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)
Date: May 23, 2008
Reporting Period: This filing serves as a disclosure of information to shareholders regarding a proposed third share repurchase program ("Shares Buyback III"). It references financial data from the audited consolidated financial statements for the year ended December 31, 2007, and share price data through May 16, 2008.
Business Overview: The Company is a telecommunications service provider domiciled in Bandung, Indonesia, with shares listed on the Indonesia Stock Exchange, the New York Stock Exchange (as ADRs), and the London Stock Exchange.
Key Financial Metrics
Historical Performance (Year Ended Dec 31, 2007):
- Total Assets: Rp 82,058,760 million (approx. $8.7 billion)
- Net Income: Rp 12,857,018 million (approx. $1.4 billion)
- Shareholders' Equity: Rp 33,748,579 million (approx. $3.6 billion)
- Return on Assets (ROA): 15.67%
- Return on Equity (ROE): 38.10%
- Basic EPS: Rp 644.08
Capital Structure (as of May 16, 2008):
- Issued and Paid-up Capital: 20,159,999,280 shares
- Treasury Shares: 391,671,000 shares (1.94% of total issued capital)
- Government of Indonesia Ownership: 51.19% (Series B Shares)
- Public Ownership: 29.94%
Previous Buyback Activity:
- Shares Buyback I: Completed June 21, 2007. Repurchased 211,290,500 shares (1.05% of capital) at an average price of Rp 8,654.
- Shares Buyback II: Active from June 29, 2007. As of May 16, 2008, repurchased 187,130,500 shares (0.93% of capital) at an average price of Rp 9,326, totaling Rp 1.75 trillion.
Material Changes and Proposed Actions
Proposed Shares Buyback III:
- Objective: To return excess free cash flow to shareholders and increase shareholder value, as management believes the current share price is below fair value due to global market weakness rather than fundamental issues.
- Maximum Funding: Rp 3,000,000,000,000 (approx. $318 million), to be sourced from Retained Earnings.
- Maximum Volume: Up to 1.68% of issued Series B Shares (approx. 339,443,313 shares).
- Duration: Maximum of 18 months following General Meeting of Shareholders (GMS) approval.
- Execution: Purchases will be made on the Indonesia Stock Exchange (via PT Danareksa Sekuritas) and the NYSE (via Morgan Stanley for ADRs).
Pro Forma Financial Impact (if fully executed):
- Total Assets: Decrease by Rp 3,104,000 million.
- Net Income: Decrease by Rp 104,000 million (due to transaction costs/fees).
- Shareholders' Equity: Decrease by Rp 3,104,000 million.
- Basic EPS: Increase from Rp 644.08 to Rp 644.81.
- ROE: Increase from 38.10% to 41.62%.
Guidance, Outlook, and Risks
Management Commentary:
- Management asserts the company has sufficient liquidity and working capital to fund the buyback without adversely affecting operations.
- The buyback is intended to improve capital efficiency, reduce the cost of financing, and enhance EPS and ROE.
- Repurchased shares may be cancelled to reduce capital or held as treasury stock for future sale, depending on future funding plans.
Regulatory Requirements and Risks:
- Approval Needed: The program requires approval from the GMS, scheduled for June 20, 2008. Approval requires a quorum of 2/3 of total shares and a vote of 2/3 of votes cast.
- Market Conditions: The program is subject to prevailing market conditions and applicable regulations (Bapepam Rule XI.B.2 in Indonesia and Rule 10b-18 in the US).
- Termination: Management reserves the right to terminate the program at any time within the 18-month period.
- Insider Trading: Company insiders are prohibited from trading on days the company executes buybacks.
Key Facts for Investor Verification
- GMS Approval Status: Verify if the General Meeting of Shareholders on June 20, 2008, approved the buyback program as proposed.
- Execution Progress: Monitor subsequent filings to determine the actual volume and average price of shares repurchased under Buyback III.
- Share Disposition: Confirm whether repurchased shares are cancelled (reducing share count) or held as treasury stock.
- Share Price Performance: Compare the buyback execution prices against the market prices listed in the filing (IDR 8,500–9,200 range for local shares; $37.00–$40.60 range for ADRs as of May 2008).
- Liquidity Impact: Review future quarterly reports to ensure the Rp 3 trillion outflow did not strain working capital or operational liquidity.