Business Context and Reporting Period
This Form 6-K filing, dated March 7, 2016, presents the audited consolidated financial statements of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia) and its subsidiaries for the fiscal year ended December 31, 2015. The company is a state-owned public limited liability corporation headquartered in Bandung, Indonesia, primarily engaged in providing telecommunications networks and information services. The financial statements were prepared in accordance with Indonesian Financial Accounting Standards (PSAK) and audited by Purwantono, Sungkoro & Surja.
Key Financial Metrics (Year Ended Dec 31, 2015)
| Metric | 2015 (Billions IDR) | 2014 (Billions IDR) |
|---|---|---|
| Total Revenues | 102,470 | 89,696 |
| Operating Profit | 32,418 | 29,206 |
| Profit for the Year | 23,317 | 21,274 |
| Net Income (Parent Company) | 15,489 | 14,471 |
| Net Income (Non-Controlling Interests) | 7,828 | 6,803 |
| Net Cash from Operating Activities | 43,669 | 37,736 |
| Net Cash Used in Investing Activities | (27,421) | (24,748) |
| Net Cash Used in Financing Activities | (6,407) | (10,083) |
| Total Assets | 166,173 | 141,822 |
| Total Liabilities | 72,745 | 55,830 |
| Total Equity | 93,428 | 85,992 |
| Net Debt-to-Equity Ratio | 8.64% | 8.54% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 14.2% to Rp102.5 trillion, driven primarily by a 44.3% surge in cellular internet and data revenues (Rp19.7 trillion) and a 161% increase in handset sales.
- Profitability: Operating profit rose 11.0% to Rp32.4 trillion, and net profit increased 9.6% to Rp23.3 trillion. This growth was supported by a significant reduction in interconnection expenses (down 26.7%) and a decrease in foreign exchange losses.
- Capital Expenditures: Cash used in investing activities increased to Rp27.4 trillion, reflecting heavy investment in property and equipment (Rp26.5 trillion) to support network modernization and expansion.
- Debt Structure: Total debt increased significantly due to the issuance of new bonds (Rp7.0 trillion) in June 2015 to finance capital expenditures. Long-term bank loans also increased substantially.
- Dividends: The company paid total cash dividends of Rp8.8 trillion to shareholders in 2015, compared to Rp9.9 trillion in 2014.
Guidance, Outlook, Risks, and Contingencies
- Management Commentary: Management highlighted the successful migration of fixed wireless subscribers to Telkomsel and the continued expansion of data and internet services. The company is actively modernizing its network, including the replacement of copper cables with fiber optics.
- Tax Contingencies: Significant ongoing disputes exist with tax authorities regarding Value Added Tax (VAT) on interconnection services and corporate income tax. The company has filed appeals and arbitration claims regarding outstanding receivables from Universal Service Obligation (USO) programs and tax assessments totaling hundreds of billions of Rupiah.
- Legal Contingencies: The company is involved in an SMS cartel investigation by the Commission for the Supervision of Business Competition (KPPU). While the District Court ruled in the company's favor in May 2015, the KPPU has appealed to the Supreme Court. Additionally, there are ongoing land dispute cases.
- Regulatory Risks: The company is subject to government-regulated tariffs for fixed line and mobile services. Changes in interconnection tariffs and frequency usage fees impact profitability.
- Subsequent Events: In February 2016, Telkomsel filed an appeal regarding a corporate income tax underpayment assessment of Rp250 billion.
Key Facts for Investor Verification
- Revenue Composition: Verify the sustainability of the 44% growth in cellular internet/data revenue and the impact of handset sales volatility on total revenue.
- Tax Disputes: Monitor the resolution of the VAT interconnection disputes and USO receivables, as these represent significant potential cash flow adjustments.
- Debt Covenants: Confirm continued compliance with debt covenants (Debt-to-Equity ratio < 2:1; EBITDA/Finance Costs > 4:1) following the significant increase in bond issuances.
- Fixed Wireless Restructuring: Assess the final financial impact of the transfer of the fixed wireless business to Telkomsel, including the status of the escrow account (Rp2.2 trillion) and associated provisions.
- Non-Controlling Interests: Note that a significant portion of net income (approx. 33%) is attributable to non-controlling interests, primarily Telkomsel (65% owned by Telkom Indonesia).