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, 2012 (Unaudited)
Comparison Period: Nine months ended September 30, 2011 (Unaudited)
Telkom Indonesia is Indonesia's largest telecommunications provider, offering fixed-line, mobile, data, internet, and information technology services. The company operates through two main segments: Consumer and Corporate. The filing includes consolidated financial statements and notes detailing significant accounting policies, related party transactions, and commitments.
Key Financial Metrics (Nine Months Ended Sept 30, 2012)
| Metric (Billions of IDR) | 2012 | 2011 |
|---|---|---|
| Revenues | 56,864 | 52,833 |
| Profit Before Tax | 18,820 | 15,744 |
| Net Profit for the Period | 14,118 | 11,706 |
| Attributable to Owners of Parent | 10,001 | 8,385 |
| Operating Cash Flow | 25,134 | 22,880 |
| Capital Expenditures (Cash Used) | (10,216) | (7,842) |
| Cash and Cash Equivalents (End of Period) | 11,925 | 9,366 |
| Total Assets | 105,402 | 103,054 |
| Total Liabilities | 42,637 | 42,073 |
| Net Debt to Equity Ratio | 10.07% | 17.34% |
Note: All figures are in billions of Indonesian Rupiah (IDR) unless otherwise stated.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 7.6% to Rp 56.86 trillion, driven by growth in Cellular (up 7.9%) and Data/Internet services (up 12.2%). Fixed line revenues declined by 7.2%.
- Profitability: Net profit increased by 20.6% to Rp 14.12 trillion. Profit attributable to the parent company rose 19.3% to Rp 10.00 trillion.
- Expense Increases: Interconnection expenses rose significantly by 33.4% to Rp 3.38 trillion. General and administrative expenses increased by 23.4%, largely due to higher provisions for impairment of receivables.
- Capital Expenditure: Cash used for acquisition of property, plant, and equipment increased by 30.3% to Rp 10.22 trillion, reflecting continued network expansion and modernization.
- Dividends: Cash dividends paid to shareholders totaled Rp 7.13 trillion in 2012, compared to Rp 6.09 trillion in 2011.
Outlook, Risks, and Contingencies
Management Commentary and Outlook
Management continues to focus on network modernization, including the rollout of 3G and fiber optic networks. The company is actively managing its capital structure to minimize the cost of capital and maintain a debt-to-equity ratio comparable to regional peers. The net debt-to-equity ratio improved significantly to 10.07% from 17.34% in the prior year.
Risks and Contingencies
- Legal Proceedings (Bankruptcy Petition): A distributor, PT Prima Jaya Informatika, filed a bankruptcy petition against Telkomsel (a subsidiary) regarding a dispute over undelivered vouchers. The Central Jakarta District Court accepted the petition in September 2012. Telkomsel has appealed to the Supreme Court. A Supervisory Judge has allowed Telkomsel to continue business operations pending the appeal. Management believes the financial impact is not significant.
- Regulatory Investigations: The company and Telkomsel are under investigation by the Commission for the Supervision of Business Competition (KPPU) regarding alleged SMS cartel practices. Penalties were previously imposed, but the company has filed objections and appeals. The case is currently consolidated in the Central Jakarta District Court.
- Tax Disputes: Various tax assessments and appeals are ongoing with the Directorate General of Tax and the Tax Court regarding withholding taxes, VAT, and corporate income tax for various fiscal years. Significant refunds have been received, but some appeals remain in process.
- Asset Impairment: In 2011, an impairment charge of Rp 563 billion was recognized for the fixed wireless segment. Management monitors the recoverable amount of this cash-generating unit closely; further impairment may be required if performance does not meet projections.
- Foreign Exchange Risk: The company has significant exposure to USD and JPY. A 1% strengthening of the USD against the Rupiah would decrease equity and profit by approximately Rp 22 billion.
Key Facts for Investor Verification
- Dividend Payout: Verify the sustainability of the high dividend payout (Rp 7.13 trillion) relative to free cash flow and future capital expenditure requirements.
- Bankruptcy Appeal Status: Monitor the outcome of the Supreme Court appeal regarding the bankruptcy petition filed by PT Prima against Telkomsel.
- Fixed Wireless Segment: Assess the performance of the fixed wireless segment to determine if further impairment charges are necessary, given the previous Rp 563 billion write-down.
- Related Party Transactions: Review the significant volume of transactions with state-owned enterprises and related parties (e.g., MoCI, Indosat, state-owned banks), which constitute a material portion of revenues and expenses.
- Capital Expenditure Commitments: Note the committed capital expenditures of approximately Rp 8.46 trillion as of September 30, 2012, primarily for network infrastructure.