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: May 31, 2007
Business Overview: The Company is a telecommunications service provider domiciled in Bandung, Indonesia. Its shares are listed on the Jakarta and Surabaya Stock Exchanges, as well as in the form of American Depositary Receipts (ADRs) on the New York Stock Exchange.
Reporting Purpose: This filing discloses a proposed plan to conduct a second phase of share repurchase ("Shares Buy Back II") following the conclusion of the first phase ("Shares Buy Back I").
Key Financial Metrics and Capital Structure
Capital Structure (as of May 22, 2007):
- Total Issued and Paid-up Capital: 20,159,999,280 shares (Rp 5,039,999,820,000).
- Treasury Stock: 195,540,500 shares (0.97% of total capital).
- Major Shareholders: Republic of Indonesia (51.19%), Public (31.80%), JPMCB US Resident (8.14%), The Bank of New York (7.90%).
Historical Financial Performance (Year Ended Dec 31, 2006):
- Total Assets: Rp 75,135,745 million (approx. US$ 8,348 million).
- Net Profit: Rp 11,005,577 million (approx. US$ 1,223 million).
- Stockholders' Equity: Rp 28,068,689 million (approx. US$ 3,119 million).
- Basic EPS: Rp 547.15 (US$ 0.06).
- Return on Equity (ROE): 39.21%.
- Return on Assets (ROA): 14.65%.
Shares Buy Back I Status (as of May 29, 2007):
- Shares Repurchased: 202,790,500 shares (1.01% of total capital).
- Average Price: Rp 8,609 per share.
Material Changes and Proposed Transaction
Proposed Shares Buy Back II:
- Objective: To return excess cash to shareholders, improve capital efficiency, and increase EPS, EPADR, and ROE.
- Maximum Scope: Up to 1.58% of issued Series B Shares (maximum 319,488,818 shares).
- Funding Source: Retained earnings, capped at Rp 3,200,000,000,000.
- Duration: Maximum of 18 months following General Meeting of Shareholders (GMS) approval.
- Method: Purchases on Jakarta/Surabaya exchanges, NYSE (ADRs), or off-bourse transactions.
Pro Forma Impact (assuming full execution in 2006):
- Total Assets Reduction: Rp 3,290,133 million.
- Stockholders' Equity Reduction: Rp 3,290,133 million.
- Net Profit Reduction: Rp 90,133 million (due to lost interest income on cash).
- Projected EPS: Rp 547.20 (increase of Rp 0.05).
- Projected ROE: 44.05% (increase of 4.84%).
- Projected ROA: 15.19% (increase of 0.55%).
Guidance, Outlook, and Risks
Management Commentary: Management asserts that the Company generates significant cash flows exceeding growth requirements and maintains low leverage compared to regional peers. The buyback is intended to demonstrate commitment to shareholder value without adversely affecting liquidity or operational activities.
Regulatory Requirements:
- Approval is required from the General Meeting of Shareholders (GMS) scheduled for June 29, 2007.
- Approval requires attendance by shareholders representing at least 2/3 of voting rights and a 2/3 majority vote.
- Repurchases must comply with Bapepam Rule XI.B.2 (Indonesia) and Rule 10b-18 (US).
Risks and Contingencies:
- The program may be terminated by management at any time within the 18-month period.
- Repurchases will not occur if they have a material adverse effect on liquidity or capital.
- Insiders are prohibited from trading on days the Company exercises repurchase rights.
Key Facts for Investor Verification
- GMS Approval: Verify the outcome of the General Meeting of Shareholders scheduled for June 29, 2007, as the buyback is contingent upon this approval.
- Execution Volume: Monitor actual repurchase volumes against the maximum cap of 319,488,818 shares over the 18-month period.
- Share Price Limits: Verify that repurchase prices on the Jakarta Stock Exchange do not exceed the previous trading price, as per regulatory constraints.
- Treasury Stock Usage: Confirm whether repurchased shares are retired or held as treasury stock for potential resale or other corporate purposes.
- Liquidity Impact: Assess whether the reduction in cash reserves (up to Rp 3.2 trillion) impacts the Company's ability to fund future growth or maintain dividend policies.