-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VQQWhMEOUEoTJYit9pzdcrGRZhLhbcpj/mi5p8uWSOLwRX7ON6X0tfcQGjGayZ3T 5SmSP/et+d+8Qo4IvqKqCg== 0001145549-03-000339.txt : 20030331 0001145549-03-000339.hdr.sgml : 20030331 20030331181901 ACCESSION NUMBER: 0001145549-03-000339 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK CENTRAL INDEX KEY: 0001001807 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 999999999 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14406 FILM NUMBER: 03632437 6-K 1 u92118e6vk.txt PT TELEKOMUNIKASI INDONESIA UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13 a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 MARCH FOR THE MONTH OF ___________________________________________ , 2003 -- PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA - -------------------------------------------------------------------------------- (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) JALAN JAPATI NO. 1 BANDUNG-40133 INDONESIA - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) [INDICATE BY CHECK MARK WHETHER THE REGISTRANT FILES OR WILL FILE ANNUAL REPORTS UNDER COVER OF FORM 20-F OR FORM 40-F FORM 20-F [X] FORM 40-F [ ] [INDICATE BY CHECK MARK WHETHER THE REGISTRANT BY FURNISHING THE INFORMATION CONTAINED IN THIS FORM IS ALSO THEREBY FURNISHING THE INFORMATION TO THE COMMISSION PURSUANT TO RULE 12g3-2(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934 YES [ ] NO [X] [IF "YES" IS MARKED, INDICATE BELOW THE FILE NUMBER ASSIGNED TO THE REGISTRANT IN CONNECTION WITH RULE 12g3-2(b): SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA --------------------------------------- (REGISTRANT) ROCHIMAN SUKARNO HEAD OF INVESTOR RELATION MARCH 31TH, 2003 /s/ Rochiman Sukarno DATE_________________________________ BY ____________________________________ (SIGNATURE) Eddy Pianto [GRANT THORNTON LOGO] Registered Public Accountants Jl Sisingamangarajn No. 30 Jakarta Selatan 12120 P.O. Box 4123/JKTM-JKT 12041 Tel: 6221 720 2605 Fax: 6221 720 2606 email: gti@grant-thornton.co.id Report of Independent Auditors Report No. 008/2003 The Stockholders, Board of Commissioners and Directors Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk We have audited the accompanying consolidated balance sheet of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its subsidiaries ("The Company") as of December 31, 2002, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion of these financial statements based on our audit. We did not audit the balance sheets of PT Telekomunikasi Selular (Telkomsel), PT Dayamitra Telekomunikasi (Dayamitra), PT Indonusa Telemedia (Indonusa) and PT Graha Sarana Duta (GSD) as of December 31, 2002, or the related statements of income, changes in equity, and cash flows for the year then ended, which statements reflect total assets constituting 29% of consolidated total assets as of December 31, 2002, and total revenues constituting 38% of consolidated total revenues for the year then ended. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Telkomsel, Dayamitra, Indonusa, and GSD, is based solely on the reports of such other auditors. The consolidated financial statements of the company and its subsidiaries for the year ended December 31, 2001, were audited by other auditors whose reports, dated February 28, 2002, expressed an unqualified opinion on those statements and included explanatory paragraphs concerning a dispute between the Company and an investor in a Joint Operation Scheme and the effects of the economic conditions in Indonesia on the Company and its subsidiaries. We conducted our audit in accordance with auditing standards established by the Indonesian Institute of Accountants and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other independent auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the reports of other independent auditors, the 2002 consolidated financial statements present fairly, in all material respects, the financial positions of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its subsidiaries as of December 31, 2002, and the results of their operations, changes in their equity, and their cash flows for the year then ended in conformity with accounting principles generally accepted in Indonesia. As described in Notes 49 and 53 to the consolidated financial statements, the Company and an Investor in a Joint Operation Scheme (AriaWest) have submitted various claims against each other for resolution in arbitration proceedings under the Rules of the International Chamber of Commerce. On May 8, 2002, the Company and the shareholders of AriaWest entered into a Conditional Sales and Purchase Agreement (CSPA) in connection with the buyout of 100% AriaWest shares. According to the CSPA, both parties have agreed to resolve all disputes with AriaWest on the date the CSPA becomes effective. So far up to the date of this report, the CSPA is not effective yet because some closing conditions have not yet been fulfilled by the shareholders of AriaWest. During the process of the dispute resolution, ICC has agreed to postpone the arbitration process until April 17, 2003. [GRANT THORNTON LOGO] Note 55 to the consolidated financial statements includes a summary of the effects the economic conditions in Indonesia have had on the Company and its subsidiaries, as well as measures the Company and its subsidiaries have implemented or plan to implement in response to the economic conditions. The accompanying consolidated financial statements include the effects of the economic conditions to the extent they can be determined and estimated. Accounting principles generally accepted in Indonesia vary in certain respects with those in the United States of America. A description of the significant differences between the U.S. and Indonesian generally accepted accounting principles and the approximate effects of those differences on the net income for the year ended December 31, 2002 and equity as of December 31, 2002 are set forth in Notes 57 and 58, respectively, to the consolidated financial statements. Our audit procedures also included the translation of Rupiah amounts into the U.S. Dollar currency and, in our opinion, such translation has been made in conformity with the basis stated in Note 3 to the consolidated financial statements. Such U.S. Dollar amounts are presented solely for the convenience of the readers. EDDY PLANTO License No. 98.2.0136 /s/ Eddy Planto Simon Drs. Eddy Planto Simon License No. 98.1.0166 March 25, 2003 NOTICE TO READERS The accompanying consolidated financial statements are intended to present the financial position and results of operations, changes in stockholders' equity and cash flows in accordance with accounting principles and practices generally accepted in Indonesia and not that of any other jurisdiction. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in Indonesia. PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollar) - --------------------------------------------------------------------------------
2001 2002 ---------- -------------------------- Notes Rp Rp US$ (Notes 3) --------- ---------- ---------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents 2e,6,47 3,644,213 5,699,070 639,411 Temporary investments 2f,7,47 348,915 1,073,000 120,386 Trade accounts receivable 2g,8,9,47 Related parties - net of allowance for doubtful accounts of Rp325,930 million in 2001 and Rp576,374 million in 2002 1,037,154 1,308,102 146,763 Third parties - net of allowance for doubtful accounts of Rp252,855 million in 2001 and Rp397,810 million in 2002 1,415,686 1,890,679 212,126 Other accounts receivable - net of allowance for doubtful accounts of Rp26,964 million in 2001 and Rp20,326 million in 2002 2g,47 196,664 285,920 32,079 Inventories - net of allowance for obsolescence of Rp48,997 million in 2001 and Rp53,795 million in 2002 2h,10 191,092 139,682 15,672 Prepaid expenses 2i 335,720 353,656 39,680 Prepaid taxes 11 -- 84,674 9,500 Other current assets 12 139,075 145,761 16,353 ---------- ---------- ---------- Total Current Assets 7,308,519 10,980,544 1,231,970 ---------- ---------- ---------- NONCURRENT ASSETS Long-term investments - net 2f,13 191,382 183,147 20,548 Property, plant and equipment - net of accumulated depreciation of Rp15,929,614 million in 2001 and Rp19,718,913 million in 2002 2j,2k,14 22,288,766 27,645,780 3,101,737 Property, plant and equipment under revenue-sharing arrangements - net of accumulated depreciation of Rp840,918 million in 2001 and Rp840,949 million in 2002 2l,15,50 452,733 379,637 42,594 Advances and other noncurrent assets 2n,7,47 694,879 528,568 59,303 Intangible assets 1b,2c,5,16 1,356,144 2,052,126 230,240 Advance payment for investment in shares of stock 5,49 -- 247,548 27,773 Escrow accounts 5,17,49 171,080 297,928 33,426 Property not used in operations 6,777 6,889 772 ---------- ---------- ---------- Total Noncurrent Assets 25,161,761 31,341,623 3,516,393 ---------- ---------- ---------- TOTAL ASSETS 32,470,280 42,322,167 4,748,363 ========== ========== ==========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 1 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) DECEMBER 31, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollar) - --------------------------------------------------------------------------------
2001 2002 ---------- ----------------------------- Notes Rp Rp US$ (Notes 3) --------- ---------- ---------- ------------- LIABILITIES AND EQUITY CURRENT LIABILITIES Trade accounts payable 18,47 Related parties 721,009 1,032,942 115,892 Third parties 1,056,644 2,356,284 264,365 Other accounts payable 47 49,392 58,708 6,588 Taxes payable 2r,19 1,875,023 1,212,575 136,046 Dividends payable 1,411 1,494 168 Accrued expenses 4,20,47 1,437,575 2,510,402 281,656 Unearned income 2o 271,928 498,801 55,963 Advances from customers and suppliers 21,49 213,432 1,132,319 127,041 Short-term bank loan 22 500,000 39,205 4,399 Current maturities of long-term liabilities 2k,5,23,24 25,26,27,29,47 1,542,600 2,012,251 225,765 Liability for cross-ownership transactions 4 2,406,309 -- -- ----------- ----------- ----------- Total Current Liabilities 10,075,323 10,854,981 1,217,883 ----------- ----------- ----------- NONCURRENT LIABILITIES Deferred tax liabilities - net 2r,42 1,767,759 1,521,209 170,673 Unearned income on revenue-sharing arrangements 2l,15,38,50 225,714 165,978 18,622 Unearned initial investor payments under joint operation scheme 2m,35,47 111,834 66,117 7,418 Long-term liabilities - net of current maturities Two-step loans - related party 24,47 8,637,340 7,694,445 863,284 Suppliers' credit loans 5,17,25 395,020 175,625 19,704 Bridging loan 5,17,26 111,401 53,405 5,992 Project cost payable 242,809 15,513 1,740 Bond payable and guaranteed notes 28 -- 2,337,518 262,259 Bank loan 29 73,150 85,355 9,576 Other long-term debt 2k 10,181 9,275 1,041 Liability for acquisition of a subsidiary 5,17,27 260,840 -- -- ----------- ----------- ----------- Total Noncurrent Liabilities 11,836,048 12,124,440 1,360,309 ----------- ----------- ----------- MINORITY INTEREST IN NET ASSETS OF SUBSIDIARIES 30 1,235,334 3,443,563 386,353 ----------- ----------- ----------- EQUITY Capital stock - Rp500 par value per Series A Dwiwarna share and Series B share Authorized - one Series A Dwiwarna share and 39,999,999,999 Series B shares Issued and fully paid - one Series A Dwiwarna share and 10,079,999,639 Series B shares 31 5,040,000 5,040,000 565,466 Additional paid-in capital 32 1,073,333 1,073,333 120,423 Difference in value of restructuring transactions between entities under common control 2c,4 (7,402,343) (7,032,455) (789,011) Difference due to change of equity in associated companies 2f,13 342,425 342,425 38,419 Translation adjustment 2d,13 179,672 164,966 18,508 Unrealized loss on decline in value of securities 2f,7 (207) -- -- Retained earnings Appropriated 44 320,392 745,403 83,630 Unappropriated 9,770,303 15,565,511 1,746,383 ----------- ----------- ----------- Total Equity 9,323,575 15,899,183 1,783,818 ----------- ----------- ----------- TOTAL LIABILITIES AND EQUITY 32,470,280 42,322,167 4,748,363 =========== =========== ===========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 2 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollar, except share and ADS data) - --------------------------------------------------------------------------------
2000 2001 2002 ----------- ----------- --------------------------- Notes Rp Rp Rp US$ (Notes 3) --------- ----------- ----------- ----------- ------------- OPERATING REVENUES Telephone 2o,33 Fixed lines 5,177,864 6,415,156 8,327,378 934,296 Cellular 2,890,002 4,707,998 6,226,801 698,620 Interconnection 2o,34,47 980,985 1,387,363 3,025,906 339,494 Joint operation scheme 2m,2o,35,47 2,267,154 2,219,586 1,637,809 183,755 Data and internet 36 107,934 673,184 1,571,470 176,312 Network 37 340,034 414,929 326,412 36,622 Revenue-sharing arrangements 38 308,365 265,173 280,158 31,433 Other telecommunications services 2l,2o 39,658 47,400 3,803 427 ----------- ----------- ----------- ----------- Total Operating Revenues 12,111,996 16,130,789 21,399,737 2,400,959 ----------- ----------- ----------- ----------- OPERATING EXPENSES Personnel 39 1,610,196 2,028,812 4,124,064 462,702 Depreciation 2j,2k,2l,14 2,419,069 2,828,603 3,504,201 393,156 Operation, maintenance and telecommunication services 40 1,385,735 2,149,921 2,432,176 272,880 General and administrative 41 871,683 1,287,747 1,557,789 174,777 Marketing 147,160 220,006 379,823 42,614 ----------- ----------- ----------- ----------- Total Operating Expenses 6,433,843 8,515,089 11,998,053 1,346,129 ----------- ----------- ----------- ----------- OPERATING INCOME 5,678,153 7,615,700 9,401,684 1,054,830 ----------- ----------- ----------- ----------- OTHER INCOME (CHARGES) Gain on sales of long term investment 2f -- -- 3,196,380 358,620 Interest income 2e,2f,47 691,962 571,587 485,356 54,455 Interest expense 47 (816,749) (1,329,642) (1,534,568) (172,172) Gain (loss) on exchange rate differences - net 2d,54 (944,077) (378,720) 516,699 57,971 Equity in net income (loss) of associated companies 2f,47 (232,044) (85,686) 62,167 6,975 Others - net 411,955 294,050 214,856 24,106 ----------- ----------- ----------- ----------- Other income (charges) - net (888,953) (928,411) 2,940,890 329,955 ----------- ----------- ----------- ----------- INCOME BEFORE TAX 4,789,200 6,687,289 12,342,574 1,384,785 TAX EXPENSE Current tax 2r,42 (1,228,199) (2,174,401) (2,838,573) (318,476) Deferred tax 2r,42 (238,068) 103,747 92,716 10,402 ----------- ----------- ----------- ----------- (1,466,267) (2,070,654) (2,745,857) (308,074) INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES AND PRE ACQUISITION (INCOME) LOSS 3,322,933 4,616,635 9,596,717 1,076,711 PRE ACQUISITION (INCOME) LOSS OF SUBSIDIARIES -- 108,080 (142,817) (16,023) MINORITY INTEREST IN NET INCOME OF SUBSIDIARIES 30 (312,930) (474,605) (1,108,626) (124,383) ----------- ----------- ----------- ----------- NET INCOME 3,010,003 4,250,110 8,345,274 936,305 =========== =========== =========== =========== BASIC EARNINGS PER SHARES 2s,43,44 Net income per share 298.61 421.64 827.90 0.09 =========== =========== =========== =========== Net income per ADS (20 Series B shares per ADS) 5,972.23 8,432.76 16,558.08 1.86 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 3 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued) FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah) - --------------------------------------------------------------------------------
Difference due to Unrealized loss Additional change of equity on decline in Capital paid-in in associated value of stock capital companies securities ------- ---------- ----------------- -------------- Description Rp Rp Rp Rp --------------- ------- ---------- ----------------- -------------- Balance as of January 1, 2000 5,040,000 1,073,333 430,722 (159) Equity resulting from restatement -- -- -- -- Difference due to change of equity in Telkomsel and PSN - net of deferred tax effect of Rp1,853 million -- -- (4,325) -- Unrealized loss on decline in value of securities -- -- -- (6) Increase in investment in CSM and PSN resulted from currency translation adjusment from US Dollar to Rupiah - net of deferred tax effect of Rp6,349 million -- -- -- -- Resolved during the Annual General Meeting of the Stockholders on April 7, 2000: Declaration of cash dividend -- -- -- -- Appropriation for general reserve -- -- -- -- Net income for the year - as restated -- -- -- -- --------- --------- ------- ---- Balance as of December 31, 2000 5,040,000 1,073,333 426,397 (165) ========= ========= ======= ====
Equity resulting Retained earnings Translation from ---------------------------- Total adjustment restatement Appropriated Unappropriated equity ----------- ----------- ------------ -------------- ---------- Description Rp Rp Rp Rp Rp --------------- ----------- ----------- ------------ -------------- ---------- Balance as of January 1, 2000 162,299 791,302 171,719 5,346,395 13,015,611 Equity resulting from restatement -- 430,231 -- (470,992) (40,761) Difference due to change of equity in Telkomsel and PSN - net of deferred tax effect of Rp1,853 million -- -- -- -- (4,325) Unrealized loss on decline in value of securities -- -- -- -- (6) Increase in investment in CSM and PSN resulted from currency translation adjusment from US Dollar to Rupiah - net of deferred tax effect of Rp6,349 million 14,815 -- -- -- 14,815 Resolved during the Annual General Meeting of the Stockholders on April 7, 2000: Declaration of cash dividend -- -- -- (1,086,161) (1,086,161) Appropriation for general reserve -- -- 21,723 (21,723) -- Net income for the year - as restated -- -- -- 3,010,003 3,010,003 ------- --------- ------- --------- ---------- Balance as of December 31, 2000 177,114 1,221,533 193,442 6,777,522 14,909,176 ======= ========= ======= ========= ==========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 4 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued) FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah) - --------------------------------------------------------------------------------
Difference in value of restructuring Difference due to Additional transactions between change of equity Capital paid-in entities under in associated stock capital common control companies ----------- ---------- -------------------- ----------------- Description Rp Rp Rp Rp ----------- ----------- ---------- -------------------- ----------------- Balance as of January 1, 2001 5,040,000 1,073,333 -- 426,397 Difference in value of restructuring transactions between entities under common control -- -- (7,402,343) -- Reversal of difference due to change of equity in Satelindo - net of deferred tax effect of Rp87,133 million -- -- -- (203,309) Difference due to change of equity in Telkomsel - net of deferred tax effect of Rp51,144 million -- -- -- 119,337 Unrealized loss on decline in value of securities -- -- -- -- Foreign currency translation of CSM - net of deferred tax effect of Rp1,096 million -- -- -- -- Resolved during the Annual General Meeting of the Stockholders on May 10, 2001 Declaration of cash dividend -- -- -- -- Appropriation for general reserve -- -- -- -- Net Income for the year -- -- -- -- ----------- ----------- ----------- ----------- Balance as of December 31, 2001 5,040,000 1,073,333 (7,402,343) 342,425 =========== =========== =========== ===========
Unrealized loss Equity on decline in resulting value of Translation from securities adjustment restatement ---------------- ----------- ----------- Description Rp Rp Rp ----------- ---------------- ----------- ----------- Balance as of January 1, 2001 (165) 177,114 1,221,533 Difference in value of restructuring transactions between entities under common control -- -- (1,221,533) Reversal of difference due to change of equity in Satelindo - net of deferred tax effect of Rp87,133 million -- -- -- Difference due to change of equity in Telkomsel - net of deferred tax effect of Rp51,144 million -- -- -- Unrealized loss on decline in value of securities (42) -- -- Foreign currency translation of CSM - net of deferred tax effect of Rp1,096 million -- 2,558 -- Resolved during the Annual General Meeting of the Stockholders on May 10, 2001 Declaration of cash dividend -- -- -- Appropriation for general reserve -- -- -- Net Income for the year -- -- -- --------- ----------- ----------- Balance as of December 31, 2001 (207) 179,672 -- ========= =========== ===========
Retained earnings ------------------------------ Total Appropriated Unappropriated equity ------------ -------------- ------ Description Rp Rp Rp ----------- ------------ -------------- ------ Balance as of January 1, 2001 193,442 6,777,522 14,909,176 Difference in value of restructuring transactions between entities under common control -- (241,725) (8,865,601) Reversal of difference due to change of equity in Satelindo - net of deferred tax effect of Rp87,133 million -- -- (203,309) Difference due to change of equity in Telkomsel - net of deferred tax effect of Rp51,144 million -- -- 119,337 Unrealized loss on decline in value of securities -- -- (42) Foreign currency translation of CSM - net of deferred tax effect of Rp1,096 million -- -- 2,558 Resolved during the Annual General Meeting of the Stockholders on May 10, 2001 Declaration of cash dividend -- (888,654) (888,654) Appropriation for general reserve 126,950 (126,950) -- Net Income for the year -- 4,250,110 4,250,110 ----------- ----------- ----------- Balance as of December 31, 2001 320,392 9,770,303 9,323,575 =========== =========== ===========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 5 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah) - --------------------------------------------------------------------------------
Difference in value of restructuring Additional transactions between Capital paid-in entities under stock capital common control --------- ---------- -------------------- Description Notes Rp Rp Rp ----------- --------- --------- --------- -------------------- Balance as of January 1, 2002 5,040,000 1,073,333 (7,402,343) Decline of investment in CSM as a result of foreign currency translation of CSM - net of deferred tax effect of Rp6,303 million 2d,13 -- -- -- Sales of mutual fund - Seruni 7 -- -- -- Reversal of deferred tax liability on restructuring transactions between entities under common control 4 -- -- 369,888 Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: Declaration of cash dividend 44 -- -- -- Appropriation for general reserve 44 -- -- -- Net Income for the year -- -- -- --------- --------- ---------- Balance as of December 31, 2002 5,040,000 1,073,333 (7,032,455) ========= ========= ==========
Difference due to Unrealized loss change of equity on decline in in associated value of Translation companies securities adjustment ----------------- ---------------- ----------- Description Rp Rp Rp ----------- ----------------- ---------------- ----------- Balance as of January 1, 2002 342,425 (207) 179,672 Decline of investment in CSM as a result of foreign currency translation of CSM - net of deferred tax effect of Rp6,303 million -- -- (14,706) Sales of mutual fund - Seruni -- 207 -- Reversal of deferred tax liability on restructuring transactions between entities under common control -- -- -- Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: Declaration of cash dividend -- -- -- Appropriation for general reserve -- -- -- Net Income for the year -- -- -- ------- ------- ------- Balance as of December 31, 2002 342,425 -- 164,966 ======= ======= =======
Retained earnings ------------------------------- Total Appropriated Unappropriated equity ------------ -------------- ------ Description Rp Rp Rp ----------- ------------ -------------- ----- Balance as of January 1, 2002 320,392 9,770,303 9,323,575 Decline of investment in CSM as a result of foreign currency translation of CSM - net of deferred tax effect of Rp6,303 million -- -- (14,706) Sales of mutual fund - Seruni -- -- 207 Reversal of deferred tax liability on restructuring transactions between entities under common control -- -- 369,888 Resolved during the Annual General Meeting of the Stockholders on June 21, 2002: Declaration of cash dividend -- (2,125,055) (2,125,055) Appropriation for general reserve 425,011 (425,011) -- Net Income for the year -- 8,345,274 8,345,274 --------- ---------- ---------- Balance as of December 31, 2002 745,403 15,565,511 15,899,183 ========= ========== ==========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 6 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollar) - --------------------------------------------------------------------------------
2000 2001 2002 ----------- ----------- ---------------------------- Rp Rp Rp US$ (Notes 3) ----------- ----------- ----------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Cash receipt from operating revenues Telephone and interconnection - net Fixed line 4,883,551 6,310,052 9,784,115 1,097,735 Cellular 2,832,332 5,237,087 8,130,370 912,192 Joint Operation Scheme 1,950,693 1,717,154 746,748 83,782 Interconnection - net 1,252,742 1,127,545 1,753,270 196,709 Other services 771,480 697,348 620,416 69,608 ----------- ----------- ----------- ----------- Total cash receipt from operating revenues 11,690,798 15,089,186 21,034,919 2,360,026 Cash payments for operating expenses (3,149,770) (5,321,836) (7,933,104) (890,060) ----------- ----------- ----------- ----------- Cash generated from operations 8,541,028 9,767,350 13,101,815 1,469,966 ----------- ----------- ----------- ----------- Interest received 725,489 590,966 565,876 63,489 Income tax payments (1,642,818) (2,098,272) (3,394,955) (380,899) Interest paid (856,961) (1,256,404) (921,448) (103,382) Cash receipt of advance from KSO III -- -- 830,431 93,171 Cash receipt from customer and advances 109,021 8,949 278,587 31,256 ----------- ----------- ----------- ----------- Net Cash Provided by Operating Activities 6,875,759 7,012,589 10,460,306 1,173,601 ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from investments and maturity of time deposits 5,118,034 7,892,554 1,497,883 168,056 Proceeds from sale of property, plant and equipment 5,950 10,944 204,008 22,889 Payment for cross ownership transactions -- (6,243,279) (2,609,145) (292,735) Puchases of marketable securities and placements in time deposits (7,682,827) (4,370,479) (2,279,362) (255,735) Sale of ownership in Telkomsel -- -- 3,948,945 443,055 Acquisitions of property, plant and equipment (2,366,450) (3,591,449) (5,057,610) (567,442) Decrease in advances and others 137,721 263,881 57,485 6,450 Payment of advance for invesment in shares of stock -- -- (272,548) (30,579) Acquisitions of long-term investment (14,000) (1,400) (749,184) (84,055) ----------- ----------- ----------- ----------- Net Cash Used in Investing Activities (4,801,572) (6,039,228) (5,259,528) (590,096) ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Security deposit -- -- (16,092) (1,806) Proceeds from bonds -- -- 2,365,314 265,378 Repayment of long term liabilities (894,998) (1,231,322) (2,753,533) (308,934) Cash dividends paid (1,218,009) (1,023,355) (2,443,749) (274,178) Net distributed to social institution -- (1,721) (615) (69) Decrease (increase) in escrow account 3,034 (171,077) (297,246) (33,350) Decrease in other non current assets -- 264,664 -- -- Receipts from Bank Loan -- 500,000 -- -- ----------- ----------- ----------- ----------- Net Cash Used in Financing Activities (2,109,973) (1,662,811) (3,145,921) (352,959) ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (35,786) (689,450) 2,054,857 230,546 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,369,449 4,333,663 3,644,213 408,865 ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR 4,333,663 3,644,213 5,699,070 639,411 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 7 PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollar) - --------------------------------------------------------------------------------
2000 2001 2002 ----------- ----------- ---------------------------- Rp Rp Rp US$ (Notes 3) ----------- ----------- ----------- ------------- SUPPLEMENTAL CASH FLOWS INFORMATION Acquisition of subsidiaries: Acquisition cost -- 12,430,716 1,075,295 120,643 Cash payment -- 6,425,057 288,799 32,402 Bank balance and cash acquired -- (181,778) -- -- ----------- ----------- ----------- ----------- Cash outflow for acquisition of subsidiaries -- 6,243,279 288,799 32,402 ----------- ----------- ----------- ----------- Noncash investing and financing activities: Increase in property under construction through the incurrence of long-term debt 580,584 60,341 190,080 21,326 Increase in property and equipment through lease liabilities -- 2,483 -- -- Capitalization of borrowing costs during construction: Gain (loss) on foreign exchange net 179,207 1,746 (27,568) (3,093) Interest 62,534 8,089 9,528 1,069 Conversion of receivable to long-term investment -- 92,750 -- -- Changes from equity transactions of associated companies affecting the following accounts: Long-term investments 14,986 174,135 -- -- Foreign currency translation adjustment of CSM's financial statements 14,815 2,558 14,706 1,650 Deferred tax liability 4,496 52,240 -- -- Difference due to change of equity in associated companies (4,325) 119,337 -- -- Decrease in property, plant and equipment and unearned income under revenue-sharing arrangement -- -- (73,065) (8,198)
See accompanying notes to consolidated financial statements which are an integral part of the consolidated financial statements 8 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL a. Establishment and General Information Perusahaan (Persero) P.T. Telekomunikasi Indonesia Tbk (the "Company") was originally a part of "Post en Telegraafdienst", which was established in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies and published in State Gazette of the Dutch Indies No. 52 dated April 3, 1884. In 1991, based on Government Regulation No. 25 year 1991, the status of the Company was changed into a state-owned limited liability corporation ("Persero"). The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H. The deed of establishment was approved by the Minister of Justice of the Republic of Indonesia in his decision letter No. C2-6870.HT.01.01.Th.1991 dated November 19, 1991, and was published in State Gazette of the Republic of Indonesia No. 210 dated January 17, 1992, Supplement No. 5. The Articles of Association have been amended several times, the most recent amendment was made through Deed No. 4 dated January 10, 2002, of Notary A. Partomuan Pohan, S.H., LL.M., concerning the change in the Company's objective, scope of activities, directors' scope of authorities and the composition of the Company's board of commissioners. The notarial deed was approved by the Minister of Justice and Human Rights of the Republic of Indonesia in his decision letter No. C-00682HT.01.04.Th.2002 dated January 15, 2002. The Company's principal business is the provision of domestic telecommunication services, including telephone, telex, telegram, satellite, leased lines, electronic mail, mobile communication and cellular services. In order to accelerate the construction of telecommunication facilities, to make the Company a world-class operator, and to increase the technology as well as the knowledge and skills of its employees, the Company has entered into agreements with investors to develop, manage and operate telecommunication facilities under Joint Operation Schemes (known as "Kerja Sama Operasi" or "KSO") (see Note 49). Under Law No. 3/1989 on Telecommunication which took effect on April 1, 1989, Indonesian legal entities are allowed to provide basic telecommunication services in cooperation with the Company as the domestic telecommunication organizing body (or "badan penyelenggara"). Other Indonesian legal entities are also allowed to individually provide non-basic telecommunication services. In providing telecommunication services, these entities are required to obtain licenses from the Minister of Communications of the Republic of Indonesia (the Ministry of Communications assumed responsibility for the telecommunication sector from the now defunct Ministry of Tourism, Post and Telecommunication in March 1998). Government Regulation No. 8/1993 concerning the provision of telecommunication services, further provides that cooperation which provides basic telecommunication services can be in the form of joint venture, joint operation or contract management and that the entities cooperating with the domestic telecommunication organizing body must use the organizing body's telecommunication networks. If the telecommunication networks are not available, the Government Regulation requires that the cooperation be in the form of a joint venture that is capable of constructing the necessary networks. 9 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) a. Establishment and General Information (continued) The Minister of Tourism, Post and Telecommunication of the Republic of Indonesia ("MTPT"), through his two decision letters both dated August 14, 1995, reaffirmed the status of the Company as the organizing body for the provision of domestic telecommunication services. Further, effective from January 1, 1996, the Company was granted the exclusive right to provide local wireline and fixed wireless services for a minimum period of 15 years and the exclusive right to provide domestic long-distance telecommunication services for a minimum period of 10 years. The exclusive rights also apply to telecommunication services provided for and on behalf of the Company through a KSO. This grant of rights does not affect the Company's right to provide other domestic telecommunication services. On September 8, 1999, the Government issued Law No. 36/1999 on Telecommunication to replace Law No. 3/1989. Under the new Law, which took effect from September 2000, telecommunication activities cover: i. Telecommunication networks ii. Telecommunication services iii. Special telecommunication National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunication networks and services. Special telecommunication can be provided by individuals, government agencies and legal entities other than telecommunication networks and service providers. Under Law No. 5/1999, activities that result in monopolistic practices and unhealthy competition are prohibited. In connection with this law, Government Regulation No. 52/2000 was issued, which provides that interconnection fees shall be charged to originating telecommunication network operators where telecommunication service is provided by two or more telecommunication network operators. Based on press release No. 05/HMS/JP/VIII/2000 dated August 1, 2002 from the Director General of Post and Telecommunication and the correction thereto No. 1718/UM/VII/2000 dated August 2, 2000, the period of exclusive rights granted to the Company to provide local wireline and fixed wireless services was shortened to expire on August 2002 and August 2003 for domestic long-distance telecommunication services. In return, new operators are required to pay compensation to the Company, the amount of which is to be estimated by an independent appraiser. It is expected that as part of the compensation given to the Company, they will be granted a permit to provide international telecommunication services effective from August 2003. Based on the press release from the Coordinating Minister of Economics dated July 31, 2002, Government decided to terminate Telkom's exclusive rights as network provider for local and long-distance since August 1, 2002. On August 1, 2002, PT Indonesian Satellite Corporation Tbk ("Indosat") was granted a license to provide local and long-distance telecommunication services. The Company's head office is located in Jalan Japati No. 1, Bandung, West Java. In 1996, five of the Company's seven regional divisions started to operate as separate units (known as "KSO Units") under Joint Operation Schemes. 10 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) a. Establishment and General Information (continued) According to Article 3 of its Articles of Association, the scope of the Company's activities is as follows: 1. The Company's objective is to provide telecommunication and information facilities and services, in accordance with prevailing regulations. 2. To achieve the above objective, the Company is involved in the following activities: i. Planning, building, providing, developing, operating, marketing or selling, leasing and maintaining telecommunication and information networks in accordance with prevailing regulations. ii. Planning, developing, providing, marketing or selling and improving telecommunication and information services in accordance with prevailing regulations. iii. Performing activities and other undertakings in connection with the utilization and development of the Company's resources and optimizing the utilization of the Company's property, plant and equipment, information systems, education and training, and repairs and maintenance facilities. As of December 31, 2001 and 2002, the Company had 37.422 employees and 34.678 employees, respectively, including those in the KSO Units. Based on the resolution of Annual Stockholders' General Meeting, the minutes of which have been notarized by Deed No. 17 dated May 10, 2001 of A. Partomuan Pohan, S.H., LL.M., the composition of the Company's Board of Commissioners from 2001 to 2004 is as follows: President Commissioner : Bacelius Ruru Commissioners : Noor Fuad : Purnomo Sidhi : Andi Siswaka Faisal : Rahardjo Tjakraningrat Based on the resolution of the Stockholders' Extraordinary General Meeting, the minutes of which have been notarized by deed No. 6 dated April 7, 2000 of the same notary, the composition of the Board of Directors from 2000 to 2005 is as follows: President Director : Muhammad Nazif Directors : Mursyid Amal : Taufik Akbar : Komaruddin Sastrakoesoemah : Kristiono Based on the resolution of the Stockholders' Extraordinary General Meeting, the minutes of which have been notarized by Deed No. 37 dated June 21, 2002 of A. Partomuan Pohan, S.H., LL.M., the composition of the Company's board of commissioners from 2002 to 2004 is as follows: President Commissioner : Bacelius Ruru Commissioner : Agus Haryanto Commissioner : Djamhari Sirat Independent Commissioner : Arif Arryman Independent Commissioner : Petrus Sartono 11 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) a. Establishment and General Information (continued) Based on the resolution of the Stockholders' Extraordinary General Meeting, the minutes of which have been notarized by Deed No. 37 dated June 21, 2002 of the same notary, the composition of the Board of Directors from 2002 to 2005 is as follows: Chief Executive Officer : Kristiono Chief Financial Officer : Guntur Siregar Director for Telecommunication Services : Garuda Sugardo Chief Information Officer : Agus Utoyo Director for Telecommunication Network : Suryatin Setiawan b. Consolidated Subsidiaries The Company consolidates the following subsidiaries as a result of majority ownership or its right to control operations.
