
(92,188
)
Net effect of foreign exchange adjustment
(29,560)
(9,143)
(20,417)
Deduction due to liquidation of SMM*
(1,249)
-
(1,249
)
Balance at end of year
461,810
57,538
404,272
December 31, 2010
Balance at beginning of year
461,810
57,538
404,272
Provision (reversal) - net (Note 23)
67,041
(9,712
)
76,753
Write-offs
(23,586)
-
(23,586)
Net effect of foreign exchange adjustment
(9,155)
(186
)
(8,969)
Balance at end of year
496,110
47,640
448,470
Individual impairment
182,175
37,576
144,599
Collective impairment
313,935
10,064
303,871
Total
496,110
47,640
448,470
Gross amount of receivables, individually impaired,
before deducting any individually assessed
impairment allowance
405,926
118,486
287,440
* 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 or Loss on Foreign Exchange”.
There are no significant concentrations of credit risk.
Management believes the established allowance is sufficient to cover impairment of accounts receivable - trade.
5.
PREPAID TAXES
This account consists of the following:
2009
2010
Claims for tax refund
580,305
651,657
Value Added Tax (“VAT”)
232,773
47,701
Others
5,248
2,202
Total
818,326
701,560
35
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
5.
PREPAID TAXES (continued)
Claims for tax refund as of December 31, 2009 and 2010 mainly consist of the Company’s corporate income tax for fiscal years 2004, 2005, 2006, 2009 and 2010, the Company’s income tax article 26 for fiscal years 2004, 2005, 2008 and 2009,and Satelindo’s corporate income tax for fiscal year 2002 and income tax article 26 for fiscal years 2002 and 2003.
On May 14, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction of the income tax article 26 for fiscal year 2004 amounting to Rp60,493 (including penalty tax). On May 25, 2010, the Company received the Decision Letter from the Tax Court which declined the Company’s objection to the 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 August 21, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s remaining objection to the correction of the 2005 corporate income tax. On October 29, 2010, the Company received the Decision Letter from the Tax Court which accepted the Company’s objection to the correction of the 2005 corporate income tax amounting to Rp38,155, which was offset against the underpayment of the Company’s 2008 and 2009 income tax article 26 based on Tax Collection Letters (“STPs”) received by the Company on September 17, 2010 (Note 13).
On September 2, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction of 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 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 (Expenses) - Others - Net”.
On July 4, 2008, the Company received the 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 the
2003 corporate income tax amounting to Rp126,403. On December 24, 2008, the Company received the Decision Letter No. KEP-539/WPJ.19/BD.05/2008 from the Directorate General of Taxation (“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.
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 13). 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 the 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. On October 14, 2010, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002. As of February 10, 2011, the Company has not yet received any decision from the Tax Court on such appeal.
36
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
5.
PREPAID TAXES (continued)
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 13). On August 27, 2009, the Company submitted an objection letter to the Tax Office for the correction of the Satelindo’s 2002 and 2003 income tax article 26. On July 16, 2010, the Company received the 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 of the Satelindo’s 2002 and 2003 income tax article 26. On October 12, 2010, the Company submitted appeal letters to the Tax Court concerning the Company’s objection to the correction of Satelindo’s 2002 and 2003 income tax article 26. As of February 10, 2011, the Company has not received any decision from the Tax Court on such appeal.
On September 7, 2009, the Company received the Decision Letter No.KEP-335/WPJ.19/BD.05/2009 from the DGT which declined the Company’s objection to the remaining corrections of the 2006 corporate income tax. On December 2, 2009, the Company submitted an appeal letter to the Tax Court regarding the remaining corrections of the Company’s 2006 corporate income tax. As of February 10, 2011, the Company has not received any decision from the Tax Court on such appeal.
6.
INVESTMENTS IN ASSOCIATED COMPANIES
As of December 31, 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 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
LMD *`
Indonesia
Information and
communication services
35.00
700
(278)
422
PT Swadharma Marga
Inforindo**
Indonesia
Telecommunication
and information services
20.00
400
(114
)
286
Total
57,612
(604)
57,008
Less allowance for impairment
56,586
Net
422
*
LMD is an associated company of Lintasarta. It 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).
Lintasarta gradually increased its ownership in LMD from 35% to 55% on November 24, 2010 and from 55% to 70% on December 21, 2010. Effective November 24, 2010, it is no longer an associated company, but a subsidiary of Lintasarta (Note 1d).
**
PT Swadharma Marga Inforindo (“SMI”) was as an associated company of Lintasarta, which was finally liquidated in October 2010.
37
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
6.
INVESTMENTS IN ASSOCIATED COMPANIES (continued)
Company’s
Portion of
Accumulated
Equity in
Undistributed
Net 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
Less allowance for impairment
56,300
Net
-
The Companies believe that the allowance for impairment amounting to Rp56,586 and Rp56,300 as of December 31, 2009 and 2010, respectively, is adequate to cover impairment losses on the above investments.
7.
OTHER LONG-TERM INVESTMENTS
As of December 31, 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 December 31, 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 impairment |
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$2,736 (equivalent to Rp26,774) and US$2,140 (equivalent to Rp19,281) for the years ended December 31, 2009 and 2010, respectively.
The Company has provided allowance for impairment of its investments in shares of stock accounted for under the cost method amounting to Rp99,977 as of December 31, 2009 and 2010, which the Company believes is adequate to cover impairment losses on the investments.
38
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
8.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
2009
Transactions during the Year
Balance
at Beginning
Liquidated
Balance at
of Year
Additions
Derecognitions
Reclassifications
SubsidiaryEnd of Year
Carrying Value
Landrights
473,109
-
-
31,511
-504,620
Buildings
551,700
18,922
-
82,055
-652,677
Information technology
equipment
1,856,437
144
-
311,892
(6,047)2,162,426
Office equipment
1,605,201
56,211
(33,249)
55,391
(570)1,682,984
Building and leasehold
improvements
8,651,137
-
(14,604)
2,287,855
(70
)
10,924,318
Vehicles
24,171
641
(1,258)
835
-24,389
Cellular technical
equipment
22,649,669
-
(817)
8,521,597
-31,170,449
Transmission and cross-
connection equipment
10,750,328
156,742
(88,631)
5,531,543
-16,349,982
FWA technical equipment
904,347
-
-
380,084
-
1,284,431
Operation and maintenance
center and measurement
unit
1,098,407
2,129
-
186,122
-1,286,658
Fixed access network
equipment
986,961
-
-
82,044
-1,069,005
Properties under
construction and
installation
13,926,944
11,334,716
(84,218)
(17,470,929)
-
7,706,513
Total
63,478,411
11,569,505
(222,777)
-
(6,687)74,818,452
Accumulated Depreciation
Buildings
258,796
24,985
-
-
-
283,781
Information technology
equipment
1,406,186
285,131
-
-
(5,014
)
1,686,303
Office equipment
1,100,225
142,940
(33,246)
-
(401
)
1,209,518
Building and leasehold
improvements
3,130,120
832,047
(9,637)
-
(70
)
3,952,460
Vehicles
13,930
2,944
(1,113)
-
-
15,761
Cellular technical
equipment
11,359,453
2,686,281
(817)
-
-
14,044,917
Transmission and cross -
connection equipment
5,905,416
1,108,994
(88,631
)
-
-
6,925,779
FWA technical
equipment
312,799
122,191
-
-
-
434,990
Operation and maintenance
center and measurement
unit
791,781
168,143
-
-
-
959,924
Fixed access network
equipment
707,021
70,580
-
-
-
777,601
Total
24,985,727
5,444,236
(133,444)
-
(5,485
)
30,291,034
Impairment in Value
98,611
-
-
-
-
98,611
Net Book Value
38,394,073
44,428,807
39
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
8.
PROPERTY AND EQUIPMENT (continued)
2010
Balance
Transactions during the Year
Balance
at Beginning
at End
of Year
Additions
Derecognitions
Reclassifications
of Year
Cost
Landrights
504,620
15,977
-
20,490
541,087
Buildings
652,677
4,088
-
157,426
814,191
Information technology
equipment
2,162,426
114
(14,141)
353,493
2,501,892
Office equipment
1,682,984
50,632
(15,016)
57,829
1,776,429
1,701,440
Building and leasehold
improvements
10,924,318
-
(70,346
)
1,120,713
11,974,685
Vehicles
24,389
635
(1,500)
1,176
24,700
25.008
Cellular technical
equipment
31,170,449
158,285
(1,741,072)
5,262,382
34,850,044
Transmission and cross-
connection equipment
16,349,982
205,849
(324,912)
2,098,301
18,329,220
FWA technical equipment
1,284,431
-
(22,070)
82,796
1,345,157
Operation and maintenance
center and measurement unit
1,286,658
-
(1,315)
69,920
1,355,263
Fixed access network
equipment
1,069,005
-
(1,851)
59,460
1,126,614
Properties under
construction and
installation
7,706,513
5,039,357
*
-
(9,283,986)
3,461,884
Total
74,818,452
5,474,937
(2,192,223
)
-
78,101,166
Accumulated Depreciation
Buildings
283,781
29,940
-
-
313,721
Information technology
equipment
1,686,303
286,175
(14,141)
-
1,958,337
Office equipment
1,209,518
148,219
(14,994)
-
1,342,743
Building and leasehold
improvements
3,952,460
920,854
(70,324)
-
4,802,990
Vehicles
15,761
3,588
(703
)
-
18,646
Cellular technical
equipment
14,044,917
3,026,386
(1,582,787
)
-
15,488,516
Transmission and cross-
connection equipment
6,925,779
1,435,193
(324,912
)
-
8,036,060
FWA technical equipment
434,990
121,922
(22,070
)
-
534,842
Operation and maintenance
center and measurement unit
959,924
134,989
(1,315
)
-
1,093,598
Fixed access network
equipment
777,601
66,342
(1,851)
-
842,092
Total
30,291,034
6,173,608
(2,033,097
)
-
34,431,545
Less Impairment in Value
98,611
-
-
-
98,611
Net Book Value
44,428,807
43,571,010
*
including additional property and equipment purchased from Lintasarta amounting to Rp71,423 (net of intercompany loss of Rp11,683).
Submarine cables (presented as part of transmission and cross-connection equipment) 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.
40
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
8.
PROPERTY AND EQUIPMENT (continued)
Depreciation expense charged to the consolidated statements of income amounted to Rp5,444,236 and Rp6,173,608 for the years ended December 31, 2009 and 2010, respectively.
Management believes that there is no impairment in asset value or recovery of the impairment reserve as contemplated in SAK 48 for the current year.
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 December 31, 2010, approximately Rp31,691 of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Note 15).
As of December 31, 2010, the Companies insured their respective property and equipment (except submarine cables and landrights) for US$232,785 and Rp40,306,958 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 December 31, 2009 and 2010 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
2009
Cellular technical equipment
5 - 99
5,682,137
January - September 2010
Transmission and cross-connection equipment
5 - 95
912,720
January - September 2010
Building and leasehold improvements
6 - 60
686,883
January 2010-January 2011
Information technology equipment
90 - 95
108,980
January - June 2010
Operation and maintenance center and
measurement unit
40 - 90
102,981
January - June 2010
Building
20 - 75
79,709
January - December 2010
FWA technical equipment
5 - 95
72,754
January - September 2010
Others (each below Rp50,000)
8 - 95
60,349
January - July 2010
Total
7,706,513
2010
Cellular technical equipment
5 - 99
2,170,612
January - December 2011
Transmission and cross-connection equipment
5 - 99
955,425
January - December 2011
Building and leasehold improvements
6 - 95
242,194
January - December 2011
Others (each below Rp50,000)
5 - 95
93,653
January - December 2011
Total
3,461,884
Borrowing costs capitalized to properties under construction and installation for the years ended December 31, 2009 and 2010 amounted to Rp181,522 and Rp18,698, respectively.
41
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
8.
PROPERTY AND EQUIPMENT (continued)
For the years ended December 31, 2009 and 2010, sales or exchange of certain property and equipment were made as follows:
2009
2010
Exchange of Assets (Note 29b)
Carrying amount of assets received
-
158,285
Carrying amount of assets given up
-
(158,285
)
Sales of Assets
Proceeds
2,253
7,741
Net book value
(5,115
)
(841)
Gain (loss)
(2,862
)
6,900
In the above exchange of assets transaction, the fair value of neither the asset received nor the assets given up cannot be measured reliably, hence, its value is measured at the carrying amount of the assets given up.
