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: Year ended December 31, 2013
Filing Date: March 11, 2014
Auditor: Purwantono, Suherman & Surja (Unqualified Opinion)
Telkom Indonesia is a state-owned public limited liability company providing telecommunications network and services, informatics, and related infrastructure in Indonesia. The consolidated financial statements include the parent company and its subsidiaries, most notably PT Telekomunikasi Selular (Telkomsel).
Key Financial Metrics (Year Ended Dec 31, 2013)
All figures in billions of Indonesian Rupiah (IDR), unless otherwise noted.
| Metric | 2013 | 2012 |
|---|---|---|
| Total Revenues | 82,967 | 77,143 |
| Operating Profit | 27,846 | 25,698 |
| Profit Before Tax | 27,149 | 24,228 |
| Net Profit (Consolidated) | 20,290 | 18,362 |
| Net Profit (Attributable to Parent) | 14,205 | 12,850 |
| Operating Cash Flow | 36,574 | 27,941 |
| Capital Expenditures | (24,898) | (17,272) |
| Total Assets | 127,951 | 111,369 |
| Total Liabilities | 50,527 | 44,391 |
| Total Equity | 77,424 | 66,978 |
| Cash and Cash Equivalents | 14,696 | 13,118 |
| Net Debt to Equity Ratio | 9.18% | 11.95% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by 7.5% to Rp82.97 trillion, driven primarily by growth in Data, Internet, and IT services (up 14.8%) and Cellular usage charges.
- Profitability: Net profit attributable to the parent company rose 10.6% to Rp14.21 trillion. Operating profit margin remained stable at approximately 33.6%.
- Impairment Charges: The company recognized a significant impairment loss of Rp596 billion on property and equipment related to the fixed wireless segment due to increased competition and declining ARPU. This compares to Rp247 billion in 2012.
- Capital Expenditure: Capex increased significantly by 44% to Rp24.9 trillion, reflecting heavy investment in network modernization and fiber optic expansion.
- Divestment: The company sold 80% of its ownership in PT Indonusa Telemedia for Rp926 billion, recognizing a gain of Rp1,383 billion (including a put option value).
- Acquisitions: Acquired full ownership of PT Patra Telekomunikasi Indonesia (Patrakom) and PT German Center Indonesia (GCI) to expand data center and satellite capabilities.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted a customer-centric strategy across Personal, Home, Corporate, and Other segments. The company successfully implemented a 5-for-1 stock split in 2013. The fixed wireless segment continues to face challenges, requiring ongoing cost efficiency initiatives to return to profitability.
Risks and Contingencies:
- Tax Disputes: Significant ongoing disputes with tax authorities regarding VAT and withholding taxes for various fiscal years. The company has filed objections and appeals, with outcomes uncertain.
- Legal Actions: The company is a defendant in cases regarding land disputes and an investigation by the Commission for the Supervision of Business Competition (KPPU) regarding alleged SMS cartel practices. A provision of Rp49 billion has been recognized.
- Foreign Exchange: The company has a net liability exposure to foreign currencies (primarily USD and JPY). A 5% strengthening of the Yen against the Rupiah would decrease equity and profit by approximately Rp48 billion.
- Regulatory: Tariffs for basic telephony services are subject to government regulation and price cap formulas.
Investor Verification Checklist
- Fixed Wireless Turnaround: Verify the progress of cost efficiency plans for the fixed wireless segment to ensure future impairment charges do not materialize.
- Tax Litigation Outcomes: Monitor the status of tax court appeals and KPPU investigations, as adverse rulings could impact future cash flows.
- Capex Efficiency: Assess the return on the significant increase in capital expenditures (Rp24.9 trillion) regarding fiber optic and data center expansion.
- Divestment Proceeds: Confirm the realization of the put option value associated with the Indonusa divestment.
- Debt Covenants: Verify continued compliance with debt-to-equity and debt service coverage ratios required by lenders (currently compliant).