TLK

Business Context and Reporting Period

This Form 6-K filing by Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia) presents unaudited consolidated financial statements for the three-month period ended March 31, 2014. The company is a state-owned public limited liability corporation and the dominant telecommunications provider in Indonesia, offering fixed-line, mobile cellular, data, internet, and information technology services. The reporting period covers the first quarter of fiscal year 2014.

Key Financial Metrics

Figures are expressed in billions of Indonesian Rupiah (IDR), unless otherwise noted.

Note: The Net Debt to Equity ratio turned negative in Q1 2014 due to cash and cash equivalents exceeding total interest-bearing debt.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by 8.7% year-over-year, driven primarily by growth in Data, Internet, and Information Technology services (up 14.3%) and Cellular usage charges.
• Profitability: Operating profit rose by 3.4% to Rp6,980 billion. Net profit attributable to the parent company increased by 5.0%.
• Expense Management: Personnel expenses decreased by 3.8% to Rp2,242 billion, while Operations, Maintenance, and Telecommunication service expenses increased by 8.7% to Rp5,106 billion, largely due to higher radio frequency usage charges and electricity costs.
• Liquidity: Cash and cash equivalents increased significantly by 40.9% (Rp6,004 billion) compared to the prior year-end, resulting in a net cash position.
• Asset Base: Total assets grew by 2.0%, with Property and Equipment increasing to Rp87,108 billion.

Guidance, Outlook, Risks, and Unusual Items

• Dividend Declaration (Subsequent Event): Following the Annual General Meeting on April 4, 2014, shareholders declared a 2013 cash dividend of Rp7,813 billion and a special cash dividend of Rp2,131 billion.
• Asset Impairment: The company recognized an impairment loss of Rp30 billion in Q1 2014 related to the fixed wireless Cash Generating Unit (CGU). Management noted that if performance continues to decline, further impairment analysis will be required.
• Foreign Exchange Risk: The company has a net liability exposure to foreign currencies (primarily USD and JPY). A 1% strengthening of the USD against the Rupiah would decrease equity and profit by approximately Rp3 billion.
• Legal Contingencies: The company is involved in various legal actions, including an investigation by the Commission for the Supervision of Business Competition (KPPU) regarding SMS cartel practices and land disputes. A provision of Rp47 billion has been recognized for probable losses.
• Regulatory Environment: Tariffs for fixed-line and mobile services are subject to government regulation and price cap formulas. Interconnection tariffs were revised effective February 2014.

Key Facts for Investor Verification

• Dividend Payout: Verify the total cash outflow for the declared 2013 dividends (Regular + Special) totaling approximately Rp9,944 billion and its impact on future liquidity.
• Fixed Wireless Segment: Monitor the performance of the fixed wireless CGU, which has faced impairment risks due to market competition and declining ARPU.
• Foreign Currency Exposure: Assess the impact of Rupiah volatility on the company's significant foreign-denominated liabilities (approx. Rp6,985 billion).
• Capital Expenditures: Review committed capital expenditures of Rp19,513 billion for network modernization and expansion projects.
• Related Party Transactions: Note that transactions with related parties (including state-owned enterprises and the government) accounted for 5.87% of total revenues and 7.13% of total expenses.