Percentage of Total Ownership Start of Assets at ---------------- Commercial December 31 Subsidiaries Domicile Nature of Business 2001 2002 Operations 2002 ------------ -------- ------------------ ---- ---- ---------- ------------ % % Rp PT Infomedia Nusantara Jakarta Data and information 51.00 51.00 1995 260,437 services PT Indonusa Telemedia Jakarta Multimedia 57.50 57.50 1995 49,787 PT Telekomunikasi Selular Jakarta Telecommunications 77.72 65.00 1995 10,939,421 PT Dayamitra Telekomunikasi Balikpapan Telecommunications 90.32 90.32 1995 854,007 PT Graha Sarana Duta Jakarta Real estate, construction 99.99 99.99 1982 47,368 and sevices PT Pramindo Ikat Nusantara Medan Telecommunications -- 30.00 1995 1,911,183 construction & services
The Company has an indirect investment through its subsidiary in the following company:
Percentage of Ownership ------------- Start of Nature of Commercial Name of Company Owner Domicile Business 2001 2002 Operations --------------- ----- -------- --------- ---- ----- ---------- % % Telekomunikasi Selular PT Telekomunikasi Mauritius Fund Raising -- 100 2002 Finance Limited Selular
PT Infomedia Nusantara ("Infomedia") Infomedia is engaged in providing telecommunication information services and other information services in the form of print and electronic media. In 2002, Infomedia established a new line of business to provide call center services. 12 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) b. Consolidated Subsidiaries (continued) PT Indonusa Telemedia ("Indonusa") Indonusa is engaged in providing multimedia telecommunication services. The Company has increased its investment in Indonusa from 35% in 2000 to 57.5% in 2001, by acquiring 2,800,000 new shares for Rp28,000 million. This acquisition resulted in goodwill of Rp654 million. PT Telekomunikasi Selular ("Telkomsel") Telkomsel is engaged in providing telecommunication facilities and mobile cellular services using Global System for Mobile Communication ("GSM") technology on a nationwide basis. Until December 31, 2000, the investment in Telkomsel was accounted for using the equity method. The Company's cross-ownership transaction with Indosat in 2001 has increased the Company's ownership interest in Telkomsel to 77.72%. The accounting treatment of the cross-ownership transaction is discussed further in Notes 4. On April 3, 2002, the Company entered into a Conditional Sale and Purchase Agreement ("CSPA") with Singapore Telkom Mobile Pte. Ltd. ("Singtel'). The CSPA covers the sale portion of the Company's shares in Telkomsel. The Company sold 23,223 ordinary registered shares of the capital of Telkomsel, numbering from 107,278 up to and including number 130,500 with a par value of Rp1,000,000 for each share representing 12.72% from Telkomsel. This transaction diluted Company's ownership in Telkomsel from 77.72% to 65%. The sale of the share closed on July 30, 2002 and resulted in a gain of Rp3,196,380 million for book purposes and Rp30,295 million for tax purposes. The difference resulted from the accounting for the acquisition of Telkomsel at its carryover basis because of the common control transaction. PT Dayamitra Telekomunikasi ("Dayamitra") Dayamitra is the investor in KSO VI, the joint operation scheme that provides telecommunication services in Kalimantan. The Company's acquisition of a 90.32% ownership interest in Dayamitra was effective on May 17, 2001, the date when the Deed of Share Transfer was signed. Details of this acquisition are discussed further in Note 5. PT Graha Sarana Duta ("GSD") GSD is engaged in providing construction, sales and leasing of offices, housing and hotels, with their related facilities. The Company acquired a 100% ownership interest in GSD from Koperasi Mitra Duta (Dalam Penyelesaian) and Dana Pensiun Bank Duta (Dalam Penyelesaian), for a purchase consideration of Rp119,000 million, based on the Sale and Purchase Agreement Deed No. 7 dated April 6, 2001 of Notary Imas Fatimah, S.H. This acquisition resulted in goodwill of Rp106,348 million. Based on the Share Sale and Purchase Agreement dated November 28, 2001, the Company sold one share to a related party for Rp9.5 million thereby reducing the Company's ownership interest to 99.99%. 13 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) b. Consolidated Subsidiaries (continued) PT Pramindo Ikat Nusantara ("Pramindo") Pramindo is the investor in KSO I, the joint operating scheme that provides telecommunication services in Sumatra. On August 15, 2002, the Company entered into a CSPA to acquire Pramindo through three installment purchase as follows:
Date Percentage ---- ---------- August 15, 2002 30% September 30, 2003 15% December 31, 2004 55%
Effective with the closing of the first installment, the Company was granted unilateral control over the operations of Pramindo and KSO Unit I. As a result, the Company has consolidated Pramindo as of January 1, 2002, with pre-acquisition net income deducted from consolidated income in the accompanying financial statements (see Note 2.6) Details of this acquisition are discussed further in Note 5. Telekomunikasi Selular Finance Limited ("TSFL") Telkomsel has 100% direct ownership interest in TSFL, a company which was established in Mauritius on April 22, 2002. TSFL's objective is to raise funds for the development of Telkomsel's business through the issuance of debenture stock, bonds, mortgages or any other securities. c. Public Offering of Shares of the Company The Company's total number of shares immediately prior to its initial public offering was 8,400,000,000, comprised of 8,399,999,999 series B shares and 1 series A Dwiwarna share, all of which were owned by the Government of the Republic of Indonesia. On November 14, 1995, the Government sold the Company's shares through an initial public offering in the Jakarta Stock Exchange and Surabaya Stock Exchange. The shares offered consisted of 933,333,000 new series B shares and 233,334,000 series B shares owned by the Government of the Republic of Indonesia. A share offering was also conducted in the New York Stock Exchange and London Stock Exchange for 700,000,000 series B shares owned by the Government of the Republic of Indonesia, which were converted into 35,000,000 American Depositary Shares (ADS). Each ADS represents 20 series B shares. In December 1996, the Government of the Republic of Indonesia sold 388,000,000 series B shares, and later in 1997, the Government distributed 2,670,300 series B shares as an incentive for the stockholders not to sell their shares within one year from the date of the initial public offering. In May 1999, the Government sold 898,000,000 series B shares. Under Law No.1/1995 on Limited Liability Companies, the minimum total par value of the Company's issued shares of capital stock should be 25% of the total par value of the Company's authorized capital stock, or in the Company's case Rp5,000,000 million. To comply with the Law, it was resolved at the Annual Stockholders' General Meeting on April 16, 1999 to increase the issued shares of capital stock. The share dividend were distributed to existing shareholders in August 1999. 14 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 1. GENERAL (continued) c. Public Offering of Shares of the Company (continued) In December 2001, the Government of the Republic of Indonesia sold 1,200,000,000 shares or 11.9% of the series B shares. In July 2002, the Government of the Republic of Indonesia sold of 312,000,000 shares or 3.1% of the series B shares. As of December 31, 2002, all of the Company's series B shares have been listed on the Jakarta Stock Exchange and Surabaya Stock Exchange and 39,717,017 ADS shares have been listed on the New York Stock Exchange and London Stock Exchange. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidated Financial Statement Presentation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Indonesia ("Indonesian GAAP"), which differ in certain respects with generally accepted accounting principles in the United States of America ("U.S. GAAP"). A description of significant differences and their approximate effects on net income and equity are set forth in Note 57 and 58. The consolidated financial statements also include certain additional disclosures in order to conform more closely to the form and content of financial statements required by the Securities and Exchange Commission of the United States of America (the "U.S. SEC") (see Note 59). The consolidated financial statements, except for statements of cash flows, are prepared under the accrual basis of accounting. The measurement basis used is historical cost, except for certain accounts recorded on the basis described in the related accounting policies. The consolidated statements of cash flows are prepared using the direct method with classifications of cash flows into operating, investing and financing activities. The reporting currency used in the preparation of the consolidated financial statements is the Indonesian Rupiah ("Rp"). b. Principles of Consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries. The Company consolidates subsidiaries over which it has control. The usual criterion for control is an ownership interest of more than 50%. The Company does not consolidate a subsidiary if control is expected to be temporary. Subsidiaries acquired that are accounted for using the purchase method are consolidated from the time the Company obtains control of such subsidiaries. Intercompany balances and transactions, including unrealized gains or losses on intercompany transactions, are eliminated to reflect the financial position and the results of operations of the Company and its subsidiaries as one business entity. 15 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) c. Acquisitions and Business Divestitures The cross-ownership transactions with Indosat have been accounted for as a reorganization of entities under common control, because the Company and Indosat are both controlled by the Government of the Republic of Indonesia. These transactions have been recorded at historical cost, in a manner similar to that in pooling of interests accounting. The difference between the consideration paid or received and the related historical carrying amount, after considering income tax effects, has been charged to equity as "Difference in Value of Restructuring Transactions Between Entities Under Common Control". The acquisition of a subsidiary from third parties is accounted for using purchase method. The excess of acquisition cost over the Company's interest in the fair value of identifiable assets and liabilities acquired is recorded as goodwill, which is amortized using straight-line method over the period not more than five years. The acquisition of KSO investors' company is accounted for using purchase method. The excess of acquisition cost over the Company's interest in the fair value of identifiable assets and liabilities acquired is recorded as intangible asset, which is amortized using straight-line method over the remaining KSO period. d. Foreign Currency Transactions and Translation The books of accounts of the Company and its subsidiaries are maintained in Indonesian Rupiah. Transactions during the year involving foreign currencies are recorded at the rates of exchange prevailing at the time of the transactions. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated to reflect the rates of exchange prevailing at that date. The resulting gains or losses are credited or charged to current operations, except for foreign exchange differences that can be attributed to qualifying assets, which are capitalized. The exchange rates used for translation of monetary assets and liabilities denominated in foreign currencies are the buy and sell rates published by Reuters in 2002 and Bridge Telerate in 2001. The buy and sell rates published by Bridge Telerate were Rp10.400 and Rp10.450 to US$1 as December 31, 2001. The Reuters buy and sell rates, applied respectively to monetary assets and liabilities, were Rp8.940 and Rp8.960 to US$1 as of December 31, 2002. Telkomsel applied Bank Indonesia's buy and sell rates export notes for monetary assets and liabilities which was Rp8,940 to US$1 as of December 31, 2002. The Company does not guarantee that assets and liabilities denominated in foreign currencies can be converted into Indonesian Rupiah at the rates of exchange as of December 31, 2002. The functional currency of PT Pasifik Satelit Nusantara and PT Citra Sari Makmur is the U.S. Dollar. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the balance sheet date are translated into Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated at the average rates of exchange for the year. The resulting translation adjustments are shown as part of equity as "Currency Translation Adjustment". e. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time deposits with maturities of three months or less from the date of placement. 16 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) f. Investments i. Time deposits Time deposits with maturities of more than three months are presented as temporary investments. ii. Investments in securities Investments in available for sale, or available for tradable are stated at fair value. Unrealized gains or losses from the increase or decrease in fair value are recorded as part of equity. Realized gains and losses are included in operations when sold. Other than temporary declines in value are charged to income when conditions giving rise to the impairment occur. Investments held to maturity are stated at cost, less amortization of premium or discount. Investment in trading securities are recorded at fair value with realized and unrealized gains or losses included in income. iii. Investments in associated companies Investments in shares of stock of companies in which the Company's ownership is 20% to 50%, are accounted for using the equity method whereby the Company's proportionate share in the income or loss of the associated company after the date of acquisition is added to or deducted from, and the dividends received are deducted from the acquisition cost of the investments. The carrying amount of the investments is written down to recognize any other than temporary decline in the value of individual investments. Any such write down is charged directly to current operations. iv. Other investments Investments in shares of stock of companies in which the Company's ownership is less than 20% which do not have readily determinable fair values and are intended for long-term investments are stated at cost. The carrying amount of the investment is written down to recognize an other than temporary decline in the value of the individual investments. Any such write down is charged directly to current operations. v. Change of equity in associated companies Changes in the value of investments due to changes in the equity of associated companies arising from capital transactions of such associated companies with other parties are recognized in equity as "Difference Due to Change of Equity in Associated Companies". g. Allowance for Doubtful Accounts An allowance for doubtful accounts is provided based upon a review of the status of the individual receivable accounts at the end of the year. h. Inventories Inventories are stated at cost which is determined using the weighted-average method, except for GSD, which uses the first-in, first-out (FIFO) method. Provisions are made to reduce the carrying value of inventories to the lower of cost or net realizable value. i. Prepaid Expenses Prepaid expenses are amortized over their beneficial periods using the straight-line method. 17 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) j. Property, Plant and Equipment - Direct Acquisitions Property, plant and equipment directly acquired are stated at cost, except for certain revalued assets, less accumulated depreciation. Property, plant and equipment, except land, are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:
Years ------ Buildings 20 Switching equipment 5 - 15 Telegraph, telex and data communication equipment 5 - 15 Transmission installation and equipment 5 - 20 Satellite, earth station and equipment 3 - 15 Cable network 5 - 15 Power supply 3 - 10 Data processing equipment 3 - 10 Other telecommunication peripherals 5 Office equipment 3 - 5 Vehicles 5 - 8 Other equipment 5
Land is stated at cost and is not depreciated. Property, plant and equipment not used in operations are stated at the lower of its carrying value or net realizable value. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount, which is determined based upon the greater of its net selling price or value in use. The cost of maintenance and repairs is charged to operations as incurred. Expenditures, that extend the useful life of the asset or result in increased future economic benefits such as increases in capacity or improvement in the quality of output or standard of performance, are capitalized. Property, plant and equipment that is no longer used due to technological change, obsolescence or malfunction, is reclassified into property not used in operations, by accelerating the depreciation of such property, plant and equipment. Any resulting gain or loss from the disposal or sale of property, plant and equipment is reflected in current operations. Computer software used for data processing is included with the value of the associated hardware. Property under construction is stated at cost, which includes all borrowing costs during construction on debts incurred to finance the construction. Gain or loss on foreign exchange that can be attributed to the property under construction is capitalized as a borrowing cost. Property under construction is transferred to the respective property, plant and equipment account when completed and ready for use. 18 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) k. Leases Lease transactions are recorded as capital leases when all the following criteria are met: i. The lessee has the option to purchase the leased asset at the end of the lease term at a price mutually agreed upon at the inception of the lease agreement. ii. Periodic lease payments made by the lessee provide for a return of the cost of the leased asset and interest thereon to the lessor. iii. The minimum lease period is two years. Lease transactions that do not meet the above criteria are recorded as operating leases. Leased assets and obligations under capital leases are recorded at the present value of the total installments plus residual value (option price). Leased assets are depreciated using the same method and estimated useful lives used for directly acquired property and equipment. l. Revenue-Sharing Arrangements Under Indonesian Statement of Financial Accounting Standards ("PSAK") No. 35, "Accounting for Income from Telecommunication Services", assets under revenue-sharing arrangements are to be capitalized by the party to whom ownership of such assets shall be transferred at the end of the revenue-sharing period (the organizing body), if the following criteria are met: i. There is a certainty that the organizing body will acquire the assets, the ownership of which will be transferred at the end of the revenue-sharing period. ii. The organizing body will be free from any claims from third parties with respect to the acquisition of such assets. iii. The agreement covering the revenue-sharing arrangements is irrevocable. The Company records such assets as "Property, Plant and Equipment under Revenue-Sharing Arrangements" (with a corresponding initial credit to "Unearned Income under Revenue-Sharing Arrangements" presented under Liabilities) based on the costs incurred by the investors as agreed upon in the contracts entered into by the Company and the investors. Property, plant and equipment are depreciated over their estimated useful lives using the straight-line method. The unearned income related to the acquisition of the property, plant and equipment under revenue-sharing arrangements is amortized over the revenue-sharing period using the straight-line method. At the end of the revenue-sharing period, the respective property, plant and equipment under revenue-sharing arrangements are reclassified into the "Property, Plant and Equipment" account. When property, plant and equipment under revenue-sharing arrangements are acquired by the Company before the end of the revenue-sharing period, the net book value of the assets is reclassified into the "Property, Plant and Equipment" account, and the balance of the related unearned income is included as a gain or loss in the current operations. Revenue earned under revenue-sharing arrangements is recognized on the basis of the Company's share as provided in the agreement. 19 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) m. Joint Operation Schemes Revenues from the operations of telecommunication facilities and the provision of telecommunication services which have been transferred by the Company to KSO investors includes amortization of the investor's initial payments, Minimum Telkom Revenues ("MTR") and the Company's share of Distributable KSO Revenues ( 'DKSOR" ). The unearned initial investor payments received as compensation from the KSO Investors are presented net of all direct costs incurred in connection with the KSO agreement and are amortized using the straight-line method over the KSO period of 15 years starting January 1, 1996. MTR are recognized on a monthly basis based upon the contracted MTR amount for the current year, in accordance with the KSO agreement. The Company's share of distributable KSO revenues is recognized on the basis of the Company's percentage share of the KSO revenues, net of MTR and operational expenses of the KSO Units, as provided in the KSO agreements. Under PSAK No. 39, "Accounting for Joint Operation Schemes", which supersedes paragraph 14 of PSAK No. 35, "Accounting for Telecommunication Services Revenue", the assets built by the KSO Investors under the Joint Operation Schemes are recorded in the books of the KSO Investors which operate the assets and are transferred to the Company at the end of the KSO period or upon termination of the KSO scheme. n. Deferred Charges for Land rights Expenses related to the legal processing of land rights are deferred and amortized using the straight-line method over the legal term of the land right, which is normally shorter than its economic life. o. Revenue Recognition i. Fixed Line Telephone Revenues Revenues from fixed line installations are recognized at the time the installations are placed in service. Revenues from usage charges are recognized as customers incur the charges. ii. Cellular Telephone Revenues Revenues from service connections (connection fees) are recognized as income at the time the connections occur. Revenues from airtime and monthly subscription charges are recognized when earned. Revenues from prepaid card customers, which consist of the sale of starter packs, also known as Subscriber Identification Module ("SIM") cards and pulse reload vouchers, are recognized as follows: 1. Sale of starter packs is recognized as revenue upon delivery of the starter packs to distributors, dealer or directly to customers. 2. Sale of pulse reload vouchers is recognized initially as unearned income and recognized proportionately as revenue based on successful calls made by the subscribers or whenever the unused stored value of the voucher has expired. 20 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) o. Revenue Recognition (continued) ii. Interconnection revenues Revenues from network interconnection with other domestic and international telecommunication carriers are recognized as incurred and are presented on a net basis. p. Pension Plan i. Defined Benefit Pension Plan The Company and certain subsidiaries established a defined benefit pension plan covering all their permanent employees. Current service cost is charged to operations in the current period. Past service cost, actuarial adjustments and the effect of changes in assumptions for active participants are amortized using the straight-line method over the estimated average residual employment period that has been determined by the actuary. The method used by the actuary for actuarial calculations is the projected-unit-credit method. ii. Early Retirement Early retirement benefits are accrued at the time the Company makes a strong commitment to provide early retirement benefits as a result of an offer made in order to encourage voluntary redundancy. The Company is demonstrably committed to a termination when, and only when, the Company has a detailed formal plan for the early retirement and is without realistic possibility of withdrawal. q. Post-retirement Health Care Plan The Company recognizes the cost of providing postretirement health care plan benefits over the working lives of its employees based on actuarial computations. This practice is similar to that provided by Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post-retirement Benefits Other than Pensions" ("SFAS 106"), in U.S. GAAP. r. Income Tax Current tax expense is determined based on the taxable income for the year computed using prevailing tax rates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for deductible temporary differences to the extent that it is probable that taxable income will be available in future periods against which the deductible temporary differences can be utilized. Deferred tax is calculated at the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also charged or credited directly to equity. Deferred tax assets and liabilities are offset in the balance sheet, except those for different legal entities. 21 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) s. Earnings per Share and Earnings per American Depositary Share ("ADS") Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the year. Net income per ADS is computed by multiplying basic earnings per share by 20, the number of shares represented by each ADS. t. Segment Information The Company and its subsidiaries' segment information is presented based upon identified business segments. A business segment is a distinguishable component that is engaged in providing an individual product or service or a group of related products or services that are different from those of other business segments, primarily to customers outside the Company or its subsidiaries. Business segment information is consistent with operating information routinely reported to the Company's chief operating decision maker. Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the consolidated financial statements. u. Reclassification of Account Certain accounts in 2001 financial statements have been reclassified to conform to the presentation of those accounts in the 2002 financial statements 3. TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS The financial statements are stated in Rupiah. The translations of Rupiah amounts into United States Dollars are included solely for the convenience of the readers and have been made using the average of the market buy and sell rates of Rp8,913 to US$1 published by Reuters on March 14, 2003. The convenience translations should not be construed as representations that the Rupiah amounts have been, could have been, or can in the future be, converted into United States Dollar at this or any other rate of exchange. 4. CROSS-OWNERSHIP TRANSACTIONS WITH INDOSAT On April 3, 2001, the Company signed a Conditional Sale and Purchase Agreement with Indosat, for a series of transactions to consolidate their cross-ownership in certain companies. The transactions under the agreement are as follows: i. Acquisition by the Company of Indosat's 35% equity interest in Telkomsel for US$945 million ("Telkomsel Transaction"); ii. Acquisition by Indosat of the Company's 22.5% equity interest in PT Satelit Palapa Indonesia ("Satelindo") for US$186 million ("Satelindo Transaction"); iii. Acquisition by Indosat of the Company's 37.66% equity interest in PT Aplikanusa Lintasarta ("Lintasarta") for US$38 million and convertible bonds of Rp4,051 million issued by Lintasarta ("Lintasarta Transaction"); and iv. The acquisition by Indosat of all of the Company's rights, and novation of all of the Company's obligations, under the KSO IV Agreement dated October 20, 1995, between the Company and PT Mitra Global Telekomunikasi Indonesia ("MGTI"), together with all of the Company's assets being used as KSO IV assets, for US$375 million, ("KSO IV Transaction"). 22 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 4. CROSS-OWNERSHIP TRANSACTIONS WITH INDOSAT (continued) Lintasarta's convertible bonds were subsequently converted into shares, thereby reducing the Company's 37.66% equity interest to 37.21% prior to the consummation of the Lintasarta Transaction. The Telkomsel and Lintasarta Transactions, were consummated on May 16, 2001 based on Deed of Share Transfer No. 1/V/2001/triplo and No. 2/V/2001/duplo, respectively, of Notary Ny. Liliana Arif Gondoutomo, S.H. The Satelindo Transaction was consummated on July 23, 2001 after DeTeAsia Holding GmbH and PT Bimagraha Telekomindo (the other Satelindo's shareholders) waived their pre-emptive rights on 7.26% and 13.06% of Satelindo's shares, respectively. On February 1, 2002, the Company and Indosat announced the cancellation of the KSO IV Transaction as certain conditions precedent to the transaction's closing provided in the Conditional Sale and Purchase Agreement dated April 3, 2001 were not fulfilled. The Telkomsel, Satelindo and Lintasarta Transactions have been accounted for as a restructuring of entities under common control. The difference between the consideration paid or received and the historical amount of the net assets of the investee acquired or carrying amount of the investment sold, is included within equity as "Difference in Value of Restructuring Transactions Between Entities Under Common Control", as follows:
