Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2019 (Unaudited)
Business Overview: A state-owned public limited liability company providing telecommunications networks and information services in Indonesia. The Group operates through four primary segments: Mobile, Consumer, Enterprise, and WIB (Wholesale & Interconnection Business).
Key Financial Metrics (Nine Months Ended Sept 30, 2019)
| Metric | 2019 (Billions IDR) | 2018 (Billions IDR) |
|---|---|---|
| Total Revenues | 102,631 | 99,203 |
| Operating Profit | 33,454 | 29,442 |
| Profit Before Tax | 31,114 | 27,672 |
| Net Profit (Consolidated) | 23,200 | 20,687 |
| Net Profit (Parent Company) | 16,459 | 14,232 |
| Operating Cash Flow | 38,263 | 28,292 |
| Capital Expenditures | (21,563) | (24,633) |
| Total Assets | 214,990 | 206,196 |
| Total Liabilities | 98,544 | 88,893 |
| Net Equity (Parent) | 99,594 | 98,910 |
| Cash & Equivalents | 15,017 | 17,439 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by 3.5% to Rp102.6 trillion, driven primarily by a 28.4% surge in "Cellular internet and data" revenues (Rp41.2 trillion vs Rp32.1 trillion).
- Profitability: Operating profit rose 13.6% to Rp33.5 trillion. Net profit attributable to the parent company increased 15.6% to Rp16.5 trillion.
- Cost Management: Operation, maintenance, and telecommunication service expenses decreased by 7.1% to Rp31.1 trillion. Personnel expenses also declined by 5.4% to Rp9.7 trillion.
- Depreciation: Depreciation and amortization expenses increased 8.7% to Rp17.3 trillion, partly due to accelerated depreciation of equipment units as part of a modernization program (impact of Rp165 billion).
- Cash Flow: Net cash provided by operating activities improved significantly by 35.2% to Rp38.3 trillion, despite a net decrease in cash and cash equivalents of Rp2.3 trillion due to investing and financing activities.
Guidance, Outlook, Risks, and Unusual Items
- Dividends: The Board of Directors approved cash dividends for 2018 totaling Rp16.2 trillion (Rp109.2 per share regular + Rp54.61 per share special), paid during the period.
- Acquisitions & M&A:
- Acquired 95% ownership of PT Persada Sokka Tama (PST), a tower rental company, for Rp1.1 trillion.
- Acquired control of PT Swadharma Sarana Informatika (SSI) and PT Collega Inti Pratama (CIP) via subsidiary Sigma.
- Sold 67% of PT Jalin Pembayaran Nusantara, reclassifying it as an associated company.
- Tax Litigation: Significant ongoing tax assessments and appeals exist. Notably, the Supreme Court rejected tax authority reviews regarding VAT on international incoming call interconnection for various periods (2007, 2011, 2012, 2016), resulting in substantial tax refunds or reduced liabilities. However, new assessments for 2014 and 2015 fiscal years are under objection.
- Regulatory Risks: The company is subject to Universal Service Obligation (USO) contributions (1.25% of gross revenue) and regulated interconnection tariffs. Telkomsel has an ongoing arbitration claim regarding USO program receivables.
- Subsequent Event: On October 14, 2019, subsidiary Dayamitra signed an agreement to purchase 2,100 telecommunication towers from Indosat for Rp4.4 trillion.
Investor Verification Checklist
- Tax Exposure: Verify the final resolution of ongoing tax objections for fiscal years 2014 and 2015, which involve significant underpayment assessments.
- Debt Covenants: Confirm continued compliance with debt-to-equity and debt service coverage ratios required by lenders (currently compliant).
- USO Receivables: Monitor the collection status of the remaining Universal Service Obligation receivables from BPPPTI/BAKTI.
- Capital Expenditure: Review the execution of committed capital expenditures (approx. Rp10.9 trillion) for network modernization and expansion.
- Foreign Exchange: Assess the impact of Rupiah volatility on the Group's significant foreign currency liabilities (primarily Yen and USD), which created a net liability exposure of approx. Rp1.2 trillion.