9.
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, in SMT in 2008 and LMD in 2010, respectively.
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 year - net
1,833,392
1,580,080
Additions:
Non-integrated software
15,044
40,052
Amortization of goodwill
(235,420
)
(226,380)
Amortization of other intangible assets
(32,936
)
(19,692)
Balance at end of year - net
1,580,080
1,374,060
10.
LONG-TERM PREPAID RENTALS - NET OF CURRENT PORTION
This account represents mainly the long-term portion of prepaid rentals on sites and towers.
11.
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.
42
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
12. PROCUREMENT PAYABLE
This account consists of payables for capital and operating expenditures procured from the following:
2009
2010
Related parties (Note 26) (including US$631 in 2009 and
US$404 in 2010)
117,284
68,681
Third parties (including US$309,520 in 2009 and US$246,211
in 2010)
5,172,498
3,575,786
Total
5,289,782
3,644,467
The billed amount of procurement payable amounted to Rp1,478,057 and Rp360,508 as of December 31, 2009 and 2010, respectively. The unbilled amount of procurement payable amounted to Rp3,811,725 and Rp3,283,959 as of December 31, 2009 and 2010, respectively.
13.
TAXES PAYABLE
This account consists of the following:
2009
2010
Estimated corporate income tax payable,
less tax prepayments of Rp439,147 in 2009
and Rp123,281 in 2010
21,826
4,890
Income tax:
Article 4(2)
22,614
14,299
Article 21
26,290
14,032
Article 22
3,826
-
Article 23
8,664
9,177
Article 25
40,122
18,899
Article 26
33,622
88,787
VAT
3,298
18,107
Others
1,558
1,254
Total
161,820
169,445
43
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
13.
TAXES PAYABLE (continued)
The reconciliation between income before income tax and estimated taxable income (tax loss) of the Company for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Income before income tax per consolidated statements of income
2,231,993
1,081,817
Subsidiaries’ income before income tax and effect of
inter-company consolidation eliminations (190,669) (197,537)
Income before income tax of the Company
2,041,324
884,280
Positive adjustments
Assessments for income taxes and related penalties
55,347
82,534
Amortization of goodwill and other intangible assets
23,118
35,811
Provision for impairment of receivables
48,640
34,739
Provision for termination, gratuity and compensation benefits
of employees
30,898
32,869
Donations
12,774
18,653
Net periodic pension cost
1,446
17,013
Accrual of employee benefits - net
115,312
15,278
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
-
10,318
Representation and entertainment
7,979
5,709
Others
126,642
143,143
Negative adjustments
Depreciation - net
(888,571
)
(1,692,108
)
Loss on sale of property and equipment - net
(3,701)
(344,221
)
Equity in net income of investees
(224,842
)
(241,230
)
Interest income already subjected to final tax
(119,490
)
(109,844
)
Amortization of long-term prepaid licenses
(7,435
)
(35,005
)
Write-off of accounts receivable
(98,905)
-
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
(2,620
)
-
Estimated taxable income (tax loss) of
the Company
1,117,916
(1,142,061
)
The computation of income tax expense for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Estimated taxable income (tax loss) of the Company
1,117,916
(1,142,061
)
Income tax expense - current (at statutory tax rates)
Company
313,016
-
Subsidiaries
147,957
128,171
Total income tax expense - current
460,973
128,171
44
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
13.
TAXES PAYABLE (continued)
2009
2010
Income tax expense (benefit) - deferred - effect
of temporary differences at enacted maximum tax rates
Company
Depreciation - net
228,846
423,027
Loss on sale of property and equipment - net
1,036
86,055
Equity in net income of investees
56,211
60,308
Amortization of long-term prepaid licenses
1,722
8,751
Tax loss
-
(285,515
)
Amortization of goodwill and other intangible assets
(6,614
)
(8,953
)
Write-off of accounts receivable (provision for impairment
of receivables) - net
15,517
(8,685
)
Provision for termination, gratuity and compensation
benefits of employees
(7,662
)
(8,217
)
Net periodic pension cost
(115
)
(4,253
)
Accrual of employee benefits - net
(27,818
)
(3,820
)
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
548
(2,580
)
Others
(31,608
)
(19,012
)
Net
230,063
237,106
Subsidiaries
(13,771
)
(7,479
)
Net income tax expense - deferred
216,292
229,627
Total income tax expense
677,265
357,798
The computation of the estimated income tax payable for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Income tax expense - current
Company
313,016
-
Subsidiaries
147,957
128,171
Total income tax expense - current
460,973
128,171
Less prepayments of income tax of the Company
Article 22
101,137
52,126
Article 23
7,071
6,810
Article 25
299,289
28,795
Total prepayments of income tax of the Company
407,497
87,731
Less prepayments of income tax of Subsidiaries
Article 22
7,534
1,107
Article 23
3,306
3,696
Article 25
151,693
194,309
Total prepayments of income tax of Subsidiaries
162,533
199,112
Total prepayments of income tax
570,030
286,843
Estimated income tax payable
Subsidiaries
21,826
4,890
45
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
13.
TAXES PAYABLE (continued)
2009
2010
Claims for tax refund (presented as part of “Prepaid Taxes”)
Company
94,481
87,731
Subsidiaries
36,402
75,831
Total
130,883
163,562
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 years ended December 31, 2009 and 2010 is as follows:
2009
2010
Income before income tax per consolidated statements
of income
2,231,993
1,081,817
Income tax expense at the applicable tax rate
624,958
270,454
Company’s equity in Subsidiaries’ income before income tax
and reversal of
inter-company consolidation eliminations
66,082
57,427
Tax effect on permanent differences
Assessment for income taxes and related penalties
15,497
20,844
Employee benefits
15,815
16,180
Donation
s
3,577
6,037
Representation and entertainment
2,825
2,343
Interest income already subjected to final tax
(41,764
)
(36,200
)
Others
(8,451
)
8,818
Others
(1,274
)
11,895
Income tax expense per consolidated statements of income
677,265
357,798
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of December 31, 2009 and 2010 are as follows:
2009
2010
Deferred tax assets
Tax loss
-
285,515
Accrual of employee benefits - net
223,067
235,104
Allowance for impairment on receivables
109,510
118,195
Allowance for impairment of investments in associated
company and
other long-term investments
39,069
39,069
Pension cost
17,890
22,143
Allowance for impairment of short-term investment
6,349
6,349
Others
1,992
3,300
Total
397,877
709,675
46
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
13.
TAXES PAYABLE (continued)
2009
2010
Deferred tax liabilities
Property and equipment
1,711,076
2,220,158
Investments in subsidiaries/associated company - net of
amortization of goodwill and other intangible assets
196,498
229,239
Long-term prepaid licenses
4,811
13,562
Deferred debt and bonds issuance costs, consent solicitation fees
and discount
13,106
10,526
Difference in transactions of equity changes in associated
company
1,460
1,460
Others
1,448
659
Total
1,928,399
2,475,604
Deferred tax liabilities - net
1,530,522
1,765,929
The breakdown by entity of the deferred tax assets and liabilities outstanding as of December 31, 2009 and 2010 is as follows:
2009
2010
Deferred Tax
Deferred Tax
Deferred TaxDeferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
1,530,522
-
1,765,929
Subsidiaries
Lintasarta
74,513
-
77,755
-
IMM
11,299
-
17,263
-
APE
-
3,070
-
4,383
SMT
-
991
-
1,597
ISPL
-
619
-
428
LMD
-
-
-
-
Total
85,812
1,535,202
95,018
1,772,337
The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation on 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 impairment of investments in associated company and other long-term investments is realized upon sale of the investments, write-off of receivables 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.
The Company provides for deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in its investment in domestic subsidiaries as the Company believes that for certain subsidiaries the investment will be recovered through the sale of the shares which is a taxable transaction and for certain subsidiaries the differences will be deductible from ordinary income as a result of a merger.
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”.
47
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
13.
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 5).
On September 17, 2010, the Company received STPs from the DGT for the underpayment of the Company’s 2008 and 2009 income tax article 26 totalling Rp80,018 (including interest). On October 13, 2010, the Company submitted cancellation letters to the Tax Office regarding such STPs. Subsequently, on November 16, 2010, the Company was required to pay a certain portion of these STPs by using the approved tax refund claim for on the Company’s corporate Income Tax for fiscal year 2005 (Note 5) amounting to Rp38,155. As of December 31, 2010, the remaining amount of Rp41,863 has not yet been paid (Note 35a).
The tax losses carryover of SMT and the Company as of December 31, 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
1,192,832
Total
1,295,788
14.
ACCRUED EXPENSES
This account consists of the following:
2009
2010
Interest
228,743
339,957
Network repairs and maintenance
301,857
265,428
Employee benefits (Notes 18 and 25)
152,447
216,732
Radio frequency fee
240,718
195,686
Dealer incentives (Note 2n)
80,778
125,836
Marketing
125,908
120,092
Utilities
94,359
85,650
Consultancy fees
66,218
65,288
Universal Service Obligation (“USO”) (Note 31)
62,378
59,899
Concession fee (Note 31)
2,468
38,005
Link
7,204
31,111
Rental
18,225
28,090
General and administration
25,546
27,706
Blackberry access fee
10,340
20,679
Others (each below Rp20,000)
108,372
90,726
Total
1,525,561
1,710,885
48
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE
This account consists of the following:
2009
2010
Related party (Note 26)
Mandiri - net of unamortized debt issuance cost and consent
solicitation fees of Rp7,511 in 2009 and Rp2,955 in 2010
2,592,489
1,297,045
Third parties - net of unamortized debt issuance cost and consent
solicitation fees of Rp250,888 in 2009 and Rp189,979 in 2010;
unamortized debt discount of Rp25,892 in 2009 and Rp19,267
in 2010
11,569,078
9,553,906
Total loans payable
14,161,567
10,850,951
Less current maturities (net of unamortized debt issuance cost
and consent solicitation fees of Rp373 in 2010)
Related party
400,000
300,000
Third parties
1,040,259
2,884,147
Total current maturities
1,440,259
3,184,147
Long-term portion
Related party
2,192,489
997,045
Third parties
10,528,819
6,669,759
Total long-term portion
12,721,308
7,666,804
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 8.96% per annum. The interest is payable quarterly. The repayment of the loan drawdowns will be made annually, as follows: (a) 10% of the total loan drawdowns in the 1st and 2nd years after the first drawdown, (b) 15% of the total loan drawdowns in the 3rd and 4th years after the first drawdown, and (c) 50% of the total loan drawdowns in the 5th year after the signing date of the agreement.
On September 27 and December 27, 2007, the Company made the first and second loan drawdowns 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.
49
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
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.
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.
On November 15, 2010, the Company made an early repayment of the remaining loan balance amounting to Rp900,000.
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 Rp44,563
in 2009 and Rp27,122 in 2010
4,185,437
4,018,828
AB Svensk Exportkredit, Sweden with Guarantee from Export
Kredit Namnden - net of unamortized debt issuance
cost of Rp36,909 in 2009 and Rp27,593 in 2010
1,200,551
1,972,905
HSBC France - net of unamortized debt issuance cost
and consent solicitation fees of Rp156,357 in 2009 and
Rp129,167 in 2010
1,736,678
1,500,434
BCA - net of unamortized debt issuance cost and consent
solicitation fees of Rp7,055 in 2009 and Rp2,903 in 2010
3,092,945
1,297,097
Goldman Sachs International
Principal, net of unamortized debt discount of Rp25,892
in 2009 and Rp19,267
in 2010
408,408
415,033
Foreign Exchange (FX) Conversion Option
103,758
54,595
9-Year Commercial Loan - net of unamortized debt issuance
cost and consent solicitation fees of Rp3,707 in 2009 and
Rp2,821 in 2010
237,733
203,805
Investment Credit Facility 6 from CIMB Niaga
23,772
52,483
Finnish Export Credit Ltd. - net of unamortized debt issuance
cost and consent solicitation fees of Rp1,113 in 2009 and
Rp373 in 2010
106,047
33,793
50
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
2009
2010
Investment Credit Facility 5 from CIMB Niaga
24,933
4,933
DBS - net of unamortized debt issuance cost and consent
solicitation fees of Rp1,184
448,816
-
Total
11,569,078
9,553,906
Less current maturities (net of unamortized debt issuance
costs and consent solicitation fees totaling Rp373 in 2010)
1,040,259
2,884,147
Long-term portion
10,528,819
6,669,759
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 totalling US$450,000 (equivalent to Rp4,704,650).