Historical Consideration Amount of Difference in Value Paid/ Net Assets/ Change in --------------------------------------------- (Received) Investment Equity - Net Total Tax Net -------------- ----------- --------------- ------------ --------- ----------- Rp Rp Rp Rp Rp Rp Telkomsel 10,782,450 1,466,658 -- 9,315,792 -- 9,315,792 Satelindo (2,122,260) -- (203,309) (2,325,569) (636,678) (1,688,891) Lintasarta (437,631) 116,834 -- (320,797) (96,239) (224,558) ----------- ----------- ----------- ----------- ----------- ----------- Total 8,222,559 1,583,492 (203,309) 6,669,426 (732,917) 7,402,343 =========== =========== =========== =========== =========== ===========
As of December 31, 2001, the Company's net obligation to Indosat for the cross-ownership transactions was Rp2,406,309 million. The Company has settled this obligation in 2002. In 2002, the Company sold its 12.72% share in Telkomsel. As of December 31, 2002, management had no intention to sell the Company's equity interest in Telkomsel. In accordance with Indonesia Financial Accounting Standard No. 46 and U.S. Financial Accounting Standards No. 109 regarding "Income Tax", therefore in 2002, the Company adjusted difference in value of restructuring transaction between entities under common controls and deferred tax liabilities for Rp369,888, respectively. 23 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 5. ACQUISITION OF KSO INVESTOR a. Dayamitra The Conditional Sale and Purchase Agreement pertaining to the transaction was signed on April 3, 2001. Pursuant to the terms of the agreement, the Company paid the initial payment amount of US$18,289,800 on May 17, 2001, the closing date of the transaction, and US$8,937,041 on August 10, 2001 as payment for Dayamitra's adjusted working capital. The remaining amount of US$103,642,200 will be paid through an escrow arrangement discussed below, in eight quarterly installments of US$12,955,275, from August 17, 2001 to May 17, 2003. This acquisition resulted in an intangible asset of Rp1,344,012 million which will be amortized over the remaining term of the KSO agreement. In connection with the Dayamitra transaction, the Company also entered into the following agreements: 1. Option Agreement The Company entered into an Option Agreement with TM Communications (HK) Ltd ("TMC"), providing the Company with an option to acquire the remaining 9.68% equity interest in Dayamitra, referred to as the Option Share. Under the agreement, TMC, the selling shareholder, shall grant the Company an exclusive option to purchase full and legal title to the Option Share (the "Call Option"), and the Company shall grant the selling shareholder an exclusive option to sell to the Company full legal title to those shares (the "Put Option"). In consideration for the grant of the options, the Company will pay to the selling shareholder the option purchase price of US$6,300,000, plus US$957,823 as payment for Dayamitra's adjusted working capital, or a total of US$7,257,823. The amount is payable in eight quarterly instalments of US$907,228, beginning on August 17, 2001 and ending on May 17, 2003. Payments will be made through the escrow account established under the Escrow Agreement discussed below. The Company may exercise the option any time after Dayamitra has satisfied all of its obligations under the J-Exim loan starting on May 17, 2003 up to five business days prior to March 26, 2006. The share price payable by the Company to the selling shareholder for the Option Shares upon exercise of the option is US$16,200,000, less certain amounts that are stipulated in the Option Agreement. As of December 31, 2002, the option purchase price that has been paid by the Company amounted to US$5,512,500 or equivalent to Rp49.898 million, which was presented as part of "Advance Payment for Investment in Shares of Stock". 2. Escrow Agreement An Escrow Agreement dated May 17, 2001, was entered into by and among the Company, Dayamitra, Intidaya, C&W plc, Mitracipta, TMC, Tomen Corporatyion ("Tomen"), Citibank Singapore Branch (the Singapore Escrow Agent) and Citibank Jakarta Branch (the Jakarta Escrow Agent), to establish an Escrow Account and facilitate the payment of the following: 24 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 5. ACQUISITION OF KSO INVESTOR (continued) a. Dayamitra (continued) 2. Escrow Agreement (continued) i. Purchase price for the Company's acquisition of 41,267,208 ordinary shares of Dayamitra from Intidaya, C&W plc and Mitracipta, and certain amounts in respect of Dayamitra's indebtedness to C&W plc; ii. Option purchase price, share price for the Option Shares, and certain amounts in respect of Dayamitra's indebtedness to Tomen. The Company is required to fund the escrow account in amounts and on scheduled dates stipulated in the agreement. The funds will then be used by the Escrow Agent to make payments on behalf of the Company for the share purchase, the indebtedness of Dayamitra to C&W plc and Tomen and the option purchase price, as they fall due. b. Pramindo Ikat Nusantara ("Pramindo") The acquisition of Pramindo is part of the Company's initiative to restructure its KSO joint operations schemes. The Class A and Class B shares are being acquired from French Cable et Radio, PT Astratel Nusantara, Indosat, Marubeni Corp Japan, NMP Singapore Pte Ltd Singapore and International Finance Corp USA ("IFC"). The aggregate purchase price for the Pramindo shares will be US$384,363,026 (including interest of US$2,864,154). Payment will be made in 27 monthly installments of US$12,800,000 for the first 11 months and US$15,000,000 for each of the remaining 16 months. The installments began on October 1, 2002 and the final payment is due on December 1, 2004. As a result of the acquisition of Pramindo, the Company has recognized an intangible asset of Rp895,138 millions which will be amortized over the remaining term of the KSO agreement. Consultancy fee in relation with Pramindo acquisition amounting to Rp 52,818 million for year 2002 was capitalized as acquisition cost. An Escrow Agreement dated August 14, 2002 was entered into by and among the Company, Pramindo, Astratel, France Cabels et Radio, Indosat, Marubeni Corp, IFC USA, NMP Singapore and JPMorgan Chase Bank Jakarta Branch (the Escrow Agent), to establish an Escrow Account and facilitate the payment of the acquisition of Pramindo by the company. The proforma results for 2000 and 2001 assuming the Pramindo acquisition had occurred on January 1, 2000, would not be significantly differrent than the reported amounts. The Company has consolidated Pramindo notwithstanding its current lack of majority ownership because it has been granted unilateral control over Pramindo and KSO I pursuant to a Conditional Sales and Purchase Agreement entered into between the Company and the shareholders of Pramindo (see Note 27). 25 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 6. CASH AND CASH EQUIVALENTS
2001 2002 ------- ------- Rp Rp Cash on hand 9,359 12,696 ------- ------- Cash in banks Related parties Rupiah Bank Negara Indonesia 82,255 152,778 Bank Mandiri 41,172 64,540 Bank Rakyat Indonesia 6,609 8,281 Bank Pos Nusantara 2,008 2,582 ------- ------- Total 132,044 228,181 ------- ------- Foreign currencies Bank Mandiri 8,918 29,015 Bank Negara Indonesia 7,615 4,560 Bank Rakyat Indonesia 361 479 ------- ------- Total 16,894 34,054 ------- ------- Total - related parties 148,938 262,235 ------- ------- Third parties Rupiah Citibank 546 10,426 Bank Bukopin 4,788 6,428 Bank Central Asia 9,881 5,630 Bank Niaga 169 540 Daichi Bank - 142 ABN Amro Bank 115 140 Bank Danamon 30 103 Lippo Bank 84 97 The Chase Manhattan Bank - 39 Bank Buana - 2 Bank Internasional Indonesia 116 - Mizuho Indonesia Bank (formerly Bank Dai-Ichi Kangyo Indonesia) 80 - Standard Chartered Bank 23 - American Express Bank 6 - ------- ------- Total 15,838 23,547 ------- ------- Foreign currencies Citibank 470 940 Deutsche Bank 384 453 ABN Amro Bank 111 230 American Express Bank 114 - Mizuho Indonesia Bank (formerly Bank Dai-Ichi Kangyo Indonesia) 15 - Bank Niaga 13 - ------- ------- Total 1,107 1,623 ------- ------- Total - third parties 16,945 25,170 ------- ------- Total cash in banks 165,883 287,405 ------- -------
26 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 6. CASH AND CASH EQUIVALENTS (continued)
2001 2002 --------- --------- Rp Rp Time deposits Related parties Rupiah Bank Mandiri 1,447,918 772,833 Bank Rakyat Indonesia 504,836 607,420 Bank Negara Indonesia 587,632 298,565 Bank Tabungan Negara 122,497 108,480 --------- --------- Total 2,662,883 1,787,298 --------- --------- Foreign currencies Bank Mandiri 619,033 3,022,639 Bank Negara Indonesia 125 2,446 --------- --------- Total 619,158 3,025,085 --------- --------- Total - related parties 3,282,041 4,812,383 --------- --------- Third parties Rupiah Standard Chartered Bank - 142,000 Bank Mega 23,000 129,757 Bank Bukopin 64,630 65,364 Bank Yudha Bhakti 1,000 6,000 Bank Niaga 2,000 5,000 Bank Internasional Indonesia - 2,000 Deutsche Bank 70,500 - Bank Umum Tugu 20,000 - Citibank 3,800 - ABN Amro Bank 1,000 - Mizuho Indonesia Bank 1,000 --------- --------- Total 186,930 350,121 --------- --------- Foreign currencies Deutsche Bank - 236,465 --------- --------- Total - 236,465 --------- --------- Total - third parties 186,930 586,586 --------- --------- Total time deposits 3,468,971 5,398,969 --------- --------- Total Cash and Cash Equivalents 3,644,213 5,699,070 ========= =========
Range of interest rates per annum for time deposits is as follows:
2001 2002 -------------------- --------------------- Rupiah 11.00% - 18.04% 11.59% - 17.45% Foreign currency 1.75% - 6.95% 1.50% - 5.03%
As of December 31, 2001, a portion of the Rupiah time deposits amounting to Rp48.340 million in Bank Mandiri and Bank Negara Indonesia were pledged by Telkomsel, as collateral for bank guarantees covering the payment of additional customs duties, if any. These time deposits and the related bank guarantees matured in January 2002. 27 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 7. TEMPORARY INVESTMENTS
2001 2002 --------------- -------------- Rp Rp Time deposits Related parties Rupiah Bank Mandiri 171,150 600,000 Bank Rakyat Indonesia - 423,000 Bank Negara Indonesia 167,650 - U.S. Dollar Bank Mandiri 8,320 - --------------- -------------- Total - related parties 347,120 1,023,000 --------------- -------------- Third party - - --------------- -------------- Total time deposit 347,120 1,023,000 --------------- -------------- Available for sale securities Medium Term Notes - PSSI - 50,000 Investment in mutual fund (Reksa Dana Seruni) At cost 2,002 - Unrealized loss on decline in value (207) - --------------- -------------- Net 1,795 - --------------- -------------- Total available for sale securities 1,795 - --------------- -------------- Total temporary investments 348,915 1,073,000 =============== ==============
Range of interest rates per annum for time deposits is as follows:
2001 2002 -------------------- --------------------- Rupiah 10.50% - 17.45% 11.14% - 14.33% US Dollars 2.00% - 3.50% 6.04% - 6.84%
The terms of time deposits rank from 3 (three) months to 1 (one) year. Medium Term Notes - PSSI represent medium term notes issued by Persatuan Sepakbola Seluruh Indonesia (PSSI) amounting to Rp50,000 million for the period from May 7, 2001 to February 22, 2003. The medium term notes has been settled on the maturity date. A time deposit in Citibank of US$ 6.948.394 was pledged as collateral for a IP Backbone loan facility given by Citibank for the two-year period ending April 10, 2004. This deposit is presented as "Advance and Other Non-Current Assets". As of December 31, 2001, Infomedia's time deposit of US$800,000 in Bank Mandiri was used as a guarantee for the Letter of Credit facility granted by the bank for the payment of Infomedia's foreign suppliers. 28 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 7. TEMPORARY INVESTMENTS (continued) Included with Bank Bukopin are time deposits of Rp7,150 million which are pledged as collateral for the working capital loan facility of Koperasi Infomedia Nusantara (KOPIN) received from the bank. The facility is used to provide loans to its subsidiaries' employees. The maximum loan facility was Rp7,000 million for a term of 3 years ending on April 6, 2003. As of December 31, 2002, this time deposit was recorded as part of "Advance Payments and Other Non Current Assets". The mutual fund investment represents an investment in a mutual fund certificate of Seruni, which is issued by PT (Persero) Danareksa - a related party. The company earned a dividend income on a monthly basis. The Company sold this investment in April 2002. Investments placed with related parties have similar interest rates, terms and conditions as those with third parties. 8. TRADE ACCOUNTS RECEIVABLE - RELATED PARTIES a. By Debtor
2001 2002 ---------------- ---------------- Rp Rp KSO Units 1,052,349 1,606,318 Governments agencies 146,787 181,995 PT Mobile Selular Indonesia 36,388 34,337 PT Radio Telepon Indonesia 4,160 18,747 PT Citra Sari Makmur 76,442 16,261 PT Komunikasi Selular Indonesia 8,602 8,612 PT Batam Bintan Telekomunikasi - 7,136 PT Metro Selular Indonesia 23,072 5,607 PT Aplikanusa Lintasarta 12,206 3,578 PT Multisaka - 1,179 PT Gratika 511 406 PT Pasifik Satelit Nusantara 267 - Others 2,300 300 ---------------- ---------------- Total 1,363,084 1,884,476 Allowance for doubtful accounts (325,930) (576,374) ---------------- ---------------- Net 1,037,154 1,308,102 ================ ================
Trade accounts receivable from certain related parties are presented net of the Company's liabilities to such parties. 29 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 8. TRADE ACCOUNTS RECEIVABLE - RELATED PARTIES (continued) b. By Age Category
2001 2002 ---------------- ---------------- Rp Rp Up to 6 months 685,716 795,929 7 to 12 months 274,461 454,559 13 to 24 months 291,415 342,507 More than 24 months 111,492 291,481 ---------------- ---------------- Total 1,363,084 1,884,476 Allowance for doubtful accounts (325,930) (576,374) ---------------- ---------------- Net 1,037,154 1,308,102 ================ ================
c. By Currency
2001 2002 ----------------- ---------------- Rp Rp Rupiah 1,313,043 1,814,258 U.S. Dollar 50,041 70,218 ----------------- ---------------- Total 1,363,084 1,884,476 Allowance for doubtful accounts (325,930) (576,374) ----------------- ---------------- Net 1,037,154 1,308,102 ================= ================
Movements in the allowance for doubtful accounts are as follows:
2001 2002 ---------------- --------------- Rp Rp Beginning balance 167,669 325,930 Net additions during the year 158,261 250,444 ---------------- --------------- Ending balance 325,930 576,374 ================ ===============
An allowance for doubtful accounts is provided for amounts that are overdue, and a full provision is made for receivables from related parties with significant capital deficiencies. Management believes that the allowance for doubtful receivables from related parties is adequate to cover possible losses on uncollectible accounts. The allowance for doubtful accounts included a provision for the MTR and share in distributable KSO revenue receivable from KSO Unit III. The allowance was Rp169,830 million in 2001 and Rp511,676 million in 2002. Management believes that there are no significant concentrations of credit risk on these receivables, except the accounts receivable from KSO Unit III. 30 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 9. TRADE ACCOUNTS RECEIVABLE - THIRD PARTIES a. By Debtor
2001 2002 ---------------- -------------- Rp Rp Residential and business subscribers 1,554,298 2,106,514 Overseas international carriers 94,029 181,975 Others 20,214 - ---------------- ----------------- Total 1,668,541 2,288,489 Allowance for doubtful accounts (252,855) (397,810) ---------------- ----------------- Net 1,415,686 1,890,679 ================ =================
b. By Age Category
2001 2002 ---------------- ------------------ Rp Rp Up to 3 months 1,436,468 1,890,679 More than 3 months 232,073 397,810 ---------------- ------------------ Total 1,668,541 2,288,489 Allowance for doubtful accounts (252,855) (397,810) ---------------- ------------------ Net 1,415,686 1,890,679 ================ ==================
c. By Currency
2001 2002 ---------------- ---------------- Rp Rp Rupiah 1,543,492 2,202,990 U.S. Dollar 125,049 85,499 ---------------- ---------------- Total 1,668,541 2,288,489 Allowance for doubtful accounts (252,855) (397,810) ---------------- ---------------- Net 1,415,686 1,890,679 ================ ================
Movements in the allowance for doubtful accounts are as follows:
2001 2002 ---------------- ---------------- Rp Rp Beginning balance 261,910 252,855 Net movements during the year (9,055) 144,955 ---------------- ---------------- Ending balance 252,855 397,810 ================ ================
Management believes that the allowance for doubtful receivables from third parties is adequate to cover possible losses on uncollectible accounts. Management also believes that there are no significant concentrations of credit risk from third party receivables. 31 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 10. INVENTORIES
2001 2002 ---------------- --------------- Rp Rp Component: Telephone terminals, cards and spare parts 96,167 69,322 Cable and transmission installation spare parts 34,154 15,226 Other spare parts 29,977 11,020 ---------------- --------------- Total 160,298 95,568 Allowance for obsolescence (33,168) (30,331) ---------------- --------------- Net 127,130 65,237 ---------------- --------------- Modules: Cable and transmission installation spare parts 48,975 54,912 Telephone terminals, cards and spare parts 30,629 42,563 Other spare parts 187 434 ---------------- --------------- Total 79,791 97,909 Allowance for obsolescence (15,829) (23,464) ---------------- --------------- Net 63,962 74,445 ---------------- --------------- Total 191,092 139,682 ================ ===============
Changes in the allowance for obsolescence of inventories are as follows:
2001 2002 ---------------- ---------------- Rp Rp Beginning balance 31,723 48,997 Net additions during the year 17,274 4,798 ---------------- ---------------- Ending balance 48,997 53,795 ================ ================
Management believes that the established allowance is sufficient to cover possible losses from decline in inventory value due to obsolescence. At December 31, 2002, modules in inventory were insured against fire, theft and other possible risks for US$750,000 and Rp23,690 million. 11. PREPAID TAXES
2001 2002 ---------------- ---------------- Rp Rp Income Tax (Article 23) - 266 Value Added Tax ("VAT") - 84,408 ---------------- ---------------- Total - 84,674 ================ ================
32 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 12. OTHER CURRENT ASSETS As of December 31, 2002, this account presented time deposits and restricted funds with details as follows: a. Telkomsel's time deposits of US$9,971,936 or equivalent to Rp89,149 million in Deutsche Bank and Citibank are used as security for a letter of credit facility to procurement contracts (see Note 52.b). b. Telkomsel's time deposits of Rp40,520 million in Bank Mandiri are used as security covering the payment of customs duties for procurement. c. The Company's time deposits of US$ 1,800,000 in Bank Mandiri are used as security for Napsindo's borrowings to finance infrastructure development (see Note 13.e). The term of this security deposit is up to August 28, 2003. 13. LONG-TERM INVESTMENTS -- NET
2001 2002 ---------------------------------- ---------------------------------- Percentage Share in Percentage Share in of Net Income Carrying of Net Income Carrying Domicile Ownership (Loss) Amount Ownership (Loss) Amount --------- ----------- ---------- -------- ---------- ---------- -------- % Rp Rp % Rp Rp Equity method: PT Citra Sari Makmur Jakarta 25.00 4,793 74,833 25.00 8,445 62,270 PT Telekomindo Selular Raya Denpasar 69.77 - 87,907 100.00 1,842 26,642 PT Metro Selular Nusantara Surabaya 20.17 (8,120) 1,657 20.17 1,137 16,308 PT Patra Telekomunikasi Indonesia Jakarta 30.00 5,272 12,133 30.00 710 12,842 PT Napsindo Primatel Internasional Jakarta 32.00 (4,200) 12,030 32.00 (7,337) 4,693 PT Multimedia Nusantara Jakarta 31.00 (647) 1,928 31.00 - 1,928 PT Pasifik Satelit Nusantara Bekasi 22.57 - - 22.57 - - PT Menara Jakarta Jakarta 20.00 - - 20.00 - - PT Mobile Selular Indonesia Jakarta 25.00 - - 25.00 - - PT Komunikasi Selular Indonesia Jakarta 35.00 (92,750) - 14.20 57,570 57,570 PT Aplikanusa Lintasarta Jakarta - 9,966 - - - - -------- ------- ------ -------- Total (85,686) 190,488 62,167 182,253 ======== ======= ====== ======= Cost method: PT Batam Bintan Telekomunikasi Batam 5.00 587 5.00 587 PT Bangtelindo Bandung 3.18 199 3.18 199 Medianusa Pte. Ltd. Singapura 9.44 108 9.44 108 PT Radio Telepon Indonesia Jakarta 12.86 11,695 - - Decline in value of investments (11,695) - ------- ------- Net 894 894 ------- ------- Total 191,382 183,147 ======= =======
*) As of December 31, 2002, the accounting treatment for Investment in Komselindo was changed into cost method in connection to the Company's ownership dilution. 33 RUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 13. LONG-TERM INVESTMENTS -- NET (continued) a PT Citra Sari Makmur ("CSM") CSM is engaged in providing Very Small Aperture Terminal ("VSAT"), net application services and consulting services on telecommunication technology and related facilities.
2001 2002 ---------- ---------- Rp Rp Beginning balance 66,386 74,833 Equity in net income of associated company 4,793 8,445 Translation adjustment 3,654 (21,008) ---------- ---------- Ending balance 74,833 62,270 ========== ==========
b. PT Telekomindo Selular Raya ("Telesera") In 2001, the Minister of Justice and Human Rights approved the corporate restructuring of PT Telekomindo Primabhakti ("Telekomindo"), an associated company engaged in the construction and development of telecommunication facilities. Pursuant to the restructuring, Telekomindo's authorized and paid-in capital was reduced and the capital reduction became the paid-in capital of two new companies: PT Telekomindo Media Informatika ("TMI") and PT Griya Insani Primabhakti ("GIP"). Based on a swap share agreement dated December 5, 2001 among the Company, PT Rajawali Corporation ("RC"), Telekomindo, and TMI, the parties agreed on the following: - The Company sold its investments (inclusive of shares owned by Dana Pensiun Telkom) in Telekomindo, TMI, and GIP to RC for Rp145,968 million. - TMI sold its investments (inclusive of shares owned by RC and Koptelindo) in PT Telekomindo Selular Raya ("Telesera") and PT Multisaka Mitra ("MSM") to the Company for Rp126,000 million and Rp25,000 million, respectively. The sale transactions of the Company's shares in Telekomindo, TMI and GIP and the purchase of MSM and Telesera were consummated on December 28, 2001 based on the Deed of Sale and Purchase of Shares No. 8, 9,10, 11, and 12, respectively of Notary Emmy Salim, S.H. The Company recognized a loss of Rp101,000 million from the transaction because of its nil basis in Telekomindo, TMI, and GIP before the transaction. The acquisition cost of MSM's assets is recorded in "Advance Payments and Other Non-Current Assets" because the transfer of those assets has not been finalized. As of December 31,2002, those advances amounted to Rp25,000 million. As of December 31,2002, the Company's investment in Telesera is accounted for using the equity method because management intends to sell its interest in Telesera. As of December 31, 2002, the carrying amount of this investment was Rp26,642 million. Management has completed the valuation process and is currently in the process of negotiating the sale of Telesera. 34 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 13. LONG-TERM INVESTMENTS -- NET (continued) b. PT Telekomindo Selular Raya ("Telesera") (continued)
2001 2002 ---------- ---------- Rp Rp Beginning balance - 87,907 Capital contribution 87,907 38,093 Equity in net income of associated company - 1,642 Acquisition loss - (101,000) ---------- ---------- Ending balance 87,907 26,642 ========== ==========
c. PT Metro Selular Nusantara ("Metrosel") Metrosel is engaged in providing national mobile cellular services and related facilities in Central Java, Yogyakarta, East Java, Maluku and Irian Jaya. These services were previously provided by the Company under a revenue-sharing arrangement with PT Centralindo Panca Sakti Cellular (a company which has taken over the rights and obligations of PT Centralindo Panca Sakti or "CPS"). The Company's initial capital contribution of Rp10,087 million represents a 20.17% ownership interest in Metrosel and was made in the form of property, plant and equipment under the revenue-sharing arrangement between the Company and CPS. The property, plant and equipment will be transferred to the company at the end of revenue-sharing arrangement. In February 1997, Metrosel issued 1,250,000 new shares with a par value of Rp10,000 per share to Asia Link B.V. for US$84,375 thousand. The issuance of the new shares has no impact on the Company's ownership interest because the Company was granted 251,940 shares by the Company's Pension Fund (formerly Yayasan Dana Pensiun Pegawai PT Telekomunikasi Indonesia or "YDPP Telkom"), a shareholder of Metrosel. On May 30, 2002 Metrosel implemented equity call. The Company made additional capital contribution of Rp13,514 million to maintain its ownership in Metrosel.
2001 2002 ---------- ---------- Rp Rp Beginning balance 9,777 1,657 Capital contribution - 13,514 Equity in net profit (loss) of associated company (8,120) 1,137 ---------- ---------- Ending balance 1,657 16,308 ========== ==========
35 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 13. LONG-TERM INVESTMENTS -- NET (continued) d. PT Patra Telekomunikasi Indonesia ("Patrakomindo") Patrakomindo is engaged in providing satellite communication system services and related facilities to companies in the petroleum industry.
2001 2002 ---------- ---------- Rp Rp Beginning balance 6,976 12,133 Equity in net income of associated company 5,272 709 Translation adjustment (115) - ---------- ---------- Ending balance 12,133 12,842 ========== ==========
e. PT Napsindo Primatel Internasional ("Napsindo") Napsindo is engaged in providing "Network Access Point" (NAP), "Voice Over Data" (VOD) and other related services.
2001 2002 ---------- ---------- Rp Rp Beginning balance 2,390 12,030 Capital contribution 13,840 - Equity in net loss of associated company (4,200) (7,337) ---------- ---------- Ending balance 12,030 4,693 ========== ==========
In connection with an increase in Napsindo's paid-in capital, the Company has increased its investment in Napsindo to Rp14,876 million, based on Deed of Napsindo's Resolution No. 104 dated October 31, 2000 which was notarized by Elliza Asmawel, S.H. The increase in investment, which was made to maintain the Company's ownership interest of 32%, was effective in March 29, 2001, the date the increase in Napsindo's authorized and issued capital was approved by the Minister of Justice and Human Rights of the Republic of Indonesia. Payment for the additional investment was made through conversion of the Company's receivable from Napsindo into equity (see Note 56.a). In December 31, 2002, Napsindo received a credit facility from Bank Mandiri for their infrastructure development. This facility was secured by the Company's time deposit that will mature on August 28, 2003. f. PT Multimedia Nusantara ("Multimedia") Multimedia is engaged in providing pay television and multimedia telecommunication services.
2001 2002 ---------- ---------- Rp Rp Beginning balance 2,575 1,928 Equity in net loss of associated company (647) - ---------- ---------- Ending balance 1,928 1,928 ========== ==========
36 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 13. LONG-TERM INVESTMENTS -- NET (continued) g. PT Pasifik Satelit Nusantara ("PSN") PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia Pacific Region.
