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, 2017
Filing Date: March 16, 2018
Auditor: Purwantono, Sungkoro & Surja (Unqualified Opinion)
Telkom Indonesia is a state-owned public limited liability company providing telecommunications networks and services in Indonesia. The consolidated financial statements include the Company and its subsidiaries, most notably PT Telekomunikasi Selular (Telkomsel), in which the Group holds a 65% interest.
Key Financial Metrics (Year Ended Dec 31, 2017)
All figures in billions of Indonesian Rupiah (IDR), unless otherwise noted.
| Metric | 2017 | 2016 |
|---|---|---|
| Revenues | 128,256 | 116,333 |
| Operating Profit | 43,933 | 39,195 |
| Profit for the Year | 32,701 | 29,172 |
| Profit Attributable to Parent | 22,145 | 19,352 |
| Net Cash from Operating Activities | 49,405 | 47,231 |
| Net Cash Used in Investing Activities | (33,007) | (27,557) |
| Net Cash Used in Financing Activities | (21,052) | (17,905) |
| Total Assets | 198,484 | 179,611 |
| Total Liabilities | 86,354 | 74,067 |
| Total Equity | 112,130 | 105,544 |
| Net Debt-to-Equity Ratio | 11.14% | 2.41% |
| Earnings Per Share (Basic) | IDR 223.55 | IDR 196.19 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by 10.2% to IDR 128.3 trillion, driven primarily by a 33% increase in data, internet, and IT service revenues (IDR 68.5 trillion vs. IDR 59.0 trillion).
- Profitability: Operating profit rose 12.1% to IDR 43.9 trillion. Profit for the year increased 12.1% to IDR 32.7 trillion.
- Capital Expenditure: Cash used in investing activities increased to IDR 33.0 trillion (from IDR 27.6 trillion), reflecting significant purchases of property and equipment (IDR 32.3 trillion) to support network expansion.
- Debt Profile: Total interest-bearing debt increased to IDR 35.5 trillion. The net debt-to-equity ratio rose to 11.14% from 2.41% due to increased borrowings and a reduction in cash balances.
- Dividends: Cash dividends paid to stockholders totaled IDR 11.6 trillion, while dividends paid to non-controlling interests (primarily Telkomsel) totaled IDR 12.4 trillion.
Outlook, Risks, and Unusual Items
- Segment Performance: The Mobile segment remains the primary revenue driver (IDR 90.1 trillion external revenue). The Enterprise and Wholesale/International segments also contributed significantly to growth.
- Actuarial Losses: Significant actuarial losses of IDR 2.4 trillion were recognized in Other Comprehensive Income (OCI) related to defined benefit pension and post-employment health care plans, driven by changes in financial assumptions (discount rates).
- Tax Contingencies: The Company is involved in ongoing tax disputes and judicial reviews regarding VAT on international incoming call interconnection and corporate income tax assessments. While some appeals have been successful, others remain in process.
- Regulatory Risks: The Company is subject to ongoing investigations by the Commission for the Supervision of Business Competition (KPPU) regarding SMS cartel practices. Penalties totaling IDR 43 billion were paid in 2017 following a Supreme Court decision.
- Subsequent Events: In early 2018, the Group entered into new credit facilities totaling over IDR 3 trillion and acquired additional stakes in fintech and IT infrastructure companies (Cellum Global and Swadharma).
Investor Verification Checklist
- Debt Covenants: Verify compliance with debt-to-equity and debt service coverage ratios required by lenders, particularly given the increase in net debt.
- Pension Obligations: Review the sensitivity of the IDR 10.2 trillion post-employment benefit obligation to changes in discount rates and health care cost trends.
- Tax Litigation: Monitor the status of judicial reviews regarding VAT assessments, which could impact future cash flows and tax provisions.
- Capital Allocation: Assess the return on the increased capital expenditures (IDR 32.3 trillion) regarding network modernization and 4G/5G readiness.
- Non-Controlling Interests: Analyze the financial performance of Telkomsel (65% owned), which accounts for a significant portion of the Group's revenue and profit.