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: Six months ended June 30, 2019 (Unaudited)
Business Overview: Telkom Indonesia is a state-owned public limited liability company providing telecommunications networks and information services in Indonesia. Its primary operating segments include Mobile, Consumer, Enterprise, and Wholesale (WIB). The Group is majority-owned by the Government of the Republic of Indonesia.
Key Financial Metrics (Six Months Ended June 30, 2019)
| Metric | 2019 (Rp Billion) | 2018 (Rp Billion) |
|---|---|---|
| Total Revenues | 69,345 | 64,368 |
| Operating Profit | 22,210 | 18,100 |
| Profit Before Tax | 20,838 | 17,189 |
| Net Profit (Total) | 15,498 | 12,807 |
| Net Profit (Parent Company) | 11,078 | 8,698 |
| Basic EPS (Rp) | 111.83 | 87.80 |
| Operating Cash Flow | 27,702 | 15,791 |
| Capital Expenditures | (15,127) | (14,138) |
| Total Assets | 215,699 | 206,196 |
| Total Liabilities | 107,354 | 88,893 |
| Net Debt-to-Equity Ratio | 43.03% | 26.94% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 7.7% to Rp69.3 trillion, driven primarily by a 33.1% surge in "Cellular internet and data" revenues (Rp26.9 trillion vs. Rp20.2 trillion) and a 39.7% increase in Interconnection revenues.
- Profitability: Operating profit rose by 22.7% to Rp22.2 trillion. Net profit attributable to the parent company increased by 27.4% to Rp11.1 trillion.
- Expense Management: Personnel expenses decreased by 7.8% to Rp6.5 trillion. However, Interconnection expenses increased significantly by 47.5% to Rp2.7 trillion, reflecting higher traffic volumes.
- Depreciation: Depreciation and amortization expenses increased by 11.0% to Rp11.5 trillion, partly due to accelerated depreciation of equipment units as part of modernization programs.
- Cash Flow: Net cash provided by operating activities improved substantially by 75.4% to Rp27.7 trillion, while net cash used in investing activities increased to Rp16.3 trillion due to higher capital expenditures.
- Dividends: The Company paid cash dividends totaling Rp24.8 trillion (including special dividends) during the period.
Guidance, Outlook, Risks, and Unusual Items
- Dividend Policy: Stockholders approved cash and special cash dividends for 2018 totaling Rp16.2 trillion (Rp163.81 per share). The Company maintains a policy of returning value to shareholders through dividends or share buybacks when idle cash exists.
- Capital Management: The Group monitors its debt-to-equity ratio to ensure compliance with loan covenants (typically not exceeding 2:1) and to maintain credit ratings. The net debt-to-equity ratio increased to 43.03% from 26.94% due to increased borrowings and dividend payments.
- Acquisitions and Divestments:
- Divestment: Sold 67% of its stake in PT Jalin Pembayaran Nusantara for Rp395 billion in June 2019.
- Acquisitions: Acquired control of PT Persada Sokka Tama (PST) for Rp1.1 trillion and increased ownership in Telin Malaysia and TSGN. Several acquisitions resulted in provisional goodwill.
- Tax Contingencies: Significant ongoing tax disputes exist with Indonesian tax authorities regarding VAT on international incoming call interconnection and corporate income tax for various fiscal years. While the Company has won several appeals at the Tax Court and Supreme Court, some judicial reviews remain pending, creating uncertainty regarding final tax liabilities.
- Regulatory Risks: The Company is subject to government-regulated tariffs for fixed line and mobile services. It must also contribute 1.25% of gross revenues to the Universal Service Obligation (USO) program.
- Financial Risks: The Group has significant exposure to foreign exchange risk, primarily in U.S. dollars and Japanese yen, with a net liability position. Interest rate risk is managed through a mix of fixed and variable rate borrowings.
Key Facts for Investor Verification
- Revenue Mix Shift: Verify the sustainability of the 33% growth in cellular data revenues, which now constitutes the largest revenue segment, offsetting declines in traditional voice revenues.
- Debt Levels: Confirm the impact of the rising net debt-to-equity ratio (43.03%) on future borrowing costs and compliance with debt covenants, particularly given the significant dividend payout.
- Tax Litigation Outcome: Monitor the resolution of pending Supreme Court judicial reviews regarding VAT and income tax assessments, which could materially impact future cash flows.
- Capital Expenditure Efficiency: Assess the return on the increased capital expenditures (Rp15.1 trillion) focused on network modernization and 4G/5G infrastructure.
- Related Party Transactions: Review the volume of transactions with state-owned enterprises and related parties, which accounted for approximately 3% of revenues and 7.4% of expenses.