2001 2002 ---------- ---------- Rp Rp Beginning balance 77,625 - Decline in value of investment (77,625) - ---------- ---------- Ending balance - - ========== ==========
In 2001, management decided to recognize an other than temporary decline in value of this investment due to the financial condition of PSN. h. PT Menara Jakarta ("MJ") MJ is engaged in the construction and the operation of towers and related facilities. The economic difficulties faced by Indonesia have resulted in the termination of MJ's construction projects at the end of 1997. i. PT Mobile Selular Indonesia ("Mobisel") Mobisel is engaged in providing mobile cellular services and related facilities. These services were previously provided by the Company under a revenue-sharing arrangement with PT Rajasa Hazanah Perkasa ("RHP"). The capital contribution of the Company amounting to Rp10,398 million, which represents a 25% equity ownership in Mobisel, was made in the form of property, plant and equipment under a revenue-sharing arrangement. On November 12, 2002, Mobisel's shareholders agreed for equity call and debt to equity swap through an Unanimous Written Resolution. Based on the resolution, all Mobisel debts to the Company converted to 20,523,079 Series A shares and promissory notes amounted to Rp4,206 million. The Company released and waived its pre-emptive right to subscribe to the newly issued shares which resulted in the dilution of the Company ownership interest in Mobisel to 4.92%. Approval from the Minister of Justice and Human Rights on the Amendment of Mobisel's Article of Association is still in process, therefore as of December 31, 2002, the dilution of the Company ownership interest in Mobilsel was not effective. j. PT Komunikasi Selular Indonesia ("Komselindo") Komselindo is a joint venture between the Company and PT Elektrindo Nusantara ("Elektrindo"), and is engaged in providing analog mobile cellular services. These services were previously provided by the Company under a revenue-sharing arrangement with Elektrindo. Elektrindo transferred its property, plant and equipment acquired under the revenue-sharing arrangements to Komselindo for Rp188,195 million based on the appraised value of the assets and the agreement among the Company, Elektrindo and Komselindo. This transaction is considered as a transaction between entities under common control since Elektrindo owns 65% of Komselindo. Based on the Deed of Komselindo's Extraordinary General Shareholders Meeting No. 110 dated October 10, 2000, which was notarized by Ny. R. Arie Soetardjo, S.H., the Company agreed to the conversion of Rp92,750 million of receivables from Komselindo into equity in order to maintain a 35% ownership interest. 37 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 13. LONG-TERM INVESTMENTS -- NET (continued) j. PT Komunikasi Selular Indonesia ("Komselindo") (continued) In 2001, the Company recorded the conversion of the receivables into equity and recognized a loss for the new carrying amount of the investment amounting to Rp92,750 million. In March 2002, Komselindo submitted a request to postpone debt settlement to a Commercial Court. The Commercial Court in Central Jakarta State Court, through its decision No 02/PKPU/2002/PN.NIAGA/JKT.PST dated May 2, 2002, granted Komselindo to postpone its debt settlement for the period of six months after the date of decision. On June 4, 2002, Komselindo proposed a settlement plan to its creditors for debt restructuring through debt to equity with conversion debt amounting to Rp117.304 million and US$171.323.044. The debt conversion also included Komselindo liabilities to the Company of Rp19.397 million. The plan was approved by the creditors through the Restructuring and Settlement Agreement dated August 30, 2002. On August 30, 2002 Komselindo's shareholders through a Shareholders Extraordinary Meeting approved equity call for debt restructuring which is included in the Settlement Agreement and the Settlement,Termination and Release Agreement dated August 30, 2002. The Company released and waived its pre-emptive right to subscribe newly issued shares. It resulted in the dilution of the Company's ownership in Komselindo to 14.20%. k. PT Batam Bintan Telekomunikasi ("BBT") BBT is engaged in providing fixed line telecommunication services at Batamindo Industrial Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island. In June 1996, based on a cooperation agreement between the Company and PT Batamindo Investment Corporation ("BIC"), the Company's investment in BBT was fully paid by BIC as a donation to the Company. l. PT Bangtelindo PT Bangtelindo is primarily engaged in providing consultancy services on the installation and maintenance of telecommunication facilities. m. Medianusa Pte. Ltd. Medianusa Pte. Ltd. is an associated company of Infomedia, which is engaged as a sales agent, in search of advertisers for telephone directories. n. PT Radio Telepon Indonesia ("Ratelindo") Ratelindo is engaged in providing facilities and telecommunication services using a domestic fixed wireless network. As of December 31, 2001, the Company recognized a loss due to an other than temporary decline in value of this investment because Ratelindo had a capital deficiency. The Company sold its equity interest in Ratelindo for Rp14.000 million on March 28,2002 and recognized a gain for this amount because the carrying amount of the investment in Ratelindo was nil. o. Lintasarta Lintasarta provides Packet Switch Data Network ("PSDN"), VSAT data, e-mail and Digital Data Network ("DDN") services. Lintasarta was sold to Indosat in 2001 as part of the cross-ownership transaction (see Note 4). 38 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 14. PROPERTY, PLANT AND EQUIPMENT
2001 Additions *) Deductions Reclassifications 2001 ---------- ------------ ---------- ----------------- ---------- Rp Rp Rp Rp Rp At cost or revalued amounts: Land 124,341 70,899 - (87) 195,153 Buildings 1,474,238 34,825 14 88,211 1,597,260 Switching equipment 8,193,862 104,070 59,462 604,473 8,842,943 Telegraph, telex and data communication equipment 206,592 - - - 206,592 Transmission installation and equipment 4,422,912 19,637 6,585 464,000 4,899,964 Satellite, earth station and equipment 3,958,626 5,491 2,240 1,810,457 5,772,334 Cable network 9,621,278 1,222,285 22,682 463,589 11,284,470 Power supply 858,329 19,218 133 121,047 998,461 Data processing equipment 1,153,861 293,761 2,299 449,133 1,894,456 Other telecommunications peripherals 496,937 11,093 - (378) 507,652 Office equipment 481,289 123,832 296 11,204 616,029 Vehicles 163,681 29,904 5,360 (158) 188,067 Other equipment 61,522 6,402 184 308 68,048 Property under construction: Buildings 71,796 50,602 - (104,842) 17,556 Switching equipment 398,102 350,736 - (561,713) 187,125 Transmission installation and equipment 302,384 445,845 - (456,368) 291,861 Satellite, earth station and equipment 531,428 1,589,051 1,167 (1,812,947) 306,365 Cable network 342,822 421,913 - (567,788) 196,947 Power supply 32,858 100,321 - (126,921) 6,258 Data processing equipment 192,169 438,151 - (496,777) 133,543 Other telecommunications peripherals 5,483 3,632 - (5,623) 3,492 Leased assets Vehicle - 3,804 - - 3,804 ---------- --------- ------- -------- ---------- Total 33,094,510 5,345,472 100,422 (121,180) 38,218,380 ========== ========= ======= ======== ========== Accumulated depreciation: Buildings 566,436 90,625 14 (2,451) 654,596 Switching equipment 3,399,503 586,153 3,562 3,396 3,985,490 Telegraph, telex and data communication equipment 195,845 5,903 - - 201,748 Transmission installation and equipment 1,725,696 350,114 65 (92) 2,075,653 Satellite, earth station and equipment 1,507,377 371,925 540 (3,746) 1,875,016 Cable network 3,728,608 1,096,163 2,364 (150,632) 4,671,775 Power supply 581,935 84,498 133 1,315 667,615 Data processing equipment 440,115 285,877 447 (123) 725,422 Other telecommunications peripherals 398,369 41,325 - (2,084) 437,610 Office equipment 363,576 61,974 110 627 426,067 Vehicles 131,842 20,901 4,922 11,317 159,138 Other equipment 35,744 12,095 - 976 48,815 Leased assets Vehicle - 669 - - 669 ---------- --------- ------- -------- ---------- Total 13,075,046 3,008,222 12,157 (141,497) 15,929,614 ---------- --------- ------- -------- ---------- Net Book Value 20,019,464 22,288,766 ========== ==========
*) Including property, plant and equipment of subsidiaries acquired and consolidated in 2001: Dayamitra, GSD, Infomedia and Indonusa 39 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 14. PROPERTY, PLANT AND EQUIPMENT (continued)
January 1, December 31, 2002 Additions*) Deductions Reclassifications 2002 ---------- ------------ ---------- ----------------- ------------ Rp Rp Rp Rp Rp At cost or revalued amounts: Land 195,153 52,791 - 13,346 261,290 Buildings 1,597,260 10,868 49 127,028 1,735,107 Switching equipment 8,842,943 592,014 15,606 (947,965) 8,471,386 Telegraph, telex and data communication equipment 206,592 5,170 3,028 8,646 217,380 Transmission installation and equipment 4,899,964 441,932 9,239 9,291,873 14,624,530 Satellite, earth station and equipment 5,772,334 5,541 - (3,228,327) 2,549,548 Cable network 11,284,470 1,241,547 9,037 25,274 12,542,254 Power supply 998,461 157,551 748 (111,071) 1,044,193 Data processing equipment 1,894,456 326,428 79,830 666,320 2,807,374 Other telecommunications peripherals 507,652 49,846 306 153,042 710,234 Office equipment 616,029 71,493 28,968 (47,264) 611,290 Vehicles 188,067 7,685 3,900 (3,066) 188,786 Other equipment 68,048 8,419 365 7,136 83,238 Property under construction: Buildings 17,556 90,550 - (44,804) 63,302 Switching equipment 187,125 516,684 - (307,648) 396,161 Transmission installation and equipment 291,861 4,147,745 - (4,116,454) 323,152 Satellite, earth station and equipment 306,365 58,103 - (316,374) 48,094 Cable network 196,947 779,471 17,185 (328,181) 631,052 Power supply 6,258 3,932 - (4,295) 5,895 Data processing equipment 133,543 558,962 - (648,387) 44,118 Other telecommunications peripherals 3,492 34,370 - (35,476) 2,386 Leased assets Vehicles 3,804 215 379 283 3,923 ---------- --------- ------- ---------- ---------- Total 38,218,380 9,161,317 168,640 153,636 47,364,693 ========== ========= ======= ========== ========== Accumulated depreciation: Buildings 654,596 101,513 16 17,848 773,941 Switching equipment 3,985,490 675,541 568 (392,642) 4,267,821 Telegraph, telex and data communication equipment 201,748 5,151 2,703 2,236 206,432 Transmission installation and equipment 2,075,653 1,198,453 1,653 1,013,452 4,285,905 Satellite, earth station and equipment 1,875,016 126,658 - (650,789) 1,350,885 Cable network 4,671,775 1,154,770 1,102 (114,926) 5,710,517 Power supply 667,615 86,428 654 (4,784) 748,605 Data processing equipment 725,422 441,203 58,618 (31,071) 1,076,936 Other telecommunications peripherals 437,610 87,916 327 58,867 584,066 Office equipment 426,067 74,934 16,244 (9,061) 475,696 Vehicles 159,138 17,250 3,363 (3,000) 170,025 Other equipment 48,815 16,770 296 1,063 66,352 Leased assets Vehicles 669 837 - 226 1,732 ---------- --------- ------- ---------- ---------- Total 15,929,614 3,987,424 85,544 (112,581) 19,718,913 ========== ========= ======= ========== ========== Net Book Value 22,288,766 27,645,780 ========== ==========
*) including property, plant and equipment of Pramindo which was acquired and consolidated in 2002 40 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 14. PROPERTY, PLANT AND EQUIPMENT (continued) Most of the Company's property, plant and equipment acquired up to January 1, 1979 and January 1, 1987 have been revalued in accordance with Decree No. 109/KMK.04/1979 dated March 27, 1979 of the Minister of Finance of the Republic of Indonesia and Government Regulation No. 45 of 1986, respectively. The revaluation increments of Rp86,787 million resulting from the 1979 revaluation and Rp381,908 million resulting from the 1987 revaluation were included in equity in 1984 and 1988, respectively. Depreciation charged to operations amounted to Rp2,321,688 million, Rp2,747,765 million and Rp3,431,831 million in 2000, 2001 and 2002, respectively. Interest capitalized into property under construction amounted to Rp62,534 million, Rp8,089 million and Rp21,482 million in 2000, 2001 and 2002, respectively. Capitalization rates are the borrowing rates on debts incurred related to property under construction. Foreign exchange losses (gains) capitalized as part of property under construction amounted to Rp179,207 million, Rp1,746 million and (Rp27,568 million) in 2000, 2001 and 2002, respectively. Management believes that no impairment in the carrying amount of its assets has occurred. The Company and its subsidiaries own several parcels of land located throughout Indonesia with land rights (Hak Guna Bangunan or HGB) for a period of 20 and 30 years, which will expire between 2003-2032. Management believes that there will be no difficulty in the extension of the land rights since all the parcels of land are supported by sufficient evidence of ownership. Some of the Company's land measuring 1,801,424 m2 are still under the name of other parties including, among others, the Ministry of Tourism, Post and Telecommunication and the Ministry of Communication of the Republic of Indonesia. As of March 14, 2003, the transfer of the legal title of ownership on those parcels of land to the Company is still in progress. The percentage of completion of construction-in-progress as of December 31, 2002 is between 17% and 95% and the estimated date of completion is between of January 2003 up to June 2003. Management believes that there is no impediment to the completion of the construction-in-progress. All of the Company's property, plant and equipment, except land, were insured with various insurance companies against fire, theft and other possible risks for Rp17,877,571 million as of December 31, 2001 and Rp 20,270,283 million and US$1,367,601,558 as of December 31, 2002. In addition, the Palapa B4 and Telkom-1 Satellite are insured for US$71,837,020 as of December 31, 2002 and US$75,640,000 as of December 31, 2001, respectively. Management believes that the insurance coverage is adequate to cover possible losses on the assets insured. All of the subsidiaries' property, plant and equipment, except land, were insured against fire, theft and other possible risks. The management of the subsidiaries believe that the insurance coverage is adequate to cover possible losses on those assets. 41 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 15. PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS
January 1, December 31, 2001 Additions Deductions Reclassifications 2001 ---------- --------- ---------- ----------------- ------------ Rp Rp Rp Rp Rp At cost: - Land 3,160 - - - 3,160 Buildings 23,952 - - - 23,952 Switching equipment 626,516 - - (1,722) 624,794 Transmission installation and equipment 107,558 - - - 107,558 Cable network 334,792 - - (447) 334,345 Other telecommunication peripherals 201,296 - - (1,454) 199,842 --------- ------ -------- ------ --------- Total 1,297,274 - - (3,623) 1,293,651 --------- ------ -------- ------ --------- Accumulated depreciation: Land 988 158 - - 1,146 Buildings 8,198 1,198 - (62) 9,334 Switching equipment 284,485 39,692 - (1,722) 322,455 Transmission installation and equipment 76,387 10,756 - - 87,143 Cable network 192,481 29,000 - (447) 221,034 Other telecommunication - peripherals 201,226 34 - (1,454) 199,806 --------- ------ -------- ------ --------- Total 763,765 80,838 - (3,685) 840,918 ========= ====== ======== ====== ========= Net Book Value 533,509 452,733 ========= =========
January 1, December 31, 2002 Additions Deductions Reclassification 2002 ---------- --------- ---------- ---------------- ------------ Rp Rp Rp Rp Rp At cost: Land 3,160 - - - 3,160 Buildings 23,952 - - (225) 23,727 Switching equipment 624,794 - - (1,037) 623,757 Transmission installation and equipment 107,558 - - - 107,558 Cable network 334,345 - - (1,157) 333,188 Other telecommunication 199,842 - 69,267 (1,379) 129,196 peripherals --------- ------ -------- ------ --------- Total 1,293,651 - 69,267 (3,798) 1,220,586 --------- ------ -------- ------ --------- Accumulated depreciation: Land 1,146 119 - - 1,265 Buildings 9,334 1,184 - (106) 10,412 Switching equipment 322,455 40,348 - (594) 362,209 Transmission installation and equipment 87,143 8,253 - - 95,396 Cable network 221,034 22,430 - (993) 242,471 Other telecommunication peripherals 199,806 36 69,267 (1,379) 129,196 --------- ------ -------- ------ --------- Total 840,918 72,370 69,267 (3,072) 840,949 --------- ------ -------- ------ --------- Net Book Value 452,733 379,637 ========= =========
42 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 15. PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS (continued) Depreciation charged to operations amounted to Rp97,381 million, Rp80,838 million and Rp72,370 million in 2000, 2001 and 2002, respectively. Rights to the property, plant and equipment under revenue-sharing arrangements are legally retained by the investors until the end of the revenue-sharing period. The unearned income under revenue-sharing arrangements is as follows:
2001 2002 ---------- ---------- Rp Rp Gross amount 1,297,274 1,293,651 Accumulated amortization (1,071,560) (1,127,673) ---------- ---------- Net 225,714 165,978 ========== ==========
16. INTANGIBLE ASSETS
2001 2002 --------- --------- Rp Rp Intangible assets 1,356,144 2,045,454 License - net - 6,672 --------- --------- Net 1,356,144 2,052,126 ========= =========
Movements of intangible assets during 2002 and 2001 are as follows :
2001 ---------------------------------------------------------------- Intangible Assets Goodwill Total ----------------------- -------------------- DMT PIN GSD Indonusa --------- ------- ------- -------- --------- Rp Rp Rp Rp Rp Beginning balance - - - - Additions 1,344,012 - 106,348 654 1,451,014 Impairment - - - - - Amortization (81,804) - (12,412) (654) (94,870) Ending balance 1,262,208 - 93,936 - 1,356,144
2002 ---------------------------------------------------------------- Intangible Assets Goodwill Total ----------------------- -------------------- DMT PIN GSD Indonusa --------- ------- ------- -------- --------- Rp Rp Rp Rp Rp Beginning balance 1,262,208 - 93,936 - 1,356,144 Additions - 895,138 - - 895,138 Amortization (140,250) (44,314) (21,264) - (205,828) Impairment - - - - - --------- ------- ------- -------- --------- Ending balance 1,121,958 850,824 72,672 - 2,045,454 ========= ======= ======= ======== =========
43 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 16. INTANGIBLE ASSETS (continued) The intangible assets resulting from the acquisition of Dayamitra and Pramindo primarily represents the present value of Dayamitra's and Pramindo's share of projected Distributable KSO Revenue over the remaining KSO period. Goodwill resulted from the acquisition of GSD and Indonusa (see Note 2.c). Total amortization of Rp205.828 million for the year ended December 31, 2002 was reported as other expense under "Other Income (Charges)" in the consolidated statements of income. The license represents the Nationwide DCS 1800 Operations and License for Nationwide DCS 1800 Radio Frequency Spectrum Utilization held by Telkomsel. Amortization expense for this license during 2002 amounted to Rp541 million. 17. ESCROW ACCOUNT Escrow accounts consist of the following: a. Dayamitra Escrow This account with Citibank N.A., Singapore ("Dayamitra Escrow Agent"), was established to facilitate the payment of the Company's obligations under the Conditional Purchase Agreement and Option Agreement entered into with the selling shareholders of Dayamitra. In accordance with the Escrow Agreement, the Company made the first installment payment of US$14,343,750 on May 17, 2001. Future monthly installments of US$6,250,000 for twenty four months are required by the agreement. The Company is also obliged to make additional installment payments necessary to settle the obligation on the due dates.and to maintain a minimum balance of US$14,343,750. The escrow account earns interest at LIBOR minus 0.75% per annum, which is computed daily. The interest income earned is included as part of the escrow fund. The remaining funds available will be transferred to the Company after all of the obligations to the Dayamitra transaction are satisfied b. PIN Escrow This escrow account with JPMorgan Chase Bank ("PIN Escrow Agent") was established to facilitate the settlement of the Company's obligations under its Conditional Sale and Purchase Agreement for the acquisition of PIN. In accordance with the Escrow Agreement, the Company will make installment payments of US$12,800,000 for eleven months and US$15,000,000 for sixteen months. The first installment was due on October 1, 2002. Escrowed funds earn interest at LIBOR minus 0.4% per annum, which is computed daily. The interest income earned will be included as part of the escrow fund. 44 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 18. TRADE ACCOUNTS PAYABLE
2001 2002 --------- --------- Rp Rp Related parties Payable to other telecommunications carriers 335,602 610,251 Concession fees 150,142 351,059 Purchases of equipment, materials and services 234,900 71,632 Other 365 - --------- --------- Total 721,009 1,032,942 --------- --------- Third parties Purchases of equipment, materials and services 913,992 2,141,153 Payable related to revenue-sharing arrangements 119,754 112,949 Payable to other telecommunication providers 22,898 102,182 --------- --------- Total 1,056,644 2,356,284 --------- --------- Total 1,777,653 3,389,226 ========= =========
Trade accounts payable by currency are as follows:
2001 2002 --------- --------- Rp Rp Rupiah 1,184,463 2,722,416 U.S. Dollar 195,164 396,496 Euro 197,544 264,974 Yen Jepang 2,064 4,410 Great Britain Pound sterling 3,218 927 Singapore Dollar - 3 Deutsche Mark 179,401 Swedish Krona 10,217 French Franc 5,582 - --------- --------- Total 1,777,653 3,389,226 ========= =========
19. TAXES PAYABLE
2001 2002 --------- --------- Rp Rp Current tax (see Note 36) 1,452,466 888,737 Income tax Article 4 839 - Article 21 29,176 20,366 Article 22 2,771 2,377 Article 23 55,569 53,327 Article 25 139,329 81,280 Article 26 5,556 6,823 VAT 189,317 159,665 --------- --------- Total 1,875,023 1,212,575 ========= =========
45 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 19. TAXES PAYABLE (continued) The amount of VAT Output that has not been remitted to the State Treasury is reported in the taxes payable account. Based on a circular letter No. SE-48/PJ.3/1988 dated December 31, 1988, by the Director General of Taxation, the Company was not allowed to credit the VAT Input against the VAT Output. However, based on the letter from Director General of Taxation No. KEP-539/PJ/2000 dated December 29, 2000, the Company was able to credit the VAT Input against the VAT Output on taxable materials and or services acquired that are directly related to the Company's operations, starting from January 1, 2001. Pursuant to Decision Letter No. KEP-01/WPJ.07/KP.0105/2002 dated March 22, 2002, the Director General of Taxation permitted the Company to pay taxes due on the cross-ownership transaction in nine monthly installments ending on December 25, 2002. 20. ACCRUED EXPENSES
2001 2002 --------- --------- Rp Rp Early retirement benefits 140,000 714,884 Post-retirement benefits 517,661 660,066 Salaries and employee bonuses 136,481 442,615 Interest and bank charges 276,953 282,632 General, administrative and marketing 265,987 220,476 Operation, maintenance and telecommunication services 79,126 180,740 Other 21,367 8,989 --------- --------- Total 1,437,575 2,510,402 ========= =========
Based on the Board of Directors' Resolution No. KD.20/PS900/SDM-10/2001 dated June 11, 2001 concerning Early Retirement, the Company offered an Early Retirement Program for interested and eligible employees. Employees' rights under the early retirement program, method of calculation and payments for compensation and other benefits are provided in the Board of Directors' Resolution No. KD.35/PS900/SDM-10/01 dated November 30, 2001 entitled Employees' Rights under Early Retirement Program Year 2002. Accrued early retirement benefits as of December 31, 2001 has been fully paid in the first semester of 2002. Accrued early retirement expenses as of December 31, 2002 represents the continued early retirement program. Included in accrued early retirement benefits is a charge of Rp357,100 million in 2002 related to the transfer of call center services to Infomedia in 2002 in connection with the First Amendment of Cooperation Agreement on Business Synergy in Inter (I) Net and service (S) Net dated February 25, 2002. The implementation of the transfer needs approval from other Infomedia shareholders. 21. ADVANCES FROM CUSTOMERS AND SUPPLIERS As of December 31, 2002, the Company received deposit payments from KSO Unit III amounting to Rp830,431 million or equivalent to US$91,750,000 related to the Company's plan to buy out AriaWest. The deposit of US$41,750,000 was received on May 17, 2002, upon signing the Conditional Sale and Purchase Agreement and US$50,000,000 upon receipt of AriaWest `s Tax Assessment Letter (see Note 49). 46 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 22. SHORT-TERM BANK LOAN a. On October 5, 2001, Telkomsel entered into a Transferable Term Loan Agreement with Deutsche Bank AG, Jakarta Branch (as "Arranger" and "Facility Agent") covering a loan facility amounting to Rp500,000 million obtained from banks (collectively as "Lenders"), as follows:
Name of bank % of Loan Assigned Amount ------------ ------------------ ------ Rp PT Bank Central Asia, Tbk 38 190,000 PT Bank Lippo, Tbk 19 95,000 PT Bank Niaga, Tbk 19 95,000 PT Bank Bali, Tbk 10 50,000 Deutsche Bank AG, Jakarta 10 50,000 PT Bank Ekonomi Raharja 4 20,000 --------- 500,000 =========
The loan was obtained to finance Telkomsel's working capital requirements. The loan bore interest at 3-months Certificates of Bank Indonesia plus 2%. The loan was settled on October 22, 2002. b. On July 12, 2002, Telkomsel entered into an Opening Letter of Credit and Trust Receipt Loan Agreement with Citibank, N.A. providing for a total facility of US$40,000,000. The facility was obtained to finance Telkomsel's capital expenditures in connection with procurement contracts with three strategic partners and a strategic supplier. Amounts drawn from the facility bear interest at the bank's cost of funds plus 2.5%, and will mature on July 12, 2003. The facility is not collateralized. Total loans drawn from the facility amounted to US$5,280,031. As of December 31, 2002 the outstanding balance of the loan amounted to US$4,385,295 (equivalent to Rp39,205 million). 23. CURRENT MATURITY OF LONG-TERM LIABILITIES
2001 2002 --------- --------- Rp Rp Two-step loan 845,366 836,109 Liabilities for acquisition of subsidiaries 466,508 807,980 Suppliers' credit loan 66,880 163,072 Bank loan 146,300 162,077 Bridging loan 16,720 42,112 Obligation under capital lease - 901 Others 826 - --------- --------- 1,542,600 2,012,251 ========= =========
47 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 24. TWO-STEP LOANS Two-step loans are loans, which were obtained by the Government of the Republic of Indonesia from overseas banks and a consortium of contractors, which are then re-loaned to the Company. The loans entered into up to July 1994 were recorded and are payable in Rupiah based on the exchange rate at the date of withdrawal. Loans entered into after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company. The details of the two-step loans are as follows:
Creditors Interest Rate 2001 2002 --------- ------------- --------- --------- (%) Rp Rp Overseas banks 2.95 - 18.41 9,118,911 8,231,508 Consortium of contractors 3.20 - 18.41 363,795 299,046 --------- --------- Total 9,482,706 8,530,554 Current maturities (845,366) (836,109) --------- --------- Long-term portion 8,637,340 7,694,445 ========= =========
Details of two-step loans obtained from overseas bank as of December 31, 2002 are as follows:
Currencies Interest Rate Amount ---------- ------------- ------ (%) Rp US Dollar 3.85 - 8.70 3,461,090 Rupiah 12.00 - 18.41 3,366,297 Yen 2.95 1,188,369 Euro 7.18 - 8.30 215,752 --------- Total 8,231,508 =========
The acquired loans are intended for the development of telecommunication infrastructure and supporting equipment. The loans are payable in semi-annual installments and are due on various dates until 2025. Detail of two-step loans obtained from consortium contractors as of December 31, 2002 is as follows:
Currencies Interest Rate 2001 2002 ---------- ------------- ---- ---- (%) Rp Rp Yen 3.20 193,639 155,681 Rupiah 13.25 - 18.41 170,156 143,365 ------- ------- Long-term portion 363,795 299,046 ======= =======
The consortium of contractors consists of: Sumitomo Corporation, PT NEC Nusantara Communications and PT Humpuss Elektronika (SNH Consortium). The acquired loans were intended for the financing of a second digital telephone exchange project. The loans are payable in semi-annual installments and are due on various dates until March 15, 2015. 48 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 24. TWO-STEP LOANS (continued) Two-step loans which are payable in Rupiah bear either a fixed interest rate or a floating rate based on the average interest rate of 3-month Certificates of Bank Indonesia during the six-month preceding the installment due date, plus 1%. Two-step loans which are payable on foreign currencies bear either a fixed rate interest or the floating interest rate offered by the lenders, plus 0.5%. As of December 31, 2002, the company has used all facilities of two-step loans and the withdrawal period of two-step loan has expired. The schedule of the principal payments on the Company's two-step loans as of December 31, 2002, is as follows:
Year Total ------ --------- Rp 2003 836,109 2004 860,262 2005 868,587 2006 764,148 2007 669,967 2008 - 2025 4,531,481 --------- Total 8,530,554 =========
The Company must maintain financial ratios as follows: a. Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1 for two-steps loans originating from World Bank and Asian Development Bank ("ADB"), respectively. b. Internal financing (earning before depreciation and interest expenses) should exceed 50% and 20% compared to capital expenditure for loan originally from World Bank and ADB, respectively. As of December 31, 2002 the Company complied with the abovementioned ratios. 25. SUPPLIERS' CREDIT LOANS The detail of suppliers' credit loans are as follows:
2001 2002 -------- ---------- Rp Rp Tomen 397,326 290,498 Cable & Wireless plc 64,574 48,199 ------- ------- Total 461,900 338,697 Current maturities (66,880) (163,072) -------- -------- Long-term portion 395,020 175,625 ======== ========
49 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 25. SUPPLIERS' CREDIT LOANS (continued) a. Tomen Dayamitra has entered into a Design, Supply, Construction and Installation Contract dated November 18, 1998 with Tomen, the ultimate holding company of TMC, which is a shareholder of Dayamitra. Under the terms of the contract, Tomen is responsible for the construction of the minimum new installations required under the KSO VI Agreement in which Dayamitra is the investor. In connection with the above agreement, Dayamitra entered into a Supplier's Credit Agreement ("SCA") with Tomen on November 18, 1998. The total commitment under the SCA was US$54,000,000 of which US$50,444,701 had been drawn down before the expiration date of the available credit on September 30, 1999. Interest accrues on the amounts drawn down at LIBOR plus 4.5% per annum, and is payable semi-annually in arrears. Annual interest rates in 2002 ranged from 5.92% to 6.48%. The SCA loan is repayable in ten semi-annual installments commencing on December 15, 2000. The SCA contains a minimum fixed repayment schedule. However, additional principal repayments are required on repayment dates in the event that Dayamitra has excess cash, as defined in the SCA. The SCA loan is secured on a pro-rata basis by the security rights provided under the C&W plc bridging facility loan. b. Cable and Wireless plc ("C&W plc") Dayamitra entered into a Supplier's Credit Agreement ("SCA") with C&W plc on May 19, 1999. The SCA loan is repayable in ten semi-annual installments commencing on December 15, 2000. The loan contains a minimum fixed repayment schedule. However, additional principal repayments are required on repayment dates in the event that Dayamitra has excess cash, as defined in the SCA. Interest on this loan is at the rate of LIBOR plus 4.5%. Annual interest rates in 2002 ranged from 5.92% to 6.48%. The SCA loan is secured on a pro-rata basis by the security rights provided under the C&W plc bridging facility loan. In addition, any distributions to shareholders in the form of dividends or repayments of share capital require the written consent of Tomen and C&W plc. The schedule of the required principal payments on the above loans as of December 31, 2002 is as follows:
Year Total ------- ----------- Rp 2003 163,072 2004 174,914 2005 711 ------- Total 338,697 =======
50 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 26. BRIDGING LOAN
2001 2002 -------- -------- Rp Rp Total outstanding amount 128,121 95,517 Current maturities (16,720) (42,112) -------- -------- Long-term portion 111,401 53,405 ======== ========
This loan is owed by Dayamitra to C&W plc under a bridging loan facility which was assigned from three local Indonesian banks. The loan is repayable in ten semi-annual installments commencing on December 15, 2000. Interest is payable on a monthly or quarterly basis, at the option of Dayamitra, at the rate of LIBOR plus 4% per annum. Annual interest rates in 2002 ranged from 5.42% to 5.98%. C&W plc has agreed to the repayment of the bridging loan facility in proportion to the amounts made available to Dayamitra under this bridging loan facility and the C&W plc and Tomen Supplier's Credit Loan.The security provided against the bridging loan facility consists of an assignment of KSO revenues; an assignment of bank accounts; a security interest in Dayamitra's movable assets; an assignment of the Tomen construction contract; an assignment of proceeds from early termination of the KSO license by the Company; and an assignment of insurance proceeds. Distributions to shareholders in the form of dividends or repayment of share capital require the written consent of C&W plc. The schedule of the required principal payments on this bridging loan as of December 31, 2002 is as follows:
Year Total ----- ------ Rp 2003 42,112 2004 52,864 2005 541 ------ Total 95,517 ======
51 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 27. LIABILITY FOR ACQUISITION OF A SUBSIDIARY This amount represents the Company's non-interest bearing obligation to the selling stockholders of Dayamitra in respect to the Company's acquisition of 90.32% of Dayamitra and to the selling stockholders of Pramindo in respect to the Company's acquisition of 30% of Pramindo.
