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: July 3, 2019
Subject: Disclosure of an Affiliation Transaction regarding a Conditional Share Subscription Agreement for PT Fintek Karya Nusantara (Finarya), a 100% subsidiary of Telkomsel (a 65% subsidiary of Telkom Indonesia). The transaction involves the issuance of new shares in Finarya to various State-Owned Enterprises (BUMN) to develop the "LinkAja" financial technology ecosystem.
Key Financial Metrics and Transaction Values
Transaction Value (Total Proposed Capital Injection): Up to Rp1,651,260,000,000 (approx. $1.65 billion IDR) across three stages.
- Stage I (by July 31, 2019): Rp665,260,000,000 for 66,526 new shares.
- Stage II (by October 31, 2019): Rp186,000,000,000 for 18,600 new shares.
- Stage III (by December 31, 2019): Rp800,000,000,000 for 80,000 new shares.
Non-Cash Contribution (In-Kind): Rp149.7 billion (Software and T-Cash Hardware) contributed by Telkomsel.
Company Capital Structure (as of May 31, 2019):
- Issued and Paid-Up Capital: Rp4,953,110,830,000 (99,062,216,600 shares).
- Shareholding: Republic of Indonesia (52.091%), Public (47.909%).
Financial Impact (Pro Forma):
- Decrease in Cash: Rp306.76 billion.
- Increase in Long-term Investments: Rp456.5 billion.
- Decrease in Fixed Assets: Rp114.8 billion.
- Increase in Equity: Rp34.9 billion.
Investment Feasibility (Finarya Level):
- Net Present Value (NPV): Rp703,108,000,000.
- Internal Rate of Return (IRR): 18.85% (Discount rate: 16.42%).
- Payback Period: 9 years, 10 months.
- Telkom Indonesia's Share of NPV: Rp114.26 billion (based on 65% ownership of Telkomsel and Telkomsel's 25% stake in Finarya).
Material Changes and Transaction Structure
Ownership Shift: Following the transaction, Telkomsel's ownership in Finarya will decrease from 100% to 25%, though it will remain the controlling shareholder. The remaining 75% will be held by various State-Owned Enterprises (BUMN) including Mandiri, BRI, BNI, BTN, Pertamina, Jiwasraya, and Danareksa.
Subscription Mechanism: The transaction is structured in three stages. If certain investors fail to subscribe ("Parties Not Taking Part"), Telkomsel and other investors have the right to subscribe to the remaining shares via cash or conversion of invoices (Shareholder Loan Agreement).
Valuation Fairness: An independent appraiser (KJPP Y&R) determined the deviation between the transaction value and fair market value for the in-kind contribution was 0.61%, deeming it within a fair range.
Guidance, Outlook, and Risks
Strategic Objective: To establish Finarya as a national fintech icon ("LinkAja") capable of competing with foreign-backed players, increasing financial literacy, and accelerating a cashless society within the BUMN ecosystem.
Management Commentary: The Board of Directors and Commissioners confirm the transaction does not involve a conflict of interest and is not a Material Transaction under Rule IX.E.2. They assert the transaction strengthens Finarya's position and profitability.
Risks and Contingencies:
- Execution Risk: The transaction is conditional on investors obtaining internal corporate approvals. If approvals are not obtained by December 31, 2019, subscription rights shift to Telkomsel and other investors.
- Sensitivity: The NPV analysis indicates that Monthly Active Users (MAU) is the most influential factor for the project's feasibility.
- Regulatory/Market Changes: The fairness opinion is valid only if no material changes occur in market, economic, or regulatory conditions after the report date (June 28, 2019).
Key Facts for Investor Verification
- Transaction Status: Verify if the Conditional Share Subscription Agreement has been fully executed and if Stage I capital has been received by Finarya.
- Investor Participation: Confirm which specific State-Owned Enterprises (Mandiri, BRI, BNI, etc.) have signed the Deed of Accession and committed to the capital injection.
- Valuation Methodology: Review the independent appraisal report (KJPP Y&R) regarding the valuation of the non-cash assets (software and hardware) contributed by Telkomsel.
- Pro Forma Impact: Monitor the actual impact on Telkom Indonesia's consolidated balance sheet, specifically the shift from fixed assets/cash to long-term investments.
- Regulatory Compliance: Ensure the transaction complies with OJK Rule No. IX.E.1 regarding affiliated party transactions and that no material facts were omitted.