Business Context and Reporting Period
This Form 6-K filing by Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk ("TELKOM") is dated June 11, 2003. The filing addresses a critical regulatory issue regarding the company's Annual Report on Form 20-F for the fiscal year ended December 31, 2002. TELKOM is submitting an amendment to the 20-F to remove auditor reports and reclassify its consolidated financial statements as "unaudited" for U.S. regulatory purposes due to the failure of its auditor to meet SEC qualification standards.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on regulatory compliance and audit status rather than operational financial performance.
- Financial Statement Status: Consolidated financial statements for 2002 are classified as "unaudited" for the U.S. Form 20-F.
- Dividend: TELKOM intends to pay an aggregate dividend to shareholders on June 12, 2003, as approved at the annual general meeting on May 9, 2003.
- Debt Covenants: The filing notes potential breaches of covenants with bank lenders if SEC compliance is not met, which could lead to debt acceleration, though specific debt figures are not listed.
Material Changes and Regulatory Developments
The primary material change is the withdrawal of the 2002 audit reports from the Form 20-F. The auditor engaged for 2002, Grant Thornton Eddy Pianto (now KAP Jimmy Budhi), did not meet SEC qualification standards because it failed to undergo the credentialing process of the SEC's Office of Chief Accountant and did not subject its work to the quality control procedures of an AICPA SEC Practice Section member. Additionally, the auditor for the subsidiary Telkomsel refused to authorize the inclusion of its report due to the principal auditor's lack of SEC qualification.
Consequently, the SEC staff has informed TELKOM that the 20-F does not comply with U.S. securities laws and has referred the matter to the Division of Enforcement. The SEC also stated that a previous press release by TELKOM grossly understated the severity of these concerns.
Outlook, Risks, and Management Commentary
Compliance Plan: TELKOM plans to engage an SEC-qualified audit firm to re-audit the 2002 financial statements. However, the company does not expect to meet the June 30, 2003 filing deadline or the available 15-day extension due to the time required to engage a qualified firm and complete the audit.
Risks and Contingencies:
- Enforcement Action: TELKOM faces potential monetary penalties, actions against directors, and suspension or delisting of its American Depositary Shares (ADSs) on the New York Stock Exchange.
- Capital Markets: Access to international capital markets is expected to be materially hampered until the 20-F is compliant.
- Debt Default: Failure to file a compliant 20-F or delisting could trigger breaches of bank loan covenants, potentially leading to defaults and acceleration of debt.
- Executive Certification: The CEO and CFO cannot make required Sarbanes-Oxley certifications until the 20-F is compliant.
Indonesian Compliance: TELKOM confirms that its 2002 financial statements were audited in accordance with Indonesian standards and ratified by shareholders, with no objections from Indonesian regulators.
Investor Verification Checklist
- Verify the status of the engagement with a new SEC-qualified audit firm and the expected timeline for the re-audit.
- Monitor communications from the SEC Division of Enforcement regarding potential penalties or trading suspensions.
- Review loan agreements to assess the specific triggers for covenant breaches and the likelihood of obtaining waivers from bank lenders.
- Confirm the actual payment of the dividend scheduled for June 12, 2003.
- Track any announcements regarding the delisting of ADSs from the New York Stock Exchange or other exchanges.