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, 2013 (Unaudited)
Business Overview: The Company is a state-owned public limited liability company providing telecommunications network and services, informatics, and optimization of resources in Indonesia. It operates through four main segments: Personal, Home, Corporate, and Others. The ultimate parent is the Government of the Republic of Indonesia.
Key Financial Metrics (in billions of Rupiah)
| Metric | Six Months Ended June 30, 2013 | Six Months Ended June 30, 2012 |
|---|---|---|
| Total Revenues | 40,160 | 36,720 |
| Operating Profit | 13,846 | 12,301 |
| Profit Before Income Tax | 13,557 | 12,004 |
| Profit for the Year (Net Income) | 10,133 | 8,989 |
| Net Income Attributable to Owners | 7,125 | 6,428 |
| Basic EPS (Rp) | 372.08 | 333.97 |
| Net Cash Provided by Operating Activities | 14,388 | 16,781 |
| Cash and Cash Equivalents (End of Period) | 11,551 | 8,582 |
| Total Assets | 111,472 | 101,536 (Dec 31, 2012: 111,369) |
| Total Liabilities | 46,723 | 43,717 (Dec 31, 2012: 44,391) |
| Total Equity | 64,749 | 57,819 (Dec 31, 2012: 66,978) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 9.4% to Rp40,160 billion, driven primarily by growth in the Personal segment (Mobile Cellular) and Data/Internet services.
- Profitability: Operating profit rose 12.6% to Rp13,846 billion. Net income attributable to owners increased by 10.8% to Rp7,125 billion.
- Expense Management: Personnel expenses increased to Rp4,605 billion (up 10.6%), while marketing expenses decreased to Rp1,339 billion (down 8.3%).
- Cash Flow: Net cash from operating activities decreased by 14.3% to Rp14,388 billion, primarily due to higher tax payments and employee costs, despite higher cash receipts from customers.
- Dividends: The Company paid cash dividends totaling Rp8,353 billion in the period, compared to Rp7,127 billion in the prior year.
Guidance, Outlook, Risks, and Unusual Items
- Asset Impairment: No new impairment charges were recorded in the first half of 2013. However, management noted that the fixed wireless Cash Generating Unit (CGU) remains sensitive to market conditions. A previous impairment of Rp247 billion was recognized in 2012. Management expects the fixed wireless CGU to generate positive cash flows from 2013.
- 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. Management believes there will be no significant financial impact.
- Bankruptcy Petition: A bankruptcy petition filed by distributor PT Prima against Telkomsel was accepted by the Central Jakarta District Court in September 2012. However, the Supreme Court revoked this verdict in November 2012. Telkomsel is currently contesting a curator fee decision.
- Regulatory Risks: The Company is subject to Universal Service Obligation (USO) contributions (1.25% of gross revenue) and frequency usage fees determined by the government. Tariffs for basic telephony services are regulated.
- 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 Rp14 billion.
- Subsequent Events: On July 2, 2013, the Company established a subsidiary in Malaysia, Telekomunikasi Indonesia International (Malaysia) Sdn. Bhd.
Investor Verification Checklist
- Fixed Wireless Performance: Verify if the fixed wireless segment has achieved the projected positive cash flows and profitability to avoid further impairment charges.
- Regulatory Compliance: Monitor the status of the SMS cartel investigation and any potential penalties from the KPPU or Supreme Court.
- Dividend Policy: Confirm the sustainability of the high dividend payout ratio (approx. 117% of net income attributable to owners for the period) given capital expenditure requirements.
- USO Obligations: Review the progress and financial impact of Universal Service Obligation projects in rural and border areas.
- Foreign Exchange Exposure: Assess the impact of Rupiah volatility on the Company's significant foreign currency-denominated liabilities (approx. Rp7.2 trillion net liability).