On February 24, 2009, the Company amended the Syndicated U.S. Dollar Loan Facility based on the consent letter received on February 19, 2009 from DBS Bank Ltd., which covers the consent provided by a majority of the 13 financial institutions to which 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.
51
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
b.
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 The Royal Bank of Scofland N.V. (formerly ABN-AMRO Bank N.V.), 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.
As of December 31, 2010, the Company has already drawn US$100,000 and US$155,000 from facilities A and B, respectively.
On November 30, 2009, May 27, 2010 and November 30, 2010, the Company paid the first, second and third 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.
c.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.
52
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
c.HSBC France (continued)
·
12-year COFACE Term Facility Agreement (“COFACE Facility”) (continued)
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.
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.
53
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
d.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 9.03% 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 and 4th years after the first drawdown, and (c) 50% of the total loan drawdowns in the 5th year after the first drawdown.
On September 27, October 26 and December 27, 2007, the Company made the first, second and third loan drawdowns 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, the 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.
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.
On October 19, 2010, the Company made an early repayment of the remaining loan balance amounting to Rp400,000.
54
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
d.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.
On October 19, 2010, the Company made an early repayment of the remaining loan balance amounting to Rp900,000.
Based on the loan agreement, the Company is required to comply with certain covenants, such as maintaining certain financial ratios.
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 December 31, 2009 and 2010 amounted to US$11,038.10 (equivalent to Rp103,758) and US$6,072.20 (equivalent to Rp54,595), respectively. If GSI takes such option, starting
May 30, 2012, the loan will bear interest at the fixed annual rate of 6.45% applied on the US$50,000 principal and both U.S. dollar principal and interest thereon will be due on May 30, 2013.
Based on the loan agreement, the Company is required to notify GSI regarding the following events which can result in loan termination, such as (i) certain changes affecting withholding taxes in the United Kingdom or Indonesia, (ii) default under Guaranteed Notes due 2012 (Note 16), (iii) default under the Company’s USD Notes and IDR Bonds (Note 16), (iv) redemption, purchase or
cancellation of the Guaranteed Notes Due 2012 (Note 16) and there are no USD Indosat Notes outstanding upon such redemption, purchase or cancellation, and (v) change of control in the Company.
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 19).
55
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
f.
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 14d). 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.
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, May 27, 2010 and November 29, 2010, the Company paid the first, second and third semi-annual installments, respectively, amounting to US$1,351.85 each.
g. 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.
56
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
g. Investment Credit Facility 6 from CIMB Niaga (continued)
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 8) purchased from the proceeds of the credit facility. The loan also has the same restrictive covenants as the Investment Credit Facility 5.
h.
Finnish Export Credit Ltd. (“FEC”)
On May 12, 2006, the Company obtained a credit facility from FEC amounting to US$38,000, with The Royal Bank of Scofland N.V. (formerly ABN-AMRO Bank N.V.), Jakarta Branch as the arranger and The Royal Bank of Scofland N.V. (formerly 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 Bank 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 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 8) 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.
57
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
j.
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.
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 Rp450,000. The amendment included the changes in the definition of certain terms and the financial ratios required to be maintained.
On October 30, 2010, the Company made an early repayment of the remaining loan balance amounting to Rp400,000.
The scheduled principal payments from 2011 to 2015 and thereafter of all the loans payable as of December 31, 2010 are as follows:
Twelve months ending December 31,
2015 and
2011
2012
2013
2014
thereafter Total
In rupiah
Mandiri
300,000
1,000,000
-
-
-1,300,000
BCA
300,000
1,000,000
-
-
-1,300,000
GSI
-
-
434,300
-
-
434,300
CIMB Niaga
34,933
22,483
-
-
-
57,416
Sub-total
634,933
2,022,483
434,300
--3,091,716
58
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
15.
LOANS PAYABLE (continued)
Twelve months ending December 31,
2015 and
2011
2012
2013
2014
thereafter Total
In U.S. dollar
Syndicated U.S. Dollar
Loan facility
(US$450,000)
1,982,516
647,352
1,416,082
-
-4,045,950
SEK, Sweden
(US$222,500)
327,529
327,529
327,529
327,529
690,382
2,000,498
HSBC France
(US$181,248.02)
181,067
181,067
181,067
181,067905,333
1,629,601
9-Year Commercial
Facility (US$22,981.45)
24,309
36,463
36,463
36,46372,928
206,626
GSI (US$6,072.20)
-
-
54,595
-
-
54,595
FEC (US$3,800)
34,166
-
-
-
-
34,166
Sub-total
2,549,587
1,192,411
2,015,736
545,059
1,668,643
7,971,436
Total
3,184,520
3,214,894
2,450,036
545,059
1,668,643
11,063,152
Less:
- unamortized debt issuance costs and consent solicitation fees
(192,934
)
- unamortized debt discount
(19,267
)
Net
10,850,951
The total amortization of debt issuance, discount and consent solicitation fees on the loans for the years ended December 31, 2009 and 2010 amounted to Rp35,838 and Rp72,091, respectively (Note 24).
As of December 31, 2009 and 2010, the Companies have complied with all financial ratios required to be maintained under the loan agreements.
16.
BONDS PAYABLE
This account consists of the following:
2009
2010
Guaranteed Notes Due 2020 - net of unamortized notes issuance cost
of Rp64,885 and discount of Rp29,666
-
5,749,599
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation fees of
Rp12,793 in 2009 and
Rp11,041 in 2010
2,587,207
2,588,959
Seventh Indosat Bonds in Year 2009 with Fixed Rates - net of
unamortized bonds issuance cost of Rp6,198 in 2009 and
Rp5,362 in 2010
1,293,802
1,294,638
Sixth Indosat Bonds in Year 2008 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp7,050 in 2009 and Rp5,414 in 2010
1,072,950
1,074,586
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp4,050 in 2009
and Rp1,382 in 2010
810,950
813,618
Indosat Sukuk Ijarah III in Year 2008 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp3,601 in 2009
and Rp2,625 in 2010
566,399
567,375
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized bonds
issuance cost and consent solicitation fees of Rp1,872 in 2009
and Rp1,517 in 2010
398,128
398,483
59
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
This account consists of the following:
2009
2010
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost and consent solicitation fees of
Rp1,429 in 2009 and Rp487 in 2010
283,571
284,513
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
- net of unamortized consent solicitation fees of Rp656 in 2009
and Rp652 in 2010
199,344
199,348
Indosat Sukuk Ijarah IV in Year 2009 - net of unamortized
bonds issuance cost of Rp982 in 2009 and Rp873 in 2010
199,018
199,127
Limited Bonds II issued by Lintasarta*25,00025,000
Limited Bonds I issued by Lintasarta**
16,989
16,989
Guaranteed Notes Due 2010 - net of unamortized notes issuance
cost of Rp3,879
2,202,743
-
Guaranteed Notes Due 2012 - net of unamortized notes discount
of Rp3,116 and unamortized notes issuance cost of Rp6,521
1,018,817
-
Third Indosat Bonds in Year 2003 with Fixed Rates - net of
unamortized
bonds issuance cost and consent
solicitation fees of Rp2,081
637,919
-
Total bonds payable
11,312,837
13,212,235
Less current maturities (net of unamortized bonds
issuance
cost and consent solicitation fees
totalling Rp5,960 in 2009
and Rp1,869 in 2010)
2,840,662
1,098,131
Long-term portion
8,472,175
12,114,104
*
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, IPBV issued Guaranteed Notes (“GN”) Due 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 semi-annually on January 29 and July 29 of each year, commencing on January 29, 2011. The notes have an effective interest rate of 7.62% 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 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 the option of IPBV or the Company, in whole but not in part, at any time, upon not less than 30 days nor more than 60 days prior notice, at a price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest to (but not including) the redemption date and any additional amounts, in the event of certain changes affecting 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 the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
60
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2020 (continued)
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 GN Due 2010 and GN 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 on 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 August and December 2010), the notes have BB (stable outlook), Ba1 (negative outlook) and BBB- (stable outlook) ratings from Standard & Poor’s (“S&P”), Moody’s Investors Service (“Moody’s”) and Fitch (“Fitch”), respectively.
Fifth Indosat Bonds in Year 2007 with Fixed Rates
On May 29, 2007, the Company issued its Fifth Indosat Bonds in Year 2007 with Fixed Rates (“Fifth Indosat Bonds”), with BRI as the trustee 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 October 2010), the bonds haveidAA+ (stable outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”).
16.
BONDS PAYABLE (continued)
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.
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 October 2010), the bonds haveidAA+ (stable outlook) rating from Pefindo.
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.
61
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Sixth Indosat Bonds in Year 2008 with Fixed Rates (continued)
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.
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 October 2010), the bonds haveidAA+ (stable outlook) rating from Pefindo.
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 October 2010), the bonds haveidAA+ (stable outlook) rating from Pefindo.
62
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Indosat Sukuk Ijarah III in Year 2008 (“Sukuk Ijarah III”)
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 October 2010), the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”)
On May 29, 2007, the Company issued its Sukuk Ijarah II, with BRI as the trustee 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.
63
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”) (continued)
Based on the minutes of the RUPO dated March 24, 2009, the holders of Indosat Sukuk Ijarah II agreed to amend the Trustee Agreement related to the changes in the definition of certain terms and the financial ratios required to be maintained.
Based on the latest rating report (released in October 2010), the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”)
On June 21, 2005, the Company issued its Syari’ah Ijarah Bonds, with BRI as the trustee 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 September 21, 2005 and every quarter thereafter up to June 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.
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 October 2010), the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates
On November 6, 2002, the Company issued its Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (“Second Indosat Bonds”), with BRI as the trustee 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.
64
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Second Indosat Bonds in Year 2002 with Fixed and Floating Rates (continued)
-
Sell Option
:
the bondholder has the right to ask for early settlement from the 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 October 2010), the bonds haveidAA+ (stable outlook) rating from Pefindo.
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 October 2010), the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo.
65
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Limited Bonds II issued by Lintasarta
On June 14, 2006, Lintasarta entered into an agreement with its stockholders for the former to issue Limited Bonds II amounting to Rp66,150. The limited bonds represent unsecured bonds which 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 15).
On June 14, 2009, Lintasarta paid a portion of the limited bonds amounting to Rp6,150. Based on the Minutes of the Joint Meeting of Lintasarta’s Boards of Commissioners and Directors held on May 20, 2009, the representatives of 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.
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.
66
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
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 bore interest at the fixed rate of 7.75% per annum payable semi-annually on May 5 and November 5 of each year, commencing on May 5, 2004. The notes had an effective interest rate of 7.93% per annum. The notes matured on November 5, 2010.
The notes would be redeemable at the option of IFB, in whole or in part, at any time on or after
November 5, 2008. The notes were 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 were 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 had the right to require IFB to repurchase all or any part of such holder’s notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.
The net proceeds, after deducting the underwriting fee and offering expenses, were received on November 5, 2003 and used primarily to repay a portion of Indosat’s (including Satelindo’s and IM3’s) outstanding indebtedness amounting to Rp1,500,000 and US$447,500.
Based on the notes indenture, the Company was required to comply with certain conditions, such as maintaining certain financial ratios.
The notes were unconditionally and irrevocably guaranteed by the Company and IIFB.
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. 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 GN Due 2010 (the "2010 Notes") and IIFB's outstanding GN 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.
67
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2010 (continued)
On 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 offers with total principal amounts of US$167,774 (equivalent to Rp1,499,564) and US$100 (equivalent to Rp894) at prices equal to 102.1875% and 101.9375%, respectively, of the principal amounts purchased, plus the accrued and unpaid interest up to settlement date, consent fee of US$9 (equivalent to Rp83) and other additional expense (Note 24).
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 the principal amount called, plus the accrued and unpaid interest up to settlement date and other additional expense (Note 24).
Guaranteed Notes Due 2012
On June 22, 2005, the Company, through IIFB, issued GN 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 bore interest at the fixed rate of 7.125% per annum payable semi-annually on June 22 and December 22 of each year, commencing December 22, 2005. The notes had an effective interest rate of 8.13% per annum. The notes would mature on June 22, 2012.