2001 2002 -------- -------- Rp Rp Dayamitra transaction PT Intidaya Sistelindomitra 348,140 99,500 PT Mitracipta Sarananusa 239,318 68,398 Cable and Wireless plc 224,838 64,260 Unamortized deferred interest (84,948) (74,915) -------- -------- 727,348 157,243 -------- -------- Pramindo transaction France Cable et Radio - 263,973 Astratel - 230,977 Indosat - 85,791 Marubeni - 52,795 IFC - USA - 19,798 NMP Singapore - 6,599 Unamortized deferred interest - (9,196) -------- -------- - 650,737 -------- -------- Total 727,348 807,980 Current maturity - net of unamortized deferred interest (466,508) (807,980) -------- -------- Long - term portion - net of unamortized deferred interest 260,840 - ======== ========
Under the Conditional Sale and Purchase Agreement of Dayamitra, the amount due to Mitracipta will be paid to Intidaya and C&W plc proportionately based on their ownership interest in Mitracipta. 28. GUARANTEED NOTES AND BONDS
2001 2002 --------- --------- Rp Rp Guaranteed Notes - 1,337,518 Bonds - 1,000,000 --------- --------- - 2,337,518 ========= =========
a. Guaranteed Notes In April 2002, TSFL, Telkomsel's wholly-owned subsidiary, issued US$150 million in guaranteed notes ("Notes"). The notes bear interest at 9.75%, payable semi-annually on April 30 and October 30 of each year, and will be due on April 30, 2007. 52 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 28. GUARANTEED NOTES AND BONDS (continued) a. Guaranteed Notes (continued) On April 23, 2002, TSFL entered into subscription agreements with UBS AG ("UBS") whereby UBS agreed to subscribe and pay for the notes at an issue price equal to 99.709% of the principal amount of the notes, less any fees. TSFL has further authorized UBS to have the notes listed in the Singapore Exchange Securities Trading Limited (the "Singapore Exchange"). Based on the "On-Loan Agreement" dated April 30, 2002, between the Telkomsel and TSFL, the proceeds from the subscription of the notes were loaned to Telkomsel at an interest rate of 9.765% per annum, payable in the same terms as above. TSFL may, on the interest payment date falling on or about the third anniversary of the issue date redeem the notes, in whole or in part, at 102.50% of the principal amount of such notes, together with interest accrued to the date fixed for redemption. If only part of the notes are redeemed, the principal amount of the notes outstanding after such redemption must be at least US$100 million. As of December 31, 2002, the outstanding balance of the notes and the unamortized portion of the discount are as follows:
Foreign Currency Rupiah Equivalent ---------------- ----------------- US$ Rp juta Principal 150,000,000 1,341,000 Discount (389,468) (3,482) ----------- --------- Net 149,610,532 1,337,518 =========== =========
b. Bonds On July 16, 2002, the Company issued bonds amounting to Rp1,000,000 million. The bonds were issued at par value and have a term of five years. The bonds bear interest at a fixed rate of 17% per annum, payable quarterly beginning October 16, 2002. The bonds are traded in the Surabaya Stock Exchange. The bonds mature on July 15, 2007. The Company must maintain the following consolidated financial ratios: 1. Debt service coverage ratio must exceed from 1.5:1 2. Debt to equity ratio must not exceed: a. 3:1, for the period of January 1, 2002 to December 31, 2002 b. 2.5:1, for the period of January 1, 2003 to December 31, 2003 c. 2:1, for the period of January 1, 2004 to the date the bonds are redeemed. 3. Debt to EBITDA ratio must not exceed 3:1 As of December 31, 2002, the Company was in compliance with these covenants. 53 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 29. LONG-TERM BANK LOANS The details of bank loans as of December 31, 2002 is as follows:
Lender Currency Total Outstanding Outstanding facility in original currency (Rp million) - ----------------------------- -------- --------------- -------------------- ------------ Citibank N.A USD 6,950,000 6,950,000 62,272 Hermes Kreditversicherungs AG USD 23,400,000 740,914 6,639 Bank Consortium USD 4,000,000 3,288,000 29,460 Bank Consortium IDR 90,000,000,000 60,438 Bank Central Asia IDR 173,000,000,000 25,903 Tomen USD 35,000,000 7,000,000 62,720 ----------- Total 247,432 Current maturities of long-term bank loans 162,077 ----------- Long term portion 85,355 ===========
a. High Performance Backbone ("HP Backbone") Loan a.1 On April 10, 2002, the Company entered into the "Term Loan Agreement HP Backbone Sumatra Project and Pledge of Right To Deposit" with Citibank, N.A. providing a total facility of US$6,950,000. The facility was obtained to finance the construction of the Sumatra High Performance Backbone, in connection with the "Partnership Agreements" dated November 30, 2001, with PT Pirelli Cables Indonesia and PT Siemens Indonesia for the construction and provision of a high performance backbone in Sumatra. Amounts drawn from the facility bear interest of 1% above the interest rate provided by the Bank on the relevant deposit being pledged to the bank. The loans are payable in eight monthly installments beginning April 2003. The loans will mature in January 2004. The Company has drawn down the entire facility of US$6,950,000. As of December 31, 2002, the outstanding balance of the loan amounted to US$6,950,000 (equivalent to Rp62,272 million). The loan facility from Citibank NA is secured by a time deposit of US$6,950,000. The schedule of the required principal payments on this HP Backbone loan as of December 31, 2002 is as follows:
Year Total --------------- ------ Rp 2003 60,424 2004 1,848 ------ Total 62,272 ======
54 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 29. LONG-TERM BANK LOANS (continued) a. High Performance Backbone ("HP Backbone") Loan (continued) a.2 On April 10, 2002, the Company entered into a "Loan Agreement" with Citibank, N.A ("arranger") and Citibank International plc ("agent"), which was supported by an export credit guarantee of Hermes Kreditversicherungs AG ("lender" and "guarantor"), providing a total facility of US$23,400,000. The facility was obtained to fund up to 85% of the cost of supplies and services sourced in Germany relating to the design, manufacture, construction, installation and testing of high performance backbone networks in Sumatra pursuant to the "Partnership Agreement". Hermes required a guarantee fee of 8.4% of the total facility. This fee is payable twice during the agreement period 15% of the guarantee fee is required to be paid in cash and 85% is included in the loan balance. The outstanding loan as of December 31, 2002 representing the first installment of the fee was US$740,914 (equivalent to Rp6,639 million). As of December 31, 2002, the Company has drawn US$740,914 from the total facility. The loans are payable in ten semi-annually installments beginning in July 2004. Amounts drawn from the facility bear interest at LIBOR plus 0.75%. a.3 On April 10, 2002, the Company entered into a "Term Loan Agreement HP Backbone Sumatra Project" with Bank Central Asia, providing a total facility of Rp173,000 million. The facility was obtained to fund the Rupiah portion of the high performance backbone network in Sumatra pursuant to the "Partnership Agreement". Amounts drawn from the facility bear interest of 4.35% plus the 3-month time deposit rate. The loans are payable in twelve quarterly installments beginning January 2004. The loans will mature in October 2006. Total principal outstanding as of December 31, 2002 is Rp25,903 million. Total available under the facility as of December 31, 2002 is Rp147,097 million. The loan facility from Bank Central Asia was unsecured. b. Internet Protocol Backbone ("IP Backbone") Loan On February 25, 2002, the Company entered into a ("Facility Funding Agreement") with Bank DBS Indonesia (syndicated agent), Bank Bukopin (lender) and Bank Central Asia (lender), providing a total facility of US$4,000,000 and Rp90,000 million to fund the IP Backbone project in 7 (seven) Regional Divisions and 6 (six) KSOs. Amounts drawn in US Dollar bear interest of 2% plus the highest of 1-,2-or 3-month SIBOR divided by 0.87% for the first year and 2% plus the 3-month SIBOR divided by 0.87% thereafter. Amounts drawn in Rupiah bear interest of 19% fixed for the first year and 5% plus the average of BCA and Bukopin interest rates (the highest of 1,3,6 or 12 month time deposit rate) thereafter. The loans are payable in eleven quarterly installments beginning September 2002. The loans will mature on March 15, 2005. Total outstanding IP Backbone loans for Rupiah and US Dollar as of December 31, 2002 are Rp60,437 million and US$3,288,000 (equivalent Rp 29,460 million), respectively. 55 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 29. LONG-TERM BANK LOANS (continued) b. Internet Protocol Backbone ("IP Backbone") Loan (continued) The total unused credit facility for the Rupiah and US Dollar facility as of December 31, 2002 is Rp16,475 million and US$nil, respectively. The Company pledged the assets under construction as collateral for the IP Backbone loan pursuant to Notarial Deed No.17 dated February 25, 2002 of Notary Siti Amiretno Diah Wasisti Bagiono, SH on "Fiduciary Collateral". The pledge has a maximum amount of US$14,587,525.20 and Rp401 million. The schedule of the required principal payments on this IP Backbone loan as of December 31, 2002 is as follows:
Year Total ---- ----- Rp 2003 38,934 2004 38,934 2005 12,029 ------ Total 89,897 ======
Average interest rates for the HP Backbone and IP Backbone loans during 2002 were as follows:
2002 ------------ Rupiah 17.14% - 19% U.S. Dollar 3.5% - 4.38%
Under the Loan Agreements for HP Backbone and IP Backbone, the Company must maintain quarterly financial ratios as follows: 1. Debt to equity ratio should not exceed 3:1 2. EBITDA to interest expense should exceed 5:1 3. EBITDA to loan installment and interest payment should exceed 1.5:1 As of December 31, 2002, the Company complied with the above mentioned ratios. c. J-Exim Loan
2001 2002 -------- -------- Total outstanding amount 219,450 62,720 Current maturities (146,300) (62,720) -------- ------- Long-term portion 73,150 - ======== =======
This represents Dayamitra's obligation under a loan facility agreement it entered into with Tomen on April 27, 1998. The facility has been fully drawn for US$35 million, which is repayable in five semi-annual installments of US$7 million commencing on March 25, 2001. 56 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 29. LONG-TERM BANK LOANS (continued) c. J-Exim Loan (continued) Interest accrues on the outstanding principal at the rate of LIBOR plus 1% and is repayable semi-annually, commencing on September 25, 1998. Annual interest rates in 2002 ranged from 2.75 % to 3.58 %. On June 21, 1999, an agreement was entered into between Tomen and The Export-Import Bank of Japan ("J-Exim") under which the loan and related security rights were assigned from Tomen to J-Exim. 30. MINORITY INTEREST IN SUBSIDIARIES
2001 2002 --------- --------- Rp Rp Minority interest in net assets of subsidiaries Telkomsel 1,162,720 2,516,181 Pramindo - 847,764 Infomedia 45,060 43,744 Dayamitra 7,022 22,172 Indonusa 20,531 13,700 GSD 1 2 --------- --------- Total 1,235,334 3,443,563 ========= ========= Minority interest in net income (loss) of subsidiaries Telkomsel 455,331 975,511 Pramindo - 104,758 Infomedia 15,067 19,031 Dayamitra 6,241 15,151 Indonusa - 1 GSD (2,034) (5,826) --------- --------- Total 474,605 1,108,626 ========= =========
31. CAPITAL STOCK
Number of Percentage Total Description Shares of Ownership Paid-in capital ----------- -------------- ------------ --------------- % Rp Series A Dwiwarna share State of the Republic of Indonesia 1 - - Series B shares State of the Republic of Indonesia 5,472,235,355 54.29 2,736,118 Public (below 5% each) 4,607,764,284 45.71 2,303,882 -------------- ------ --------- Total 10,079,999,640 100.00 5,040,000 ============== ====== =========
57 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 31. CAPITAL STOCK (continued)
2002 Number of Percentage Total Description Shares of Ownership Paid-in capital ----------- -------------- ------------ --------------- % Rp Series A Dwiwarna share State of the Republic of Indonesia 1 - - Series B shares State of the Republic of Indonesia 5,160,235,355 51.19 2,580,118 JPMCB 879,723,798 8.73 439,862 The Bank of New York 610,489,548 6.06 305,245 Public (below 5% each) 3,429,550,938 34.02 1,714,775 -------------- ------ --------- Total 10,079,999,640 100.00 5,040,000 ============== ====== =========
As of December 31, 2001 and 2002, the Company's commissioners, directors, and employees owned a total of 23,039,919 and 18,132,681 Company's shares, respectively. 32. ADDITIONAL PAID-IN CAPITAL
2001 2002 --------- --------- Rp Rp Proceeds from sale of 933,333,000 shares with par value of Rp 2,050 per share through initial public offering in 1995 1,446,666 1,446,666 Capitalization into 746,666,640 series B shares in 1999 (373,333) (373,333) --------- --------- Total 1,073,333 1,073,333 ========= =========
33. TELEPHONE REVENUES
2000 2001 2002 ---------- ---------- ---------- Rp Rp Rp Fixed lines Local and domestic long-distance usage 4,097,093 5,225,705 6,337,365 Monthly subscription charges 887,355 997,651 1,649,590 Installation charges 75,382 98,017 166,722 Phone cards 34,426 25,455 54,689 Others 83,608 68,328 119,012 ---------- ---------- ---------- Total 5,177,864 6,415,156 8,327,378 ---------- ---------- ---------- Cellular Air time charges 2,484,518 3,987,738 5,453,597 Monthly subscription charges 356,034 581,566 593,348 Connection fee charges 42,644 128,543 172,302 Features 6,806 10,151 7,554 ---------- ---------- ---------- Total 2,890,002 4,707,998 6,226,801 ---------- ---------- ---------- Total Telephone Revenues 8,067,866 11,123,154 14,554,179 ---------- ---------- ----------
58 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 34. INTERCONNECTION REVENUES
2000 2001 2002 ------- --------- --------- Rp Rp Rp Cellular 704,160 1,205,280 2,577,263 International 235,936 116,770 344,912 Other 40,889 65,313 103,731 ------- --------- --------- Total 980,985 1,387,363 3,025,906 ======= ========= =========
35. REVENUE UNDER JOINT OPERATION SCHEMES
2000 2001 2002 --------- --------- --------- Rp Rp Rp Minimum Telkom Revenues 1,556,699 1,474,200 1,023,453 Share in Distributable KSO Revenues 695,106 732,960 603,572 Amortization of unearned initial investor payments under Joint Operation Schemes 15,349 12,426 10,784 --------- --------- --------- Total 2,267,154 2,219,586 1,637,809 ========= ========= =========
Distributable KSO Revenues represent the entire KSO revenues, less MTR and operational expenses of the KSO Units. These revenues are shared between the Company and the KSO Investors based on agreed percentages. The agreed percentages for revenue distribution between the Company and KSO Investors was 35%:65% for KSO Unit VII and 30%:70% for KSO Unit III and IV, respectively. 36. DATA AND INTERNET REVENUES
2000 2001 2002 ------- ------- --------- Rp Rp Rp SMS 24,512 344,600 997,249 Multimedia 64,527 218,300 349,678 VoIP - 25,589 160,051 ISDN 18,895 84,695 64,492 ------- ------- --------- TOTAL 107,934 673,184 1,571,470 ======= ======= =========
37. NETWORK REVENUE
2000 2001 2002 ------- ------- ------- Rp Rp Rp Satellite transponder lease 183,255 203,558 190,220 Leased lines 156,779 211,371 136,192 ------- ------- ------- Total 340,034 414,929 326,412 ======= ======= =======
59 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 38. REVENUE-SHARING ARRANGEMENT REVENUES
2000 2001 2002 ------- ------- ------- Rp Rp Rp Revenue-Sharing Arrangement Revenue-Net 170,133 191,478 177,054 Amortization of Unearned Revenue 138,232 73,695 103,104 ------- ------- ------- TOTAL 308,365 265,173 280,158 ======= ======= =======
39. OPERATING EXPENSES -- PERSONNEL
2000 2001 2002 --------- --------- --------- Rp Rp Rp Salaries and related benefit 703,568 882,620 1,212,720 Vacation pay, incentives and other benefit 297,606 364,707 1,086,106 Early retirement benefits - 140,789 906,684 Net periodic postretirement benefit cost 165,103 187,752 367,302 Employee income tax 196,565 132,855 215,251 Net periodic pension cost 72,643 86,233 205,124 Housing 75,387 95,733 105,446 Medical 57,727 81,698 7,447 Others 41,597 56,425 17,984 --------- --------- --------- Total 1,610,196 2,028,812 4,124,064 ========= ========= =========
40. OPERATING EXPENSES - OPERATION, MAINTENANCE AND TELECOMMUNICATION SERVICES
2000 2001 2002 --------- --------- --------- Rp Rp Rp Operation and maintenance 575,647 891,435 1,018,174 Radio frequency usage charges 16,711 101,305 298,076 Electricity, gas and water 116,484 157,068 241,740 Cost of phone cards 47,076 173,412 198,192 Concession fees 78,482 63,561 167,816 Insurance 98,604 67,783 156,184 Leased lines 34,656 82,880 115,805 Motor vehicles 15,694 38,235 88,332 Travel 11,029 15,700 19,768 Telephone kiosks' commissions 372,258 520,947 - Others 19,094 37,595 128,089 --------- --------- --------- Total 1,385,735 2,149,921 2,432,176 ========= ========= =========
Based on the Director's Decree No KD.01/HK.220/OPSAR -- 33/2002 dated January 16, 2002, the rates for phone kiosks 70% of the normal tariff rate. Telephone kiosk's commissions were no longer collected in 2002. 60 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 41. OPERATING EXPENSES - GENERAL AND ADMINISTRATIVE
2000 2001 2002 --------- --------- --------- Rp Rp Rp Provision for doubtful accounts and inventory obsolescence 348,421 342,900 512,399 Professional fees 43,409 325,268 256,109 Collection expenses 131,449 181,925 232,206 Training, education and recruitment 114,723 147,312 153,984 Travel 65,913 92,828 119,530 Security and screening 35,154 48,792 85,209 Printing and stationery 32,150 37,589 47,396 Social contribution - - 33,867 Meetings 17,711 26,498 33,346 General expense - - 28,871 Research and development 33,110 39,523 8,995 Deferred stock issuance amortization 22,402 - - Others 27,241 45,112 45,877 --------- --------- --------- Total 871,683 1,287,747 1,557,789 ========= ========= =========
The provision for doubtful accounts included the provision for the MTR and share in distributable KSO revenues receivable from the KSO Unit III amounting to Rp14,322 million, Rp155,508 million, and Rp341,846 million in 2000, 2001, and 2002, respectively. 42. INCOME TAX Tax expense of the Company and its subsidiaries consists of the following:
2000 2001 2002 --------- --------- --------- Rp Rp Rp Current tax 1,228,199 2,174,401 2,838,573 Deferred tax expense/(benefit) 238,068 (103,747) (92,716) --------- --------- --------- Total 1,466,267 2,070,654 2,745,857 ========= ========= =========
61 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 42. INCOME TAX (continued) A reconciliation between income before tax from the consolidated statements of income and taxable income is as follows:
2000 2001 2002 ------------- ------------- ------------- Rp Rp Rp Pre-tax income 4,789,200 6,687,289 12,342,574 Minority interest (880,919) (1,359,109) (2,586,468) Preacquisition loss of subsidiaries - 108,080 (142,817) ------------- ------------- ------------- 3,908,281 5,436,260 9,613,289 ------------- ------------- ------------- Temporary differences: Provision for doubtful accounts 217,294 226,514 303,495 Depreciation of property, plant, and equipments (349,114) 165,239 214,782 Provision for early retirement benefits - 140,000 574,884 Provision for inventory obsolescence 61,666 74,059 33,477 Timing difference of KSO Units 14,605 10,694 13,936 Amortization of landrights (894) 5,839 (1,524) Equity in net income of associate companies (356,575) (147,633) 432,191 Net periodic pension costs (155,839) (46,852) 24,673 Accounts receivable written off - (44,423) (94,234) Gain on sale of property, plant, and equipments (218,708) (21,759) (9,846) Gain on sale of Ratelindo shares - - (11,695) Decline in value of investments 18,856 (12,376) - Amortization of deferred stock issuance costs 14,428 (5,981) (4,486) Inventory written off (3,992) (3,013) (11,545) ------------- ------------- ------------- Total (758,273) 340,308 1,464,108 ------------- ------------- ------------- Non-deductible expenses (nontaxable income): Net periodic post-retirement benefit costs 165,103 186,316 197,428 Amortization of intangible assets and deferred interests - 94,870 292,162 Depreciation of property, plant, and equipments under revenue-sharing arrangements 97,381 80,838 72,322 Reversal of unrealized share in Telkomsel's net income - 79,899 - Repairs and maintenance on leased land/buildings 28,426 60,092 23,587 Employee benefit 32,048 42,781 48,643 Non-deductible expenses of KSO Units 17,256 27,428 (738) Share in net income of subsidiaries - (1,159,771) (2,510,905) Interest income (631,646) (494,332) (359,049) Income from land/buildings rental (58,211) (116,831) (78,686) Amortization of unearned income on revenue-sharing arrangements (138,232) (73,695) (102,823) Tax penalty 16,703 - 143,629 Adjustment of share in net income of Telkomsel as a result of restatement (470,992) (241,725) - Gain on sale of Telkomsel's shares - - (3,166,086) Others 28,139 31,765 54,004 ------------- ------------- ------------- Total (913,989) (1,482,365) (5,386,512) ------------- ------------- ------------- Total taxable income of the Company 2,236,019 4,294,203 5,690,885 ============= ============= =============
62 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 42. INCOME TAX (continued) The details of current taxes payable are as follows:
2000 2001 2002 --------------- ---------------- ---------------- Rp Rp Rp Current tax expense of the Company 670,796 1,288,243 1,707,248 --------------- ---------------- ---------------- Tax payable on cross ownership transactions Sale of Satelindo - 627,678 - Sale of Lintasarta - 119,586 - --------------- ---------------- ---------------- Total - 747,264 - --------------- ---------------- ---------------- Total 670,796 2,035,507 1,707,248 --------------- ---------------- ---------------- Less prepaid taxes Income tax Article 22 25 45 - Article 23 14,283 40,245 122,736 Article 25 541,074 900,148 917,983 --------------- ---------------- ---------------- Total 555,382 940,438 1,040,719 --------------- ---------------- ---------------- Current tax payable of the Company 115,414 1,095,069 666,529 Subsidiaries 358,776 357,397 222,208 --------------- ---------------- ---------------- Total 474,190 1,452,466 888,737 =============== ================ ================
Current tax expense in the consolidated statements of income is as follows:
2000 2001 2002 ---------------- ---------------- --------------- Rp Rp Rp Company 670,796 1,288,243 1,707,248 Subsidiaries 557,403 886,158 1,131,325 ---------------- ---------------- --------------- Total 1,228,199 2,174,401 2,838,573 ================ ================ ===============
The taxable income and current tax payable of the Company for 2001 and 2002 are in accordance with the corporate tax returns filed with the Tax Service Office. In 2002, the Company received a Tax Underpayment Assessment Letter (SKPKB) from the Tax Service Office for its corporate income tax for fiscal years 2000 and 2001 amounting to Rp34,489 and 19,568, respectively. The additional tax due was settled in December 2002 and the difference between the recorded amount of tax liabilities/prepayments and the amount assessed by the Tax Service Office was charged to current operations. 63 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 42. INCOME TAX (continued) b. Deferred Tax The details of the Company and subsidiaries' deferred tax assets and liabilities are as follows:
December 31, Movements December 31, Movements December 31, 2001 for the year 2001 for the year 2002 ------------ ------------ ------------ ------------ ------------ Rp Rp Rp Rp Rp The Company Deferred tax assets: Allowance for doubtful accounts 167,539 56,726 224,265 47,092 271,357 Allowance for inventory obsolescence 33,173 22,423 55,596 (43,901) 11,695 Provision for early retirement benefits - 42,000 42,000 172,465 214,465 Decline in value of investments 32,657 (3,713) 28,944 (28,944) - Deferred stock issuance costs 7,176 (1,794) 5,382 (1,345) 4,037 Landrights (1,133) 1,752 619 28,368 28,987 ------------ ------------ ------------ ------------ ------------ Total deferred tax assets 239,412 117,394 356,806 173,735 530,541 ------------ ------------ ------------ ------------ ------------ Deferred tax liabilities: Depreciation of property, plant and equipment (1,562,173) 43,044 (1,519,129) 68,345 (1,450,784) Long-term investments (414,204) (82,183) (496,387) 529,036 32,650 Net periodic pension costs (30,250) (14,056) (44,306) 44,306 - ------------ ------------ ------------ ------------ ------------ Total deferred tax liabilities (2,006,627) (53,195) (2,059,822) 641,687 (1,418,134) ------------ ------------ ------------ ------------ ------------ Net deferred tax liabilities - Company (1,767,215) 64,199 (1,703,016) 815,422 (887,593) ============ ============ ============ ============ ============ Subsidiaries Deferred tax assets: Loss carryovers 96,812 16,254 Allowance for doubtful accounts and inventory obsolescence 25,199 54,673 Provision for early retirement benefit - 2,292 Interest on obligations under capital lease 106 (308) ------------ ------------ Total deferred tax assets 122,117 72,911 ------------ ------------ Deferred tax liabilities: Depreciation of property, plant and equipment (175,241) (675,803) Amortization of prepaid expenses (7,315) (21,618) Amortization of unearned initial investor payments (3,778) (2,833) Rental expense (274) - Net periodic pension costs (232) (2,194) Capital leases (20) (4,079) ------------ ------------ Total deferred tax liabilities (186,860) (706,527) ------------ ------------ Net deferred tax liabilities - subsidiaries (64,743) (633,616) ------------ ------------ Total (1,767,759) (1,521,209) ============ ============
64 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 42. INCOME TAX (continued) b. Deferred Tax (continued) A reconciliation between the total tax expense and the amounts computed by applying the effective tax rates to income before tax is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Income before tax per consolidated statements of income 4,789,200 6,687,289 12,342,574 Minority interest in subsidiaries' income before tax (880,919) (1,359,109) (2,586,468) Preacquisition loss of subsidiaries - 108,080 (142,817) ------------ ------------ ------------ Income before tax of the Company 3,908,281 5,436,260 9,613,289 ------------ ------------ ------------ Tax expense at effective tax rates: 10% x Rp 25 million in 2000 and 2001, and Rp 50 million in 2002 3 5 5 15% x Rp 25 million in 2000 and 2001, and Rp 50 million in 2002 4 8 8 30% x Rp 3,175,374 million in 2000, Rp 3,908,231 million in 2001 and Rp 9,613,189 million in 2002 1,172,469 1,630,848 2,883,957 ------------ ------------ ------------ Total 1,172,476 1,630,861 2,883,970 ------------ ------------ ------------ Tax effect of non-taxable income (nondeductible expenses): Net periodic post-retirement benefit cost 49,531 55,895 59,228 Amortization of intangible assets - 28,461 87,649 Depreciation of property, plant and equipments under Revenue-Sharing Arrangements 29,215 24,251 21,697 Amortization of deferred interest - 23,970 22,474 Repairs and maintenance on leased land/buildings 8,539 18,028 7,076 Employee benefits 9,614 12,834 14,593 Nondeductible expenses of KSO Units 5,177 8,228 (222) Share in net income of subsidiaries - (347,931) (753,272) Interest income (189,494) (148,300) (107,715) Income from land/building rental (17,463) (35,049) (23,606) Amortization of unearned income under Revenue-Sharing Arrangements (41,470) (22,109) (30,847) Tax penalty 5,011 - 43,089 Reversal of unrealized Telkomsel's net income - - (57,792) Adjustment of share in net income of Telkomsel as a result of restatement (141,298) (72,518) - Gain on sale of Telkomsel's share - - (949,826) Others 8,441 9,529 51,519 ------------ ------------ ------------ Total (274,197) (444,711) (1,615,955) ------------ ------------ ------------ Tax expense of the Company 898,279 1,186,150 1,268,015 Tax expense of the Subsidiaries 567,988 884,504 1,477,842 ------------ ------------ ------------ Total Tax Expense 1,466,267 2,070,654 2,745,857 ============ ============ ============
65 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 43. BASIC EARNINGS PER SHARE Net income per share is computed by dividing net income by the average number of shares outstanding during the year, totaling 10,079,999,640 shares in 2000, 2001 and 2002. The Company does not have potentially dilutive ordinary shares. 44. CASH DIVIDENDS AND GENERAL RESERVE - Pursuant to the Annual Shareholders' General Meeting as stated in Notarial Deed No. 6 dated April 7, 2000 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved cash dividends for 1999 amounting to Rp1,086,161 million or Rp107.76 per share, and appropriated Rp21,723 million for general reserves. - Pursuant to the Annual Shareholders' General Meeting as stated in Notarial Deed No. 17 dated May 10, 2001 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved cash dividends for 2000 amounting to Rp888,654 million or Rp88.16 per share, and appropriated Rp126,950 million for general reserves. - Pursuant to the Annual Shareholders' General Meeting as stated in Notarial Deed No. 16 dated June 21, 2002 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved cash dividends for 2001 amounting to Rp2,125,055 million or Rp210.82 per share, and appropriated Rp425,011 million for general reserves. 45. PENSION PLAN a. The Company The Company provides a defined benefit pension plan for its employees under which pension benefits to be paid are based on the employee's latest basic salary and number of years of service. The plan is managed by Dana Pensiun Telkom, whose deed of establishment was approved by the Minister of Finance of the Republic of Indonesia in his decision letter No. S.199/MK.11/1984 dated April 23, 1984. The Pension Fund's main sources of funds are the contributions from the employees and the Company. The employees' contribution is 8.4% of basic salary. Any remaining amount required to fund the plan is contributed by the Company. To increase the pension benefits, the Company has increased the basic salaries of active employees by 50% effective August 1, 2000. The Company doubled pension benefits for employees above 56 years of age, deceased employees or employees with physical defects. The increase applies to employees still in active service on July 1, 2002. The Company also increased pension benefit of employees who retired prior to August 1, 2000 by 50% effective January 1, 2003 Pursuant to the Annual Shareholders' General Meeting and the Board of Commissioners meeting, the stockholders and Board of Commissioners approved a 15% increase in the pension benefit for pensioners and an increase in the basic salary of active employees effective January 1, 1999. The Company's contributions to the pension fund amounted to Rp228,482 million, Rp129,252 million and Rp327,786 million for the years ended 2000, 2001 and 2002, respectively. The pension contribution of KSO Units during 2002 amounted to Rp30,434 million. 66 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 45. PENSION PLAN (continued) a. The Company (continued) The composition of the net periodic pension cost charged to income for the Company's plan (excluding those of KSO Units) is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Return on plan assets (279,302) (266,324) (343,121) Interest cost 216,869 277,077 418,044 Amortization and deferral - net 90,068 17,624 132,928 Increase in amortization of prior service cost 23,806 23,806 88,786 Service cost (benefits earned during the year) 21,202 30,216 58,941 ------------ ------------ ------------ Net periodic pension cost 72,643 82,399 355,578 ============ ============ ============
The pension cost attributable to the KSO Units amounted to Rp18,241 million, Rp29,413 million and Rp31,927 million in 2000, 2001 and 2002, respectively. The funded status of the plan as of December 31, 2000, 2001 and 2002 is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Projected benefit obligation (2,209,592) (2,289,134) (4,248,110) Plan assets at fair value 2,091,721 2,571,714 3,099,648 ------------ ------------ ------------ Projected benefit obligation (in excess of) less than plan assets (117,871) 282,580 (1,148,462) ------------ ------------ ------------ Unamortized net amount resulting from changes in plan experience and actuarial assumptions (363,314) (632,536) (820,394) Unamortized prior service cost 284,838 224,383 1,812,198 Unrecognized net obligation at the date of initial application of PSAK No. 24 234,792 206,158 177,525 ------------ ------------ ------------ Prepaid (accrued) pension cost 38,445 80,585 20,867 ============ ============ ============
Plan assets consist mainly of Rupiah time deposits. The unrecognized net obligation at the date of initial application of PSAK No. 24 is amortized over the remaining average future working lives of active employees. This was 17.2 years, starting from January 1, 1992. 67 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 45. PENSION PLAN (continued) a. The Company (continued) The actuarial valuations for the pension plan as of December 31, 2000, 2001 and 2002 were prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide, using the projected-unit-credit method with the following assumptions:
2000 2001 2002 --------- --------- --------- % % % Discount rate 13 13 13 Expected long-term rate of return on Pension Fund assets 13 13 13 Salary growth rate 6 6 6 Defined benefits growth rate - - -
b. Telkomsel Telkomsel provides a defined benefit pension plan to its employees under which pension benefits to be paid are based on the employee's latest basic salary and number of years of service. The plan is managed by PT Asuransi Jiwasraya, a state-owned life insurance company. The employees contribute 5% of their basic salaries to the plan and Telkomsel contributes any remaining amount required to fund the plan. Telkomsel's contributions to the pension fund amounted to Rp2,189 million, Rp3,080 million, and Rp5,163 million for the years ended 2000, 2001, and 2002, respectively. The composition of the net periodic pension cost is as follows:
2000 2001 2002 --------- --------- --------- Rp Rp Rp Service cost 1,418 2,247 4,188 Net amortization and deferral (1,410) (943) (2,070) --------- --------- --------- Net periodic pension cost 8 1,304 2,118 ========= ========= =========
PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide, prepared the actuarial valuations for 2000, 2001 and 2002, using the "Projected-Unit-Credit" method with the following assumptions: Discount rate 12% Salary growth rate 10% Expected long term return on assets 12%
68 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 45. PENSION PLAN (continued) b. Telkomsel (continued) The funding status of the plan as of December 31, 2000, 2001 and 2002 is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Vested benefits 976 1,651 3,226 ============ ============ ============ Accumulated benefit obligation 4,798 6,153 8,072 ============ ============ ============ Projected benefit obligation 11,008 15,001 20,927 Plan assets at fair value 18,526 19,546 27,919 ------------ ------------ ------------ Excess of plan assets over projected benefit obligation 7,518 4,545 6,992 Unrecognized past service cost 3,272 3,207 3,135 Unrecognized experience adjustment (8,296) (3,482) (2,813) ------------ ------------ ------------ Prepaid pension cost 2,494 4,270 7,314 ============ ============ ============
The unrecognized net obligation at the date of initial application of PSAK No. 24 is being amortized over the estimated average remaining service period of active employees of 18.87 years as of June 1, 1999. c. Infomedia Infomedia provides a defined benefit pension plan to its employees. The Company's contributions to the pension fund amounted to Rp246 million, and Rp274 million for the years ended 2001, and 2002, respectively. Pension benefit cost is calculated based on the actuarial valuations from PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide dated September 5, 2002 using the "Projected-Unit-Credit" method with the following assumptions: Discount rate 10% Salary growth rate 5% Mortality rate Mortality rate in Indonesia Retirement age 55 years
Plan assets of pension fund were maintained by Dana Pensiun Infomedia Nusantara. As of December 31, 2002, the funded status of the plan was as follows: Fair Value of plan assets 3,212 Projected benefit obligations (2,364) --------- Projected benefit obligation less than plan assets 848 =========
