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, 2013 (Unaudited)
Comparison Period: Nine months ended September 30, 2012 (Unaudited)
Business Overview: The Company is a state-owned public limited liability company providing telecommunication network and services, informatics, and optimization of resources in Indonesia. Its primary operating segments are Personal (mobile/fixed wireless), Home (fixed wireline/data), Corporate, and Others.
Key Financial Metrics (Nine Months Ended Sept 30, 2013)
| Metric (Billions of IDR) | 2013 | 2012 |
|---|---|---|
| Total Revenues | 61,499 | 56,864 |
| Operating Profit | 21,302 | 19,307 |
| Profit Before Tax | 20,748 | 18,820 |
| Net Profit (Total) | 15,628 | 14,118 |
| Attributable to Owners of Parent | 11,057 | 10,001 |
| Net Cash from Operating Activities | 22,121 | 25,134 |
| Net Cash Used in Investing Activities | (5,809) | (9,185) |
| Net Cash Used in Financing Activities | (12,533) | (13,747) |
| Cash and Cash Equivalents (End of Period) | 17,662 | 11,925 |
| Total Assets | 120,795 | 111,369 |
| Total Liabilities | 48,055 | 44,391 |
| Equity Attributable to Owners | 57,355 | 51,541 |
| Basic EPS (IDR) | 115.05 | 104.07 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 8.2% to Rp61.5 trillion, driven by growth in Data, Internet, and IT Services (up 16.1%) and Cellular usage charges.
- Profitability: Operating profit rose 10.3% to Rp21.3 trillion. Net profit attributable to owners increased by 10.6% to Rp11.1 trillion.
- Cost Management: While personnel expenses increased by 10.6% and depreciation/amortization rose 4.4%, marketing expenses decreased by 4.7%.
- Capital Expenditure: Cash used in investing activities decreased significantly (from -Rp9.2T to -Rp5.8T), primarily due to a reduction in the acquisition of property and equipment (down from -Rp10.2T to -Rp8.8T).
- Dividends: The Company paid cash dividends totaling Rp8.35 trillion in 2013, compared to Rp7.13 trillion in 2012.
- Treasury Stock: The Company sold a portion of its treasury stock in July 2013, generating proceeds of Rp2.4 trillion and crediting Rp544 billion to additional paid-in capital.
Guidance, Outlook, Risks, and Unusual Items
- Subsequent Event (Sale of Indonusa): On October 3, 2013, the Company sold 80% of its subsidiary PT Indonusa to PT Trans Corpora for Rp926.5 billion. This transaction reduced ownership to 20% and is a significant post-balance sheet event.
- Acquisition of Patrakom: In September 2013, the Company acquired an additional 40% stake in PT Patra Telekomunikasi Indonesia (Patrakom) for Rp45.6 billion, increasing ownership to 80% and consolidating the subsidiary.
- Impairment Risks: Management noted that the fixed wireless Cash Generating Unit (CGU) was impaired in 2012. While no new impairment was recorded in 2013, management warned that if performance continues to decline or cost efficiency plans fail, further impairment may be required.
- Legal Contingencies:
- SMS Cartel: The Company and Telkomsel are under investigation by the KPPU for alleged SMS cartel practices. Penalties were previously charged, but appeals are ongoing.
- Tax Disputes: Various tax assessments and appeals are ongoing with the Directorate General of Tax, including significant VAT and income tax disputes involving Telkomsel.
- Bankruptcy Petition: A bankruptcy petition filed by distributor PT Prima against Telkomsel was dismissed by the Supreme Court in June 2013, closing the dispute.
- Foreign Exchange Risk: The Company has a net liability exposure in foreign currencies (primarily USD and JPY). A 1% strengthening of the USD against the Rupiah would decrease equity and profit by approximately Rp14 billion.
Key Facts for Investor Verification
- Dividend Payout: Verify the sustainability of the high dividend payout ratio (approx. 75% of net profit attributable to owners) given the capital expenditure requirements.
- Indonusa Sale Impact: Confirm the financial impact of the 80% sale of PT Indonusa (completed Oct 2013) on future consolidated revenue and profit, as this asset is no longer fully consolidated.
- Fixed Wireless Segment: Monitor the performance of the fixed wireless segment, which previously required significant impairment, to assess the risk of future write-downs.
- Tax Litigation: Review the status of ongoing tax disputes, particularly those involving Telkomsel, as they involve material amounts (hundreds of billions of IDR) that could impact future cash flows.
- Debt Covenants: Verify continued compliance with debt covenants, specifically the Debt-to-Equity ratio (currently 3.94% net debt-to-equity) and Debt Service Coverage ratios required by lenders.