The notes would 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 might 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 were 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 had 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 was required to comply with certain conditions, such as maintaining certain financial ratios.
The notes were unconditionally and irrevocably guaranteed by the Company.
On July 22, 2008, IIFB announced the Change of Control Offer to all holders of the notes. 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.
68
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
Guaranteed Notes Due 2012 (continued)
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 2010 Notes and IIFB’s outstanding 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 offers with total principal amounts of US$55,835 (equivalent to Rp499,053) and US$200 (equivalent to Rp1,788) at prices equal to 103.8125% and 103.5625%, respectively, of the principal amounts purchased, plus the accrued and unpaid interest up to settlement date and other additional expenses (Note 24).
On September 2, 2010, IIFB paid a total of 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 the principal amount called, plus the accrued and unpaid interest up to settlement date and other additional expenses.
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 amounted to Rp640,000 bore interest at the fixed rate of 12.875% per annum for 7 years starting October 22, 2003. On October 22, 2010, the Company paid in full the Series B bonds amounting to Rp640,000. The bonds had an effective interest rate of 13.31% per annum.
The bonds would mature before maturity date if after the 1st anniversary of the bonds, the Company exercised 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.
KSEI, acting as payment agent, paid 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 was required to comply with certain conditions, such as maintaining certain financial ratios.
The bonds were neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that had been specifically used as security to its other creditors, were used aspari-passu security 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.
69
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
BONDS PAYABLE (continued)
The scheduled principal payments of all the bonds payable outstanding as of December 31, 2010 are as follows:
Twelve months ending December 31,
2015 and
2011
2012
2013
2014
thereafter*
Total
In U.S. dollar
Guaranteed Notes *
Due 2020
(US$650,000)
-
-
-
-
5,844,150
5,844,150
In Rupiah
Fifth Indosat Bonds *
-
-
-
1,230,000
1,370,0002,600,000
Seventh Indosat Bonds*
-
-
-
700,000
600,000
1,300,000
Sixth Indosat Bonds*
-
-
760,000
-
320,000
1,080,000
Fourth Indosat Bonds
*
815,000
-
-
-
-815,000
Sukuk Ijarah III *
-
-
570,000
-
-
570,000
Sukuk Ijarah II *
-
-
-
400,000
-400,000
Syari’ah Ijarah Bonds *
285,000
-
-
-
-
285,000
Second Indosat Bonds
*
-
-
-
-
200,000
200,000
Sukuk Ijarah IV *
-
-
-
28,000
172,000200,000
Limited Bonds II
-
25,000
-
-
-
25,000
Limited Bonds I
-
16,989
-
-
-
16,989
Sub-total
1,100,000
41,989
1,330,000
2,358,0002,662,0007,491,989
Total
1,100,000
41,989
1,330,000
2,358,000
8,506,15013,336,139
Less:
-
unamortized notes issuance cost
(64,885
)
-
unamortized bonds issuance costs and consent solicitation fees
(29,353
)
-
unamortized notes discount
(29,666
)
Net
13,212,235
*
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 discount for the years ended December 31, 2009 and 2010 totaling to Rp15,467 and Rp18,025, respectively (Note 24).
As of December 31, 2009 and 2010, the Companies have complied with all financial ratios required to be maintained under the Notes Indenture and Trustee Agreements.
17.
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, accrued expenses, 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.
70
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
17.
FINANCIAL ASSETS AND LIABILITIES (continued)
The following table sets forth the Companies’ financial assets and financial liabilities as of
December 31, 2009 and 2010:
2009
2010
Financial Assets
Held for trading
Derivative assets
224,743
69,334
Loans and receivables
Cash and cash equivalents
2,835,999
2,075,270
Accounts receivable - trade and others - net
1,949,984
1,558,457
Other current financial assets
35,173
53,119
Due from related parties - net
7,215
8,421
Other non-current financial assets
100,004
77,675
Available for sale
Short-term investments - net
-
-
Other long-term investments - net
2,730
2,730
Total Financial Assets
5,155,848
3,845,006
Financial Liabilities
Held for trading
Derivative liabilities
200,202
215,403
Liabilities at amortized cost
Accounts payable - trade
537,476
645,505
Procurement payable
5,289,782
3,644,467
Accrued expenses
1,525,561
1,710,885
Deposits from customers
22,463
50,279
Loans payable - current maturities
1,440,259
3,184,147
Bonds payable - current maturities
2,840,662
1,098,131
Other current financial liabilities
43,721
23,127
Due to related parties
13,764
22,099
Loans payable - net of current maturities
12,721,308
7,666,804
Bonds payable - net of current maturities
8,472,175
12,114,104
Total Financial Liabilities
33,107,373
30,374,951
71
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
17.
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 December 31, 2010:
Carrying Amount
Fair Value Amount
Current Financial Assets
Cash and cash equivalents
2,075,270
2,075,270
Short-term investments - net
-
-
Accounts receivable - trade and others - net
1,558,457
1,558,457
Derivative assets
69,334
69,334
Other current financial assets
53,119
53,119
Total current financial assets
3,756,180
3,756,180
Non-Current Financial Assets
Due from related parties - net
8,421
7,176
Other long-term investments - net
2,730
2,730
Other non-current financial assets
77,675
73,309
Total non-current financial assets
88,826
83,215
Total Financial Assets
3,845,006
3,839,395
Current Financial Liabilities
Accounts payable - trade
645,505
645,505
Procurement payable
3,644,467
3,644,467
Accrued expenses
1,710,885
1,710,885
Deposits from customers
50,279
50,279
Derivative liabilities
215,403
215,403
Loans payable - current maturities
3,184,147
3,155,634
Bonds payable - current maturities
1,098,131
1,110,737
Other current financial liabilities
23,127
23,127
Total current financial liabilities
10,571,944
10,556,037
Non-Current Financial Liabilities
Due to related parties
22,099
18,833
Loans payable - net of current maturities
7,666,804
7,510,510
Bonds payable - net of current maturities
12,114,104
13,228,171
Total non-current financial liabilities
19,803,007
20,757,514
Total Financial Liabilities
30,374,951
31,313,551
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 instruments for which it is practicable to estimate such value:
72
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
17.
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 accounts receivable, other current financial assets, trade accounts payable , 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 (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 long-term investments and other non-current financial assets)
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 December 31, 2010.
73
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
18.
EMPLOYEE BENEFIT OBLIGATIONS
This account consists of the non-current portions of employee benefit obligations as follows:
2009
2010
Post-retirement healthcare (Note 25)
549,007
639,271
Labor Law 13 (Note 25)
147,790
187,944
Service award
31,265
43,058
Accumulated leave benefits
1,391
2,134
Post-retirement benefit of salary continuation
before retirement*
96,261
-
Total
825,714
872,407
*
Before December 31, 2010, the current portion of salary continuation before retirement included in accrued expenses (Note 14) amounted to Rp1,412 and the non-current portion included in employee benefit obligations amounted to Rp117,773, before deducting benefit payments made during the year amounting to Rp852. On December 31, 2010, the Company and its employees’ union reached a collective labor agreement (“CLA”) on the revocation of post-retirement benefit of salary continuation before retirement effective January 1, 2011. This revocation eliminates the Company’s legal or constructive obligation on the benefit. Consequently, the Company reversed the outstanding accrual for this benefit as of December 31, 2010 amounting to Rp118,333.
19.
CAPITAL STOCK
The Company’s capital stock ownership as of December 31, 2009 and 2010 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
2009
A Share
Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
(previously ICLS)
3,532,056,600
353,206
65.00
Government
776,624,999
77,662
14.29
Director:
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
Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
3,532,056,600
353,206
65.00
Government
776,624,999
77,662
14.29
SKAGEN Funds (SKAGEN AS)
277,824,400
27,782
5.11
Director:
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
847,417,500
84,742
15.60
Total
5,433,933,500
543,393
100.00
74
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
19.
CAPITAL STOCK (continued)
The “A” share is a special share held by the Government and has special voting rights. The material rights and restrictions which are applicable to the “B” shares are also applicable to the “A” share, except that the Government may not transfer the “A” share, which has a veto right with respect to (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation, acquisition and demerger; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company. The “A” share also has the right to appoint one director and one commissioner of the Company.
On 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.
20.
OPERATING REVENUES
This account consists of the following:
2009
2010
Cellular
Usage charges
7,085,741
7,943,960
Value-added services
5,998,963
7,039,243
Interconnection revenues (Note 32)
1,709,193
1,252,751
Tower leasing (Note 29d)
62,365
251,981
Monthly subscription charges
184,174
200,519
Sale of Blackberry handsets
206,481
34,956
Others
140,310
172,080
Upfront discount and Customer Loyalty Program (Note 2n)
(1,087,064
)
(868,428
)
Net
14,300,163
16,027,062
MIDI
Internet Protocol Virtual Private Network(IP VPN)
566,105
605,685
Internet
677,375
519,553
World link and direct link
394,189
278,788
Frame net
276,477
227,051
Leased line
211,092
189,112
Application services
146,137
168,196
Satellite lease
113,060
136,008
Digital data network
144,619
94,686
Multiprotocol Label Switching (MPLS)
67,141
66,579
Others
124,789
190,618
Sub-total
2,720,984
2,476,276
75
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20.
OPERATING REVENUES (continued)
2009
2010
Fixed Telecommunication
International Calls
1,422,268
993,165
Fixed Wireless
249,886
174,157
Fixed Line
129,935
125,383
Others
950
472
Sub-total
1,803,039
1,293,177
Total
18,824,186
19,796,515
Operating revenues from related parties amounted to Rp1,474,208 and Rp1,640,591 for the years ended December 31, 2009 and 2010, respectively. These amounts represent 7.83% and 8.29% of the total operating revenues for the years ended December 31, 2009 and 2010, respectively (Note 26).
The operating revenues from interconnection services are presented on a gross basis (Note 2o).
21.
OPERATING EXPENSES - COST OF SERVICES
2009
2010
Interconnection (Note 32)
1,880,105
1,735,942
Radio frequency fee (Note 1)
1,331,416
1,612,375
Maintenance
922,225
943,503
Utilities
772,450
715,349
Rent
449,759
517,432
Leased circuits
487,074
377,580
Cost of SIM cards and pulse reload vouchers
326,472
259,323
USO (Note 32)
218,210
214,636
Blackberry access fee
50,068
197,434
Installation
97,142
133,746
Concession fee (Note 32)
83,970
112,404
Delivery and transportation
80,157
84,075
Cost of handsets and modems
247,135
74,266
Billing and collection
44,297
54,816
License
67,030
31,543
Others
30,340
48,986
Total
7,087,850
7,113,410
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).
76
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
22.
OPERATING EXPENSES - PERSONNEL
This account consists of:
2009
2010
Salaries
451,150
492,452
Incentives and other employee benefits
260,884
277,361
Bonuses
207,690
236,950
Employee income tax
145,421
131,630
Post-retirement healthcare benefits (Note 25)
88,615
104,600
Medical expense
68,471
69,509
Outsourcing
74,809
60,858
Pension (Note 25)
32,336
45,688
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 25)
40,972
42,833
Early retirement*
38,106
16,253
Post-retirement benefit of salary continuation
before retirement (Note 18)
14,933
(96,820)
Others
28,173
29,930
Total
1,451,560
1,411,244
*
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 years ended December 31, 2009 and 2010, there were 66 and 19 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation for the years ended December 31, 2009 and 2010 amounted to Rp34,092 and Rp38,668, respectively.
23.
OPERATING EXPENSES- GENERAL AND ADMINISTRATION
This account consists of:
2009
2010
Rent
144,585
120,428
Professional fees
103,916
109,374
Utilities
77,318
97,518
Provision for impairment of receivables (Note 4)
98,042
67,041
Transportation
58,882
64,485
Office
44,710
48,370
Insurance
29,183
39,807
Catering
20,730
25,585
Others (each below Rp20,000)
116,071
87,379
Total
693,437
659,987
77
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
24.
OTHER EXPENSES - FINANCING COST
This account consists of:
2009
2010
Interest on loans
1,808,620
2,080,274
Loss on the redemption of GN 2010 and GN 2012 (Note 16)
-
96,487
Amortization of debt and bonds/notes issuance costs,
consent solicitation fees and discount (Notes 15 and 16)
51,305
90,116
Bank charges
13,042
4,751
Total
1,872,967
2,271,628
25.