69 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 45. PENSION PLAN (continued) d. Pramindo Before acquisition, Pramindo participated in a defined benefit multi-employers pension scheme ("the scheme") that covers substantially all Indonesian employees of Pramindo. The scheme provides for benefits to be paid to eligible employees at retirement based primarily upon the number of years with Pramindo and average remuneration during the last three years before retirement. The scheme is funded through contributions made by the related employees (3.2% of basic salary) and Pramindo to Dana Pensiun Astra ("the Fund"). The establishment of the fund was approved by the Ministry of Finance No. KEP-038/KM.17/1996 of February 6, 1996 and published in Supplement No. 19 to State Gazette No. 26 of March 5, 1996. Contributions charged to operating expenses in 2001 and 2002 amounted to Rp576 million and Rp232 million, respectively. After the closing date of acquisition, all Pramindo's employees were terminated and replaced by the Company's employees seconded to Pramindo before August 15,2002. All the Company's seconded employees are participants in the Company's Pension Fund Program. Pramindo did not apply the accounting policy regarding provision for settlement of employee termination and severance payment, gratuity, and indemnity in accordance with the Ministry of Manpower Decree No. Kep-150/Men/2000 dated June 20, 2000, due to Pramindo's employees being registered in the Company's Pension Fund Program. Management believes that the effect of not applying this accounting policy is not significant. 46. POST-RETIREMENT BENEFITS The Company provides a post-retirement health care plan for all of its pensioners who have worked for over 20 years and to their eligible dependents. The requirement of working for over 20 years does not apply to employees who retired prior to June 3, 1995. However, the employees hired by the Company starting from November 1, 1995 will no longer be entitled to this plan. The plan is managed by Yayasan Kesehatan Pegawai Telkom ("YKPT"). The Company accounts for the cost of the benefits over the working lives of its employees based on actuarial computations similar to those provided by Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post-retirement Benefits Other than Pensions" ("SFAS 106"), of U.S. GAAP. The transition obligation at the date of initial application was Rp524,250 million and is being amortized over 20 years beginning on January 1, 1995. The Company's contributions to YKPT amounted to Rp82,853 million, Rp40,257 million and Rp55,000 million in 2000, 2001 and 2002, respectively. The composition of the net periodic post-retirement benefit cost (excluding those of KSO Units) is as follows: 70 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 46. POST-RETIREMENT BENEFITS (continued)
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Return on plan assets (39,773) (49,087) (54,645) Service cost 16,082 17,130 18,810 Interest cost 149,765 176,460 193,734 Amortization of unrecognized transition obligation 26,213 26,213 26,213 Amortization of prior service cost 12,816 15,600 13,316 ------------ ------------ ------------ Net periodic postretirement benefit cost 165,103 186,316 197,428 ============ ============ ============
Cost of post-retirement benefits attributable to the KSO Units amounted to Rp16,704 million, Rp17,647 million and Rp19,131 million in 2000, 2001 and 2002, respectively. The actuarial valuations for the post-retirement benefit plan as of December 31, 2000, 2001 and 2002 were prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide, using the projected-unit-credit" method and the following assumptions:
2000 2001 2002 ------------ ------------ ------------ % % % Discount rate 13 13 13 Expected long-term rate of return of YKPT assets 13 13 13 Cost trend rate 10 10 10
The funded status of the plan as of December 31, 2000, 2001 and 2002 is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Accumulated postretirement benefit obligation Retirees 713,646 728,264 790,331 Other fully eligible plan participants 116,807 179,534 194,835 Other active plan participants 551,411 607,262 659,016 ------------ ------------ ------------ Total 1,381,864 1,515,060 1,644,182 Plan assets at fair value (317,694) (345,148) (371,395) ------------ ------------ ------------ Unfunded postretirement benefit obligation 1,064,170 1,169,912 1,272,787 Unrecognized prior service cost 48,180 43,258 38,336 Unrecognized transition obligation (366,972) (340,759) (314,546) Unrecognized net loss (373,775) (354,750) (336,511) ------------ ------------ ------------ Accrued postretirement benefit cost 371,603 517,661 660,066 ============ ============ ============
71 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 46. POSTRETIREMENT BENEFITS (continued) A 1% increase in the cost trend rate would increase service cost and interest cost, and accumulated postretirement benefit obligation as of December 31, 2000, 2001 and 2002 as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Service cost and interest cost 222,659 278,646 308,512 Accumulated post-retirement benefit obligation 1,619,262 1,792,929 1,960,811
YKPT did not prepare an actuarial calculation of post-retirement benefit for the year ended December 31, 2002. 47. TRANSACTIONS WITH RELATED PARTIES In the normal course of business, the Company and its subsidiaries entered into transactions with related parties. The following transactions with related parties have been conducted under terms and conditions, which the Company believes are the same as if these were conducted with third parties: a. Government of the Republic of Indonesia i. The Company obtained "two-step loans" from the Government of the Republic of Indonesia, the Company's majority shareholder. ii. The Company and its subsidiaries pay concession fees for telecommunication services provided and radio frequency usage charges to the Ministry of Communication (formerly, Ministry of Tourism, Post and Telecommunication) of the Republic of Indonesia. Concession fees amounted to Rp78,482 million, Rp63,561 million and Rp70,596 million in 2000, 2001 and 2002, respectively. Concession fees reflected 1.2%, 0.7% and 0.6% of total operating expenses in 2000, 2001, and 2002, respectively. Radio frequency usage charges amounted to Rp16,711 million, Rp101,305 million and Rp11,928 million in 2000, 2001 and 2002, respectively. Radio frequency usage charges reflected 0.3%, 1.2%, and 0.1% of total operating expenses in 2000, 2001, and 2002, respectively. b. Commissioners and Directors Remuneration i. The Company and its subsidiaries provide honorarium and facilities to support the operational duties of the Board of Commissioners. Total of such benefits amounted to Rp4,851 million, Rp7,189 million, and Rp8,972 million in 2000, 2001 and 2002, respectively, which reflected 0.1%, 0.1%, and 0.1% of total operating expenses in 2000, 2001, and 2002, respectively. ii. The Company and its subsidiaries provide salaries and facilities to support the operational duties of the Board of Directors. Total of such benefits amounted to Rp22,650 million, Rp30,329 million, and Rp42,693 million in 2000, 2001 and 2002, respectively, which reflected 0.4%, 0.4%, and 0.4% of total operating expenses in 2000, 2001, and 2002, respectively. c. Indosat The Company has an agreement with Indosat, a majority state-owned international telecommunication services company, for the provision of international telecommunication services to the public. 72 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) c. Indosat (continued) The principal matters covered by the agreement are as follows: i. The Company provides a local network for customers to make or receive international calls. Indosat provides the international network for the customers, except for certain border towns, as determined by the Director General of Post and Telecommunication of the Republic of Indonesia. The international telecommunication services include telephone, telex, telegram, package switched data network, television, teleprinter, Alternate Voice/Data Telecommunication (AVD), hotline and teleconferencing. ii. The Company and Indosat are responsible for their respective telecommunication facilities. iii. Customer billing and collection, except for leased lines and public phones located at the international gateways, are handled by the Company. iv. The Company receives compensation for the services provided in the first item above, based on the interconnection tariff determined by the Minister of Tourism, Post and Telecommunication of the Republic of Indonesia. The Company has also entered into an interconnection agreement between the Company's PSTN network and Indosat's STBS network in connection with the implementation of Indosat Multimedia Mobile services and the settlement of the related interconnection rights and obligation. Pursuant to the Minister of Communication Decree regarding the transfer of license of Indosat's mobile cellular network operation from Indosat to PT Indosat Multimedia Mobile ("IM3"), the Company agreed to transfer all interconnection rights and obligations to IM3 based on Interconnection Cooperation Agreement, as regulated in the Amendment of Agreement in the side letter No. 656 dated March 18, 2002. The Company's compensation relating to leased lines/channel services, such as IBS, AVD and printers is calculated at 15% of Indosat's revenues from such services. Indosat also leases circuits from the Company to link Jakarta and Medan. The Company has been handling customer billing and collection for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record. Telkomsel also entered into an agreement with Indosat for the provision of international telecommunication services to GSM mobile cellular customers. The principal matters covered by the agreement are as follows: i. Telkomsel's GSM mobile cellular telecommunication network is connected with Indosat's international gateway exchanges to make outgoing or receive incoming international calls through Indosat's international gateway exchanges. ii. Telkomsel receives as compensation for the interconnection, a specific percentage of Indosat's revenues from the related services made through Indosat's international gateway exchanges. 73 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) c. Indosat (continued) iii. Billings for international calls made by customers of GSM mobile cellular telecommunication are handled by Telkomsel. Telkomsel is obliged to pay Indosat's share of revenue although billings to customers have not been collected. iv. The agreement dated March 29, 1996, was initially valid for one year, but extendable for one-year periods as agreed by both parties. The latest extension expired on February 28, 2003. Telkomsel is still under negotiating. In the interim, interconnection revenue was charged based upon the previous agreement. The Company and its subsidiaries earned net interconnection revenues from Indosat Rp93,175 million, Rp54,024 million and Rp158,100 million in 2000, 2001 and 2002, respectively, reflecting 0.8%, 0,3%, and 0.7% of total operating revenues in 2000, 2001, 2002, respectively. Telkomsel also has an agreement for the usage of Indosat's telecommunication facilities. The agreement, which was made in 1997, is valid for eleven years, and subject to change based on an annual review and agreement by both parties. The charges for the usage of the facilities amounted to Rp11,821 million, Rp13,372 million and Rp12,703 million in 2000, 2001 and 2002, respectively, reflecting 0.2%, 0.2%, and 0.1% of total operating expenses in 2000, 2001, and 2002, respectively. Other agreement between Telkomsel and Indosat are as follows : i. Development and maintenance for Jakarta-Surabaya cable system agreement ("J -- S Cable System"). Telkomsel, Lintasarta, Satelindo and Indosat ("the parties") entered into Development and Maintenance for Cable System Agreement. The parties formed a management committee consisting of a chief and a representative of respective part, to direct the development of cable system which was completed in 1998. Based on the agreement, Telkomsel shares 19.325% of total development cost. Telkomsel shares the total cost of operation and maintenance based on the agreed formula. The cost of operation and maintenance shared amounted to Rp956 millions and Rp1,359 millions for the year 2002 and 2001, respectively. ii. Indefeasible Right of Use Agreement On September 21, 2000, Telkomsel entered into agreement with Indosat with respect to the use of SEA -- ME -- WE 3 and tail link in Jakarta and Medan. Based on the agreement, Telkomsel granted an irrevocable right to use a certain capacity of the network commencing from September 21, 2000 to 2015 by prepaying a compensation amounting to US$2,727,273. Beside the aforementioned prepayment, Telkomsel is also charged annual operation and maintenance cost amounting to US$136,364. iii. Indosat, on behalf of IM3, on 1 November 2001 entered into interconnection agreement with Telkomsel agreeing to the following: - Telkomsel's GSM cellular mobile network transferred to IM 3's network, that enable Telkomsel's customer to make or receive a call from or to IM 3's customers. - Supply and installation of interconnection tools needed is Telkomsel's responsibility. - The agreement is effective upon the signing date and extendable for a period agreed by both parties. 74 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) c. Indosat (continued) Based on the amendment upon the above agreement, since December 14, 2001, Telkomsel's customers are able to send and receive short message services from IM3's customers. The Company and its subsidiaries incurred net interconnection costs from IM3 of Rp421 million in 2002 and earned net interconnection revenue from IM3 of Rp157 million in 2001. d. Satelindo The Company has an agreement with Satelindo, an Indosat subsidiary, whereby both parties agreed, among other matters, on the following: i. Interconnection of the Company's PSTN with Satelindo's international gateway exchange, enabling the Company's customers to make outgoing or receive incoming international calls through Satelindo's international gateway exchange. ii. Billings for the international telecommunication services used by domestic customers through Satelindo's international gateway exchange will be handled by the Company. The Company also has an agreement with Satelindo for the interconnection of Satelindo's GSM mobile cellular telecommunication network with the Company's PSTN, enabling the Company's customers to make outgoing calls to or receive incoming calls from Satelindo's customers. Interconnection revenues earned from Satelindo were Rp227,253 million, Rp293,726 million and Rp459,306 million in 2000, 2001 and 2002, respectively, reflecting 1.9%, 1.8%, and 1.1% of total operating income for 2000, 2001, and 2002, respectively. The Company leases international circuits from Satelindo. Payments made in relation to the lease expense amounted to Rp19,611 million, Rp28,111 million and Rp32,222 million in 2000, 2001 and 2002, respectively, which reflecting 0.3%, 0.3%, and 0.3% of total operating expenses for 2000, 2001, and 2002, respectively. Based on an agreement entered into among the Company, PT Bimagraha Telekomindo and Indosat in 1993, at the time of Satelindo's establishment, the Company agreed to transfer to Satelindo, its so-called B2P, B2R and B4 Palapa satellites and other assets relating to the Company's satellite control station located in Jakarta. These transfers are to be covered in a separate agreement between Satelindo and the Company. The separate agreement regarding the transfers of these satellites and other assets has not been made. However, the useful life of the B2P and B2R Palapa satellite had expired. In November 2000, the Company entered into an agreement with a third party, in which the Company agreed to sell the expired B2R Satellite, or to lease the satellite to such third party if the sale is not consummated. In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo, an associated company. Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp43,023 million to the Company for the thirty-year right. Satelindo paid Rp17,214 million in 1995 and the remaining Rp25,809 million has not been paid because the Utilization Right ("Hak Pengelolaan Lahan") on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution by accounting for the above payment as lease expense up to 2006. In 2001, Satelindo paid the remaining amount as lease expense up to 2024. 75 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) e. The Company provides telecommunication services to Government agencies. f. The Company has entered into agreements with Government agencies and associated companies, Lintasarta, CSM and Patrakomindo, for utilization of the Company's Palapa B4 and Telkom 1 satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp86,305 million, Rp89,469 million and Rp44,108 million in 2000, 2001 and 2002, respectively, which reflecting 0.7%, 0.6%, and 0.2% of total operating revenues in 2000, 2001, and 2002, respectively. g. The Company provides leased lines to associated companies and Indosat's subsidiaries - CSM, Lintasarta, Satelindo, Komselindo, Excelcomindo Pratama, Mobisel, Metrosel and PSN. The leased lines can be used by the associated companies permanently or temporarily for telephone, telegraph, data, telex, facsimile or other telecommunication services. Revenue earned from these transactions amounted to Rp17,454 million, Rp19,764 million and Rp199,674 million in 2000, 2001 and 2002, respectively, reflecting 0.1%, 0.1%, and 0.9% of total operating revenues in 2000, 2001, and 2002. h. The Company provides a data communication network system for Lintasarta - an Indosat subsidiary and operates a telemetry tracking and command station for PSN - an associated company. Revenues earned by the Company from these transactions amounted to Rp16,384 million, Rp27,963 million and Rp nil in 2000, 2001 and 2002, respectively, reflecting 0.1%, 0.2%, and 0% of total operating revenues in 2000, 2001, and 2002. i. The Company purchases property and equipment including construction and installation services from a number of related parties. These related parties include PT Industri Telekomunikasi Indonesia ("PT Inti"), Lembaga Elektronika Nasional, PT Adhi Karya, PT Pembangunan Perumahan, PT Nindya Karya, PT Boma Bisma Indra, PT Wijaya Karya, PT Waskita Karya which are all state-owned companies, PT Gratika which is an associated company of Dana Pensiun Telkom, Telekomindo and PT Bangtelindo which are associated companies and Koperasi Pegawai Telekomunikasi, a related party cooperative. Purchases made from these related parties amounted to Rp104,669 million, Rp100,459 million and Rp164,651 million in 2000, 2001 and 2002, respectively, reflecting 1.6%, 1.2%, and 1.4% of total operating expenses in 2000, 2001, and 2002, respectively. j. Inti is also a major contractor and supplier providing equipment, including construction and installation services for Telkomsel. Total purchases from Inti in 2000, 2001 and 2002 amounted to Rp405,351 million, Rp663,587 million and Rp34,717 million, respectively, reflecting 6.3%, 7.8%, and 0.3% of total operating expenses in 2000, 2001, and 2002, respectively. k. The Company and its subsidiary carry insurance (on their property, plant and equipment against property losses and on employees' social security) obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga Kerja and PT Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance premiums amounted to Rp109,821 million, Rp83,945 million and Rp110,477 million in 2000, 2001 and 2002, respectively, reflecting 1.7%, 1%, and 0.9% of total operating expenses in 2000, 2001, and 2002, respectively. l. The Company and its subsidiaries maintain current accounts and time deposits in several state-owned banks. In addition, some of those banks are appointed as collecting agents for the Company. As of December 31, 2001, the Company also has an investment in mutual funds managed by Danareksa, a state-owned company. Total placement in the form of current accounts and time deposits in state-owned banks amounted to Rp6, 097, 618 million as of December 31, 2001 and 2002, respectively, reflecting 11.5% and 14.4% of total assets as of December 31, 2001 and 2002, respectively. 76 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) m. The Company has revenue-sharing arrangements with Telekomindo, an associated company. Revenues earned under these arrangements amounted to Rp5,382 million, Rp6,007 million and Rp10,157 million in 2000, 2001 and 2002, respectively, reflecting 0.1%, 0.1%, and 0.1% of total operating revenues in 2000, 2001, and 2002, respectively. n. The Company leases buildings, purchases materials and construction services, and utilizes maintenance and cleaning services from Dana Pensiun Telkom and PT Sandhy Putra Makmur, a subsidiary of Yayasan Sandikara Putra Telkom -- a foundation managed by Dharma Wanita Telkom. Total charges from these transactions amounted to Rp35,103 million, Rp18,680 million and Rp15,938 million in 2000, 2001 and 2002, respectively, reflecting 0.5%, 0.2%, and 0.1% of total operating expenses in 2000, 2001, and 2002, respectively. o. The Company purchased encoded phone cards from Perusahaan Umum Percetakan Uang Republik Indonesia, a state-owned company. Expenses arising from this transaction amounted to Rp2,195 million, Rp1,781 million and Rp1,377 million in 2000, 2001 and 2002, respectively, reflecting 0.1%, 0.1%, and 0.1% of total operating expenses for 2000, 2001, and 2002, respectively. p. In 1991, the Company granted loans to Koperasi Telekomunikasi ("Koptel") amounting to Rp1,000 million to support Koptel's activities in providing housing loans to the Company's employees. The balance of the loans amounted to Rp200 million as of December 31, 2001 and Rp100 million as of December 2002, which is immaterial to the Company's total assets as of December 31, 2001 and 2002. q. The Company and its subsidiaries earned interconnection revenues from Komselindo, Excelcomindo Pratama, Metrosel, Mobisel, Ratelindo, BBT, PSN and Patrakomindo, which are associated companies, totaling Rp671,612 million, Rp345,284 million and Rp213,092 million in 2000, 2001 and 2002, respectively, reflecting 5.5%, 2.1%, and 1% of total operating revenues in 2000, 2001, and 2002, respectively. r. In addition to revenues earned under the KSO Agreement (see Note 49), the Company also earned income from building rental, repairs and maintenance services, and training services provided to the KSO Units, amounting to Rp95,227 million, Rp114,200 million and Rp47,235 million in 2000, 2001 and 2002, respectively, reflecting 0.8%, 0.7%, and 0.2% of total operating revenues in 2000, 2001, and 2002. s. The Company provides a defined benefit pension plan and a postretirement health care plan for its pensioners through Dana Pensiun Telkom and YKPT (see Notes 45 and 46). The Company has also seconded a number of its employees to related parties to assist them in operating their business. In addition, the Company provides certain of its related parties with the right to use its buildings free of charge. 77 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued) Presented below are balances of accounts with related parties: a. Cash and cash equivalents (see Note 6) b. Temporary investments (see Note 7). c. Trade receivables (see Note 8).
2001 2002 ----------- ------------ Rp Rp d. Other accounts receivable KSO Units 108,128 63,356 State-owned banks (interest) 9,860 12,523 Employees 21,186 4,463 Government agencies - 4,122 Others 3,331 58,411 ----------- ------------ Total 142,505 142,875 =========== ============ e. Advances and other non-current assets PT Multisaka Mitra 17,442 25,000 PT Industri Telekomunikasi Indonesia 6,325 - PT Bangtelindo 231 - ----------- ------------ Total 23,998 25,000 =========== ============
78 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 47. TRANSACTIONS WITH RELATED PARTIES (continued)
2001 2002 ------------ -------------- Rp Rp f. Trade accounts payable Government agencies 150,142 350,605 KSO Units 73,572 251,644 Indosat 37,817 147,259 Excelcomindo 104,599 103,428 Satelindo 118,173 73,378 Koperasi Pegawai Telkom 1,353 14,977 PT Quantum - 8,715 Mitra PBH - 6,531 PSN - 5,183 STB Garuda - 4,675 Inti 208,629 1,420 Perusahaan Listrik Negara - 847 PT Sandhy Putra Makmur 441 498 Telekomindo 288 - Bangtelindo 6,953 - Others 19,042 63,782 ---------- ------------ Total 721,009 1,032,942 ========== ============ g. Other accounts payable Employees 7,804 56,167 Others - 2,542 ---------- ------------ Total 7,804 58,709 ========== ============ h. Liability for cross-ownership transactions (see Note 4). 2001 2002 ---------- ------------ Rp Rp i. Accrued expenses Employees 276,481 1,157,499 Yayasan Kesehatan Pegawai Telkom 517,661 661,390 Government agencies 276,953 219,023 Dana Pensiun Elnusa Yellow Pages - 18,233 PT Asuransi Jasa Indonesia 643 7,213 Singtel - 4,270 Others 2,832 1,771 ---------- ------------ Total 1,074,570 2,069,399 ========== ============ j. Deposits KSO Unit III - 830,431 ========== ============
79 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 48. SEGMENT INFORMATION The Company and its subsidiaries have two reportable segments: fixed line and cellular. The fixed line segment provides local and domestic long distance telephone services and other telecommunication services (including among others, leased lines, telex, transponder, satellite, and Very Small Aperture Terminal-VSAT) as well as ancillary services. The cellular segment provides basic telecommunication services, particularly mobile cellular telecommunication services. In relation with Telkomsel acquisition as described in Note 4, The management has presented segment information based on fixed line and cellular.
Total Total Fixed Before After Line Cellular Other Elimination Elimination Elimination ---------- ----------- -------- ----------- ----------- ----------- Rp Rp Rp Rp Rp Rp 2000 Revenue from external customers 8,888,909 3,223,087 - 12,111,996 - 12,111,996 Intersegment revenue 486,796 (421,630) - 65,166 (65,166) - Interest income 631,650 60,312 - 691,962 - 691,962 Interest expense 816,749 816,749 - 816,749 Depreciation and amortization expense 2,110,226 331,245 - 2,441,471 - 2,441,471 Equity in net income (loss) of associated companies 356,575 - - 356,575 (588,619) (232,044) Segment result before tax 3,437,289 1,905,745 34,785 5,377,819 (588,619) 4,789,200 Segment assets 28,731,740 4,670,571 186,548 33,588,859 (1,569,919) 32,018,940 Long-term investments - net 1,806,166 - 108 1,806,274 (1,529,139) 277,135 Capital expenditures for property, plant and equipment 1,769,009 1,365,191 22,424 3,156,624 - 3,156,624 - --------------------------------------------------------------------------------------------------------------------- 2001 Revenue from external customers 10,540,681 5,590,108 - 16,130,789 - 16,130,789 Intersegment revenue 1,174,993 (671,884) - 503,109 (503,109) - Interest income 505,077 57,220 9,290 571,587 - 571,587 Interest expense 1,302,452 27,190 - 1,329,642 - 1,329,642 Depreciation and amortization expense 2,399,112 513,065 11,302 2,923,479 - 2,923,479 Equity in net income (loss) of associated companies 1,334,083 - - 1,334,083 (1,419,769) (85,686) Segment result before tax 5,384,444 2,925,875 38,464 8,348,783 (1,661,494) 6,687,289 Segment assets 29,250,373 7,363,322 305,835 36,919,530 (4,449,250) 32,470,280 Long-term investments - net 4,403,322 - 108 4,403,430 (4,212,048) 191,382 Capital expenditures for property, plant and equipment 1,417,299 2,780,366 14,416 4,212,081 - 4,212,081 - ---------------------------------------------------------------------------------------------------------------------
80 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 48. SEGMENT INFORMATION (continued)
Total Total Fixed Before After Line Cellular Other Elimination Elimination Elimination --------- ----------- --------- ----------- ----------- ----------- Rp Rp Rp Rp Rp Rp 2002 Revenue from external customers 14,059,958 7,315,028 24,751 21,399,737 - 21,399,737 Intersegment revenue 1,065,909 918,565 - 1,984,474 (1,984,474) - Interest income 373,405 102,176 9,775 485,356 - 485,356 Interest expense 1,357,226 177,341 - 1,534,567 - 1,534,567 Depreciation and amortization expense 2,703,818 980,994 10,005 3,694,817 - 3,694,817 Equity in net income (loss) of associated companies 2,078,714 - - 2,078,714 (2,016,231) 62,483 Segment result before tax 10,300,508 4,014,132 44,164 14,358,804 (2,016,230) 12,342,574 Segment assets 39,931,151 12,456,379 362,987 52,750,517 (10,428,350) 42,322,167 Long-term investments - net 5,513,017 - 108 5,513,125 (5,329,978) 183,147 Capital expenditures for property, plant and equipment 57,147 1,173,006 7,122 1,237,275 - 1,237,275
49. JOINT OPERATION SCHEME ("KSO") In 1995, the Company and five investors (PT Pramindo Ikat Nusantara, PT AriaWest International, PT MGTI, PT Dayamitra Telekomunikasi, and PT Bukaka Singtel International) entered into agreements for Joint Operation Schemes ("KSO") and KSO construction agreements for the provision of telecommunication facilities and services for the Sixth Five-Year Development Plan ("Repelita VI") of the Republic of Indonesia. The five investors have conducted the development and have taken over the operation of the basic fixed telecommunication facilities and services in five of the Company's seven regional divisions. The agreements contain, among others, the following provisions: i. The Company's existing assets in the five regional divisions, together with the assets to be built under the KSO construction agreements, will be managed, operated and maintained by each KSO Unit, in the name of the Company and for and on behalf of the Company and the KSO Investors, commencing from January 1, 1996 to December 31, 2010 ("KSO period"). ii. In the aggregate, a minimum of two million lines are to be planned, designed, engineered, financed and constructed by the KSO Investors during a 3-year period beginning from January 1, 1996, except for Regional Division VI - Kalimantan which started on April 1, 1996. iii. The Company will receive two principal types of payments from each KSO Unit during the term of the KSO, namely Minimum Telkom Revenues ("MTR") and share in distributable KSO revenues, and a one-time initial investor payment from each of the KSO Investors. The initial investor payments totaling US$105 million or equivalent to Rp230,239 million were made by the KSO Investors to the Company as a compensation for their rights to participate in developing and operating telecommunication facilities in the KSO regional divisions. 81 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 49. JOINT OPERATION SCHEME ("KSO") (continued) MTR represents an annual amount guaranteed by the KSO Investors and is required to be supported by bank guarantees. The MTR is payable on a monthly basis in fixed amounts which may increase every year during the KSO period. A further monthly adjustment for the MTR is possible depending upon KSO Investor's performance under its commitment to install additional lines. Distributable KSO revenues are the entire KSO revenues, less the MTR and the operational expenses of the KSO Units, as provided in the KSO agreements. These revenues are shared between the Company and the KSO Investors based on agreed percentages. The Company receives 35% of the distributable KSO revenues from Regional Division VII, and 30% from the other KSO Regional Divisions. At the end of the KSO period, all rights, title and interests of the KSO Investor in existing installations and all work-in-progress, inventories, equipment, materials, plans and data relating to any approved additional new installation projects then uncompleted or in respect of which Interconnection Tests have not then been successfully completed, shall be sold and transferred to the Company without requiring any further action by any party, upon payment by the Company to the KSO Investor of one hundred Rupiah, plus: i. the net present value, if any, of the KSO Investor's projected share in distributable KSO revenues, from the additional new installations forming part of the KSO system on the termination date, over the balance of the applicable payback periods. ii. an amount to be agreed upon between the Company and the KSO Investor as fair compensation in respect of any uncompleted or untested additional new installations transferred. The depreciation of the Rupiah against the U.S. Dollar, which started in the second half of 1997, has impacted the financial condition of the KSO Investors. In response to economic conditions, on June 5, 1998, all KSO Investors and the Company have signed a Memorandum of Understanding ("MoU") to amend certain provisions of the KSO agreements. Among the amendments are as follows: i. The percentage of sharing of the distributable KSO revenues for 1998 and 1999 was 10% and 90% for the Company and the KSO Investors, respectively. ii. The minimum number of access line units to be installed by the KSO Investors up to March 31, 1999 was 1,268,000 lines. iii. The incremental rate of the MTR would not exceed 1% in 1998 and 1.5% in 1999 for the KSO agreements with the Investors that have MTR incremental factors. iv. "Operating Capital Expenditures" in each of the KSO Units will be shared between the Company and the respective KSO Investors in proportion to the previous year's share in the annual net income of the KSO Units, starting from 1999. v. The cancellation of the requirement to maintain a bank guarantee in respect of MTR. In 1998 and 1999, the Company adopted the provisions of the MoU. Beginning November 1999, the Company and the KSO Investors had begun to renegotiate the terms of the KSO agreements in conjunction with the changing environment and the expiration of certain terms in the MOU. Among others, it was agreed to return to most of the provisions of the original KSO agreements beginning January 1, 2000. The Company is seeking a fair resolution to the KSO problems. The Company believes that the long-term solution for all five KSO's requires Government intervention and must be considered in the context of restructuring the entire Indonesian telecommunication sector. 82 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 49. JOINT OPERATION SCHEME ("KSO") (continued) KSO I The Company and the shareholders of Pramindo has reached an agreement in which the Company will acquire the KSO I assets (see Note 5). On April 19, 2002, the Company entered into the Conditional Sale and Purchase Agreement with PT Astratel Nusantara, France Cabel et Radio, Indosat, Marubeni Corporation, International Finance Corporation and NMP Singapore Pte Limited ("Selling Shareholders") regarding the acquisition of 100% Pramindo's shares. Pursuant to the CSPA, the Company at the same time will buy out all Pramindo's ordinary subscribed and fully paid-in capital from respective stockholders in pro-rata basis as follows: i. 30% in August 15, 2002 (pursuant to the amendment), other than IFC's shares, which will be transferred on the date of pledged shares, which has been fully unconditional released based on IFC Investment Agreement and Common Term Agreement. ii. 15% at the interim closing which will be carried on whichever is coming first of the first drawdown date and September 30, 2003. iii 55% at the subsequent closing which will be carried on whichever is coming first of the (a) drawdown date, (b) December 31, 2004, and 30 days after Pramindo buy out all promissory notes. The total purchase price of Pramindo's shares of US$384,363,026 including interest from promissory notes and US$9,263,953 should be paid on the date of shares pledged and US$372,234,919 shall be paid off through the issuance of promissory notes series I and II. Pursuant to the agreement, the Company will provide loan to Pramindo in the amount of US$86,176,000 for the loan settlement to shareholders (IFC). All of the promissory notes will be paid on an installment basis. The last payment will be on December 15, 2004. KSO III On May 8, 2002, the Company entered into a Conditional Sales and Purchase Agreement with PT Aria Infotek, Media International B.V. and Asian Infrastructure Fund ("Selling Shareholders") regarding the acquisition of 100% AriaWest's shares. Based on the CSPA, the Company shall purchase 2,704,444 subscribed and paid-in capital of AriaWest with par value of Rp114,000. The selling price is US$184,500,000 and US$44,500,000 of the amount should be paid first, the settlement value of US$20,000,000 shall be paid on closing date, and US$120,000,000 will be paid off through the issuance of promissory notes. The CSPA was intended to clear off all disputes with AriaWest. Up to March 25, 2002, the agreement has not been closed yet because of AriaWest's debt restructuring proposal, as a closing condition note, has not been approved by its creditors. International Chamber of Commerce ("ICC") gives time extension up to April 17, 2003 to the Company and selling shareholders to settle the dispute out of ICC arbitration process. Up to December 31, 2002, the Company has deposited advance to AriaWest's stockholders amounting to US$21,750,000 which is recorded as "Advance Payment for Investment in Shares of Stocks", and The Company has received payment from KSO Unit III, of US$91,750,000 which was recorded as "Advance from Customers and Suppliers". 