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, 2009 (Unaudited)
Business Overview: The Company is Indonesia's leading telecommunications provider, offering fixed wireline, fixed wireless, and cellular services. It operates through major subsidiaries including PT Telekomunikasi Selular (Telkomsel) and PT Multimedia Nusantara (Metra). The Company is majority-owned by the Indonesian Government.
Key Financial Metrics
All figures in millions of Indonesian Rupiah (Rp) unless otherwise noted.
| Metric | 2009 (9 Months) | 2008 (9 Months) |
|---|---|---|
| Total Operating Revenues | 47,114,390 | 44,649,525 |
| Operating Income | 17,954,291 | 17,178,668 |
| Net Income | 9,300,462 | 8,919,888 |
| Net Cash Provided by Operating Activities | 22,262,387 | 19,024,676 |
| Net Cash Used in Investing Activities | (17,134,642) | (12,743,407) |
| Cash and Cash Equivalents (End of Period) | 7,212,193 | 7,545,364 |
| Total Assets | 95,215,932 | 86,028,657 |
| Total Liabilities | 47,943,264 | 44,605,466 |
| Long-Term Debt (Bank Loans + Two-Step Loans) | 14,937,998 | 9,907,421 |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased by approximately 5.5% to Rp 47.1 trillion. This was driven primarily by a 15.1% increase in Cellular revenues (Rp 21.0 trillion) and a 14.1% increase in Data, Internet, and IT services (Rp 12.4 trillion). Conversely, Fixed line revenues declined by 14.5% to Rp 6.4 trillion.
- Profitability: Net income increased by 4.3% to Rp 9.3 trillion. Operating income rose 4.5% despite a 16.7% increase in depreciation expenses (Rp 9.2 trillion) due to continued network expansion.
- Capital Expenditures: Net cash used in investing activities increased significantly to Rp 17.1 trillion (from Rp 12.7 trillion), reflecting heavy investment in property, plant, and equipment (Rp 15.1 trillion) and the acquisition of minority interest in Infomedia (Rp 0.6 trillion).
- Debt Levels: Long-term bank loans increased substantially from Rp 6.4 trillion to Rp 11.7 trillion, indicating increased leverage to fund capital projects.
- Foreign Exchange: The Company recorded a significant gain on foreign exchange of Rp 774.8 billion in 2009, compared to a loss of Rp 63.8 billion in 2008.
Guidance, Outlook, and Risks
- Management Commentary: The Company continues to invest heavily in network infrastructure, particularly in 3G expansion and fiber optic networks (Palapa Ring Consortium). The Company announced a new corporate identity and business portfolio (TIME: Telecommunication, Information, Media, and Edutainment) in October 2009.
- Regulatory Environment: The Company is subject to government-regulated tariffs for fixed-line and interconnection services. The Universal Service Obligation (USO) contribution rate was increased to 1.25% of gross revenues in 2009. Telkomsel was selected to provide USO services in rural areas.
- Legal Contingencies:
- Competition Law: The Commission for the Supervision of Business Competition (KPPU) found Telkomsel violated anti-monopoly laws regarding cross-ownership with Temasek Holdings and SMS cartel practices. Penalties were imposed, and appeals are pending before the Supreme Court.
- Corruption Allegations: Several former and current employees face corruption charges related to procurement and KSO VII operations. Management believes these will not have a significant financial impact.
- Class Action: Subscribers have filed class-action lawsuits alleging excessive pricing. Management believes the allegations lack merit as tariffs comply with regulations.
- Commitments: Significant capital expenditure commitments remain outstanding, totaling approximately Rp 10.3 trillion, primarily for network equipment and satellite procurement (Telkom-3).
Key Facts for Investor Verification
- Restatement of 2008 Data: The 2008 financial figures presented in this filing have been restated to correct the fair value assessment of the Sigma acquisition and reclassify certain accounts. Investors should verify the impact of these restatements on year-over-year comparisons.
- Minority Interest Acquisition: The Company acquired the remaining 49% of Infomedia Nusantara from Elnusa for Rp 598 billion in June 2009, resulting in a 100% ownership stake. This transaction is recorded as an equity adjustment rather than goodwill.
- Debt Covenants: The Company and its subsidiaries (specifically Metra and Telkomsel) are subject to various financial covenants regarding debt-to-equity ratios and debt service coverage. The filing states compliance as of September 30, 2009.
- Tax Disputes: Telkomsel is involved in ongoing tax disputes regarding withholding taxes and VAT for prior years. Significant amounts are recorded as claims for tax refund, but realization is not assured.
- Foreign Currency Exposure: The Company has significant liabilities denominated in foreign currencies (primarily USD and JPY). A net liability position of approximately Rp 6.4 trillion in foreign currencies exposes the Company to exchange rate fluctuations.