PENSION PLAN
The Company, Satelindo and Lintasarta have defined benefit and defined contribution pension plans covering substantially all of their qualified permanent employees.
Defined Benefit Pension Plan
The Company, Satelindo and Lintasarta provide defined benefit pension plans to their respective employees under which pension benefits to be paid upon retirement are based on the employees’ most recent basic salary and number of years of service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plans. Pension contributions are determined by periodic actuarial calculations performed by Jiwasraya.
Based on an amendment dated December 22, 2000 of the Company’s pension plan, which was further amended on March 29, 2001, the benefits and 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.
78
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, February to December 2008, January to December 2009 and January to December 2010, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees, Rp415 for additional 81 employees, and Rp120 for additional 14 employees, respectively.
On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefits and premium payment pattern of the former’s pension plan. The amendment covers employees registered as participants of the pension plan as of December 25, 2002 up to June 25, 2003. Other new conditions include the following:
·
An increase in pension basic salary at 6% compounded annually starting from December 25, 2002
·
Thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri
·
An increase in periodic payment of retirement benefit at 6% compounded annually starting one year after receiving periodic retirement benefit for the first time
·
If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.
On April 15, 2005, Lintasarta entered into an agreement with Jiwasraya to replace their existing agreement. Based on the new agreement, the benefits and 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 years ended December 31, 2009 and 2010.
79
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
The net periodic pension cost for the pension plans for the years ended December 31, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2009 and 2010, 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
10.5 - 10.7%
8.5 - 9.0%
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
a.
The composition of the net periodic pension cost for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Interest cost
63,648
74,558
Service cost
39,510
41,749
Amortization of unrecognized actuarial loss (gain)
(1,429
)
850
Return on plan assets
(69,393
)
(71,469
)
Net periodic pension cost (Note 22)
32,336
45,688
b.
The funded status of the plans as of December 31, 2009 and 2010 is as follows:
2009
2010
Plan assets at fair value
813,588
852,958
Projected benefit obligation
(726,427
)
(750,625
)
Excess of plan assets over projected benefit obligation
87,161
102,333
Unrecognized actuarial loss
62,659
10,928
Total prepaid pension cost
149,820
113,261
80
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
c.
Movements in the prepaid pension cost for the years ended December 31, 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
(29,487
)
(41,505)
Lintasarta
(2,849
)
(4,183)
Refund from Jiwasraya
Company
(649
)
(464)
Lintasarta
(363
)
(180)
Contribution to Jiwasraya
Company
415
120
Lintasarta
9,653
9,653
Ending balance
Company
124,720
82,871
Lintasarta
25,100
30,390
d.
Prepaid pension cost consists of:
2009
2010
Current portion (presented as part of “Prepaid Expenses”)
Company
1,715
1,401
Lintasarta
725
516
2,440
1,917
Long-term portion
Company
123,005
81,470
Lintasarta
24,375
29,874
147,380
111,344
Total prepaid pension cost
149,820
113,261
Plan assets as of December 31, 2009 and 2010 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
81
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Defined Contribution Pension Plan
In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3 employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10% - 20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of employees for the years ended December 31, 2009 and 2010 amounted to Rp19,451 and Rp46,557, 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 years ended December 31, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2009 and 2010, 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
10.5%
8.5 - 9.0%
Annual rate of increase in compensation 9.0 - 10.0%8.0 - 9.0%
a.
The composition of the periodic pension cost under the Labor Law for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Service cost
19,587
21,747
Interest cost
18,639
19,586
Amortization of unrecognized actuarial loss
1,842
1,500
Immediate recognition of past service cost - vested benefit
904
-
Total periodic pension cost under the Labor Law (Note 22)
40,972
42,833
b.
The composition of the accrued pension cost under the Labor Law as of December 31, 2009 and 2010 is as follows:
2009
2010
Projected benefit obligation
187,888
217,754
Unrecognized actuarial loss
(27,147
)
(17,245)
Unrecognized past service cost
(10,348
)
(9,632
)
Accrued pension cost
150,393
190,877
82
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
c.
Movements in the accrued pension cost under the Labor Law for the years ended December 31, 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
34,739
35,019
Lintasarta
4,209
4,974
IMM
2,024
2,840
Benefit payment
Company
(3,841
)
(2,150
)
Lintasarta
(47
)
(97
)
IMM
(20
)
(102
)
Ending balance
Company
131,416
164,285
Lintasarta
12,771
17,648
IMM
6,206
8,944
As of December 31, 2009 and 2010, the current portion of pension cost under the Labor Law included in accrued expenses (Note 14) amounted to Rp2,603 and Rp2,933, respectively, and the non-current portion included in employee benefit obligations amounted to Rp147,790 and Rp187,944, respectively (Note 18).
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.
83
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
The net periodic post-retirement healthcare cost for the years ended December 31, 2009 and 2010 was calculated based on actuarial valuations as of December 31, 2009 and 2010, 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
11.0%
9.5%
Ultimate cost trend rate
6.0%
6.0%
Next year trend rate
16.0%
14.0%
Period to reach ultimate cost trend rate
5 years
4 years
a.
The composition of the periodic post-retirement healthcare cost for the years ended December 31, 2009 and 2010 is as follows:
2009
2010
Interest cost
58,535
65,919
Service cost
19,628
28,229
Amortization of unrecognized past service cost
10,452
10,452
Periodic post-retirement
healthcare cost (Note 22)
88,615
104,600
b.
The composition of the accrued post-retirement healthcare cost as of December 31, 2009 and 2010 is as follows:
2009
2010
Projected benefit obligation
605,660
846,636
Unrecognized past service cost
(41,705
)
(31,253
)
Unrecognized actuarial loss
(2,150)
(161,443
)
Accrued post-retirement healthcare cost
561,805
653,940
84
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
c.
Movements in the accrued post-retirement healthcare cost for the years ended
December 31, 2009 and 2010 are as follows:
2009
2010
Beginning balance
483,772
561,805
Net periodic post-retirement healthcare cost
88,615
104,600
Benefit payment
(10,582)
(12,465)
Ending balance
561,805
653,940
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 years ended December 31, 2009 and 2010 and accumulated post-retirement healthcare benefit obligation as of December 31, 2009 and 2010, as follows:
2009
2010
Increase
Service and interest costs
95,709
116,581
Accumulated post-retirement healthcare
benefit obligation
725,664
1,030,938
Decrease
Service and interest costs
64,493
76,868
Accumulated post-retirement healthcare
benefit obligation
510,522
702,632
As of December 31, 2009 and 2010, the current portion of post-retirement healthcare cost included in accrued expenses (Note 14) amounted to Rp12,798 and Rp14,669 respectively, and the non-current portion included in employee benefit obligations amounted to Rp549,007 and Rp639,271, respectively (Note 18).
85
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES
The details of the accounts and the significant transactions entered into with related parties (affiliates, unless otherwise indicated) are as follows:
Amount
Percentage to Total Assets/Liabilities (%)
2009
2010
2009
2010
Cash and cash equivalents (Note 3)
State-owned banks
2,068,042
1,615,651
3.76
3.06
Accounts receivable - trade (Note 4)
State-owned banks
42,860
91,774
0.08
0.17
Telkom
31,724
56,108
0.06
0.11
PT Televisi Republik Indonesia
(Persero) (“TVRI”)
25,322
38,261
0.04
0.07
PT Citra Sari Makmur (“CSM”)
13,807
13,135
0.02
0.02
PT Telekomunikasi Selular (“Telkomsel”)
5,318
9,073
0.01
0.02
PT Pos Indonesia (Persero)
10,752
8,935
0.02
0.02
PT Pasifik Satelit Nusantara (“PSN”)
2,746
8,607
0.00
0.02
Qtel
3,460
2,827
0.01
0.01
PT Perusahaan Tambang Minyak
Negara (Persero) (“Pertamina”)
1,737
2,281
0.00
0.00
PT Indonesia Comnet Plus (“Comnet”)
-
1,683
-
0.00
Others
45,724
37,462
0.09
0.07
Total
183,450
270,146
0.33
0.51
Less allowance for impairment of
receivables
57,538
47,640
0.10
0.09
Net
125,912
222,506
0.23
0.42
Prepaid expenses
MOCIT
783,533
1,186,669
1.42
2.16
Kopindosat
2,306
3,294
0.00
0.01
Telkom
1,434
2,452
0.00
0.00
PT Industri Telekomunikasi
Indonesia (Persero)
(“INTI”)
2,116
1,947
0.00
0.00
Jiwasraya (Note 25)
2,440
1,917
0.010.00
Others
3,051
5,367
0.01
0.01
Total
794,880
1,201,646
1.44
2.18
Other current financial assets
State-owned banks
20,173
35,957
0.04
0.07
Other current assets
Others
54
-
0.00
-
Due from related parties
Kopindosat
5,958
5,958
0.01
0.01
Senior management
68
1,362
-
0.01
Telkomsel
1,558
1,053
0.00
0.00
Others
813
694
0.00
0.00
Total
8,397
9,067
0.01
0.02
Less allowance for impairment of
receivables
1,182
646
0.00
0.00
Net
7,215
8,421
0.01
0.02
Long-term prepaid pension (Note 25)
Jiwasraya
147,380
111,344
0.27
0.21
Long-term advances
INTI
3,108
3,705
0.01
0.01
Kopindosat
2,059
1,016
0.00
0.00
Total
5,167
4,721
0.01
0.01
86
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2009
2010
2009
2010
Long-term prepaid rentals
Telkom
19,598
18,164
0.04
0.03
Kopindosat
11,982
12,817
0.03
0.02
INTI
5,499
3,658
0.010.01
Others
2,608
2,850
0.00
0.01
Total
39,687
37,489
0.08
0.07
Other non-current financial assets
State-owned banks
46,170
55,274
0.08
0.10
Other non-current assets
Others
-
87
-
0.00
Accounts payable - trade
Telkomsel
30,901
20,292
0.09
0.06
Comnet
2,793
1,345
0.010.00
Telkom
4,447
456
0.01
0.00
Others
529
167
0.00
0.00
Total
38,670
22,260
0.11
0.06
Procurement payable (Note 12)
INTI
30,143
24,048
0.08
0.07
Kopindosat
25,509
22,123
0.070.06
PT Personel Alih Daya (“Persada”)
13,907
13,210
0.04
0.04
PT Pembangunan Perumahan
-
7,007
-
0.02
PT Perusahaan Listrik Negara
(Persero) (“PLN”)
35,911
210
0.10
0.00
TVRI
11,797
-
0.03
-
Other
17
2,083
0.00
0.01
Total
117,284
68,681
0.32
0.20
Accrued expenses
MOCIT (Note 14)
305,564
293,590
0.83
0.85
PLN
94,337
81,578
0.26
0.23
Senior management
27,825
33,553
0.08
0.10
Persada
9,305
16,906
0.03
0.05
Kopindosat
6,702
13,838
0.01
0.04
Telkom
1,112
1,063
0.00
0.00
Total
444,845
440,528
1.21
1.27
Other current liabilities
Telkomsel
1,664
1,664
0.00
0.00
Due to related parties
TVRI
10,147
19,141
0.03
0.06
Kopindosat
1,490
1,490
0.01
0.00
State-owned banks
977
101
0.00
0.00
Others
1,150
1,367
0.00
0.00
Total
13,764
22,099
0.04
0.06
87
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
2009
2010
2009
2010
Loans payable (including current
maturities) (Note 15)
Mandiri
2,592,489
1,297,045
7.05
3.75
Other non-current liabilities
Telkomsel
8,118
6,454
0.02
0.02
Kas Negara
-
3,895
-
0.01
Total
8,118
10,349
0.02
0.03
Percentage to Respective Income
Amount
or Expenses (%)
2009
2010
2009
2010
Operating revenues (Note 20)
Telkom
672,225
587,386
3.57
2.97
Telkomsel
260,345
414,860
1.38
2.10
State-owned banks
301,434
387,546
1.60
1.96
Qtel
6,714
36,521
0.04
0.18
PSN
7,202
23,694
0.04
0.12
Governmental departments
12,668
23,478
0.07
0.12
TVRI
22,547
19,698
0.12
0.10
PT Pos Indonesia
14,379
15,378
0.08
0.08
Pertamina
11,238
10,431
0.06
0.05
State-owned universities
17,348
8,445
0.09
0.04
Comnet
5,831
8,121
0.03
0.04
CSM
14,855
7,124
0.08
0.04
PT Angkasa Pura (Persero)
3,887
6,213
0.02
0.03
Badan Pusat Statistik
430
3,922
0.00
0.02
PLN
2,667
2,527
0.010.01
PT Infomedia Nusantara
2,274
2,248
0.010.01
Badan Meteorologi dan
Geofisika (“BMG”)
3,027
2,217
0.020.01
PT Aneka Tambang Tbk
1,591
1,623
0.010.01
Others
113,546
79,159
0.60
0.40
Total
1,474,208
1,640,591
7.83
8.29
Operating expenses
Cost of services
MOCIT (Note 21)
1,633,596
1,939,415
10.46
11.88
Telkom
711,784
550,124
4.56
3.37
Telkomsel
566,334
528,067
3.63
3.23
PLN
617,953
508,473
3.96
3.12
Persada
57,714
80,902
0.37
0.50
Kopindosat
5,661
59,205
0.04
0.36
Comnet
36,741
27,681
0.23
0.17
Qtel
2,821
27,375
0.02
0.17
PT Pos Indonesia
6,121
14,947
0.04
0.09
INTI
3,367
10,040
0.02
0.06
PT Perusahaan Gas Negara (Persero) Tbk
(“PGN”)
3,213
1,933
0.020.01
PSN
1,692
1,024
0.01
0.01
Total
3,646,997
3,749,186
23.36
22.97
Personnel
Senior management
145,510
131,906
0.93
0.81
Jiwasraya (Note 25)
32,336
45,688
0.21
0.28
Persada
56,613
40,139
0.36
0.24
Total
234,459
217,733
1.50
1.33
88
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income
Amount
or Expenses (%)
2009
2010
2009
2010
General and administration
PLN
75,967
88,697
0.49
0.54
Kopindosat24,465
26,072
0.16
0.16
Persada
35,912
17,914
0.23
0.11
Telkom
658
2,393
0.01
0.02
Usaha Gedung Bank
Dagang Negara
(“UGBDN”)
887
1,603
0.00
0.01
State-owned banks
1,971
1,567
0.01
0.01
Others
3,464
6,727
0.02
0.04
Total
143,324
144,973
0.92
0.89
Other income (expenses)
Interest income
State-owned banks
101,693
106,177
10.37
4.44
Others
306
754
0.03
0.03
Total
101,999
106,931
10.40
4.47
Financing cost
State-owned banks
(225,216
)
(231,530)
(22.96
)
(9.68
)
Others
(5,624
)
-
(0.57
)
-
Total
(230,840
)
(231,530
)
(23.53
)
(9.68
)
Net
(128,841
)
(124,599)
(13.13
)
(5.21
)
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 29j and 32)
UCC
Operating revenues - cellular,
fixed telecommunications and
MIDI; operating expenses -
cost of services
3.