83 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 49. JOINT OPERATION SCHEME ("KSO") (continued) KSO IV The sale of KSO IV to Indosat was terminated due to some condition precedents that were not fulfilled. The Company plans to buy out MGTI, the KSO IV investor in Central Java and Yogyakarta. Currently, the Company is in the process of negotiation. KSO VI The Company has acquired 90.32% of issued and paid-in capital of Dayamitra, the KSO VI Investor. KSO VII The Company and PT Bukaka Singtel International intend to continue the KSO schemes in accordance with original agreements with some modifications. 50. REVENUE-SHARING AGREEMENTS WITH SEVERAL INVESTORS The Company has entered into separate agreements with several investors under Revenue-Sharing Arrangements ("RSA") to develop fixed lines, analog mobile cellular lines, public card-phone booths (including their maintenance), and related supporting telecommunication facilities. Under the RSA, the investors finance the costs incurred in developing telecommunication facilities. Upon completion of the construction, the Company manages and operates the facilities. The investors legally retain the rights to the property, plant and equipment constructed by them during the revenue-sharing periods. At the end of each revenue-sharing period, the investors transfer the ownership of the facilities to the Company. The Company bears the cost of repairs and maintenance of the facilities during the revenue-sharing period. The revenue-sharing period is determined on the basis of the internal rates of return agreed by both parties. The internal rates of return range from 24% to 30%, and the revenue-sharing periods vary from one year and seven months to fifteen years from the start of commercial operations. The revenue-sharing period can be either fixed regardless of full investment returns to the investors, or extended to ensure full investment returns to the investors. The revenue-sharing periods end on various dates through 2009. The revenues earned from the customers in the form of line installation charges are fully for the account of the investors. The revenues from outgoing telephone pulse and monthly subscription charges are shared between the investors and the Company 60:40 or 70:30 (in favor of the investors) depending on the agreements. Certain additional arrangements are made for revenues earned from analog mobile cellular, whereby revenues from international outgoing pulses are fully owned by the Company. Revenues earned from pay phone cards during the revenue-sharing period are shared 60:40 (in favor of the investors) based on the recorded usage of pulses. On August 1, 2002, RSA period with Telesera was expired. The legal title on property, plant and equipments under RSA was not transferred to the Company because RSA did not achieve the investment's rate of return in accordance with the RSA Agreement. The Company accelerated the depreciation of those assets amounting to the book value of Rp3,300 million. The investors' share of revenues amounted to Rp508,355 million, Rp546,701 million and Rp636,985 million in 2000, 2001 and 2002, respectively. 84 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 51. TELECOMMUNICATION SERVICES TARIFFS Under law No.36 1999 and Government Regulation No. 52 year 2000, Tariffs for the use of telecommunication network and telecommunication services are determined by providers based on the tariffs category, structure and with respect to fixed line telecommunication services price cap formula set by the Government. Fixed line telephone Tariffs Fixed line telephone tariffs are imposed for network access and usage. Access charges consist of a one-time installation charge and a monthly subscription charge. Usage charges are measured in pulses and classified as either local or domestic long-distance. The tariffs depend on call distance, call duration, the time of day, the day of the week and holidays. Tariff for fixed line telephone are regulated under Minister of Communication Decree No. KM.12 year 2002 dated January 29, 2002 concerning the addendum of the decree of Minister of Tourism, Post and Telecommunication ("MTPT") No. 79 year 1995, concerning The Method for Basic Tariff Adjustment on Domestic Fixed Line Telecommunication Services. Furthermore, the Minister of Communication issued Letter No. PK 302/1/3 PHB-2002 dated January 29, 2002 regarding the price cap in basic tariff increase of fixed line telephone services. According to the letter, tariff for fixed line domestic calls would increase by 45.49% over three years. The average increase in 2002 is 15%. This increase was effective on February 1, 2002. The Ministry of Communication issued Letter No. PR.304/2/4/PHB-2002 dated December 17, 2002 regarding tariff adjustment for domestic fixed line services effective on January 1, 2003. By considering that the Independent Regulatory Body, as the precondition for the tariff adjustment, has not been established, The Minister of Communication has finally postponed the implementation of rate adjustment by issuing Ministerial Letter No. PR. 304/1/1/PHB/-203 dated January 16, 2003. Mobile Cellular Telephone Tariffs. Tariff for cellular providers are set on the basis of the MTPT decree No. KM. 27/PR.301/MPPT--98 dated February 23, 1998. Under the regulation, the cellular rates consist of activation fees, monthly charges and usage charges. The maximum tariff for the activation fee is Rp200,000 per new subscriber number. The maximum tariff for the monthly charges is Rp65,000. Usage charges consist of the following : a. Airtime The basic airtime tariff charged to the originating cellular subscriber is Rp325/minute. The details are as follows: 1. Cellular to cellular : 2 x airtime rate 2. Cellular to PSTN : 1 x airtime rate 3. PSTN to cellular : 1 x airtime rate 4. Card Phone to cellular : 1 x airtime rate plus 41% surcharges b. Usage Tariff 1. Usage tariff charged for a cellular subscriber who makes a call to another subscriber using the PSTN network is similar to the usage tariffs for PSTN subscribers. For the use of local PSTN network, the tariff is computed at 50% of the prevailing local PSTN tariff. 2. The long-distance usage tariff between two different service areas is similar to the prevailing tariff for a domestic long-distance call ("SLJJ") for a PSTN subscriber. 85 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 51. TELECOMMUNICATION SERVICES TARIFFS (continued) Mobile Cellular Telephone Tariffs (continued) b. Usage Tariff (continued) Based on the Decree No. KM. 79 year 1998 of the Ministry of Communications, the maximum tariff for prepaid customers may not exceed 140% of the peak time tariffs for post paid subscribers. Interconnection Tariffs Interconnection tariffs regulate the sharing of interconnection calls between the Company and other cellular operators. The current interconnection tariff is governed under MTPT Decree No. KM.46/PR.301/MPPT-98 ("KM. 46 year 1998") dated February 27, 1998 which came into effect on April 1, 1998 and was further revised by the Minister of Communication Decree No. KM.37 year 1999 dated June 11, 1999 ("KM. 37 year 1999"). a. International interconnection with PSTN and cellular telecommunication network Based on KM.37 year 1999, effective December 1, 1998, the international interconnection tariff is calculated by applying the following charges to successful incoming and outgoing calls to the Company's network: Tariff ---------------------- Access charge Rp 850 per call Usage charge Rp 550 per paid minute Universal Service Obligation (USO) Rp 750 per call Indosat is exempted from paying the USO until December 31, 2004, while the USO charges payable by Satelindo are paid directly to the MTPT or Minister of Communications. (see Note 47). b. Mobile and fixed cellular interconnection with the PSTN Based on KM. 46 year 1998, cellular interconnection tariffs with PSTN are as follows: 1. Local Calls For local calls from a mobile cellular network to PSTN, the cellular operator pays the Company 50% of the prevailing tariff for local calls. For local calls from PSTN to a cellular network, the Company charges its subscribers the applicable local call tariff plus an air time charge, and pays the cellular operator the air time charge. 2. Domestic Long-distance Calls KM.46 year 1998 provides tariffs which vary among long-distance carriers depending upon the routes and the long distance network used. Pursuant to this decree, for long-distance calls which originate from the PSTN, the Company is entitled to retain a portion of the prevailing long-distance tariff, which portion ranges from 40% of the tariff, in cases where the entire long-distance portion is carried by one cellular operator and delivered to another, and up to 85% of the tariff, in cases where the entire long-distance portion is carried by the PSTN. 86 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 51. TELECOMMUNICATION SERVICES TARIFFS (continued) Interconnection Tariffs (continued) b. Mobile and fixed cellular interconnection with the PSTN (continued) For long-distance calls which originate from a cellular operator, the Company is entitled to retain a portion of the prevailing long-distance tariff, which portion ranges from 25% of the tariff, in cases where the entire long-distance portion is carried by a cellular operator and the call is delivered to a cellular subscriber, and up to 85% of the tariff, in cases where the entire long-distance portion is carried by the PSTN and the call is delivered to a PSTN subscriber. Interconnection tariffs with mobile satellite networks ("STBSAT") are established based on a Joint Operation Agreements between the Company and STBSAT providers pursuant to The Minister of Communication Decree No. KM. 30 year 2000 concerning Global Mobile Personal Telecommunication Service Tariffs by Garuda Satellite dated March 29, 2000. Flat interconnection tariffs per minute apply for those Companies. Interconnection tariffs with mobile cellular networks, including USO, are determined based on the duration of the call. Access and usage charges for international telecommunication traffic interconnection with telecommunication networks of more than one domestic carrier are to be shared proportionately with each carrier involved, which proportion is determined by the MTPT. Interconnection tariffs between a fixed wireless network and PSTN, and amongst PSTN, are regulated under MTPT letter No. KU.506/1/1/MPPT-97 dated January 2, 1997 and letter No. KU.506/4/6/MPPT-97 dated July 21, 1997. Currently, Ratelindo is the only operator of a fixed wireless network and apart from the Company, BBT is the only operator of PTSN. For fixed wireless interconnection with the PSTN and BBT with the PSTN, the "sender-keeps-all" basis for local calls is applied and for domestic long-distance calls that originate from Ratelindo's network and transit to PSTN, the Company receives 35% of Ratelindo's revenue for such calls. For domestic long-distance calls that originate from PSTN, the Company retains 65% as its revenue for such calls. For long distance calls from and to BBT, the Company retains 75% of the revenue while BBT receives the remaining 25%. c. Mobile cellular interconnection with other mobile cellular providers Based on KM.46 year 1998, the mobile cellular interconnection tariffs with other mobile cellular providers are as follows: 1. Local Calls For local calls from one cellular telecommunication network to another, the originating cellular operator pays the airtime to the destination cellular operator. If the call is carried by the PSTN, the cellular operator pays the PSTN operator 50% of the prevailing tariff for local calls. 2. Domestic Long-distance Calls For long-distance calls which originate from a cellular telecommunication network, the cellular operator is entitled to retain a portion of the prevailing long-distance tariff, which portion ranges from 15% of the tariff in cases where the entire long-distance portion is not carried by the cellular operator, up to 60% of the tariff in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, or up to 75% if the call is delivered to the same cellular operator. 87 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 51. TELECOMMUNICATION SERVICES TARIFFS (continued) Interconnection Tariffs (continued) In connection with the issuance of Law No. 36 year 1999 and Government Regulation No. 52 year 2000, the Minister of Communications, on May 31, 2001, issued Decree No. KM. 20 year 2001, concerning Operations of Telecommunication Network and KM 21 year 2001 concerning Operations of Telecommunication Services, which came to effective from at the date of the decree. Subsequently, the Minister of Communication issued Decree No. KM.84 year 2002 concerning Telecommunication Traffic Clearing Process. Public Phone Kiosk ("Wartel") Tariff The Company is entitled to retain 70% of the telephone tariff based on Director Decree No. 01/H220/OPSAR-33/2002 dated January 16, 2002, which came into effect on February 1, 2002. This governs the transition of the business arrangement between Telkom and Wartel providers, from a commission-based revenue sharing into agreed usage charges (pulses). On August 7, 2002, the Minister of Communication issued Deree No. KM. 46 year 2002 regarding the operation of phone kiosks. The decree provides that the Company is entitled to retain a maximum of 70% of the phone kiosk basic tariff from domestic calls and up to 92% of telephone kiosk basic tariffs from International Calls. 52. COMMITMENTS a. Letters of Comfort The Company issued letters of comfort to certain lenders of Komselindo with respect to a US$100,000,000 loan in 1997 and to lenders of Mobisel, with respect to a US$60,000,000 loan in 1996, which were due in 2002 and 2001, respectively. On August 30, 2002 Komselindo's shareholders agreed to issue additional paid-in capital for loan restructuring (see Note 13.j). The Company pledged its deposits of Rp500,000 million as collateral for the credit facility from Bank Mandiri. The time deposits matured on February 18, 2003. The Company also pledged its time deposits of US$1,800,000 as collateral for the loan facility granted to Napsindo from Bank Mandiri. The time deposits will mature on August 28, 2003. b. Credit Facilities Telkomsel has credit facilities related to a procurement contract with Motorola Inc., Ericsson radio A.B., Nokia OYJ and Siemens Aktiengesellschaft (AG). The details are as follows: 1. Letter of Credit ("LC") Facilities On June 7, 2002, Telkomsel entered into an Opening LC Agreement with Deutsche Bank A.G., Jakarta. The agreement requires Telkomsel to deposit an amount equal to the LC amount prior to the issuance of the LC. Upon the maturity date which is 180 days from the date of Bill of Lading, the outstanding LC shall be settled by applying the deposit. Through December 31, 2002, Telkomsel has entered into LC transactions totaling to US$8,200,435. On July 12, 2002, Telkomsel entered into an Opening LC and Trust Receipt Loan Facility Agreement with Citibank N.A., Jakarta covering an LC amount of US$40,000,000 with two credit structures as follows: 88 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) b. Credit Facilities (continued) 1. Letter of Credit ("LC") Facilities i. Structure 1 Credit Prior to issuance of the Credit, Telkomsel must deposit 20% of the face value of the Credit. Upon maturity, the Usance Draft will be settled by applying the initial 20% deposit together with Telkomsel's loan drawn from the facility for the remaining 80% of the face value of the Usance Draft. The Credit shall be available for one drawing by the beneficiary made against presentation of a Usance Draft with a maturity date of 120 days. The drawing will only be available for six (6) months from the issuance date of the Credit. The repayment of the loan will be made in three equal monthly installments, commencing upon the maturity date of the Usance Draft, with an interest rate of 2.5% above the bank's cost of funds. Telkomsel may, however, upon at least fourteen days prior written notice to the bank, prepay the loan in whole, provided that Telkomsel shall first pay to the Bank any interest, fees and or other amounts due. ii. Structure 2 Credit Prior to issuance of the Credit, Telkomsel must deposit 25% of the face value of the Credit to be available upon the acceptance of the Sight Draft. The Credit will be available for two partial drawings by the beneficiary as follows: The first drawing shall be for a Sight Draft available in an amount up to 25% of the face value of the Credit and such drawing shall only be available for two (2) months from the issuance date of the Credit. The second drawing shall be for a Usance Draft in an amount up to 75% of the face value of the Credit with a maturity date of 180 days after the acceptance of the Sight Draft. Such drawing will only be available for four (4) months from the issuance date of the Credit. Upon maturity date of the Usance Draft, the outstanding balance payable by Telkomsel shall be converted into a loan. The repayment of the loan will be made in nine (9) equal monthly installments, commencing on the acceptance of the Usance Draft, with an interest rate of 2.5% above the Bank's cost of funds. Telkomsel may, however, upon at least fourteen (14) days prior written notice to the Bank, prepay the loan in whole, provided that Telkomsel shall first pay to the Bank any interest, fees, and or other amounts due. As of December 31, 2002, the unused portion of the facility amounted to US$8,857,725. On July 19, 2002, Telkomsel entered into an Opening LC Agreement with Standard Chartered Bank, Jakarta. The agreement requires Telkomsel to deposit an amount equal to the LC amount prior to the issuance of the LC. Upon maturity date which is 180 days from the date of the Bill of Lading, the payment of the LC shall be made by applying the deposit. 89 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) b. Credit Facilities (continued) On October 29, 2002, Telkomsel entered into a Banking Facilities Credit Agreement with Standard Chartered Bank with details are as follows: i. Import Facilities (I) -- US$25,000,000 Sight or usance documentary letters of credit, secured and unsecured by the underlying goods and covering the procurement of materials or equipment in relation to Telkomsel's operation with a corresponding acceptance against the trust receipt facility. ii. Local LC Facility (II) - Rp100,000,000,000 Documentary local letter of credit up to 12 months for the procurement of materials or equipment from local suppliers with corresponding loans against the trust receipt facility. iii. Bank Guarantee -- US$25,000,000 For issuance of various bank guarantees in relation to Telkomsel's operations against a letter of indemnity from Telkomsel for a period up to 12 months. iv. Foreign Exchange Facility (I) The Bank will quote rates for spot, forwards, and swap foreign exchange transaction up to three (3) years v. Foreign Exchange Facility (II) The Bank will quote rates for foreign exchange spot transactions up to two (2) days. The facility was obtained to finance Telkomsel's funding requirements for transactions with vendors and will expire on July 31, 2003. A loan drawn from the facility bears interest on the basis of SIBOR plus 2.5% per annum for the US Dollar facility and of the three-month SBI plus 2% per annum for Indonesian Rupiah. Telkomsel is allowed to make a prepayment of the loan on ten (10) days notice without penalty. A prepayment fee of 3.5% per annum of the prepaid amount will be applied if written notice is given less than the above notice period. 2 EKN - Backed Facility On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia, Telkomsel obtained an EKN-Backed Facility (" Facility") with Citibank International plc (as "Arranger" and "Agent") covering a total facility of US$70,483,426.49 which was divided into several tranches. The Interest rate on the facility is the aggregate of the applicable margin, CIRR (Commercial Interest Reference rate) and mandatory cost, if any. Interest will be paid semi-annually, starting on the date the facility is drawn. 90 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) b. Credit Facilities (continued) 3. Hermes Export Facility On December 2, 2002, pursuant to the Partnership Agreement with Siemens Aktiengesellschaft (AG), Telkomsel entered into a Hermes Export Facility Agreement ("Facility") with Citibank International plc (as "Arranger" and "Agent")covering a total facility of Euro76,195,3132 which is divided into several tranches. The interest rate on the facility is aggregate of the applicable margin, EURIBOR and mandatory cost, if any. Interest will be paid semi-annually, starting on the facility is drawn. As of December 31, 2002, none of the credit facilities have been used, except for the facilities from Citibank N.A. of US$40,000,000 and Standard Chartered Bank of US$ 25,000,000 for which the unused portion amounted to US$8,857,725 and US$21,400,457, respectively. c. Procurement Agreements In September 2001, Telkomsel entered into partnership agreements with Motorola, Inc., Ericsson Radio A.B., and Siemens Aktiengesellschafts ("Strategic Partners") and Nokia Oyj ("Strategic Supplier") for the procurement of equipment and related services. The partnership agreements are valid and effective as of the execution date by the respective parties for a period of three years and extendable upon mutual agreement of the parties for a maximum of two additional years. Telkomsel uses the LC facility from Citibank to pay for goods and services procured under the Partnership Agreements. d. Capital Expenditures As of December 31, 2002, the amount of capital expenditures committed under contractual arrangements, principally relating to procurement and installation of switching equipment, transmission equipment and cable network, are as follows:
Amounts in Foreign Currencies Equivalent Currencies (in thousands) in Rupiah --------------- ---------------------- ---------------- Rupiah - 3,831,703 U.S.Dollar 203,171 1,818,380 EURO Europe 98,650 923,889 ----------- Total 6,573,972 ===========
e. Agreement on Derivative Transaction In 2002, the Company entered into two derivative transaction agreements with Bank Mandiri and HSBC to hedge Company's liabilities in foreign currency and for the Company's assets swap or cross ownership transaction amounting to US$120,000,000 and US$1,000,000, respectively. These two agreements mature in April 5, 2003 and August 31, 2003 respectively. As of December 31, 2002 the Company has not used these derivative facilities. 91 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) f. Procurement of TELKOM-2 Satellite In accordance with Agreement No.K.TEL.191/HK.810/UTA-00/2002 dated October 24, 2002, the Company and Orbital Science Corporation ("Contractor") agreed on procurement of satellite TELKOM-2. The Company obliged to pay US$73,000,000 including refund provision in amount of US$4,338,292 to any transponder that has reduced communication capabilities below 3dB as agreed and which cannot be corrected by switching to a redundant transponders. Payment to Contractor is made within thirty days after the date of the original invoice received by the Company. All Indonesian taxes, duties, assessment of fees, including rate and VAT resulting from performance of this contract that are required by present of future laws or regulation in Indonesia shall be paid by the Company, except for any temporary imported goods that will not owned by the Company and any taxes and or duties of Contractor's expatriates working in Indonesia shall be borne by Contractor. The Contractor shall be responsible for taxes, duties, assessment or fees, including rate and value added taxes resulting from performance of this contract that are required by present of future laws or regulation in the USA including any interest or penalties related to such U.S. taxes and U.S. duties. The Contractor shall submit warranty bond to the Company for Augmented Master Control Station ("AMCS") in the amount of 10% of AMCS fixed firm price in the form of unconditional bank guarantee/ Letter of Credit from U.S. affiliated bank in Indonesia, as selected by Contractor, and shall be submit to the Company at least five business days before starting Warranty Period. This Warranty shall be extended until the earlier of: i 365 days commencing from the time satellite is placed in storage; ii 365 days commencing from final acceptance of the Satellite or from the time of launch failure. Contractor shall use reasonable efforts to obtain Contractor's Government approvals and licenses necessary for export of the Satellite. If after six months from the time Contractor submits its application for a U.S. Government licenses and authorization, the Company may, in writing, notify the Contractor of its intention to terminate this Contract. The Contract price shall include in transit insurance for the satellite, AMCS and the other deliverable items that are transported from Contractor facility to the launch site or the Company's operation site; and also include insurance for the satellite during manufacturing, shipping and up to the launch Site until such time as risk of loss passes to the Company under this Contract. Contractor shall provide the Company with certificate of insurance for such coverage 92 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) g. Launching of TELKOM-2 Satellite On November 8, 2002, the Company and ARIANESPACE S.A. agreed upon the launching of Satellite TELKOM-2 of the Company. Total amount to be paid by the Company for that services is amounted to US$62,880,000 with the payment schedule as follows:
Percentage of the portion of the Payment Date Launching Services price ----------------- ------------------ ------------------------- US$ First Payment January 13, 2004 27,500,000 Second Payment March 1, 2004 9,000,000 Third Payment April 1, 2004 20,000,000 Fourth Payment September 1, 2004 6,380,000
Total amount mentioned above shall be increased by 7% of the total if the Company exercise the Re-flight Option, and if any increase or decrease of the satellite mass from the agreed mass, then the increase or decrease above 25kg shall be subject to additional cost of US$25,000 per kg. The Launch Period of Satellite TELKOM-2 is from period November 1, 2004 until January 31, 2005. The Launch Slot will be determined by mutual agreement of the parties not later than eight months prior to the first day of the Launch Period. The Launch Day shall be determined, no later than three months to the first day of the Launch Slot. ARIANESPACE S.A shall take out an insurance policy at no cost to the Company. The Insurance policy shall be in the amount of Euros 60,980,000. h. PSTN Excellence Regional Junction DIVRE II Project On February 8, 2002, the Company entered into agreement with Consortium Olex-Lucent-Brimbun ("Consortium") upon procurement of SDH Transmission System, Optical Fiber, NMS and other services. The Company must pay for the work and procurement made by Consortium amounted to US$28,807,460 and Rp102,828,788,753, net of tax, respectively. The Agreement came into effect within eighteen months from the contract date. The consortium shall submit a performance guarantee issued by Indonesian state-owned banks or other International reputable banks amounting to 5 % of contract value, net of tax, to the Company at least 3 days after the contract date. The Consortium must cover all risks of delivery, storage and development of goods and services up to the issuance of provisional acceptance certificate for and on behalf of Consortium as a beneficiary to the insurance company appointed by the Company. The insurance shall be paid by Consortium and if any accident happened, the replacement money received shall be used to continue the project and or to replace the damaged equipment. i. Network Facility for Multimedia Services and Pay TV Program During the year 2002, Indonusa has a undersigned several agreements on procurement of network facility of multimedia services and TV program by subscription with several program provider and property management, both for extending terminated agreements and for negotiating new ones. 93 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) i. Network Facility for Multimedia Services and Pay TV Program (continued) Those agreements set the rights and obligations of both parties in procurement of TV program by subscription including its network, determination of monthly subscription fee, and revenue sharing. j. Universal Service Obligation ("USO") and Public Payphone Under USO agreement, Pramindo must allocate at least 20% of total yearly investment plan to develop telecommunication facilities in remote areas and for public interest in its KSO Unit area, which have not been covered by such facilities as of the effective date of the KSO Agreement. Pramindo must meet those targets for at least 50% of all villages and 100% of districts in The KSO Unit area at the end of Repelita VI, up to the limit of 20% of total investment. Pramindo must submit a detailed annual report in detail to the Directorate General of Post and Telecommunication (DGPT) regarding the total investment including special investment and the achievement progress of USO project within 60 days after the end of each year. If Pramindo has not fully allocated its 20% of total investment to fulfill its obligation as targeted, DGPT will enforce Pramindo to complete other USO project under a certain schedule with the costs not up to the unallocated amount. Pramindo must also provide at least 3% of access line units constructed for public payphone (including Wartel). Such capacity will be used for providing public payphone, either by KSO unit or by other party, with permission from Minister of Communication. However, based on the MoU and Side Letter, USO obligation is considered accomplished if either of the following conditions are met: - 5% of total investment has been allocated for USO obligation; or - 50% of all remote villages have been covered by telecommunication facilities k. Collateral of Credit Facility On January 24, 2000, Infomedia undersigned the agreement with Koperasi Pegawai Infomedia Nusantara ("KOPIN"), a cooperative whose members are also the employee of Infomedia, in relation to the usage of Infomedia's time deposit as collateral of credit facility from PT Bank Umum Koperasi Indonesia to KOPIN in a maximum amount of Rp7,500 million for the term of three years up to 2003. The guarantee bears no interest. l. Building Rent Agreement Infomedia entered into a building rent agreement with Dana Pensiun Elnusa ("Dapenusa") which came into effect on April 1, 1996. Dapenusa is the entity that manages the pension fund of employees of PT Elnusa (the shareholder of Infomedia). Pursuant to the agreement, the rent price is amounted to Rp1,157 million per annum. The agreement will expire on August 30, 2003. m. Call Center Development and Operation Services On July 24, 2000, Infomedia undersigned an agreement on call center development and operation services with PT Bank Niaga Tbk. ("Bank Niaga"). Infomedia provides call center services, which shall receive, patch and respond the request, claim and complaint of customers regarding the products and provide information about Bank Niaga's products. Infomedia receives monthly fee of Rp400 million for incoming calls up to 180,000 calls per month and outgoing calls up to 7,500 calls per month consisting of 60% for Jakarta calls and 40% calls for non-Jakarta calls. 94 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) m. Call Center Development and Operation Services (continued) The agreement is valid for three years since the date of agreement. The revenue received from Bank Niaga were Rp2,914 million and Rp6,179 million, for the years 2001 and 2002, respectively. In 2002, Infomedia entered into call center operation services agreement with other third parties. Pursuant to the agreement, Infomedia shall provide call center personnel who receive, patch and respond the customers' complaints, give information about the products of those parties, and also give technical assistance. Pursuant to the agreement, Infomedia receives service fee, which is computed monthly. Total revenue received by Infomedia from those parties for the year 2002 amounted to Rp1,285 million. n. Management Services and Phone Banking Center Development On November 17, 2000, Infomedia entered into a Management Services and Phone Banking Center Development Agreement with ABN-AMRO Bank N.V.(ABN-AMRO bank) Infomedia provides Phone Banking Center, Telemarketing Services to receive and patch needs, claim from customers and give information about ABN-AMRO Bank products and also provide technical assistances. Pursuant to the agreement, Infomedia receives a monthly fee, which is computed from a certain formula in accordance with the agreement. The agreement was valid from December 2000 up to February 2002. The agreement was then amended and extended up to the date February 28, 2003. The Revenue received from ABN-AMRO bank is amounted to Rp296 million and Rp139 million, for the year 2001 and 2002, respectively. o. Call Center Provision Service Agreement In 2002, Infomedia entered into call center provision service agreement with other parties ("the parties"). Based on the agreement, Infomedia provides personnel assigned to receive, gather and respond complaints from customer, share information regarding ABN-AMRO product and technical assistant. In return of this, Infomedia earns monthly fees as computed in the agreement. Total income received during 2002 amounted to Rp1.285 million. p. Software License and Support Agreement On October 13, 1997 Dayamitra executed a Software License and Support Agreement with Cable and Wireless Plc. Pursuant to the agreement, Cable and Wireless Plc provides software, conversion services, training, implementation, maintenance and support for the Customer Care Billing System project. The Company also receives rights in the intellectual property. The cost of the license and support agreement are charged to KSO Unit VI. q. Turnkey Project Agreement Dayamitra entered into Turnkey Project Agreement of Sekura Tower Project and Addition work on Sampit Central Location with PT Dutamitra Telekomunikasi dated on May 3, 2001 and October 21, 2002 with the contract value of Rp72.186 million and US$72.503, respectively. On December 31, 2002, those project were still not complete. Management estimated those projects will be completed by the end of first quarter of 2003. 95 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 52. COMMITMENTS (continued) r. CDMA Procurement Agreement with Samsung Consortium On October 9, 2002, the Company entered into Initial Purchase Order Contract CDMA 2000-IX with Samsung Consortium for BSS procurement in Divisional Regional II. On December 23, 2002, the Company signed a Master Procurement Partnership Agreement of CDMA Package-2 for a nationwide package of NSS procurement for Telkom's Regional Division, (excluding KSO III) and a regional package of BSS procurement for KSO IV, KSO VI, KSO VII and Divisi Regional V. This procurement is part of T-21 Program. s. Loan Agreement Junction Regional Division V Project On June 21, 2002, the Company entered into a loan agreement with Consortium Bank amounting to Rp150,000 million for financing the Regional Division V Junction Project. Bank Bukopin acted as facility agent. The first year interest rate, calculated from the signing date, is 19.5% and then average 3 month deposit rate plus 4% for the remaining year. Disbursement period is 19 months since the signing loan agreement with a repayment period 14 times quarterly payments starting from April 2004. The loan facility is secured by the project equipment. Currently, the Company is processing an amendment the Loan Agreement to reduce the loan facility to Rp150,000 million. As of December 31, 2002, the Company had not used this facility. t. Cooperation Agreement with Labor Union (SEKAR TELKOM) On June 3, 2002, the Company entered into a Cooperation Agreement with the Company's labor union - namely Serikat Karyawan Telkom (SEKAR TELKOM), an organization within the Company open to all Non KSO and KSO unit employees. The agreement, provides for the bonuses and leave allowance. u. Loan Agreement with Citibank N.A. and Citibank International Plc On April 10, 2002, the Company entered into a "Loan Agreement" with Citibank, N.A ("arranger") and Citibank International Plc ("agent") supported by an export credit guarantee of Instituto per I Servizi Assicurativi del Commercio Estero (SACE-Italy), providing a total facility of US$21,000,000. The facility was obtained to fund up to 85% of the cost of supplies and services sourced in Italy relating to the design, manufacture, construction, installation and testing of Sub-System VI, part of the high performance backbone network. This facility was secured by Company assets under construction that related to project pursuant to the "Partnership Agreement". On December 31, 2002, the facility has not been drawn down. This facility bears fixed interest rate of 4.14% per annum. 96 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 53. CONTINGENCIES a. Claims from AriaWest On May 15, 2001, AriaWest (KSO Investor in Region III, West Java and Banten) commenced an arbitration proceeding under the Rules of the International Chamber of Commerce against the Company for breach of the KSO Agreement between the Company and AriaWest. The Company and AriaWest have submitted various claims for resolution in the arbitration proceedings. AriaWest has alleged that the Company materially breached the KSO Agreement by, among other things, (i) terminating certain exclusive rights granted to AriaWest; (ii) failing to transfer control of the KSO's finances, employees and management to AriaWest and interfering with AriaWest's efforts to exercise management control over the KSO; (iii) failing to pay amounts identified in a "forensic audit" conducted by PriceWaterhouse Coopers on behalf of AriaWest as being unaccounted for, lost or otherwise unreasonably disbursed; (iv) causing the Government to reduce telecommunication tariffs in 1999 and to impose a zero tariff increase in 2000; (v) wrongfully terminating the KSO Agreement and wrongfully taking control of the KSO; (vi) failing to negotiate the terms of certain construction projects proposed by AriaWest and certain amendments to the KSO Agreements requested by AriaWest; and (vii) failing to cause the KSO to pay AriaWest certain disputed sums as reimbursement for cash outlays by AriaWest or other funds claimed by AriaWest. AriaWest alleges damages in excess of US$1.3 billion, but has not specified the amount of damages associated with most of its claims. The Company has denied AriaWest's allegations and claims that AriaWest has materially breached the KSO Agreement by, among other things, (i) causing the KSO not to pay "Minimum Telkom Revenue" or "MTR"; (ii) wrongfully rejecting the Company's termination of the KSO Agreement; (iii) failing to pay the Company "Distributable Telkom Revenue" or "DTR"; (iv) mismanaging the KSO Unit; (v) failing to construct Minimum New Installation; and (vi) failing to reimburse Operating Capital Expenditures. The Company is still in the process of quantifying its damages; however, among the Company's damages are claims for more than Rp412 billion in MTR and more than Rp98 billion in DTR due to the Company as of July 9, 2001 (the date the Company delivered its notice of termination of the KSO Agreement). On May 8, 2002, the Company entered into the Conditional Sales and Purchase Agreement with PT Aria Infotek, Media International B.V. and Asian Infrastructure Fund ("selling shareholders") regarding the acquisition of 100% AriaWest's shares. The CSPA was intended to settle all disputes with AriaWest. As of March 25, 2003, the agreement has not been finalized because AriaWest's has not been able to restructure its outstanding debt. The International Chamber of Commerce ("ICC") gives time extension up to April 17, 2003 to the Company and selling stockholders to settle the CSPA. The management cannot assess the ultimate result of this claim. b. Other Claims In the ordinary course of business, the Company has been named as a defendant in various litigations. Management believes that the litigations will be settled within Rp49,540 million accrued for these cases in the accompanying financial statement. 97 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 54. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The balances of monetary assets and liabilities denominated in foreign currencies are as follows:
