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: December 28, 2006
Reporting Period: The filing primarily announces an Extraordinary General Meeting of Shareholders (EGMS) scheduled for January 26, 2007. It includes unaudited consolidated financial data for the nine months ended September 30, 2006, and audited data for the fiscal year ended December 31, 2005.
Primary Purpose: To seek shareholder approval for an amendment to the Company's share buyback plan, specifically to utilize up to 51,150,750 treasury shares for a new Employee and Management Stock Option Plan (EMSOP).
Key Financial Metrics
Revenue (9 months ended Sept 30, 2006): Rp 37,200 billion (Unaudited)
- Fixed Lines: Rp 8,073 billion
- Cellular: Rp 14,899 billion
- Data and Internet: Rp 6,369 billion
Profitability (9 months ended Sept 30, 2006):
- Operating Income: Rp 17,183 billion
- Net Income: Rp 9,222 billion
- Net Income Per Share: Rp 458.12
Liquidity and Assets (as of Sept 30, 2006):
- Cash and Cash Equivalents: Rp 8,309 billion
- Total Assets: Rp 68,351 billion
- Total Liabilities: Rp 33,647 billion (Current: Rp 16,993 billion; Non-Current: Rp 16,654 billion)
- Equity: Rp 27,509 billion
Debt: Current maturities of long-term liabilities stood at Rp 5,531 billion. Bank loans (non-current) were Rp 2,670 billion.
Material Changes and Transaction Details
Share Buyback Status: As of December 20, 2006, the Company had repurchased 116,876,500 shares (11.59% of the total planned buyback) using funds allocated from profits as of September 30, 2005.
Proposed Change: The Company proposes to change the plan for the repurchased shares (Treasury Stock). Previously, the plan was to hold shares for potential resale at a profit. The new plan proposes to use a maximum of 51,150,750 treasury shares for the EMSOP program.
EMSOP Program Details:
- Participants: Permanent employees with at least one year of service, Board of Directors, and Board of Commissioners of the Company and its subsidiaries/affiliates.
- Allocation: Maximum of 51,150,750 options. 45,661,500 to be issued immediately; 5,489,250 reserved for new hires/top performers.
- Exercise Price: Based on the average closing price of the 25 trading days prior to the report, with discounts of 5% (Band I-III) and 10% (Band IV-VII) relative to the Management level price.
- Vesting: 30% at end of Year 1, 30% at end of Year 2, 40% at end of Year 3 for Management/Bands I-III. 100% at end of Year 1 for Bands IV-VII.
Guidance, Outlook, and Risks
Management Commentary: The EMSOP is designed as a long-term incentive to motivate employees, attract talent, and align employee goals with shareholder value creation. The Company aims to become a "Leading Infocom Company in the Region."
Financial Impact (Pro Forma): The implementation of the EMSOP is estimated to result in an additional personnel expense of Rp 39 billion (amortization of deferred compensation) for the first year, reducing Net Income to Rp 9,183 billion and Net Income Per Share to Rp 457.10.
Risks and Contingencies:
- Conflict of Interest: The transaction is classified as a conflict of interest under Bapepam-LK Rule IX.E.1 because the Board of Directors manages the buyback and are also recipients of the options.
- Approval Requirement: The plan requires approval from an Extraordinary General Meeting of Shareholders (EGMS). Specifically, it requires a quorum of Independent Shareholders representing more than 50% of total shares owned by Independent Shareholders, and approval by more than 50% of the votes cast by Independent Shareholders.
- Regulatory Compliance: The program is subject to prevailing capital market regulations and Bapepam-LK rules.
Investor Verification Checklist
- EGMS Outcome: Verify if the Extraordinary General Meeting held on January 26, 2007, achieved the required quorum of Independent Shareholders and approved the EMSOP amendment.
- Treasury Stock Utilization: Confirm the exact number of treasury shares allocated to the EMSOP versus those retained for potential resale.
- Exercise Price Determination: Monitor the announcement of the specific exercise price once the Board determines the grant date, as it depends on the 25-day average closing price.
- Financial Dilution: Assess the long-term impact on earnings per share as options are exercised and new shares are issued from the treasury stock.
- Regulatory Filings: Check for any subsequent filings with Bapepam-LK regarding the final implementation details of the EMSOP.