TVRI
UCC
Operating revenues - MIDI
4.
CSM
UCC
Operating revenues - MIDI
5.
Telkomsel (Note 32)
UCC
Operating revenues - cellular and
fixed telecommunications
6.
PT Pos Indonesia (Persero)
UCC
Operating revenues - MIDI
7.
PSN
UCC
Operating revenues - MIDI
89
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
8.
Qtel
Ultimate stockholder
Operating revenues - fixed
telecommunications
9.
Pertamina
UCC
Due from related party,
operating revenues - MIDI
10.
Comnet
UCC
Operating expenses - cost of
services
11.
MOCIT
Government agency
Operating revenues - MIDI;
operating expenses - cost of
services
12.
Kopindosat
The Companies’
Operating expenses - personnel
employees cooperative
expenses, general and
administration expenses
13.
INTI
UCC
Procurement payable
14.
Jiwasraya
UCC
Long-term prepaid pension
15.
Senior management
Key management
Operating expenses - personnel
personnel
expenses, prepaid
expense - unamortized
portions of housing and
transformation advances, and
transformation incentives
16.
Persada
Under common
Operating expenses - personnel
significant influence
expenses and cost of services
17.
PT Pembangunan Perumahan
UCC
Procurement payable
18.
PLN
UCC
Operating expenses - cost of
services
19.
Kas Negara
Government agency
Other non-current liabilities
20. Governmental Departments
Government agency
Operating revenues - MIDI
21.
State-owned universities
UCC
Operating revenues - MIDI
22.
PT Angkasa Pura (Persero)
UCC
Operating revenues - MIDI
23.
Badan Pusat Statistik
Government agency
Operating revenues - MIDI
24.
PT Infomedia Nusantara
UCC
Operating revenues - MIDI
25.
BMG
Government agency
Operating revenues - MIDI
90
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
26.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Nature of Account
No.
Related Parties
Relationship
Balances/Transactions
26.
PT Aneka Tambang Tbk
UCC
Operating revenues - MIDI
27.
PGN
UCC
Operating revenues - MIDI
28.
UGBDN
UCC
Operating expenses - cost of
services
27.
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 | 18,786 | 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.
28.
DERIVATIVES
The Company entered into several swap contracts. Listed below is information related to the contracts and their fair values (net of credit risk adjustment) as of December 31, 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
88,523
-
--
b.
GSI(*)
25,000
-
10,033
--
c.
GSI
75,000
70,588
-
50,866-
d.
StandChart
25,000
-
458
-12,055
e.
StandChart
25,000
12,003
-
-1,731
f.
StandChart
25,000
22,996
-
9,443-
g.
HSBC, Jakarta Branch(**)
25,000
14,451
-
--
h.
Merrill Lynch International Bank Limited,
London Branch (“MLIB”)
50,000
-
7,058
-
2,234
i.
MLIB
25,000
3,382
-
2,154
-
j.
MLIB
25,000
5,541
-
3,778-
k.
DBS
25,000
1,619
-
3,093-
l.
GSI(***)
84,000
5,640
-
--
Sub-total
224,743
17,549
69,33416,020
(*)
contract entered into May 2005 and settled in November 2010
(**)
contract entered into August 2006 and settled in November 2010
(***)
contract entered into December 2008 and settled in November 2010
91
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
28.
DERIVATIVES (continued)
Fair Value (Rp)
Notional
2009
2010
Amount
(US$)
Receivable
Payable
ReceivablePayable
Interest Rate Swap Contracts:
m.
HSBC, Jakarta Branch
27,037 with
decreasing amount
-
11,842
-13,100
n.
HSBC, Jakarta Branch
44,200 with
decreasing amount
-
30,144
-29,027
o.
GSI
100,000
-
80,840
-90,273
p.
DBS
25,000 with
decreasing amount
-
11,791
-
9,238
q.
DBS
25,000 with
decreasing amount
-
10,959
-
9,343
r.
Bank of Tokyo MUFJ (“BTMUFJ”)
25,000 with
decreasing amount
-
5,668
-
6,656
s.
BTMUFJ
25,000 with
decreasing amount
-
4,327
-
5,885
t.
BTMUFJ
25,000 with
decreasing amount
-
3,305
-
5,297
u.
StandChart
40,000 with
decreasing amount
-
1,447
-
6,814
v.
DBS
26,000 with
decreasing amount
-
3,699
-
4,966
w.
DBS
26,000 with
decreasing amount
-
2,500
-
4,303
x.
BTMUFJ
36,500 with
decreasing amount
-
6,758
-
7,347
y.
ING Bank N.V.
25,000 with
decreasing amount
-
4,459
-
4,014
z.
ING Bank N.V.
33,500
-
4,914
-3,120
Sub-total
-
182,653
-199,383
Total
224,743
200,202
69,334215,403
The net changes in fair value of the swap contracts and embedded derivative (Note 15e), swap income or cost, termination income or cost, and settlement of derivative instruments totalling (Rp517,655) and (Rp418,092) 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.
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(i) | 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 | Every May 5 and November 5 | 54,116 | 46,136 |
b. | GSI(ii) | 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 | 10,906 | 9,841 |
(i)
On November 5, 2010, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp59,929.
(ii)
On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to Rp21,881.
92
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
28.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid/Amortized (Rp) | |
2009 | 2010 | |||||
c. | GSI | August 22, 2005 - June 22, 2012 The Company will swap the following: · US$75,000 which is equal to US$75,000 multiplied by the lowest IDR/USD exchange rate within the period of August 22, 2005 - June 22, 2012 if the IDR/USD spot rate at termination date is less than or equal to the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amount) · US$75,000 which is equal to US$75,000 multiplied by IDR/USD spot rate at termination date minus Rp4,300 (in full amount) if IDR/USD spot rate at termination date is greater than the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amount) | 3.28% of US$75,000 | Every June 22 and December 22 | 24,357 | 22,866 |
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 | 11,791 | 11,034 |
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 | 9,250 | 8,657 |
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 | 8,510 | 7,964 |
g. | HSBC(iii) | 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 | 10,145 | 9,074 |
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 | 22,778 | 23,965 |
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 June 12, 2011, and 4.10% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013 | Every June 12 and December 12 | 11,230 | 11,852 |
(iii)
On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to Rp2,550.
93
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
28.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid/ Amortized (Rp) | |
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 | 6,801 | 7,156 |
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 | 9,980 | 9,044 |
l. | GSI(iv) | 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. | - | 55,899 | 47,323 |
(iv) On November 5, 2010, this contract expired and the Company received zero settlement on the cross currency swap.
94
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
28.
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.
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 | |||||
m. | 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 | (4,320) | (7,589) |
n. | 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) |
o. | 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 | (24,051) | (39,332) |
p. | 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 | (4,539) | (7,289) |
q. | 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) |
r. | 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) |
s. | 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) | (4,291) |
t. | 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) | (3,921) |
u. | StandChart | December 19, 2008 - June 12, 2013 | 3.85% of US$40,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | (504) | (5,384) |
95
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
28.
DERIVATIVES (continued)
Interest Rate Swap Contracts (continued)
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income (Expense) Receipt Date | Amount of Swap Income (Expense) Received (Paid) (Rp) | |
v. | 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) |
w. | 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) |
x. | BTMUFJ | March 2, 2009 - June 12, 2012 | 4.10% of US$36,500, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | (627) | (5,758) |
y. | 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) |
z. | ING Bank N.V. | April 14, 2009 - June 12, 2011 | 3.75% of US$33,500, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and on June 12, 2011 | - | (4,199) |
29. SIGNIFICANT AGREEMENTS AND COMMITMENTS
a.
As of December 31, 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$90,015 (Note 35j) and Rp569,173.
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 |
December 10, 2010 | The Procurement of Technology Upgrade for 2G and 3G Telecommunications Network in Kalimantan (see “b” below) | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$38,439 | US$17,959 |
June 16, 2010 | The Procurement of Telco Infrastructure | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$106,655 and Rp461,479 | US$13,344 and Rp142,002 |
May 16, 2007 | Supply of GSM Cellular Infrastructure | PT Nokia Siemens Networks, Nokia Siemens Networks Oy and Nokia Siemens Networks GmbH & Co. KG. | US$318,446 and Rp1,385,390 | US$4,118 and Rp55,310 |
April 20, 2007 | Telecommunications Equipment Supply and Service | PT Alcatel Lucent Indonesia and Alcatel Shanghai Bell Co. Ltd. | US$79,311 and Rp679,301 | US$2,334 and Rp41,105 |
April 3, 2007 | Supply of GSM Infrastructure | PT Ericsson Indonesia and Ericsson AB | US$383,104 and Rp1,110,375 | US$358 and Rp24,871 |
b.
On December 10, 2010, the Company agreed with PT Nokia Siemens Networks and Nokia Siemens Networks OY (“Nokia”) to restate and amend the agreement for “The Procurement of Technology Upgrade for 2G and 3G Telecommunication Network in Kalimantan” that was originally entered into on June 30, 2010. Based on the new agreement, the Company agreed to exchange certain existing cellular technical equipment units in Kalimantan area with new equipment units from Nokia with total value of US$75,243 consisting of cellular technical equipment with net book value of U$66,963 (net of discount amounting to US$2,029) for 1,325 units of 2G Base Transceiver Station [BTS], 24 units of Base Station Controller [BSC], 11 units of Transcoders, 66 units of Node B equipment and 3 units of Radio Network Controller [RNC], and pay US$6,251 to Nokia for the installation services. As of December 31, 2010, carrying amount of the cellular technical equipment units given up (122 units of 2G BTS, 5 units of BSC, 25 units of Node B equipment and 1 unit of RNC) totalling Rp158,285 (Note 8). The Company also committed to procure additional equipment units from Nokia with total value of US$11,708 until the end of 2012.
