Business Context and Reporting Period
This Form 6-K filing summarizes the Annual Report of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia) for the fiscal year ended December 31, 2014. The report was filed on April 2, 2015. Telkom is Indonesia's largest telecommunications provider and a state-owned enterprise (SOE) with the Government of Indonesia holding a 52.56% stake. The company operates through a holding structure with four main business groups: Cellular (Telkomsel), Media (Telkom Metra), Infrastructure (Telkom Infra), and International (Telin).
Key Financial Metrics (Year Ended Dec 31, 2014)
| Metric | 2014 Value (Rp Billion) | 2013 Value (Rp Billion) | Change (%) |
|---|---|---|---|
| Total Revenues | 89,696 | 82,967 | +8.1% |
| Adjusted EBITDA | 46,508 | 43,626 | +6.6% |
| Operating Profit | 29,377 | 27,846 | +5.5% |
| Profit for the Year | 21,445 | 20,290 | +5.7% |
| Net Income (Attributable to Parent) | 14,638 | 14,205 | +3.0% |
| Total Assets | 140,895 | 127,951 | +10.1% |
| Total Liabilities | 54,770 | 50,527 | +8.4% |
| Capital Expenditures | 24,661 | 24,898 | -1.0% |
Key Ratios:
- EBITDA Margin: 51.1% (up from 50.4% in 2013)
- Operating Profit Margin: 32.8% (down from 33.6% in 2013)
- Return on Equity (ROE): 21.6%
- Current Ratio: 106.2%
- Debt to Equity Ratio: 34.6%
Material Changes vs. Prior Period
- Revenue Growth: Driven primarily by a 15.7% increase in Data, Internet, and IT services revenue (Rp37.7 trillion) and a 6.7% increase in Cellular revenue (Rp34.3 trillion). This was partially offset by an 8.5% decline in Fixed Line revenue (Rp8.9 trillion) due to declining voice usage.
- Subscriber Growth: Total cellular subscribers reached 140.6 million (+6.9%). Mobile broadband (Flash) subscribers surged 80.7% to 31.2 million. Fixed wireless (Flexi) subscribers declined 35.2% to 4.4 million as part of a migration strategy to Telkomsel.
- Infrastructure Expansion: Telkomsel added 15,556 new Base Transceiver Stations (BTS), bringing the total to 85,420. The company deployed 170,000 Wi-Fi access points and expanded its fiber-optic backbone to 76,700 km.
- Cost Management: Operating expenses grew 6.4% to Rp61.4 trillion. Personnel expenses decreased slightly by 1.2% due to reduced post-retirement healthcare costs, while depreciation increased 8.6% due to new asset additions.
Guidance, Outlook, and Management Commentary
Strategic Focus: Management emphasizes the transformation into a "Digital Company" with three main programs: (1) Double-digit revenue growth for Telkomsel, (2) Development of the Indonesia Digital Network (IDN) 2015, and (3) International expansion. Digital business revenue contribution increased to 32.5% of total revenue.
Outlook: The company anticipates continued growth driven by data traffic, which increased 143% in 2014. Management expects the digital business to become the primary growth driver. The company plans to discontinue its fixed wireless (Flexi) service by the end of 2015, migrating customers to Telkomsel.
Risks and Contingencies:
- Regulatory: Risks related to interconnection tariff reductions and potential new entrants in the IDD market.
- Operational: Risks associated with network failures, cyber security threats, and the limited operational life of satellites (Telkom-1 and Telkom-2).
- Legal: Ongoing litigation regarding alleged monopolistic practices (KPPU case) and a land dispute in Makassar (Supreme Court rejected Telkom's appeal in Jan 2015; judicial review requested).
- Macroeconomic: Exposure to Rupiah depreciation against the US Dollar, as a significant portion of capital expenditures and debt are denominated in foreign currencies.
Important Facts for Investor Verification
- Dividend Policy: The 2014 dividend payout ratio was not yet determined at the time of filing; it is to be decided at the 2015 Annual General Meeting of Shareholders (AGMS). The 2013 payout ratio was 70%.
- Government Ownership: The Government of Indonesia holds 52.56% of shares and possesses a Series A Dwiwarna share with special veto rights over strategic decisions (e.g., mergers, capital changes, board appointments).
- Legal Proceedings: Verify the status of the KPPU (anti-monopoly) case involving a potential fine of Rp18 billion for Telkom and Rp25 billion for Telkomsel, and the Makassar land dispute with a potential liability of Rp57.6 billion.
- Accounting Standards: Financial statements are prepared under Indonesian Financial Accounting Standards (IFAS), which differ from IFRS. Dividends are calculated based on IFAS net income.
- Capital Expenditure Commitments: As of Dec 31, 2014, the company had material commitments for capital investment totaling Rp16.2 billion, primarily for network infrastructure and satellite projects.