Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2009 (Unaudited)
Business Overview: The Company is Indonesia's primary telecommunications provider, offering fixed wireline, fixed wireless, and cellular services. It operates through three main segments: Fixed Wireline, Fixed Wireless, and Cellular (primarily via its subsidiary Telkomsel). The Company is a state-owned enterprise with significant government ownership.
Key Financial Metrics
| Metric (Millions of Rupiah) | Six Months Ended June 30, 2009 | Six Months Ended June 30, 2008 |
|---|---|---|
| Total Operating Revenues | 30,672,732 | 30,211,078 |
| Operating Income | 11,577,097 | 12,467,961 |
| Net Income | 6,043,813 | 6,297,610 |
| Net Cash Provided by Operating Activities | 13,433,708 | 12,563,424 |
| Net Cash Used in Investing Activities | (10,993,787) | (8,298,892) |
| Total Assets (June 30) | 94,170,736 | 85,930,203 |
| Total Liabilities (June 30) | 51,564,488 | 47,646,430 |
| Stockholders' Equity (June 30) | 34,110,732 | 30,386,225 |
Note: Figures are in millions of Indonesian Rupiah (Rp). US$ translations are provided in the source but omitted here for consistency.
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased by approximately 1.5% (Rp 461.7 billion) compared to the prior year period. This growth was driven primarily by the Cellular segment, which saw revenue rise to Rp 13.5 trillion from Rp 12.2 trillion. Conversely, Fixed Line revenues declined from Rp 5.3 trillion to Rp 4.3 trillion.
- Profitability Decline: Operating income decreased by 7.1% (Rp 890.9 billion) to Rp 11.6 trillion. This was largely due to a significant increase in depreciation expenses (up 17.5% to Rp 6.0 trillion) and higher operating expenses overall.
- Net Income: Net income attributable to the Company decreased by 4.0% to Rp 6.0 trillion. Basic earnings per share dropped from Rp 317.83 to Rp 306.04.
- Capital Expenditures: Cash used for the acquisition of property, plant, and equipment increased significantly to Rp 10.2 trillion from Rp 7.6 trillion, reflecting continued network expansion.
- Foreign Exchange: The Company recorded a substantial net gain on foreign exchange of Rp 550.5 billion in 2009, compared to Rp 35.8 billion in 2008, partially offsetting operating income declines.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Network Expansion: The Company is heavily investing in 3G network rollout and fiber optic infrastructure (Palapa Ring Consortium). Telkomsel has secured additional spectrum in the 2.1 GHz band.
- Tariff Adjustments: The Company implemented tariff adjustments in August 2008, resulting in decreases for local and long-distance charges, and significant reductions in SMS charges. Internet tariffs were reduced by an average of 20% in April 2009.
- USO Program: Telkomsel was selected to provide Universal Service Obligation (USO) services in rural areas, winning a tender worth Rp 1.66 trillion.
Risks and Contingencies:
- Legal Proceedings: The Company and Telkomsel are involved in various legal actions, including:
- Antitrust/Competition: Investigations by the Commission for the Supervision of Business Competition (KPPU) regarding SMS cartel practices and monopoly allegations. Penalties have been imposed, and appeals are ongoing.
- Corruption Allegations: Several former and current employees have been indicted for corruption related to procurement and KSO VII operations. Appeals are pending at the Supreme Court.
- Class Action: Subscribers have filed class-action lawsuits alleging excessive pricing, though management believes these lack strong basis.
- Tax Disputes: Telkomsel is engaged in ongoing tax disputes regarding withholding taxes and VAT, with significant amounts claimed as refunds pending court decisions.
- Regulatory Changes: The Company is subject to government regulation regarding tariffs, interconnection fees, and spectrum allocation.
Important Facts for Investor Verification
- Restatement of 2008 Data: The 2008 comparative figures have been restated due to the reassessment of the fair value of assets and liabilities from the acquisition of Sigma. Investors should verify the impact of these restatements on year-over-year comparisons.
- Minority Interest: A significant portion of the Company's net income (approx. Rp 2.2 trillion) is attributable to minority interests, primarily from the Telkomsel subsidiary. Net income attributable to Telkom Indonesia shareholders is lower than the consolidated net income.
- Dividend Payouts: The Company declared cash dividends for 2008 totaling Rp 5.8 trillion (approx. Rp 296.94 per share) at the AGM in June 2009. Subsequent payments were made in July 2009.
- Debt Structure: The Company holds significant "Two-step loans" from the Government (approx. Rp 3.9 trillion) and substantial long-term bank loans. Verify the interest rate exposure and covenant compliance.
- Capital Commitments: As of June 30, 2009, the Company had committed capital expenditures of approximately Rp 10.7 trillion for network equipment and infrastructure.