96
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29. SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
c.
On August 18, 2010, the Company and Telkom signed a memorandum of understanding on the cooperation for joint utilization of filing of satellite networks at 150.5 degree East geostationary orbital slot. This cooperation will include procuring, operating and maintaining satellite between the Company and Telkom in order to utilize filing of satellite networks at 150.5 degree East geostationary orbital slot after the termination of the operation of Satellite Palapa C-2 owned by the Company. The capital expenditure related to such cooperation will be borne on a pro rata basis between the Company and Telkom.
As of December 31, 2010, the Company has not made any capital expenditure related to such cooperation.
d.
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, to PT Natrindo Telepon Selular (“NTS”) for a period of 10 years, to PT XL Axiata Tbk (“XL Axiata”, formerly PT Excelcomindo Pratama Tbk or “Excelcom”) for a period of 10 years and to PT Berca Global Access (“Berca”) for a period of 10 years, respectively. Hutchison, NTS, and XL Axiata (on annual basis) and Berca (on quarterly basis) are required to pay the 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.
e.
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, West Nusa Tenggara, East Nusa Tenggara, West Kalimantan, South Kalimantan, East Kalimantan, Central Kalimantan, Maluku and Papua. On December 22, 2010, the agreements were amended to increase the contract value. The agreements cover four years starting from October 15, 2010 with contract value amounting to Rp91,895, Rp143,668 and Rp116,721 for Work Packages 7, 8 and 9, respectively. As of December 31, 2010, Lintasarta has outstanding advance payments from MOCIT-BTIP related with the agreements amounting to Rp56,573 and Rp11,739 which are classified as part of unearned income for the current portion and other non-current liabilities for the long-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. On October 20, 2010, the agreement was amended to increase the contract value to become Rp203,776. As of December 31, 2010, Lintasarta has outstanding advances to WEB totalling Rp39,107 and Rp2,668 which are classified as part of advances for the current portion and long-term advances for the long-term portion, respectively.
97
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
On December 12, 2010, Lintasarta entered into agreements with MOCIT-BTIP to providePusat Layanan Jasa Akses Internet Kecamatan Bergerak (Mobile Center for Internet Access and Services in Rural Areas) (PLIKB) for Work Packages 2, 3, 11, 15, 16 and 18 that cover the provinces of North Sumatra, West Sumatra, East Nusa Tenggara, West Kalimantan, South Kalimantan and East Kalimantan. The agreements cover four years starting on June 22, 2011 with contract values amounting to Rp79,533, Rp92,003, Rp71,879, Rp84,583, Rp69,830 and Rp60,149 for Work Packages 2, 3, 11, 15, 16 and 18, respectively. As of December 31, 2010, Lintasarta has outstanding advance payments from MOCIT-BTIP related with the agreements amounting to Rp9,725 and Rp73,543 which are classified as part of unearned income for the current portion and other non-current liabilities for the long-term portion, respectively.
f.
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.
Furthermore, three of the telecommunications operators also no longer joined the project. Consequently, as of December 31, 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 December 31, 2010, the Company has paid the amount of US$1,503 which is recorded as part of other non-current financial assets.
g.
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.
h.
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.
98
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
·
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 December 31, 2010, the Company has not used these facilities.
c.
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 December 31, 2010, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$5,428. 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.
d.
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 Rp30,255 and Rp27,547 in 2009 and 2010, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of income.
99
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
TARIFF SYSTEM
a.
International telecommunications services
The service rates (“tariffs”) for overseas exchange carriers are set based on the international telecommunications regulations established by the International Telecommunications Union (“ITU”). These regulations require the international telecommunications administrations to establish and revise, under mutual agreement, accounting rates to be applied among them, taking into account the cost of providing specific telecommunications services and relevant recommendations from the Consultative Committee on International Telegraph and Telephone (“CCITT”). The rates are divided into terminal shares payable to the administrations of terminal countries and, where appropriate, into transit shares payable to the administrations of transit countries.
The ITU also regulates that the monetary unit to be used, in the absence of special arrangements, shall be the Special Drawing Right (“SDR”) or the Gold Franc, which is equivalent to 1/3.061SDR. Each administration shall, subject to applicable national law, establish the charges to be collected from its customers.
The tariffs billed to domestic subscribers for international calls originating in Indonesia, also known as collection rates, are established in a decision letter of the MOC, which rates are generally higher than the accounting rates. During the period 1996 to 1998, the MOC made tariff changes effective January 1, 1997, March 15, 1998 and November 15, 1998.
Based on Decision Letter No. 09/PER/M.KOMINFO/02/06 dated February 28, 2006 of the MOCIT, the collection rates are set by tariff formula known as price cap formula which already considers customer price index starting January 1, 2007.
b.
Cellular services
The basic telephony tariffs for cellular mobile network service are set on the basis of Regulation No. 12/PER/M.KOMINFO/ 02/2006 dated February 28, 2006 of the MOCIT. Under this regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges
·
Additional facilities fee
Cellular providers should implement the new tariffs referred to as “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee), while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.
On April 7, 2008, the MOCIT issued Ministerial Decree No. 09/PER/M.KOMINFO/04/2008 about guidelines on calculating basic telephony service tariffs through cellular mobile network. Under this new Decree, the cellular providers should implement the new tariffs referred to as “price cap”. The types of tariffs for 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 the total industry revenue for a certain segment.
Starting May 2008, the Company has fully adopted the new cellular tariff system.
30.
TARIFF SYSTEM (continued)
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.
31.
INTERCONNECTION TARIFFS
Interconnection tariffs among domestic telecommunications operators are regulated by the MOC through its Decree No. KM.108/PR.301/MPPT-94 dated December 28, 1994. The Decree was updated several times with the latest update being Decree No. KM.37 Year 1999 (“Decree No. 37”) dated June 11, 1999. This Decree, along with Decree No. KM.46/PR.301/MPPT-98 (“Decree No. 46”) 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 Decree No. 37 dated June 11, 1999, 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 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.
100
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
1.
Structure of Interconnection Tariffs (continued)
c.
Between cellular telecommunications network and domestic PSTN (continued)
(2)
SLJJ
For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of
the prevailing SLJJ tariffs plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs plus the airtime charges in cases where the entire long-distance portion is carried by the cellular operator.
For SLJJ which originates from a cellular telecommunications network to a PSTN subscriber, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator.
d.
Between cellular telecommunications network and another cellular telecommunications network
Based on Decree No. 46, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the cellular operator pays the PSTN operator 50% of the prevailing tariffs for local calls.
(2)
SLJJ
For SLJJ which originates from a cellular telecommunications network, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by
the cellular operator, to 85% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, and to 100% if the call is delivered to the same cellular operator.
e.
Between international PSTN and cellular telecommunications network
Starting 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 (Note32).
f.
Between international gateway exchanges
Interconnection charges for international telecommunications traffic between international gateway exchanges are based on agreements between international telecommunications carriers and international telecommunications joint ventures.
101
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
31.
INTERCONNECTION TARIFFS (continued)
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.
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. 37 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 32).
The implementation of interconnection billing between operators starts from the time they sign their interconnection agreements.All interconnection agreements will be based on Reference Interconnection Offer (“RIO”). All operators have to publish their RIO and a dominant operator is required to obtain an approval of its RIO from the Government.
On August 4, 2006, the DGPT issued Decree No. 278/DIRJEN/2006, which approved the RIO of the Company and two other dominant telecommunications operators (Telkom and Telkomsel). This decree was implemented since January 1, 2007 as agreed by all operators and approved by the Government. On April 11, 2008, the DGPT approved the new RIO for dominant operators (Telkom, Telkomsel and the Company). The DGPT requires all domestic operators to amend their interconnection agreements in line with the approved new RIO starting April 1, 2008. On April 1, 2008, the Company implemented the new interconnection tariffs based on the approved RIO.
However, on December 31, 2010, theBadan Regulasi Telekomunikasi Indonesia (BRTI or Indonesian Telecommunications Regulatory Bureau) issued letter No. 227/BRTI/XII/2010 regarding the implementation of new interconnection tariffs based on the implementation of cost-based interconnection fees, which will be used by all telecommunications operators effective January 1, 2011.
102
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
32.
INTERCONNECTION AGREEMENTS
The Company (including Satelindo and IM3 until they were merged - Note 1e) has interconnection arrangements with domestic and overseas operators. Some significant interconnection agreements are as follows:
1.
Telkom
The following are significant interconnection agreements/transactions with Telkom:
a.
Fixed 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.
·
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 (Note 35c).
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.
103
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
32. INTERCONNECTION AGREEMENTS (continued)
2.
XL Axiata, 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.
·
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. Subsequently, the agreement with Telkomsel was further amended on September 7, 2010.
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 (Note 35c).
Net interconnection revenues (charges) from (to) major operators are as follows:
2009
2010
Telkom
142,514
169,389
Mobile-8
11,841
10,455
Telkomsel
(131,127)
(158,860)
XL Axiata
(71,339)
(103,125)
Bakrie Telecom
(8,103
)
(5,381)
Net charges
(56,214
)
(87,522)
104
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
33.
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
14,300,163
1,803,039
2,720,984
18,824,186
Inter-segment revenues
-
-
515,961
515,961
Total operating revenues
14,300,163
1,803,039
3,236,945
19,340,147
Inter-segment revenues elimination
(515,961)
Operating revenues - net
18,824,186
Income
Operating income
2,003,034
330,401
879,580
3,213,015
Gain on foreign exchange - net
1,656,407
Interest income
138,951
Financing cost
(1,872,967)
Income tax expense
(677,265)
Loss on change in fair value of derivatives - net
(517,655)
Amortization of goodwill
(235,420)
Others - net
(150,338
)
Income before minority interest in net income
of subsidiaries
1,554,728
Other Information
Segment assets
43,871,953
2,606,166
7,776,333
54,254,452
Unallocated assets
5,740,701
Inter-segment assets elimination
(4,953,666)
Assets - net
55,041,487
Segment liabilities
31,678,430
1,028,375
3,748,888
36,455,693
Unallocated liabilities
3,840,474
Inter-segment liabilities elimination
(3,542,963)
Liabilities - net
36,753,204
Capital expenditures
9,661,360
579,862
1,343,327
11,584,549
Depreciation and amortization
4,585,081
335,270
641,039
5,561,390
105
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
33. SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
2010
Operating revenues
Revenues from external customers
16,027,062
1,293,177
2,476,276
19,796,515
Inter-segment revenues
-
-
563,726
563,726
Total operating revenues
16,027,062
1,293,177
3,040,002
20,360,241
Inter-segment revenues elimination
(563,726
)
Operating revenues - net
19,796,515
Income
Operating income (loss)
2,745,063
(34,495)
763,376
3,473,944
Gain on foreign exchange - net
492,401
Interest income
143,402
Financing cost
(2,271,628)
Loss on change in fair value of derivatives - net
(418,092)
Income tax expense
(357,798)
Amortization of goodwill
(226,380)
Others - net
(111,830)
Income before minority interest in net income
of subsidiaries
724,019
Other Information
Segment assets
45,875,021
2,020,957
8,459,948
56,355,926
Unallocated assets
4,264,808
Inter-segment assets elimination
(7,802,547)
Assets - net
52,818,187
Segment liabilities
27,195,689
630,442
3,250,615
31,076,746
Unallocated liabilities
9,724,480
Inter-segment liabilities elimination
(6,219,525)
Liabilities - net
34,581,701
Capital expenditures
4,455,608
210,770
848,611
5,514,989
Depreciation and amortization
5,052,691
297,334
801,886
6,151,911
34.
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.
106
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34.
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 December 31, 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 for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.
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 year ended December 31, 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 41 |
Effect on consolidated net income for the year: | |
U.S. dollar Rupiah | US$1,445 (equivalent to Rp12,994) Rp9,490 |
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 March 31, 2011. The outlook is that the LIBOR and JIBOR interest rates may move 31 and 41 basis points, respectively, higher or lower than the interest rates at the end of the fourth quarter of 2010.
