Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia)
Reporting Period: Year ended December 31, 2012 (Comparative figures for 2011 provided).
Filing Type: Form 6-K (Report of Foreign Private Issuer) containing audited consolidated financial statements prepared under Indonesian Financial Accounting Standards (PSAK).
Business Overview: A state-owned public limited liability company providing telecommunication network and services, informatics, and resource optimization. Key subsidiaries include PT Telekomunikasi Selular (Telkomsel), PT Multimedia Nusantara (Metra), and PT Dayamitra Telekomunikasi.
Key Financial Metrics (in billions of Rupiah)
| Metric | 2012 | 2011 |
|---|---|---|
| Revenues | 77,143 | 71,253 |
| Operating Profit | 25,698 | 21,958 |
| Profit Before Tax | 24,228 | 20,857 |
| Profit for the Year | 18,362 | 15,470 |
| Profit Attributable to Owners | 12,850 | 10,965 |
| Net Cash from Operating Activities | 27,941 | 30,553 |
| Net Cash Used in Investing Activities | (11,311) | (14,505) |
| Net Cash Used in Financing Activities | (13,314) | (15,539) |
| Total Assets | 111,369 | 103,054 |
| Total Liabilities | 44,391 | 42,073 |
| Total Equity | 66,978 | 60,981 |
| Cash and Cash Equivalents (Year End) | 13,118 | 9,634 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by 8.3% to Rp77.1 trillion, driven primarily by growth in the Personal segment (mobile cellular) and Data/Internet services.
- Profitability: Operating profit rose 17% to Rp25.7 trillion. Profit for the year increased 18.7% to Rp18.4 trillion.
- Impairment Charges: The company recognized an impairment loss of Rp247 billion on fixed wireless assets in 2012, a significant decrease from Rp563 billion in 2011, attributed to improved cash flow projections and cost efficiency plans.
- Unusual Items:
- Telkom-3 Satellite: The satellite failed to reach orbit in August 2012. The carrying value (Rp1,606 billion) was charged to expenses, but an insurance claim of Rp1,772 billion was recognized as other income, resulting in a net gain.
- Early Retirement Program: An accrual of Rp699 billion was recognized for an early retirement program announced in November 2012.
- Capital Expenditures: Cash used for acquisition of property and equipment decreased to Rp8.2 trillion in 2012 from Rp13.2 trillion in 2011.
Guidance, Outlook, Risks, and Contingencies
- Segment Strategy: Management changed its reporting segments in 2012 from a product-based approach to a customer-centric approach (Personal, Home, Corporate, Others) to provide one-stop solutions.
- Regulatory Risks:
- Tax Disputes: Significant ongoing tax assessments and appeals involving Telkomsel regarding withholding taxes, VAT, and corporate income tax for various fiscal years. Some appeals are pending with the Supreme Court.
- Competition: The fixed wireless segment faces increased competition leading to lower tariffs and declining ARPU, necessitating impairment reviews.
- Legal Contingencies:
- Bankruptcy Petition: A distributor (PT Prima) filed a bankruptcy petition against Telkomsel. The Supreme Court revoked the District Court's acceptance of the petition in November 2012, but the case remains in a Judicial Review process.
- Antitrust: The company is under investigation by the Business Competition Supervisory Commission (KPPU) regarding alleged SMS cartel practices.
- Subsequent Events: In early 2013, Telkomsel was selected to receive an additional 3G license (2.1 GHz bandwidth). Several new subsidiaries were established in January 2013.
Key Facts for Investor Verification
- Dividend Payout: Verify the total cash dividend distribution of Rp7.1 trillion paid in June 2012 for the 2011 fiscal year.
- Debt Structure: Confirm the composition of long-term liabilities, including "Two-step loans" (government re-loans) totaling Rp1.99 trillion and significant bank loans from state-owned banks.
- Related Party Transactions: Review the significant volume of transactions with state-owned enterprises and related parties, which accounted for 4.7% of total revenues and 8.3% of total expenses.
- Accounting Standards: Note that financial statements are prepared under PSAK (Indonesian GAAP). Significant differences exist with IFRS, particularly regarding the treatment of actuarial gains/losses on employee benefits (recognized in OCI under IFRS vs. amortized in P&L under PSAK).
- Fixed Wireless Impairment: Monitor the performance of the fixed wireless Cash Generating Unit (CGU) as future impairment charges depend on the success of management's cost efficiency and profitability plans.