2001 2002 ---------------------------- ---------------------------- Foreign Foreign Currencies Equivalent Currencies Equivalent (in thousands) in Rupiah (in thousands) in Rupiah -------------- ----------- -------------- ----------- Assets Cash and cash equivalents Related parties U.S Dollar 61,250 637,005 341,912 3,059,136 Yen 454 36 36 3 Euro 13 118 - - Third parties U.S Dollar - - 105 940 Euro - - 25,305 237,148 Temporary investments Related parties U.S Dollar 800 8,320 - - Third parties U.S Dollar - - - - Trade accounts receivable Related parties U.S Dollar 4,812 50,041 7,837 70,218 Third parties U.S Dollar 12,024 125,049 9,563 85,499 Other accounts receivable U.S Dollar 1,147 11,927 9,972 89,149 Singapore Dollar 5 31 - - Malaysian Ringgit 2 6 - - Other current asset U.S Dollar - - 1,800 16,092 Sinking fund U.S Dollar 13,373 139,075 - - Advances and other non-current assets Third parties U.S Dollar 64 665 7,041 62,950 Unearned revenue Related Parties U.S Dollar - - 204 1,824 Third Parties U.S Dollar - - 16 148 Euro - - 3 25 Escrow account U.S Dollar 16,450 171,080 33,235 297,118 --------- --------- Total Assets 1,143,353 3,920,250 ========= =========
98 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 54. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)
2001 2002 ---------------------------- ---------------------------- Foreign Foreign Currencies Equivalent Currencies Equivalent (in thousands) in Rupiah (in thousands) in Rupiah -------------- ----------- -------------- ----------- Liabilities Trade accounts payable Related parties Deutsche Mark 30,196 141,868 - - U.S Dollar 1,091 11,345 54,141 485,094 Euro - - 2,028 19,007 Third parties U.S Dollar 17,661 183,819 40,558 362,975 Euro 21,499 197,544 26,228 245,755 Deutsche Mark 7,989 37,533 - - Swedish Krona 10,355 10,217 - - Great Britain Pound sterling 213 3,218 319 4,494 French Franc 3,985 5,582 - - Yen 25,934 2,064 35,332 2,667 Dollar Singapore - - 1 3 Other accounts payable Third Parties U.S Dollar 354 3,693 8 77 Accrued expenses Related parties U.S Dollar 14,109 147,360 11,610 103,985 Euro 392 3,599 - - Yen 56,555 4,500 252,601 19,069 French Franc 2,133 3,007 3,514 4,238 Netherlands Guilder 428 1,796 407 1,461 Hongkong Dollar - - - - Deutsche Mark 1,723 8,093 - - Third Parties Euro - - 9,033 84,636 U.S Dollar - - 6,445 57,635 Short-term bank loans Third Parties U.S Dollar - - 4,385 39,204 Advances from customers and suppliers U.S Dollar 1,057 11,046 - -
99 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 54. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)
2001 2002 ------------------------------ ------------------------------ Foreign Foreign Currencies Equivalent Currencies Equivalent (in thousands) in Rupiah (in thousands) in Rupiah -------------- ------------ -------------- ----------- Current portion of long-term liabilities Related parties U.S Dollar 116,003 1,212,234 41,712 373,738 French Franc 25,119 35,401 22,312 26,911 Japanese Yen 374,364 29,790 374,955 28,306 Netherlands Guilder 3,044 12,774 3,608 12,954 Third Parties U.S.Dollar - - 128,244 1,149,067 Long-term liabilities Related parties U.S Dollar 425,693 4,448,491 344,605 3,087,663 French Franc 110,358 155,530 108,238 130,549 Japanese Yen 17,874,011 1,422,353 17,626,174 1,330,614 Netherlands Guilder 13,699 57,483 12,628 45,338 Third Parties U.S Dollar - - 177,983 1,591,736 Total Liabilities 8,150,340 9,207,176 ----------- ----------- Net Liabilities (7,006,987) (5,286,926) =========== ===========
55. ECONOMIC CONDITION Since the middle of 1997, many Asia Pacific countries, including Indonesia, have been experiencing adverse economic condition mainly resulting from currency depreciation in the region, the principal consequences of which have been an extreme lack of liquidity and high interest and foreign exchange rates. The crisis has also involved declining prices in shares of stock, tightening of available credit, and stoppage or postponement of certain construction projects. The adverse economic conditions continues to this date as evidenced by the weak exchange rate, sluggish economic growth, and pressures on inflation. High volatile of exchange and interest rates have increased the cost of funds, as well as the amount of debt to be serviced by the Company, its subsidiaries, and the associated companies. Management has adopted measures in maintain adequate liquidity by, among other things, evaluating priorities and rescheduling construction projects, initiating cost-cutting and managing funds to service current maturities of foreign currency denominated liabilities. In its investment activities, management has adopted more stringent criteria and pursued project developments using a "turnkey" system, hence not all risk is borne by the Company. Management has also strived to resolve the KSO issues and managed investments in associated companies effectively and selectively by utilizing the services of international legal and financial consultants. 100 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 55. ECONOMIC CONDITION (continued) Recovery of the economy to a sound and stable condition is dependent on the fiscal, monetary and other measures being taken by the Government, actions which are beyond the Company and its subsidiaries' control. It is not possible to determine the future effect these economic conditions may have on the Company and its subsidiaries' liquidity and earnings, including the effect flowing through from their investors, customers and suppliers. 56. SUBSEQUENT EVENTS a. Additional equity ownership in Napsindo Pursuant to Statements on Shareholders Resolution of Napsindo dated November 30, 2002 and Notarial Deed No.47, by H.Yunardi S.H., notary in Jakarta, dated December 30, 2002, the Company agreed to purchase 13,615 shares of 316,115 shares owned by PT Infoasia Sukses Mandiri ("InfoAsia", one of Napsindo's shareholders) in Napsindo. The agreed price was US$4,900,000 and paid on January 8, 2003: The Company's equity ownership in Napsindo was increased to 60%. b. Establishment of PT Pro Infokom Indonesia On January 9, 2003, the Company together with PT Indonesia Comnet Plus, a subsidiary of PT Perusahaan Listrik Negara ("PLN"), and PT Prima Infokom Indonesia, has established PT Pro Infokom Indonesia ("PII"), domiciled in Jakarta, and it has been notarized by Deed of Amrul Partomuan Pohan S.H., notary in Jakarta, under Articles of Association No.24, dated January 9, 2003. Subsequent to the financial statements date, the Articles of Association are still in the process of being approved by the Minister of Justice and Human Rights of Republic of Indonesia. The authorized capital is Rp36,000 million divided into 90,000 Series A shares and 270,000 Series B shares, with a par value of Rp100,000 per share. The composition of the stockholders is as follows:
Shareholders Number of shares Nominal Share Capital Percentage ----------------------- ----------------------- Series A Series B value Series A Series B of ownership ----------- ----------- --------- ------------ ---------- ------------ Rp Rp PT Telekomunikasi Indonesia 45,900 - 100,000 4,590 - 51% Tbk. PT Indonesia Comnet Plus 22,500 - 100,000 2,250 - 25% PT Prima Infokom Indonesia 21,600 - 100,000 2,160 - 24% ----------- ----------- ------------ ---------- ------------ 90,000 - 9,000 - 100% ----------- ----------- ------------ ---------- ------------
101 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 56. SUBSEQUENT EVENTS (continued) b. Establishment of PT Pro Infokom Indonesia (continued) PII is established to develop a national information network system as the back-bone for the development of the Indonesian e-Government. PII will work together with Korea Telecom ("KT"). KT will provide technical and financial support. Furthermore, KT's involvement will also increase to become a shareholder of PII. The cooperation between the Company and PLN with this new company is intended to maximize the utilization of both company's existing infrastructure. PII will act as a service provider that manages the Government Secure Intranet and Government Information Center. All government institution, including state-owned companies, are expected to take advantage of this network. c. Non-Cash Credit Facility Agreement On January 20, 2003, Infomedia entered into Non-Cash Credit Facility Agreement with PT Bank Mandiri (Persero). Pursuant to the agreement, Infomedia obtained Letters of Credit (L/C) facility for US$517,750. As collateral, Infomedia subscribed and pledged its time deposits amounted to US$900,000 dated January 3, 2003 and held in PT Bank Mandiri (Persero). This facility is valid until April 21, 2003. 57. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ITS SUBSIDIARIES AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The consolidated financial statements have been prepared in accordance with Indonesian GAAP which differs in certain respects from U.S. GAAP. The significant differences are reflected in the approximation provided in Note 60 and arise due to the items discussed in the following paragraphs: a. Termination Benefits Under Indonesian GAAP, termination benefits are recognized as liabilities when certain criteria are met (e.g. the enterprise is demonstratively committed to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy). The Company has elected to adopt early the provisions of Statement of Financial Accounting Standards (SFAS) No. 146, "Accounting for the Costs Associated with Exit or Disposal Activities". Under SFAS No. 146, benefits offered for voluntary termination of employment are recognized upon the employees' acceptance of the offer. b. Foreign Exchange Differences on Property under Construction Under Indonesian GAAP, the foreign exchange difference resulting from loans used to finance property under construction is capitalized. Capitalization of foreign exchange differences cease when the construction is substantially completed and the constructed property is ready for its intended use. Under U.S. GAAP, foreign exchange differences are charged to current operations. 102 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 57. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ITS SUBSIDIARIES AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) c. Interest Capitalized on Property under Construction Under Indonesian GAAP, one of the criteria for capitalizing interest cost into a qualifying asset (i.e. property under construction) is that the interest should be attributable to the qualifying asset. Under U.S. GAAP, the borrowing need not be directly linked to the construction of a qualifying asset. Interest cost is capitalized on qualifying assets (i.e. property under construction) based upon the Company's overall effective interest rate and the average balance of qualifying assets for the period. d. Revenue-Sharing Arrangements Under Indonesian GAAP, property, plant and equipment built by an investor under revenue-sharing arrangements are recognized as property, plant and equipment under revenue-sharing arrangements in the books of the party to whom ownership in such properties shall be transferred at the end of the revenue-sharing period, with a corresponding initial credit to unearned income. The property, plant and equipment are depreciated over their useful lives, while the unearned income is amortized over the revenue-sharing period. The Company records its share of the revenues earned on a net basis. Under U.S. GAAP, the accounting for revenue-sharing arrangements depends on whether or not the investor will receive a guaranteed minimum return. When there is no guaranteed investment return to the investors, the accounting treatment is similar to that under Indonesian GAAP. The property is depreciated, unearned income is amortized and the Company records its contractual share of the earnings for the period. When there is a guaranteed minimum return to the investors, the transaction is accounted for as the acquisition of property by the Company under a capital lease. In lieu of unearned income, the Company records a capital lease obligation equal to the fair value of the property. The capital lease obligation is increased by the guaranteed return and decreased by the investor's share of earnings. The revenue is recorded gross. e. Revaluation of Property, Plant and Equipment While Indonesian GAAP does not generally allow companies to recognize increases in the value of property, plant and equipment that occur subsequent to acquisition, an exception is provided for revaluations made in accordance with Government regulations. The Company revalued its property, plant and equipment that were used in operations as of January 1, 1979 and January 1, 1987. Under U.S. GAAP, property, plant and equipment may not be stated at more than their historical acquisition cost. The effect of the previous revaluations have fully reversed in 2002 such that there is no remaining difference in equity at December 31, 2002. f. Deferred Tax on Excess of Financial Reporting Basis Over Tax Basis of Subsidiaries Under Indonesian GAAP, deferred tax liabilities are not recognized for the excess of the parent's carrying amount of its equity investment in a domestic subsidiary over its tax basis if the parent company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Under U.S. GAAP, the excess of the parent's carrying amount of its equity investment in a domestic subsidiary over its tax basis is a temporary difference. However, if the tax law provides a means by which the investment can be recovered tax-free and the parent ultimately plans to utilize such means to recover its investment, the temporary difference is non-taxable and no deferred taxes are recorded. Generally, no benefit is recorded for the excess of a parent's tax basis in its subsidiary over its carrying amount for financial reporting purposes. At December 31, 2002, the Company intends to recover tax-free its investment in its Indonesian subsidiaries and such actions will not require the Company to incur a significant cost. Accordingly, no deferred taxes differences have been provided for the basis difference. 103 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 57. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ITS SUBSIDIARIES AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) g. Pension The Company and a subsidiary, for purposes of Indonesian GAAP, use a method of accounting for pensions that is substantially consistent with the requirements of U.S. GAAP. As stated in its pension plan regulations, the Company does not provide regular pension increases. However, in 1994, 1998 and 2002, the Company provided for increases in pension benefits for pensioners, which were considered prior service costs. Based on PSAK No. 24, the prior service costs attributable to the increases in pension benefits for pensioners were directly charged to expense in those years. Under SFAS 87, such prior service costs should be deferred and amortized systematically over the estimated average future working periods of active employees. The subsidiary is amortizing past service cost using the double-declining method for Indonesian GAAP, while under U.S. GAAP, past service cost is amortized using the straight-line method. h. Share in Net Income of Associated Companies The Company records its equity in net income of associated companies based on the associates' financial statements that have been prepared under Indonesian GAAP. For U.S. GAAP reporting purposes, the Company conforms the associates earnings to U.S. GAAP prior to recording their share of earnings or loss. The primary difference has historically related to land rights held by associates. i. Land rights In Indonesia, the title of land rests with the State under the Basic Agrarian Law No. 5 of 1960. Land use is accomplished through land rights whereby the holder of the right enjoys the full use of the land for a stated period of time, subject to extensions. The land rights generally are freely tradable and may be pledged as security under borrowing agreements. Under Indonesian GAAP, land ownership is not depreciated unless it can be foreseen that the possibility for the holder to obtain extension or renewal of rights is remote. Under U.S. GAAP, the cost of acquired land rights is amortized over the period the holder is expected to retain the land rights. j. Stock Issuance Costs Under Indonesian GAAP, stock issuance costs are deferred and amortized over a certain period of time. The Company amortized deferred stock issuance costs over five years using the straight-line method. Effective 2000, the Capital Market Supervisory Agency (Bapepam) requires that stock issuance costs be recorded as part of additional paid-in capital. Under U.S. GAAP, stock issuance costs are offset against the proceeds from the stock issuance. k. Employee Bonuses In 2000, a subsidiary (Telkomsel) has charged to retained earnings employee bonuses of Rp26,714 million. Under U.S. GAAP, personnel and related costs, including bonuses are charged to income. 104 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 57. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ITS SUBSIDIARIES AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) l. Equipment to be Installed Under Indonesian GAAP, equipment is depreciated beginning when the asset is ready for its intended use. Temporarily idle equipment or equipment that is awaiting installation is not depreciated. Under U.S. GAAP equipment is depreciated when it is ready for its intended use. Equipment that is part of a network is depreciated when the network or the applicable component of the network is ready for its intended use. Temporarily idle equipment continues to be depreciated. When the equipment is expected to be idle for protracted periods, the equipment is written down to its estimated realizable value. If the equipment is held for sale, depreciation ceases. However, if the equipment is held for future use, depreciation continues. m. Revenue Recognition Under Indonesian GAAP, revenue from cellular service connection fees are recognized as income when the connection takes place (for postpaid service) or at the time of delivery of starter packs to distributors, dealers or customers (for prepaid service). Installation fees for wire line services are recognized at the time of installation. Under U.S. GAAP, revenue from front-end fees are deferred and recognized over the longer of the expected term of the customer relationship or the contractual term. Costs incurred related to the installation or connection activities are deferred, but only to the extent of deferred revenues. The cost of provisioning wire line services far exceeds the fee charged by the Company thus the reconciling item relates solely to the Company's cellular operations. n. Goodwill Under Indonesian GAAP, goodwill is amortized over the period expected to be benefited by the acquisition. Under U.S. GAAP, goodwill is not amortized but rather subjected to a test for impairment. The Company has an immaterial amount of goodwill on its balance sheet (Rp72,672 million or approximately US$8 million). o. Capital Leases The criteria for a capital lease under Indonesian GAAP differ from U.S. GAAP. Under Indonesian GAAP, a lease is capitalized if the lessee has a fixed price purchase option, the lease provides for a return of the cost of the asset with profit thereon to the lessor, and the lease term exceeds two years. Under U.S. GAAP, a lease is capitalized if there is an automatic transfer if ownership, a bargain purchase option, the lease terms is for 75% of the economic life of the asset or the lease payments are at least 90% of the fair value of the asset on a present value basis. 105 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 58. RECONCILIATION OF NET INCOME AND EQUITY DETERMINED UNDER INDONESIAN AND U.S. GAAP A summary of the significant adjustments to net income for the years ended December 31, 2000, 2001 and 2002 and to equity as of December 31, 2001 and 2002 which would be required if U.S. GAAP had been applied, instead of Indonesian GAAP, are set forth below:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Net income according to the consolidated statements of income prepared under Indonesian GAAP 3,010,003 4,250,110 8,345,274 ------------ ------------ ------------ U.S. GAAP adjustments - increase (decrease) due to: Pension 95,053 (19,703) 132,167 Capitalization of foreign exchange differences,net of related depreciation (122,887) 80,296 107,598 Interest capitalized on property under construction - 15,304 44,415 Revenue-sharing arrangements (23,347) 5,429 - Revaluation of property, plant and equipment 4,095 4,095 3,929 Equity in net income (loss) of associated companies 2,389 (3,786) 183 Income tax effect on U.S. GAAP adjustments (10,273) (71,479) (244,248) Deferral of fees - - (66,404) Amortization of landrights (218) (939) (1,801) Deferred tax on share in net income of subsidiaries - (362,686) 362,686 Early retirement benefits - 140,000 574,884 Amortization of deferred stock issuance costs 22,402 - - Employee bonuses (20,762) - - Others (4,322) - 15,566 ------------ ------------ ------------ Net adjustments (57,870) (213,469) 928,975 ------------ ------------ ------------ Approximate net income in accordance with U.S. GAAP 2,952,133 4,036,641 9,274,249 ============ ============ ============ Net income per share - in full Rupiah amount 292.87 400.46 920.06 Net income per ADS (20 Series B shares per ADS) - in full Rupiah amount 5,857.41 8,009.21 18,401.29
106 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 58. RECONCILIATION OF NET INCOME AND EQUITY DETERMINED UNDER INDONESIAN AND U.S. GAAP (continued)
2001 2002 ------------- ------------ Rp Rp Equity according to the consolidated balance sheets prepared under Indonesian GAAP 9,323,575 15,899,183 ------------- ------------ U.S. GAAP adjustments - increase (decrease) due to: Pension 119,891 252,058 Capitalization of foreign exchange differences - net of related depreciation (850,844) (743,246) Interest capitalized on property under construction-net 15,304 59,719 Revenue-sharing arrangements (379,243) (379,243) Revaluation of property, plant and equipment: Increment (664,974) (664,974) Accumulated depreciation 661,045 664,974 Equity in net loss of associated companies (17,900) (17,717) Deferral of fees - (66,404) Amortization of landrights (1,606) (3,407) Deferred tax on share in net income of subsidiaries (362,686) - Early retirement benefits 140,000 714,884 Deferred tax liabilities on U.S. GAAP adjustments 265,580 21,332 Others (7,544) 8,022 ------------- ------------ Net adjustments (1,082,977) (154,002) ------------- ------------ Approximate equity in accordance with U.S. GAAP 8,240,598 15,745,181 ============= ============
With regard to the consolidated balance sheets and consolidated statements of income, the following significant captions determined under U.S. GAAP would have been:
2001 2002 ------------- ------------ Rp Rp Consolidated balance sheets Current assets 7,308,519 10,994,786 Non-current assets 24,265,242 30,616,949 Total assets 31,573,761 41,611,735 Current liabilities 9,815,248 9,989,926 Non-current liabilities 12,316,260 12,391,846 Total liabilities 22,131,508 22,381,772 Minority interest in net assets of subsidiaries 1,201,655 3,484,784 Consolidated statements of income Operating income 7,965,753 10,119,982
107 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 59. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC The following information is presented on the basis of U.S. GAAP: a. Income Tax The reconciliation between the expected income tax provision in accordance with U.S. GAAP and the actual provision for income tax recorded in accordance with U.S. GAAP is as follows:
2000 2001 2002 ------------ ------------ ------------ Rp Rp Rp Approximate income before tax in accordance with U.S. GAAP 4,737,560 6,917,892 13,005,081 ============ ============ ============ Expected income tax in accordance with U.S. GAAP at statutory tax rates 1,421,259 2,075,351 3,901,507 ------------ ------------ ------------ Effect of permanent differences at the enacted maximum tax rate (30%): Net periodic postretirement benefits cost 49,531 55,895 59,228 Amortization of deferred interest - 23,970 22,475 Employee benefits 11,233 18,707 14,593 Permanent differences of the KSO Units 5,177 12,209 (221) Revenue-sharing arrangements (10,330) 8,426 (9,150) Amortization of land rights 84 362 831 Interest income which was already subjected to final tax (210,142) (169,447) (107,715) Revaluation of property, plant and equipment *) (1,229) (1,229) (1,179) Net periodic pension cost (161) (85) - Deferred stock issuance costs *) (6,721) - - Employee bonus 8,014 - - Gain on sale of Telkomsel shares - - (949,826) Share on net income from associates - - (753,272) Others 33,793 51,017 107,103 ------------ ------------ ------------ Total (120,751) (175) (1,617,133) ------------ ------------ ------------ Deferred tax recognized on equity in net income of subsidiaries 176,586 432,678 342,065 ------------ ------------ ------------ Provision for income tax in accordance with U.S. GAAP 1,477,094 2,507,854 2,626,439 ============ ============ ============
*) The tax effects of the stock issuance costs and revaluation of property, plant and equipment are offset against stockholders' equity for U.S. GAAP purposes Benefits enjoyed by pensioners fall under the category of benefits in kind which are non-deductible expenses under Indonesian tax laws. 108 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 59. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC (continued) b. Fair Value of Financial Instruments The following methods and assumptions are used to estimate the fair value of each class of financial instruments: - Cash and cash equivalents and temporary investments The carrying amount approximates fair value because of the short-term nature of the instruments. - Short-term and long-term borrowings The fair value of the Company's borrowings are estimated on the basis of the discounted value of future cash flows expected to be paid, considering rates of interest at which the Company could borrow as of the respective balance sheet dates. As of December 31, 2001 and December 31, 2002, the fair value of the Company's long-term borrowings are Rp7,782,443 million and Rp13,498,456 million, respectively, and the fair value of the Company's short-term borrowings are Rp nil and Rp39,889 million, respectively. For purposes of estimating the fair value of two-step loans, the Company has used the average Rupiah borrowing rates of 16.81% and 14.10%, the average U.S. Dollar borrowing rate of 7.33% and 7.31% and the respective average borrowing rates for 2001 and 2002 for the debt in other currencies, respectively. Under the current environment, an estimate of the interest rates as of a point in time, given the significance of the Company's debt and the general unavailability of funds, is difficult. For one percentage point increase in the above-mentioned borrowing rates, the fair value of the Company's long-term two-step loans at December 31, 2002 would decrease by Rp359,73 million. 109 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 59. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC (continued) b. Fair Value of Financial Instruments (continued) The estimated fair values of the Company and its subsidiaries' financial instruments are as follows:
Carrying Fair Amount Value ------------- ------------ Rp Rp 2001: Cash and cash equivalents 3,644,213 3,644,213 Temporary investments 348,915 348,915 Long-term liabilities - net of current maturities Two-step loans 8,637,340 7,033,919 Suppliers' credit loans 395,020 351,658 Bridging loan 111,401 98,837 Liability for acquisition of a subsidiary 260,840 230,298 Long-term bank loan 73,150 67,731 2002: Cash and cash equivalents 5,699,070 5,699,070 Temporary investments 1,073,000 1,073,000 Short term bank loan 39,205 39,889 Long-term liabilities: Two-step loans 8,530,554 9,120,204 Suppliers' credit loans 338,697 338,697 Bridging loan 95,517 95,517 Bond 1,000,000 1,328,159 Guaranteed notes payable 1,337,518 1,534,778 Liability for acquisition of a subsidiary 807,980 807,980 Bank loan 247,432 247,432 Project cost payable 15,513 15,513 Obligation under capital lease 1,026 1,026 Other 9,150 9,150
The methods and assumptions followed to disclose the fair value are inherently judgmental and involve various limitations, including the following: i. Fair values presented do not take into consideration the effect of future currency fluctuations. ii. Estimated fair values are not necessarily indicative of the amounts that the Company and its subsidiary would record upon disposal/termination of the financial instruments. c. Research and Development Research and development expenditures, as determined under U.S. GAAP, amounted to approximately Rp33,110 million, Rp39,523 million and Rp8,995 million in 2000, 2001 and 2002, respectively. 110 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 59. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC (continued) d. Valuation and Qualifying Accounts The following summarizes the activities in the valuation and qualifying accounts:
Beginning Charged to Cost Unrealized Balance at of Year and Expenses Loss Deductions End of Year ----------- ----------------- ------------ ------------ ------------- Rp Rp Rp Rp Rp 2001 (as restated - see Note 52): Unrealized loss on decline in market value of marketable securities 165 - 42 - 207 Allowance for doubtful accounts Trade accounts receivable Related parties 167,669 158,261 - - 325,930 Third parties 261,910 119,414 - 128,469 252,855 Allowance for inventory obsolescence 31,723 17,279 - 5 48,997 2002: Unrealized loss on decline in market value of marketable securities 207 - - 207 0 Allowance for doubtful accounts Trade accounts receivable Related parties 325,930 250,444 - - 576,374 Third parties 252,855 273,711 - 128,755 397,811 Allowance for inventory obsolescence 48,997 158,602 - 153,804 53,795
e. Risks and Uncertainties The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be different from these estimates. f. Derivative Financial Transactions Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended by SFAS 138, Accounting for Certain Instruments and Certain Hedging Activities, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company and its subsidiaries had no derivative contracts or contracts that require accounting under SFAS 133 and SFAS 138. 111 PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued DECEMBER 31, 2001 AND 2002, AND FOR YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002 (Figures in tables are presented in millions of Rupiah, unless otherwise stated) - -------------------------------------------------------------------------------- 59. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC (continued) g. Comprehensive Income Comprehensive income - net of tax, as determined under U.S. GAAP in 2000, 2001 and 2002 amounted to Rp2,962,617 million, Rp3,955,185 million and Rp9,259,750 million, respectively. Adjustments to net income to arrive at comprehensive income include the increase in investments as a result of foreign currency translation of associated companies and unrealized losses on decline in value of securities. h. Recent Accounting Pronouncements SFAS No.145, "Revision of FSAB Statements No.4, 44 and 64, Amendment of FASB Statement 13, and Technical Corrections" Among other technical corrections, SFAS No.145 eliminates the absolute requirement to classify gains or losses from the early extinguishment of debt as extraordinary. SFAS No.145 will be effective in fiscal 2003 and should have no impact on the Company's U.S. GAAP reconciliation. SFAS No.146 "Accounting for Costs Associated with Exit or Disposal Activities" This statement now requires that a liability be recognized when the liability is incurred. Previously, a liability for exit costs was recognized at the date of an entity's commitment to an exit plan. SFAS No.146, which is effective in fiscal 2003, could have an impact on the U.S. GAAP reconciliation depending upon the level of exit activities. SFAS No.148 "Accounting for Stock-Based Compensation Transition And Disclosure" SFAS No.148 provides alternative methods for transitioning for voluntary charges to the fair value method and enhances disclosures for stock options. The Company does not utilize stock based compensation and thus SFAS No.148 will have no effect on the U.S. GAAP reconciliation. FASB Interpretation No.46, "Consolidation of Variable Interest Entities" FIN 46 provides guidance for consolidating entities not with standing the lack of majority voting control. FIN 46 is effective for fiscal 2003; however, the Company has no current interest in variable interest entities. As such, there should be no impact on the U.S. GAAP reconciliation. 60. CHANGE OF ACCOUNTING SYSTEM APPLICATION Effective January 1, 2002, the Company implemented System Application and Product ("SAP"), a software package for processing the financial transactions, replacing Computer Associate General Ledger ("CAGL") with still maintain the consistency of financial presentation with previous years. ******* 112 -----END PRIVACY-ENHANCED MESSAGE-----