If LIBOR interest rates were 31 basis points higher or lower than the market levels for the year ended December 31, 2010, with all other variables held constant, the Company’ consolidated net income for the year then ended and the consolidated stockholders’ equity would be Rp634,180 or Rp660,168 and Rp17,837,652 or Rp17,863,640, respectively, which are lower or higher than the actual results for the year ended December 31, 2010, mainly due to the higher or lower interest expense on floating rate borrowings.
If JIBOR interest rates were 41 basis points higher or lower than the market levels for the year ended December 31, 2010, with all other variables held constant, the Company’ consolidated net income for the year then ended and the consolidated stockholders’ equity would be Rp637,684 or Rp656,664 and Rp17,841,156 or Rp17,860,136, respectively, which are lower or higher than the actual results for the year ended December 31, 2010, mainly due to the higher or lower interest expense on floating rate borrowings.
107
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34.
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 for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.
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 December 31, 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 December 31, 2010, 17.90% 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 December 31, 2010:
2010
U.S. Dollar
Rupiah *
Assets:
Cash and cash equivalents
111,782
1,005,042
Accounts receivable
Trade
115,530
1,038,726
Others
544
4,893
Derivative assets
7,711
69,334
Other current financial assets
1,715
15,418
Due from related parties
117
1,047
Other non-current financial assets
1,427
12,833
Total assets
238,826
2,147,293
Liabilities:
Accounts payable - trade
32,788
294,797
Procurement payable
246,615
2,217,320
Accrued expenses
46,263
415,953
Deposits from customers
1,477
13,275
Derivative liabilities
23,958
215,403
Other current financial liabilities
67
602
Other current liabilities
6,124
55,058
Loans payable (including current maturities)
886,602
7,971,436
Bonds payable (including current maturities)
650,000
5,844,150
Other non-current liabilities
8,730
78,494
Total liabilities
1,902,624
17,106,488
Net liabilities position
1,663,798
14,959,195
*
The exchange rate used to translate the U.S. dollar amounts into rupiah was Rp8,991 to US$1 (in full amounts) as published by the Indonesian Central Bank as of December 31, 2010.
108
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34. 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 year:
Change in U.S. dollar exchange rate | 2% | |
Effect on consolidated net income for the year | (224,388) |
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 March 31, 2011. The outlook is that the U.S. dollar exchange rate may strengthen by 2% as compared to the exchange rate at
December 31, 2010.
If the U.S. dollar exchange rate strengthened by 2% as compared to the exchange rate as of December 31, 2010, with all other variables held constant, the Company’s consolidated net income for the year then ended would be Rp422,786, 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.
109
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34. 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 as of December 31, 2010:
Gross Maximum
Net Maximum
Exposure (1)
Exposure (2)
Loans and receivables:
Cash and cash equivalents
2,075,270
2,075,270
Accounts receivable
Trade - net
1,548,426
1,548,426
Others - net
10,031
10,031
Other current financial assets
53,119
53,119
Due from related parties - net
8,421
8,421
Other non-current financial assets
77,675
77,675
Held-for-trading:
Cross currency swaps
69,334
69,334
Available-for-sale investments:
Other long-term investments - net
2,730
2,730
Total
3,845,006
3,845,006
(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.
110
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34. 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 December 31,
Discount/
debt
issuance
Carrying
costs and
value
2015
consent
as of
and
solicitation
December
2011
2012
2013
2014
thereafter
Total
fees31, 2010
Accounts payable - trade
645,505
-
-
-
-
645,505
-
645,505
Procurement payable
3,644,467
-
-
-
-
3,644,467
-
3,644,467
Accrued expenses
1,710,885
-
-
-
-
1,710,885
-
1,710,885
Deposits from customers
50,279
-
-
-
-
50,279
-
50,279
Derivative liabilities
215,403
-
-
-
-
215,403
-
215,403
Other current financial liabilities
23,127
-
-
-
-
23,127
-
23,127
Due to related parties
-
22,099
-
-
-
22,099
-
22,099
Loans payable
In rupiah
634,933
2,022,483
434,300
-
-
3,091,716
(25,125
)
3,066,591
In U.S. dollar
2,549,587
1,192,411
2,015,736
545,059
1,668,643
7,971,436
(187,076
)7,784,360
Total loans payable
3,184,520
3,214,894
2,450,036
545,059
1,668,643
11,063,152
(212,201
)10,850,951
Bonds payable
In rupiah
1,100,000
41,989
1,330,000
2,358,000
2,662,000
7,491,989
(29,353
)
7,462,636
In U.S. dollar
-
-
-
-
5,844,150
5,844,150
(94,551
)
5,749,599
Total bonds payable
1,100,000
41,989
1,330,000
2,358,000
8,506,150
13,336,139
(123,904
)13,212,235
Total
10,574,186
3,278,982
3,780,036
2,903,059
10,174,793
30,711,056
(336,105
)
30,374,951
B.
COLLATERAL
The loans of Lintasarta, a subsidiary, which were obtained from CIMB Niaga, are collateralized by all equipment (Notes 8,15g and 15i) purchased by Lintasarta from the proceeds of the credit facilities. There are no other significant terms and conditions associated with the use of collateral.
The Company did not hold any collateral as of December 31, 2010.
111
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
35. SUBSEQUENT EVENTS
a.
On January 1, 2011, Lintasarta paid the last installment amounting to Rp4,933 on Investment Credit Facility 5 loan from CIMB Niaga (Note 15i).
b.
On January 7, 2011, the Company paid the remaining amount of Rp41,863 on the underpayment of the Company’s 2008 and 2009 income tax article 26 based on STPs from the DGT (Note 13).
c.
On January 11, 2011 and February 9, 2011, the Company agreed to amend the latest interconnection agreements with Telkom and Bakrie Telcom, respectively (Note 32), to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariff in 2011.
d.
On January 20, 2011, the Company’s Board of Directors issued Directors’ Decree No. 003/Direksi/2011 regarding the Organizational Restructuring Program through an offering program on the basis of mutual agreement between the Company and certain employees (Voluntary Separation Scheme), that became effective on the same date.
e.
On February 4, 2011, the Company and PT Dayamitra Telekomunikasi (“Mitratel”) entered into a Tower Lease Agreement. Mitratel may re-lease the Company's tower to Telkom and Telkomsel with additional infrastructure at Mitratel's cost.
f.
On February 8, 2011, the Company held an Extraordinary General Meeting of Stockholders approving the changes in the composition of the Company's Board of Commissioners (until the closing of Annual General Meeting in 2012) and Board of Directors (until the closing of Annual General Meeting in 2015).
g.
On February 10, 2011, the Company entered into a Revolving Time Loan facility agreement with BCA covering a maximum amount of Rp1,000,000 to fund the Company's capital expenditure and/or for general corporate purposes. This facility will be available from February 10, 2011 to February 10, 2014 and drawdowns bear interest at 1-month JIBOR plus 1.4% per annum.
h.
On February 10, 2011, SKAGEN AS increased its ownership in the Company to 5.15%.
i.
On February 10, 2011, the Company agreed to lease part of its telecommunications towers and sites to PT First Media Tbk (FM) for a period of 5 years. FM is required to pay the lease and maintenance fees in advance on a semi-annual basis.
j.
As of February 10, 2011, the prevailing exchange rate of the rupiah to U.S. dollar is Rp8,924 to US$1 (in full amounts), while as of December 31, 2010, the prevailing exchange rate was Rp8,991 to US$1 (in full amounts). Using the exchange rate as of February 10, 2011, the Companies earned foreign exchange gain amounting to approximately Rp111,474 (excluding the effect of revaluing derivative contracts on February 10, 2011) on the foreign currency liabilities, net of foreign currency assets, as of December 31, 2010 (Note 34).
The translation of the foreign currency liabilities, net of foreign currency assets, should not be construed as a representation that these foreign currency liabilities and assets have been, could have been, or could in the future be, converted into rupiah at the prevailing exchange rate of the rupiah to U.S. dollar as of December 31, 2010 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of December 31, 2010 as disclosed in Note 29a are approximately Rp803,294 if translated at the prevailing exchange rate as of February 10, 2011.
112
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
36.
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 December 31, 2010 are summarized below:
Effective for financial statements starting 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 3 (Revised 2010), “Interim Financial Reporting”, prescribes the minimum content of an interim financial report and the principles for recognition and measurement in financial statements presented for an interim period.
·
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 8 (Revised 2010), “Events after the Reporting Period”, prescribes when an entity should adjust its financial statements for events after the reporting period and the disclosures that an entity should give about the date when the financial statements were authorized for issue and about events after the reporting period. This SAK also requires an entity not to prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate.
·
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”, prescribes 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.
113
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
36.
RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS (continued)
Effective for financial statements starting on or after January 1, 2011 (continued):
·
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.
·
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.
·
ISAK 17, “Interim Financial Reporting and Impairment”, requires that an entity shall not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost.
114
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
36.
RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS (continued)
Effective for financial statements starting on or after January 1, 2012:
·
SAK 18 (Revised 2010), “Accounting and Reporting by Retirement Benefit Plans”, provides guidance on the accounting and reporting by plan to all participants as a group. This Standard complements SAK 24 (Revised 2010), “Employee Benefits”.
·
SAK 24 (Revised 2010), “Employee Benefits”, established the accounting and disclosures for employee benefits.
·
SAK 34 (Revised 2010), “Accounting for Construction Contracts”, prescribes the accounting treatment of revenue and costs associated with construction contracts.
·
SAK 46 (Revised 2010), “Accounting for Income Taxes”, prescribes the accounting treatment for income taxes to account for the current and future tax consequences of the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognized in the balance sheet; and transactions and other events of the current period that are recognized in the financial statements.
·
SAK 50 (Revised 2010), “Financial Instruments: Presentation”, established the principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities.
·
SAK 53 (Revised 2010), “Share-based Payment”, specifies the financial reporting by an entity when it undertakes a share-based payment transaction.
·
SAK 60, “Financial Instruments: Disclosures”, requires disclosures in financial statements that enable users to evaluate the significance of financial instruments for financial position and performance; and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.
·
SAK 61, “Accounting for Government Grants and Disclosures of Government Assistance”, provides guidance on the accounting for, and in the disclosures of, government grants and in the disclosures of other forms of government assistance.
·
ISAK 15, “SAK 24 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, provides guidance on how to assess the limit on the amount of surplus in a defined scheme that can be recognized as an asset under SAK 24 (Revised 2010), ”Employee Benefits”.
·
ISAK 18, “Government Assistance - No Specific Relation to Operating Activities”, prescribes that government grants to entities meet the definition of government grants in SAK 61, “Accounting for Government Grants and Disclosures of Government Assistance”, even if there are no conditions specifically relating to the operating activities of the entity other than the requirement to operate in certain regions or industry sectors.
·
ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders”,prescribes how an entity should account for the current and deferred tax consequences of a change in its tax status or that of its shareholders.
The Companies are presently evaluating and have not yet determined the effects of these revised standards and interpretations on the consolidated financial statements.
115
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
37.
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 | |||
Accounts receivable - others | Accounts receivable - trade - third parties | 28,428 | Reclassification to conform with the 2010 presentation | |||
Other current assets | Other current financial assets | 35,173 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Long-term receivables | Other non-current financial assets | 15,844 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Other non-current assets | Long-term prepaid rentals - net of current portion | 735,185 | Reclassification to conform with the 2010 presentation | |||
Other non-current financial assets | 84,160 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | ||||
Other current liabilities | Other current financial liabilities | 43,721 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | |||
Accrued expenses | Other current liabilities | 58,171 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006)
| |||
Other non-current liabilities | Employee benefit obligations - net of current portion | 825,714 | Reclassification to conform with the 2010 presentation | |||
Other current liabilities | 3,112 | Reclassification to conform with the presentation requirement of SAK 50 (Revised 2006) | ||||
Operating revenues - cellular | Operating expenses - cost of services | 217,421 | Reclassification resulting from the revocation of SAK 35 | |||
Operating revenues - fixed telecommunications | Operating expenses - cost of services | 213,749 | Reclassification resulting from the revocation of SAK 35 | |||
Operating revenues - cellular | 154,140 | Reclassification to conform with the 2010 presentation |
116
These consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2009 and 2010
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
38.
COMPLETION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The management of the Company is responsible for the preparation of the accompanying consolidated financial statements that were completed on February 10, 2011.
117